SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment no. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
LINEAR TECHNOLOGY
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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LINEAR TECHNOLOGY CORPORATION
----------------------------
Notice of Annual Meeting of Shareholders
To Be Held on November 8, 2000
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Linear
Technology Corporation, a California corporation (the "Company"), will be held
on November 8, 2000 at 3:00 p.m., local time, at the Company's principal
executive offices, located at 720 Sycamore Drive, Milpitas, California 95035,
for the following purposes:
1. To elect five (5) directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending July 1, 2001.
3. To approve a change in the Company's state of incorporation from
California to Delaware by means of a merger of the Company with and
into a wholly-owned Delaware subsidiary of the Company.
4. To approve an increase in the number of authorized shares of Common
Stock of the Company from 480,000,000 to 2,000,000,000, primarily to
facilitate future stock splits, effective when the change in state of
incorporation, proposed above, occurs.
5. To make certain amendments to the 1996 Senior Executive Bonus Plan.
6. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record of the Company's Common Stock at the close of
business on September 13, 2000, the record date, are entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. Any shareholder
attending the Annual Meeting may vote in person even if such shareholder has
returned a proxy.
FOR THE BOARD OF DIRECTORS
Arthur F. Schneiderman
Secretary
Milpitas, California
October 6, 2000
- - --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
LINEAR TECHNOLOGY CORPORATION
----------------------------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
----------------------------
INFORMATION CONCERNING SOLICITATION
AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Linear Technology Corporation, a California corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held November 8, 2000, at 3:00
p.m., local time, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at the Company's principal executive offices,
located at 720 Sycamore Drive, Milpitas, California 95035. The telephone number
at that location is (408) 432-1900.
These proxy solicitation materials and the Company's Annual Report to
Shareholders for the year ended July 2, 2000, including financial statements,
were mailed on or about October 6, 2000 to all shareholders entitled to vote at
the Annual Meeting.
Proxies; Revocability of Proxies
All shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting, and not revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated on those proxies.
If no instructions are indicated on a properly executed proxy, the shares
represented by that proxy will be voted as recommended by the Board of
Directors. If any other matters are properly presented for consideration at the
Annual Meeting, the persons named in the enclosed proxy and acting thereunder
will have discretion to vote on those matters in accordance with their best
judgment. The Company does not currently anticipate that any other matters will
be raised at the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Paul Coghlan, Vice President of Finance and Chief Financial Officer) a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
1
Voting Rights and Solicitation of Proxies
On all matters other than the election of directors, each share has one
vote. Each shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected (which number is currently set at five)
multiplied by the number of shares held by such shareholder, or may distribute
such shareholder's votes on the same principle among as many candidates as the
shareholder may select. However, no shareholder will be entitled to cumulate
votes unless the candidate's name has been placed in nomination prior to the
voting, and the shareholder, or any other shareholder, has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate votes.
If any shareholder gives such notice, all shareholders may cumulate their votes
for the candidates in nomination. In the event that cumulative voting is
invoked, the proxy holders will have the discretionary authority to vote all
proxies received by them in such a manner as to ensure the election of as many
of the Board of Directors' nominees as possible. See "Proposal One--Election of
Directors."
The Company will bear the cost of soliciting proxies. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Solicitation of proxies by mail may be supplemented by one
or more of telephone, telegram, facsimile, e-mail or personal solicitation by
directors, officers or regular employees of the Company. No additional
compensation will be paid to such persons for such services.
Quorum; Abstentions; Broker Non-Votes
Under California law, some of the proposals submitted at the Annual
Meeting require for their approval both the affirmative vote of a majority of
the shares "represented and voting" at the Annual Meeting and the affirmative
vote of a majority of the quorum required for the transaction of business. A
quorum is established by the presence at the Annual Meeting, either in person
or by proxy, of the holders of a majority of the outstanding shares of Common
Stock "entitled to vote" at the Annual Meeting, including those shares as to
which no votes are cast at the Annual Meeting. Accordingly, abstentions and
broker non-votes will be counted as "entitled to vote" and thus represented for
purposes of establishing a quorum, but will not be counted for purposes of
determining the number of shares which are "represented and voting" with
respect to a given proposal.
2
Other proposals submitted at the Annual Meeting require for their approval
the affirmative vote of a majority of the outstanding shares of Common Stock.
Abstentions and broker non-votes will have the effect of a negative vote on
these proposals.
Deadline for Receipt of Shareholder Proposals; Discretionary Authority to Vote
on Shareholder Proposals
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's 2001 Annual Meeting must be
received by the Company no later than June 9, 2001 in order that they may be
included in the proxy statement and form of proxy relating to that meeting.
The Company may use its discretionary voting authority on all shareholder
proposals not received by the Company on or prior to August 23, 2001.
Record Date and Voting Securities
Shareholders of record at the close of business on September 13, 2000 (the
"Record Date") are entitled to notice of and to vote at the meeting. As of the
Record Date, 316,515,460 shares of the Company's Common Stock, no par value,
were issued and outstanding. No shares of the Company's Preferred Stock are
outstanding. Based on the last reported sale on the Nasdaq National Market on
September 13, 2000, the market value of one share of the Company's Common Stock
was $66.75. For information regarding security ownership by management and by
the beneficial owners of more than five percent of the Company's Common Stock,
see "Beneficial Security Ownership of Directors, Executive Officers and Certain
Other Beneficial Owners."
3
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
The Company's Bylaws currently provide for a board of five directors.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the Company's five nominees named below, all of whom are currently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any substitute nominee who is designated by the
current Board of Directors to fill the vacancy. It is not expected that any
nominee listed below will be unable or will decline to serve as a director. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will ensure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. In any event, the proxy
holders cannot vote for more than five persons. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Shareholders or until his successor has been elected and qualified.
The names of the nominees, and certain information about them, are set
forth below.
Director
Name Of Nominee Age(1) Principal Occupation Since
- - -------------------------------- -------- --------------------------------------- ---------
Robert H. Swanson, Jr. ......... 62 Chairman and Chief Executive Officer 1981
of the Company
David S. Lee ................... 63 Chairman, Cortelco Systems Holding 1988
Corp.
Leo T. McCarthy ................ 70 President, The Daniel Group
Richard M. Moley ............... 61 Former President and Chief Executive 1994
Officer, StrataCom, Inc.
Thomas S. Volpe ................ 49 Chairman, Prudential Volpe Technology 1984
Group
<FN>
- - -----------------
(1) As of September 13, 2000
</FN>
There are no family relationships among the Company's directors and
executive officers.
Mr. Swanson, a founder of the Company, has served as Chairman and Chief
Executive Officer since April 1999. From the Company's incorporation
4
in September 1981 until April 1999, Mr. Swanson served as President and Chief
Executive Officer. Mr. Swanson has also served as a director of the Company
since its incorporation. From August 1968 to July 1981, he was employed in
various positions at National Semiconductor Corporation, a manufacturer of
integrated circuits, including Vice President and General Manager of the Linear
Integrated Circuit Operation and Managing Director in Europe.
Mr. Lee is Chairman of the Boards of eOn Communication Corp. and Cortelco,
and a Regent of the University of California. Mr. Lee co-founded Qume
Corporation in 1973 and served as Executive Vice-President of Qume until it was
acquired by ITT Corporation in 1978. After the acquisition, Mr. Lee held the
positions of Executive Vice President of ITT Qume until 1981, and President of
ITT Qume through 1983. From 1983 to 1985, he served as Vice President of ITT
and as Group Executive and Chairman of its Business Information Systems Group.
In 1985, he became President and Chairman of Data Technology Corp. ("DTC"), and
in 1988 DTC acquired and merged with Qume. Currently, Mr. Lee is a member of
the Board of Directors of ACT Manufacturing Inc., ESS Technology Inc.,
Accela.com and Daily Wellness Co. Mr. Lee also serves as a board member of
Directors of the California Chamber of Commerce and President of Asian Cultural
Teachings. Mr. Lee served as an adviser to Presidents George Bush and Bill
Clinton on the Advisory Committee on Trade Policy and Negotiation (Office of
the U.S. Trade Representative/Executive Office of the President) and to
Governor Pete Wilson on the California Economic Development Corporation
(CalEDC) and the Council on California Competitiveness. Mr. Lee was the past
Commissioner of California Postsecondary Education Commission, as well as
having founded and served as Chairman of the Chinese Institute of Engineers,
the Asian American Manufacturers' Association and the Monte Jade Science and
Technology Association.
Mr. McCarthy has served since January 1995 as President of The Daniel
Group, a partnership engaged in international trade and other investment
opportunities. Mr. McCarthy retired from elective office in 1994 after twelve
years as Lieutenant Governor of the State of California. His primary
responsibility as Lieutenant Governor was to help businesses start and grow
through his role as chair of the California Commission for Economic
Development. One major area of focus for Mr. McCarthy was and still remains
international trade and investment, particularly involving Pacific Rim markets.
Mr. McCarthy serves as a director on the boards of two mutual funds, Parnassus
Income Trust and Forward Funds. He also serves as Vice Chair of the Board of
Accela.com, a privately held software company.
5
Mr. Moley served as Chairman, President and Chief Executive Officer of
StrataCom, Inc., a network systems company, from June 1986 until its
acquisition by Cisco Systems, Inc., a provider of computer internetworking
solutions, in July 1996. Mr. Moley served as Senior Vice President and Board
Member of Cisco Systems until November 1997, when he became a consultant and
private investor. Mr. Moley served in various executive positions at ROLM
Corporation, a telecommunications company, from 1973 to 1986. Prior to joining
ROLM, he held management positions in software development and marketing at
Hewlett-Packard Company. Mr. Moley serves as a director of Netro, Echelon
Corporation and Spirent, plc, a British company.
Mr. Volpe has served as Chairman of Prudential Volpe Technology Group
since December 1999. Mr. Volpe served as Chief Executive Officer of Volpe Brown
Whelan & Company, LLC (formerly Volpe, Welty & Company), a private investment
banking and risk capital firm, from its founding in April 1986 until its
acquisition by Prudential Securities in December 1999. Until April 1986, he was
President and Chief Executive Officer of Hambrecht & Quist Incorporated, an
investment banking firm with which he had been affiliated since 1981.
Vote Required and Recommendation of Board of Directors
The five nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors. Votes withheld will
be counted for purposes of determining the presence or absence of a quorum for
the transaction of business at the meeting, but will not be counted as votes
cast in the election of directors.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
NOMINEES SET FORTH HEREIN.
6
BENEFICIAL SECURITY
OWNERSHIP OF DIRECTORS, EXECUTIVE
OFFICERS AND CERTAIN OTHER
BENEFICIAL OWNERS
Security Ownership
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of the
Record Date, by (a) each beneficial owner of more than 5% of the Company's
Common Stock, (b) the Company's Chief Executive Officer and the Company's four
other most highly compensated executive officers during fiscal 2000
(collectively, the "Named Executive Officers"), (c) each director of the
Company and (d) all directors and executive officers of the Company as a group.
Except as otherwise indicated, each person has sole voting and investment power
with respect to all shares shown as beneficially owned, subject to community
property laws where applicable.
Shares Percentage
Beneficially Beneficially
Beneficial Owner Owned Owned
- - ----------------------------------------------- -------------- -------------
Janus Capital Corporation (1) ................. 38,691,510 12.2%
100 Fillmore Street
Denver, CO 80206-4923
Putnam Investments, Inc. (2) .................. 33,178,698 10.5%
One Post Office Square
Boston, MA 02109
FMR Corp. (3) ................................. 32,431,844 10.2%
82 Devonshire Street
Boston, MA 02109
Robert H. Swanson, Jr. (4) .................... 737,800 *
Robert C. Dobkin (5) .......................... 1,580,432 *
Clive B. Davies (6) ........................... 1,075,256 *
Paul Coghlan (7) .............................. 483,448 *
Hans J. Zapf (8) .............................. 304,000 *
Thomas S. Volpe (9) ........................... 208,000 *
David S. Lee (10) ............................. 76,000 *
Leo T. McCarthy (11) .......................... 204,400 *
Richard M. Moley (12) ......................... 96,000 *
All directors and executive officers as a group
(13 persons) (13) ........................... 5,182,536 1.6%
7
- - -----------------
* Less than one percent of the outstanding Common Stock.
