EXHIBIT 10.2
[GRAPHICS]
FY04 BONUS PLAN
ANALOG DEVICES EUROPE-BASED EMPLOYEES
Analog Devices places great value in sharing the company's success with those
who make it possible--our employees. One of the ways we are able to do this is
through the Analog Devices Bonus Plan. The aim of this Bonus Plan is to
encourage all of us to participate in reaching company goals and to share the
rewards of our achievements.
JERRY FISHMAN
President & CEO
[ANALOG DEVICES LOGO]
THE FY04 BONUS PLAN
ADI is a growth company. Given our focus on the highest growth segments of the
semiconductor industry--analog integrated circuits, digital signal processing,
and micro-electro mechanical systems--we believe it is possible and necessary
to grow at rates moving forward faster than the industry. Throughout the down
cycle of the past couple of years, we have continued to invest in R&D at rates
consistent with much higher revenues in order to strengthen our position as the
cycle turns. As sales continue to grow, it is critical to focus on those
products that not only grow but achieve high profit levels.
Therefore, we have decided to simplify the Bonus Plan for 2004 to focus on one
key metric--operating profit before taxes (OPBT) as a percentage of revenues
- --which implicitly requires high sales growth and high return on assets to meet
our goals.
With our current mix of business and an eye towards competitive profit margins,
our goal is to operate with an OPBT at the 30% level as we exit 2004. At this
level, the bonus payout factor would be 1.5. The Plan is designed to pay a 1.0
bonus at an OPBT of 27%.
Under our current business plan for 2004, we estimate that the payout factor for
the first bonus period, which is the first half of FY04, will be somewhat below
1, and the second bonus payout factor will slightly exceed 1 by the end of the
Plan Year. Of course, the actual payout will depend on our actual results, which
will likely be above or below our business plan. The Plan is designed to allow
bonus payments to accelerate substantially as operating profit, as a percentage
of sales increases, as outlined on the graph below.
The FY04 Bonus Plan is consistent with ADI's long-term business objectives of
high growth and profitability.
WE CAN MAKE A DIFFERENCE
All ADI employees can contribute to achieving our goals by working to control
expenses, minimize waste, increase customer satisfaction, develop new products
on time, and improve process efficiency.
CALCULATING BONUS PAYMENTS
The bonus payout factor is determined by using the percentage of OPBT as a
percentage of sales that we achieve in a given bonus period. As indicated in the
graph below, if we achieve an OPBT of 27% for the bonus period, then the bonus
factor utilized will be 1.0. Each fiscal year, the first bonus period consists
of the first and second quarters, and the second bonus period consists of the
third and fourth quarters.
The maximum payout for the FY04 Bonus Plan is 3 X target. For any bonus period
during which our OPBT is 20% or less, there will be no bonus payout for that
bonus period.
[GRAPH]
To determine the potential individual gross bonus payment for each employee, the
bonus payout factor is multiplied by an eligible employee's accumulated earnings
for the bonus period and their individual bonus target percentage. The
percentage of earnings used in the bonus calculation varies by job grade and is
assigned by the Human Resource organisation.
Example:
Accumulated eligible earnings for the bonus period E 15,000
Bonus target for your job grade 4%
Payout factor for the bonus period 0.8
Gross bonus (before tax) payment:
E 15,000 X 4% X 0.8 E 480
Earnings included in the bonus calculation:
- - Base pay
- - Holiday pay
- - Shift differential
- - Bereavement pay
- - Jury duty pay
- - Maternity and paternity pay (in EU states where paid)
- - Vacation pay
- - Alternative work schedule pay
Earnings excluded from the bonus calculation:
- - Overtime pay
- - Bonus payments from a previous bonus period
- - Other payments that are taxable but not considered regular earnings
Bonus payments are not eligible for company basic or matching contributions for
the company or individual pension plans or any retirement or other such plan.
Bonus payments are made subject to any taxes or other deductions which are
required by law.
WHEN BONUS PAYMENTS ARE MADE
Bonus payments will be made on a semiannual basis in June and December,
approximately six weeks after the end of 2Q and 4Q. The Plan is effective
November 1, 2003, and covers the period from November 1, 2003, to October 31,
2004.
WHO'S ELIGIBLE?
Most ADI European subsidiary employees are eligible to participate in the Plan
if they are actively employed during the applicable bonus period and remain
employed on the date bonus payments are made. New employees are eligible to
participate in the Plan after their first full quarter of employment.
