SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant o Check the appropriate box: [ ]
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LINEAR TECHNOLOGY CORPORATION
- ------------------------------------------------------------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:__________________
(2) Aggregate number of securities to which transaction 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:_____________________
(5) Total fee paid:___________________
[ ] Fee paid previously with preliminary materials.
[ ] 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.:___________________
(3) Filing Party:______________________
(4) Date Filed:_______________________
-1-
LINEAR TECHNOLOGY CORPORATION
---------------------------
Notice of Annual Meeting of Shareholders
To Be Held on November 5, 1997
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 5, 1997 at 3:00 p.m., local time, at the Company's principal
executive offices, located at 1630 McCarthy Boulevard, Milpitas, California
95035, for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected.
2. To approve an amendment to the Company's 1986 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 500,000 shares.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending June 28, 1998.
4. 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 at the close of business on September 8, 1997
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 2, 1997
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
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PROXY STATEMENT
FOR
1997 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 5, 1997, 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 1630
McCarthy Boulevard, 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 June 29, 1997, including financial statements,
were mailed on or about October 2, 1997 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 it 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.
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 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, provided that votes
cannot be cast for more than five candidates. 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 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 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, all 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.
Deadline for Receipt of Shareholder Proposals
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting must be received by
the Company no later than June 4, 1998 in order that they may be included in the
proxy statement and form of proxy relating to that meeting.
Record Date and Voting Securities
Shareholders of record at the close of business on September 8, 1997 (the
"Record Date"), are entitled to notice of and to vote at the meeting. As of the
Record Date, 76,482,395 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 8, 1997, the market value of one share of the Company's Common Stock
was $71.50. For information regarding security ownership by management and by
the beneficial owners of more than five percent of the Company's Common Stock,
see "Other Information Regarding Security Ownership, Directors and Officers."
-2-
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 shall be 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 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.
Name Of Nominee Age Principal Occupation Director Since
- -------------------------------- --------------- ----------------------------------------- ------------------------------
Robert H. Swanson, Jr. 59 President and Chief Executive 1981
Officer of the Company
David S. Lee 60 Chairman, Cortelco Systems 1988
Holding Corp.
Leo T. McCarthy 67 President, The Daniel Group 1994
Richard M. Moley 58 Former Senior Vice President, Cisco 1994
Systems, Inc.
Thomas S. Volpe 46 General Partner, Volpe Brown 1984
Whelan & Co., LLC
There are no family relationships among the Company's directors and
executive officers.
Mr. Swanson, a founder of the Company, has served as President, Chief
Executive Officer and a director of the Company since its incorporation in
September 1981. 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 Board of CMC Industries, Inc., Cortelco Kellogg,
Cortelco Holding, DTC Data Technology Corp. (formerly Qume Corporation), and
Regent, University of California. Mr. Lee originally 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
-3-
Qume until 1981, and President 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 Corporation and in 1988, Data Technology Corporation bought Qume and
merged both companies. Currently, Mr. Lee is a member of the Board of Directors
for the following business-related ventures, Award Software International,
Centigram Communications Corporation, BCS Technologies, Inc., COMSAT RSI
Plexsys, Daily Wellness Co., Internex, and non-business related ventures,
California Chamber of Commerce, Commissioner of California Postsecondary
Education Commission, and President of Asian Cultural Teachings. Mr. Lee was an
advisor to Presidents Bush and 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
founder and Chairman of CIE, AAMA, and Monte Jade.
Mr. McCarthy has served since January 1995 as President of The Daniel
Group, a partnership engaged in international trade in Asia 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 remains international trade and
investment, particularly involving Pacific Rim markets. In December 1996, Mr.
McCarthy was appointed by the United States Senate Leadership to the newly
created nine member National Gambling Impact Study Commission. The Commission is
directed by Congress to undertake a two year study of the economic benefits
and/or detriments of all forms of gambling in the United States and thereafter
propose recommendations for presidential and congressional action. Mr. McCarthy
also serves on the board of Open Data Systems, a privately-held maker of
software which correlates government building permits and related documents from
different databases.
Mr. Moley served as Senior Vice President, Cisco Systems, Inc., a provider
of computer internetworking solutions, until August 1997, when he became a
consultant. 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. in July 1996. Mr. Moley served in various
executive positions at ROLM Corporation, a telecommunications company, from 1973
to 1986, most recently as a Group Vice President. Prior to joining ROLM, he held
management positions in software development and marketing at Hewlett-Packard
Company. Mr. Moley also serves as a director of CIDCO, Inc.