(1) As reported by Janus Capital Corporation ("Janus Capital") as of February
14, 2000. Includes 15,225,430 shares beneficially owned by Janus Fund.
Janus Capital and Janus Fund have shared voting power and shared
dispositive power with respect to the shares beneficially owned by Janus
Capital and Janus Fund.
(2) As reported by Putnam Investments, Inc. as of March 7, 2000. Consists of
15,044,412 shares held by Putnam Investment Management, Inc. ("PIM") and
1,545,337 shares held by The Putnam Advisory Company, Inc. ("PAC"), each a
registered investment advisor under the Investment Advisers Act of 1940.
PIM and PAC are deemed to be beneficial owners of the shares held by their
respective investment advisory clients. Putnam Investments, Inc. ("PI"), a
wholly owned subsidiary of Marsh & McLennan Companies, Inc. ("MMC"), is the
sole owner of PIM and PAC. PI and MMC disclaim the power to vote or dispose
of, or to direct the voting or disposition of, any of the securities owned
by PIM and PAC.
(3) As reported by Fidelity Management & Research Company ("FMRC") as of
February 14, 2000. Includes 14,959,880 shares beneficially owned by FMRC,
1,162,542 shares beneficially owned by Fidelity Management Trust Company,
and 23,200 shares beneficially owned by Fidelity International Limited. FMR
Corp. has sole voting power with respect to 15,720,172 shares and has sole
dispositive power with respect to the 16,215,922 shares.
(4) Includes 284,800 shares issued in the name of Robert H. Swanson, Jr. and
Sheila L. Swanson, Trustees of the Robert H. Swanson, Jr. and Sheila L.
Swanson Trust U/T/A dated May 27, 1976. Also includes 453,000 shares
issuable pursuant to options exercisable within 60 days of September 13,
2000.
(5) Includes 708,432 shares issued in the name of Robert C. Dobkin and Kathleen
C. Dobkin, Trustees of the Dobkin Family Trust U/D/T 9/16/91. Also includes
872,000 shares issuable pursuant to options exercisable within 60 days of
September 13, 2000.
(6) Includes 636,256 shares issued in the name of Clive B. Davies and Carol B.
Davies, Trustees of the Davies Living Trust 9/9/94. Also includes 439,000
shares issuable pursuant to options exercisable within 60 days of September
13, 2000.
(7) Includes 410,000 shares issuable pursuant to options exercisable within 60
days of September 13, 2000.
8
(8) Includes 249,000 shares issuable pursuant to options exercisable within 60
days of September 13, 2000.
(9) Consists of 208,000 shares issuable pursuant to options exercisable within
60 days of September 13, 2000.
(10) Consists of 76,000 shares issuable pursuant to options exercisable within
60 days of September 13, 2000.
(11) Includes 18,000 shares issued in the name of Leo and Jacqueline McCarthy
LLC. Also includes 186,400 shares issuable pursuant to options exercisable
within 60 days of September 13, 2000.
(12) Consists of 96,000 shares issuable pursuant to options exercisable within
60 days of September 13, 2000.
(13) Includes 3,461,600 shares issuable pursuant to options exercisable within
60 days of September 13, 2000.
Board Meetings And Committees
The Board of Directors of the Company held a total of four meetings during
the fiscal year ended July 2, 2000. No director attended fewer than 75% of the
meetings of the Board of Directors and the Board committees upon which such
director served. The Board of Directors has an Audit Committee and a
Compensation Committee. The Board of Directors has no nominating committee or
any committee performing similar functions.
The Audit Committee of the Board of Directors currently consists of
directors Lee, McCarthy, Moley and Volpe, and held a total of four meetings
during the last fiscal year. The Audit Committee recommends engagement of the
Company's independent auditors, and is primarily responsible for approving the
services performed by the Company's independent auditors and for reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls.
The Compensation Committee of the Board of Directors currently consists of
directors Lee, McCarthy, Moley and Volpe, and held a total of four meetings
during the last fiscal year. The Committee reviews and approves the Company's
executive compensation policy, including the salaries and target bonuses of the
Company's executive officers, and administers the Company's employee stock
plans.
Director Compensation
The Company currently pays each non-employee director an annual retainer
of $20,000 and a fee of $1,500 for each meeting of the Board of Directors
attended. Directors are generally eligible to receive options under the
9
Company's stock option plans. For the fiscal year ended July 2, 2000, Messrs.
Lee, Moley and Volpe each received an option to purchase 32,000 shares.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee currently consists of directors Lee,
McCarthy, Moley and Volpe. No executive officer of the Company served on the
compensation committee of another entity or on any other committee of the board
of directors of another entity performing similar functions during the last
fiscal year.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership on Form 3 and of changes in ownership on Forms 4 or 5 with
the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. Executive officers, directors and ten percent
shareholders are also required by Commission rules to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely upon its review of copies of such forms and amendments, if
any, received by the Company, or written representations from certain reporting
persons that no Forms 5 were required for such persons, the Company believes
that it has complied with all Section 16(a) filing requirements applicable to
its executive officers and directors during the fiscal year ended July 2, 2000.
10
EXECUTIVE OFFICER COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company in all capacities, for the last three fiscal years
ended July 2, 2000, by the Named Executive Officers:
Summary Compensation Table
Long Term
Compensation
-------------
Annual Compensation Shares
Name and Principal ------------------------------------ Underlying All Other
Position Year Salary Bonus(1) Options(2) Compensation(3)
- - -------------------------------- ------ ------------------- -------------- ------------- ----------------
Robert H. Swanson, Jr. ......... 2000 $ 274,273 $ 2,263,455 -- $ 31,980
Chairman and Chief 1999 283,488 1,340,347 200,000 33,064
Executive Officer 1998 268,258 1,273,804 500,000 23,790
Clive B. Davies ................ 2000 $ 272,696 $ 1,795,484 -- $ 23,156
President 1999 253,615 1,064,105 130,000 22,576
1998 241,662 979,622 260,000 22,620
Robert C. Dobkin ............... 2000 $ 261,639 $ 1,140,285 -- $ 22,397
Vice President, Engineering 1999 249,677 853,018 90,000 22,250
and Chief Technical Officer 1998 237,717 908,210 380,000 22,172
Paul Coghlan ................... 2000 $ 255,152 $ 1,452,206 -- $ 21,693
Vice President, Finance and 1999 244,677 881,256 70,000 21,440
Chief Financial Officer 1998 232,833 861,497 180,000 21,820
Hans J. Zapf ................... 2000 $ 245,992(4) $ 663,058 -- $ 21,135
Vice President 1999 231,157(4) 431,455 50,000 22,250
International Sales 1998 218,827(4) 486,689 160,000 22,258
<FN>
- - -----------
(1) Includes cash profit sharing and cash bonuses earned for the fiscal year,
whether accrued or paid.
(2) All stock numbers reflect two-for-one splits of the Company's Common Stock
in February 1999 and February 2000.
(3) Includes insurance premiums paid by the Company under its life insurance
program. Also includes 401(k) profit sharing distributions earned during
the fiscal year.
(4) Includes sales commissions earned by Mr. Zapf for the fiscal year.
</FN>
11
Option Grants in Last Fiscal Year
No stock options were granted to any of the Named Executive Officers
during the fiscal year ended July 2, 2000.
Option Exercises And Holdings
The following table provides information with respect to option exercises
in fiscal 2000 by the Named Executive Officers and the value of such officers'
unexercised options at June 30, 2000.
12
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Value of Unexercised
Number of Shares Underlying In-the-Money Options at
Shares Unexercised Options at Fiscal Fiscal
Year-end (1) Year-end(3)
Acquired On Value ----------------------------- ----------------------------
Name Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- - --------------------------------- ------------- ------------- ------------- --------------- ------------- --------------
Robert H. Swanson, Jr. .......... 340,000 $12,567,253 333,000 700,000 $16,995,738 $34,875,602
Clive B. Davies ................. 490,000 20,332,813 440,000 380,000 24,197,306 18,602,362
Robert C. Dobkin ................ 120,000 5,071,875 770,000 480,000 43,423,804 24,592,110
Paul Coghlan .................... 400,000 17,133,253 372,000 248,000 20,878,433 12,359,367
Hans J. Zapf .................... 230,000 10,421,562 220,000 220,000 12,051,309 11,175,243
<FN>
- - -----------
(1) All stock numbers reflect the two-for-one split of the Company's Common Stock in February 2000.
(2) Market value of underlying securities on the exercise date, minus the exercise price.
(3) Value is based on the last reported sale price of the Common Stock on the Nasdaq National Market of $63.9375 per
share on June 30, 2000 (the last trading day for fiscal 2000), minus the exercise price.
</FN>
13
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
shareholder return, calculated on a dividend reinvested basis, for Linear
Technology Corporation, the Nasdaq National Market and the Semiconductor
Subgroup of the S&P Electronics Index (the "Semiconductor Index"). The graph
assumes that $100 was invested in the Company's Common Stock, in the Nasdaq
National Market and in the Semiconductor Index on the last trading day of the
Company's 1995 fiscal year. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
<PLOT POINTS NEEDED FOR PERFORMANCE GRAPH>
[GRAPHIC OMITTED]
14
COMPENSATION COMMITTEE REPORT
Introduction
The Compensation Committee of the Board of Directors is composed only of
non-employee directors. It is responsible for reviewing and recommending for
approval by the Board of Directors the Company's compensation practices,
executive salary levels and variable compensation programs, both cash-based and
equity-based. The Committee generally determines base salary levels for
executive officers of the Company at or about the start of each fiscal year and
determines actual bonuses at the end of each six-month fiscal period based upon
Company and individual performance.
Compensation Philosophy
The Committee has adopted an executive pay-for-performance philosophy
covering all executive officers, including the Chief Executive Officer. This
philosophy emphasizes variable compensation in order to align executive
compensation with the Company's business objectives and performance and to
attract, retain and reward executives who contribute both to the short-term and
long-term success of the Company. Pay is sufficiently variable that
above-average performance results in above-average total compensation, and
below-average performance for the Company or the individual results in
below-average total compensation. The focus is on corporate performance and
individual contributions toward that performance.
Compensation Program
The Company has a comprehensive compensation program which consists of
cash compensation, both fixed and variable, and equity-based compensation. The
program has four principal components, which are intended to attract, retain,
motivate and reward executives who are expected to manage both the short-term
and long-term success of the Company. These components are:
Cash-Based Compensation
Base Salary--Base salary is predicated on industry and peer group
comparisons and on performance judgments as to the past and expected future
contribution of the individual executive officer. In general, salary increases
are made based on median increases in salaries for similar executives of
similar-size companies in the high technology industry.
Profit Sharing--Profit sharing payments are distributed semi-annually to
all employees, including executives, from a profit sharing pool. The amount of
the pool is largely determined by the magnitude of sales and operating income
15
for the six-month period. This pool is distributed to all eligible employees
based on the ratio of their individual salary to total salaries for all
employees. A portion of this profit sharing is paid directly into a 401(k)
retirement plan for all employees.
Bonuses--The Company has a discretionary key employee incentive pool
pursuant to which executive officers and a limited number of key employees may
receive semi-annual cash bonuses. Targets for sales growth and operating income
as a percentage of sales influence the size of the pool. Individual payments
are made based on the Company's achievement of these targets and upon the
individual's personal and departmental performance.