The following situations shall EXCLUDE an employee from participating in the
Plan:
- - Employee is already covered under a field sales, field application
engineering, or other incentive program.
- - Employee terminates employment at an ADI subsidiary before the end of the
bonus period, or before the date payouts are made.
- - Employee who receives a `Needs Improvement' or `Marginal' performance
rating (where applicable) during the bonus period.
- - Employee receives a final written warning during the bonus period.
- - Co-op and intern employees are not eligible for participation in the Plan.
OTHER INFORMATION ABOUT THE BONUS PLAN
HOW CHANGES IN YOUR EMPLOYMENT STATUS AFFECT BONUS PAYMENT
- - If your job grade and bonus target change during the bonus period:
Your bonus target will be based on the job grade that was effective at the
end of the bonus period.
- - If you change work shifts during the bonus period:
Because shift differential paid during the bonus period is included as
part of your earnings for the bonus calculation, your bonus payment
already will take into consideration any shift differential earnings that
you may have for the period.
- - If you transfer business units:
If you transfer between business units, your earnings records transfer
with you, so your bonus amount is based on the total eligible earnings for
the bonus period.
- - If you change status between full-time and part-time working hours:
Because your bonus amount is based on your accumulated paid earnings for
the bonus period, your bonus calculation will take into account any change
in status, such as part-time to full-time or full-time to part-time
working hours.
- - If you are on leave of absence or disability for part of the bonus period:
The bonus is paid based on your earnings while actively at work during the
period (not on sick pay, long-term disability, or voluntary leave of
absence). Therefore, any pay received during your leave of absence will be
excluded from your accumulated paid earnings for bonus calculation
purposes.
- - If you are a new employee:
You are eligible for a bonus payment during the first full quarter of
employment. For example, if you were hired during 1Q, your bonus payment
for the first half of the year would be based on eligible earnings for 2Q
only--your first full quarter of employment.
BONUS PLAN DESIGN
The Bonus Plan is designed to reward all eligible employees for contributing to
company-wide business goals during each fiscal year. It also serves as an
incentive for continued employment with ADI (or an ADI subsidiary). The Plan
design, or portions of the design, may change as the company's focus moves to
different company-wide performance goals that are determined to be critical
during that fiscal year. The fact that this Bonus Plan is in force for a
particular year is no guarantee that the Bonus Plan will be offered in future
years. Further, below certain levels, ADI's results may not be competitive and
may not meet key business performance measures. At these low levels of business
performance, no bonus would be paid.
Unless modified or terminated earlier as provided for in this Plan, all prior
bonus plans have expired of their own terms or have been revoked and withdrawn.
This Plan supersedes all prior written or oral bonus and incentive plans,
promises, agreements, practices, understandings, negotiations, and/or incentive
arrangements.
WORLDWIDE
HEADQUARTERS
One Technology Way
P.O. Box 9106
Norwood, MA
02062-9106 U.S.A.
Tel: 781.329.4700,
(1.800.262.5643,
U.S.A. only)
Fax: 781.326.8703
ANALOG DEVICES, INC.
EUROPE
c/o Analog Devices SA
17-19, rue Georges Besse
Parc de Haute
Technologie d'Antony
F-92182
Antony Cedex, France
Tel: 33.1.46.74.45.00
Fax: 33.1.46.74.45.01
ANALOG DEVICES, INC.
JAPAN HEADQUARTERS
New Pier Takeshiba
South Tower Building
1-16-1 Kaigan,
Minato-ku, Tokyo
105-6891, Japan
Tel: 813.5402.8210
Fax: 813.5402.1063
ANALOG DEVICES, INC.
SOUTHEAST ASIA
HEADQUARTERS
RBS Tower, Rm 4501-3
Times Square
1 Matheson Street
Causeway Bay
Hong Kong, PRC
Tel: 852.2.506.9336
Fax: 852.2.506.4755
The Plan brochure provides a summary of the FY04 Bonus Plan. If you need further
information, please ask your supervisor or human resources consultant. Analog
Devices reserves the right to modify the Bonus Plan at the sole discretion of
management. All changes to the Bonus Plan are subject to the approval of ADI's
Board of Directors.
(C) 2004 Analog Devices, Inc. All rights reserved.
Trademarks and registered trademarks are the property [ANALOG DEVICES LOGO]
of their respective owners.
BR04730-0-2/04