Mr. Volpe is Chief Executive Officer of Volpe Brown Whelan & Co., LLC
(formerly Volpe, Welty & Company), a private investment banking and risk capital
firm. 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. From 1978 to 1981, Mr. Volpe was Vice President and
Director of the Science and Technology Group for Blyth Eastman Paine Webber,
Inc., an investment banking firm. Mr. Volpe is also a director of PharmChem
Laboratories, Inc. and a number of privately-held companies.
Vote Required and Recommendation of Board of Directors
The nominees receiving the highest number of affirmative votes of the
shares entitled to be voted, up to the number of directors to be elected, 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.
-4-
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE COMPANY'S
1986 EMPLOYEE STOCK PURCHASE PLAN
General
The 1986 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors in April 1986 and approved by the shareholders in May
1986. A total of 1,600,000 shares of the Company's Common Stock is reserved for
issuance under the Purchase Plan. The Purchase Plan, which is intended to
qualify under Section 423 of the Internal Revenue Code of 1986, permits eligible
employees to purchase Common Stock through payroll deductions at a price equal
to 85% of the fair market value of the Common Stock at the beginning or at the
end of each offering period, whichever is lower. Employees are eligible to
participate in the Purchase Plan if they are employed by the Company on an
enrollment date. As of the Record Date, a total of 1,567,364 shares of Common
Stock had been purchased under the Purchase Plan, and 532 employees were
participating under the Purchase Plan.
Proposal
In July 1997, the Board of Directors approved an amendment to the Purchase
Plan to increase the number of shares reserved thereunder by an additional
500,000 shares of Common Stock, for an aggregate of 2,100,000 shares reserved
for issuance thereunder.
Required Vote
The affirmative vote of the holders of a majority of the Common Stock
represented and voting at the Annual Meeting is required to approve and ratify
the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE AMENDMENT TO THE PURCHASE PLAN.
Summary of Purchase Plan
Certain features of the Purchase Plan are outlined below.
Administration. The Purchase Plan is administered by the Board of Directors
or a committee appointed by the Board (the "Administrator"). Every finding,
decision and determination by the Administrator shall, to the full extent
permitted by law, be final and binding upon all parties.
Eligibility. All persons who are employed by the Company on a given
enrollment date and who are customarily employed by the Company for at least
twenty hours per week and more than five months per calendar year are eligible
to participate in the Purchase Plan. Participation in the Purchase Plan ends
automatically on termination of employment with the Company. An eligible
employee may become a participant by completing a subscription agreement
authorizing payroll deductions and filing it with the Company's payroll office
prior to the applicable enrollment date.
-5-
Offering Periods. The Purchase Plan is implemented by consecutive offering
periods of approximately six months each, ending on the last trading day of
fiscal months April and October of each year.
Purchase Price. The purchase price per share of the shares offered under
the Purchase Plan in a given offering period is the lower of 85% of the fair
market value of the Common Stock on the first day of the offering period (the
"Enrollment Date") or 85% of the fair market value of the Common Stock on the
last day of the offering period (the "Exercise Date"). The fair market value of
the Common Stock on a given date is the closing sale price of the Common Stock
for such date as reported by the Nasdaq National Market.
Payroll Deductions. The purchase price for the shares is accumulated by
payroll deductions during the offering period. The deductions must be at least
5%, but may not exceed 10%, of a participant's eligible compensation, which is
defined in the plan to include all base straight time gross earnings (exclusive
of sales commissions, payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation) for a given
offering period. A participant may discontinue his or her participation in the
Purchase Plan at any time during the offering period. Payroll deductions
commence on the first payday following the Enrollment Date, and end on the
Exercise Date unless sooner terminated as provided in the Purchase Plan.
Grant and Exercise of Option. The Purchase Plan operates through the
granting on the Enrollment Date of an option to purchase shares. The maximum
number of shares placed under option in an offering period is determined by
dividing the amount of the participant's total payroll deductions that will be
accumulated prior to the Exercise Date by the purchase price. Unless a
participant withdraws from the Purchase Plan, such participant's option for the
purchase of shares will be exercised automatically on the Exercise Date for the
maximum number of whole shares at the applicable price, provided that the
maximum number of shares subject to such option may not exceed 300 shares per
offering period.
Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the Purchase Plan if, immediately after such subscription, the
employee would own 5% or more of the voting power or value of all classes of
stock of the Company or of any of its subsidiaries (including stock which may be
purchased under the Purchase Plan or pursuant to any other options), nor will
any employee be permitted to participate to the extent such employee could buy
under all employee stock purchase plans of the Company more than $25,000 worth
of stock (determined at the fair market value of the shares at the time the
option is granted) in any calendar year.