In 1996, the Company adopted the 1996 Senior Executive Bonus Plan to
facilitate, under Section 162(m) of the Internal Revenue Code, the federal
income tax deductibility of compensation paid to the Company's most highly
compensated executive officers. In fiscal 2000, the participants were Messrs.
Swanson, Davies, Dobkin, Coghlan and Zapf. In fiscal 2001, the plan will
include the Chief Executive Officer and each of the Company's four other most
highly compensated executive officers. In July 2000, the Board of Directors
approved an amendment to the plan to increase the maximum amount payable to any
individual in any one year under the plan from $3 million to $5 million. See
"Proposal Five--Amendment of the 1996 Senior Executive Bonus Plan."
Equity-Based Compensation
Stock Options--Stock options are granted periodically to provide
additional incentive to executives and other key employees to work to maximize
long-term total return to shareholders. The options vest over a five-year
period to encourage option holders to continue in the employ of the Company.
Over 35% of worldwide employees have received stock options. In granting
options, the Compensation Committee takes into account the number of shares and
outstanding options already held by the individual.
Chief Executive Officer Compensation
The Committee uses the same factors and criteria described above for
compensation decisions regarding the Chief Executive Officer.
Compensation Limitations for Tax Purposes
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code adopted under the federal Revenue Reconciliation Act of
1993. Section 162(m) generally disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1 million in
16
any taxable year for any of the Named Executive Officers, unless compensation
is performance-based. The Company's policy is to qualify, to the extent
reasonable, its executive officers' compensation for deductibility under
applicable tax laws. In 1996, the Company implemented the 1996 Senior Executive
Bonus Plan in order to qualify certain bonus payments to the Named Executive
Officers as performance-based compensation under Section 162(m). The Committee
believes that the implementation of the 1996 Senior Executive Bonus Plan
enables the Company to compensate its executive officers in accordance with its
pay-for-performance philosophy while maximizing the deductibility of such
compensation. However, the Committee recognizes that the loss of a tax
deduction may be necessary in some circumstances.
Summary
The Committee believes that a fair and motivating compensation program has
played a critical role in the success of the Company. The Committee reviews
this program on an ongoing basis to evaluate its continued effectiveness.
Respectfully submitted by:
The Compensation Committee
David S. Lee
Leo T. McCarthy
Richard M. Moley
Thomas S. Volpe
17
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the year ending
July 1, 2001, and recommends that the shareholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection. Ernst & Young LLP has audited
the Company's financial statements since the fiscal year ended June 30, 1982.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement and are expected to be
available to respond to appropriate questions from shareholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JULY 1, 2001.
18
PROPOSAL THREE
REINCORPORATION IN DELAWARE
Introduction
For the reasons set forth below, the Board of Directors believes that it
is in the best interests of the Company and its shareholders to change the
state of incorporation of the Company from California to Delaware (the
"Proposed Reincorporation"). Shareholders are urged to read carefully this
section of the Proxy Statement, including the related exhibits referenced below
and attached hereto, before voting on the Proposed Reincorporation. Throughout
this Proxy Statement, the term "Linear California" or the "Company" refers to
Linear Technology Corporation, the existing California corporation, and the
term "Linear Delaware" refers to the new Delaware corporation, a wholly owned
subsidiary of Linear California, which is the proposed successor to Linear
California in the Proposed Reincorporation.
As discussed below, the principal reason for the Proposed Reincorporation
is the potential advantages of the greater flexibility of Delaware corporate
law and the substantial body of case law interpreting that law. The Company
believes that its shareholders will benefit from the well established
principles of corporate governance that Delaware law affords. The provisions of
the Linear Delaware Certificate of Incorporation and Bylaws are similar to
those of the Linear California Articles of Incorporation and Bylaws in most
respects. The Proposed Reincorporation is NOT being proposed in order to
prevent an unsolicited takeover attempt, and the Board of Directors is not
aware of any present attempt by any person to acquire control of the Company,
obtain representation on the Board of Directors or take any action that would
materially affect the governance of the Company.
The Proposed Reincorporation will be effected by merging Linear California
into Linear Delaware. Upon completion of the merger, Linear California, as a
corporate entity, will cease to exist and Linear Delaware will continue to
operate the business of the Company under its current name, Linear Technology
Corporation.
Pursuant to an Agreement and Plan of Merger, in substantially the form
attached hereto as Appendix A (the "Merger Agreement"), each outstanding share
of Linear California Common Stock, no par value, will be automatically
converted into one share of Linear Delaware Common Stock, par value $0.001 per
share, upon the effective date of the merger. Each stock certificate
representing issued and outstanding shares of Linear California Common Stock
will continue to represent the same number of shares of Common Stock of Linear
Delaware. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR
19
STOCK CERTIFICATES OF LINEAR DELAWARE. However, shareholders may exchange their
certificates if they so choose. The Common Stock of Linear California is listed
for trading on The Nasdaq Stock Market's National Market and, after the
Reincorporation, Linear Delaware's Common Stock will continue to be traded on
The Nasdaq Stock Market's National Market without interruption, under the same
symbol ("LLTC") as the shares of Linear California Common Stock are currently
traded.
Under California law, the affirmative vote of a majority of the
outstanding shares of Common Stock of Linear California is required for
approval of the Merger Agreement and the other terms of the Proposed
Reincorporation. See "Vote Required for the Proposed Reincorporation." The
Proposed Reincorporation has been unanimously approved by the Company's Board
of Directors. If approved by the shareholders, it is anticipated that the
Reincorporation will become effective as soon as practicable (the "Effective
Date") following the Annual Meeting of Shareholders. However, pursuant to the
Merger Agreement, the Proposed Reincorporation may be abandoned or the Merger
Agreement may be amended by the Board of Directors (except that the principal
terms may not be amended without shareholder approval) either before or after
shareholder approval has been obtained and prior to the Effective Date if, in
the opinion of the Board of Directors of the Company, circumstances arise which
make it inadvisable to proceed under the original terms of the Merger
Agreement. Shareholders of Linear California will have no appraisal rights with
respect to the Proposed Reincorporation.
The discussion set forth below is qualified in its entirety by reference
to the Merger Agreement, the Certificate of Incorporation of Linear Delaware
and the Bylaws of Linear Delaware, copies of which are attached as Appendices
A, B and C.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION AND THE
BYLAWS OF LINEAR DELAWARE AND ALL PROVISIONS THEREOF, EXCEPT WITH RESPECT TO
THOSE MATTERS SET FORTH IN PROPOSAL FOUR TO BE SEPARATELY VOTED UPON BY THE
SHAREHOLDERS.
Vote Required for the Proposed Reincorporation
Approval of the Proposed Reincorporation, which will also constitute
approval of (i) the Merger Agreement, the Certificate of Incorporation and the
Bylaws of Linear Delaware (except those provisions regarding the increase in
the number of authorized shares, which is being submitted for separate
shareholder approval in Proposal Four), (ii) the assumption of Linear
California's employee benefit plans and stock option and employee stock
20
purchase plans by Linear Delaware, and (iii) the restatement of the Company's
indemnification agreements with each of its officers and directors to afford
such persons indemnification by the Company to the fullest extent permitted by
Delaware law, will require the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock of Linear California entitled to vote.
Abstentions and broker non-votes will have the same effect as a vote against
the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSED
REINCORPORATION. The effect of an abstention or a broker non-vote is the same
as that of a vote against the Proposed Reincorporation.
Principal Reasons for the Proposed Reincorporation
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established
principles of corporate governance in making legal and business decisions. The
prominence and predictability of Delaware corporate law provide a reliable
foundation on which the Company's governance decisions can be based, and the
Company believes that shareholders will benefit from the responsiveness of
Delaware corporate law to their needs and to those of the corporation they own.
Prominence, Predictability, and Flexibility of Delaware Law. For many
years Delaware has followed a policy of encouraging incorporation in that state
and, in furtherance of that policy, has been a leader in adopting, construing
and implementing comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws. Many corporations
have chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to that proposed by
the Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to
meet changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues, and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.
Well Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by a corporation and to the conduct of a
corporation's board of directors, such as under the business judgment rule
21
and other standards. The Company believes that its shareholders will benefit
from the well established principles of corporate governance that Delaware law
affords.
Increased Ability to Attract and Retain Qualified Directors. Both
California and Delaware law permit a corporation to include a provision in its
certificate of incorporation which reduces or eliminates the monetary liability
of directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and
money required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce these risks to its directors
and officers and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who otherwise might be unwilling to serve because of the
risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors than California law and that Delaware case law
regarding a corporation's ability to limit director liability is more developed
and provides more guidance than California law.
California Proposition 211. In November 1996, Proposition 211 was rejected
by the California electorate. Proposition 211 would have limited the ability of
California companies to indemnify their directors and officers. While
Proposition 211 was defeated, similar initiatives or legislation containing
similar provisions may be proposed in California in the future. As a result,
the Company believes that the more favorable corporate environment afforded by
Delaware will enable it to compete more effectively with other public companies
in attracting new directors.
No Change in the Name, Board Members, Business, Management, Employee Benefit
Plans or Location of Principal Facilities of the Company
The Proposed Reincorporation will effect only a change in the legal
domicile of the Company and certain other changes of a legal nature which are
described in this Proxy Statement. The Proposed Reincorporation will NOT result
in any change in the name, business management, fiscal year, assets or
liabilities or location of the principal facilities of the Company. The five
directors who will be elected at the Annual Meeting of Shareholders will become
the directors of Linear Delaware. All employee benefits, stock options and
employee stock purchase plans of Linear California will be assumed and
continued by Linear Delaware, and each option or right issued pursuant to such
plans will automatically be converted into an option or right to purchase the
same number of shares of Linear Delaware Common Stock at the
22
same price per share, upon the same terms and subject to the same conditions.
Shareholders should note that approval of the Proposed Reincorporation will
also constitute approval of the assumption of these plans by Linear Delaware.
Other employee benefit arrangements of Linear California will also be continued
by Linear Delaware upon the terms and subject to the conditions currently in
effect. As noted above, after the merger the shares of Common Stock of Linear
Delaware will continue to be traded without interruption, on the same exchange
(The Nasdaq Stock Market's National Market) and under the same symbol ("LLTC")
as the shares of Common Stock of Linear California are currently traded. The
Company believes that the Proposed Reincorporation will not affect any of its
material contracts with any third parties and that Linear California's rights
and obligations under such material contractual arrangements will continue and
be assumed by Linear Delaware.
Anti-takeover Implications
Delaware, like many other states, permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to unsolicited
takeover attempts through amendment of the corporate charter or bylaws or
otherwise. The Proposed Reincorporation is NOT being proposed in order to
prevent such a change in control, and the Board of Directors is not aware of
any present attempt to acquire control of the Company or to obtain
representation on the Board of Directors.
In the discharge of its fiduciary obligations to its shareholders, the
Board of Directors has evaluated the Company's vulnerability to potential
unsolicited bidders. In the course of such evaluation, the Board of Directors
of the Company has considered or may consider in the future certain defensive
strategies designed to enhance the Board's ability to negotiate with an
unsolicited bidder. These strategies include, but are not limited to, the
establishment of a classified board of directors, the elimination of the right
to remove a director other than for cause, the elimination of stockholder
action by written consent, the elimination of cumulative voting, and the
authorization of preferred stock, the rights and preferences of which may be
determined by the Board of Directors. Other than the authorization of preferred
stock (which will continue in Linear Delaware following the Reincorporation),
none of these measures has been previously adopted by Linear California and
none is proposed to be adjusted by Linear Delaware at this time. It should also
be noted that the establishment of a classified board of directors and the
elimination of cumulative voting also can be undertaken under California law in
certain circumstances. For a detailed discussion of the changes which will be
implemented as part of the Proposed Reincorporation, see "The Charters and
Bylaws
23
of Linear California and Linear Delaware" and "Significant Differences Between
the Corporation Laws of California and Delaware" below.
