SC TO-I

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE TO
(RULE 13e-4)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR SECTION 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934

MICREL, INC.
(NAME OF SUBJECT COMPANY (ISSUER) AND FILING PERSON (OFFEROR))

OPTIONS TO PURCHASE COMMON STOCK, NO PAR VALUE
WITH AN EXERCISE PRICE OF $13.00 OR HIGHER PER SHARE
(TITLE OF CLASS OF SECURITIES)

59479310
(CUSIP NUMBER OF CLASS OF SECURITIES)

RAYMOND D. ZINN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
MICREL, INC.
1849 FORTUNE DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 944-0800
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE FILING PERSON)

COPY TO:
JONN R. BEESON, ESQ.
LATHAM & WATKINS
650 TOWN CENTER DRIVE, SUITE 2000
COSTA MESA, CA 92626
(714) 540-1235

CALCULATION OF FILING FEE

TRANSACTION VALUATION*	AMOUNT OF FILING FEE
$33,745,345	$	3,104.57

* Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 5,761,102 shares of common stock of Micrel, Inc. having an aggregate value of $33,745,345 as of November 6, 2002 will be exchanged and/or cancelled pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11(b)(2) of the Securities Exchange Act of 1934, as amended, equals $92 per $1,000,000 of the value of the transaction.

[   ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:   Not applicable.    Filing party:  Not applicable.
Form or Registration No.:   Not applicable.    Date Filed:    Not applicable.

[   ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

[   ]	third-party tender offer subject to Rule 14d-1
[X]	issuer tender offer subject to Rule 13e-4
[   ]	going private transaction subject to Rule 13e-3
[   ]	amendment to Schedule 13D under Rule 13d-2

Check the following box if the filing is a final amendment reporting the results of the tender offer [   ]

TABLE OF CONTENTS

	Item 12. Exhibits
SIGNATURE
EXHIBIT INDEX
EXHIBIT (A)(1)(I)
EXHIBIT (A)(1)(II)
EXHIBIT (A)(1)(III)
EXHIBIT (A)(1)(IV)
EXHIBIT (A)(1)(V)
EXHIBIT (A)(1)(VI)
EXHIBIT (A)(1)(VII)
EXHIBIT (A)(1)(VIII)
EXHIBIT (A)(1)(IX)
EXHIBIT (A)(1)(X)
EXHIBIT (A)(1)(XI)

     This Tender Offer Statement on Schedule TO relates to an offer by Micrel, Inc., a California corporation, to exchange all options to purchase shares of Micrel’s common stock (“common stock”), no par value (“option shares”), with an exercise price of $13.00 or higher per share (the “options”) outstanding under its 1994 Stock Option Plan, the 1989 Stock Option Plan and 2000 Non-Qualified Stock Incentive Plan and held by eligible employees, for new options (the “new options”) to purchase shares of common stock to be granted under the 1994 Stock Option Plan and 2000 Non-Qualified Stock Incentive Plan upon the terms and subject to the conditions set forth in the Offer to Exchange Certain Outstanding Options dated November 8, 2002 (the “offer to exchange”), and the related Election Concerning Exchange of Stock Options form (the “election form” and, together with the offer to exchange, as they may be amended from time to time, the “offer”), attached hereto as Exhibit (a)(1)(i) and Exhibit (a)(1)(v).

     This offer to exchange contemplates a grant of new options in a ratio equivalent to:

• with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and

• with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange.

• Additionally, if an employee elects to exchange any options, then all options granted to that employee during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged regardless of their exercise price. The new options granted in exchange for those automatically elected options will be exercisable for the same number of shares of common stock as the options that are automatically accepted for exchange and cancelled.

     New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. The number of shares of common stock that will be subject to the new options will be subject to adjustment for any stock splits, stock dividends and similar events occurring between the date the options are accepted for exchange and the date on which the new options are granted. If you are eligible to participate, you may only elect to exchange options that are subject to one or more eligible option agreements and you must exchange all or none of the options that were granted to you on a single grant date and at the same exercise price.

     This Tender Offer Statement on Schedule TO is intended to satisfy the reporting requirements of Section 13(e) of the Securities Exchange Act of 1934, as amended.

     The information in the offer, a copy of which is filed with this Schedule TO as Exhibits (a)(1)(i) and (a)(1)(v) hereto, is incorporated herein by reference in answer to items 1 through 11 in this Tender Offer Statement on Schedule TO. The following items are inapplicable: Item 7 (the information required by Item 1007(d) of Regulation M-A); Item 9 (the information required by Item 1009(a) of Regulation M-A); Item 10 (the information required by Item 1010(b) of Regulation M-A); and Item 13.

Item 12. Exhibits

(a)(1)(i)	Offer to Exchange Certain Outstanding Options, dated November 8, 2002.
(a)(1)(ii)	Letter and E-mail Communication to Micrel Employees from Raymond D. Zinn, CEO & President, dated November 8, 2002.
(a)(1)(iii)	E-mail or Internal Post Communication to Micrel Employees from Andrea Belanger, dated November 8, 2002.
(a)(1)(iv)	Cover Letter for Election Concerning Exchange of Stock Options Form.
(a)(1)(v)	Election Concerning Exchange of Stock Options Form.
(a)(1)(vi)	Form of E-mail or Internal Post Communication to Tendering Option Holders Confirming Receipt of Election Concerning Exchange of Stock Options.
(a)(1)(vii)	Notice of Election to Withdraw Options Form.
(a)(1)(viii)	E-mail or Internal Post Communication to Eligible Micrel Employees to be delivered on or

	about December 2, 2002.
(a)(1)(ix)	Form of Rights Letter.
(a)(1)(x)	Form of E-mail or Internal Post Communication to Rejected Tendering Option Holders.
(a)(1)(xi)	E-mail or Internal Post Communication to Eligible Micrel Employees to be delivered on June 13, 2003.
(a)(1)(xii)	Micrel Annual Report on Form 10-K for its fiscal year ended December 31, 2002. Filed with the Securities and Exchange Commission on April 1, 2002 and incorporated herein by reference.
(a)(1)(xii)	Micrel Quarterly Report on Form 10-Q for its quarter ended June 30, 2002. Filed with the Securities and Exchange Commission on August 14, 2002 and incorporated herein by reference.
(a)(1)(xiii)	Micrel Current Report on Form 8-K. Filed with the Securities and Exchange Commission on November 8, 2002 and incorporated herein by reference.
(a)(2)	Not applicable.
(a)(3)	Not applicable.
(a)(4)	Not applicable.
(b)	Not applicable.
(d)(1)	Amended and Restated Articles of Incorporation of Micrel, Inc. Filed as Exhibit 3.1 with Micrel’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 28, 1994 (File No. 333-85694) and incorporated by reference herein.
(d)(2)	Certificate of Amendment of Articles of Incorporation of Micrel, Inc. Filed as Exhibit 3.2 with Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on December 8, 1994 (File No. 333-85694) and incorporated herein by reference.
(d)(3)	Certificate of Amendment of Articles of Incorporation of Micrel, Inc. Filed as Exhibit 3.4 with Micrel’s Quarterly Report on Form 10-Q for the period ended September 30, 2000, filed with the Securities and Exchange Commission on November 14, 2000 and incorporated herein by reference.
(d)(4)	Amended and Restated Bylaws of Micrel, Inc. Filed as Exhibit 3.3 with Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on November 4, 1994 (File No. 333-85694) and incorporated herein by reference.
(d)(5)	1989 Stock Option Plan of Micrel, Inc. Filed as Exhibit 10.3 to Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on March 20, 1997 (File No. 333-12929) and incorporated herein by reference.
(d)(6)	1994 Stock Option Plan of Micrel, Inc. Filed as Exhibit 10.3 to Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on March 20, 1997 (File No. 333-12929) and incorporated herein by reference.
(d)(7)	1994 Stock Purchase Plan. Filed as Exhibit 10.4 with Micrel’s Annual Report on Form 10-K for the year ended December 31, 1995, filed with the Securities and Exchange Commission on February 5, 1996 and incorporated herein by reference.
(g)	Not applicable.
(h)	Not applicable.

SIGNATURE

     After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated:  November 8, 2002 MICREL, INC.

By:	/s/  Raymond D. Zinn
Name: Raymond D. Zinn
Title:   President and Chief Executive Officer

EXHIBIT INDEX

(a)(1)(i)	Offer to Exchange Certain Outstanding Options, dated November 8, 2002.
(a)(1)(ii)	Letter and E-mail Communication to Micrel Employees from Raymond D. Zinn, CEO & President, dated November 8, 2002.
(a)(1)(iii)	E-mail or Internal Post Communication to Micrel Employees from Andrea Belanger, dated November 8, 2002.
(a)(1)(iv)	Cover Letter for Election Concerning Exchange of Stock Options Form.
(a)(1)(v)	Election Concerning Exchange of Stock Options Form.
(a)(1)(vi)	Form of E-mail or Internal Post Communication to Tendering Option Holders Confirming Receipt of Election Concerning Exchange of Stock Options.
(a)(1)(vii)	Notice of Election to Withdraw Options Form.
(a)(1)(viii)	E-mail or Internal Post Communication to Eligible Micrel Employees to be delivered on or about December 2, 2002.
(a)(1)(ix)	Form of Rights Letter.
(a)(1)(x)	Form of E-mail or Internal Post Communication to Rejected Tendering Option Holders.
(a)(1)(xi)	E-mail or Internal Post Communication to Eligible Micrel Employees to be delivered on June 13, 2003.
(a)(1)(xii)	Micrel Annual Report on Form 10-K for its fiscal year ended December 31, 2002. Filed with the Securities and Exchange Commission on April 1, 2002 and incorporated herein by reference.
(a)(1)(xii)	Micrel Quarterly Report on Form 10-Q for its quarter ended June 30, 2002. Filed with the Securities and Exchange Commission on August 14, 2002 and incorporated herein by reference.
(a)(1)(xiii)	Micrel Current Report on Form 8-K. Filed with the Securities and Exchange Commission on November 8, 2002 and incorporated herein by reference.
(a)(2)	Not applicable.
(a)(3)	Not applicable.
(a)(4)	Not applicable.
(b)	Not applicable.
(d)(1)	Amended and Restated Articles of Incorporation of Micrel, Inc. Filed as Exhibit 3.1 with Micrel’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 28, 1994 (File No. 333-85694) and incorporated by reference herein.
(d)(2)	Certificate of Amendment of Articles of Incorporation of Micrel, Inc. Filed as Exhibit 3.2 with Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on December 8, 1994 (File No. 333-85694) and incorporated herein by reference.
(d)(3)	Certificate of Amendment of Articles of Incorporation of Micrel, Inc. Filed as Exhibit 3.4 with Micrel’s Quarterly Report on Form 10-Q for the period ended September 30, 2000, filed with the Securities and Exchange Commission on November 14, 2000 and incorporated herein by reference.
(d)(4)	Amended and Restated Bylaws of Micrel, Inc. Filed as Exhibit 3.3 with Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on November 4, 1994 (File No. 333-85694) and incorporated herein by reference.
(d)(5)	1989 Stock Option Plan of Micrel, Inc. Filed as Exhibit 10.3 to Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on March 20, 1997 (File No. 333-12929) and incorporated herein by reference.
(d)(6)	1994 Stock Option Plan of Micrel, Inc. Filed as Exhibit 10.3 to Micrel’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on March 20, 1997 (File No. 333-12929) and incorporated herein by reference.
(d)(7)	1994 Stock Purchase Plan. Filed as Exhibit 10.4 with Micrel’s Annual Report on Form 10-K for the year ended December 31, 1995, filed with the Securities and Exchange Commission on February 5, 1996 and incorporated herein by reference.
(g)	Not applicable.
(h)	Not applicable.

EX-99.(A)(1)(I) 3 a85702orexv99wxayx1yxiy.txt EXHIBIT (A)(1)(I) EXHIBIT (a)(1)(i) MICREL, INC. OFFER TO EXCHANGE CERTAIN OUTSTANDING OPTIONS TO PURCHASE COMMON STOCK UNDER THE 1989 STOCK OPTION PLAN, THE 1994 STOCK OPTION PLAN AND 2000 NON-QUALIFIED STOCK INCENTIVE PLAN OF MICREL, INC. THIS OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M. PACIFIC STANDARD TIME ON DECEMBER 11, 2002 UNLESS THIS OFFER IS EXTENDED Micrel is offering eligible employees the opportunity to exchange outstanding options to purchase shares of our common stock for new options to be granted the first business day that is six months and two days from the expiration of this offer (the date on which we grant the new options being referred to as the "replacement grant date"). We are making this offer upon the terms and subject to the conditions set forth in this Offer to Exchange Certain Outstanding Options ("offer to exchange") and in the related Election Concerning Exchange of Stock Options form ("election form" which together, as they may be amended from time to time, constitute the "offer"). Options that are included in this offer are those that: - have an exercise price of at least $13.00 per share; and - were granted under the 1989 Stock Option Plan, the 1994 Stock Option Plan or the 2000 Non-Qualified Stock Incentive Plan of Micrel, Inc., which we refer to collectively as the Stock Option Plans. You are eligible to participate in the exchange program only if you: - are an employee of Micrel on November 8, 2002; - reside in the United States; - are not a director, the Chief Executive Officer or the Chief Financial Officer of Micrel; - remain an eligible employee through the expiration of this offer; and - hold at least one eligible option on November 8, 2002. If you elect to exchange options you will not be eligible to receive new options unless you continue to be employed by Micrel and continue to reside in the United States through the replacement grant date. This offer to exchange contemplates a grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange. - Additionally, if an employee elects to exchange any options, then all options granted to that employee during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged regardless of their exercise price. The new options granted in exchange for those automatically elected options will be exercisable for the same number of shares of common stock as the options that are automatically accepted for exchange and cancelled. New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. The number of shares of common stock that will be subject to the new options will be subject to adjustment for any stock splits, stock dividends and similar events occurring between the date the options are accepted for exchange and the replacement grant date. If you are eligible to participate, you may only elect to exchange options that are subject to one or more eligible option agreements and you must exchange all or none of the options that were granted to you on a single grant date and at the same exercise price. All eligible options we accept pursuant to the offer will be cancelled shortly following the close of the offer, currently scheduled for 5:00 p.m. Pacific Standard Time on December 11, 2002, and options elected for exchange will no longer be exercisable after that time. If you elect to exchange options as described in this offer, your offer is accepted and you remain an eligible employee of Micrel through the replacement grant date, on the first business day that is six months and two days from the date we cancel the options accepted for exchange, we will grant you (i) new options issued under our 1994 Stock Option Plan for eligible options elected for exchange under our 1989 Stock Option Plan and our 1994 Stock Option Plan and (ii) new options issued under our 2000 Non-Qualified Stock Incentive Plan for eligible options elected for exchange under our 2000 Non-Qualified Stock Incentive Plan. Each new option will be granted pursuant to a new option agreement between you and us. The new options will: - have an exercise price equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date; - be exercisable for a number of shares that is equal to, in the case of employees holding the position of vice president or higher, one-half, or in the case of all other employees, two-thirds, the number of shares subject to the options that are accepted for exchange and cancelled, rounded down to the nearest whole number and subject to adjustments for any stock splits, stock dividends and similar events, provided that all options granted to you in the six-month period ending as of the expiration of this offer will be automatically exchanged for options exercisable for the same number of shares of common stock; - have the same vesting schedule as the cancelled options, and will be vested in the same ratio that the cancelled options would have been vested, except that in the case of non-exempt employees under the federal wage laws, options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested; and - have a full ten year term beginning on the replacement grant date. BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL THE FIRST BUSINESS DAY THAT IS SIX MONTHS AND TWO DAYS AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. Except for the exchange ratio, the new option exercise price and the new termination date, the terms and conditions of the new options will be substantially similar to the cancelled options. ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM ELECTING TO EXCHANGE YOUR OPTIONS. YOU MUST MAKE YOUR OWN DECISION WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS. This offer is not conditioned upon a minimum aggregate number of options being elected for exchange. This offer is subject to certain conditions which we describe in Schedule A of this offer to exchange and the terms described in this offer. Shares of our common stock are quoted on the Nasdaq National Market under the symbol "MCRL." On November 6, 2002, the closing sales price of our common stock as quoted on the Nasdaq National Market was $9.14 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS. You should direct questions about this offer or requests for assistance to Andrea Belanger, Stock Administrator for Micrel. You are also invited to send questions about this offer to andrea.belanger@micrel.com and you will receive a response. As of November 6, 2002, options to purchase 116,800 shares of our common stock were issued and outstanding under the 1989 Stock Option Plan, options to purchase 12,992,880 shares of common stock were issued and outstanding under the 1994 Stock Option Plan and options to purchase 61,780 shares of common stock were issued and outstanding under the 2000 Non-Qualified Stock Incentive Plan. Of these options, eligible Micrel employees held outstanding options to purchase 5,761,102 shares of our common stock with an exercise price of at least $13.00 per share. As of November 6, 2002, there were 91,449,526 shares outstanding of Micrel's common stock. The shares of common stock issuable upon exercise of options we are offering to exchange represents approximately 5.51% of the aggregate of our outstanding shares of our common stock and the shares subject to all options outstanding under the Stock Option Plans outstanding as of November 6, 2002. IMPORTANT If you wish to elect to exchange your options, you must complete and sign the Election Concerning Exchange of Stock Options form in accordance with its instructions, and send it to us personally or by internal mail, facsimile ((408) 435-2400) or post to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, Attn: Andrea Belanger. We are not making this offer to, nor will we accept any election to exchange options from or on behalf of, option holders in any jurisdiction in which this offer or the acceptance of any election to exchange options would not be in compliance with the laws of such jurisdiction. However, we may, at our discretion, take any actions necessary or desirable for us to make this offer to option holders in any such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM ELECTING TO EXCHANGE YOUR OPTIONS PURSUANT TO THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR OTHER INFORMATION TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED ELECTION CONCERNING EXCHANGE OF STOCK OPTIONS FORM. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. NOTHING IN THIS DOCUMENT SHALL BE CONSTRUED TO GIVE ANY PERSON THE RIGHT TO REMAIN IN THE EMPLOY OF MICREL OR TO AFFECT OUR RIGHT TO TERMINATE THE EMPLOYMENT OF ANY PERSON AT ANY TIME WITH OR WITHOUT CAUSE TO THE EXTENT PERMITTED UNDER LAW. NOTHING IN THIS DOCUMENT SHOULD BE CONSIDERED A CONTRACT OR GUARANTEE OF WAGES OR COMPENSATION. THE EMPLOYMENT RELATIONSHIP BETWEEN MICREL AND EACH EMPLOYEE REMAINS "AT WILL." TABLE OF CONTENTS

PAGE SUMMARY TERM SHEET...........................................................................1 THIS OFFER..................................................................................10 1. NUMBER OF OPTIONS; EXPIRATION TIME. ...................................................10 2. PURPOSE OF THIS OFFER. ................................................................11 3. PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS. ..........................................13 4. WITHDRAWAL RIGHTS. ....................................................................13 5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS. .......................14 6. PRICE RANGE OF THE COMMON STOCK UNDERLYING THE OPTIONS. ...............................15 7. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS. .............................16 8. INFORMATION CONCERNING MICREL. ........................................................17 9. INTERESTS OF DIRECTORS, OFFICERS AND AFFILIATES; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS. ............................................................18 10. STATUS OF OPTIONS ACQUIRED BY US IN THIS OFFER; ACCOUNTING CONSEQUENCES OF THIS OFFER. .............................................................................19 11. LEGAL MATTERS; REGULATORY APPROVALS. ..................................................19 12. MATERIAL FEDERAL INCOME TAX CONSEQUENCES. .............................................20 13. EXTENSION OF OFFER; TERMINATION; AMENDMENT. ...........................................21 14. FEES AND EXPENSES. ....................................................................22 15. ADDITIONAL INFORMATION. ...............................................................22 16. MISCELLANEOUS. ........................................................................23 SCHEDULE A CONDITIONS OF THIS OFFER SCHEDULE B INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF MICREL, INC.