Withdrawal; Termination of Employment. Employees may end their
participation in an offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
A participant may withdraw all, but not less than all, of the payroll deductions
credited to such participant's account by giving written notice to the Company.
Transferability. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or pursuant to the Purchase Plan), and any such attempt may be
treated by the Company as an election to withdraw from the Purchase Plan.
Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
or Change of Control. The shares reserved under the Purchase Plan, as well as
the price per share of Common Stock covered by each option under the Purchase
Plan which has not yet been exercised, will be proportionately adjusted for any
stock split,
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reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company. In the
event of the proposed dissolution or liquidation of the Company, the pending
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all the assets of the Company or a merger
of the Company with or into another corporation, the Purchase Plan provides that
each option under the plan will be assumed or an equivalent option will be
substituted by the successor or purchaser corporation, unless the Board
determines to terminate the pending offering period prior to the consummation of
such event.
Amendment and Termination. The Board of Directors of the Company may at any
time and for any reason terminate or amend the Purchase Plan. Except as provided
in the Purchase Plan, no such termination can affect options previously granted,
provided that an offering period may be terminated by the Board of Directors on
any exercise date if the Board determines that the termination of the Purchase
Plan is in the best interests of the Company and its shareholders. Except as
provided in the Purchase Plan, no amendment may make any change in any option
already granted which adversely affects the rights of any participant.
Shareholder approval may be required for certain amendments in order to comply
with the federal securities or tax laws, or any other applicable law or
regulation.
Unless terminated sooner, the Purchase Plan will terminate 20 years from
its effective date.
Federal Income Tax Consequences for the Purchase Plan
No income will be taxable to a participant until the shares purchased under
the Purchase Plan are sold or otherwise disposed of. Upon sale or other
disposition, the participant will generally be subject to tax in an amount that
depends upon the participant's holding period in the plan. If the shares are
sold or otherwise disposed of more than two years after the Enrollment Date and
one year after the Exercise Date, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the time of such sale or disposition over the purchase price, or (b) an
amount equal to 15% of the fair market value of the shares as of the Enrollment
Date. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company generally is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding periods described above.
The foregoing summary of the effect of federal income taxation upon the
participant and the Company with respect to the shares purchased under the
Purchase Plan does not purport to be complete, and does not discuss the tax
consequences of a participant's death or the income tax laws of any state or
foreign country in which the participant may reside.
Participation in the Purchase Plan
Eligible employees participate in the Purchase Plan voluntarily and each
such employee determines his or her level of payroll deductions within the
guidelines fixed by the Purchase Plan. Accordingly, future purchases under the
Purchase Plan are not determinable. During the fiscal year ended June 29, 1997,
the Company issued a total of 81,079 shares of Common Stock in the offering
periods ended October 31, 1996 and April 30, 1997. Such shares had an aggregate
value of $3,287,762 as of their respective purchase dates, and were purchased at
-7-
an aggregate price of $2,367,217. No executive officers of the Company
participated in the Purchase Plan during the last fiscal year.
-8-
PROPOSAL THREE
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
June 28, 1998, 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 of Shareholders and will have the opportunity to make a statement if
they so desire. The representatives also 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 JUNE 28, 1998.
-9-
OTHER INFORMATION
REGARDING SECURITY OWNERSHIP,
DIRECTORS AND OFFICERS
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 1997
(collectively, the "Named 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 Beneficially Percentage
Beneficial Owner Owned Beneficially-Owned
- --------------------------------------------------------------------------------
FMR Corp. (1)
82 Devonshire Street
Boston, MA 02109 7,079,930 9.3%
Putnam Investments, Inc. (2)
One Post Office Square
Boston, MA 02109 6,129,068 8.0%
Robert H. Swanson, Jr. (3) 319,000 *
Robert C. Dobkin (4) 338,438 *
Clive B. Davies (5) 369,064 *
Paul Coghlan (6) 233,612 *
Hans J. Zapf (7) 129,600 *
Thomas S. Volpe (8) 32,000 *
David S. Lee (9) 10,000 *
Leo T. McCarthy (10) 26,000 *
Richard M. Moley (8) 32,000 *
All directors and executive officers as a
group (14 persons) (3)(4)(5)(11) 1,616,714 2.1%
- ---------------------------
* Less than one percent of the outstanding Common Stock.