The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because, among
other reasons: (i) a non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices; (ii) a non-negotiated takeover bid may
be designed to foreclose or minimize the possibility of more favorable
competing bids or alternative transactions; and (iii) a non-negotiated takeover
bid may involve the acquisition of only a controlling interest in the
corporation's stock, without affording all shareholders the opportunity to
receive the same economic benefits.
By contrast, in a transaction in which a potential acquiror must negotiate
with an independent board of directors, the board can and should take account
of the underlying and long-term values of the Company's business, technology
and other assets, the possibilities for alternative transactions on more
favorable terms, possible advantages from a tax-free reorganization,
anticipated favorable developments in the Company's business not yet reflected
in the stock price, and equality of treatment of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Proposed Reincorporation, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which
is not approved by the Board of Directors, but which a majority of the
shareholders may deem to be in their best interests or in which shareholders
may receive a substantial premium for their shares over the then current market
value or over their cost bases in such shares. As a result, shareholders who
might wish to participate in an unsolicited tender offer may not have an
opportunity to do so. In addition, to the extent that provisions of Delaware
law enable the Board of Directors to resist a takeover or a change in control
of the Company, such provisions could make it more difficult to change the
existing Board of Directors and management.
Certain effects of the Proposed Reincorporation may be considered to have
anti-takeover implications. Section 203 of the Delaware General Corporation
Law, from which Linear Delaware does not intend to opt out, restricts certain
"business combinations" with "interested stockholders" for three years
following the date that a person becomes an interested stockholder, unless the
Board of Directors approves the business combination. See "Significant
Differences Between the Corporation Laws of California and Delaware-Stockholder
Approval of Certain Business Combinations."
24
The Charters and Bylaws of Linear California and Linear Delaware
The provisions of the Linear Delaware Certificate of Incorporation and
Bylaws are similar to those of the Linear California Articles of Incorporation
and Bylaws in most respects. This discussion of the Certificate of
Incorporation and Bylaws of Linear Delaware is qualified by reference to
Appendices B and C hereto.
Number of Authorized Shares. The Articles of Incorporation of Linear
California currently authorize the Company to issue up to 480,000,000 shares of
Common Stock, no par value, and 2,000,000 shares of Preferred Stock, no par
value. The Certificate of Incorporation of Linear Delaware provides that it
will have 2,000,000,000 authorized shares of Common Stock, par value $0.001 per
share, and 2,000,000 authorized shares of Preferred Stock, par value $0.001 per
share. Like Linear California's Articles of Incorporation, Linear Delaware's
Certificate of Incorporation provides that the Board of Directors is entitled
to determine the powers, preferences and rights, and the qualifications,
limitations or restrictions, of the authorized and unissued Preferred Stock.
Monetary Liability of Directors. The Articles of Incorporation of Linear
California and the Certificate of Incorporation of Linear Delaware both provide
for the elimination of personal monetary liability of directors to the fullest
extent permissible under the laws of the respective states. The provision
eliminating monetary liability of directors set forth in the Linear Delaware
Certificate of Incorporation is potentially more expansive than the
corresponding provision in the Linear California Articles of Incorporation, in
that the former incorporates future amendments to Delaware law with respect to
the elimination of such liability. For a more detailed explanation of the
foregoing, see "Significant Differences Between the Corporation Laws of
California and Delaware-Indemnification and Limitation of Liability."
Size of Board of Directors. The Bylaws of Linear Delaware provide for a
Board of Directors consisting of five members, until changed by a duly adopted
amendment to the Bylaws. The Bylaws of Linear California provide for a Board of
Directors consisting of not less than four nor more than seven directors,
within which the exact number is set at five members. Under California law,
although changes in the number of directors, in general, must be approved by a
majority of the outstanding shares, a board of directors may fix the exact
number of directors within a stated range set forth in the articles of
incorporation or bylaws, if the stated range has been approved by the
shareholders. Delaware law permits a board of directors, acting alone, to
change the authorized number of directors by amendment to the bylaws, unless
the directors are not authorized to amend the bylaws or the number of directors
is fixed in the certificate of incorporation (in which case a change in the
25
number of directors may be made only by amendment to the certificate of
incorporation following approval of such change by stockholders). The Linear
Delaware Certificate of Incorporation provides that the number of directors
will be as specified in the Bylaws and authorizes the Board of Directors to
adopt, alter, amend or repeal the Bylaws. Following the Proposed
Reincorporation, the Board of Directors of Linear Delaware could amend the
Bylaws to change the size of the Board of Directors from five directors without
further stockholder approval. If the Proposed Reincorporation is approved, the
five directors of Linear California who are elected at the Annual Meeting of
Shareholders will continue as the five directors of Linear Delaware after the
Proposed Reincorporation is consummated and until their successors have been
duly elected and qualified.
Cumulative Voting for Directors. Under Delaware law, cumulative voting in
the election of directors is not mandatory but is a permitted option. The
Linear Delaware Certificate of Incorporation provides for cumulative voting
rights. Under cumulative voting, if any shareholder has given notice of an
intention to cumulate votes for the election of directors, such shareholder and
any other shareholder of the Company would be entitled to cumulate his or her
votes at such election. Cumulative voting provides that each share of stock
normally having one vote is entitled to a number of votes equal to the number
of directors to be elected. A shareholder may then cast all such votes for a
single candidate or may allocate them among as many candidates as the
shareholder may choose. In the absence of cumulative voting, the holders of the
majority of the shares present or represented at a meeting in which directors
are to be elected would have the power to elect all the directors to be elected
at such meeting, and no person could be elected without the support of holders
of the majority of shares present or represented at such meeting. Elimination
of cumulative voting could make it more difficult for a minority shareholder
adverse to a majority of the shareholders to obtain representation on the
Company's Board of Directors. California corporations whose stock is listed on
a national stock exchange can also eliminate cumulative voting with shareholder
approval, although the Company to date has not done so.
Power to Call Special Shareholders' Meetings. Under California law and
Linear California's Bylaws, a special meeting of shareholders may be called by
the Board of Directors, the Chairman of the Board, the President, the holders
of shares entitled to cast not less than 10% of the votes at such meeting and
such additional persons as are authorized by the articles of incorporation or
the bylaws. Under Delaware law, a special meeting of stockholders may be called
by the board of directors or any other person authorized to do so in the
certificate of incorporation or the bylaws. The Bylaws of Linear Delaware
authorize the Board of Directors, the Chairman of the Board, the President,
26
or the holders of 10% or more of the voting shares of the Company to call a
special meeting of stockholders, although in the future the Board of Directors
could amend the Bylaws of Linear Delaware to change these provisions without
stockholder approval.
Filling Vacancies on the Board of Directors. Under California law, any
vacancy on a board of directors other than one created by removal of a director
may be filled by the board. If the number of directors then in office is less
than a quorum, a vacancy may be filled by (i) the unanimous written consent of
the directors then in office, (ii) the affirmative vote of a majority of the
directors then in office at a meeting held pursuant to notice or waivers of
notice or (iii) a sole remaining director. A vacancy created by removal of a
director may be filled by the board only if so authorized by the corporation's
articles of incorporation or by a bylaw approved by the corporation's
shareholders. Linear California's Articles of Incorporation and Bylaws do not
permit directors to fill vacancies created by removal of a director. Under
Delaware law, vacancies and newly created directorships may be filled by a
majority of the directors then in office (even though less than a quorum) or by
a sole remaining director, unless otherwise provided in the certificate of
incorporation or bylaws (or unless the certificate of incorporation directs
that a particular class of stock is to elect such director(s), in which case a
majority of the directors elected by such class, or a sole remaining director
so elected, shall fill such vacancy or newly created directorship). The Bylaws
of Linear Delaware provide that any vacancy created by the removal of a
director by the stockholders of Linear Delaware may be filled by the vote of a
majority of the remaining directors.
Nominations of Director Candidates and Introduction of Business at
Shareholder Meetings. The Bylaws of Linear Delaware include an advance notice
procedure with regard to the nomination, other than by or at the direction of
the Board of Directors, of candidates for election as directors (the
"Nomination Procedure") and with regard to certain matters to be brought before
an annual meeting or special meeting of shareholders (the "Business
Procedure").
The Nomination Procedure provides that only persons nominated by or at the
direction of the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Company prior to the meeting will be
eligible for election as directors. The Business Procedure provides that at an
annual or special meeting, and subject to any other applicable requirements,
only such business may be conducted as has been brought before the meeting by
or at the direction of the Board of Directors or by a shareholder who has given
timely written notice to the Secretary of the Company of such
27
shareholder's intention to bring such business before the meeting. In all
cases, to be timely, notice must be received by the Company at least 90 days
prior to the meeting.
Under the Nomination Procedure, a shareholder's notice to the Company must
contain certain information about the nominee, including name, address, the
consent to be nominated and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee, as well as certain information about the shareholder
proposing to nominate that person, including name, address, a representation
that the shareholder is a holder of record of stock entitled to vote at the
meeting and a description of all arrangements or understandings between the
shareholder and the nominee. Under the Business Procedure, notice relating to
the conduct of business at a meeting other than the nomination of directors
must contain certain information about the business and about the shareholder
who proposes to bring the business before the meeting. If the chairman or other
officer presiding at the meeting determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director, or if he or she determines that other business was not
properly brought before such meeting in accordance with the Business Procedure,
such business will not be conducted at such meeting. Nothing in the Nomination
Procedure or the Business Procedure will preclude discussion by any shareholder
of any nomination or business proposal properly made or brought before an
annual or special meeting in accordance with the above-described procedures.
By requiring advance notice of nominations by shareholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the shareholders about such qualifications.
By requiring advance notice of proposed business, the Business Procedure
provides the Board with an opportunity to inform shareholders of any business
proposed to be conducted at a meeting and the Board's position on such
proposal, enabling shareholders to decide better whether to attend the meeting
or grant a proxy to the Board of Directors as to the disposition of such
business. Although the Linear Delaware Bylaws do not give the Board any power
to approve or disapprove shareholder nominations for the election of directors
or any other business desired by shareholders to be conducted at a meeting, the
Linear Delaware Bylaws may have the effect of precluding a nomination for the
election of directors or of precluding other business at a particular meeting
if the proper procedures are not followed. In addition, the procedures may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to
28
obtain control of the Company, even if the conduct of such business or such
attempt might be deemed to be beneficial to the Company and its shareholders.
Loans to Officers and Employees. Under California law, any loan or
guaranty to or for the benefit of a director or officer of the corporation or
its parent requires approval of the shareholders unless such loan or guaranty
is provided under a plan approved by shareholders owning a majority of the
outstanding shares of the corporation. However, under California law,
shareholders of any corporation with 100 or more shareholders of record, such
as the Company, may approve a bylaw authorizing the board of directors alone to
approve loans or guaranties to or on behalf of officers (whether or not such
officers are directors) if the board determines that any such loan or guaranty
may reasonably be expected to benefit the corporation. Pursuant to the Linear
Delaware Bylaws and in accordance with Delaware law, Linear Delaware may make
loans to, guarantee the obligations of or otherwise assist its officers or
other employees and those of its subsidiaries (including directors who are also
officers or employees) when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation.
Voting by Ballot. California law provides that the election of directors
may proceed in the manner described in a corporation's bylaws. Linear
California's Bylaws provide that the election of directors at a shareholders'
meeting may be by voice vote or ballot, unless prior to such vote a shareholder
demands a vote by ballot, in which case such vote must be by ballot. Under
Delaware law, the right to vote by written ballot may be restricted if so
provided in the certificate of incorporation. The Bylaws and Certificate of
Incorporation of Linear Delaware do not restrict the right to vote by written
ballot. Stockholders of Linear Delaware may therefore continue to demand
election by ballot, unless and until the Certificate of Incorporation is
amended, which amendment would require a majority stockholder vote. It may be
more difficult for a stockholder to contest the outcome of a vote that has not
been conducted by written ballot.