INDEX TO SUMMARY TERM SHEET GENERAL QUESTIONS ABOUT THE EXCHANGE 1. What securities are we offering to exchange?..............................................1 2. Why are we making this offer to exchange?.................................................1 3. Who is eligible to participate in this exchange?..........................................1 4. Are employees located outside the United States eligible to participate?..................2 5. What if I leave Micrel or change my place of residence between the date my options are cancelled and the replacement grant date?..........................................2 6. How does this exchange work?..............................................................2 7. What do I need to do to participate in this offer to exchange?............................3 8. Why can't Micrel just reprice my options?.................................................3 9. Why won't I receive my new options immediately after the expiration date of this offer?.................................................................................3 10. Why can't I just be granted additional options?..........................................3 11. Why will I receive options to purchase fewer shares of common stock than are subject to the options I elect to exchange?............................................4 12. Wouldn't it be easier to quit Micrel and then get rehired?...............................4 13. If I elect to participate in the exchange program, why must all options granted to me in the last six months also be exchanged?...........................................4 14. If I participate, what will happen to my exchanged options?..............................4 15. What happens to eligible options that I choose not to exchange or that you do not accept for exchange?...................................................................4 16. If I have incentive stock options, what happens if I elect not to exchange eligible incentive stock options for new options?...............................................4 17. What is the deadline to elect to exchange and how do I elect to exchange?................4 18. Will you accept all options offered to be exchanged?.....................................5 19. What will happen if I do not turn in my form by the deadline?............................5 20. During what period of time can I withdraw previously elected options?....................5 21. Am I eligible to receive future grants if I participate in this exchange?................5 22. Does Micrel plan to make any company-wide option grants between the cancellation date and the replacement grant date?...................................................5 23. Is there any tax consequence to my participation in this exchange?.......................5 24. How should I decide whether or not to participate?.......................................6 SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS 25. What do the officers and the members of our Board of Directors think of this offer?......6 26. What are the conditions to this offer?...................................................6 27. Which options can be exchanged?..........................................................6 28. Can I exchange the remaining portion of an option that I have already partially exercised?.............................................................................6 29. Can I select which portion of an option to exchange?.....................................6 30. Can I exchange both vested and unvested options?.........................................6 SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS 31. Can I exchange options that I have already exercised?....................................6 32. How many new options will I receive on the replacement grant date?.......................7 33. What will be my new option exercise price?...............................................7 34. When will I receive my new option?.......................................................7 35. If my current eligible options are incentive stock options, will my the new options issued on the replacement grant date be incentive stock options?.......................7 35. Will my new options be incentive stock options or non-qualified stock options?...........7 36. When will the new options vest?..........................................................8 37. What will be the terms and conditions of my new option?..................................8 38. Can I have an example of a hypothetical exchange?........................................8 39. What happens if Micrel is subject to a change in control AFTER the new options are granted?...............................................................................9 40. What happens if Micrel is subject to a change in control BEFORE the new options are granted?...............................................................................9 41. Are there other circumstances where I would not be granted new options?..................9 42. After the replacement grant date, what happens if my options end up out of the money again?...........................................................................9 SUMMARY TERM SHEET The following are answers to some of the questions that you may have about this offer. We urge you to read carefully the remainder of this offer to exchange and the accompanying election form because the information in this summary is not complete, and additional important information is contained in the remainder of this offer. We have included section references to the remainder of this offer to exchange where you can find a more complete description of the topics in this summary. GENERAL QUESTIONS ABOUT THE EXCHANGE 1. WHAT SECURITIES ARE WE OFFERING TO EXCHANGE? We are offering to exchange options to purchase shares of our common stock that are outstanding under our Stock Option Plans and that have an exercise price of at least $13.00 per share for new options issued under our 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan. Eligible options issued under our 1989 Stock Option Plan and our 1994 Stock Option Plan and elected for exchange will be replaced with new options granted under our 1994 Stock Option Plan. Eligible options issued under our 2000 Non-Qualified Stock Incentive Plan and elected for exchange will be replaced with new options granted under our 2000 Non-Qualified Stock Incentive Plan. We are offering to exchange only those options that are held by eligible employees and that remain eligible from the date of this offer through the expiration of the offer. Eligible employees who elect to participate in this exchange program will also automatically be deemed to have elected to exchange all stock options granted to them during the six-month period ending on the commencement of this offer regardless of exercise price, for new options exercisable for the same number of shares of common stock that are accepted for exchange and cancelled. Only options granted during the six-month period ending on the commencement of this offer will be exchanged on a one for one basis. All other options that are accepted and canceled under this offer will be exchanged for grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange. with any fractional shares subject to the new options rounded down to the nearest whole number and subject to adjustments for any stock splits, stock dividends and similar events. (Section 1) 2. WHY ARE WE MAKING THIS OFFER TO EXCHANGE? We are implementing this offer to exchange because a considerable number of our eligible employees have stock options, whether or not they are currently exercisable, with exercise prices that are significantly above our current and recent trading prices. These options were originally granted to give employees a stake in the growth and success of our company and to provide them with a valuable incentive to stay with our company. This exchange program is VOLUNTARY and will allow eligible employees to choose whether to keep their current stock options at their current exercise price or to exchange those options for new options to purchase two-thirds (one-half, for employees holding the position of vice president or higher) the number of shares, subject to adjustments for any stock splits, stock dividends and similar events, provided that all options granted to you in the six-month period ending as of the commencement of this offer will be automatically exchanged for options exercisable for the same number of shares of common stock. We will grant these new options in accordance with the terms of this offer on the first business day that is six months and two days from the date we cancel the options accepted for exchange. By making this offer to exchange outstanding options for new options that will have an exercise price equal to the market value of our common stock on the replacement grant date, we intend to provide our eligible employees with the benefit of owning options that over time may have a greater potential to increase in value. In addition, we hope to create better performance incentives for our eligible employees and thereby maximize stockholder value. (Section 2) 1 3. WHO IS ELIGIBLE TO PARTICIPATE IN THIS EXCHANGE? Employees are eligible to participate in the exchange program only if they: - are an employee of Micrel on November 8, 2002; - reside in the United States; - are not a director, the Chief Executive Officer or Chief Financial Officer of Micrel; - remain an eligible employee through the expiration of this offer; and - hold at least one eligible option on November 8, 2002. If you are eligible and choose to participate, you may only elect to exchange options subject to one or more eligible option agreements that were granted under the Stock Option Plans and that have an exercise price of at least $13.00 per share. You may only elect to exchange all or none of the options granted to you on the same grant date and at the same exercise price. Directors, the Chief Executive Officer, the Chief Financial Officer and consultants are not eligible to participate. (Section 1) 4. ARE EMPLOYEES LOCATED OUTSIDE THE UNITED STATES ELIGIBLE TO PARTICIPATE? No. (Section 1) 5. WHAT IF I LEAVE MICREL OR CHANGE MY PLACE OF RESIDENCE BETWEEN THE DATE MY OPTIONS ARE CANCELLED AND THE REPLACEMENT GRANT DATE? The election form will not be revocable after 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002 unless this offer is extended. All options tendered for exchange and accepted by us will be cancelled as of December 11, 2002. Therefore, if you leave Micrel voluntarily, involuntarily, or for any other reason before your new options are granted, you will not have a right to any stock options that were previously cancelled and you will not have a right to any stock options that would have been granted on the replacement grant date. Also, if you change your place of residence to a country other than the United States, you will not have a right to any stock options that were previously cancelled and you will not have a right to any stock options that would have been granted on the replacement grant date. THEREFORE, IF YOU ARE NOT AN ELIGIBLE EMPLOYEE OF MICREL FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE REPLACEMENT GRANT DATE, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE AND YOU WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR THE OPTIONS ELECTED TO BE EXCHANGED, EVEN IF THE OPTIONS YOU ELECTED TO EXCHANGE WERE FULLY OR PARTIALLY VESTED. (Section 1) 6. HOW DOES THIS EXCHANGE WORK? Participating in the exchange program requires an eligible employee to make a voluntary election to exchange eligible stock options by 5:00 p.m. Pacific Standard Time on December 11, 2002, after which time this offer becomes irrevocable, unless extended by us. All options tendered for exchange and accepted by us will be cancelled as of December 11, 2002. This offer to exchange contemplates a grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange. 2 - Additionally, if an employee elects to exchange any options, then all options granted to that employee during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged regardless of their exercise price. The new options granted in exchange for those automatically elected options will be exercisable for the same number of shares of common stock as the options that are automatically accepted for exchange and cancelled. New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. To participate, eligible employees may only elect to exchange options, subject to one or more eligible option agreements, that have an exercise price of at least $13.00 per share. You may only elect to exchange all or none of the options granted to you on the same grant date and at the same exercise price. Each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange, except that in the case of non-exempt employees under the federal wage laws, options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested. The new options will have a full ten year term beginning on the replacement grant date. The exercise price for the new options, which will be granted on the replacement grant date, will be equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date. Except for the exchange ratio, the new exercise price and the new termination date, the new options will have terms and conditions that are substantially similar to the cancelled options. If your options are properly elected and accepted by us for exchange, you will receive a rights letter promptly following the expiration of this offer. The rights letter will confirm that your options have been accepted for exchange and cancelled and will summarize your rights as a participant in the exchange program, including the material terms of this offer such as the number of shares of our common stock your new options will entitle you to purchase, subject to adjustments for any stock splits, stock dividends and similar events. (Section 5) 7. WHAT DO I NEED TO DO TO PARTICIPATE IN THIS OFFER TO EXCHANGE? To participate, you must complete the election form, sign it, and ensure that Andrea Belanger, Stock Administrator for Micrel, receives it no later than 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless the offer is extended. You can return your election form personally or by either internal mail, facsimile ((408) 435-2400) or post to Stock Administrator, Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, Attn: Andrea Belanger. Delivery by e-mail will not be accepted. Within five business days after receiving your election form, we will confirm our receipt of your election form. (Section 3) 8. WHY CAN'T MICREL JUST REPRICE MY OPTIONS? Between 1998 and 2000, the Financial Accounting Standards Board adopted certain rules and principles that result in accounting charge consequences for companies that reprice options. If we were to simply reprice options, we would be required to take a charge against earnings on any future appreciation of the repriced options. (Section 10) 9. WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION OF THIS OFFER? If we were to grant the new options on any date which is earlier than six months and one day after the date we cancel the options accepted for exchange, this would be considered equivalent to a repricing of your existing options and we would be required to take a charge against earnings on any future appreciation of the repriced options. By deferring the grant of the new options for six months and two days, we believe we will not have to record such a compensation expense. (Section 10) 10. WHY CAN'T I JUST BE GRANTED ADDITIONAL OPTIONS? Because of the large number of options with exercise prices above our current and recent trading prices, a re-grant of new options to all of these option holders would have a negative effect on our dilution and outstanding shares. Additionally, we have a limited pool of options that we are allowed to grant without stockholder approval. Therefore, our current reserves must be conserved for new hires and ongoing grants. 3 11. WHY WILL I RECEIVE OPTIONS TO PURCHASE FEWER SHARES OF COMMON STOCK THAN ARE SUBJECT TO THE OPTIONS I ELECT TO EXCHANGE? We understand that a significant number of options have exercise prices above our current and recent trading prices and we are implementing this exchange offer in order to encourage employee retention, align employee interests with the long term objectives of the Company, and link employee interests to those of the shareholders through stock ownership. However, a complete re-grant of new options would have a negative effect on our dilution and outstanding shares. We feel that permitting eligible employees to exchange their options for new options to purchase two-thirds (one-half for employees who currently hold the position of vice president or higher) the number of shares, subject to adjustment, strikes a balance between these two competing interests. 12. WOULDN'T IT BE EASIER TO QUIT MICREL AND THEN GET REHIRED? This is not an alternative for us because this would be treated the same as a repricing if the rehire and resulting re-grant are within six months of the option cancellation date. Again, such a repricing would cause Micrel to take a charge against earnings on any future appreciation of the repriced options. (Section 10) 13. IF I ELECT TO PARTICIPATE IN THE EXCHANGE PROGRAM, WHY MUST ALL OPTIONS GRANTED TO ME IN THE LAST SIX MONTHS ALSO BE EXCHANGED? If we were to allow participating employees to keep options that were granted within the six-month period ending on November 8, 2002, then the financial accounting rules applicable to us could require us to take a charge against earnings on any future appreciation of the options granted within the six-month period prior to the cancellation date. (Section 10) 14. IF I PARTICIPATE, WHAT WILL HAPPEN TO MY EXCHANGED OPTIONS? Options designated to be exchanged under this program will be cancelled on December 11, 2002, unless this offer is extended by us, in which case such options will be cancelled on the expiration of the offer as extended. The shares of common stock subject to options that were issued under the 1989 Stock Option Plan will not be available for further issuance. The shares of common stock subject to the options that were issued under the 1994 Stock Option Plan and the 2000 Non-Qualified Stock Incentive Plan will be returned to the pool of shares available for the grant of new options and for issuance of shares upon the exercise of new options under the 1994 Stock Option Plan and the 2000 Non-Qualified Stock Incentive Plan, respectively. (Section 10) 15. WHAT HAPPENS TO ELIGIBLE OPTIONS THAT I CHOOSE NOT TO EXCHANGE OR THAT YOU DO NOT ACCEPT FOR EXCHANGE? Eligible options that you choose not to exchange or that we do not accept for exchange remain outstanding and retain their current exercise price, vesting schedule and termination date. 16. IF I HAVE INCENTIVE STOCK OPTIONS, WHAT HAPPENS IF I ELECT NOT TO EXCHANGE ELIGIBLE INCENTIVE STOCK OPTIONS FOR NEW OPTIONS? You will not be subject to current income tax if you do not elect to exchange your eligible options intended to qualify as incentive stock options. We do not believe that our offer to you will change any of the terms of your eligible incentive stock options if you do not accept the offer. However, the IRS may characterize our offer to you as a "modification" of those incentive stock options, even if you decline the offer. A successful assertion by the IRS that the options are modified could extend the options' holding period to qualify for favorable tax treatment and cause a portion of your incentive stock options to be treated as non-qualified stock options. If you choose not to exchange your eligible options, we recommend that you consult with your own tax advisor to determine the tax consequences of the exercise of your options intended to qualify as incentive stock options or the sale of the common stock that you will receive when you exercise those options. (Section 12) 17. WHAT IS THE DEADLINE TO ELECT TO EXCHANGE AND HOW DO I ELECT TO EXCHANGE? The deadline to participate in this program is 5:00 p.m. Pacific Standard Time on December 11, 2002 unless the offer is extended by us. All options tendered for exchange and accepted by us will be cancelled as of December 11, 2002. This means that Andrea Belanger, Stock Administrator, must have received your election form before that 4 time. Delivery by e-mail will not be accepted. Within five business days after receiving your election form, we will confirm our receipt of your election form. We may, in our discretion, extend this offer at any time, but we cannot assure you that this offer will be extended or, if extended, for how long. If this offer is extended, we will make a public announcement of the extension no later than 6:00 a.m. Pacific Standard Time on the next business day following the previously scheduled expiration of this offer. If this offer is extended by us beyond that time, you must deliver your election form before the extended expiration of this offer. 18. WILL YOU ACCEPT ALL OPTIONS OFFERED TO BE EXCHANGED? We reserve the right to reject any or all options elected for exchange that we determine are not properly submitted for exchange, not eligible for exchange under the terms of the offer to exchange or that we determine are unlawful to accept. Otherwise, we will accept eligible options properly and timely elected for exchange that are not validly withdrawn. Subject to our rights to extend, terminate and amend this offer, we currently expect that we will accept all options properly elected for exchange promptly after the expiration of this offer. (Section 3) 19. WHAT WILL HAPPEN IF I DO NOT TURN IN MY FORM BY THE DEADLINE? If you do not turn in your election form by the deadline, then you will not participate in the option exchange, and all stock options currently held by you will remain intact at their original price and termination date. (Section 1) 20. DURING WHAT PERIOD OF TIME CAN I WITHDRAW PREVIOUSLY ELECTED OPTIONS? You can withdraw any options that you previously elected for exchange at any time before 5:00 p.m. Pacific Standard Time on December 11, 2002. If this offer is extended by us beyond that time, you can withdraw your options elected for exchange at any time until the extended expiration of this offer. To withdraw options elected for exchange, you must deliver to us a written notice of withdrawal containing the required information and we must receive the withdrawal notice before the election deadline. Providing us with a properly completed and signed Notice of Election to Withdraw Options form, which has been provided to you in connection with this offer, will constitute a proper written notice of withdrawal. It is your responsibility to confirm that we have received your withdrawal notice before the deadline. Once you have withdrawn options, you can re-elect to exchange options only by again following the delivery procedures described above. You can also withdraw your options elected for exchange after the expiration of this offer if we have not provided notice that we have accepted options elected for exchange by 9:00 p.m. Pacific Standard Time on January 9, 2003. (Section 4) 21. AM I ELIGIBLE TO RECEIVE FUTURE GRANTS IF I PARTICIPATE IN THIS EXCHANGE? Because of the accounting consequences, participants in this program are ineligible for any additional stock option grants until after the replacement grant date. After the replacement grant date, participants in this program will be eligible for future stock option grants, if any. (Section 5) 22. DOES MICREL PLAN TO MAKE ANY COMPANY-WIDE OPTION GRANTS BETWEEN THE CANCELLATION DATE AND THE REPLACEMENT GRANT DATE? We typically make grants of stock options to eligible employees on their date of hire, in the summer or fall four years after their date of hire and approximately annually thereafter. We refer to option grants made after an employee's date of hire as "replenishment grants." Replenishment grants are not guaranteed and are subject to the approval of our board of directors in their sole and absolute discretion. Employees that do not elect to participate in the offer to exchange may be eligible to receive their customary replenishment grant for 2002 prior to December 31, 2002. Employees that do elect to participate in the exchange offer, will not become eligible to receive any customary replenishment grant for 2002 until after replacement grant date. (Section 5) 23. IS THERE ANY TAX CONSEQUENCE TO MY PARTICIPATION IN THIS EXCHANGE? If you accept this offer you will not recognize income for federal income tax purposes either at the time your exchanged options are cancelled or when the new options are granted. However, we recommend that you consult with your own tax advisor to determine the tax consequences of electing to exchange options pursuant to this offer. (Section 12) 5 24. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE? We understand that this will be a challenging decision for all eligible employees. THE PROGRAM DOES CARRY CONSIDERABLE RISK, AND THERE ARE NO GUARANTEES OF OUR FUTURE STOCK PERFORMANCE OR THE PRICE OF OUR COMMON STOCK ON THE REPLACEMENT GRANT DATE. So, the decision to participate must be each individual employee's personal decision, and it will depend largely on each employee's assumptions about the future overall economic environment, the performance of the Nasdaq National Market and our own stock price, and our business. (Section 16) 25. WHAT DO THE OFFICERS AND THE MEMBERS OF OUR BOARD OF DIRECTORS THINK OF THIS OFFER? Although our board of directors has approved this offer, neither the officers nor the members of our board of directors make any recommendation as to whether you should elect to exchange or refrain from exchanging your options. 26. WHAT ARE THE CONDITIONS TO THIS OFFER? This offer is subject to a number of conditions as described throughout the offer (which include, among other things, eligibility of options to be exchanged, residency conditions and eligibility of participating employees), and is further subject to the conditions described in Schedule A. This offer is not conditioned upon a minimum aggregate number of options being elected for exchange. (Schedule A) SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS 27. WHICH OPTIONS CAN BE EXCHANGED? If you are eligible to participate in this offer, you may only elect to exchange options that are subject to one or more eligible option agreements that were granted under our Stock Option Plans and that have an exercise price of at least $13.00 per share. You may only elect to exchange all or none of the options granted to you on the same grant date and at the same exercise price. In addition, if you elect to exchange any options, then all options granted to you during the six-month period ending on November 8, 2002 will also be automatically exchanged, regardless of their exercise price, for new options exercisable for the same number of shares of common stock that are accepted for exchange and cancelled. (Section 1) 28. CAN I EXCHANGE THE REMAINING PORTION OF AN OPTION THAT I HAVE ALREADY PARTIALLY EXERCISED? Yes, any remaining outstanding, unexercised eligible options can be exchanged. (Section 1) 29. CAN I SELECT WHICH PORTION OF AN OPTION TO EXCHANGE? No. You cannot partially exchange outstanding options subject to a single grant. If you choose to exchange an option grant, all options within that grant (that is, all options granted to you on the same grant date and at the same exercise price) will be exchanged and cancelled. (Section 1) 30. CAN I EXCHANGE BOTH VESTED AND UNVESTED OPTIONS? Yes. You can exchange eligible options, whether or not they are vested. If you do elect to exchange your options under this exchange offer, each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange. In the case of non-exempt employees under the federal wage laws, options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested. (Section 1) 31. CAN I EXCHANGE OPTIONS THAT I HAVE ALREADY EXERCISED? No. This offer only pertains to options and does not apply in any way to shares purchased, whether upon the exercise of options or otherwise. If you have exercised an option in its entirety, that option is no longer outstanding and is therefore not subject to this offer. If you have exercised an eligible option in part, the remaining unexercised portion of that option is outstanding and can be exchanged pursuant to this offer. Options for which you have 6 properly submitted an exercise notice prior to the date this offer expires will be considered exercised to that extent, whether or not you have received confirmation of exercise for the shares purchased. (Section 1) SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS 32. HOW MANY NEW OPTIONS WILL I RECEIVE ON THE REPLACEMENT GRANT DATE? This offer to exchange contemplates a grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange. - Additionally, if an employee elects to exchange any options, then all options granted to that employee during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged regardless of their exercise price. The new options granted in exchange for those automatically elected options will be exercisable for the same number of shares of common stock as the options that are automatically accepted for exchange and cancelled. New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. You will receive new stock options subject to the terms described above and to adjustments for any stock splits, stock dividends and similar events. Unless prevented by law or applicable regulations, eligible options issued under our 1989 Stock Option Plan and our 1994 Stock Option Plan and exchanged for new options will be replaced with options granted under our 1994 Stock Option Plan. Options issued under our 2000 Non-Qualified Stock Incentive Plan and exchanged for new options will be replaced with options granted under our 2000 Non-Qualified Stock Incentive Plan. Each new option will be granted pursuant to a new option agreement between you and us. Except for the exchange ratio, the new exercise price and the new termination date, the new option will have substantially similar terms and conditions as the cancelled option. (Section 1) 33. WHAT WILL BE MY NEW OPTION EXERCISE PRICE? The exercise price for the new options, which will be granted on the replacement grant date, will be equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date. BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL THE FIRST BUSINESS DAY THAT IS SIX MONTHS AND TWO DAYS AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS. (Section 2) 34. WHEN WILL I RECEIVE MY NEW OPTION? We will grant the new options on the first business day that is six months and two days from the date we cancel options elected for exchange. If we cancel options elected for exchange on December 11, 2002, which is the scheduled expiration of this offer, the replacement grant date of the new options will be June 13, 2003. (Section 7) 35. WILL MY NEW OPTIONS BE INCENTIVE STOCK OPTIONS OR NON-QUALIFIED STOCK OPTIONS? The answer depends on the type of stock option you are exchanging. If your current eligible options are non-qualified stock options, your new options will be granted as non-qualified stock options. If your current eligible options were intended to qualify as incentive stock options, your new options will be granted as incentive stock options to the maximum extent they qualify as incentive stock options under the tax laws on the date of the grant. 7 For options to qualify as incentive stock options under the current tax laws, the value of shares subject to options that first become exercisable by the option holder in any calendar year cannot exceed $100,000, as determined using the option exercise price. The excess value is deemed to be a non-qualified stock option, which is an option that is not qualified to be an incentive stock option under the current tax laws. If the exercise price of your new options is equal to or less than the exercise price of the eligible options you tender, the new options may qualify as incentive stock options to the extent that the options tendered qualified as incentive stock options before being tendered. If the new options have a higher exercise price than some or all of your current eligible options, or if you receive additional incentive stock options after you tender options for exchange but before we grant the new options, or if the vesting of the new options overlaps with other grants of incentive stock options, a portion of the new options may exceed the limits for incentive stock options and will have to be granted as non-qualified stock options. (Section 12) 36. WHEN WILL THE NEW OPTIONS VEST? Each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange. In the case of non-exempt employees under the federal wage laws, options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested. The new options will have a full ten year term beginning on the replacement grant date. (Section 7) 37. WHAT WILL BE THE TERMS AND CONDITIONS OF MY NEW OPTION? Except for the exchange ratio, the new option exercise price and the new termination date, the terms and conditions of the new options will be substantially similar to the cancelled options. (Section 7) 38. CAN I HAVE AN EXAMPLE OF A HYPOTHETICAL EXCHANGE? Assumptions: Original Grant Date: January 31, 2000 Your Original Stock Option: Non-qualified stock option to purchase 10,000 shares Your Original Stock Option Price: $31.62 Your Original Vesting Schedule: 20% of the number of options granted or in this case 2,000 shares vest each year until fully vested on January 31, 2005. Expiration Date of Exchange Offer: December 11, 2002 Hypothetical Stock Price on Replacement Grant Date, on or after June 13, 2003: $16.25 Prior exercise of options subject to grant: none Shares vested on December 11, 2002: 4,000 shares Shares that would have vested between December 11, 2002 and on or around June 13, 2003: 2,000 shares Using the above hypothetical assumptions for the sake of illustrating this offer to exchange, we would cancel your original stock option on December 11, 2002. On the replacement grant date, which would be on June 13, 2003, we would grant you a new option to purchase 6,666 shares our common stock (5,000 shares for employees in the position of vice president or higher) at the closing sale price of our common stock on the date preceding the replacement grant date. In this example, using a purely hypothetical common stock price of $16.25, your new exercise price would be $16.25. In the case of exempt employees under the federal wage laws, each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange. In this example, 3,999 shares (3,000 shares for employees in the position of vice president or higher) subject to the new options will be vested on the replacement grant date, if granted to an exempt employee and an additional 1,333 shares (1,000 shares for employees in the position of vice president or higher) subject to the new options will become vested on each of January 31, 2004 and January 31, 2005. In the case of non-exempt employees, under the federal wage laws, options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange. In this example, 3,999 shares subject to the new options will become vested on December 13, 2003, if granted to a non-exempt employee and an 8 additional 1,333 shares subject to the new options will become vested on each of January 31, 2004 and January 31, 2005. 39. WHAT HAPPENS IF MICREL IS SUBJECT TO A CHANGE IN CONTROL AFTER THE NEW OPTIONS ARE GRANTED? The new options will include the same vesting acceleration provisions, if any, as the cancelled options. To obtain detailed change of control provisions governing your options, you can refer to the Micrel 1989 Stock Option Plan, 1994 Stock Option Plan and/or 2000 Non-Qualified Stock Incentive Plan prospectus, each of which are available upon request by contacting Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or post to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or by sending an e-mail to andrea.belanger@micrel.com. 40. WHAT HAPPENS IF MICREL IS SUBJECT TO A CHANGE IN CONTROL BEFORE THE NEW OPTIONS ARE GRANTED? It is possible that, prior to the grant of new options, we might effect or enter into an agreement such as a merger or other similar transaction. These types of transactions could have substantial effects on our stock price, including potentially substantial appreciation in the price of our common stock. Depending on the structure of such a transaction, option holders participating in the offer might be deprived of any further price appreciation in the common stock associated with the new options. For example, if our stock was acquired in a cash merger, the fair market value of our stock, and hence the price at which we grant the new options, would likely be a price at or near the cash price being paid for the common stock in the transaction. As a result of such a transaction, it is possible that the exercise price of the new options may be more than you might otherwise anticipate. In addition, in the event of an acquisition of our company for stock, option holders participating in the offer might receive options to purchase shares of a different issuer. We are also reserving the right, in the event of a merger or similar transaction, to take any actions we deem necessary or appropriate to complete a transaction that our board of directors believes is in the best interest of our company and our stockholders. This could include terminating your right to receive replacement options under this offer to exchange. If we were to terminate your right to receive replacement options under this offer in connection with such a transaction, eligible employees who have exchanged options for cancellation pursuant to this offer would not receive options to purchase securities of the acquiror or any other consideration for their exchanged and cancelled options. (Section 2) 41. ARE THERE OTHER CIRCUMSTANCES WHERE I WOULD NOT BE GRANTED NEW OPTIONS? Yes. Even if we accept your tendered options, we will not issue new options to you if we are prohibited by applicable law or regulations from doing so. We will use reasonable efforts to avoid such prohibition, but if these laws and regulations are applicable on the first business day that is six months and two days after we cancel the eligible options accepted for exchange, you will not be granted new options. Additionally, you are only eligible to participate in this exchange offer if you: (i) are an employee of Micrel on November 8, 2002, (ii) are not a director, the Chief Executive Officer or the Chief Financial Officer of Micrel, (iii) remain an eligible employee through the expiration of this offer and (iv) hold at least one eligible option on November 8, 2002. Furthermore, in the event of a merger or other circumstance described in question 38 above, if in the best interests of our company and stockholders, we may not be issuing new options (Section 11) 42. AFTER THE REPLACEMENT GRANT DATE, WHAT HAPPENS IF MY OPTIONS END UP OUT OF THE MONEY AGAIN? We are conducting this offer only at this time considering the unusual stock market conditions that have affected many companies throughout the country. This offer is therefore considered a one-time offer and is not expected to be offered again in the future. As your new stock options are valid for ten years from the date of initial grant, subject to vesting, continued employment and residence in the United States, the price of our common stock may appreciate over the long term, even if your options are out of the money for some period of time after the replacement grant date. HOWEVER, WE CAN PROVIDE NO ASSURANCE AS TO THE PRICE OF OUR COMMON STOCK AT ANY TIME IN THE FUTURE. (Section 2) 9 THIS OFFER 1. NUMBER OF OPTIONS; EXPIRATION TIME. Upon the terms and subject to the conditions of this offer, we will exchange options to purchase shares of our common stock that are outstanding under our Stock Option Plans for new options issued under our 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan. Eligible options issued under our 1989 Stock Option Plan and our 1994 Stock Option Plan and exchanged for new options will be replaced with options granted under our 1994 Stock Option Plan. Eligible options issued under our 2000 Non-Qualified Stock Incentive Plan and exchanged for new options will be replaced with options granted under our 2000 Non-Qualified Stock Incentive Plan. We will exchange all eligible outstanding options held by eligible employees under the 1989 Stock Option Plan, the 1994 Stock Option Plan or the 2000 Non-Qualified Stock Incentive Plan that are properly elected for exchange and not validly withdrawn in accordance with Section 4 of this offer before the "expiration time," as defined below. You are eligible to participate in the exchange program only if you: - are an employee of Micrel on November 8, 2002; - reside in the United States; - are not a director, the Chief Executive Officer or the Chief Financial Officer of Micrel; - remain an eligible employee through the expiration of this offer; and - hold at least one eligible option on November 8, 2002. If you elect to exchange options you will not be eligible to receive new options unless you continue to be employed by Micrel and continue to reside in the United States through the replacement grant date. ACCORDINGLY, IF YOU ARE NOT AN ELIGIBLE EMPLOYEE OF MICREL FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR ELECTED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE AND YOU WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR ELECTED OPTIONS EVEN IF THE OPTIONS YOU ELECTED TO EXCHANGE WERE FULLY OR PARTIALLY VESTED. If you are eligible and choose to participate, you may only elect to exchange options (the terms "option" or "options" refer to an entire option grant), subject to one or more eligible option agreements, that have an exercise price of at least $13.00 per share. That is, you must exchange all or none of the options granted to you on a single grant date at the same exercise price. If you so elect to participate, then all options granted to you during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged, regardless of their exercise price, for new options exercisable for the same number of shares of common stock that are accepted for exchange and cancelled. This offer to exchange contemplates a grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange. - Additionally, if an employee elects to exchange any options, then all options granted to that employee during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged regardless of their exercise price. The new options granted in exchange for those automatically elected options will be exercisable for the same number of shares of common stock as the options that are automatically accepted for exchange and cancelled. 10 New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. The number of shares of common stock that will be subject to the new options will be subject to adjustment for any stock splits, stock dividends and similar events occurring between the date the options are accepted for exchange and the replacement grant date. Eligible options issued under our 1989 Stock Option Plan and our 1994 Stock Option Plan and exchanged for new options will be replaced with options granted under our 1994 Stock Option Plan. Eligible options issued under our 2000 Non-Qualified Stock Incentive Plan and exchanged for new options will be replaced with options granted under our 2000 Non-Qualified Stock Incentive Plan. All new options will be subject to the terms of the 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan, pursuant to a new option agreement between us and you. Each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange, except that in the case of non-exempt employees under the federal wage laws, options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested. In addition, the new options will have a full ten year term beginning on the replacement grant date. Finally, the exercise price of the new options will be equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date. Each non-qualified stock option elected for exchange will be replaced with a non-qualified stock option. Each stock option intended to qualify as an incentive stock option, that is elected for exchange will be replaced with an incentive stock option to the maximum extent it qualifies as an incentive stock option under the tax laws on the date of the grant. Please refer to Section 12 "Material Federal Income Tax Consequences" for a more detailed discussion of the relevant federal tax laws in connection with the grant of incentive stock options. You should note, this program does carry considerable risk, and there are no guarantees of our future stock performance or the price of our common stock on the replacement grant date. The term "expiration time" means 5:00 p.m. Pacific Standard Time on December 11, 2002, unless and until we, in our discretion, extend the period of time during which this offer will remain open, in which event the term "expiration time" refers to the latest time and date at which this offer, as so extended, expires. See Section 13 of this offer to exchange for a description of our rights to extend, delay, terminate and amend this offer. If we decide to take any of the following actions, we will publish notice or otherwise notify you of such action in writing after the date of such notice: (a) we increase or decrease the amount of consideration offered for the options; (b) we decrease the number of options eligible to be elected for exchange in this offer; or (c) we increase the number of options eligible to be elected for exchange in this offer by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to this offer immediately prior to the increase. If this offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in Section 13 of this offer, we will extend the offer so that the offer is open at least ten business days following the publication, sending or giving of notice. For purposes of this offer, a "business day" means any day other than Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time. 2. PURPOSE OF THIS OFFER. We issued the options outstanding under the Stock Option Plans to promote our long-term growth and success and the creation of stockholder value by: - encouraging employees to focus on critical long-range objectives; - encouraging the attraction and retention of employees with exceptional qualifications; and - linking employee's interests directly to those of stockholders through increased stock ownership. 11 Many of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current and recent trading prices of our common stock. We believe these options are unlikely to be exercised in the foreseeable future and therefore do not serve their original purpose. By making this offer to exchange outstanding options for new options that will have an exercise price equal to the market value of our common stock on the replacement grant date, we intend to provide our eligible employees with the benefit of owning options that over time may have a greater potential to increase in value. In addition, we hope to create better performance incentives for employees and thereby maximize stockholder value. HOWEVER, THIS PROGRAM IS NOT GUARANTEED TO ACCOMPLISH THESE OBJECTIVES, CONSIDERING THE EVER-PRESENT RISKS ASSOCIATED WITH A VOLATILE AND UNPREDICTABLE STOCK MARKET. We may engage in transactions in the future which could significantly change our structure, ownership, organization or management or the make-up of our board of directors and which could significantly affect the price of our stock. If we engage in such a transaction or transactions prior to the date we grant the new options, our stock price could increase (or decrease) and the exercise price of the new options could be higher (or lower) than the exercise price of eligible options you elect to have cancelled as part of this offer. The exercise price of any new options granted to you in return for options you elect to exchange will be equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date. You will be at risk of any increase in our stock price during the period prior to the replacement grant date for these and other reasons. Although we are not currently contemplating a merger or similar transaction that would result in a change in control of our company, we are reserving the right, in the event of a merger or similar transaction, to take any actions we deem necessary or appropriate to complete a transaction that our board of directors believes is in the best interest of our company and our stockholders. This could include terminating your right to receive replacement options under this offer. If we were to terminate your right to receive replacement options under this offer in connection with such a transaction, eligible employees who have exchanged options for cancellation pursuant to this offer would not receive options to purchase securities of the acquiror or any other consideration for their options elected for exchange. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, capital infusions and the purchase or sale of assets. At any given time we may be engaged in discussions or negotiations with respect to various corporate transactions. Subject to the foregoing, and except as otherwise disclosed in this offer or in our filings with the Securities and Exchange Commission (the "SEC"), as of the date hereof, we have no plans, proposals or negotiations that relate to or would result in: (a) any extraordinary transaction, such as a merger, reorganization or liquidation, involving us; (b) any purchase, sale or transfer of a material amount of our assets; (c) any material change in our present dividend rate or policy, or our indebtedness or capitalization; (d) any change in our present board of directors or management, including, but not limited to, any plans or proposals to change the number or the term of directors or to fill any existing board vacancies or to change any material term of the employment contract of any executive officer; (e) any other material change in our corporate structure or business; (f) our common stock being delisted from any national securities exchange or ceasing to be authorized for quotation in an automated quotation system operated by a national securities association; (g) our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act; (h) the suspension of our obligation to file reports pursuant to Section 15(d) of the Securities Exchange Act; (i) the acquisition by any person of any of our securities or the disposition of any of our securities; or (j) any change in our certificate of incorporation or bylaws, or any actions which could impede the acquisition of control of us by any person. NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE YOUR OPTIONS, NOR HAVE WE AUTHORIZED ANY 12 PERSON TO MAKE ANY SUCH RECOMMENDATION. YOU ARE URGED TO EVALUATE CAREFULLY ALL OF THE INFORMATION IN THIS OFFER TO EXCHANGE AND TO CONSULT YOUR OWN INVESTMENT AND TAX ADVISORS. YOU MUST MAKE YOUR OWN DECISION WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS. 3. PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS. Proper Exchange of Options. To validly elect to exchange your options pursuant to this offer, you must, in accordance with the terms of the election form, properly complete, duly execute and deliver to us the election form. We will only accept a paper copy of the election form. Delivery by e-mail will not be accepted. We must receive the election form in our office by personal delivery or by internal mail, facsimile ((408) 435-2400) or post. To participate in the exchange offer program you should deliver your completed election form to Micrel, Inc., Stock Administrator, 1849 Fortune Drive, San Jose, CA 95131 Attn: Andrea Belanger before the expiration time. Within five business days after receiving your election form, we will confirm our receipt of your election form. If you do not turn in your election form by the expiration time, you will not be eligible to participate in the option exchange, and all stock options currently held by you will remain intact at their original price and with their original terms. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING ELECTION CONCERNING EXCHANGE OF STOCK OPTIONS FORMS AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE ELECTING OPTION HOLDER. IT IS YOUR RESPONSIBILITY TO ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY TO AND RECEIPT BY US. Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our discretion, all questions as to the validity, form, eligibility, including time of receipt, and acceptance of any documentation relating to the exchange of options. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all elections to exchange options that we determine are not properly submitted for exchange, not eligible for exchange under the terms of the offer to exchange or that we determine are unlawful to accept. Otherwise, we will accept properly and timely elected options which are not validly withdrawn. We also reserve the right to waive any of the conditions of this offer or any defect or irregularity in any election with respect to any particular options or any particular option holder. In the event that we waive any condition, defect or irregularity with respect to a particular option or option holder, we will also waive such condition, defect or irregularity with respect to all options and option holders. No election to exchange options will be deemed to have been properly made until all defects or irregularities have been cured by the electing option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in elections, nor will anyone incur any liability for failure to give any such notice. Our Acceptance Constitutes an Agreement. Your election to exchange options pursuant to the procedures described above constitutes your acceptance of the terms and conditions of this offer. OUR ACCEPTANCE OF THE OPTIONS THAT YOU ELECT TO EXCHANGE PURSUANT TO THIS OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THIS OFFER. Subject to our rights to extend, terminate and amend this offer, we currently expect that we will accept promptly after the expiration of this offer all properly elected options that have not been validly withdrawn. 4. WITHDRAWAL RIGHTS. You can only withdraw your elected options in accordance with the provisions of this Section 4. You can withdraw your elected options at any time before 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002 (the "expiration time"). If the expiration time is extended by us beyond that time, you can withdraw your elected options at any time until the extended expiration of this offer. You can also withdraw your options elected for exchange after the expiration of this offer if we have not provided notice that we have accepted options elected for exchange by 9:00 p.m. Pacific Standard Time on January 9, 2003. To validly withdraw elected options, you must deliver to us at the address set forth in Section 3 above a written notice of withdrawal with the required information listed below and we must RECEIVE the notice of withdrawal 13 before the expiration time. We will only accept a paper copy of your notice of withdrawal. Delivery by e-mail will not be accepted. The notice of withdrawal must specify the name of the option holder who is electing to withdraw the options, the grant date, exercise price, the number of option shares subject to each option to be withdrawn and the total number of option shares to be withdrawn. Except as described in the following sentence, the notice of withdrawal must be executed by the option holder who elected to exchange the options sought to be withdrawn, exactly as such option holder's name appears on the option agreement or agreements evidencing such options. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, the signor's full title and proper evidence of the authority of such person to act in such capacity must be indicated on the notice of withdrawal. Providing us with a properly completed and signed Notice of Election to Withdraw form, which has been provided to you in connection with this offer, will constitute a proper notice of withdrawal. It is your responsibility to confirm that we received your withdrawal notice before the expiration time. If you elect to withdraw options, you must withdraw all or none of the options granted to you on the same grant date and at the same exercise price. You cannot rescind any withdrawal, and any options you withdraw will thereafter be deemed not properly elected for exchange for purposes of this offer unless you properly re-elect to exchange those options before the expiration time by following the procedures described in Section 3. Neither Micrel nor any other person is obligated to give notice of any defects or irregularities in any notice of withdrawal, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding. 5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS. Upon the terms and subject to the conditions of this offer, including those conditions listed on Schedule A, and as promptly as practicable following the expiration of this offer, we will accept for exchange and cancel options properly elected for exchange and not validly withdrawn before the expiration time. Once your options have been accepted for exchange, you will receive a rights letter promptly following the expiration of this offer confirming that your options have been accepted for exchange and cancelled and summarizing your rights as a participant in the exchange program, including the number of shares of our common stock your new options will entitle you to purchase. If your options are properly elected for exchange and accepted by us, we will cancel your options shortly following the expiration of this offer, and you will be granted new options on the replacement grant date. The replacement grant date will be on the first business day that is six months and two days from the date we cancel the options accepted for exchange. If we accept options you elect to exchange in this offer, you will be ineligible until after the replacement grant date to receive any additional stock option grants for which you may have otherwise been eligible. We believe that this restriction will allow us to avoid incurring a compensation expense against our earnings because of accounting rules that could apply, as a result of this offer, to these interim option grants. We typically make grants of stock options to eligible employees on their date of hire, in the summer or fall four years after their date of hire and approximately annually thereafter. We refer to option grants made after an employee's date of hire as "replenishment grants." Replenishment grants are not guaranteed and are subject to the approval of our board of directors in their sole and absolute discretion. Employees that do not elect to participate in the offer to exchange may be eligible to receive their customary replenishment grant for 2002 prior to December 31, 2002. Employees that do elect to participate in the exchange offer, will not become eligible to receive any customary replenishment grant for 2002 until after replacement grant date. This offer to exchange contemplates a grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for one-half the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange; and 14 - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. That is, to the extent these individuals elect to participate in the offer, they will receive options exercisable for two-thirds the number of shares of common stock as the number of shares of common stock subject to the options elected for exchange. - Additionally, if an employee elects to exchange any options, then all options granted to that employee during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged regardless of their exercise price. The new options granted in exchange for those automatically elected options will be exercisable for the same number of shares of common stock as the options that are automatically accepted for exchange and cancelled. New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. The number of shares of common stock that will be subject to the new options will be subject to adjustment for any stock splits, stock dividends and similar events occurring between the date the options are accepted for exchange and the replacement grant date. ACCORDINGLY, IF YOU ARE NOT AN ELIGIBLE EMPLOYEE OF MICREL FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE AND YOU WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR ELECTED OPTIONS, EVEN IF THE OPTIONS THAT YOU ELECTED TO EXCHANGE WERE FULLY OR PARTIALLY VESTED. Therefore, if you leave Micrel voluntarily, involuntarily or for any other reason before your new replacement option is granted you will not have a right to any stock options that were previously cancelled and you will not have a right to the options that would have been granted on the replacement grant date. Also, if you change your place of residence to a country other than the United States, you will not have a right to any stock options that were previously cancelled and you will not have a right to any stock options that would have been granted on the replacement grant date. For purposes of this offer, we will be deemed to have accepted for exchange options that are validly elected for exchange and not properly withdrawn, when we give written notice to the option holders of our acceptance for exchange of such options, such notice may be given by press release, letter or delivered via e-mail. Subject to our rights to extend, terminate and amend this offer, we currently expect that you will receive your new option as well as the new option agreement within three weeks of the replacement grant date. 6. PRICE RANGE OF THE COMMON STOCK UNDERLYING THE OPTIONS. Our common stock is quoted on the Nasdaq National Market under the symbol "MCRL." The following table shows, for the periods indicated, the high and low sales prices per share of our common stock as quoted on the Nasdaq National Market.