(1) As reported by FMR Corp. ("FMR") as of September 8, 1997. Consists of
5,631,740 shares beneficially owned by Fidelity Management & Research
Company ("FMRC"), 1,397,840 shares beneficially owned by Fidelity
Management Trust Company ("FMTC"), 29,400 shares beneficially owned by
Fidelity International Limited ("FIL"), and 20,950 shares beneficially
owned directly by Edward C. Johnson 3d or in trusts for the benefit of
Edward C. Johnson 3d or an Edward C. Johnson 3d family member for which
Edward C. Johnson serves as trustee. FMR has sole voting power with
respect to 943,840 shares and has sole dispositive power with respect to
the 7,029,580 shares beneficially owned by FMRC and FMTC. FIL has sole
voting and dispositive power with respect to all the shares it
beneficially owns. Edward C. Johnson has sole voting and dispositive
control with respect to 11,500 shares, shared voting and dispositive power
with respect to 9,300 shares, and no voting and dispositive power with
respect to 150 shares.
-10-
(2) As reported by Putnam Investments, Inc. as of August 31, 1997. Consists of
5,937,716 shares held by Putnam Investment Management, Inc. ("PIM") and
191,352 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) Includes 164,000 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/D/T dated May 27, 1976. Also includes 155,000 shares
issuable pursuant to options exercisable within 60 days of September 8,
1997.
(4) Includes 208,438 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 130,000 shares issuable pursuant to options exercisable within 60
days of September 8, 1997.
(5) Includes 159,064 shares issued in the name of Clive B. Davies and Carol B.
Davies Trustees of the Davies Living Trust 9/9/94. Also includes 210,000
shares issuable pursuant to options exercisable within 60 days of
September 8, 1997.
(6) Includes 215,000 shares issuable pursuant to options exercisable within 60
days of September 8, 1997.
(7) Includes 118,000 shares issuable pursuant to options exercisable within 60
days of September 8, 1997.
(8) Consists of 32,000 shares issuable pursuant to options exercisable within
60 days of September 8, 1997.
(9) Consists of 10,000 shares issuable pursuant to options exercisable within
60 days of September 8, 1997.
(10) Consists of 26,000 shares issuable pursuant to options exercisable within
60 days of September 8, 1997.
(11) Includes 1,055,000 shares issuable pursuant to options exercisable within
60 days of September 8, 1997.
Board Meetings And Committees
The Board of Directors of the Company held a total of four meetings
during the fiscal year ended June 29, 1997. No director attended fewer than 75%
of the meetings of the Board of Directors and its 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 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 four meetings
during the last fiscal year. The Compensation 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
incentive stock plans.
Director Compensation
The Company currently pays to 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.
-11-
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.
Compliance With Section 16(a) of the Exchange Act
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 changes in ownership on Forms 4 or 5
with the Securities and Exchange Commission. Such executive officers, directors
and 10% shareholders are also required by the Securities and Exchange 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 received by it, or
written representations from certain reporting persons that no filings were
required for such persons, the Company believes that during the year ended June
29, 1997, all Section 16(a) filing requirements applicable to its executive
officers and directors were complied with.
-12-
Executive 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
June 29, 1997, by the Named Officers:
Summary Compensation Table
Underlying All Other
Name and Principal Position Year Salary Bonus(1) Options(2) Compensation(3)
- --------------------------- ---- ------- -------- ---------- ---------------
Robert H. Swanson, Jr 1997 $262,260 $827,910 200,000 $22,139
President and Chief 1996 234,135 958,361 -- 32,936
Executive Officer 1995 227,415 679,974 -- 23,586
Clive B. Davies 1997 $224,315 $641,303 100,000 $21,083
Vice President and 1996 218,621 774,366 -- 28,470
Chief Operating Officer 1995 205,341 547,263 -- 20,087
Robert C. Dobkin 1997 $220,683 $610,080 150,000 $20,372
Vice President, 1996 215,214 733,649 -- 27,933
Engineering 1995 199,241 511,381 -- 19,022
Paul Coghlan 1997 $215,620 $573,807 70,000 $20,379
Vice President, Finance and 1996 209,733 697,141 -- 26,836
Chief Financial Officer 1995 198,525 500,906 -- 18,784
Hans J. Zapf 1997 $231,284(4) $359,278 70,000 $20,352
Vice President, 1996 210,191(4) 407,883 -- 27,298
International Sales 1995 193,229(4) 260,430 -- 18,353
<FN>
- ---------------------------
(1) Includes cash profit sharing and cash bonuses earned for the fiscal year,
whether accrued or paid.
(2) On July 23, 1996, the Company cancelled options granted on July 25, 1995
and exchanged them for new options dated July 23, 1996. As part of such
exchange, all vesting under the cancelled options was lost and a new five-
year vesting period was started. See "Compensation Committee Report on
Repricing of Options."
(3) Includes insurance premiums paid by the Company under its life insurance
program. Also includes 401(k) profit sharing distributions earned by the
officer during the fiscal year.
(4) Includes sales commissions earned by Mr. Zapf for the fiscal year.