Significant Differences Between the Corporation Laws of California and Delaware
The following provides a summary of the major substantive differences
between the Corporation Laws of California and Delaware. It is not an
exhaustive description of all differences between the two states' laws.
Stockholder Approval of Certain Business Combinations
Delaware. Under Section 203 of the Delaware General Corporation Law, a
Delaware corporation is prohibited from engaging in a "business combination"
with an "interested stockholder" for three years following the date
29
that such person or entity becomes an interested stockholder. With certain
exceptions, an interested stockholder is a person or entity who or which owns,
individually or with or through certain other persons or entities, 15% or more
of the corporation's outstanding voting stock (including any rights to acquire
stock pursuant to an option, warrant, agreement, arrangement or understanding,
or upon the exercise of conversion or exchange rights, and stock with respect to
which the person has voting rights only). The three-year moratorium imposed by
Section 203 on business combinations does not apply if (i) prior to the date on
which such stockholder becomes an interested stockholder the board of directors
of the subject corporation approves either the business combination or the
transaction that resulted in the person or entity becoming an interested
stockholder; (ii) upon consummation of the transaction that made him or her an
interested stockholder, the interested stockholder owns at least 85% of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding from the 85% calculation shares owned by directors who are also
officers of the subject corporation and shares held by employee stock plans that
do not give employee participants the right to decide confidentially whether to
accept a tender or exchange offer); or (iii) on or after the date such person or
entity becomes an interested stockholder, the Board approves the business
combination and it is also approved at a stockholder meeting by 66 2/3% of the
outstanding voting stock not owned by the interested stockholder. Although a
Delaware corporation to which Section 203 applies may elect not to be governed
by Section 203, the Board of Directors of the Company intends that the Company
be governed by Section 203. The Company believes that most Delaware corporations
have availed themselves of this statute and have not opted out of Section 203.
The Company believes that Section 203 will encourage any potential
acquiror to negotiate with the Company's Board of Directors. Section 203 also
might have the effect of limiting the ability of a potential acquiror to make a
two-tiered bid for Linear Delaware in which all stockholders would not be
treated equally. Shareholders should note, however, that the application of
Section 203 to Linear Delaware will confer upon the Board the power to reject a
proposed business combination in certain circumstances, even though a potential
acquiror may be offering a substantial premium for the Company's shares over
the then-current market price. Section 203 would also discourage certain
potential acquirors unwilling to comply with its provisions.
California. California law requires that, in a merger of the corporation
with the holder of more than 50% but less than 90% of the target common stock
or its affiliate, the holders of common stock receive common stock in the
surviving entity unless all of the target company's shareholders consent to the
transaction. This provision of California law may have the effect of making a
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"cash-out" merger by a majority shareholder more difficult to accomplish.
Although Delaware law does not parallel California law in this respect, under
some circumstances Delaware Section 203 does provide protection to shareholders
against coercive two-tiered bids for a corporation in which the stockholders
are not treated equally.
Classified Board of Directors
A classified board is one on which a certain number, but not all, of the
directors are elected on a rotating basis each year.
Delaware. Delaware law permits a corporation to establish a classified
board of directors, pursuant to which the directors can be divided into as many
as three classes with staggered three-year terms of office, with only one class
of directors standing for election each year. The Linear Delaware Certificate
of Incorporation and Bylaws do not provide for a classified board.
California. Under California law, certain publicly traded companies may
adopt a classified board of directors by adopting amendments to their charter
or bylaws, which amendments must be approved by the shareholders. The Linear
California Articles of Incorporation and Bylaws do not currently provide for a
classified board.
Removal of Directors
Delaware. Under Delaware law, any director or the entire board of
directors of a corporation that does not have a classified board of directors
or cumulative voting may be removed with or without cause with the approval of
a majority of the outstanding shares entitled to vote at an election of
directors. In the case of a Delaware corporation having cumulative voting, if
less than the entire board is to be removed, a director may not be removed
without cause if the number of shares voted against such removal would be
sufficient to elect the director under cumulative voting. In addition, in the
case of a Delaware corporation having a classified board, a director may be
removed by the stockholders only for cause. The Linear Delaware Certificate of
Incorporation and Bylaws provide for cumulative voting, but do not provide for
a classified board.
California. Under California law, any director or the entire board of
directors may be removed with or without cause, with the approval of a majority
of the outstanding shares entitled to vote; however, no individual director may
be removed (unless the entire board is removed) if the number of votes cast
against such removal would be sufficient to elect the director under cumulative
voting. Linear California's Articles of Incorporation provide for cumulative
voting.
31
Indemnification and Limitation of Liability
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a corporation to adopt
charter provisions eliminating the liability of a director to the corporation
or its shareholders for monetary damages for breach of the director's fiduciary
duty. There are nonetheless certain differences between the laws of the two
states respecting indemnification and limitation of liability which are
summarized below.
Delaware. The Linear Delaware Certificate of Incorporation would eliminate
the liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permissible under Delaware law, as such law exists currently and as it may be
amended in the future. Under Delaware law, such provision may not eliminate or
limit director monetary liability for: (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which the director received an improper
personal benefit. Such limitation of liability provisions also may not limit a
director's liability for violation of, or otherwise relieve the corporation or
its directors from the necessity of complying with, federal or state securities
laws or affect the availability of nonmonetary remedies such as injunctive
relief or rescission.
California. The Linear California Articles of Incorporation eliminate the
liability of directors to the Company to the fullest extent permissible under
California law. California law does not permit the elimination of monetary
liability where such liability is based on: (i) intentional misconduct or
knowing and culpable violation of law; (ii) acts or omissions that a director
believes to be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the part of the
director; (iii) receipt of an improper personal benefit; (iv) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the
corporation or its shareholders; (v) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the
director's duty to the corporation and its shareholders; (vi) transactions
between the corporation and a director who has a material financial interest in
such transaction; and (vii) liability for improper distributions, loans or
guarantees.
32
Indemnification Compared and Contrasted. California law requires
indemnification when the individual has defended successfully the action on the
merits. Delaware law requires indemnification of expenses when the individual
being indemnified has successfully defended any action, claim, issue or matter
therein, on the merits or otherwise. Delaware law generally permits
indemnification of expenses, including attorneys' fees, actually and reasonably
incurred in the defense or settlement of a derivative or third-party action,
provided there is a determination by a majority vote of a disinterested quorum
of the directors, by independent legal counsel or by the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in the best interests of the corporation. Without court
approval, however, no indemnification may be made in respect of any derivative
action in which such person is adjudged liable for negligence or misconduct in
the performance of his or her duty to the corporation.
Expenses incurred by an officer or director in defending an action may be
paid in advance under Delaware law or California law, if the director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation to purchase indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
California law permits a California corporation to provide rights to
indemnification beyond those provided therein to the extent such additional
indemnification is authorized in the corporation's articles of incorporation.
Thus, if so authorized, rights to indemnification may be provided pursuant to
agreements or bylaw provisions which make mandatory the permissive
indemnification provided by California law. Linear California's Articles of
Incorporation authorize indemnification beyond that expressly mandated by
California law.
Delaware law also permits a Delaware corporation to provide
indemnification in excess of that provided by statute. Delaware law does not
require authorizing provisions in the certificate of incorporation.
Indemnification Agreements. A provision of Delaware law states that
indemnification provided by statute will not be deemed exclusive of any other
right under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise. Under Delaware law, therefore, the indemnification
agreement entered into by Linear California with its officers and directors may
be assumed by Linear Delaware as part of the Proposed Reincorporation. If the
Proposed Reincorporation is consummated, the indemnification agreements will be
amended to the extent necessary to conform the agreements to Delaware law and
to provide for indemnification of officers and
33
directors and advancement of expenses to the maximum extent permitted by
Delaware law. A vote in favor of the Proposed Reincorporation is also approval
of such amendments to the indemnification agreements. Among other things, the
indemnification agreements will be amended to include within their purview
future changes in Delaware law that expand the permissible scope of
indemnification of directors and officers of Delaware corporations.
Inspection of Shareholder List
Both California and Delaware law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to such person's interest as
a shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by persons holding an
aggregate of 5% or more of the corporation's voting shares, or shareholders
holding an aggregate of 1% or more of such shares who have contested the
election of directors. Delaware law also provides for inspection rights as to a
list of stockholders entitled to vote at a meeting within a ten day period
preceding a stockholders' meeting for any purpose germane to the meeting.
However, Delaware law contains no provisions comparable to the absolute right
of inspection provided by California law to certain shareholders.
Dividends and Repurchases of Shares
California law dispenses with the concepts of par value of shares as well
as statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus exist under Delaware law.
Delaware. Delaware law permits a corporation to declare and pay dividends
out of surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, Delaware law,
generally provides that a corporation may redeem or repurchase its shares only
if the capital of the corporation is not impaired and such redemption or
repurchase would not impair the capital of the corporation.
California. Under California law, a corporation may not make any
distribution to its shareholders unless either: (i) the corporation's retained
earnings immediately prior to the proposed distribution equal or exceed the
amount of the proposed distribution, or (ii) immediately after giving effect to
such distribution, the corporation's assets (exclusive of goodwill, capitalized
research and development expenses and deferred charges) would be at least equal
to 125% of its liabilities (not including deferred taxes, deferred income
34
and other deferred credits), and the corporation's current assets would be at
least equal to its current liabilities (or 125% of its current liabilities if
the average pre-tax and pre-interest expense earnings for the preceding two
fiscal years were less than the average interest expense for such years). Such
tests are applied to California corporations on a consolidated basis.
Shareholder Voting
Both California and Delaware law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers.
Delaware. Delaware law does not require a stockholder vote of the
surviving corporation in a merger (unless the corporation provides otherwise in
its certificate of incorporation) if (i) the merger agreement does not amend
the existing certificate of incorporation; (ii) each share of stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding share after the merger; and (iii) either no
shares of common stock of the surviving corporation and no shares, securities
or obligations convertible into such stock are to be issued or delivered under
the plan of merger, or the authorized unissued shares or shares of common stock
of the surviving corporation to be issued or delivered under the plan of merger
plus those initially issuable upon conversion of any other shares, securities
or obligations to be issued or delivered under such plan do not exceed 20% of
the shares of common stock of such constituent corporation outstanding
immediately prior to the effective date of the merger.
California. California law contains a similar exception to its voting
requirements for reorganizations where shareholders or the corporation itself,
or both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83.3% of the voting
power of the surviving or acquiring corporation or its parent entity.
Appraisal Rights
Under both California and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights, pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in
the transaction.
Delaware. Under Delaware law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, and such appraisal rights are not
available: (i) with respect to the sale, lease or exchange of all or
substantially all of
35
the assets of a corporation; (ii) with respect to a merger or consolidation by
a corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such stockholders
receive only shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares of
such corporations; or (iii) to stockholders of a corporation surviving a merger
if no vote of the stockholders of the surviving corporation is required to
approve the merger under Delaware law.
California. The limitations on the availability of appraisal rights under
California law are different from those under Delaware law. Shareholders of a
California corporation whose shares are listed on a national securities
exchange generally do not have such appraisal rights unless the holders of at
least 5% of the class of outstanding shares claim the right or the corporation
or any law restricts the transfer of such shares. Appraisal rights are also
unavailable if the shareholders of a corporation or the corporation itself, or
both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83.3% of the voting
power of the surviving or acquiring corporation or its parent entity.
California law generally affords appraisal rights in sale of assets
reorganizations.