HIGH LOW -------- ------ FISCAL YEAR ENDED DECEMBER 31, 2000 First Quarter*............................ 127.81 53.50 Second Quarter*........................... 110.19 59.22 Third Quarter............................. 78.63 39.88 Fourth Quarter............................ 67.31 29.31 FISCAL YEAR ENDED DECEMBER 31, 2001 First Quarter............................. 51.12 23.25 Second Quarter............................ 41.12 22.94 Third Quarter............................. 35.80 17.49 Fourth Quarter............................ 32.99 17.10 FISCAL YEAR ENDED DECEMBER 31, 2002 First Quarter............................. 30.26 18.90

15 Second Quarter........................... 25.79 14.58 Third Quarter ............................ 16.20 5.16 Fourth Quarter (October 1, 2002 through November 6, 2002)......................... 9.60 4.33 * based on values prior to June 28, 2000 2:1 stock split As of November 6, 2002, the last reported sale price of our common stock, as quoted on the Nasdaq National Market, was $9.14 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS. 7. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS. Consideration. We will issue new options, subject to applicable laws and regulations, to purchase common stock under our 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan. Eligible options issued under our 1989 Stock Option Plan and our 1994 Stock Option Plan and exchanged for new options will be replaced with options granted under our 1994 Stock Option Plan. Eligible options issued under our 2000 Non-Qualified Stock Incentive Plan and exchanged for new options will be replaced with options granted under our 2000 Non-Qualified Stock Incentive Plan. This offer to exchange contemplates a grant of new options in a ratio equivalent to: - with respect to employees who currently hold the position of vice president or higher, one new option granted for every two options elected for exchange and cancelled; and - with respect to all other employees, two new options granted for every three options elected for exchange and cancelled. - Additionally, if you elect to exchange any options, then all options granted to you during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged, regardless of their exercise price, for new options exercisable for the same number of shares of common stock that are accepted for exchange and cancelled. New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. The number of shares of common stock that will be subject to the new options will be subject to adjustment for any stock splits, stock dividends and similar events occurring between the date the options are accepted for exchange and the replacement grant date. Terms of New Options. As a condition to the issuance of the new option we will enter into a new option agreement with each option holder who has elected to exchange options in this offer. Each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange, except that in the case of non- exempt employees under the federal wage laws options granted on the replacement grant date will not be vested until the six month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested. Except for the exchange ratio, the new option exercise price and the new termination date, the terms and conditions of the new options will be substantially similar to the terms and conditions of the options elected for exchange. Additionally, the new options will have a full ten year term beginning on the replacement grant date. The terms and conditions of your current options are set forth in the Micrel 1989 Stock Option Plan, the 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan, depending upon the plan under which the option occurred and the stock option agreement you entered into in connection with each grant. The terms and conditions of the Stock Option Plans are summarized in the plan prospectus pertaining to each plan, prepared by us and available upon request by contacting Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or post to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or by sending an e-mail to andrea.belanger@micrel.com. 16 Federal Income Tax Consequences of Options. You should refer to section 12 for a discussion on U.S. federal income tax consequences of the new options, as well as the consequences of accepting or rejecting the new options under this offer to exchange. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THIS OFFER. Registration of Option Shares. All shares of common stock issuable upon exercise of options under the Stock Option Plans, including the shares that will be issuable upon exercise of all new options, have been registered under the Securities Act of 1933 on one or more registration statements on Form S-8 filed with the Securities and Exchange Commission. Unless you are considered an "affiliate" of Micrel, you will be able to sell your the shares you acquired upon option exercise, free of any transfer restrictions under SEC Rule 144 promulgated under the Securities Act of 1933. IMPORTANT NOTE. THE STATEMENTS IN THIS OFFER CONCERNING THE STOCK OPTION PLANS AND THE NEW OPTIONS ARE MERELY SUMMARIES AND DO NOT PURPORT TO BE COMPLETE. THE STATEMENTS ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, ALL PROVISIONS OF THE STOCK OPTION PLANS AND THE FORM OF STOCK OPTION AGREEMENT UNDER EACH STOCK OPTION PLAN. PLEASE CONTACT US AT MICREL, INC., 1849 FORTUNE DRIVE, SAN JOSE, CA 95131 ATTN: ANDREA BELANGER, TO RECEIVE A COPY OF THE 1989 STOCK OPTION PLAN, THE 1994 STOCK OPTION PLAN OR THE 2000 Non-Qualified Stock Incentive Plan, PROSPECTUS OR FORM OF STOCK OPTION AGREEMENT. 8. INFORMATION CONCERNING MICREL General. We design, develop, manufacture and market a range of high-performance analog power integrated circuits and mixed-signal and digital integrated circuits. We currently ship over 1,400 standard products an have derived the majority of our product revenue for the year ended December 31, 2002 from sales of standard analog integrated circuits for power management. These analog power circuits are used in a wide variety of electronic products, including those in the computer, telecommunications and industrial markets. In addition, we manufacture custom analog and mixed-signal circuits and provide wafer foundry services for a diverse range of customers who produce electronic systems for communications, consumer and military applications. In addition to power and thermal management products, we also offer a family of highly integrated RF products. These QwikRadio products enable customers to develop wireless control systems significantly improving the consumer experience of their products. Applications for the QwikRadio products include remote keyless entry for automobiles, TV remote controls, wireless game controllers, keyboards and mice. Stock Repurchase Program. On February 12, 2002, our Board of Directors announced a stock repurchase program under which we may purchase up to $20,000,000 of our common stock in accordance with Rule 10b5-1 of the Securities and Exchange Act. On July 24, 2002, our Board of Directors expanded the stock repurchase program by authorizing the repurchase of up to $40,000,000 of our common stock. The stock repurchase program is scheduled to be terminated on December 31, 2002. Shares of our common stock purchased pursuant to the repurchase program are used to offset dilution from the Company's stock option plans, employee stock purchase plans and 401(k). As of November 6, 2002, $36,391,044 have been used to repurchase 2,639,300 shares of our common stock. Selected Financial Information. The following selected consolidated financial data for the fiscal years ended December 31, 2001 and 2000, the six months ended August 31, 2002 and 2001 and as of December 31 and August 31, 2001 and 2000 have been derived from our consolidated financial statements. The information presented below should be read together with our consolidated financial statements and the notes related thereto as well as the section of our Annual Report on Form 10-K entitled Management's Discussion and Analysis of Financial Condition and Results of Operations. 17

SIX MONTHS ENDED --------------------------- YEAR ENDED DECEMBER 31, SEPTEMBER 30 --------------------------- --------------------------- 2001 2000 2002 2001 --------- --------- --------- --------- (in thousands, except (in thousands, except per share data) per share data) INCOME STATEMENT DATA Net sales .................... $ 217,808 $ 346,335 $ 103,688 $ 125,725 Cost of goods sold ........... 126,242 149,083 64,816 67,004 Gross profit ................. 91,566 197,252 38,872 58,721 ========= ========= ========= ========= Income from operations ....... (11,068) 103,672 (9,420) 983 Net income (loss) ............ 552 73,307 (3,711) 1,033 Weighted average shares outstanding Basic .................... 91,888 89,242 93,045 91,412 Diluted .................. 98,092 98,186 93,045 98,188 Net income (loss) per share Basic .................... .01 .82 (.04) .01 Diluted .................. .01 .75 (.04) .01

AT DECEMBER 31, AT JUNE 30, 2001 2000 2002 2001 --------- --------- --------- --------- (in thousands, except (in thousands, except per share data) per share data) BALANCE SHEET DATA Cash and cash equivalents ............. $130,406 $ 86,137 $118,739 $124,517 Working capital ....................... 196,940 172,768 192,900 179,874 Total assets .......................... 354,813 359,748 344,561 358,968 Total long term-term liabilities ...... 5,200 9,211 7,549 6,958 Total stockholders' equity ............ 313,330 281,835 302,588 299,645 Book value per share .................. 3.38 3.11 3.26 3.22

The financial information in our Annual Report on form 10-K for the fiscal year ended December 31, 2001 and in our Quarterly Report for the period ended June 30, 2002 is incorporated herein by reference. See "Additional Information" under section 15 for instructions on how you can obtain copies of our SEC reports that contain our audited financial statements and unaudited financial data. Our principal executive offices are located at 2180 Fortune Drive, San Jose, CA 95131 and our telephone number is (408) 944-0800. 9. INTERESTS OF DIRECTORS, OFFICERS AND AFFILIATES; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS. A list of our directors and executive officers is attached to this offer to exchange as Schedule B. Except as otherwise described above, there have been no transactions in options to purchase our common stock or in our common stock which were effected during the past 60 days by Micrel, or to our knowledge, by any executive officer, director, or affiliate of Micrel. For more detailed information on the beneficial ownership of our common stock, you can consult the beneficial ownership table on page 3 of our definitive proxy statement for our 2002 annual meeting of stockholders. As of November 6, 2002, our executive officers and directors (17 persons) as a group held options outstanding under the Stock Option Plans to purchase a total of 4,144,176 shares of our common stock. Additionally, these executive officers and directors held 23,716,910 shares of our outstanding common stock, which together with the number of shares of common stock subject to the options represented approximately 26.63% of the aggregate of our outstanding shares of our common stock and the shares subject to all options outstanding under the Stock Option Plans as of that date. As of November 6, 2002, our executive officers eligible to participate in the offer (11 persons) as a group held eligible options outstanding under the Stock Option Plans to purchase a total of 1,341,342 shares of our common stock. This number represented approximately 23.3% of the shares subject to all eligible options outstanding under the Stock Option Plans as of that date. 18 10. STATUS OF OPTIONS ACQUIRED BY US IN THIS OFFER; ACCOUNTING CONSEQUENCES OF THIS OFFER. Options designated to be exchanged under this program will be cancelled on December 11, 2002, unless this offer is extended by us, in which case such options will be cancelled on the expiration of the offer as extended. The shares of common stock subject to options that were issued under the 1989 Stock Option Plan will not be available for further issuance. The shares of common stock subject to the options that were issued under the 1994 Stock Option Plan and 2000 Non-Qualified Stock Incentive Plan will be returned to the pool of shares available for the grant of new options and for issuance of shares upon the exercise of new options under the 1994 Stock Option Plan and 2000 Non-Qualified Stock Incentive Plan, respectively. We believe that Micrel will not incur any additional compensation expense solely as a result of the transactions contemplated by this offer because: - we will not grant any new options until the first business day that is six months and two days after the date that we accept and cancel options elected for exchange; and - the exercise price of all new options will equal the market value of the common stock on the date we grant the new options. If we were to grant any options to any option holder before six months and one day following the cancellation of options elected for exchange, our grant of new options to the electing option holder would be treated for financial reporting purposes as a variable award to the extent that the number of shares subject to the new options is equal to or less than the number of the option holder's option shares elected for exchange and to the extent the per share exercise price of such options is less than the per share exercise price of the options elected for exchange by such holder. In this event, we would be required to record as compensation expense the amount by which the market value of the shares subject to the new options exceeds the exercise price of those shares. This compensation expense would accrue as a variable accounting charge to our earnings over the period when the new options are outstanding. Accordingly, we would have to adjust this compensation expense periodically during the option term based on increases or decreases in the market value of the shares subject to the new options. Certain employee stock options that were granted prior to December 21, 2001 have been previously determined to be compensatory per APB 25 and deferred stock compensation expense has been recorded on Micrel's financial statements for these options. Should any of these options be tendered for cancellation and exchange, all unrecognized deferred compensation expense associated with the cancelled options will accelerate to the period of cancellation. Based on an expected cancellation date of December 11, 2002, a significant charge may be recorded by Micrel in the fourth quarter of 2002 related to the acceleration of non-cash, deferred stock compensation expense associated with options cancelled under this exchange offer. The size of the charge will depend on the percentage of employee acceptance of this offer and the actual number of stock options with deferred stock compensation expense that are cancelled. 11. LEGAL MATTERS; REGULATORY APPROVALS. We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of options and issuance of new options as contemplated by this offer, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any such approval or other action be required, we presently contemplate that we will undertake commercially reasonable steps to seek such approval or take such other action. We are unable to predict whether we may in the future determine that we are required to delay the acceptance of options for exchange pending the outcome of any such matter. We cannot assure you that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation under this offer to accept options elected for exchange and to issue new options for options elected for exchange is subject to conditions, including the conditions described in Schedule A. We may be prohibited by applicable laws or regulations from granting new options on the first business day that is six months and two days from the date that we cancel the eligible options accepted for exchange. We will not issue new options to you if we are prohibited by applicable law or regulations from doing so. We will use reasonable efforts to avoid such prohibition, but if these laws and regulations are applicable on the first business day 19 that is six months and two days after we cancel the eligible options accepted for exchange, you will not be granted new options at such time. If we are unable to issue the new options on the replacement grant date, we will continue to make commercially reasonable efforts to grant the new options, for a period of six months following the replacement grant date, upon the termination of the legal prohibition against the issuance of the new options. Additionally, you are only eligible to participate in this exchange offer if you: (i) are an employee of Micrel on November 8, 2002, (ii) are not a director, the Chief Executive Officer or the Chief Financial Officer of Micrel, (iii) remain an eligible employee through the expiration of this offer and (iv) hold at lease one eligible option on November 8, 2002. 12. MATERIAL FEDERAL INCOME TAX CONSEQUENCES. The following is a general summary of the material U.S. federal income tax consequences of the exchange of options under the offer. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations and administrative and judicial interpretations as of the date of the offer, all of which may change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to apply in all respects to all categories of option holders. If you exchange outstanding incentive or non-qualified stock options for new options, you will not be required to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable exchange. At the date of grant of the new options, you will not be required to recognize additional income for federal income tax purposes. The grant of options is not recognized as taxable income. The following discussion will allow you to compare the material features of incentive stock options with those of non-qualified stock options. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THIS OFFER. Federal Income Tax Consequences for Outstanding Incentive Stock Options. We do not believe that our offer to you will change any of the terms of your eligible stock options intended to qualify as incentive stock options at their date of grant if you do not accept the offer. If you choose not to accept this offer, it is possible that the IRS would decide that your right to exchange your incentive stock options under this offer is a "modification" of your incentive stock options, even if you do not exchange the options. A successful assertion by the IRS that the options are modified could extend the options' holding period to qualify for favorable tax treatment and cause a portion of your incentive stock options to be treated as non-qualified stock options. Under current law you should not have realized taxable income when the stock options intended to qualify as incentive stock options were granted to you under the option plans. In addition, you generally will not realize taxable income when you exercise an incentive stock option. However, your alternative minimum taxable income will be increased by the amount that the aggregate fair market value of the shares you may purchase under the option, which is generally determined as of the date you exercise the option, exceeds the aggregate exercise price of the option. If you sell common stock that you acquired by exercising an incentive stock option, the tax consequences of the sale depend on whether the disposition is "qualifying" or "disqualifying." The disposition of the common stock is qualifying if it is made after the later of: (a) two years from the date the incentive stock option was granted or (b) at least one year after the date the incentive stock option was exercised. If the disposition of the common stock you received when you exercised incentive stock options is qualifying, any excess of the sale price over the exercise price of the option will be treated as long-term capital gain taxable to you at the time of the sale. If the disposition is not qualifying, which we refer to as a "disqualifying disposition," the excess of the fair market value of the common stock on the date the option was exercised over the exercise price will be taxable income to you at the time of the sale. Of that income, the amount up to the excess of the fair market value of the common stock at the time the option was exercised over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long or short-term capital gain, depending on whether or not the common stock was sold more than one year after the option was exercised. If you sell common stock you received when you exercised an incentive stock option in a qualifying disposition, we will not be entitled to a deduction equal to the gain you realize when you completed that sale. However, if you 20 sell, in a disqualifying disposition, common stock you received when you exercised an incentive stock option, we will be entitled to a deduction equal to the amount of compensation income taxable to you. Federal Income Tax Consequences of Non-qualified Stock Options. Under current law, you will not realize taxable income upon the grant of a non-incentive or non-qualified stock option. However, when you exercise the option, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will be treated as taxable compensation income to you, and you will be subject to withholding of income and employment taxes at that time. We will be generally be entitled to a deduction equal to the amount of compensation income taxable to you. The subsequent sale of the shares acquired pursuant to the exercise of a non-qualified stock option generally will give rise to capital gain or loss equal to the difference between the sale price and the sum of the exercise price paid for the shares plus the ordinary income recognized with respect to the shares, and these capital gains or losses will be treated as long term capital gains or losses if you held the shares for more than one year following exercise of the option. 13. EXTENSION OF OFFER; TERMINATION; AMENDMENT. We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in Schedule A has occurred or is deemed by us to have occurred, to extend the period of time during which this offer is open, and thereby delay the acceptance for exchange of any options, by giving oral or written notice of such extension to the option holders eligible to participate in the exchange or making a public announcement thereof. We also expressly reserve the right, in our reasonable judgment, prior to the expiration time, to terminate or amend this offer and to postpone our acceptance and cancellation of any options elected for exchange upon the occurrence of any of the conditions specified in Schedule A by giving oral or written notice of such termination, amendment or postponement to the option holders eligible to participate in the exchange and making a public announcement thereof. We will return the options elected for exchange promptly after termination or withdrawal of an offer to exchange. Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event set forth in Schedule A has occurred or is deemed by us to have occurred, to amend this offer in any respect, including, without limitation, by decreasing or increasing the consideration offered in this offer to option holders or by decreasing or increasing the number of options being sought in this offer. Amendments to this offer may be made at any time and from time to time by public announcement of the amendment. In the case of an extension, the amendment must be issued no later than 6:00 a.m. Pacific Standard Time on the next business day after the last previously scheduled or announced expiration time. Any public announcement made pursuant to this offer will be disseminated promptly to option holders in a manner reasonably designed to inform option holders of such change. Without limiting the manner in which we may choose to make a public announcement, except as required by applicable law, we have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a press release to the Dow Jones News Service. If we materially change the terms of this offer or the information concerning this offer, or if we waive a material condition of this offer, we will extend this offer. Except for a change in price or a change in percentage of securities sought, the amount of time by which we will extend this offer following a material change in the terms of this offer or information concerning this offer will depend on the facts and circumstances, including the relative materiality of such terms or information. If we decide to take any of the following actions, we will publish notice or otherwise notify you of such action in writing after the date of such notice: (a) we increase or decrease the amount of consideration offered for the options; (b) we decrease the number of options eligible to be elected for exchange in this offer; or (c) we increase the number of options eligible to be elected for exchange in this offer by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to this offer immediately prior to the increase. If this offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the 21 manner specified in Section 13 of this offer, we will extend the offer so that the offer is open at least 10 business days following the publication, sending or giving of notice. 14. FEES AND EXPENSES. We will not pay any fees or commissions to any broker, dealer or other person for soliciting elections to exchange options pursuant to this offer to exchange. 15. ADDITIONAL INFORMATION. We have filed with the SEC a Tender Offer Statement on Schedule TO, of which this offer to exchange is a part. This offer to exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that, in addition to this offer to exchange and the election form, you review the following materials that we have filed with the SEC and are incorporated by reference herein, before making a decision on whether to elect to exchange your options: (a) Our Annual Report on Form 10-K for our fiscal year ended December 31, 2001, filed with the SEC on April 1, 2002. (b) Our Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed with the SEC on August 14, 2002. (c) Our definitive Proxy Statement for our 2002 Annual Meeting of Stockholders, filed with the SEC on April 19, 2002. (d) The description of our common stock included in our Registration Statement on Form 8-A, filed with the SEC on December 6, 1994 (File No. 0-25236). We hereby incorporate by reference additional documents that we may file with the SEC between the date of this offer and the expiration time of the offer. These include periodic reports, such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy statements. These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the following SEC public reference room: 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549 You may obtain information on the operation of the public reference room by calling the SEC at (800) SEC-0330. Our SEC filings are also available to the public on the SEC's internet site at http://www.sec.gov. Our common stock is quoted on the Nasdaq National Market under the symbol "MCRL" and our SEC filings can be read at the following Nasdaq National Market address: Nasdaq National Market 1735 K Street, N.W. Washington, D.C. 20006 We will also provide, without charge, to each person to whom a copy of this offer to exchange is delivered, upon the written or oral request of any such person, a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to: Micrel, Inc. Investor Relations Attention: Andrea Belanger 1849 Fortune Drive San Jose, CA 95131 22 or by telephoning us at (408) 944-0800 between the hours of 8:00 a.m. and 5:00 p.m. Pacific Standard Time. As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this offer to exchange, you should rely on the statements made in the most recent document. The information contained in this offer to exchange about Micrel should be read together with the information contained in the documents to which we have referred you. 16. MISCELLANEOUS. This offer to exchange and our SEC reports referred to above include "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue" or the negative of such terms or other comparable terminology. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. These factors include, among other things, those listed in our most recently filed Report on Form 10-K or Form 10-Q. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The safe harbor provided in the Private Securities Litigation Reform Act of 1995, by its terms, does not apply to statements made in connection with this tender offer. We are not aware of any jurisdiction where the making of this offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of this offer is not in compliance with any valid applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, this offer will not be made to, nor will elections to exchange options be accepted from or on behalf of, the option holders residing in such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM EXCHANGING YOUR OPTIONS PURSUANT TO THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR OTHER INFORMATION TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED ELECTION CONCERNING EXCHANGE OF STOCK OPTIONS FORM. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. Micrel, Inc. November 8, 2002 23 SCHEDULE A CONDITIONS OF THIS OFFER Notwithstanding any other provision of this offer, we will not be required to accept any options elected for exchange, and we may terminate or amend this offer, or postpone our acceptance and cancellation of any options elected for exchange, in each case subject to certain limitations, if at any time on or after November 8, 2002 and prior to the expiration time any of the following events has occurred or has been determined by us to have occurred, regardless of the circumstances giving rise thereto: (a) there shall have been threatened or instituted or be pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of this offer, the acquisition of some or all of the options elected for exchange pursuant to this offer or the issuance of new options; (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to this offer or us, by any court or any authority, agency or tribunal that would or might directly or indirectly: (i) make the acceptance for exchange of, or issuance of new options for, some or all of the options elected for exchange illegal or otherwise restrict or prohibit consummation of this offer; (ii) delay or restrict our ability, or render us unable, to accept for exchange or issue new options for some or all of the options elected for exchange; or (iii) materially and adversely affect the business, condition (financial or other), income, operations or prospects of Micrel; (c) there shall have occurred: (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory; (iii) the commencement or escalation of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States; (iv) any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that might affect, the extension of credit by banks or other lending institutions in the United States; (v) any decrease of greater than 50% of the market price of the shares of our common stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on the business, condition (financial or other), operations or prospects of Micrel or on the trading in our common stock; (vi) in the case of any of the foregoing existing at the time of the commencement of this offer, a material acceleration or worsening thereof; or (vii) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on November 8, 2002; (d) there shall have occurred any change in generally accepted accounting standards which could or would require us for financial reporting purposes to record compensation expense against our earnings in connection with this offer; (e) a tender or exchange offer with respect to some or all of our common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that: 1 (i) any person, entity or group within the meaning of Section 13(d)(3) of the Securities Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before November 8, 2002; (ii) any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before November 8, 2002 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or (iii) any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or made a public announcement reflecting an intent to acquire us or any of the assets or securities of us; or (f) any change or changes shall have occurred in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of Micrel that, in our reasonable judgment, is or may have a material adverse effect on Micrel. The conditions to this offer are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them prior to the expiration time. We may waive them, in whole or in part, at any time and from time to time prior to the expiration time, in our discretion, whether or not we waive any other condition to this offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Schedule A will be final and binding upon all persons. 2 SCHEDULE B INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF MICREL, INC. The directors and executive officers of Micrel and their positions and offices as of November 8, 2002 are set forth in the following table:

NAME POSITIONS AND OFFICES HELD - ---- -------------------------- Raymond D. Zinn.................. President, Chief Executive Officer and Chairman of the Board of Directors Richard D. Crowley, Jr. ......... Vice President, Finance and Chief Financial Officer Robert Whelton................... Executive Vice President, Operations Mark A. Downing.................. Vice President Marketing Jack B. Small ................... Vice President, Analog Design/R&D Thomas S. Wong................... Vice President, High Bandwidth Products Robert J. Barker Vice President, Corporate Business Development Mark Lunsford Vice President, Sales Carlos Mejia, Jr. Vice President, Human Resources Dr. Tian Liou Vice President, General Manager, Kendin Operations J. Vincent Tortolano Vice President, General Counsel Scott Ward Vice President, Test Operations Richard Zelenka Vice President, Quality Assurance Warren H. Muller................. Director George Kelly..................... Director Donald Livingstone............... Director Larry L. Hansen.................. Director

The address of each director and executive officer is: c/o Micrel, Inc., 1849 Fortune Drive, San Jose, California 95131. 1 EX-99.(A)(1)(II) 4 a85702orexv99wxayx1yxiiy.txt EXHIBIT (A)(1)(II) EXHIBIT (a)(1)(ii) To: Eligible Micrel Employees From: Raymond D. Zinn, CEO & President Date: November 8, 2002 Re: Micrel Stock Option Exchange Program I am pleased to announce that Micrel is launching an important employee compensation program for eligible Micrel employees. As you are all aware, market downturns have left our current stock price much lower than the exercise price of many employee stock options. In response to this stock price decline, we are implementing a voluntary program that allows eligible Micrel employees to exchange existing stock options for new options. To participate, you may submit your options for cancellation and new options will be granted to you on the first business day that is six months and two days from the date we cancel your options accepted for exchange (the "replacement grant date"). Your new options will have an exercise price equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date. This is a significant initiative, requiring a formal tender offer filing with the Securities and Exchange Commission. By making it possible to exchange your higher priced stock options for new options with an exercise price equal to the market value of our common stock on the replacement grant date, we hope to provide you with stock options that could provide greater value in the future. Today, we will distribute information that explains the stock option exchange program in greater detail, including its potential benefits and risks and the actions you will need to take if you choose to participate. Please review the material carefully and weigh your decision with equal care. Micrel cannot advise you on what decision to make. Accordingly, no Micrel employee is authorized to make any recommendation on our behalf as to your choices. As a result, you may wish to consult with a professional financial advisor as part of your decision making process. Please take the time to carefully review the information and instructions that you will receive. If you would like to participate in the program, you will need to return the election form that will be provided to you. The election form must be received by us prior to the expiration of the offer, which is currently scheduled for 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002. If you have any questions about the offer, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or you may send an e-mail to andrea.belanger@micrel.com. Sincerely, Raymond D. Zinn 1 EX-99.(A)(1)(III) 5 a85702orexv99wxayx1yxiiiy.txt EXHIBIT (A)(1)(III) EXHIBIT (a)(1)(iii) E-mail or US Mail To: Eligible Micrel Employees From: Andrea Belanger Date: November 8, 2002 Dear Micrel Employees: Pursuant to Ray's announcement earlier today, below is a link to our Stock Option Exchange Program site that contains details about the Program. This site contains copies of the Offer to Exchange Certain Outstanding Options and Election Concerning Exchange of Stock Options form as well as communications regarding the Program. For those of you who do not have e-mail access, these are the same documents that are being included in your Stock Option Exchange Program package that is being distributed to you today. Read the information provided and, as advised in the announcement, carefully consider your decision. If you wish to participate in this program, your Election Concerning Exchange of Stock Options form must be received by myself (Andrea Belanger, Stock Administrator), no later than 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless this offer is extended. If you have further questions after reading the Offer to Exchange Certain Outstanding Options and the Election Concerning Exchange of Stock Options form, you are invited to send your questions to me (Andrea Belanger, Stock Administrator of Micrel) by internal mail, facsimile (408) 435-2400 or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or to our internal e-mail address: andrea.belanger@micrel.com, and a response will be delivered back to you. You can view the Option Exchange Web Site through your web browser at: http://topaz/intranet. Go to "Stock Administration", then "Option Exchange Program." The website will allow you to view the following documents: * Frequently Asked Questions (Summary Term Sheet) * Offer to Exchange * Election Form (can be printed and sent via internal mail, facsimile or via US Mail) * Withdrawal Form (can be printed and sent via internal mail, facsimile or via US Mail) * Communication from Raymond D. Zinn, CEO & President, dated November 8, 2002 * Communication from Andrea Belanger dated November 8, 2002 Sincerely, Andrea Belanger 1 EX-99.(A)(1)(IV) 6 a85702orexv99wxayx1yxivy.txt EXHIBIT (A)(1)(IV) EXHIBIT (a)(1)(iv) US Mail To: [Name of Micrel Employee] From: Andrea Belanger Date: November 8, 2002 Re: Election Concerning Exchange of Stock Options Form. Attached you will find the Election Concerning Exchange of Stock Options form which summarizes the terms of the Stock Option Exchange Program and which you may use to elect to exchange your eligible options issued under the 1989 Stock Option Plan, the 1994 Stock Option Plan and the 2000 Non-Qualified Stock Incentive Plan. In order to elect to exchange or not to exchange your respective stock options, please complete the attached election form by indicating which options you wish to exchange and dating and signing the election form. For your convenience we have included with the attached election form, a Grant Detail Report which identifies your stock options that are eligible for exchange under the Stock Option Exchange Program. You must return the election form to Andrea Belanger, Stock Administrator, no later than 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless this offer is extended. If you have any questions, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or send an e-mail to andrea.belanger@micrel.com. Sincerely, Andrea Belanger 1 EX-99.(A)(1)(V) 7 a85702orexv99wxayx1yxvy.txt EXHIBIT (A)(1)(V) EXHIBIT (a)(1)(v) MICREL, INC. ELECTION CONCERNING EXCHANGE OF STOCK OPTIONS Name of Optionee: -------------------------------- Social Security Number (last 4 digits): ---------- I have received the Offer to Exchange Certain Outstanding Options to Purchase Common Stock Under the 1994 Stock Option Plan, the 1989 Stock Option Plan and 2000 Non-Qualified Stock Incentive Plan dated November 8, 2002. I understand that I am eligible to participate in this exchange program only if I: - am an employee of Micrel on November 8, 2002; - reside in the United States; - am not a director, the Chief Executive Officer or the Chief Financial Officer of Micrel; - remain an eligible employee through the expiration of the offer; and - hold at least one eligible option on November 8, 2002. I understand that, by choosing to participate in this exchange program, I may only elect to exchange options that have an exercise price of at least $13.00 per share that were granted to me under the Micrel 1989 Stock Option Plan, 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan. I further understand that I must elect to exchange all or none of the options (defined as the entire option grant) granted to me on a single grant date and at the same exercise price subject to one or more eligible option agreements. In return for those options I elect to exchange, Micrel will grant me new options entitling me to purchase - if I am an employee who currently holds the position of vice president or higher, one-half of the number of shares of common stock as are subject to the options I elect to exchange and that are accepted by Micrel and cancelled; and - if I don't hold a position of Vice President or higher, two-thirds of the number of shares of common stock as are subject to the options I elect to exchange and that are accepted by Micrel and cancelled. Additionally, if I elect to exchange any options, then I understand that all options granted to me during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged, regardless of their exercise price, for new options exercisable for the same number of shares of common stock as are subject to the options that are automatically exchanged and cancelled. New options exercisable for fractional shares will not be issued. Instead, any fractional number of new options to be granted to any individual will be rounded down to the nearest whole number. The number of shares of common stock that will be subject to the new options will be subject to adjustment for any stock splits, stock dividends and similar events occurring between the date the options are accepted for exchange and the replacement grant date. These new options will be granted on the first business day that is six months and two days from the date my exchanged options are cancelled (the date on which the new options are granted being referred to as the "replacement grant date"), unless the offer is extended. In order to remain eligible to receive new options, I understand that I must remain employed by Micrel through the replacement grant date and continue to reside in the United States. I understand that the exercise price of the new option will be equal to the closing sales price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date, as reported in the print edition of The Wall Street Journal on the replacement grant date. Each new option issued on the replacement grant date will be vested in the same ratio that the cancelled options would have been vested and will continue to vest on the same vesting schedule as those options elected for exchange, except that if I am a non-exempt employee under the federal wage laws, options granted to me on the replacement grant date will not be vested until the six 1 month anniversary of the replacement grant date, at which time the new options will become vested and exercisable in the same ratio that the cancelled options would have been vested. In addition, the new options will have a full ten year term beginning on the replacement grant date. Finally, each non-qualified stock option will be replaced with non-qualified stock options. Each stock option intended to qualify as an incentive stock option, that is elected for exchange will be replaced with an incentive stock option to the maximum extent it qualifies as an incentive stock option under the tax laws on the date of the grant. Except for the exchange ratio, the new option exercise price and the new termination date, the terms and conditions of the new options will be substantially similar to the cancelled options. I understand that by participating in the offer, I will not be eligible to receive any other options until the replacement grant date. I recognize that, under certain circumstances set forth in the Offer to Exchange Certain Outstanding Options, Micrel may terminate or amend the offer and postpone its acceptance and cancellation of any options elected for exchange. In any such event, I understand that the options elected for exchange but not accepted will remain in effect without change. I hereby give up my entire ownership interest in the options listed below and all options granted to me during the six-month period ending as of the commencement of the offer dated November 8, 2002, regardless of their exercise price for new options. I understand all of the options I have elected to exchange will become null and void on Wednesday, December 11, 2002, unless this offer is extended. I acknowledge that this election is entirely voluntary. I also acknowledge that this election will be irrevocable after 5:00 p.m. Pacific Standard Time on December 11, 2002, unless the offer is extended by Micrel in its sole discretion, in which case the offer will become irrevocable upon expiration of the extension. I hereby elect to exchange and cancel the following options (an option is defined as all or none of the options granted to me on a single grant date and at the same exercise price):

NUMBER OF OPTION OPTION OPTION SHARES EXERCISE GRANT DATE OUTSTANDING PRICE ---------- ----------- -------- 1. Option granted on: $ --------- -------- ------ 2. Option granted on: $ --------- -------- ------ 3. Option granted on: $ --------- -------- ------ 4. Option granted on: $ --------- -------- ------

- ------------------------------------- --------------------- Optionee's Signature Date - ------------------------------------- Optionee's Name Participation Instructions: 1. Complete this form and send it to our office personally or by internal mail, facsimile ((408) 435-2400) or via US Mail to Stock Administrator, Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, Attn: Andrea Belanger as soon as possible. This form must be received by Andrea Belanger, Stock Administrator for Micrel before 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless the offer is extended by Micrel in its sole discretion. Delivery by e-mail will not be accepted. 2. Ensure that you receive a confirmation of receipt from Micrel within five (5) business days. Micrel, Inc. hereby accepts this Election Concerning Exchange of Stock Options form and agrees to honor this election. - ------------------------------------------------------ --------------------- [Name & Title of Authorized Signatory] Date 2 EX-99.(A)(1)(VI) 8 a85702orexv99wxayx1yxviy.txt EXHIBIT (A)(1)(VI) EXHIBIT (a)(1)(vi) E-mail or US Mail To: Participating Micrel Employee From: Andrea Belanger Date: _____________, 2002 Dear Micrel Employee: This message confirms that we have received your Election Concerning Exchange of Stock Options form (the "election form"). Pursuant to the Offer to Exchange Certain Outstanding Options and the Election Concerning Exchange of Stock Options form, if your election form is properly completed, we will accept your options elected for exchange at 5:00 p.m. Pacific Standard Time on December 11, 2002, unless this offer is extended, in which case we will accept your options shortly following the expiration of the extended period. Unless you withdraw your elected options in accordance with the provisions of Section 4 of the Offer to Exchange Certain Outstanding Options before this time (or, if this offer is extended, before the new expiration time), we will cancel all options that you have properly elected to exchange. If you elect to exchange any options, then all options granted to you during the six-month period ending as of the commencement of the offer dated November 8, 2002, will also be automatically exchanged for new options. If you do not withdraw your elected options and we accept your options for exchange, shortly following the expiration of this offer, we will provide you with a rights letter confirming that your options have been accepted for exchange and will be cancelled. New options will be granted to you in exchange for the options we cancel on the first business day that is six months and two days from the date we cancel your options elected for exchange, subject to your continued employment and other terms and conditions of the offer. If you have any questions, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or by e-mail at andrea.belanger@micrel.com. Thank you Andrea Belanger 1 EX-99.(A)(1)(VII) 9 a85702orexv99wxayx1yxviiy.txt EXHIBIT (A)(1)(VII) EXHIBIT (a)(1)(vii) NOTICE OF ELECTION TO WITHDRAW OPTIONS - -------------------------------------------------------------------------------- If you previously elected to accept Micrel's Offer to Exchange Certain Outstanding Options, and you would like to change your election and reject this offer, you must sign this Notice (or otherwise provide written notice containing the required information) and return it to Andrea Belanger, Stock Administrator for Micrel before 5:00 p.m. Pacific Standard Time, on December 11, 2002, unless the offer is extended. - -------------------------------------------------------------------------------- To Micrel: I previously received a copy of the Offer to Exchange Certain Outstanding Options and the Election Concerning Exchange of Stock Options form. I signed and returned the Election Concerning Exchange of Stock Options form, in which I elected to accept Micrel's Offer to Exchange Certain Outstanding Options. I now wish to change that election and reject your Offer to Exchange Certain Outstanding Options with respect to the options identified below. I understand that I must withdraw all or none of the options granted to me on a single grant date and at the same exercise price (defined as a single option grant). I further understand, that by signing this Notice and delivering it to Andrea Belanger, Stock Administrator for Micrel, I will be able to withdraw my acceptance of the offer with respect to the options identified below and reject the Offer to Exchange Certain Outstanding Options instead. I have read and understand all of the terms and conditions of the Offer to Exchange Certain Outstanding Options. I understand that in order to reject the offer, I must sign and deliver proper notice so that it is received by Andrea Belanger, Stock Administrator for Micrel before 5:00 p.m., Pacific Standard Time, on December 11, 2002, unless the offer is extended. By rejecting the Offer to Exchange Certain Outstanding Options, I understand that I will not receive any new options and I will retain my eligible options previously elected for exchange with their existing exercise price and vesting schedule. These options will continue to be governed by the stock option plan under which they were granted and the existing option agreements between Micrel and myself. I hereby elect to withdraw the following options from the offer:

NUMBER OF OPTION OPTION SHARES OPTION EXERCISE GRANT DATE OUTSTANDING PRICE ---------- ---------------- --------------- Option granted on: $ --------- -------- ------ Option granted on: $ --------- -------- ------ Option granted on: $ --------- -------- ------ Option granted on: $ --------- -------- ------

I have completed and signed the following exactly as my name appears on the option agreement governing the grant of the foregoing options. - --------------------------------------- ------------------ Optionee's Signature Date - --------------------------------------- Optionee's Name 1 EX-99.(A)(1)(VIII) 10 a85702orexv99wxayx1yxviiiy.txt EXHIBIT (A)(1)(VIII) EXHIBIT (a)(1)(viii) E-mail or US Mail To: Eligible Micrel Employees From: Andrea Belanger Date: December __, 2002 Dear Micrel Employee: There are less than two weeks left for you to elect to exchange your stock options under Micrel's Stock Option Exchange Program. Reminder: If you wish to participate in this program, your Election Concerning Exchange of Stock Options form must be received by Andrea Belanger, Stock Administrator, no later than 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless this offer is extended. Please ensure that you receive confirmation from us after you submit your election form. If you have questions about the Offer to Exchange Certain Outstanding Options or the Election Concerning Exchange of Stock Options form, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or by our internal e-mail address: andrea.belanger@micrel.com and a response will be delivered back to you. You can view the Option Exchange Web Site through your web browser at: http://topaz/intranet. Go to "Stock Administration", then "Option Exchange Program." The website will allow you to view the following documents: * Frequently Asked Questions (Summary Term Sheet) * Offer to Exchange * Election Form (can be printed and sent via internal mail, facsimile or via US Mail) * Withdrawal Form (can be printed and sent via internal mail, facsimile or via US Mail) * Communication from Raymond D. Zinn, CEO & President, dated November 8, 2002 * Communication from Andrea Belanger dated November 8, 2002 Sincerely, Andrea Belanger 1 EX-99.(A)(1)(IX) 11 a85702orexv99wxayx1yxixy.txt EXHIBIT (A)(1)(IX) EXHIBIT (a)(1)(ix) US Mail To: [Name of Micrel Employee] Re: Employee Rights Letter Date: December __, 2002 Thank you for your submission of the Election Concerning Exchange of Stock Options form. We confirm with this letter that we have accepted your election form and have cancelled your options elected for exchange. Subject to your continued employment, your continued status as a resident of the United States and other terms of the Offer to Exchange Certain Outstanding Options dated November 8, 2002, except for the exchange of options that were granted to you within the six month period ending as of the commencement of this offer, you now have the right to receive new options entitling you to purchase a number of shares of our common stock that is equal to, in the case of employees holding the position of vice president or higher, one-half the number of shares of common stock, or in the case of all other employees, two-thirds the number of shares of common stock, that were subject to the options you elected for exchange, with any fractional shares subject to the new options rounded down to the nearest whole number. If you elected to exchange any options, then all options granted to you during the six-month period ending as of the commencement of this offer, will also be exchanged, regardless of their exercise price, for new options exercisable for the same number of shares of common stock that are accepted for exchange and cancelled. The new options will have an exercise price equal to the closing sale price of our common stock as quoted on the Nasdaq National Market on the date preceding the replacement grant date as reported in the print edition of The Wall Street Journal on the replacement grant date. We will issue this new option grant on the first business day that is six months and two days form the date we cancel the options accepted for exchange. Enclosed is your election form countersigned by us. This countersigned election form confirms the number of shares accepted by us for exchange. If you have any questions about the option exchange, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, or e-mail them to andrea.belanger@micrel.com. Thank you Andrea Belanger 1 EX-99.(A)(1)(X) 12 a85702orexv99wxayx1yxxy.txt EXHIBIT (A)(1)(X) EXHIBIT (a)(1)(x) E-mail or US Mail To: [Name of Micrel Employee] From: Andrea Belanger Date: ____________, 2002 Dear Micrel Employee: Unfortunately, your Election Concerning Exchange of Stock Options form regarding the Stock Option Exchange Program was either inaccurate or incomplete and was not accepted by Micrel. If you wish to exchange any of your eligible stock options, you must submit a new Election Concerning Exchange of Stock Options form, listing the options you elect to have exchanged and cancelled. A blank form may be printed from http://topaz/intranet. Go to "Stock Administration", then "Option Exchange Program." You may also contact Andrea Belanger at the address or phone number listed below and she will send you a new election form. Andrea Belanger, Stock Administrator for Micrel must be in receipt of a completed election form before 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless the offer is extended. If we do not receive an accurate and complete election form from you before the deadline, all stock options currently held by you will remain intact at their original price and original terms. If you have any questions, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or reply to this note at andrea.belanger@micrel.com. Thank you Andrea Belanger 1 EX-99.(A)(1)(XI) 13 a85702orexv99wxayx1yxxiy.txt EXHIBIT (A)(1)(XI) EXHIBIT (a)(1)(xi) E-mail or US Mail To: Participating Micrel Employees From: Andrea Belanger Date: June __, 2002 Dear Micrel Employees: The new stock options have been granted under the Company's Stock Option Exchange Program. If you participated in the stock option exchange program, you will be receiving a new option agreement issued under the 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan, depending on the plan under which the options subject to an election for exchange were granted, setting forth the number of options granted and the terms and conditions of your new options. You can accept the new option grant by promptly signing and returning the new option agreement to Andrea Belanger, Stock Administrator for Micrel. If you have any questions, please contact Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or reply to this note at andrea.belanger@micrel.com. Thank you Andrea Belanger -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.(A)(1)(I)

                                                               EXHIBIT (a)(1)(i)


                                  MICREL, INC.

                  OFFER TO EXCHANGE CERTAIN OUTSTANDING OPTIONS
                       TO PURCHASE COMMON STOCK UNDER THE
             1989 STOCK OPTION PLAN, THE 1994 STOCK OPTION PLAN AND
                   2000 NON-QUALIFIED STOCK INCENTIVE PLAN OF
                                  MICREL, INC.

                     THIS OFFER AND WITHDRAWAL RIGHTS EXPIRE
             AT 5:00 P.M. PACIFIC STANDARD TIME ON DECEMBER 11, 2002
                          UNLESS THIS OFFER IS EXTENDED

    Micrel is offering eligible employees the opportunity to exchange
outstanding options to purchase shares of our common stock for new options to be
granted the first business day that is six months and two days from the
expiration of this offer (the date on which we grant the new options being
referred to as the "replacement grant date"). We are making this offer upon the
terms and subject to the conditions set forth in this Offer to Exchange Certain
Outstanding Options ("offer to exchange") and in the related Election Concerning
Exchange of Stock Options form ("election form" which together, as they may be
amended from time to time, constitute the "offer").

    Options that are included in this offer are those that:

        -  have an exercise price of at least $13.00 per share; and

        -  were granted under the 1989 Stock Option Plan, the 1994 Stock Option
           Plan or the 2000 Non-Qualified Stock Incentive Plan of Micrel, Inc.,
           which we refer to collectively as the Stock Option Plans.

    You are eligible to participate in the exchange program only if you:

        -  are an employee of Micrel on November 8, 2002;

        -  reside in the United States;

        -  are not a director, the Chief Executive Officer or the Chief
           Financial Officer of Micrel;

        -  remain an eligible employee through the expiration of this offer; and

        -  hold at least one eligible option on November 8, 2002.

    If you elect to exchange options you will not be eligible to receive new
options unless you continue to be employed by Micrel and continue to reside in
the United States through the replacement grant date.

    This offer to exchange contemplates a grant of new options in a ratio
equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled. That is, to the extent these
           individuals elect to participate in the offer, they will receive
           options exercisable for one-half the number of shares of common stock
           as the number of shares of common stock subject to the options
           elected for exchange; and

        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled. That is, to
           the extent these individuals elect to participate in the offer, they
           will receive options exercisable for two-thirds the number of shares
           of common stock as the number of shares of common stock subject to
           the options elected for exchange.

        -  Additionally, if an employee elects to exchange any options, then all
           options granted to that employee during the six-month period ending
           as of the commencement of the offer dated November 8, 2002, will also
           be automatically exchanged regardless of their exercise price. The
           new options granted in exchange for those automatically elected
           options will be exercisable for the same number of shares of common
           stock as the options that are automatically accepted for exchange and
           cancelled.

      New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. The number of shares of





common stock that will be subject to the new options will be subject to
adjustment for any stock splits, stock dividends and similar events occurring
between the date the options are accepted for exchange and the replacement grant
date. If you are eligible to participate, you may only elect to exchange options
that are subject to one or more eligible option agreements and you must exchange
all or none of the options that were granted to you on a single grant date and
at the same exercise price.

    All eligible options we accept pursuant to the offer will be cancelled
shortly following the close of the offer, currently scheduled for 5:00 p.m.
Pacific Standard Time on December 11, 2002, and options elected for exchange
will no longer be exercisable after that time.

    If you elect to exchange options as described in this offer, your offer is
accepted and you remain an eligible employee of Micrel through the replacement
grant date, on the first business day that is six months and two days from the
date we cancel the options accepted for exchange, we will grant you (i) new
options issued under our 1994 Stock Option Plan for eligible options elected for
exchange under our 1989 Stock Option Plan and our 1994 Stock Option Plan and
(ii) new options issued under our 2000 Non-Qualified Stock Incentive Plan for
eligible options elected for exchange under our 2000 Non-Qualified Stock
Incentive Plan. Each new option will be granted pursuant to a new option
agreement between you and us.

