<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ANALOG DEVICES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
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 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:
- --------------------------------------------------------------------------------
<PAGE> 2
ANALOG DEVICES, INC.
ONE TECHNOLOGY WAY
NORWOOD, MASSACHUSETTS 02062-9106
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 9, 1999
To the Stockholders:
The 1999 Annual Meeting of Stockholders of Analog Devices, Inc. (the
"Company") will be held at the Hilton at Dedham Place, 25 Allied Drive, Dedham,
Massachusetts 02026, on Tuesday, March 9, 1999 at 10:00 a.m. (Local Time) to
consider and act upon the following matters:
1. To elect two members to the Board of Directors to serve as Class III
Directors for a term of three years.
2. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase the number of shares reserved for issuance under the
Plan from 4,800,000 to 6,800,000.
3. To approve an amendment to the Company's 1994 Director Option Plan to
increase the number of shares of Common Stock underlying the initial
option grant to newly elected non-employee directors from 10,500 to
30,000.
4. To ratify the selection by the Board of Directors of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending
October 30, 1999.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on January 22, 1999 will be
entitled to notice of and to vote at the meeting. The stock transfer books of
the Company will remain open for the purchase and sale of the Company's Common
Stock.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors,
PAUL P. BROUNTAS, Clerk
Norwood, Massachusetts
February 5, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 3
ANALOG DEVICES, INC.
ONE TECHNOLOGY WAY
NORWOOD, MASSACHUSETTS 02062-9106
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 9, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Analog Devices, Inc. (the "Company") for
use at the 1999 Annual Meeting of Stockholders to be held on March 9, 1999 and
at any adjournment of that meeting (the "Meeting"). All proxies will be voted in
accordance with the instructions contained therein, and if no choice is
specified, the proxies will be voted in favor of the proposals set forth in the
Notice of Meeting. Any proxy may be revoked by a stockholder at any time before
it is exercised by giving written notice to that effect to the Clerk of the
Company.
On January 22, 1999, the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting, there were outstanding and
entitled to vote an aggregate of 160,866,825 shares of Common Stock of the
Company, $.16 2/3 par value per share ("Common Stock"). Stockholders are
entitled to one vote per share.
The Company's Annual Report for the fiscal year ended October 31, 1998 is
being mailed to stockholders concurrently with this Notice and Proxy Statement
on or about February 5, 1999.
VOTING SECURITIES AND VOTES REQUIRED
A majority of the issued and outstanding shares of Common Stock entitled to
vote constitutes a quorum at the Meeting. Shares of Common Stock represented by
executed proxies received by the Company will be counted for purposes of
establishing a quorum at the Meeting, regardless of how or whether such shares
are voted on any specific proposal. The affirmative vote of the holders of a
plurality of the votes cast at the Meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented and voting at the Meeting is required for
the approval of other matters to be voted on at the Meeting.
Both abstentions and broker non-votes are counted as present for the
purpose of determining the existence of a quorum for the transaction of business
at the Meeting. However, for purposes of determining the number of shares voting
on a particular proposal, abstentions and broker non-votes are not counted as
votes cast or shares voting.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as otherwise indicated, the table set forth below provides
information, as of December 31, 1998, regarding the ownership of the Company's
Common Stock by (i) the stockholders known by the Company to own more than five
percent of the outstanding shares of Common Stock; (ii) each director and
nominee for director; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all directors and executive officers of the Company
as a group:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER (1) OWNED (2) OUTSTANDING (3)
-------------------- ------------ ---------------
<S> <C> <C>
5% Stockholders:
T. Rowe Price Associates, Inc.(4)................ 9,302,132 5.8
100 E. Pratt Street
Baltimore, Maryland 21202
Directors, Nominees for Director and Executive
Officers:
John L. Doyle(5)................................. 71,814 *
Jerald G. Fishman(6)............................. 223,956 *
Charles O. Holliday, Jr.(7)...................... 3,720 *
Joel Moses(8).................................... 45,248 *
F. Grant Saviers(7).............................. 3,500 *
Ray Stata(9)..................................... 3,150,832 2.0
Lester C. Thurow(10)............................. 78,990 *
Russell K. Johnsen(11)........................... 197,885 *
Brian P. McAloon(12)............................. 158,173 *
Joseph E. McDonough(13).......................... 118,401 *
All directors and officers as a group
(17 persons)(14).................................... 4,835,840 3.0
</TABLE>
- ---------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock of the Company.