Dissolution
Under California law, shareholders holding 50% or more of the total voting
power may authorize a corporation's dissolution, with or without the approval
of the corporation's board of directors and, this right may not be modified by
the articles of incorporation. Under Delaware law, unless the board of
directors approves the proposal to dissolve, the dissolution must be
unanimously approved by all the stockholders entitled to vote thereon. Only if
the dissolution is initially approved by the board of directors may the
dissolution be approved by a simple majority of the outstanding shares of the
corporation's stock entitled to vote. In the event of such a board-initiated
dissolution, Delaware law allows a Delaware corporation to include in its
certificate of incorporation a supermajority (greater than a simple majority)
voting requirement in connection with dissolutions. Linear Delaware's
Certificate of Incorporation contains no such supermajority voting requirement.
Interested Director Transactions
Under both California and Delaware law, certain contracts or transactions
in which one or more of a corporation's directors has an interest are not void
or voidable simply because of such interest, provided that certain conditions,
such as obtaining required disinterested approval and fulfilling the
36
requirements of good faith and full disclosure, are met. With certain minor
exceptions, the conditions are similar under California and Delaware law.
Shareholder Derivative Suits
California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under Delaware
law, a stockholder may bring a derivative action on behalf of the corporation
only if the stockholder was a stockholder of the corporation at the time of the
transaction in question or if his or her stock thereafter devolved upon him or
her by operation of law. California law also provides that the corporation or
the defendant in a derivative suit may make a motion to the court for an order
requiring the plaintiff shareholder to furnish a security bond. Delaware does
not have a similar bonding requirement.
Application of the General Corporation Law of California to Delaware
Corporations
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law)
which have significant contacts with California are subject to a number of key
provisions of the California General Corporation Law. However, an exemption
from Section 2115 is provided for corporations whose shares are listed on a
major national securities exchange, such as the The Nasdaq Stock Market's
National Market. Following the Proposed Reincorporation, the Common Stock of
Linear Delaware will continue to be traded on the The Nasdaq Stock Market's
National Market, and, accordingly, it is expected that Linear Delaware will be
exempt from Section 2115.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Linear California Common Stock who receive
Linear Delaware Common Stock in exchange for their Linear California Common
Stock as a result of the Proposed Reincorporation. The discussion does not
address all of the tax consequences of the Proposed Reincorporation that may be
relevant to particular Linear California shareholders, such as dealers in
securities, or those Linear California shareholders who acquired their shares
upon the exercise of stock options, nor does it address the tax consequences to
holders of options or warrants to acquire Linear California Common Stock.
Furthermore, no foreign, state, or local tax considerations are addressed
herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX CONSEQUENCES, EACH
SHAREHOLDER
37
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE APPLICABILITY OF
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications and exceptions described
herein, and assuming the Proposed Reincorporation qualifies as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, the following tax consequences generally should result:
(a) No gain or loss should be recognized by holders of Linear
California Common Stock upon receipt of Linear Delaware Common Stock
pursuant to the Proposed Reincorporation;
(b) The aggregate tax basis of the Linear Delaware Common Stock
received by each shareholder in the Proposed Reincorporation should be
equal to the aggregate tax basis of the Linear California Common Stock
surrendered in exchange therefor; and
(c) The holding period of the Linear Delaware Common Stock received by
each shareholder of Linear California should include the period for which
such shareholder held the Linear California Common Stock surrendered in
exchange therefor, provided that such Linear California Common Stock was
held by the shareholder as a capital asset at the time of the Proposed
Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service,
nor an opinion from its outside legal counsel, with respect to the federal
income tax consequences of the Proposed Reincorporation under the Code. In any
case, such an opinion would neither bind the IRS nor preclude it from asserting
a contrary position.
State, local or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above.
The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and Linear Delaware
should succeed, without adjustment, to the federal income tax attributes of
Linear California.
38
PROPOSAL FOUR
INCREASE IN THE NUMBER OF AUTHORIZED SHARES
The Articles of Incorporation of Linear California currently authorize the
Company to issue up to 480,000,000 shares of Common Stock and 2,000,000 shares
of undersigned Preferred Stock. The Certificate of Incorporation of Linear
Delaware authorizes Linear Delaware to issue up to 2,000,000,000 shares of
Common Stock and 2,000,000 shares of undesignated Preferred Stock. The Board of
Directors has no immediate plans to issue a significant number of additional
shares of Common Stock or Preferred Stock. However, the larger number of
authorized shares provided for in the Linear Delaware Certificate of
Incorporation will provide the Company the certainty and flexibility to
undertake stock splits (in the form of stock dividends), as well as other types
of transactions, including financings, increases in the shares reserved for
issuance pursuant to employee stock and option incentive plans, or other
corporate transactions not yet determined.
The Board of Directors of Linear California believes it is in the
Company's best interest to increase the number of shares of Common Stock that
it is authorized to issue in order to give the Company additional flexibility
to maintain a reasonable stock price with future stock splits and stock
dividends without having to wait for shareholder approval. In particular, under
California law, the board of directors' approval of a stock split automatically
and proportionately increases a corporation's authorized stock without
requiring shareholder approval. Under Delaware law, however, the board of
directors cannot split the corporation's stock by means of a stock dividend
without shareholder approval if there are insufficient authorized shares
available.
Both in February 1999 and in February 2000, the Board of Directors
approved 2-for-1 splits of the Company's Common Stock. In order for the Board
of Directors of Linear Delaware to respond to growth of the Company's business
in the future with the same flexibility the Company has had as a California
corporation, the Company must have a sufficient number of authorized shares to
cover appropriate levels of future stock dividends. Since there are currently
approximately 316,515,460 issued and outstanding shares of the Company's Common
Stock and approximately an additional 10,425,312 reserved for future issuance
under the Company's stock incentive plans and employee stock purchase plans,
the number of shares of Common Stock currently authorized would not be
sufficient to permit the Board of Directors of Linear Delaware to approve a
2-for-1 stock split in the form of a 100% stock dividend without first
obtaining stockholder approval. Under the proposed Certificate of Incorporation
of Linear Delaware, the additional shares of Common Stock would be available
for issuance without further stockholder
39
action, unless shareholder action is otherwise required by Delaware law or the
rules of any stock exchange or automated quotation system on which the Common
Stock may then be listed or quoted. Although the Company is not currently
contemplating any additional stock split or stock dividend, and there can be no
assurance that any additional stock split or stock dividend will happen at any
particular time in the future or at all, the additional authorized shares in
Linear Delaware will effectively provide the Board with flexibility to split
the Company's shares.
The Board of Directors also believes that the availability of additional
authorized but unissued shares of Common Stock will provide the Company with
the flexibility to issue shares for other proper corporate purposes which may
be identified in the future, such as to raise equity capital, to make
acquisitions through the use of stock, to establish strategic relationships
with other companies, and to adopt additional employee benefit plans or reserve
additional shares for issuance under such plans. The Board of Directors has no
immediate plans, understandings, agreements or commitments to issue additional
Common Stock or Preferred Stock for any purpose.
Required Vote
Approval of an increase in the number of authorized shares as part of the
Proposed Reincorporation, which will also constitute approval of the provisions
of the Certificate of Incorporation establishing such an increase, will require
the affirmative vote of a majority of outstanding shares of Common Stock of
Linear California entitled to vote.
If this proposal is not approved by the shareholders but the shareholders
approve the Proposed Reincorporation, the Company will revise the Certificate
of Incorporation of Linear Delaware to set the number of authorized shares of
Common Stock of Linear Delaware to 480,000,000, as currently authorized for
Linear California, and then complete the Proposed Reincorporation. If the
Proposed Reincorporation is not approved, the Company will not seek shareholder
approval of the increase in the number of authorized shares at this time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO SET THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AT
2,000,000,000 IN CONNECTION WITH THE PROPOSED REINCORPORATION. The effect of an
abstention or broker non-vote is the same as a vote against the proposal.
40
PROPOSAL FIVE
AMENDMENT OF THE 1996 SENIOR EXECUTIVE BONUS PLAN
The 1996 Senior Executive Bonus Plan provides the Company's senior key
executives with the opportunity to earn incentive awards based on the
achievement of goals relating to the performance of the Company. The Board of
Directors has approved the amendment of the 1996 Senior Executive Bonus Plan.
Background and Reasons for Adoption
The Company has a general performance-based bonus plan similar to the 1996
Senior Executive Bonus Plan, pursuant to which the Company rewards management
for achieving certain performance objectives. However, under Section 162(m) of
the Internal Revenue Code, the federal income tax deductibility of compensation
paid to the Company's Chief Executive Officer and to each of its four other
most highly compensated executive officers may be limited to the extent that
such compensation exceeds $1 million in any one year. Under Section 162(m), the
Company may deduct compensation in excess of that amount if it qualifies as
"performance-based compensation," as defined in Section 162(m).
In July 1996, the Company adopted the 1996 Senior Executive Bonus Plan to
qualify payments thereunder as "performance-based compensation", so that the
Company could continue to receive a federal income tax deduction for the
payment of incentive bonuses to its most highly compensated executive officers.
As originally adopted, no actual award under the plan may exceed $3 million for
any fiscal year for any individual. The Company now proposes to amend the Plan
to increase this maximum award to $5 million to take into consideration
significantly improved Company financial performance since the plan was
originally adopted in 1996. In all other respects, the 1996 Senior Executive
Bonus Plan will remain unchanged. The Company will also continue to operate its
general bonus plan for the compensation of senior executives and other key
employees for whom Section 162(m) is not applicable.
Vote Required
The affirmative vote of a majority of the votes cast will be required to
approve the amendment of the 1996 Senior Executive Bonus Plan, provided such
affirmative vote also constitutes a majority of the quorum.
41
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE AMENDMENT OF THE 1996 SENIOR EXECUTIVE BONUS PLAN. The effect of an
abstention or broker non-vote is the same as a vote against the proposal.
Description of the 1996 Senior Executive Bonus Plan
The following paragraphs provide a summary of the principal features of
the 1996 Senior Executive Bonus Plan and its operation, as amended. The
discussion set forth below is qualified in its entirety by reference to the
copy of the 1996 Senior Executive Bonus Plan as Appendix D.
Purpose of the Plan
The 1996 Senior Executive Bonus Plan is intended to increase shareholder
value and the success of the Company by aligning senior executive compensation
with the Company's business objectives and performance.
Administration of the Plan
The 1996 Senior Executive Bonus Plan is administered by the Compensation
Committee of the Board of Directors in accordance with (i) the express
provisions of the plan and (ii) the requirements of Section 162(m).
Eligibility to Receive Awards
Participation in the 1996 Senior Executive Bonus Plan is determined
annually in the discretion of the Company's Compensation Committee. In
selecting participants for the plan, the Committee will choose officers of the
Company who are likely to have a significant impact on Company performance and
be highly compensated. For fiscal 2000, the participants in the plan were
Messrs. Swanson, Davies, Dobkin, Coghlan and Zapf. Participation in future
years will be in the discretion of the Committee, but it currently is expected
that two to five officers will participate each year.
Target Awards and Performance Goals
For each fiscal year, the Committee will establish: (i) a target award for
each participant, (ii) the performance goals which must be achieved in order
for the participant to be paid the target award, and (iii) a formula for
increasing or decreasing a participant's actual award depending upon how actual
performance compares to the pre-established performance goals. The performance
measures which the Committee may use are: annual revenue, and operating income
expressed as a percent of sales.
For fiscal 2001, the Committee has established for the plan participants a
combined performance goal with respect to: operating profit return on sales
(i.e. fiscal 2001 operating profit as a percentage of revenue), and revenue
42
growth from fiscal 2000 to fiscal 2001. The Committee has also established a
formula, with such measurements as variables, which will determine actual
awards.
Determination of Actual Awards
After the end of each fiscal year, the Committee must certify in writing
the extent to which the performance goals applicable to each participant were
achieved or exceeded. The actual award (if any) for each participant will be
determined by applying the formula to the level of actual performance which has
been certified by the Committee. However, the Committee retains discretion to
eliminate or reduce the actual award payable to any participant below that
which otherwise would be payable under the applicable formula. Also, no
participant's actual award under the 1996 Senior Executive Bonus Plan may
exceed $5 million for any fiscal year.