    The new options will:

        -  have an exercise price equal to the closing sales price of our common
           stock as quoted on the Nasdaq National Market on the date preceding
           the replacement grant date, as reported in the print edition of The
           Wall Street Journal on the replacement grant date;

        -  be exercisable for a number of shares that is equal to, in the case
           of employees holding the position of vice president or higher,
           one-half, or in the case of all other employees, two-thirds, the
           number of shares subject to the options that are accepted for
           exchange and cancelled, rounded down to the nearest whole number and
           subject to adjustments for any stock splits, stock dividends and
           similar events, provided that all options granted to you in the
           six-month period ending as of the expiration of this offer will be
           automatically exchanged for options exercisable for the same number
           of shares of common stock;

        -  have the same vesting schedule as the cancelled options, and will be
           vested in the same ratio that the cancelled options would have been
           vested, except that in the case of non-exempt employees under the
           federal wage laws, options granted on the replacement grant date will
           not be vested until the six month anniversary of the replacement
           grant date, at which time the new options will become vested and
           exercisable in the same ratio that the cancelled options would have
           been vested; and

        -  have a full ten year term beginning on the replacement grant date.

    BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL THE FIRST BUSINESS DAY THAT IS
SIX MONTHS AND TWO DAYS AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR
EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF
YOUR CURRENT OPTIONS.

    Except for the exchange ratio, the new option exercise price and the new
termination date, the terms and conditions of the new options will be
substantially similar to the cancelled options.

    ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR
BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD ELECT TO
EXCHANGE OR REFRAIN FROM ELECTING TO EXCHANGE YOUR OPTIONS. YOU MUST MAKE YOUR
OWN DECISION WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS.

    This offer is not conditioned upon a minimum aggregate number of options
being elected for exchange. This offer is subject to certain conditions which we
describe in Schedule A of this offer to exchange and the terms described in this
offer.

    Shares of our common stock are quoted on the Nasdaq National Market under
the symbol "MCRL." On November 6, 2002, the closing sales price of our common
stock as quoted on the Nasdaq National Market was $9.14 per share. WE RECOMMEND
THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING
WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS.

    You should direct questions about this offer or requests for assistance to
Andrea Belanger, Stock Administrator for Micrel. You are also invited to send
questions about this offer to andrea.belanger@micrel.com and you will receive a
response.




     As of November 6, 2002, options to purchase 116,800 shares of our common
stock were issued and outstanding under the 1989 Stock Option Plan, options to
purchase 12,992,880 shares of common stock were issued and outstanding under the
1994 Stock Option Plan and options to purchase 61,780 shares of common stock
were issued and outstanding under the 2000 Non-Qualified Stock Incentive Plan.
Of these options, eligible Micrel employees held outstanding options to purchase
5,761,102 shares of our common stock with an exercise price of at least $13.00
per share. As of November 6, 2002, there were 91,449,526 shares outstanding of
Micrel's common stock. The shares of common stock issuable upon exercise of
options we are offering to exchange represents approximately 5.51% of the
aggregate of our outstanding shares of our common stock and the shares subject
to all options outstanding under the Stock Option Plans outstanding as of
November 6, 2002.

                                    IMPORTANT

     If you wish to elect to exchange your options, you must complete and sign
the Election Concerning Exchange of Stock Options form in accordance with its
instructions, and send it to us personally or by internal mail, facsimile ((408)
435-2400) or post to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, Attn:
Andrea Belanger.

    We are not making this offer to, nor will we accept any election to exchange
options from or on behalf of, option holders in any jurisdiction in which this
offer or the acceptance of any election to exchange options would not be in
compliance with the laws of such jurisdiction. However, we may, at our
discretion, take any actions necessary or desirable for us to make this offer to
option holders in any such jurisdiction.

    WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM ELECTING TO EXCHANGE
YOUR OPTIONS PURSUANT TO THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED IN THIS DOCUMENT OR OTHER INFORMATION TO WHICH WE HAVE REFERRED YOU.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED ELECTION CONCERNING
EXCHANGE OF STOCK OPTIONS FORM. IF ANYONE MAKES ANY RECOMMENDATION OR
REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT
RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

    NOTHING IN THIS DOCUMENT SHALL BE CONSTRUED TO GIVE ANY PERSON THE RIGHT TO
REMAIN IN THE EMPLOY OF MICREL OR TO AFFECT OUR RIGHT TO TERMINATE THE
EMPLOYMENT OF ANY PERSON AT ANY TIME WITH OR WITHOUT CAUSE TO THE EXTENT
PERMITTED UNDER LAW. NOTHING IN THIS DOCUMENT SHOULD BE CONSIDERED A CONTRACT OR
GUARANTEE OF WAGES OR COMPENSATION. THE EMPLOYMENT RELATIONSHIP BETWEEN MICREL
AND EACH EMPLOYEE REMAINS "AT WILL."





                                TABLE OF CONTENTS



                                                                                          PAGE
                                                                                       
SUMMARY TERM SHEET...........................................................................1
THIS OFFER..................................................................................10
1.   NUMBER OF OPTIONS; EXPIRATION TIME. ...................................................10
2.   PURPOSE OF THIS OFFER. ................................................................11
3.   PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS. ..........................................13
4.   WITHDRAWAL RIGHTS. ....................................................................13
5.   ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS. .......................14
6.   PRICE RANGE OF THE COMMON STOCK UNDERLYING THE OPTIONS. ...............................15
7.   SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS. .............................16
8.   INFORMATION CONCERNING MICREL. ........................................................17
9.   INTERESTS OF DIRECTORS, OFFICERS AND AFFILIATES; TRANSACTIONS AND ARRANGEMENTS
        CONCERNING THE OPTIONS. ............................................................18
10.  STATUS OF OPTIONS ACQUIRED BY US IN THIS OFFER; ACCOUNTING CONSEQUENCES OF THIS
        OFFER. .............................................................................19
11.  LEGAL MATTERS; REGULATORY APPROVALS. ..................................................19
12.  MATERIAL FEDERAL INCOME TAX CONSEQUENCES. .............................................20
13.  EXTENSION OF OFFER; TERMINATION; AMENDMENT. ...........................................21
14.  FEES AND EXPENSES. ....................................................................22
15.  ADDITIONAL INFORMATION. ...............................................................22
16.  MISCELLANEOUS. ........................................................................23

SCHEDULE A     CONDITIONS OF THIS OFFER
SCHEDULE B     INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
               MICREL, INC.






                           INDEX TO SUMMARY TERM SHEET

                                                                                         
                      GENERAL QUESTIONS ABOUT THE EXCHANGE

1. What securities are we offering to exchange?..............................................1
2. Why are we making this offer to exchange?.................................................1
3. Who is eligible to participate in this exchange?..........................................1
4. Are employees located outside the United States eligible to participate?..................2
5. What if I leave Micrel or change my place of residence between the date my options
      are cancelled and the replacement grant date?..........................................2
6. How does this exchange work?..............................................................2
7. What do I need to do to participate in this offer to exchange?............................3
8. Why can't Micrel just reprice my options?.................................................3
9. Why won't I receive my new options immediately after the expiration date of this
      offer?.................................................................................3
10. Why can't I just be granted additional options?..........................................3
11. Why will I receive options to purchase fewer shares of common stock than are
      subject to the options I elect to exchange?............................................4
12. Wouldn't it be easier to quit Micrel and then get rehired?...............................4
13. If I elect to participate in the exchange program, why must all options granted to
      me in the last six months also be exchanged?...........................................4
14. If I participate, what will happen to my exchanged options?..............................4
15. What happens to eligible options that I choose not to exchange or that you do not
      accept for exchange?...................................................................4
16. If I have incentive stock options, what happens if I elect not to exchange eligible
      incentive stock options for new options?...............................................4
17. What is the deadline to elect to exchange and how do I elect to exchange?................4
18. Will you accept all options offered to be exchanged?.....................................5
19. What will happen if I do not turn in my form by the deadline?............................5
20. During what period of time can I withdraw previously elected options?....................5
21. Am I eligible to receive future grants if I participate in this exchange?................5
22. Does Micrel plan to make any company-wide option grants between the cancellation
      date and the replacement grant date?...................................................5
23. Is there any tax consequence to my participation in this exchange?.......................5
24. How should I decide whether or not to participate?.......................................6

                     SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS

25. What do the officers and the members of our Board of Directors think of this offer?......6
26. What are the conditions to this offer?...................................................6
27. Which options can be exchanged?..........................................................6
28. Can I exchange the remaining portion of an option that I have already partially
      exercised?.............................................................................6
29. Can I select which portion of an option to exchange?.....................................6
30. Can I exchange both vested and unvested options?.........................................6

                        SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS

31. Can I exchange options that I have already exercised?....................................6
32. How many new options will I receive on the replacement grant date?.......................7
33. What will be my new option exercise price?...............................................7
34. When will I receive my new option?.......................................................7
35. If my current eligible options are incentive stock options, will my the new options
      issued on the replacement grant date be incentive stock options?.......................7
35. Will my new options be incentive stock options or non-qualified stock options?...........7
36. When will the new options vest?..........................................................8
37. What will be the terms and conditions of my new option?..................................8
38. Can I have an example of a hypothetical exchange?........................................8
39. What happens if Micrel is subject to a change in control AFTER the new options are
      granted?...............................................................................9
40. What happens if Micrel is subject to a change in control BEFORE the new options are
      granted?...............................................................................9
41. Are there other circumstances where I would not be granted new options?..................9
42. After the replacement grant date, what happens if my options end up out of the
      money again?...........................................................................9







                               SUMMARY TERM SHEET

    The following are answers to some of the questions that you may have about
this offer. We urge you to read carefully the remainder of this offer to
exchange and the accompanying election form because the information in this
summary is not complete, and additional important information is contained in
the remainder of this offer. We have included section references to the
remainder of this offer to exchange where you can find a more complete
description of the topics in this summary.

                      GENERAL QUESTIONS ABOUT THE EXCHANGE

    1.  WHAT SECURITIES ARE WE OFFERING TO EXCHANGE?

    We are offering to exchange options to purchase shares of our common stock
that are outstanding under our Stock Option Plans and that have an exercise
price of at least $13.00 per share for new options issued under our 1994 Stock
Option Plan or 2000 Non-Qualified Stock Incentive Plan. Eligible options issued
under our 1989 Stock Option Plan and our 1994 Stock Option Plan and elected for
exchange will be replaced with new options granted under our 1994 Stock Option
Plan. Eligible options issued under our 2000 Non-Qualified Stock Incentive Plan
and elected for exchange will be replaced with new options granted under our
2000 Non-Qualified Stock Incentive Plan. We are offering to exchange only those
options that are held by eligible employees and that remain eligible from the
date of this offer through the expiration of the offer. Eligible employees who
elect to participate in this exchange program will also automatically be deemed
to have elected to exchange all stock options granted to them during the
six-month period ending on the commencement of this offer regardless of exercise
price, for new options exercisable for the same number of shares of common stock
that are accepted for exchange and cancelled. Only options granted during the
six-month period ending on the commencement of this offer will be exchanged on a
one for one basis.

    All other options that are accepted and canceled under this offer will be
exchanged for grant of new options in a ratio equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled. That is, to the extent these
           individuals elect to participate in the offer, they will receive
           options exercisable for one-half the number of shares of common stock
           as the number of shares of common stock subject to the options
           elected for exchange; and

        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled. That is, to
           the extent these individuals elect to participate in the offer, they
           will receive options exercisable for two-thirds the number of shares
           of common stock as the number of shares of common stock subject to
           the options elected for exchange.

with any fractional shares subject to the new options rounded down to the
nearest whole number and subject to adjustments for any stock splits, stock
dividends and similar events. (Section 1)

    2.  WHY ARE WE MAKING THIS OFFER TO EXCHANGE?

    We are implementing this offer to exchange because a considerable number of
our eligible employees have stock options, whether or not they are currently
exercisable, with exercise prices that are significantly above our current and
recent trading prices. These options were originally granted to give employees a
stake in the growth and success of our company and to provide them with a
valuable incentive to stay with our company. This exchange program is VOLUNTARY
and will allow eligible employees to choose whether to keep their current stock
options at their current exercise price or to exchange those options for new
options to purchase two-thirds (one-half, for employees holding the position of
vice president or higher) the number of shares, subject to adjustments for any
stock splits, stock dividends and similar events, provided that all options
granted to you in the six-month period ending as of the commencement of this
offer will be automatically exchanged for options exercisable for the same
number of shares of common stock. We will grant these new options in accordance
with the terms of this offer on the first business day that is six months and
two days from the date we cancel the options accepted for exchange. By making
this offer to exchange outstanding options for new options that will have an
exercise price equal to the market value of our common stock on the replacement
grant date, we intend to provide our eligible employees with the benefit of
owning options that over time may have a greater potential to increase in value.
In addition, we hope to create better performance incentives for our eligible
employees and thereby maximize stockholder value. (Section 2)



                                       1


    3.  WHO IS ELIGIBLE TO PARTICIPATE IN THIS EXCHANGE?

    Employees are eligible to participate in the exchange program only if they:

        -  are an employee of Micrel on November 8, 2002;

        -  reside in the United States;

        -  are not a director, the Chief Executive Officer or Chief Financial
           Officer of Micrel;

        -  remain an eligible employee through the expiration of this offer; and

        -  hold at least one eligible option on November 8, 2002.

    If you are eligible and choose to participate, you may only elect to
exchange options subject to one or more eligible option agreements that were
granted under the Stock Option Plans and that have an exercise price of at least
$13.00 per share. You may only elect to exchange all or none of the options
granted to you on the same grant date and at the same exercise price. Directors,
the Chief Executive Officer, the Chief Financial Officer and consultants are not
eligible to participate. (Section 1)

    4.  ARE EMPLOYEES LOCATED OUTSIDE THE UNITED STATES ELIGIBLE TO PARTICIPATE?

    No.  (Section 1)

    5.  WHAT IF I LEAVE MICREL OR CHANGE MY PLACE OF RESIDENCE BETWEEN THE DATE
        MY OPTIONS ARE CANCELLED AND THE REPLACEMENT GRANT DATE?

    The election form will not be revocable after 5:00 p.m. Pacific Standard
Time on Wednesday, December 11, 2002 unless this offer is extended. All options
tendered for exchange and accepted by us will be cancelled as of December 11,
2002. Therefore, if you leave Micrel voluntarily, involuntarily, or for any
other reason before your new options are granted, you will not have a right to
any stock options that were previously cancelled and you will not have a right
to any stock options that would have been granted on the replacement grant date.
Also, if you change your place of residence to a country other than the United
States, you will not have a right to any stock options that were previously
cancelled and you will not have a right to any stock options that would have
been granted on the replacement grant date.

    THEREFORE, IF YOU ARE NOT AN ELIGIBLE EMPLOYEE OF MICREL FROM THE DATE YOU
ELECT TO EXCHANGE OPTIONS THROUGH THE REPLACEMENT GRANT DATE, YOU WILL NOT
RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR OPTIONS THAT HAVE BEEN ACCEPTED FOR
EXCHANGE AND YOU WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR THE OPTIONS
ELECTED TO BE EXCHANGED, EVEN IF THE OPTIONS YOU ELECTED TO EXCHANGE WERE FULLY
OR PARTIALLY VESTED. (Section 1)

    6.  HOW DOES THIS EXCHANGE WORK?

    Participating in the exchange program requires an eligible employee to make
a voluntary election to exchange eligible stock options by 5:00 p.m. Pacific
Standard Time on December 11, 2002, after which time this offer becomes
irrevocable, unless extended by us. All options tendered for exchange and
accepted by us will be cancelled as of December 11, 2002.

    This offer to exchange contemplates a grant of new options in a ratio
equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled. That is, to the extent these
           individuals elect to participate in the offer, they will receive
           options exercisable for one-half the number of shares of common stock
           as the number of shares of common stock subject to the options
           elected for exchange; and

        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled. That is, to
           the extent these individuals elect to participate in the offer, they
           will receive options exercisable for two-thirds the number of shares
           of common stock as the number of shares of common stock subject to
           the options elected for exchange.



                                       2

        -  Additionally, if an employee elects to exchange any options, then all
           options granted to that employee during the six-month period ending
           as of the commencement of the offer dated November 8, 2002, will also
           be automatically exchanged regardless of their exercise price. The
           new options granted in exchange for those automatically elected
           options will be exercisable for the same number of shares of common
           stock as the options that are automatically accepted for exchange and
           cancelled.

    New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. To participate, eligible employees may
only elect to exchange options, subject to one or more eligible option
agreements, that have an exercise price of at least $13.00 per share. You may
only elect to exchange all or none of the options granted to you on the same
grant date and at the same exercise price.

    Each new option issued on the replacement grant date will be vested in the
same ratio that the cancelled options would have been vested and will continue
to vest on the same vesting schedule as those options elected for exchange,
except that in the case of non-exempt employees under the federal wage laws,
options granted on the replacement grant date will not be vested until the six
month anniversary of the replacement grant date, at which time the new options
will become vested and exercisable in the same ratio that the cancelled options
would have been vested. The new options will have a full ten year term beginning
on the replacement grant date.

    The exercise price for the new options, which will be granted on the
replacement grant date, will be equal to the closing sales price of our common
stock as quoted on the Nasdaq National Market on the date preceding the
replacement grant date, as reported in the print edition of The Wall Street
Journal on the replacement grant date. Except for the exchange ratio, the new
exercise price and the new termination date, the new options will have terms and
conditions that are substantially similar to the cancelled options.

    If your options are properly elected and accepted by us for exchange, you
will receive a rights letter promptly following the expiration of this offer.
The rights letter will confirm that your options have been accepted for exchange
and cancelled and will summarize your rights as a participant in the exchange
program, including the material terms of this offer such as the number of shares
of our common stock your new options will entitle you to purchase, subject to
adjustments for any stock splits, stock dividends and similar events. (Section
5)

    7.  WHAT DO I NEED TO DO TO PARTICIPATE IN THIS OFFER TO EXCHANGE?

    To participate, you must complete the election form, sign it, and ensure
that Andrea Belanger, Stock Administrator for Micrel, receives it no later than
5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002, unless the
offer is extended. You can return your election form personally or by either
internal mail, facsimile ((408) 435-2400) or post to Stock Administrator,
Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, Attn: Andrea Belanger.
Delivery by e-mail will not be accepted. Within five business days after
receiving your election form, we will confirm our receipt of your election form.
(Section 3)

    8.  WHY CAN'T MICREL JUST REPRICE MY OPTIONS?

     Between 1998 and 2000, the Financial Accounting Standards Board adopted
certain rules and principles that result in accounting charge consequences for
companies that reprice options. If we were to simply reprice options, we would
be required to take a charge against earnings on any future appreciation of the
repriced options. (Section 10)

    9.  WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION OF
        THIS OFFER?

    If we were to grant the new options on any date which is earlier than six
months and one day after the date we cancel the options accepted for exchange,
this would be considered equivalent to a repricing of your existing options and
we would be required to take a charge against earnings on any future
appreciation of the repriced options. By deferring the grant of the new options
for six months and two days, we believe we will not have to record such a
compensation expense. (Section 10)

    10. WHY CAN'T I JUST BE GRANTED ADDITIONAL OPTIONS?

    Because of the large number of options with exercise prices above our
current and recent trading prices, a re-grant of new options to all of these
option holders would have a negative effect on our dilution and outstanding
shares. Additionally, we have a limited pool of options that we are allowed to
grant without stockholder approval. Therefore, our current reserves must be
conserved for new hires and ongoing grants.



                                       3


    11. WHY WILL I RECEIVE OPTIONS TO PURCHASE FEWER SHARES OF COMMON STOCK THAN
        ARE SUBJECT TO THE OPTIONS I ELECT TO EXCHANGE?

    We understand that a significant number of options have exercise prices
above our current and recent trading prices and we are implementing this
exchange offer in order to encourage employee retention, align employee
interests with the long term objectives of the Company, and link employee
interests to those of the shareholders through stock ownership. However, a
complete re-grant of new options would have a negative effect on our dilution
and outstanding shares. We feel that permitting eligible employees to exchange
their options for new options to purchase two-thirds (one-half for employees who
currently hold the position of vice president or higher) the number of shares,
subject to adjustment, strikes a balance between these two competing interests.

    12. WOULDN'T IT BE EASIER TO QUIT MICREL AND THEN GET REHIRED?

    This is not an alternative for us because this would be treated the same as
a repricing if the rehire and resulting re-grant are within six months of the
option cancellation date. Again, such a repricing would cause Micrel to take a
charge against earnings on any future appreciation of the repriced options.
(Section 10)

    13. IF I ELECT TO PARTICIPATE IN THE EXCHANGE PROGRAM, WHY MUST ALL OPTIONS
        GRANTED TO ME IN THE LAST SIX MONTHS ALSO BE EXCHANGED?

    If we were to allow participating employees to keep options that were
granted within the six-month period ending on November 8, 2002, then the
financial accounting rules applicable to us could require us to take a charge
against earnings on any future appreciation of the options granted within the
six-month period prior to the cancellation date. (Section 10)

    14. IF I PARTICIPATE, WHAT WILL HAPPEN TO MY EXCHANGED OPTIONS?

    Options designated to be exchanged under this program will be cancelled on
December 11, 2002, unless this offer is extended by us, in which case such
options will be cancelled on the expiration of the offer as extended. The shares
of common stock subject to options that were issued under the 1989 Stock Option
Plan will not be available for further issuance. The shares of common stock
subject to the options that were issued under the 1994 Stock Option Plan and the
2000 Non-Qualified Stock Incentive Plan will be returned to the pool of shares
available for the grant of new options and for issuance of shares upon the
exercise of new options under the 1994 Stock Option Plan and the 2000
Non-Qualified Stock Incentive Plan, respectively.
(Section 10)

    15. WHAT HAPPENS TO ELIGIBLE OPTIONS THAT I CHOOSE NOT TO EXCHANGE OR THAT
        YOU DO NOT ACCEPT FOR EXCHANGE?

    Eligible options that you choose not to exchange or that we do not accept
for exchange remain outstanding and retain their current exercise price, vesting
schedule and termination date.

    16. IF I HAVE INCENTIVE STOCK OPTIONS, WHAT HAPPENS IF I ELECT NOT TO
        EXCHANGE ELIGIBLE INCENTIVE STOCK OPTIONS FOR NEW OPTIONS?

    You will not be subject to current income tax if you do not elect to
exchange your eligible options intended to qualify as incentive stock options.

    We do not believe that our offer to you will change any of the terms of your
eligible incentive stock options if you do not accept the offer. However, the
IRS may characterize our offer to you as a "modification" of those incentive
stock options, even if you decline the offer. A successful assertion by the IRS
that the options are modified could extend the options' holding period to
qualify for favorable tax treatment and cause a portion of your incentive stock
options to be treated as non-qualified stock options.

    If you choose not to exchange your eligible options, we recommend that you
consult with your own tax advisor to determine the tax consequences of the
exercise of your options intended to qualify as incentive stock options or the
sale of the common stock that you will receive when you exercise those options.
(Section 12)

    17. WHAT IS THE DEADLINE TO ELECT TO EXCHANGE AND HOW DO I ELECT TO
        EXCHANGE?

    The deadline to participate in this program is 5:00 p.m. Pacific Standard
Time on December 11, 2002 unless the offer is extended by us. All options
tendered for exchange and accepted by us will be cancelled as of December 11,
2002. This means that Andrea Belanger, Stock Administrator, must have received
your election form before that



                                       4


time. Delivery by e-mail will not be accepted. Within five business days after
receiving your election form, we will confirm our receipt of your election form.
We may, in our discretion, extend this offer at any time, but we cannot assure
you that this offer will be extended or, if extended, for how long. If this
offer is extended, we will make a public announcement of the extension no later
than 6:00 a.m. Pacific Standard Time on the next business day following the
previously scheduled expiration of this offer. If this offer is extended by us
beyond that time, you must deliver your election form before the extended
expiration of this offer.

    18. WILL YOU ACCEPT ALL OPTIONS OFFERED TO BE EXCHANGED?

    We reserve the right to reject any or all options elected for exchange that
we determine are not properly submitted for exchange, not eligible for exchange
under the terms of the offer to exchange or that we determine are unlawful to
accept. Otherwise, we will accept eligible options properly and timely elected
for exchange that are not validly withdrawn. Subject to our rights to extend,
terminate and amend this offer, we currently expect that we will accept all
options properly elected for exchange promptly after the expiration of this
offer. (Section 3)

    19. WHAT WILL HAPPEN IF I DO NOT TURN IN MY FORM BY THE DEADLINE?

    If you do not turn in your election form by the deadline, then you will not
participate in the option exchange, and all stock options currently held by you
will remain intact at their original price and termination date. (Section 1)

    20. DURING WHAT PERIOD OF TIME CAN I WITHDRAW PREVIOUSLY ELECTED OPTIONS?

    You can withdraw any options that you previously elected for exchange at any
time before 5:00 p.m. Pacific Standard Time on December 11, 2002. If this offer
is extended by us beyond that time, you can withdraw your options elected for
exchange at any time until the extended expiration of this offer. To withdraw
options elected for exchange, you must deliver to us a written notice of
withdrawal containing the required information and we must receive the
withdrawal notice before the election deadline. Providing us with a properly
completed and signed Notice of Election to Withdraw Options form, which has been
provided to you in connection with this offer, will constitute a proper written
notice of withdrawal. It is your responsibility to confirm that we have received
your withdrawal notice before the deadline. Once you have withdrawn options, you
can re-elect to exchange options only by again following the delivery procedures
described above.

    You can also withdraw your options elected for exchange after the expiration
of this offer if we have not provided notice that we have accepted options
elected for exchange by 9:00 p.m.
Pacific Standard Time on  January 9, 2003.  (Section 4)

    21. AM I ELIGIBLE TO RECEIVE FUTURE GRANTS IF I PARTICIPATE IN THIS
        EXCHANGE?

    Because of the accounting consequences, participants in this program are
ineligible for any additional stock option grants until after the replacement
grant date. After the replacement grant date, participants in this program will
be eligible for future stock option grants, if any. (Section 5)

    22. DOES MICREL PLAN TO MAKE ANY COMPANY-WIDE OPTION GRANTS BETWEEN THE
        CANCELLATION DATE AND THE REPLACEMENT GRANT DATE?

    We typically make grants of stock options to eligible employees on their
date of hire, in the summer or fall four years after their date of hire and
approximately annually thereafter. We refer to option grants made after an
employee's date of hire as "replenishment grants." Replenishment grants are not
guaranteed and are subject to the approval of our board of directors in their
sole and absolute discretion. Employees that do not elect to participate in the
offer to exchange may be eligible to receive their customary replenishment grant
for 2002 prior to December 31, 2002. Employees that do elect to participate in
the exchange offer, will not become eligible to receive any customary
replenishment grant for 2002 until after replacement grant date. (Section 5)

    23. IS THERE ANY TAX CONSEQUENCE TO MY PARTICIPATION IN THIS EXCHANGE?

    If you accept this offer you will not recognize income for federal income
tax purposes either at the time your exchanged options are cancelled or when the
new options are granted. However, we recommend that you consult with your own
tax advisor to determine the tax consequences of electing to exchange options
pursuant to this offer. (Section 12)



                                       5


    24. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE?

    We understand that this will be a challenging decision for all eligible
employees. THE PROGRAM DOES CARRY CONSIDERABLE RISK, AND THERE ARE NO GUARANTEES
OF OUR FUTURE STOCK PERFORMANCE OR THE PRICE OF OUR COMMON STOCK ON THE
REPLACEMENT GRANT DATE. So, the decision to participate must be each individual
employee's personal decision, and it will depend largely on each employee's
assumptions about the future overall economic environment, the performance of
the Nasdaq National Market and our own stock price, and our business. (Section
16)

    25. WHAT DO THE OFFICERS AND THE MEMBERS OF OUR BOARD OF DIRECTORS THINK OF
        THIS OFFER?

    Although our board of directors has approved this offer, neither the
officers nor the members of our board of directors make any recommendation as to
whether you should elect to exchange or refrain from exchanging your options.