(1) Unless otherwise indicated, the address of each beneficial owner listed is
c/o Analog Devices, Inc., One Technology Way, Norwood, MA 02062-9106.
(2) The number of shares of Common Stock beneficially owned by each person is
determined under rules promulgated by the Securities and Exchange
Commission (the "Commission"). Under such rules, beneficial ownership
includes any shares as to which the person has sole or shared voting power
or investment power, and also includes any shares which the person has the
right to acquire within 60 days after December 31, 1998. Unless otherwise
indicated, each person referred to above has sole voting and investment
power with respect to the shares listed. The inclusion herein of any shares
deemed beneficially owned does not constitute an admission of beneficial
ownership of such shares.
(3) Number of shares deemed outstanding with respect to any particular
stockholder as of December 31, 1998 is 160,576,413 shares, plus any shares
subject to options held by the person or persons in question that are
exercisable within 60 days after December 31, 1998.
(4) T. Rowe Price Associates, Inc. ("Price Associates") has filed a Securities
and Exchange Commission Schedule 13G reporting the above stock ownership as
of February 9, 1998. Price Associates is a registered investment adviser,
in which capacity it has sole voting power with respect to 567,966 shares
and sole dispositive power with respect to 9,302,132 shares. Price
Associates expressly disclaims beneficial ownership of all such shares.
(5) Includes options for the purchase of 42,500 shares of Common Stock which
are exercisable within 60 days after December 31, 1998.
2
<PAGE> 5
(6) Includes options for the purchase of 210,238 shares of Common Stock which
are exercisable within 60 days after December 31, 1998.
(7) Includes options for the purchase of 3,500 shares of Common Stock which are
exercisable within 60 days after December 31, 1998.
(8) Excludes 325 shares of Common Stock held by Mr. Moses' wife, as to which
Mr. Moses disclaims beneficial ownership. Includes options for the purchase
of 41,500 shares of Common Stock held by Mr. Moses which are exercisable
within 60 days after December 31, 1998.
(9) Excludes 595,554 shares of Common Stock held by Mr. Stata's wife and
107,558 shares of Common Stock held in charitable trusts for the benefit of
Mr. Stata's children, as to which Mr. Stata disclaims beneficial ownership.
Includes 2,173,334 shares of Common Stock held in charitable lead trusts.
Also includes options for the purchase of 486,666 shares of Common Stock
held by Mr. Stata which are exercisable within 60 days after December 31,
1998.
(10) Includes options for the purchase of 66,500 shares of Common Stock which
are exercisable within 60 days after December 31, 1998.
(11) Includes options for the purchase of 92,500 shares of Common Stock which
are exercisable within 60 days after December 31, 1998.
(12) Includes options for the purchase of 94,355 shares of Common Stock which
are exercisable within 60 days after December 31, 1998.
(13) Includes options for the purchase of 53,333 shares of Common Stock which
are exercisable within 60 days after December 31, 1998.
(14) Includes options for the purchase of 1,508,771 shares of Common Stock held
by twelve officers and five non-employee directors which are exercisable
within 60 days after December 31, 1998.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, two of
which consist of two directors each (Class II and Class III) and one of which
consists of three directors (Class I). One class of directors is elected each
year to serve for a three-year term. Class I Directors were elected at the 1997
Annual Meeting of Stockholders; Class II Directors were elected at the 1998
Annual Meeting of Stockholders; and Class III Directors will be elected at the
Meeting. Members of each class will hold office until their successors have been
duly elected and qualified.