</FN>
-13-
Option Grants in Last Fiscal Year
The following table shows, as to the Named Officers, information
concerning stock options granted during the year ended June 29, 1997.
Individual Grants
---------------------------------------------------
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to for Option Term(4)
Options Employees in Exercise Price Expiration ------------------------
Name Granted(1) Fiscal Year(2) Per Share Date(3) 5% 10%
- -------------------------------- ------- ------------ --------- ------- --------- ----------
Robert H. Swanson, Jr........... 200,000 4.9% $24.75 7/23/06 $3,113,028 $7,889,025
Clive B. Davies................. 100,000 2.5% $24.75 7/23/06 1,556,514 3,944,513
Robert C. Dobkin................ 150,000 3.7% $24.75 7/23/06 2,334,771 5,916,769
Paul Coghlan.................... 70,000 1.7% $24.75 7/23/06 1,089,559 2,761,159
Hans J. Zapf.................... 70,000 1.7% $24.75 7/23/06 1,089,559 2,761,159
<FN>
- ---------------------------
(1) On July 23, 1996, the Company cancelled options granted on July 25, 1995
and exchanged them for new options dated July 23, 1996. As part of such
exchange, all vesting under the cancelled options was lost and a new
five-year vesting period was started. See "Compensation Committee Report
on Repricing of Options." None of the Named Officers were granted any
additional stock options during the year.
(2) The Company granted to employees in fiscal 1997 options to purchase
4,057,600 shares of Common Stock.
(3) Options may terminate before their expiration upon the termination of
optionee's status as an employee, director or consultant, the optionee's
death or disability or an acquisition of the Company.
(4) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (10 years) at the annual
rate specified (5% and 10%). Annual compounding results in total
appreciation of approximately 63% (at 5% per year) and 159% (at 10% per
year). If the price per share of the Company's Common Stock were to
increase at such rates from the price at the date of the above grants
$24.75 per share) over the next 10 years, the resulting stock price at 5%
and 10% appreciation would be approximately $40.32 per share and
approximately $64.20 per share, respectively. The 5% and 10% assumed
annual rates of compounded stock price appreciation are mandated by rules
of the SEC and do not represent the Company's estimate or projection of
future stock price growth.
</FN>
-14-
Option Exercises And Holdings
The following table provides information with respect to option
exercises in fiscal 1997 by the Named Officers and the value of such officers'
unexercised options at June 29, 1997.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Shares Value of Unexercised In-the
Shares Underlying Unexercised Money Options at Fiscal
Acquired Options at Fiscal Year-end Year-end(2)
On Value ---------------------------- ------------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- -------- ---------- ----------- ------------- ----------- -------------
Robert H. Swanson, Jr. 10,000 $ 406,250 115,000 240,000 $3,740,000 $6,630,000
Clive B. Davies 60,000 2,996,249 210,000 120,000 8,374,375 3,315,000
Robert C. Dobkin -- -- 115,000 180,000 3,782,500 4,972,500
Paul Coghlan 40,000 1,944,425 216,000 84,000 9,159,496 2,320,500
Hans J. Zapf -- -- 122,000 75,000 5,242,000 2,014,500
<FN>
- ---------------------------
(1) Market value of underlying securities on the exercise date, minus the
exercise price.
(2) Value is based on the last reported sale price of the Company's Common Stock
on the Nasdaq National Market of $50.25 per share on June 28, 1997 (the last
trading day for fiscal 1997), minus the exercise price.
</FN>
Compensation Committee Report on Option Repricing
On July 23, 1996, the Board of Directors offered to all employees,
including executive officers, the opportunity to cancel outstanding stock
options that were granted between July 1995 and April 1996 in exchange for new
options exercisable at $24.75 per share (the fair market value of the Company's
Common Stock as of such date). All exchanged options had exercise prices in
excess of $24.75 per share. As part of such exchange, all vesting under the
cancelled options was lost and a new five-year vesting period was started under
the new options. Other than the repriced options, no additional stock options
were granted to any executive officers during the last fiscal year. The option
exchange was an acknowledgment of the importance to the Company of having equity
incentives in the hands of key employees. Stock options which are "out of the
money" provide no particular compensatory incentive if an employee is
considering alternate opportunities. The Committee decided to include executive
officers in the exchange because of the importance of their managerial and
technical leadership to the success of the Company's business. The Company has
repriced options in the past as noted in the Table of Ten-Year Option Repricings
which follows this report.
The Compensation Committee
David S. Lee
Thomas S. Volpe
Leo T. McCarthy
Richard M. Moley
-15-
The following table sets forth the option repricings for the last ten
years for all executive officers.