    26. WHAT ARE THE CONDITIONS TO THIS OFFER?

    This offer is subject to a number of conditions as described throughout the
offer (which include, among other things, eligibility of options to be
exchanged, residency conditions and eligibility of participating employees), and
is further subject to the conditions described in Schedule A. This offer is not
conditioned upon a minimum aggregate number of options being elected for
exchange. (Schedule A)

                 SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS

    27. WHICH OPTIONS CAN BE EXCHANGED?

    If you are eligible to participate in this offer, you may only elect to
exchange options that are subject to one or more eligible option agreements that
were granted under our Stock Option Plans and that have an exercise price of at
least $13.00 per share. You may only elect to exchange all or none of the
options granted to you on the same grant date and at the same exercise price. In
addition, if you elect to exchange any options, then all options granted to you
during the six-month period ending on November 8, 2002 will also be
automatically exchanged, regardless of their exercise price, for new options
exercisable for the same number of shares of common stock that are accepted for
exchange and cancelled. (Section 1)

    28. CAN I EXCHANGE THE REMAINING PORTION OF AN OPTION THAT I HAVE ALREADY
        PARTIALLY EXERCISED?

    Yes, any remaining outstanding, unexercised eligible options can be
exchanged. (Section 1)

    29. CAN I SELECT WHICH PORTION OF AN OPTION TO EXCHANGE?

    No. You cannot partially exchange outstanding options subject to a single
grant. If you choose to exchange an option grant, all options within that grant
(that is, all options granted to you on the same grant date and at the same
exercise price) will be exchanged and cancelled.
(Section 1)

    30. CAN I EXCHANGE BOTH VESTED AND UNVESTED OPTIONS?

    Yes. You can exchange eligible options, whether or not they are vested. If
you do elect to exchange your options under this exchange offer, each new option
issued on the replacement grant date will be vested in the same ratio that the
cancelled options would have been vested and will continue to vest on the same
vesting schedule as those options elected for exchange. In the case of
non-exempt employees under the federal wage laws, options granted on the
replacement grant date will not be vested until the six month anniversary of the
replacement grant date, at which time the new options will become vested and
exercisable in the same ratio that the cancelled options would have been vested.
(Section 1)

    31. CAN I EXCHANGE OPTIONS THAT I HAVE ALREADY EXERCISED?

    No. This offer only pertains to options and does not apply in any way to
shares purchased, whether upon the exercise of options or otherwise. If you have
exercised an option in its entirety, that option is no longer outstanding and is
therefore not subject to this offer. If you have exercised an eligible option in
part, the remaining unexercised portion of that option is outstanding and can be
exchanged pursuant to this offer. Options for which you have



                                       6


properly submitted an exercise notice prior to the date this offer expires will
be considered exercised to that extent, whether or not you have received
confirmation of exercise for the shares purchased. (Section 1)

                    SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS

    32. HOW MANY NEW OPTIONS WILL I RECEIVE ON THE REPLACEMENT GRANT DATE?

    This offer to exchange contemplates a grant of new options in a ratio
equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled. That is, to the extent these
           individuals elect to participate in the offer, they will receive
           options exercisable for one-half the number of shares of common stock
           as the number of shares of common stock subject to the options
           elected for exchange; and

        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled. That is, to
           the extent these individuals elect to participate in the offer, they
           will receive options exercisable for two-thirds the number of shares
           of common stock as the number of shares of common stock subject to
           the options elected for exchange.

        -  Additionally, if an employee elects to exchange any options, then all
           options granted to that employee during the six-month period ending
           as of the commencement of the offer dated November 8, 2002, will also
           be automatically exchanged regardless of their exercise price. The
           new options granted in exchange for those automatically elected
           options will be exercisable for the same number of shares of common
           stock as the options that are automatically accepted for exchange and
           cancelled.

    New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. You will receive new stock options
subject to the terms described above and to adjustments for any stock splits,
stock dividends and similar events. Unless prevented by law or applicable
regulations, eligible options issued under our 1989 Stock Option Plan and our
1994 Stock Option Plan and exchanged for new options will be replaced with
options granted under our 1994 Stock Option Plan. Options issued under our 2000
Non-Qualified Stock Incentive Plan and exchanged for new options will be
replaced with options granted under our 2000 Non-Qualified Stock Incentive Plan.
Each new option will be granted pursuant to a new option agreement between you
and us. Except for the exchange ratio, the new exercise price and the new
termination date, the new option will have substantially similar terms and
conditions as the cancelled option. (Section 1)

    33. WHAT WILL BE MY NEW OPTION EXERCISE PRICE?

    The exercise price for the new options, which will be granted on the
replacement grant date, will be equal to the closing sales price of our common
stock as quoted on the Nasdaq National Market on the date preceding the
replacement grant date, as reported in the print edition of The Wall Street
Journal on the replacement grant date. BECAUSE WE WILL NOT GRANT NEW OPTIONS
UNTIL THE FIRST BUSINESS DAY THAT IS SIX MONTHS AND TWO DAYS AFTER THE DATE WE
CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER
EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU
OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO
ELECT TO EXCHANGE YOUR OPTIONS. (Section 2)

    34. WHEN WILL I RECEIVE MY NEW OPTION?

    We will grant the new options on the first business day that is six months
and two days from the date we cancel options elected for exchange. If we cancel
options elected for exchange on December 11, 2002, which is the scheduled
expiration of this offer, the replacement grant date of the new options will be
June 13, 2003. (Section 7)

    35. WILL MY NEW OPTIONS BE INCENTIVE STOCK OPTIONS OR NON-QUALIFIED STOCK
        OPTIONS?

    The answer depends on the type of stock option you are exchanging. If your
current eligible options are non-qualified stock options, your new options will
be granted as non-qualified stock options. If your current eligible options were
intended to qualify as incentive stock options, your new options will be granted
as incentive stock options to the maximum extent they qualify as incentive stock
options under the tax laws on the date of the grant.



                                       7


    For options to qualify as incentive stock options under the current tax
laws, the value of shares subject to options that first become exercisable by
the option holder in any calendar year cannot exceed $100,000, as determined
using the option exercise price. The excess value is deemed to be a
non-qualified stock option, which is an option that is not qualified to be an
incentive stock option under the current tax laws. If the exercise price of your
new options is equal to or less than the exercise price of the eligible options
you tender, the new options may qualify as incentive stock options to the extent
that the options tendered qualified as incentive stock options before being
tendered. If the new options have a higher exercise price than some or all of
your current eligible options, or if you receive additional incentive stock
options after you tender options for exchange but before we grant the new
options, or if the vesting of the new options overlaps with other grants of
incentive stock options, a portion of the new options may exceed the limits for
incentive stock options and will have to be granted as non-qualified stock
options. (Section 12)

    36. WHEN WILL THE NEW OPTIONS VEST?

    Each new option issued on the replacement grant date will be vested in the
same ratio that the cancelled options would have been vested and will continue
to vest on the same vesting schedule as those options elected for exchange. In
the case of non-exempt employees under the federal wage laws, options granted on
the replacement grant date will not be vested until the six month anniversary of
the replacement grant date, at which time the new options will become vested and
exercisable in the same ratio that the cancelled options would have been vested.
The new options will have a full ten year term beginning on the replacement
grant date.
(Section 7)

    37. WHAT WILL BE THE TERMS AND CONDITIONS OF MY NEW OPTION?

    Except for the exchange ratio, the new option exercise price and the new
termination date, the terms and conditions of the new options will be
substantially similar to the cancelled options. (Section 7)

    38. CAN I HAVE AN EXAMPLE OF A HYPOTHETICAL EXCHANGE?

Assumptions:
Original Grant Date:  January 31, 2000
Your Original Stock Option:  Non-qualified stock option to purchase 10,000
shares
Your Original Stock Option Price:  $31.62
Your Original Vesting Schedule:   20% of the number of options granted or in
this case 2,000 shares vest each year until fully vested on January 31, 2005.
Expiration Date of Exchange Offer: December 11, 2002
Hypothetical Stock Price on Replacement Grant Date, on or after June 13,
2003: $16.25
Prior exercise of options subject to grant: none
Shares vested on December 11, 2002: 4,000 shares
Shares that would have vested between December 11, 2002 and on or around June
13, 2003: 2,000 shares

    Using the above hypothetical assumptions for the sake of illustrating this
offer to exchange, we would cancel your original stock option on December 11,
2002. On the replacement grant date, which would be on June 13, 2003, we would
grant you a new option to purchase 6,666 shares our common stock (5,000 shares
for employees in the position of vice president or higher) at the closing sale
price of our common stock on the date preceding the replacement grant date. In
this example, using a purely hypothetical common stock price of $16.25, your new
exercise price would be $16.25.

    In the case of exempt employees under the federal wage laws, each new option
issued on the replacement grant date will be vested in the same ratio that the
cancelled options would have been vested and will continue to vest on the same
vesting schedule as those options elected for exchange. In this example, 3,999
shares (3,000 shares for employees in the position of vice president or higher)
subject to the new options will be vested on the replacement grant date, if
granted to an exempt employee and an additional 1,333 shares (1,000 shares for
employees in the position of vice president or higher) subject to the new
options will become vested on each of January 31, 2004 and January 31, 2005.

    In the case of non-exempt employees, under the federal wage laws, options
granted on the replacement grant date will not be vested until the six month
anniversary of the replacement grant date, at which time the new options will
become vested and exercisable in the same ratio that the cancelled options would
have been vested and will continue to vest on the same vesting schedule as those
options elected for exchange. In this example, 3,999 shares subject to the new
options will become vested on December 13, 2003, if granted to a non-exempt
employee and an



                                       8


additional 1,333 shares subject to the new options will become vested on each of
January 31, 2004 and January 31, 2005.

    39. WHAT HAPPENS IF MICREL IS SUBJECT TO A CHANGE IN CONTROL AFTER THE NEW
        OPTIONS ARE GRANTED?

    The new options will include the same vesting acceleration provisions, if
any, as the cancelled options. To obtain detailed change of control provisions
governing your options, you can refer to the Micrel 1989 Stock Option Plan, 1994
Stock Option Plan and/or 2000 Non-Qualified Stock Incentive Plan prospectus,
each of which are available upon request by contacting Andrea Belanger, Stock
Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or post to
Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or by sending an e-mail to
andrea.belanger@micrel.com.

    40. WHAT HAPPENS IF MICREL IS SUBJECT TO A CHANGE IN CONTROL BEFORE THE NEW
        OPTIONS ARE GRANTED?

    It is possible that, prior to the grant of new options, we might effect or
enter into an agreement such as a merger or other similar transaction. These
types of transactions could have substantial effects on our stock price,
including potentially substantial appreciation in the price of our common stock.
Depending on the structure of such a transaction, option holders participating
in the offer might be deprived of any further price appreciation in the common
stock associated with the new options. For example, if our stock was acquired in
a cash merger, the fair market value of our stock, and hence the price at which
we grant the new options, would likely be a price at or near the cash price
being paid for the common stock in the transaction. As a result of such a
transaction, it is possible that the exercise price of the new options may be
more than you might otherwise anticipate. In addition, in the event of an
acquisition of our company for stock, option holders participating in the offer
might receive options to purchase shares of a different issuer.

    We are also reserving the right, in the event of a merger or similar
transaction, to take any actions we deem necessary or appropriate to complete a
transaction that our board of directors believes is in the best interest of our
company and our stockholders. This could include terminating your right to
receive replacement options under this offer to exchange. If we were to
terminate your right to receive replacement options under this offer in
connection with such a transaction, eligible employees who have exchanged
options for cancellation pursuant to this offer would not receive options to
purchase securities of the acquiror or any other consideration for their
exchanged and cancelled options. (Section 2)

    41. ARE THERE OTHER CIRCUMSTANCES WHERE I WOULD NOT BE GRANTED NEW OPTIONS?

    Yes. Even if we accept your tendered options, we will not issue new options
to you if we are prohibited by applicable law or regulations from doing so. We
will use reasonable efforts to avoid such prohibition, but if these laws and
regulations are applicable on the first business day that is six months and two
days after we cancel the eligible options accepted for exchange, you will not be
granted new options. Additionally, you are only eligible to participate in this
exchange offer if you: (i) are an employee of Micrel on November 8, 2002, (ii)
are not a director, the Chief Executive Officer or the Chief Financial Officer
of Micrel, (iii) remain an eligible employee through the expiration of this
offer and (iv) hold at least one eligible option on November 8, 2002.
Furthermore, in the event of a merger or other circumstance described in
question 38 above, if in the best interests of our company and stockholders, we
may not be issuing new options (Section 11)

    42. AFTER THE REPLACEMENT GRANT DATE, WHAT HAPPENS IF MY OPTIONS END UP OUT
        OF THE MONEY AGAIN?

    We are conducting this offer only at this time considering the unusual stock
market conditions that have affected many companies throughout the country. This
offer is therefore considered a one-time offer and is not expected to be offered
again in the future. As your new stock options are valid for ten years from the
date of initial grant, subject to vesting, continued employment and residence in
the United States, the price of our common stock may appreciate over the long
term, even if your options are out of the money for some period of time after
the replacement grant date. HOWEVER, WE CAN PROVIDE NO ASSURANCE AS TO THE PRICE
OF OUR COMMON STOCK AT ANY TIME IN THE FUTURE. (Section 2)



                                       9


                                   THIS OFFER

1.  NUMBER OF OPTIONS; EXPIRATION TIME.

    Upon the terms and subject to the conditions of this offer, we will exchange
options to purchase shares of our common stock that are outstanding under our
Stock Option Plans for new options issued under our 1994 Stock Option Plan or
2000 Non-Qualified Stock Incentive Plan. Eligible options issued under our 1989
Stock Option Plan and our 1994 Stock Option Plan and exchanged for new options
will be replaced with options granted under our 1994 Stock Option Plan. Eligible
options issued under our 2000 Non-Qualified Stock Incentive Plan and exchanged
for new options will be replaced with options granted under our 2000
Non-Qualified Stock Incentive Plan. We will exchange all eligible outstanding
options held by eligible employees under the 1989 Stock Option Plan, the 1994
Stock Option Plan or the 2000 Non-Qualified Stock Incentive Plan that are
properly elected for exchange and not validly withdrawn in accordance with
Section 4 of this offer before the "expiration time," as defined below.

    You are eligible to participate in the exchange program only if you:

        -  are an employee of Micrel on November 8, 2002;

        -  reside in the United States;

        -  are not a director, the Chief Executive Officer or the Chief
           Financial Officer of Micrel;

        -  remain an eligible employee through the expiration of this offer; and

        -  hold at least one eligible option on November 8, 2002.

    If you elect to exchange options you will not be eligible to receive new
options unless you continue to be employed by Micrel and continue to reside in
the United States through the replacement grant date.

    ACCORDINGLY, IF YOU ARE NOT AN ELIGIBLE EMPLOYEE OF MICREL FROM THE DATE YOU
ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL
NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR ELECTED OPTIONS THAT HAVE BEEN
ACCEPTED FOR EXCHANGE AND YOU WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR
ELECTED OPTIONS EVEN IF THE OPTIONS YOU ELECTED TO EXCHANGE WERE FULLY OR
PARTIALLY VESTED.

    If you are eligible and choose to participate, you may only elect to
exchange options (the terms "option" or "options" refer to an entire option
grant), subject to one or more eligible option agreements, that have an exercise
price of at least $13.00 per share. That is, you must exchange all or none of
the options granted to you on a single grant date at the same exercise price. If
you so elect to participate, then all options granted to you during the
six-month period ending as of the commencement of the offer dated November 8,
2002, will also be automatically exchanged, regardless of their exercise price,
for new options exercisable for the same number of shares of common stock that
are accepted for exchange and cancelled.

    This offer to exchange contemplates a grant of new options in a ratio
equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled. That is, to the extent these
           individuals elect to participate in the offer, they will receive
           options exercisable for one-half the number of shares of common stock
           as the number of shares of common stock subject to the options
           elected for exchange; and

        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled. That is, to
           the extent these individuals elect to participate in the offer, they
           will receive options exercisable for two-thirds the number of shares
           of common stock as the number of shares of common stock subject to
           the options elected for exchange.

        -  Additionally, if an employee elects to exchange any options, then all
           options granted to that employee during the six-month period ending
           as of the commencement of the offer dated November 8, 2002, will also
           be automatically exchanged regardless of their exercise price. The
           new options granted in exchange for those automatically elected
           options will be exercisable for the same number of shares of common
           stock as the options that are automatically accepted for exchange and
           cancelled.



                                       10


    New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. The number of shares of common stock
that will be subject to the new options will be subject to adjustment for any
stock splits, stock dividends and similar events occurring between the date the
options are accepted for exchange and the replacement grant date. Eligible
options issued under our 1989 Stock Option Plan and our 1994 Stock Option Plan
and exchanged for new options will be replaced with options granted under our
1994 Stock Option Plan. Eligible options issued under our 2000 Non-Qualified
Stock Incentive Plan and exchanged for new options will be replaced with options
granted under our 2000 Non-Qualified Stock Incentive Plan. All new options will
be subject to the terms of the 1994 Stock Option Plan or 2000 Non-Qualified
Stock Incentive Plan, pursuant to a new option agreement between us and you.
Each new option issued on the replacement grant date will be vested in the same
ratio that the cancelled options would have been vested and will continue to
vest on the same vesting schedule as those options elected for exchange, except
that in the case of non-exempt employees under the federal wage laws, options
granted on the replacement grant date will not be vested until the six month
anniversary of the replacement grant date, at which time the new options will
become vested and exercisable in the same ratio that the cancelled options would
have been vested. In addition, the new options will have a full ten year term
beginning on the replacement grant date. Finally, the exercise price of the new
options will be equal to the closing sales price of our common stock as quoted
on the Nasdaq National Market on the date preceding the replacement grant date,
as reported in the print edition of The Wall Street Journal on the replacement
grant date.

    Each non-qualified stock option elected for exchange will be replaced with a
non-qualified stock option. Each stock option intended to qualify as an
incentive stock option, that is elected for exchange will be replaced with an
incentive stock option to the maximum extent it qualifies as an incentive stock
option under the tax laws on the date of the grant. Please refer to Section 12
"Material Federal Income Tax Consequences" for a more detailed discussion of the
relevant federal tax laws in connection with the grant of incentive stock
options.

    You should note, this program does carry considerable risk, and there are no
guarantees of our future stock performance or the price of our common stock on
the replacement grant date.

    The term "expiration time" means 5:00 p.m. Pacific Standard Time on December
11, 2002, unless and until we, in our discretion, extend the period of time
during which this offer will remain open, in which event the term "expiration
time" refers to the latest time and date at which this offer, as so extended,
expires. See Section 13 of this offer to exchange for a description of our
rights to extend, delay, terminate and amend this offer.

    If we decide to take any of the following actions, we will publish notice or
otherwise notify you of such action in writing after the date of such notice:

        (a) we increase or decrease the amount of consideration offered for the
options;

        (b) we decrease the number of options eligible to be elected for
exchange in this offer; or

        (c) we increase the number of options eligible to be elected for
exchange in this offer by an amount that exceeds 2% of the shares of common
stock issuable upon exercise of the options that are subject to this offer
immediately prior to the increase.

    If this offer is scheduled to expire at any time earlier than the expiration
of a period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given in the
manner specified in Section 13 of this offer, we will extend the offer so that
the offer is open at least ten business days following the publication, sending
or giving of notice.

    For purposes of this offer, a "business day" means any day other than
Saturday, Sunday or a federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Eastern Standard Time.

2.  PURPOSE OF THIS OFFER.

    We issued the options outstanding under the Stock Option Plans to promote
our long-term growth and success and the creation of stockholder value by:

    -   encouraging employees to focus on critical long-range objectives;

    -   encouraging the attraction and retention of employees with exceptional
        qualifications; and

    -   linking employee's interests directly to those of stockholders through
        increased stock ownership.



                                       11


    Many of our outstanding options, whether or not they are currently
exercisable, have exercise prices that are significantly higher than the current
and recent trading prices of our common stock. We believe these options are
unlikely to be exercised in the foreseeable future and therefore do not serve
their original purpose. By making this offer to exchange outstanding options for
new options that will have an exercise price equal to the market value of our
common stock on the replacement grant date, we intend to provide our eligible
employees with the benefit of owning options that over time may have a greater
potential to increase in value. In addition, we hope to create better
performance incentives for employees and thereby maximize stockholder value.
HOWEVER, THIS PROGRAM IS NOT GUARANTEED TO ACCOMPLISH THESE OBJECTIVES,
CONSIDERING THE EVER-PRESENT RISKS ASSOCIATED WITH A VOLATILE AND UNPREDICTABLE
STOCK MARKET.

    We may engage in transactions in the future which could significantly change
our structure, ownership, organization or management or the make-up of our board
of directors and which could significantly affect the price of our stock. If we
engage in such a transaction or transactions prior to the date we grant the new
options, our stock price could increase (or decrease) and the exercise price of
the new options could be higher (or lower) than the exercise price of eligible
options you elect to have cancelled as part of this offer. The exercise price of
any new options granted to you in return for options you elect to exchange will
be equal to the closing sales price of our common stock as quoted on the Nasdaq
National Market on the date preceding the replacement grant date, as reported in
the print edition of The Wall Street Journal on the replacement grant date. You
will be at risk of any increase in our stock price during the period prior to
the replacement grant date for these and other reasons.

    Although we are not currently contemplating a merger or similar transaction
that would result in a change in control of our company, we are reserving the
right, in the event of a merger or similar transaction, to take any actions we
deem necessary or appropriate to complete a transaction that our board of
directors believes is in the best interest of our company and our stockholders.
This could include terminating your right to receive replacement options under
this offer. If we were to terminate your right to receive replacement options
under this offer in connection with such a transaction, eligible employees who
have exchanged options for cancellation pursuant to this offer would not receive
options to purchase securities of the acquiror or any other consideration for
their options elected for exchange.

    We continually evaluate and explore strategic opportunities as they arise,
including business combination transactions, strategic partnerships, capital
infusions and the purchase or sale of assets. At any given time we may be
engaged in discussions or negotiations with respect to various corporate
transactions. Subject to the foregoing, and except as otherwise disclosed in
this offer or in our filings with the Securities and Exchange Commission (the
"SEC"), as of the date hereof, we have no plans, proposals or negotiations that
relate to or would result in:

        (a) any extraordinary transaction, such as a merger, reorganization or
liquidation, involving us;

        (b) any purchase, sale or transfer of a material amount of our assets;

        (c) any material change in our present dividend rate or policy, or our
indebtedness or capitalization;

        (d) any change in our present board of directors or management,
including, but not limited to, any plans or proposals to change the number or
the term of directors or to fill any existing board vacancies or to change any
material term of the employment contract of any executive officer;

        (e) any other material change in our corporate structure or business;

        (f) our common stock being delisted from any national securities
exchange or ceasing to be authorized for quotation in an automated quotation
system operated by a national securities association;

        (g) our common stock becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act;

        (h) the suspension of our obligation to file reports pursuant to Section
15(d) of the Securities Exchange Act;

        (i) the acquisition by any person of any of our securities or the
disposition of any of our securities; or

        (j) any change in our certificate of incorporation or bylaws, or any
actions which could impede the acquisition of control of us by any person.

    NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER
YOU SHOULD ELECT TO EXCHANGE YOUR OPTIONS, NOR HAVE WE AUTHORIZED ANY



                                       12


PERSON TO MAKE ANY SUCH RECOMMENDATION. YOU ARE URGED TO EVALUATE CAREFULLY ALL
OF THE INFORMATION IN THIS OFFER TO EXCHANGE AND TO CONSULT YOUR OWN INVESTMENT
AND TAX ADVISORS. YOU MUST MAKE YOUR OWN DECISION WHETHER TO ELECT TO EXCHANGE
YOUR OPTIONS.

3.  PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS.

    Proper Exchange of Options. To validly elect to exchange your options
pursuant to this offer, you must, in accordance with the terms of the election
form, properly complete, duly execute and deliver to us the election form. We
will only accept a paper copy of the election form. Delivery by e-mail will not
be accepted. We must receive the election form in our office by personal
delivery or by internal mail, facsimile ((408) 435-2400) or post. To participate
in the exchange offer program you should deliver your completed election form to
Micrel, Inc., Stock Administrator, 1849 Fortune Drive, San Jose, CA 95131 Attn:
Andrea Belanger before the expiration time. Within five business days after
receiving your election form, we will confirm our receipt of your election form.

    If you do not turn in your election form by the expiration time, you will
not be eligible to participate in the option exchange, and all stock options
currently held by you will remain intact at their original price and with their
original terms.

    THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING ELECTION CONCERNING
EXCHANGE OF STOCK OPTIONS FORMS AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE
ELECTION AND RISK OF THE ELECTING OPTION HOLDER. IT IS YOUR RESPONSIBILITY TO
ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY TO AND RECEIPT BY US.

    Determination of Validity; Rejection of Options; Waiver of Defects; No
Obligation to Give Notice of Defects. We will determine, in our discretion, all
questions as to the validity, form, eligibility, including time of receipt, and
acceptance of any documentation relating to the exchange of options. Our
determination of these matters will be final and binding on all parties. We
reserve the right to reject any or all elections to exchange options that we
determine are not properly submitted for exchange, not eligible for exchange
under the terms of the offer to exchange or that we determine are unlawful to
accept. Otherwise, we will accept properly and timely elected options which are
not validly withdrawn. We also reserve the right to waive any of the conditions
of this offer or any defect or irregularity in any election with respect to any
particular options or any particular option holder. In the event that we waive
any condition, defect or irregularity with respect to a particular option or
option holder, we will also waive such condition, defect or irregularity with
respect to all options and option holders. No election to exchange options will
be deemed to have been properly made until all defects or irregularities have
been cured by the electing option holder or waived by us. Neither we nor any
other person is obligated to give notice of any defects or irregularities in
elections, nor will anyone incur any liability for failure to give any such
notice.

    Our Acceptance Constitutes an Agreement. Your election to exchange options
pursuant to the procedures described above constitutes your acceptance of the
terms and conditions of this offer. OUR ACCEPTANCE OF THE OPTIONS THAT YOU ELECT
TO EXCHANGE PURSUANT TO THIS OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN
US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THIS OFFER.

    Subject to our rights to extend, terminate and amend this offer, we
currently expect that we will accept promptly after the expiration of this offer
all properly elected options that have not been validly withdrawn.

4.  WITHDRAWAL RIGHTS.

    You can only withdraw your elected options in accordance with the provisions
of this Section 4.

    You can withdraw your elected options at any time before 5:00 p.m. Pacific
Standard Time on Wednesday, December 11, 2002 (the "expiration time"). If the
expiration time is extended by us beyond that time, you can withdraw your
elected options at any time until the extended expiration of this offer.

    You can also withdraw your options elected for exchange after the expiration
of this offer if we have not provided notice that we have accepted options
elected for exchange by 9:00 p.m. Pacific Standard Time on January 9, 2003.

    To validly withdraw elected options, you must deliver to us at the address
set forth in Section 3 above a written notice of withdrawal with the required
information listed below and we must RECEIVE the notice of withdrawal



                                       13


before the expiration time. We will only accept a paper copy of your notice of
withdrawal. Delivery by e-mail will not be accepted.

    The notice of withdrawal must specify the name of the option holder who is
electing to withdraw the options, the grant date, exercise price, the number of
option shares subject to each option to be withdrawn and the total number of
option shares to be withdrawn. Except as described in the following sentence,
the notice of withdrawal must be executed by the option holder who elected to
exchange the options sought to be withdrawn, exactly as such option holder's
name appears on the option agreement or agreements evidencing such options. If
the signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or another person acting in a
fiduciary or representative capacity, the signor's full title and proper
evidence of the authority of such person to act in such capacity must be
indicated on the notice of withdrawal. Providing us with a properly completed
and signed Notice of Election to Withdraw form, which has been provided to you
in connection with this offer, will constitute a proper notice of withdrawal. It
is your responsibility to confirm that we received your withdrawal notice before
the expiration time. If you elect to withdraw options, you must withdraw all or
none of the options granted to you on the same grant date and at the same
exercise price.

    You cannot rescind any withdrawal, and any options you withdraw will
thereafter be deemed not properly elected for exchange for purposes of this
offer unless you properly re-elect to exchange those options before the
expiration time by following the procedures described in Section 3.