The 1996 Senior Executive Bonus Plan contains a continuous employment
requirement. If a participant's employment with the Company terminates prior to
the end of a fiscal year, he or she generally will not be entitled to the
payment of an award for the fiscal year. However, if the participant's
termination is due to retirement, disability or death, the Committee will
proportionately reduce (or eliminate) his or her actual award based on the date
of termination and such other considerations as the Committee deems
appropriate.
Awards under the 1996 Senior Executive Bonus Plan generally will be
payable in cash after the end of the fiscal year during which the award was
earned.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
BY ORDER OF THE BOARD OF
DIRECTORS
Dated: October 6, 2000
43
Appendix A -- Agreement and Plan of Merger
Appendix B -- Certificate of Incorporation of Linear Delaware
Appendix C -- Bylaws of Linear Delaware
Appendix D -- 1996 Senior Executive Bonus Plan, as amended
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF LINEAR TECHNOLOGY CORPORATION
(a Delaware corporation)
AND
LINEAR TECHNOLOGY CORPORATION
(a California corporation)
THIS AGREEMENT AND PLAN OF MERGER dated as of , 2000 (the
"Agreement") is between Linear Technology Corporation, a Delaware corporation
("Linear Delaware"), and Linear Technology Corporation, a California
corporation ("Linear California"). Linear Delaware and Linear California are
sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. Linear Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 2,002,000,000
shares, 2,000,000,000 of which are designated "Common Stock," par value $0.001
per share, and 2,000,000 of which are designated "Preferred Stock," par value
$0.001 per share. The Preferred Stock of Linear Delaware is undesignated as to
series, rights, preferences, privileges or restrictions. As of , 2000,
1,000 shares of Common Stock were issued and outstanding, all of which were
held by Linear California, and no shares of Preferred Stock were issued and
outstanding.
B. Linear California is a corporation duly organized and existing under
the laws of the State of California and has an authorized capital of
482,000,000 shares, 480,000,000 of which are designated "Common Stock," no par
value, and 2,000,000 of which are designated "Preferred Stock," no par value.
The Preferred Stock of Linear California is undesignated as to series, rights,
preferences, privileges or restrictions. As of September 13, 2000, 316,515,460
shares of Common Stock and no shares of Preferred Stock were issued and
outstanding.
C. The Board of Directors of Linear California has determined that, for
the purpose of effecting the reincorporation of Linear California in the State
of Delaware, it is advisable and in the best interests of Linear California and
its shareholders that Linear California merge with and into Linear Delaware
upon the terms and conditions herein provided.
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D. The respective Boards of Directors of Linear Delaware and Linear
California have approved this Agreement and have directed that this Agreement
be submitted to a vote of their respective sole stockholder and shareholders
and executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Linear Delaware and Linear California hereby agree, subject
to the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Linear California shall be merged with and into Linear Delaware (the "Merger"),
the separate existence of Linear California shall cease and Linear Delaware
shall survive the Merger and shall continue to be governed by the laws of the
State of Delaware, and Linear Delaware shall be, and is herein sometimes
referred to as, the "Surviving Corporation." The name of the Surviving
Corporation shall be "Linear Technology Corporation."
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and Merger shall have been adopted and approved by
the stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
Corporations Code;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof; and
(c) An executed counterpart of this Agreement meeting the requirements
of the Delaware General Corporation Law shall have been filed with the
Secretary of State of the State of Delaware.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of Linear California shall cease, and Linear Delaware, as
the Surviving Corporation, (i) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date of the Merger, (ii) shall be subject to all actions previously taken by
its and Linear California's Board of Directors, (iii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of Linear
California in the
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manner more fully set forth in Section 259 of the Delaware General Corporation
Law, (iv) shall continue to be subject to all of the debts, liabilities and
obligations of Linear Delaware as constituted immediately prior to the
Effective Date of the Merger, and (v) shall succeed, without other transfer, to
all of the debts, liabilities and obligations of Linear California in the same
manner as if Linear Delaware had itself incurred them, all as more fully
provided under the applicable provisions of the Delaware General Corporation
Law and the California General Corporation Law.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Linear Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance
with the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of Linear Delaware as in effect immediately prior
to the Effective Date of the Merger shall continue in full force and effect as
the Bylaws of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of Linear
California immediately prior to the Effective Date of the Merger shall be the
directors and officers of the Surviving Corporation until their successors
shall have been duly elected and qualified or until as otherwise provided by
law, or the Certificate of Incorporation of the Surviving Corporation or the
Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 Linear California Common Stock. Upon the Effective Date of the Merger,
each share of Linear California Common Stock issued and outstanding immediately
prior thereto shall, by virtue of the Merger and without any action by the
Constituent Corporations, the holder of such shares or any other person, be
converted into and exchanged for one (1) fully paid and nonassessable share of
Common Stock, par value $0.001 per share, of the Surviving Corporation.
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3.2 Linear California Options, Stock Purchase Rights and Convertible
Securities.
(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume and continue the stock option plans and all other employee
benefit plans of Linear California. Each outstanding and unexercised option
or other right to purchase or security convertible into Linear California
Common Stock shall become an option or right to purchase or a security
convertible into the Surviving Corporation's Common Stock on the basis of
one share of the Surviving Corporation's Common Stock for each share of
Linear California Common Stock issuable pursuant to any such option, stock
purchase right or convertible security, on the same terms and conditions
and at an exercise price per share equal to the exercise price applicable
to any such Linear California option, stock purchase right or convertible
security at the Effective Date of the Merger. There are no options,
purchase rights for or securities convertible into Preferred Stock of
Linear California.
(b) A number of shares of the Surviving Corporation's Common Stock
shall be reserved for issuance upon the exercise of options, stock purchase
rights and convertible securities equal to the number of shares of Linear
California Common Stock so reserved immediately prior to the Effective Date
of the Merger.
3.3 Linear Delaware Common Stock. Upon the Effective Date of the Merger,
each share of Common Stock, par value $0.001 per share, of Linear Delaware
issued and outstanding immediately prior thereto shall, by virtue of the Merger
and without any action by Linear Delaware, the holder of such shares or any
other person, be canceled and returned to the status of authorized but unissued
shares.
3.4 Exchange of Certificates. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of Linear California
Common Stock may, at such stockholder's option, but need not, surrender the
same for cancellation to the transfer agent for the Linear California Common
Stock, as exchange agent (the "Exchange Agent"), and each such holder shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of the Surviving Corporation's Common Stock
into which the surrendered shares were converted as herein provided. Unless and
until so surrendered, each outstanding certificate theretofore representing
shares of Linear California Common Stock shall be deemed for all purposes to
represent the number of shares of the Surviving Corporation's Common Stock into
which such shares of Linear California Common Stock were converted in the
Merger.
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The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any shares of stock represented by such outstanding
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation
or the Exchange Agent, have and be entitled to exercise any voting and other
rights with respect to and to receive dividends and other distributions upon
the shares of Common Stock of the Surviving Corporation represented by such
outstanding certificate as provided above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Linear California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws, or other such additional legends as agreed upon by the holder and the
Surviving Corporation.
If any certificate for shares of Linear Delaware stock is to be issued in
a name other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
Linear Delaware or the Exchange Agent any transfer or other taxes payable by
reason of issuance of such new certificate in a name other than that of the
registered holder of the certificate surrendered or establish to the
satisfaction of Linear Delaware that such tax has been paid or is not payable.
IV. GENERAL
4.1 Covenants of Linear Delaware. Linear Delaware covenants and agrees
that it will, on or before the Effective Date of the Merger:
(a) qualify to do business as a foreign corporation in the State of
California and in connection therewith appoint an agent for service of
process as required under the provisions of Section 2105 of the California
General Corporation Law;
(b) file any and all documents with the California Franchise Tax Board
necessary for the assumption by Linear Delaware of all of the franchise tax
liabilities of Linear California;
(c) file an executed counterpart of this Agreement meeting the
requirements of the California General Corporation Law with the Secretary
of State of the State of California; and
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(d) take such other actions as may be required by the California
General Corporation Law.
4.2 Further Assurances. From time to time, as and when required by Linear
Delaware or by its successors or assigns, there shall be executed and delivered
on behalf of Linear California such deeds and other instruments, and there
shall be taken or caused to be taken by Linear Delaware and Linear California
such further and other actions as shall be appropriate or necessary in order to
vest or perfect in or conform of record or otherwise by Linear Delaware the
title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of Linear California
and otherwise to carry out the purposes of this Agreement, and the officers and
directors of Linear Delaware are fully authorized in the name and on behalf of
Linear California or otherwise to take any and all such action and to execute
and deliver any and all such deeds and other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Linear California or of Linear
Delaware, or of both, notwithstanding the approval of this Agreement by the
shareholders of Linear California or by the sole stockholder of Linear
Delaware, or by both.
4.4 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement with the
Secretaries of State of the States of Delaware and California, provided that an
amendment made subsequent to the adoption of this Agreement by the stockholders
of either Constituent Corporation shall not, unless approved by the
stockholders as required by law: (a) alter or change the amount or kind of
shares, securities, cash, property and/or rights to be received in exchange for
or on conversion of all or any of the shares of any class or series thereof of
such Constituent Corporation; (b) alter or change any term of the Certificate
of Incorporation of the Surviving Corporation to be effected by the Merger; or
(c) alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class or series
of capital stock of any Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation
in the State of Delaware is Street, , Delaware , County of and is the registered
agent of the Surviving Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 1630 McCarthy
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Boulevard, Milpitas, California 95035 and copies thereof will be furnished to
any stockholder of either Constituent Corporation, upon request and without
cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.8 Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of Linear Technology Corporation, a
Delaware corporation, and Linear Technology Corporation, a California
corporation, is hereby executed on behalf of each of such two corporations and
attested by their respective officers thereunto duly authorized.
LINEAR TECHNOLOGY CORPORATION
a Delaware corporation
---------------------------------------------------
Robert H. Swanson, Jr.
Chief Executive Officer
---------------------------------------------------
Arthur F. Schneiderman
Secretary
LINEAR TECHNOLOGY CORPORATION
a California corporation
---------------------------------------------------
Robert H. Swanson, Jr.
Chief Executive Officer
---------------------------------------------------
Arthur F. Schneiderman
Secretary
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LINEAR TECHNOLOGY CORPORATION
(a California corporation)
OFFICERS' CERTIFICATE
Robert H. Swanson, Jr. and Arthur F. Schneiderman certify that:
1. They are the Chief Executive Officer and the Secretary, respectively,
of Linear Technology Corporation, a corporation organized under the laws of the
State of California.
2. The corporation has authorized two classes of stock, designated "Common
Stock" and "Preferred Stock," respectively. There are authorized 480,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock. The Preferred
Stock is undesignated as to series, rights, preferences or restrictions.
3. There were 316,515,460 shares of Common Stock and no shares of
Preferred Stock outstanding as of the record date (the "Record Date") and
entitled to vote at the shareholders' meeting at which the Agreement and Plan
of Merger (the "Merger Agreement") attached hereto was approved.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class of stock which
equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of Common Stock outstanding as of the Record Date, voting as
a single class.
6. Robert H. Swanson, Jr. and Arthur F. Schneiderman further declare under
penalty of perjury under the laws of the State of California that they have
read the foregoing certificate and know the contents thereof and that the same
is true of their own knowledge.
Executed in Milpitas, California on , 2000.
---------------------------------------------------
Robert H. Swanson, Jr.