Table of Ten-Year Option Repricings
Market Length of
Number Price of Original Option
of Stock at Exercise Price New Term Remaining
Options Time of at Time of Exercise at Date of
Name Date Repriced Repricing($) Repricing($) Price($) Repricing(Yrs)
- ----------------------- ------ -------- ----------- ------------- -------- --------------
Robert H. Swanson, Jr.
President and Chief
Executive Officer 7/23/96 200,000 $24.75 $34.125 $24.75 9.0
Clive B. Davies
Vice President and
Chief Operating Officer 7/23/96 100,000 $24.75 $34.125 $24.75 9.0
Robert C. Dobkin
Vice President,
Engineering 7/23/96 150,000 $24.75 $34.125 $24.75 9.0
Paul Coghlan
Vice President, Finance and 7/23/96 70,000 $24.75 $34.125 $24.75 9.0
Chief Financial Officer 10/27/88 60,000 $2.00 $3.0313 $2.00 9.5
Hans J. Zapf
Vice President,
International Sales 7/23/96 70,000 $24.75 $34.125 $24.75 9.0
Timothy D. Cox
Vice President, North
American Sales 7/23/96 70,000 $24.75 $34.125 $24.75 9.0
Sean T. Hurley
Vice President,
Operations 7/23/96 40,000 $24.75 $34.125 $24.75 9.0
Paul Chantalat
Vice President, Quality,
Reliability and Service 7/23/96 40,000 $24.75 $34.125 $24.75 9.0
-16-
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 1992 fiscal year. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
***PERFORMANCE GRAPH HERE***
[Table of Data Points for Edgar Version Only]
Year S&P LLTC Nasdaq
- --------- --- ---- ------
June 1992 100 100 100
June 1993 209 154 125
June 1994 222 236 125
June 1995 419 356 166
June 1996 384 325 210
June 1997 719 563 256
-17-
COMPENSATION COMMITTEE REPORT
Introduction
The Compensation Committee of the Board of Directors (the "Committee") 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 of operating income
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 amount 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 a 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
-18-
compensated executive officers. In 1997, the participants were Messrs. Swanson
and Davies. In 1998, the plan will include the Chief Executive Officer and each
of the Company's four other most highly compensated executive officers.
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.
Approximately 33% of worldwide employees have received stock options. In
granting options, the Compensation Committee takes into account the number of
shares and outstanding options 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 any taxable year
for any of the Named 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 fiscal
1997, the Company implemented the Senior Executive Bonus Plan in order to
qualify certain bonus payments to the Named Officers as performance-based
compensation under Section 162(m). The Committee believes that the
implementation of the 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
Thomas S. Volpe
Leo T. McCarthy
Richard M. Moley
-19-
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 2, 1997
-20-
EDGAR APPENDIX A
P
R LINEAR TECHNOLOGY CORPORATION
O 1997 ANNUAL MEETING OF SHAREHOLDERS
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned shareholder of Linear Technology Corporation, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated October 2, 1997 and hereby appoints
Robert H. Swanson, Jr. and Paul Coghlan, or either of them, proxies and
attorney-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual Meeting
of Shareholders of Linear Technology Corporation to be held on November 5, 1997,
at 3:00 p.m. local time, at the Company's principal executive offices, located
at 1630 McCarthy Boulevard, Milpitas, California 95035, and at any
adjournment(s) thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side, and, in their discretion, upon such
other matter or matters which may properly come before the meeting and any
adjournment(s) thereof.
This proxy will be voted as directed or, if no contrary direction is
indicated, will be voted FOR the election of the specified nominees as
directors, FOR the approval of the amendment of the 1986 Employee Stock Purchase
Plan, FOR the ratification of the appointment of Ernst & Young LLP as
independent auditors, and as said proxies deem advisable on such other matters
as may properly come before the meeting.
--------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
--------------
Please mark
[x] votes as in
this example.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE SPECIFIED NOMINEES AS DIRECTORS, FOR THE
APPROVAL OF THE AMENDMENT OF THE 1986 EMPLOYEE STOCK PURCHASE PLAN, FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS,
AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THIS
MEETING.
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS: 2. PROPOSAL TO APPROVE AMENDMENT OF
Nominees: Robert H. Swanson, Jr.; David S. Lee; THE 1986 EMPLOYEE STOCK PURCHASE PLAN. [ ] [ ] [ ]
Leo T. McCarthy; Richard M. Moley;
Thomas S. Volpe
FOR WITHHELD
[ ] [ ]
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT [ ] [ ] [ ]
OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE
COMPANY:
In their discretion, upon such other matter or matters which may
properly come before the meeting and any adjournment(s) thereof.