    Neither Micrel nor any other person is obligated to give notice of any
defects or irregularities in any notice of withdrawal, nor will anyone incur any
liability for failure to give any such notice. We will determine, in our
discretion, all questions as to the form and validity, including time of
receipt, of notices of withdrawal. Our determination of these matters will be
final and binding.

5.  ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS.

    Upon the terms and subject to the conditions of this offer, including those
conditions listed on Schedule A, and as promptly as practicable following the
expiration of this offer, we will accept for exchange and cancel options
properly elected for exchange and not validly withdrawn before the expiration
time. Once your options have been accepted for exchange, you will receive a
rights letter promptly following the expiration of this offer confirming that
your options have been accepted for exchange and cancelled and summarizing your
rights as a participant in the exchange program, including the number of shares
of our common stock your new options will entitle you to purchase.

    If your options are properly elected for exchange and accepted by us, we
will cancel your options shortly following the expiration of this offer, and you
will be granted new options on the replacement grant date. The replacement grant
date will be on the first business day that is six months and two days from the
date we cancel the options accepted for exchange.

    If we accept options you elect to exchange in this offer, you will be
ineligible until after the replacement grant date to receive any additional
stock option grants for which you may have otherwise been eligible. We believe
that this restriction will allow us to avoid incurring a compensation expense
against our earnings because of accounting rules that could apply, as a result
of this offer, to these interim option grants.

    We typically make grants of stock options to eligible employees on their
date of hire, in the summer or fall four years after their date of hire and
approximately annually thereafter. We refer to option grants made after an
employee's date of hire as "replenishment grants." Replenishment grants are not
guaranteed and are subject to the approval of our board of directors in their
sole and absolute discretion. Employees that do not elect to participate in the
offer to exchange may be eligible to receive their customary replenishment grant
for 2002 prior to December 31, 2002. Employees that do elect to participate in
the exchange offer, will not become eligible to receive any customary
replenishment grant for 2002 until after replacement grant date.

    This offer to exchange contemplates a grant of new options in a ratio
equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled. That is, to the extent these
           individuals elect to participate in the offer, they will receive
           options exercisable for one-half the number of shares of common stock
           as the number of shares of common stock subject to the options
           elected for exchange; and



                                       14


        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled. That is, to
           the extent these individuals elect to participate in the offer, they
           will receive options exercisable for two-thirds the number of shares
           of common stock as the number of shares of common stock subject to
           the options elected for exchange.

        -  Additionally, if an employee elects to exchange any options, then all
           options granted to that employee during the six-month period ending
           as of the commencement of the offer dated November 8, 2002, will also
           be automatically exchanged regardless of their exercise price. The
           new options granted in exchange for those automatically elected
           options will be exercisable for the same number of shares of common
           stock as the options that are automatically accepted for exchange and
           cancelled.

    New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. The number of shares of common stock
that will be subject to the new options will be subject to adjustment for any
stock splits, stock dividends and similar events occurring between the date the
options are accepted for exchange and the replacement grant date.

    ACCORDINGLY, IF YOU ARE NOT AN ELIGIBLE EMPLOYEE OF MICREL FROM THE DATE YOU
ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL
NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR OPTIONS THAT HAVE BEEN ACCEPTED
FOR EXCHANGE AND YOU WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR ELECTED
OPTIONS, EVEN IF THE OPTIONS THAT YOU ELECTED TO EXCHANGE WERE FULLY OR
PARTIALLY VESTED.

    Therefore, if you leave Micrel voluntarily, involuntarily or for any other
reason before your new replacement option is granted you will not have a right
to any stock options that were previously cancelled and you will not have a
right to the options that would have been granted on the replacement grant date.
Also, if you change your place of residence to a country other than the United
States, you will not have a right to any stock options that were previously
cancelled and you will not have a right to any stock options that would have
been granted on the replacement grant date.

    For purposes of this offer, we will be deemed to have accepted for exchange
options that are validly elected for exchange and not properly withdrawn, when
we give written notice to the option holders of our acceptance for exchange of
such options, such notice may be given by press release, letter or delivered via
e-mail. Subject to our rights to extend, terminate and amend this offer, we
currently expect that you will receive your new option as well as the new option
agreement within three weeks of the replacement grant date.

6.  PRICE RANGE OF THE COMMON STOCK UNDERLYING THE OPTIONS.

    Our common stock is quoted on the Nasdaq National Market under the symbol
"MCRL." The following table shows, for the periods indicated, the high and low
sales prices per share of our common stock as quoted on the Nasdaq National
Market.



                                                             HIGH       LOW
                                                           --------    ------
                                                                 
         FISCAL YEAR ENDED DECEMBER 31, 2000

         First Quarter*............................         127.81     53.50
         Second Quarter*...........................         110.19     59.22
         Third Quarter.............................          78.63     39.88
         Fourth Quarter............................          67.31     29.31

         FISCAL YEAR ENDED DECEMBER 31, 2001

         First Quarter.............................          51.12     23.25
         Second Quarter............................          41.12     22.94
         Third Quarter.............................          35.80     17.49
         Fourth Quarter............................          32.99     17.10

         FISCAL YEAR ENDED DECEMBER 31, 2002

         First Quarter.............................          30.26     18.90




                                       15


                                                                 
         Second Quarter...........................           25.79     14.58
         Third Quarter ............................          16.20      5.16
         Fourth Quarter (October 1, 2002 through
         November 6, 2002).........................           9.60      4.33



         * based on values prior to June 28, 2000 2:1 stock split

    As of November 6, 2002, the last reported sale price of our common stock, as
quoted on the Nasdaq National Market, was $9.14 per share.

WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK
BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS.

7.  SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS.

    Consideration. We will issue new options, subject to applicable laws and
regulations, to purchase common stock under our 1994 Stock Option Plan or 2000
Non-Qualified Stock Incentive Plan. Eligible options issued under our 1989 Stock
Option Plan and our 1994 Stock Option Plan and exchanged for new options will be
replaced with options granted under our 1994 Stock Option Plan. Eligible options
issued under our 2000 Non-Qualified Stock Incentive Plan and exchanged for new
options will be replaced with options granted under our 2000 Non-Qualified Stock
Incentive Plan.

    This offer to exchange contemplates a grant of new options in a ratio
equivalent to:

        -  with respect to employees who currently hold the position of vice
           president or higher, one new option granted for every two options
           elected for exchange and cancelled; and

        -  with respect to all other employees, two new options granted for
           every three options elected for exchange and cancelled.

        -  Additionally, if you elect to exchange any options, then all options
           granted to you during the six-month period ending as of the
           commencement of the offer dated November 8, 2002, will also be
           automatically exchanged, regardless of their exercise price, for new
           options exercisable for the same number of shares of common stock
           that are accepted for exchange and cancelled.

    New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. The number of shares of common stock
that will be subject to the new options will be subject to adjustment for any
stock splits, stock dividends and similar events occurring between the date the
options are accepted for exchange and the replacement grant date.

    Terms of New Options. As a condition to the issuance of the new option we
will enter into a new option agreement with each option holder who has elected
to exchange options in this offer. Each new option issued on the replacement
grant date will be vested in the same ratio that the cancelled options would
have been vested and will continue to vest on the same vesting schedule as those
options elected for exchange, except that in the case of non- exempt employees
under the federal wage laws options granted on the replacement grant date will
not be vested until the six month anniversary of the replacement grant date, at
which time the new options will become vested and exercisable in the same ratio
that the cancelled options would have been vested. Except for the exchange
ratio, the new option exercise price and the new termination date, the terms and
conditions of the new options will be substantially similar to the terms and
conditions of the options elected for exchange. Additionally, the new options
will have a full ten year term beginning on the replacement grant date.

    The terms and conditions of your current options are set forth in the Micrel
1989 Stock Option Plan, the 1994 Stock Option Plan or 2000 Non-Qualified Stock
Incentive Plan, depending upon the plan under which the option occurred and the
stock option agreement you entered into in connection with each grant. The terms
and conditions of the Stock Option Plans are summarized in the plan prospectus
pertaining to each plan, prepared by us and available upon request by contacting
Andrea Belanger, Stock Administrator of Micrel by internal mail, facsimile
((408) 435-2400) or post to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131
or by sending an e-mail to andrea.belanger@micrel.com.



                                       16


    Federal Income Tax Consequences of Options. You should refer to section 12
for a discussion on U.S. federal income tax consequences of the new options, as
well as the consequences of accepting or rejecting the new options under this
offer to exchange.

    WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THIS OFFER.

    Registration of Option Shares. All shares of common stock issuable upon
exercise of options under the Stock Option Plans, including the shares that will
be issuable upon exercise of all new options, have been registered under the
Securities Act of 1933 on one or more registration statements on Form S-8 filed
with the Securities and Exchange Commission. Unless you are considered an
"affiliate" of Micrel, you will be able to sell your the shares you acquired
upon option exercise, free of any transfer restrictions under SEC Rule 144
promulgated under the Securities Act of 1933.

    IMPORTANT NOTE. THE STATEMENTS IN THIS OFFER CONCERNING THE STOCK OPTION
PLANS AND THE NEW OPTIONS ARE MERELY SUMMARIES AND DO NOT PURPORT TO BE
COMPLETE. THE STATEMENTS ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO, ALL PROVISIONS OF THE STOCK OPTION PLANS AND THE FORM OF STOCK
OPTION AGREEMENT UNDER EACH STOCK OPTION PLAN. PLEASE CONTACT US AT MICREL,
INC., 1849 FORTUNE DRIVE, SAN JOSE, CA 95131 ATTN: ANDREA BELANGER, TO RECEIVE A
COPY OF THE 1989 STOCK OPTION PLAN, THE 1994 STOCK OPTION PLAN OR THE 2000
Non-Qualified Stock Incentive Plan, PROSPECTUS OR FORM OF STOCK OPTION
AGREEMENT.

8.  INFORMATION CONCERNING MICREL

    General. We design, develop, manufacture and market a range of
high-performance analog power integrated circuits and mixed-signal and digital
integrated circuits. We currently ship over 1,400 standard products an have
derived the majority of our product revenue for the year ended December 31, 2002
from sales of standard analog integrated circuits for power management. These
analog power circuits are used in a wide variety of electronic products,
including those in the computer, telecommunications and industrial markets. In
addition, we manufacture custom analog and mixed-signal circuits and provide
wafer foundry services for a diverse range of customers who produce electronic
systems for communications, consumer and military applications.

    In addition to power and thermal management products, we also offer a family
of highly integrated RF products. These QwikRadio products enable customers to
develop wireless control systems significantly improving the consumer experience
of their products. Applications for the QwikRadio products include remote
keyless entry for automobiles, TV remote controls, wireless game controllers,
keyboards and mice.

    Stock Repurchase Program. On February 12, 2002, our Board of Directors
announced a stock repurchase program under which we may purchase up to
$20,000,000 of our common stock in accordance with Rule 10b5-1 of the Securities
and Exchange Act. On July 24, 2002, our Board of Directors expanded the stock
repurchase program by authorizing the repurchase of up to $40,000,000 of our
common stock. The stock repurchase program is scheduled to be terminated on
December 31, 2002. Shares of our common stock purchased pursuant to the
repurchase program are used to offset dilution from the Company's stock option
plans, employee stock purchase plans and 401(k). As of November 6, 2002,
$36,391,044 have been used to repurchase 2,639,300 shares of our common stock.

    Selected Financial Information.

    The following selected consolidated financial data for the fiscal years
ended December 31, 2001 and 2000, the six months ended August 31, 2002 and 2001
and as of December 31 and August 31, 2001 and 2000 have been derived from our
consolidated financial statements. The information presented below should be
read together with our consolidated financial statements and the notes related
thereto as well as the section of our Annual Report on Form 10-K entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations.



                                       17




                                                                                  SIX MONTHS ENDED
                                                                             ---------------------------
                                            YEAR ENDED DECEMBER 31,                  SEPTEMBER 30
                                          ---------------------------        ---------------------------
                                             2001              2000             2002              2001
                                          ---------         ---------        ---------         ---------
                                             (in thousands, except              (in thousands, except
                                                per share data)                    per share data)
                                                                                   
INCOME STATEMENT DATA
    Net sales ....................        $ 217,808         $ 346,335        $ 103,688         $ 125,725
    Cost of goods sold ...........          126,242           149,083           64,816            67,004
    Gross profit .................           91,566           197,252           38,872            58,721
                                          =========         =========        =========         =========
    Income from operations .......          (11,068)          103,672           (9,420)              983
    Net income (loss) ............              552            73,307           (3,711)            1,033
    Weighted average shares
    outstanding
        Basic ....................           91,888            89,242           93,045            91,412
        Diluted ..................           98,092            98,186           93,045            98,188
    Net income (loss) per share
        Basic ....................              .01               .82             (.04)              .01
        Diluted ..................              .01               .75             (.04)              .01





                                                        AT DECEMBER 31,                  AT JUNE 30,
                                                     2001            2000            2002            2001
                                                  ---------       ---------       ---------       ---------
                                                    (in thousands, except           (in thousands, except
                                                       per share data)                  per share data)

                                                                                      
BALANCE SHEET DATA
    Cash and cash equivalents .............        $130,406        $ 86,137        $118,739        $124,517
    Working capital .......................         196,940         172,768         192,900         179,874
    Total assets ..........................         354,813         359,748         344,561         358,968
    Total long term-term liabilities ......           5,200           9,211           7,549           6,958
    Total stockholders' equity ............         313,330         281,835         302,588         299,645
    Book value per share ..................            3.38            3.11            3.26            3.22



    The financial information in our Annual Report on form 10-K for the fiscal
year ended December 31, 2001 and in our Quarterly Report for the period ended
June 30, 2002 is incorporated herein by reference. See "Additional Information"
under section 15 for instructions on how you can obtain copies of our SEC
reports that contain our audited financial statements and unaudited financial
data.

    Our principal executive offices are located at 2180 Fortune Drive, San Jose,
CA 95131 and our telephone number is (408) 944-0800.

9.  INTERESTS OF DIRECTORS, OFFICERS AND AFFILIATES; TRANSACTIONS AND
    ARRANGEMENTS CONCERNING THE OPTIONS.

    A list of our directors and executive officers is attached to this offer to
exchange as Schedule B.

    Except as otherwise described above, there have been no transactions in
options to purchase our common stock or in our common stock which were effected
during the past 60 days by Micrel, or to our knowledge, by any executive
officer, director, or affiliate of Micrel. For more detailed information on the
beneficial ownership of our common stock, you can consult the beneficial
ownership table on page 3 of our definitive proxy statement for our 2002 annual
meeting of stockholders.

    As of November 6, 2002, our executive officers and directors (17 persons) as
a group held options outstanding under the Stock Option Plans to purchase a
total of 4,144,176 shares of our common stock. Additionally, these executive
officers and directors held 23,716,910 shares of our outstanding common stock,
which together with the number of shares of common stock subject to the options
represented approximately 26.63% of the aggregate of our outstanding shares of
our common stock and the shares subject to all options outstanding under the
Stock Option Plans as of that date. As of November 6, 2002, our executive
officers eligible to participate in the offer (11 persons) as a group held
eligible options outstanding under the Stock Option Plans to purchase a total of
1,341,342 shares of our common stock. This number represented approximately
23.3% of the shares subject to all eligible options outstanding under the Stock
Option Plans as of that date.



                                       18


10. STATUS OF OPTIONS ACQUIRED BY US IN THIS OFFER; ACCOUNTING CONSEQUENCES OF
    THIS OFFER.

    Options designated to be exchanged under this program will be cancelled on
December 11, 2002, unless this offer is extended by us, in which case such
options will be cancelled on the expiration of the offer as extended. The shares
of common stock subject to options that were issued under the 1989 Stock Option
Plan will not be available for further issuance. The shares of common stock
subject to the options that were issued under the 1994 Stock Option Plan and
2000 Non-Qualified Stock Incentive Plan will be returned to the pool of shares
available for the grant of new options and for issuance of shares upon the
exercise of new options under the 1994 Stock Option Plan and 2000 Non-Qualified
Stock Incentive Plan, respectively.

    We believe that Micrel will not incur any additional compensation expense
solely as a result of the transactions contemplated by this offer because:

    -   we will not grant any new options until the first business day that is
        six months and two days after the date that we accept and cancel options
        elected for exchange; and

    -   the exercise price of all new options will equal the market value of the
        common stock on the date we grant the new options.

    If we were to grant any options to any option holder before six months and
one day following the cancellation of options elected for exchange, our grant of
new options to the electing option holder would be treated for financial
reporting purposes as a variable award to the extent that the number of shares
subject to the new options is equal to or less than the number of the option
holder's option shares elected for exchange and to the extent the per share
exercise price of such options is less than the per share exercise price of the
options elected for exchange by such holder. In this event, we would be required
to record as compensation expense the amount by which the market value of the
shares subject to the new options exceeds the exercise price of those shares.
This compensation expense would accrue as a variable accounting charge to our
earnings over the period when the new options are outstanding. Accordingly, we
would have to adjust this compensation expense periodically during the option
term based on increases or decreases in the market value of the shares subject
to the new options.

    Certain employee stock options that were granted prior to December 21, 2001
have been previously determined to be compensatory per APB 25 and deferred stock
compensation expense has been recorded on Micrel's financial statements for
these options. Should any of these options be tendered for cancellation and
exchange, all unrecognized deferred compensation expense associated with the
cancelled options will accelerate to the period of cancellation. Based on an
expected cancellation date of December 11, 2002, a significant charge may be
recorded by Micrel in the fourth quarter of 2002 related to the acceleration of
non-cash, deferred stock compensation expense associated with options cancelled
under this exchange offer. The size of the charge will depend on the percentage
of employee acceptance of this offer and the actual number of stock options with
deferred stock compensation expense that are cancelled.

11. LEGAL MATTERS; REGULATORY APPROVALS.

    We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our exchange of
options and issuance of new options as contemplated by this offer, or of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
the acquisition or ownership of our options as contemplated herein. Should any
such approval or other action be required, we presently contemplate that we will
undertake commercially reasonable steps to seek such approval or take such other
action. We are unable to predict whether we may in the future determine that we
are required to delay the acceptance of options for exchange pending the outcome
of any such matter. We cannot assure you that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that the failure to obtain any such approval or other action might not result
in adverse consequences to our business. Our obligation under this offer to
accept options elected for exchange and to issue new options for options elected
for exchange is subject to conditions, including the conditions described in
Schedule A.

    We may be prohibited by applicable laws or regulations from granting new
options on the first business day that is six months and two days from the date
that we cancel the eligible options accepted for exchange. We will not issue new
options to you if we are prohibited by applicable law or regulations from doing
so. We will use reasonable efforts to avoid such prohibition, but if these laws
and regulations are applicable on the first business day



                                       19


that is six months and two days after we cancel the eligible options accepted
for exchange, you will not be granted new options at such time. If we are unable
to issue the new options on the replacement grant date, we will continue to make
commercially reasonable efforts to grant the new options, for a period of six
months following the replacement grant date, upon the termination of the legal
prohibition against the issuance of the new options. Additionally, you are only
eligible to participate in this exchange offer if you: (i) are an employee of
Micrel on November 8, 2002, (ii) are not a director, the Chief Executive Officer
or the Chief Financial Officer of Micrel, (iii) remain an eligible employee
through the expiration of this offer and (iv) hold at lease one eligible option
on November 8, 2002.

12. MATERIAL FEDERAL INCOME TAX CONSEQUENCES.

    The following is a general summary of the material U.S. federal income tax
consequences of the exchange of options under the offer. This discussion is
based on the Internal Revenue Code, its legislative history, Treasury
Regulations and administrative and judicial interpretations as of the date of
the offer, all of which may change, possibly on a retroactive basis. This
summary does not discuss all of the tax consequences that may be relevant to you
in light of your particular circumstances, nor is it intended to apply in all
respects to all categories of option holders.

    If you exchange outstanding incentive or non-qualified stock options for new
options, you will not be required to recognize income for federal income tax
purposes at the time of the exchange. We believe that the exchange will be
treated as a non-taxable exchange.

    At the date of grant of the new options, you will not be required to
recognize additional income for federal income tax purposes. The grant of
options is not recognized as taxable income. The following discussion will allow
you to compare the material features of incentive stock options with those of
non-qualified stock options.

    WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THIS OFFER.

    Federal Income Tax Consequences for Outstanding Incentive Stock Options. We
do not believe that our offer to you will change any of the terms of your
eligible stock options intended to qualify as incentive stock options at their
date of grant if you do not accept the offer. If you choose not to accept this
offer, it is possible that the IRS would decide that your right to exchange your
incentive stock options under this offer is a "modification" of your incentive
stock options, even if you do not exchange the options. A successful assertion
by the IRS that the options are modified could extend the options' holding
period to qualify for favorable tax treatment and cause a portion of your
incentive stock options to be treated as non-qualified stock options.

    Under current law you should not have realized taxable income when the stock
options intended to qualify as incentive stock options were granted to you under
the option plans. In addition, you generally will not realize taxable income
when you exercise an incentive stock option. However, your alternative minimum
taxable income will be increased by the amount that the aggregate fair market
value of the shares you may purchase under the option, which is generally
determined as of the date you exercise the option, exceeds the aggregate
exercise price of the option.

    If you sell common stock that you acquired by exercising an incentive stock
option, the tax consequences of the sale depend on whether the disposition is
"qualifying" or "disqualifying." The disposition of the common stock is
qualifying if it is made after the later of: (a) two years from the date the
incentive stock option was granted or (b) at least one year after the date the
incentive stock option was exercised.

    If the disposition of the common stock you received when you exercised
incentive stock options is qualifying, any excess of the sale price over the
exercise price of the option will be treated as long-term capital gain taxable
to you at the time of the sale. If the disposition is not qualifying, which we
refer to as a "disqualifying disposition," the excess of the fair market value
of the common stock on the date the option was exercised over the exercise price
will be taxable income to you at the time of the sale. Of that income, the
amount up to the excess of the fair market value of the common stock at the time
the option was exercised over the exercise price will be ordinary income for
income tax purposes and the balance, if any, will be long or short-term capital
gain, depending on whether or not the common stock was sold more than one year
after the option was exercised.

    If you sell common stock you received when you exercised an incentive stock
option in a qualifying disposition, we will not be entitled to a deduction equal
to the gain you realize when you completed that sale. However, if you



                                       20


sell, in a disqualifying disposition, common stock you received when you
exercised an incentive stock option, we will be entitled to a deduction equal to
the amount of compensation income taxable to you.

    Federal Income Tax Consequences of Non-qualified Stock Options. Under
current law, you will not realize taxable income upon the grant of a
non-incentive or non-qualified stock option. However, when you exercise the
option, the difference between the exercise price of the option and the fair
market value of the shares subject to the option on the date of exercise will be
treated as taxable compensation income to you, and you will be subject to
withholding of income and employment taxes at that time. We will be generally be
entitled to a deduction equal to the amount of compensation income taxable to
you.

    The subsequent sale of the shares acquired pursuant to the exercise of a
non-qualified stock option generally will give rise to capital gain or loss
equal to the difference between the sale price and the sum of the exercise price
paid for the shares plus the ordinary income recognized with respect to the
shares, and these capital gains or losses will be treated as long term capital
gains or losses if you held the shares for more than one year following exercise
of the option.

13. EXTENSION OF OFFER; TERMINATION; AMENDMENT.

    We expressly reserve the right, in our discretion, at any time and from time
to time, and regardless of whether or not any event set forth in Schedule A has
occurred or is deemed by us to have occurred, to extend the period of time
during which this offer is open, and thereby delay the acceptance for exchange
of any options, by giving oral or written notice of such extension to the option
holders eligible to participate in the exchange or making a public announcement
thereof.

    We also expressly reserve the right, in our reasonable judgment, prior to
the expiration time, to terminate or amend this offer and to postpone our
acceptance and cancellation of any options elected for exchange upon the
occurrence of any of the conditions specified in Schedule A by giving oral or
written notice of such termination, amendment or postponement to the option
holders eligible to participate in the exchange and making a public announcement
thereof. We will return the options elected for exchange promptly after
termination or withdrawal of an offer to exchange.

    Subject to compliance with applicable law, we further reserve the right, in
our discretion, and regardless of whether any event set forth in Schedule A has
occurred or is deemed by us to have occurred, to amend this offer in any
respect, including, without limitation, by decreasing or increasing the
consideration offered in this offer to option holders or by decreasing or
increasing the number of options being sought in this offer.

    Amendments to this offer may be made at any time and from time to time by
public announcement of the amendment. In the case of an extension, the amendment
must be issued no later than 6:00 a.m. Pacific Standard Time on the next
business day after the last previously scheduled or announced expiration time.
Any public announcement made pursuant to this offer will be disseminated
promptly to option holders in a manner reasonably designed to inform option
holders of such change. Without limiting the manner in which we may choose to
make a public announcement, except as required by applicable law, we have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a press release to the Dow Jones News Service.

    If we materially change the terms of this offer or the information
concerning this offer, or if we waive a material condition of this offer, we
will extend this offer. Except for a change in price or a change in percentage
of securities sought, the amount of time by which we will extend this offer
following a material change in the terms of this offer or information concerning
this offer will depend on the facts and circumstances, including the relative
materiality of such terms or information. If we decide to take any of the
following actions, we will publish notice or otherwise notify you of such action
in writing after the date of such notice:

            (a) we increase or decrease the amount of consideration offered for
        the options;

            (b) we decrease the number of options eligible to be elected for
        exchange in this offer; or

            (c) we increase the number of options eligible to be elected for
        exchange in this offer by an amount that exceeds 2% of the shares of
        common stock issuable upon exercise of the options that are subject to
        this offer immediately prior to the increase.

    If this offer is scheduled to expire at any time earlier than the expiration
of a period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given in the



                                       21


manner specified in Section 13 of this offer, we will extend the offer so that
the offer is open at least 10 business days following the publication, sending
or giving of notice.

14. FEES AND EXPENSES.

    We will not pay any fees or commissions to any broker, dealer or other
person for soliciting elections to exchange options pursuant to this offer to
exchange.

15. ADDITIONAL INFORMATION.

    We have filed with the SEC a Tender Offer Statement on Schedule TO, of which
this offer to exchange is a part. This offer to exchange does not contain all of
the information contained in the Schedule TO and the exhibits to the Schedule
TO. We recommend that, in addition to this offer to exchange and the election
form, you review the following materials that we have filed with the SEC and are
incorporated by reference herein, before making a decision on whether to elect
to exchange your options:

    (a) Our Annual Report on Form 10-K for our fiscal year ended December 31,
2001, filed with the SEC on April 1, 2002.

    (b) Our Quarterly Report on Form 10-Q for the period ended June 30, 2002,
filed with the SEC on August 14, 2002.

    (c) Our definitive Proxy Statement for our 2002 Annual Meeting of
Stockholders, filed with the SEC on April 19, 2002.

    (d) The description of our common stock included in our Registration
Statement on Form 8-A, filed with the SEC on December 6, 1994 (File No.
0-25236).

    We hereby incorporate by reference additional documents that we may file
with the SEC between the date of this offer and the expiration time of the
offer. These include periodic reports, such as annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy
statements.


    These filings, our other annual, quarterly and current reports, our proxy
statements and our other SEC filings may be examined, and copies may be
obtained, at the following SEC public reference room:

                             450 Fifth Street, N.W.
                                    Room 1024
                             Washington, D.C. 20549

    You may obtain information on the operation of the public reference room by
calling the SEC at (800) SEC-0330.

    Our SEC filings are also available to the public on the SEC's internet site
at http://www.sec.gov.

    Our common stock is quoted on the Nasdaq National Market under the symbol
"MCRL" and our SEC filings can be read at the following Nasdaq National Market
address:

                             Nasdaq National Market
                               1735 K Street, N.W.
                             Washington, D.C. 20006

    We will also provide, without charge, to each person to whom a copy of this
offer to exchange is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents to which we have referred you,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to:

                                  Micrel, Inc.
                               Investor Relations
                           Attention: Andrea Belanger
                               1849 Fortune Drive
                               San Jose, CA 95131



                                       22


or by telephoning us at (408) 944-0800 between the hours of 8:00 a.m. and 5:00
p.m. Pacific Standard Time.

    As you read the foregoing documents, you may find some inconsistencies in
information from one document to another. If you find inconsistencies between
the documents, or between a document and this offer to exchange, you should rely
on the statements made in the most recent document.