The nominees for Class III Directors, Messrs. Doyle and Stata, are
presently serving as directors of the Company. Mr. Doyle has been a director of
the Company since 1987 and Mr. Stata has been a director since 1965. The persons
named in the enclosed proxy will vote for the election of each of the nominees
for Class III Directors unless the proxy is marked otherwise or unless one or
more nominees are unable or unwilling to serve. Each of the nominees has
indicated his willingness to serve, if elected. However, if a nominee should be
unable or unwilling to serve, the proxies may be voted for a substitute nominee
designated by the Board of Directors or the Board of Directors may reduce the
number of directors.
Set forth below is the name, age, length of service as a director of each
member of the Board of Directors, including the nominees for Class III
Directors, information given by each concerning all positions he holds with the
Company, his principal occupation and business experience for the past five
years and the names of other publicly held companies of which he serves as a
director. Information about the number of shares of Common Stock beneficially
owned by each director, directly or indirectly, as of December 31, 1998, appears
under the heading "Security Ownership of Certain Beneficial Owners and
Management."
3
<PAGE> 6
NOMINEES FOR CLASS III DIRECTORS
(TERMS WILL EXPIRE AT THE 2002 ANNUAL MEETING)
JOHN L. DOYLE, age 67, has been a director of the Company since 1987. Mr.
Doyle is retired. He was employed formerly by the Hewlett-Packard Company where
he served as the Executive Vice President of Business Development from 1988
through 1991; Executive Vice President, Systems Technology Sector from 1986 to
1988; Executive Vice President, Information Systems and Networks from 1984 to
1986; and Vice President, Research and Development, from 1981 to 1984. Mr. Doyle
was Co-Chief Executive Officer of Hexcel Corp. from July 1993 to December 1993.
Mr. Doyle also serves as a director of DuPont Photomasks, Inc. and Xilinx, Inc.
RAY STATA, age 64, has been a director of the Company since 1965. He has
served as the Chairman of the Board of Directors since 1973, as Chief Executive
Officer from 1973 to November 1996 and as the President of the Company from 1971
to November 1991. Mr. Stata also serves as a director of INSO Corporation.
CLASS I DIRECTORS
(TERMS EXPIRE AT THE 2000 ANNUAL MEETING)
JOEL MOSES, age 57, has been a director of the Company since 1982. Mr.
Moses has been the D.C. Jackson Professor of Computer Science and Engineering at
the Massachusetts Institute of Technology ("MIT") since 1989. Mr. Moses was the
Provost of MIT from June 1995 to August 1998, and Dean of the School of
Engineering at MIT from January 1991 to June 1995. He was a Visiting Professor
of Business Administration at Harvard University from September 1989 to June
1990. Mr. Moses was the Head of the Department of Electrical Engineering and
Computer Science at MIT from 1981 to 1989. Mr. Moses also serves as a director
of Coltec Industries, Inc.
LESTER C. THUROW, age 60, has been a director of the Company since 1988. He
is a Professor of Management and Economics at MIT and, from 1987 to 1993, was
the Dean of the Sloan School of Management at MIT. Mr. Thurow also serves as a
director of Grupo Casa Autrey S.A. de CV.
CHARLES O. HOLLIDAY, JR., age 50, has been a director of the Company since
1997. He has been Chairman and Chief Executive Officer of E. I. duPont de
Nemours and Company ("DuPont") since January 1999, and has served as Chief
Executive Officer of DuPont since February 1998. Mr. Holliday served as
President of DuPont from December 1997 to December 1998, Chairman of DuPont,
Asia Pacific from July 1995 until November 1997, and as President of DuPont,
Asia Pacific from November 1990 to October 1995. He was Senior Vice President of
DuPont from November 1992 to October 1995. From 1970 through November 1990, Mr.