MARK HERE This Proxy should be marked, dated, signed by the shareholder(s) exactly
FOR ADDRESS as his or her name appears hereon, and returned promptly in the enclosed
CHANGE AND [ ] envelope. Persons signing in a fiduciary capacity should so indicate.
[ ]______________________________________ NOTE BELOW If shares are held by joint tenants or as community property, both
For all nominees except as noted above should sign.
Signature:________________Date________
Signature:________________Date________
EDGAR APPENDIX B
1986 Employee Stock Purchase Plan, as amended
LINEAR TECHNOLOGY CORPORATION
1986 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED)
The following constitute the provisions of the 1986 Employee Stock
Purchase Plan of Linear Technology Corporation.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock, no par value,
of the Company.
(d) "Company" shall mean Linear Technology Corporation, a
California corporation.
(e) "Compensation" shall mean all regular straight time gross
earnings, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses or other compensation.
(f) "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, provided that such leave is for a
period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(g) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
-1-
(h) "Employee" shall mean any person, including an officer,
who is customarily employed for at least twenty (20) hours per week and more
than five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(i) "Exercise Date" shall mean the last day of each offering
period of the Plan.
(j) "Offering Date" shall mean the first day of each offering
period of the Plan.
(k) "Plan" shall mean this 1986 Employee Stock Purchase Plan.
(l) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of
a given offering period shall be eligible to participate in such offering period
under the Plan, subject to the requirements of paragraph 5(a) and the
limitations imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 425(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or (ii)
which permits his rights to purchase stock under all employee stock purchase
plans (described in Section 423 of the Code) of the Company and its subsidiaries
to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by one
offering during each six-month period of the Plan, commencing on or about
November 1, 1986, and continuing thereafter until terminated in accordance with
paragraph 19 hereof. The Board of Directors of the Company shall have the power
to change the duration of offering periods with respect to future offerings
without shareholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first offering period to be
affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deduction on the form
provided by the Company and filing it with the Company's payroll office prior to
the applicable Offering Date, unless a later time
-2-
for filing the subscription agreement is set by the Board for all eligible
Employees with respect to a given offering.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Offering Date and shall end on the Exercise Date of
the offering to which such authorization is applicable, unless sooner terminated
by the participant as provided in paragraph 10.
6. Payroll Deductions.
(a) At the time a participant files his subscription
agreement, he shall elect to have payroll deductions made on each payday during
the offering period in an amount not less than five percent (5%) and not
exceeding ten percent (10%) of the Compensation which he received on the payday
immediately preceding the Offering Date, and the aggregate of such payroll
deductions during the offering period shall not exceed ten percent (10%) of his
aggregate Compensation during said offering period.
(b) All payroll deductions made by a participant shall be
credited to his account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his participation in the
Plan as provided in paragraph 10, or may lower, but not increase, the rate of
his payroll deductions during the offering period by completing or filing with
the Company a new authorization for payroll deduction. The change in rate shall
be effective fifteen (15) days following the Company's receipt of the new
authorization.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and paragraph 3(b) herein, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar year that
the aggregate of all payroll deductions accumulated with respect to such
Offering Period and any other Offering Period ending within the same calendar
year equal $21,250. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in paragraph 10.
7. Grant of Option.
(a) On the Offering Date of each offering period, each
eligible Employee participating in the Plan shall be granted an option to
purchase (at the per share option price) up to a number of shares of the
Company's Common Stock determined by dividing such Employee's payroll deductions
to be accumulated during such offering period (to be an amount not less than
five percent (5%) and not to exceed an amount equal to ten percent (10%) of his
Compensation as of the date of the commencement of the applicable offering
period) by the lower of (i) eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Offering Date, or (ii)
eighty-five percent (85%) of the fair market value of a share of Common Stock on
the Exercise
-3-
Date, subject to the limitations set forth in Section 3(b) and 12 hereof,
provided that the number of shares of the Company's Common Stock subject to any
option granted to a participant pursuant to this Plan shall not exceed 300. Fair
market value of a share of the Company's Common Stock shall be determined as
provided in Section 7(b) herein.
(b) The option price per share of the shares offered in a
given offering period shall be the lower of: (i) 85% of the fair market value of
a share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Exercise Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion; provided, however, that
where there is a public market for the Common Stock, the fair market value per
Share shall be the mean of the bid and asked prices of the Common Stock for such
date, as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a
stock exchange, the fair market value per Share shall be the closing price on
such exchange on such date, as reported in the Wall Street Journal.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in paragraph 10, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.