    The information contained in this offer to exchange about Micrel should be
read together with the information contained in the documents to which we have
referred you.

16. MISCELLANEOUS.

    This offer to exchange and our SEC reports referred to above include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements involve known and unknown risks, uncertainties,
and other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
such forward-looking statements. These factors include, among other things,
those listed in our most recently filed Report on Form 10-K or Form 10-Q. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.

    The safe harbor provided in the Private Securities Litigation Reform Act of
1995, by its terms, does not apply to statements made in connection with this
tender offer.

    We are not aware of any jurisdiction where the making of this offer is not
in compliance with applicable law. If we become aware of any jurisdiction where
the making of this offer is not in compliance with any valid applicable law, we
will make a good faith effort to comply with such law. If, after such good faith
effort, we cannot comply with such law, this offer will not be made to, nor will
elections to exchange options be accepted from or on behalf of, the option
holders residing in such jurisdiction.

    WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM EXCHANGING YOUR
OPTIONS PURSUANT TO THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED IN THIS DOCUMENT OR OTHER INFORMATION TO WHICH WE HAVE REFERRED YOU.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED ELECTION CONCERNING
EXCHANGE OF STOCK OPTIONS FORM. IF ANYONE MAKES ANY RECOMMENDATION OR
REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT
RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

Micrel, Inc.
November 8, 2002



                                       23


                                   SCHEDULE A

                            CONDITIONS OF THIS OFFER

    Notwithstanding any other provision of this offer, we will not be required
to accept any options elected for exchange, and we may terminate or amend this
offer, or postpone our acceptance and cancellation of any options elected for
exchange, in each case subject to certain limitations, if at any time on or
after November 8, 2002 and prior to the expiration time any of the following
events has occurred or has been determined by us to have occurred, regardless of
the circumstances giving rise thereto:

    (a) there shall have been threatened or instituted or be pending any action
or proceeding by any government or governmental, regulatory or administrative
agency, authority or tribunal or any other person, domestic or foreign, before
any court, authority, agency or tribunal that directly or indirectly challenges
the making of this offer, the acquisition of some or all of the options elected
for exchange pursuant to this offer or the issuance of new options;

    (b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered, amended,
enforced or deemed to be applicable to this offer or us, by any court or any
authority, agency or tribunal that would or might directly or indirectly:

            (i) make the acceptance for exchange of, or issuance of new options
        for, some or all of the options elected for exchange illegal or
        otherwise restrict or prohibit consummation of this offer;

            (ii) delay or restrict our ability, or render us unable, to accept
        for exchange or issue new options for some or all of the options elected
        for exchange; or

            (iii) materially and adversely affect the business, condition
        (financial or other), income, operations or prospects of Micrel;

    (c) there shall have occurred:

            (i) any general suspension of trading in, or limitation on prices
        for, securities on any national securities exchange or in the
        over-the-counter market;

            (ii) the declaration of a banking moratorium or any suspension of
        payments in respect of banks in the United States, whether or not
        mandatory;

            (iii) the commencement or escalation of a war, armed hostilities or
        other international or national crisis directly or indirectly involving
        the United States;

            (iv) any limitation, whether or not mandatory, by any governmental,
        regulatory or administrative agency or authority on, or any event that
        might affect, the extension of credit by banks or other lending
        institutions in the United States;

            (v) any decrease of greater than 50% of the market price of the
        shares of our common stock or any change in the general political,
        market, economic or financial conditions in the United States or abroad
        that could have a material adverse effect on the business, condition
        (financial or other), operations or prospects of Micrel or on the
        trading in our common stock;

            (vi) in the case of any of the foregoing existing at the time of the
        commencement of this offer, a material acceleration or worsening
        thereof; or

            (vii) any decline in either the Dow Jones Industrial Average or the
        Standard and Poor's Index of 500 Companies by an amount in excess of 10%
        measured during any time period after the close of business on November
        8, 2002;

    (d) there shall have occurred any change in generally accepted accounting
standards which could or would require us for financial reporting purposes to
record compensation expense against our earnings in connection with this offer;

    (e) a tender or exchange offer with respect to some or all of our common
stock, or a merger or acquisition proposal for us, shall have been proposed,
announced or made by another person or entity or shall have been publicly
disclosed, or we shall have learned that:



                                       1


            (i) any person, entity or group within the meaning of Section
        13(d)(3) of the Securities Exchange Act, shall have acquired or proposed
        to acquire beneficial ownership of more than 5% of the outstanding
        shares of our common stock, or any new group shall have been formed that
        beneficially owns more than 5% of the outstanding shares of our common
        stock, other than any such person, entity or group that has filed a
        Schedule 13D or Schedule 13G with the SEC on or before November 8, 2002;

            (ii) any such person, entity or group that has filed a Schedule 13D
        or Schedule 13G with the SEC on or before November 8, 2002 shall have
        acquired or proposed to acquire beneficial ownership of an additional 2%
        or more of the outstanding shares of our common stock; or

            (iii) any person, entity or group shall have filed a Notification
        and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act
        of 1976, as amended, or made a public announcement reflecting an intent
        to acquire us or any of the assets or securities of us; or

    (f) any change or changes shall have occurred in the business, condition
(financial or other), assets, income, operations, prospects or stock ownership
of Micrel that, in our reasonable judgment, is or may have a material adverse
effect on Micrel.

    The conditions to this offer are for our benefit. We may assert them in our
discretion regardless of the circumstances giving rise to them prior to the
expiration time. We may waive them, in whole or in part, at any time and from
time to time prior to the expiration time, in our discretion, whether or not we
waive any other condition to this offer. Our failure at any time to exercise any
of these rights will not be deemed a waiver of any such rights. The waiver of
any of these rights with respect to particular facts and circumstances will not
be deemed a waiver with respect to any other facts and circumstances. Any
determination we make concerning the events described in this Schedule A will be
final and binding upon all persons.



                                       2


                                   SCHEDULE B

         INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
                                  MICREL, INC.

    The directors and executive officers of Micrel and their positions and
offices as of November 8, 2002 are set forth in the following table:



NAME                                 POSITIONS AND OFFICES HELD
- ----                                 --------------------------

                                  
Raymond D. Zinn..................    President, Chief Executive Officer and Chairman of
                                     the Board of Directors
Richard D. Crowley, Jr. .........    Vice President, Finance and Chief Financial Officer
Robert Whelton...................    Executive Vice President, Operations
Mark A. Downing..................    Vice President Marketing
Jack B. Small ...................    Vice President, Analog Design/R&D
Thomas S. Wong...................    Vice President, High Bandwidth Products
Robert J. Barker                     Vice President, Corporate Business Development
Mark Lunsford                        Vice President, Sales
Carlos Mejia, Jr.                    Vice President, Human Resources
Dr. Tian Liou                        Vice President, General Manager, Kendin Operations
J. Vincent Tortolano                 Vice President, General Counsel
Scott Ward                           Vice President, Test Operations
Richard Zelenka                      Vice President, Quality Assurance
Warren H. Muller.................    Director
George Kelly.....................    Director
Donald Livingstone...............    Director
Larry L. Hansen..................    Director


    The address of each director and executive officer is: c/o Micrel, Inc.,
1849 Fortune Drive, San Jose, California 95131.




                                        1

EX-99.(A)(1)(II)

                                                              EXHIBIT (a)(1)(ii)



To:     Eligible Micrel Employees
From:   Raymond D. Zinn, CEO & President
Date:   November 8, 2002

Re: Micrel Stock Option Exchange Program

    I am pleased to announce that Micrel is launching an important employee
compensation program for eligible Micrel employees. As you are all aware, market
downturns have left our current stock price much lower than the exercise price
of many employee stock options.

    In response to this stock price decline, we are implementing a voluntary
program that allows eligible Micrel employees to exchange existing stock options
for new options. To participate, you may submit your options for cancellation
and new options will be granted to you on the first business day that is six
months and two days from the date we cancel your options accepted for exchange
(the "replacement grant date"). Your new options will have an exercise price
equal to the closing sales price of our common stock as quoted on the Nasdaq
National Market on the date preceding the replacement grant date, as reported in
the print edition of The Wall Street Journal on the replacement grant date.

    This is a significant initiative, requiring a formal tender offer filing
with the Securities and Exchange Commission. By making it possible to exchange
your higher priced stock options for new options with an exercise price equal to
the market value of our common stock on the replacement grant date, we hope to
provide you with stock options that could provide greater value in the future.

    Today, we will distribute information that explains the stock option
exchange program in greater detail, including its potential benefits and risks
and the actions you will need to take if you choose to participate. Please
review the material carefully and weigh your decision with equal care. Micrel
cannot advise you on what decision to make. Accordingly, no Micrel employee is
authorized to make any recommendation on our behalf as to your choices. As a
result, you may wish to consult with a professional financial advisor as part of
your decision making process.

    Please take the time to carefully review the information and instructions
that you will receive. If you would like to participate in the program, you will
need to return the election form that will be provided to you. The election form
must be received by us prior to the expiration of the offer, which is currently
scheduled for 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002.

    If you have any questions about the offer, please contact Andrea Belanger,
Stock Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or
via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or you may
send an e-mail to andrea.belanger@micrel.com.



                                        Sincerely,


                                         Raymond D. Zinn



                                       1

EX-99.(A)(1)(III)

                                                             EXHIBIT (a)(1)(iii)


E-mail or US Mail

To:     Eligible Micrel Employees
From:   Andrea Belanger
Date:   November 8, 2002

Dear Micrel Employees:

    Pursuant to Ray's announcement earlier today, below is a link to our Stock
Option Exchange Program site that contains details about the Program. This site
contains copies of the Offer to Exchange Certain Outstanding Options and
Election Concerning Exchange of Stock Options form as well as communications
regarding the Program. For those of you who do not have e-mail access, these are
the same documents that are being included in your Stock Option Exchange Program
package that is being distributed to you today. Read the information provided
and, as advised in the announcement, carefully consider your decision. If you
wish to participate in this program, your Election Concerning Exchange of Stock
Options form must be received by myself (Andrea Belanger, Stock Administrator),
no later than 5:00 p.m. Pacific Standard Time on Wednesday, December 11, 2002,
unless this offer is extended.

    If you have further questions after reading the Offer to Exchange Certain
Outstanding Options and the Election Concerning Exchange of Stock Options form,
you are invited to send your questions to me (Andrea Belanger, Stock
Administrator of Micrel) by internal mail, facsimile (408) 435-2400 or via US
Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or to our internal
e-mail address: andrea.belanger@micrel.com, and a response will be delivered
back to you.

    You can view the Option Exchange Web Site through your web browser at:
http://topaz/intranet. Go to "Stock Administration", then "Option Exchange
Program."

    The website will allow you to view the following documents:

* Frequently Asked Questions (Summary Term Sheet)
* Offer to Exchange
* Election Form (can be printed and sent via internal mail, facsimile or via US
  Mail)
* Withdrawal Form (can be printed and sent via internal mail, facsimile or via
  US Mail)
* Communication from Raymond D. Zinn, CEO & President, dated November 8, 2002
* Communication from Andrea Belanger dated November 8, 2002




                                       Sincerely,


                                         Andrea Belanger


                                       1

EX-99.(A)(1)(IV)

                                                              EXHIBIT (a)(1)(iv)


US Mail

To:     [Name of Micrel Employee]
From:   Andrea Belanger
Date:   November 8, 2002

Re:     Election Concerning Exchange of Stock Options Form.


        Attached you will find the Election Concerning Exchange of Stock Options
form which summarizes the terms of the Stock Option Exchange Program and which
you may use to elect to exchange your eligible options issued under the 1989
Stock Option Plan, the 1994 Stock Option Plan and the 2000 Non-Qualified Stock
Incentive Plan. In order to elect to exchange or not to exchange your respective
stock options, please complete the attached election form by indicating which
options you wish to exchange and dating and signing the election form. For your
convenience we have included with the attached election form, a Grant Detail
Report which identifies your stock options that are eligible for exchange under
the Stock Option Exchange Program. You must return the election form to Andrea
Belanger, Stock Administrator, no later than 5:00 p.m. Pacific Standard Time on
Wednesday, December 11, 2002, unless this offer is extended.

        If you have any questions, please contact Andrea Belanger, Stock
Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US
Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or send an e-mail
to andrea.belanger@micrel.com.




                                       Sincerely,


                                        Andrea Belanger


                                       1

EX-99.(A)(1)(V)

                                                               EXHIBIT (a)(1)(v)


                                  MICREL, INC.

                  ELECTION CONCERNING EXCHANGE OF STOCK OPTIONS

Name of Optionee:
                 --------------------------------

Social Security Number (last 4 digits):
                                       ----------

    I have received the Offer to Exchange Certain Outstanding Options to
Purchase Common Stock Under the 1994 Stock Option Plan, the 1989 Stock Option
Plan and 2000 Non-Qualified Stock Incentive Plan dated November 8, 2002.

    I understand that I am eligible to participate in this exchange program only
if I:

        -  am an employee of Micrel on November 8, 2002;

        -  reside in the United States;

        -  am not a director, the Chief Executive Officer or the Chief Financial
           Officer of Micrel;

        -  remain an eligible employee through the expiration of the offer; and

        -  hold at least one eligible option on November 8, 2002.

    I understand that, by choosing to participate in this exchange program, I
may only elect to exchange options that have an exercise price of at least
$13.00 per share that were granted to me under the Micrel 1989 Stock Option
Plan, 1994 Stock Option Plan or 2000 Non-Qualified Stock Incentive Plan. I
further understand that I must elect to exchange all or none of the options
(defined as the entire option grant) granted to me on a single grant date and at
the same exercise price subject to one or more eligible option agreements.

    In return for those options I elect to exchange, Micrel will grant me new
options entitling me to purchase

        -  if I am an employee who currently holds the position of vice
           president or higher, one-half of the number of shares of common stock
           as are subject to the options I elect to exchange and that are
           accepted by Micrel and cancelled; and

        -  if I don't hold a position of Vice President or higher, two-thirds of
           the number of shares of common stock as are subject to the options I
           elect to exchange and that are accepted by Micrel and cancelled.

Additionally, if I elect to exchange any options, then I understand that all
options granted to me during the six-month period ending as of the commencement
of the offer dated November 8, 2002, will also be automatically exchanged,
regardless of their exercise price, for new options exercisable for the same
number of shares of common stock as are subject to the options that are
automatically exchanged and cancelled.

    New options exercisable for fractional shares will not be issued. Instead,
any fractional number of new options to be granted to any individual will be
rounded down to the nearest whole number. The number of shares of common stock
that will be subject to the new options will be subject to adjustment for any
stock splits, stock dividends and similar events occurring between the date the
options are accepted for exchange and the replacement grant date. These new
options will be granted on the first business day that is six months and two
days from the date my exchanged options are cancelled (the date on which the new
options are granted being referred to as the "replacement grant date"), unless
the offer is extended. In order to remain eligible to receive new options, I
understand that I must remain employed by Micrel through the replacement grant
date and continue to reside in the United States.

    I understand that the exercise price of the new option will be equal to the
closing sales price of our common stock as quoted on the Nasdaq National Market
on the date preceding the replacement grant date, as reported in the print
edition of The Wall Street Journal on the replacement grant date. Each new
option issued on the replacement grant date will be vested in the same ratio
that the cancelled options would have been vested and will continue to vest on
the same vesting schedule as those options elected for exchange, except that if
I am a non-exempt employee under the federal wage laws, options granted to me on
the replacement grant date will not be vested until the six



                                       1


month anniversary of the replacement grant date, at which time the new options
will become vested and exercisable in the same ratio that the cancelled options
would have been vested. In addition, the new options will have a full ten year
term beginning on the replacement grant date. Finally, each non-qualified stock
option will be replaced with non-qualified stock options. Each stock option
intended to qualify as an incentive stock option, that is elected for exchange
will be replaced with an incentive stock option to the maximum extent it
qualifies as an incentive stock option under the tax laws on the date of the
grant. Except for the exchange ratio, the new option exercise price and the new
termination date, the terms and conditions of the new options will be
substantially similar to the cancelled options.

    I understand that by participating in the offer, I will not be eligible to
receive any other options until the replacement grant date.

    I recognize that, under certain circumstances set forth in the Offer to
Exchange Certain Outstanding Options, Micrel may terminate or amend the offer
and postpone its acceptance and cancellation of any options elected for
exchange. In any such event, I understand that the options elected for exchange
but not accepted will remain in effect without change.

    I hereby give up my entire ownership interest in the options listed below
and all options granted to me during the six-month period ending as of the
commencement of the offer dated November 8, 2002, regardless of their exercise
price for new options. I understand all of the options I have elected to
exchange will become null and void on Wednesday, December 11, 2002, unless this
offer is extended. I acknowledge that this election is entirely voluntary. I
also acknowledge that this election will be irrevocable after 5:00 p.m. Pacific
Standard Time on December 11, 2002, unless the offer is extended by Micrel in
its sole discretion, in which case the offer will become irrevocable upon
expiration of the extension.

    I hereby elect to exchange and cancel the following options (an option is
defined as all or none of the options granted to me on a single grant date and
at the same exercise price):



                                               NUMBER OF
                                                OPTION       OPTION
                                  OPTION        SHARES      EXERCISE
                                GRANT DATE    OUTSTANDING    PRICE
                                ----------    -----------   --------
                                                   

        1.  Option granted on:                              $
                                 ---------      --------     ------
        2.  Option granted on:                              $
                                 ---------      --------     ------
        3.  Option granted on:                              $
                                 ---------      --------     ------
        4.  Option granted on:                              $
                                 ---------      --------     ------




- -------------------------------------                      ---------------------
Optionee's Signature                                               Date


- -------------------------------------
Optionee's Name

Participation Instructions:

        1.  Complete this form and send it to our office personally or by
    internal mail, facsimile ((408) 435-2400) or via US Mail to Stock
    Administrator, Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131, Attn:
    Andrea Belanger as soon as possible. This form must be received by Andrea
    Belanger, Stock Administrator for Micrel before 5:00 p.m. Pacific Standard
    Time on Wednesday, December 11, 2002, unless the offer is extended by Micrel
    in its sole discretion. Delivery by e-mail will not be accepted.

        2.  Ensure that you receive a confirmation of receipt from Micrel within
    five (5) business days.

Micrel, Inc. hereby accepts this Election Concerning
Exchange of Stock Options form and agrees to honor this election.



- ------------------------------------------------------     ---------------------
       [Name & Title of Authorized Signatory]                      Date



                                       2

EX-99.(A)(1)(VI)

                                                              EXHIBIT (a)(1)(vi)


E-mail  or US Mail

To:     Participating Micrel Employee
From:   Andrea Belanger
Date:   _____________, 2002

Dear Micrel Employee:

    This message confirms that we have received your Election Concerning
Exchange of Stock Options form (the "election form"). Pursuant to the Offer to
Exchange Certain Outstanding Options and the Election Concerning Exchange of
Stock Options form, if your election form is properly completed, we will accept
your options elected for exchange at 5:00 p.m. Pacific Standard Time on December
11, 2002, unless this offer is extended, in which case we will accept your
options shortly following the expiration of the extended period. Unless you
withdraw your elected options in accordance with the provisions of Section 4 of
the Offer to Exchange Certain Outstanding Options before this time (or, if this
offer is extended, before the new expiration time), we will cancel all options
that you have properly elected to exchange. If you elect to exchange any
options, then all options granted to you during the six-month period ending as
of the commencement of the offer dated November 8, 2002, will also be
automatically exchanged for new options. If you do not withdraw your elected
options and we accept your options for exchange, shortly following the
expiration of this offer, we will provide you with a rights letter confirming
that your options have been accepted for exchange and will be cancelled. New
options will be granted to you in exchange for the options we cancel on the
first business day that is six months and two days from the date we cancel your
options elected for exchange, subject to your continued employment and other
terms and conditions of the offer.

    If you have any questions, please contact Andrea Belanger, Stock
Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US
Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or by e-mail at
andrea.belanger@micrel.com.



                                       Thank you


                                        Andrea Belanger



                                       1

EX-99.(A)(1)(VII)

                                                             EXHIBIT (a)(1)(vii)



                     NOTICE OF ELECTION TO WITHDRAW OPTIONS


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

If you previously elected to accept Micrel's Offer to Exchange Certain
Outstanding Options, and you would like to change your election and reject this
offer, you must sign this Notice (or otherwise provide written notice containing
the required information) and return it to Andrea Belanger, Stock Administrator
for Micrel before 5:00 p.m. Pacific Standard Time, on December 11, 2002, unless
the offer is extended.

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


To Micrel:

    I previously received a copy of the Offer to Exchange Certain Outstanding
Options and the Election Concerning Exchange of Stock Options form. I signed and
returned the Election Concerning Exchange of Stock Options form, in which I
elected to accept Micrel's Offer to Exchange Certain Outstanding Options. I now
wish to change that election and reject your Offer to Exchange Certain
Outstanding Options with respect to the options identified below. I understand
that I must withdraw all or none of the options granted to me on a single grant
date and at the same exercise price (defined as a single option grant). I
further understand, that by signing this Notice and delivering it to Andrea
Belanger, Stock Administrator for Micrel, I will be able to withdraw my
acceptance of the offer with respect to the options identified below and reject
the Offer to Exchange Certain Outstanding Options instead. I have read and
understand all of the terms and conditions of the Offer to Exchange Certain
Outstanding Options.

    I understand that in order to reject the offer, I must sign and deliver
proper notice so that it is received by Andrea Belanger, Stock Administrator for
Micrel before 5:00 p.m., Pacific Standard Time, on December 11, 2002, unless the
offer is extended.

    By rejecting the Offer to Exchange Certain Outstanding Options, I understand
that I will not receive any new options and I will retain my eligible options
previously elected for exchange with their existing exercise price and vesting
schedule. These options will continue to be governed by the stock option plan
under which they were granted and the existing option agreements between Micrel
and myself.

    I hereby elect to withdraw the following options from the offer:



                                         NUMBER OF OPTION
                              OPTION           SHARES      OPTION EXERCISE
                            GRANT DATE      OUTSTANDING         PRICE
                            ----------   ----------------  ---------------
                                                  
    Option granted on:                                        $
                            ---------        --------          ------
    Option granted on:                                        $
                            ---------        --------          ------
    Option granted on:                                        $
                            ---------        --------          ------
    Option granted on:                                        $
                            ---------        --------          ------


    I have completed and signed the following exactly as my name appears on the
option agreement governing the grant of the foregoing options.



- ---------------------------------------                       ------------------
Optionee's Signature                                                Date


- ---------------------------------------
Optionee's Name



                                        1

EX-99.(A)(1)(VIII)

                                                            EXHIBIT (a)(1)(viii)


E-mail or US Mail

To:     Eligible Micrel Employees
From:   Andrea Belanger
Date:   December __, 2002

Dear Micrel Employee:

    There are less than two weeks left for you to elect to exchange your stock
options under Micrel's Stock Option Exchange Program.

    Reminder: If you wish to participate in this program, your Election
Concerning Exchange of Stock Options form must be received by Andrea Belanger,
Stock Administrator, no later than 5:00 p.m. Pacific Standard Time on Wednesday,
December 11, 2002, unless this offer is extended. Please ensure that you receive
confirmation from us after you submit your election form.

    If you have questions about the Offer to Exchange Certain Outstanding
Options or the Election Concerning Exchange of Stock Options form, please
contact Andrea Belanger, Stock Administrator of Micrel by internal mail,
facsimile ((408) 435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive,
San Jose, CA 95131 or by our internal e-mail address: andrea.belanger@micrel.com
and a response will be delivered back to you.

    You can view the Option Exchange Web Site through your web browser at:
http://topaz/intranet. Go to "Stock Administration", then "Option Exchange
Program."

    The website will allow you to view the following documents:

* Frequently Asked Questions (Summary Term Sheet)
* Offer to Exchange
* Election Form (can be printed and sent via internal mail, facsimile or via US
  Mail)
* Withdrawal Form (can be printed and sent via internal mail, facsimile or via
  US Mail)
* Communication from Raymond D. Zinn, CEO & President, dated November 8, 2002
* Communication from Andrea Belanger dated November 8, 2002



                                        Sincerely,


                                          Andrea Belanger



                                        1

EX-99.(A)(1)(IX)

                                                              EXHIBIT (a)(1)(ix)


US Mail

To:     [Name of Micrel Employee]
Re:     Employee Rights Letter
Date:   December __, 2002


    Thank you for your submission of the Election Concerning Exchange of Stock
Options form. We confirm with this letter that we have accepted your election
form and have cancelled your options elected for exchange. Subject to your
continued employment, your continued status as a resident of the United States
and other terms of the Offer to Exchange Certain Outstanding Options dated
November 8, 2002, except for the exchange of options that were granted to you
within the six month period ending as of the commencement of this offer, you
now have the right to receive new options entitling you to purchase a number of
shares of our common stock that is equal to, in the case of employees holding
the position of vice president or higher, one-half the number of shares of
common stock, or in the case of all other employees, two-thirds the number of
shares of common stock, that were subject to the options you elected for
exchange, with any fractional shares subject to the new options rounded down to
the nearest whole number. If you elected to exchange any options, then all
options granted to you during the six-month period ending as of the commencement
of this offer, will also be exchanged, regardless of their exercise price, for
new options exercisable for the same number of shares of common stock that are
accepted for exchange and cancelled. The new options will have an exercise price
equal to the closing sale price of our common stock as quoted on the Nasdaq
National Market on the date preceding the replacement grant date as reported in
the print edition of The Wall Street Journal on the replacement grant date. We
will issue this new option grant on the first business day that is six months
and two days form the date we cancel the options accepted for exchange.

    Enclosed is your election form countersigned by us. This countersigned
election form confirms the number of shares accepted by us for exchange.

    If you have any questions about the option exchange, please contact Andrea
Belanger, Stock Administrator of Micrel by internal mail, facsimile ((408)
435-2400) or via US Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA
95131, or e-mail them to andrea.belanger@micrel.com.



                                         Thank you




                                           Andrea Belanger



                                        1

EX-99.(A)(1)(X)

                                                               EXHIBIT (a)(1)(x)

E-mail or US Mail

To:     [Name of Micrel Employee]
From:   Andrea Belanger
Date:   ____________, 2002

Dear Micrel Employee:

    Unfortunately, your Election Concerning Exchange of Stock Options form
regarding the Stock Option Exchange Program was either inaccurate or incomplete
and was not accepted by Micrel. If you wish to exchange any of your eligible
stock options, you must submit a new Election Concerning Exchange of Stock
Options form, listing the options you elect to have exchanged and cancelled. A
blank form may be printed from http://topaz/intranet. Go to "Stock
Administration", then "Option Exchange Program." You may also contact Andrea
Belanger at the address or phone number listed below and she will send you a new
election form. Andrea Belanger, Stock Administrator for Micrel must be in
receipt of a completed election form before 5:00 p.m. Pacific Standard Time on
Wednesday, December 11, 2002, unless the offer is extended. If we do not receive
an accurate and complete election form from you before the deadline, all stock
options currently held by you will remain intact at their original price and
original terms.


    If you have any questions, please contact Andrea Belanger, Stock
Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US
Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or reply to this
note at andrea.belanger@micrel.com.



                                       Thank you



                                         Andrea Belanger



                                        1

EX-99.(A)(1)(XI)

                                                              EXHIBIT (a)(1)(xi)


E-mail or US Mail

To:     Participating Micrel Employees
From:   Andrea Belanger
Date:   June __, 2002

Dear Micrel Employees:

    The new stock options have been granted under the Company's Stock Option
Exchange Program. If you participated in the stock option exchange program, you
will be receiving a new option agreement issued under the 1994 Stock Option Plan
or 2000 Non-Qualified Stock Incentive Plan, depending on the plan under which
the options subject to an election for exchange were granted, setting forth the
number of options granted and the terms and conditions of your new options. You
can accept the new option grant by promptly signing and returning the new option
agreement to Andrea Belanger, Stock Administrator for Micrel.

    If you have any questions, please contact Andrea Belanger, Stock
Administrator of Micrel by internal mail, facsimile ((408) 435-2400) or via US
Mail to Micrel, Inc., 1849 Fortune Drive, San Jose, CA 95131 or reply to this
note at andrea.belanger@micrel.com.


                                        Thank you



                                          Andrea Belanger