Chief Executive Officer
---------------------------------------------------
Arthur F. Schneiderman
Secretary
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LINEAR TECHNOLOGY CORPORATION
(a Delaware corporation)
OFFICERS' CERTIFICATE
Robert H. Swanson, Jr. and Arthur F. Schneiderman certify that:
1. They are the Chief Executive Officer and the Secretary, respectively,
of Linear Technology Corporation, a corporation organized under the laws of the
State of Delaware.
2. The corporation has authorized two classes of stock, designated "Common
Stock" and "Preferred Stock," respectively. There are authorized 2,000,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock. The Preferred
Stock is undesignated as to series, rights, preferences or restrictions.
3. There are 1,000 shares of Common Stock outstanding and entitled to vote
on the Agreement and Plan of Merger (the "Merger Agreement") attached hereto.
There are no shares of Preferred Stock outstanding.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of 100% of the shares outstanding and entitled to
vote on the Merger Agreement.
5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of outstanding shares of Common Stock.
6. Robert H. Swanson, Jr. and Arthur F. Schneiderman further declare under
penalty of perjury under the laws of the State of Delaware that they have read
the foregoing certificate and know the contents thereof and that the same is
true of their own knowledge.
Executed in Milpitas, California on , 2000.
---------------------------------------------------
Robert H. Swanson, Jr.
Chief Executive Officer
---------------------------------------------------
Arthur F. Schneiderman
Secretary
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APPENDIX B
CERTIFICATE OF INCORPORATION
OF
LINEAR TECHNOLOGY CORPORATION
ARTICLE I
The name of this corporation is Linear Technology Corporation (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is . The name of its registered agent at such address is
.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be
designated, respectively, Preferred Stock, par value $0.001 per share
("Preferred"), and Common Stock, par value $0.001 per share ("Common"). The
total number of shares of Common that the Corporation shall have authority to
issue is 2,000,000,000. The total number of shares of Preferred that the
Corporation shall have authority to issue is 2,000,000.
The shares of Preferred Stock authorized by this Certificate of
Incorporation may be issued from time to time in one or more series. For any
wholly unissued series of Preferred Stock, the Board of Directors is hereby
authorized to fix and alter the dividend rights, dividend rates, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), redemption prices, liquidation preferences, the number of shares
constituting any such series and the designation thereof, or any of them.
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For any series of Preferred Stock having issued and outstanding shares,
the Board of Directors is hereby authorized to increase or decrease the number
of shares of such series when the number of shares of such series was
originally fixed by the Board of Directors, but such increase or decrease shall
be subject to the limitations and restrictions stated in the resolution of the
Board of Directors originally fixing the number of shares of such series.
If the number of shares of any series is so decreased, then the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors shall be fixed and may be changed from time to time by an
amendment to the Bylaws duly adopted by the stockholders or by the Board
of Directors.
B. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, amend, or repeal the Bylaws of the Corporation.
C. The directors of the Corporation need not be elected by written
ballot unless the Bylaws of the Corporation so provide.
D. Advance notice of stockholder nomination for the election of
directors and of any other business to be brought by stockholders before
any meeting of the stockholders of the Corporation shall be given in the
manner provided in the Bylaws of the Corporation.
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E. At the election of directors of the Corporation, each holder of
stock of any class or series shall be entitled to cumulative voting rights
as to the directors to be elected by each class or series in accordance
with the provisions of Section 214 of the General Corporation Law of the
State of Delaware.
ARTICLE VII
The name and mailing address of the incorporator are as follows:
Herbert P. Fockler
Wilson Sonsini Goodrich and Rosati
650 Page Mill Road
Palo Alto, CA 94304
ARTICLE VIII
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
ARTICLE IX
A. To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or as may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article IX, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article IX, shall eliminate or reduce the effect of this Article IX,
with respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article IX, would accrue or arise, prior to such
amendment, repeal, or adoption of an inconsistent provision.
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ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the
Corporation.
IN WITNESS WHEREOF, the undersigned incorporator hereby acknowledges that
the foregoing Certificate of Incorporation is his act and deed and that the
facts stated herein are true.
---------------------------------------------------
Herbert P. Fockler
Incorporator
Dated: , 2000
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APPENDIX C
BYLAWS
OF
LINEAR TECHNOLOGY CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be. The name of the
registered agent of the corporation at such location is __________________ .
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held the first
Wednesday of November in each year at 3:00 P.M. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected
and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, by the president or by the
holders of 10% or more of the voting shares of the corporation. The date, time
and location of, and record date for, any such special meeting shall be
determined by the Board of Directors.
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2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not less than ninety (90) days prior to the
meeting; provided, however, that in the event that less than one-hundred (100)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, the name and
address of the person or persons to be nominated or the nature of the
business to be proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice or introduce the
business specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to
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be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of
the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation
Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of notice
unless so required by the certificate of incorporation or these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action that may be taken by the stockholders of the corporation at a
duly called annual or special meeting may be taken by written consent of the
holders of a majority of the outstanding shares entitled to vote.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
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(i) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed
by the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic or facsimile transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The number of directors shall be five (5), until changed by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by the
stockholders. No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, at each annual meeting
of stockholders, directors of the corporation shall be elected at each annual
meeting of stockholders to hold office until the expiration of the term for
which they are elected, and until their successors have been duly elected and
qualified; except that if any such election shall not be so held, such election
shall take place at a stockholders' meeting called and held in accordance with
the Delaware General Corporation Law.
Directors need not be stockholders unless so required by the certificate
of incorporation or these bylaws, wherein other qualifications for directors
may be prescribed. Election of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
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Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or
by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the
directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the certificate of incorporation or these
bylaws, or may apply to the Court of Chancery for a decree summarily ordering
an election as provided in Section 211 of the General Corporation Law of
Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors,
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or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place, if any, as may be fixed by the vote of the stockholders
at the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of
directors, or in the event such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for meetings of
the board of directors, or as shall be specified in a written waiver signed by
all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally, by facsimile transmission or by telephone or by telegram, it shall
be delivered personally, by facsimile transmission or by telephone or to the
telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally, by facsimile
transmission or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. The notice need
not specify the purpose or the place of the meeting, if the meeting is to be
held at the principal executive office of the corporation.
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3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of incorp-
oration. If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the directors, or members of a committee of directors, need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto
in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
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3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all
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papers that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and
perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
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5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or
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registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings, and shares. The books of account shall at all reasonable times be
open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall
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perform such other duties and have such other powers as the board of directors
or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was
an agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director
or officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (i) who is or was an
employee or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or agent
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
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6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney
or such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not
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so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
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8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation
shall declare a dividend upon partly paid shares of the same class, but only
upon the basis of the percentage of the consideration actually paid thereon.
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8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the
designations, the preferences, and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
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The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
This corporation may have a corporate seal, which may be adopted or
altered at the pleasure of the board of directors, and may use the same by
causing it or a facsimile thereof, to be impressed or affixed or in any other
manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
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ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to
adopt, amend or repeal bylaws upon the directors. The fact that such power has
been so conferred upon the directors shall not divest the stockholders of the
power, nor limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation
Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
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stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to
be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders
are so divided that they have failed to elect successors to directors whose
terms have expired or would have expired upon qualification of their
successors; or
(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for
action by the board of directors cannot be obtained and the stockholders
are unable to terminate this division; or
(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not
to liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
LINEAR TECHNOLOGY CORPORATION
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of Linear Technology Corporation hereby adopts the
foregoing bylaws, comprising pages, as the bylaws of the corporation.
Executed this _____________ day of ____________ , 2000.
-------------------------------------
Herbert P. Fockler, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Linear Technology Corporation and that the foregoing
bylaws, comprising ( ) pages, were adopted as the Bylaws of the corporation
on the day of ________ , 2000, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this day of ________ , 2000.
-------------------------------------
Arthur F. Schneiderman, Secretary
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APPENDIX D
1996 SENIOR EXECUTIVE BONUS PLAN
As Amended July 25, 2000
The Compensation Committee (the "Committee") of the Board of Directors has
approved the Amendment of the 1996 Senior Executive Bonus Plan (the "Plan").
Adoption of the Plan is subject to the approval of a majority of the shares of
the Company's Common Stock which are present in person or by proxy and entitled
to vote at the Annual Meeting. The Plan provides the Company's senior key
executives with the opportunity to earn incentive awards based on the
achievement of goals relating to the performance of the Company.
Background and Reasons for Adoption
The Company has a performance-based bonus plan similar to the Plan,
pursuant to which the Company rewards management for achieving certain
performance objectives. However, under section 162(m) of the Internal Revenue
Code, the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of its four other most highly
compensated executive officers may be limited to the extent that such
compensation exceeds $1 million in any one year. Under section 162(m), the
Company may deduct compensation in excess of that amount if it qualifies as
"performance-based compensation," as defined in section 162(m). The Plan is
designed to qualify payments thereunder as performance-based compensation, so
that the Company may continue to receive a federal income tax deduction for the
payment of incentive bonuses to its executives. The Company will continue to
operate its current bonus plan, as well, for the compensation of senior
executives and other key employees for whom section 162(m) is not an issue.
Description of the Plan
The following paragraphs provide a summary of the principal features of
the Plan and its operation.
Purpose of the Plan
The Plan is intended to increase stockholder value and the success of the
Company by aligning senior executive compensation with the Company's business
objectives and performance.
Administration of the Plan
The Plan will be administered by the Committee in accordance with (1) the
express provisions of the Plan and (2) the requirements of section 162(m).
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Eligibility to Receive Awards
Participation in the Plan is determined annually in the discretion of the
Committee. In selecting participants for the Plan, the Committee will choose
officers of the Company who are likely to have a significant impact on Company
performance and be highly compensated. For fiscal 2000, the participants in the
Plan were Messrs. Swanson, Davies, Dobkin, Coghlan and Zapf. In fiscal 2001,
the Plan will include the Chief Executive Officer and each of the Company's
four other most highly compensated executive officers.
Target Awards and Performance Goals
For each fiscal year, the Committee will establish: (1) a target award for
each participant, (2) the performance goals which must be achieved in order for
the participant to be paid the target award, and (3) a formula for increasing
or decreasing a participant's actual award depending upon how actual
performance compares to the pre-established performance goals.
Each participant's target award will be expressed as a percentage of his
or her base salary. Base salary under the Plan means the lesser of: (1) 125% of
the participant's annual salary rate on the first day of the fiscal year, or
(2) the participant's annual salary rate on the last day of the fiscal year.
There are several performance measures which the Committee may use in
setting the performance goals for any fiscal year. Specifically, the
performance goals applicable to any participant will provide for a targeted
level of achievement using one or more of the following measures: (1) annual
revenue, and (2) operating income expressed as a percent of sales.
For fiscal 2001, the Committee has established for the Plan participants a
combined performance goal with respect to: (1) operating profit return on sales
(i.e. fiscal 2001 operating profit as a percentage of revenue), and (2) revenue
growth from fiscal 2000 to fiscal 2001. The Committee has also established a
formula, with such measurements as variables, which will determine actual
awards.
Determination of Actual Awards
After the end of each fiscal year, the Committee must certify in writing
the extent to which the performance goals applicable to each participant were
achieved or exceeded. The actual award (if any) for each participant will be
determined by applying the formula to the level of actual performance which has
been certified by the Committee. However, the Committee retains discretion to
eliminate or reduce the actual award payable to any participant below that
which otherwise would be payable under the applicable formula. Also, no
participant's actual award under the Plan may exceed $5 million for any fiscal
year.
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The Plan contains a continuous employment requirement. If a participant
terminates employment with the Company prior the end of a fiscal year, he or
she generally will not be entitled to the payment of an award for the fiscal
year. However, if the participant's termination is due to retirement,
disability or death, the Committee will proportionately reduce (or eliminate)
his or her actual award based on the date of termination and such other
considerations as the Committee deems appropriate.
Awards under the Plan generally will be payable in cash after the end of
the fiscal year during which the award was earned.
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