9. Delivery. As promptly as practicable after the Exercise Date
of each offering period, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his option. Any cash remaining to the credit of a participant's
account under the Plan after a purchase by him of shares at the termination of
each offering period, or which is insufficient to purchase a full share of
Common Stock of the Company, shall be returned to said participant.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his account under the Plan at any time prior to
the Exercise Date of the offering period by giving written notice to the
Company. All of the participant's payroll deductions credited to his account
will be paid to him promptly after receipt of his notice of withdrawal and his
option for the current period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during the offering
period.
(b) Upon termination of the participant's Continuous Status as
an Employee prior to the Exercise Date of the offering period for any reason,
including retirement or death, the payroll
-4-
deductions credited to his account will be returned to him or, in the case of
his death, to the person or persons entitled thereto under paragraph 14, and his
option will be automatically terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20) hours per week
during the offering period in which the employee is a participant, he will be
deemed to have elected to withdraw from the Plan and the payroll deductions
credited to his account will be returned to him and his option terminated.
(d) A participant's withdrawal from an offering will not have
any effect upon his eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 2,100,000*
shares, subject to adjustment upon changes in capitalization of the Company as
provided in paragraph 18. If the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a) hereof on the Offering Date
of an offering period exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his spouse.
13. Administration. The Plan shall be administered by the Board of
the Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
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* Available share number reflects two-for-one stock splits effected in 1992 and
1995.
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(a) Members of the Board who are eligible to participate in
the Plan may not vote on any matter affecting the administration of the Plan or
the grant of any option pursuant to the Plan.
(b) If a Committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be a member
of the Committee.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of the offering period but prior to delivery to him of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to the Exercise Date of
the offering period.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Exercise Date, which statements will set forth
the amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each option under the Plan which has not yet been
exercised and the number of shares of Common Stock which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively,
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the "Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise pro vided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
19. Amendment or Termination. The Board of Directors of the
Company may at any time and for any reason terminate or amend the Plan. Except
as provided in paragraph 18, no such termination can affect options previously
granted, provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the termination of
the Plan is in the best interests of the Company and its shareholders. Except as
provided in paragraph 18, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participation. In
addition, to the extent necessary to comply with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or regulation), the
Company shall obtain shareholder approval in such a manner and to such a degree
as so required.
-7-
20. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and degree required under the California General Corporate Law.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in paragraph 21. It shall continue in
effect for a term of twenty (20) years unless sooner terminated under paragraph
19.
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LINEAR TECHNOLOGY CORPORATION
1986 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Offering Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. __________________________________ hereby elects to participate in the
Linear Technology Corporation 1986 Employee Stock Purchase Plan (the
"Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock, without par value, in accordance with this
Subscription Agreement and the Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of $__________ (which equals ____% of my Base compensation as of the
payday immediately preceding the Offering Date) in accordance with the
Stock Purchase Plan.
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock, without par value, at the
applicable purchase price determined in accordance with the Stock
Purchase Plan. I further understand that, except as otherwise set forth
in the Stock Purchase Plan, shares will be purchased for me
automatically on the Exercise Date of the offering period unless I
otherwise withdraw from the Stock Purchase Plan by giving written
notice to the Company for such purpose.
4. I have received a copy of the Company's most recent prospectus which
describes the Stock Purchase Plan and a copy of the complete "Linear
Technology Corporation 1986 Employee Stock Purchase Plan." I understand
that my participation in the Stock Purchase Plan is in all respects
subject to the terms of the Stock Purchase Plan.
5. Shares purchased for me under the Stock Purchase Plan should be issued
in the name(s) of:
----------------------------------------------------------------------.
6. I understand that if I dispose of any shares received by me pursuant to
the Stock Purchase Plan within 2 years after the Offering Date (the
first day of the offering period during which I purchased such shares)
or within 1 year after the date on which such shares were transferred
to me, I may be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount
equal to the excess of the fair market value of the shares at the time
such shares were transferred to me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any such disposition. However, if I dispose of such
shares at any time after the expiration of the 2 year and 1 year
holding periods, I understand that I will be treated for federal income
tax purposes as having received income only at the time of such
disposition, and that such
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income will be taxed as ordinary income only to the extent of an amount
equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I
paid for the shares under the option, or (2) the excess of the fair
market value of the shares over the option price, measured as if the
option had been exercised on the Offering Date. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital
gains.
7. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Stock Purchase Plan:
NAME: (Please print)
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(First) (Middle) (Last)
- ------------ -----------------------------------------------------------
Relationship
-----------------------------------------------------------
(Address)
NAME: (Please print)
-----------------------------------------------------------
(First) (Middle) (Last)
- ------------ -----------------------------------------------------------
Relationship
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(Address)
- ------------ -----------------------------------------------------------
Dated: Signature of Employee
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