Holliday served in a number of positions with DuPont, including Executive Vice
President of DuPont, Asia Pacific and global business manager of certain product
lines. Mr. Holliday also serves as a director of Pioneer Hi-Bred International,
Inc.
CLASS II DIRECTORS
(TERMS EXPIRE AT THE 2001 ANNUAL MEETING)
JERALD G. FISHMAN, age 53, has been a director of the Company since 1991.
Mr. Fishman has been the President and Chief Executive Officer of the Company
since November 1996 and he served as President and Chief Operating Officer of
the Company from November 1991 to November 1996. Mr. Fishman served as Executive
Vice President of the Company from 1988 to November 1991. He served as the Group
Vice President-Components of the Company from 1982 to 1988. Mr. Fishman also
serves as a director of Kollmorgen Corporation and Cognex Corporation.
4
<PAGE> 7
F. GRANT SAVIERS, age 54, has been a director of the Company since 1997. He
served as Chairman of Adaptec, Inc. ("Adaptec") from August 1997 to August 1998,
President and Chief Executive Officer of Adaptec from July 1995 to August 1998,
and President and Chief Operating Officer of Adaptec from August 1992 to July
1995. Prior to joining Adaptec, Mr. Saviers was employed with Digital Equipment
Corporation for more than five years, last serving as Vice President of its
Personal Computer and Peripherals Operation. Mr. Saviers also serves as a
director of Craig Technologies, Inc. and Chaparral Technologies, Inc.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee which held three meetings during
the fiscal year ended October 31, 1998. The members of the Audit Committee
during the fiscal year ended October 31, 1998 were Messrs. Doyle, Moses and
Thurow. The principal functions of the Audit Committee are to make
recommendations to the Board of Directors regarding the selection, retention and
termination, if necessary, of the Company's independent auditors. The Audit
Committee also reviews the general scope of the Company's accounting and
reporting policies, annual audits and internal control programs, matters
relating to internal control systems and fees charged by the independent
auditors.
The Company has a standing Compensation Committee, which held three
meetings during the fiscal year ended October 31, 1998. The members of the
Compensation Committee during the fiscal year ended October 31, 1998 were
Messrs. Holliday and Saviers. The principal functions of the Compensation
Committee are to make recommendations to the Board of Directors as to
compensation arrangements, including the granting of stock options and
restricted stock awards to officers of the Company.
The Company has a standing Nominating Committee, which held no meetings
during the fiscal year ended October 31, 1998. The members of the Nominating
Committee during the fiscal year ended October 31, 1998 were Messrs. Doyle and
Stata. The principal functions of the Nominating Committee are to nominate
persons to serve as members of the Company's Board of Directors, to recommend
directors to serve on the various Board Committees and to recommend a successor
to the chief executive officer whenever a vacancy occurs for any reason. The
Nominating Committee will consider for nomination to the Board of Directors
candidates suggested by the stockholders, provided that such recommendations are
delivered to the Company, with an appropriate biographical summary, no later
than the deadline for submission of stockholder proposals. See "Deadline for
Submission of Stockholder Proposals for the 2000 Annual Meeting."
During the fiscal year ended October 31, 1998, the Board of Directors of
the Company held six meetings (including two teleconference meetings). All
directors, during the time which they served as directors, attended at least 75%
of the total number of meetings of the Board of Directors and of all committees
of the Board on which they respectively served.
DIRECTORS' COMPENSATION
Each Director who is not an employee of the Company is paid an annual fee
of $20,000, and $2,500 for attendance at each meeting of the Board and $1,000
for each committee meeting, plus expenses.
Directors who are not employees of the Company ("Non-Employee Directors")
are entitled to participate in the Company's 1994 Director Option Plan ("1994
Director Plan"). Each Non-Employee Director who was a member of the Board of
Directors on December 7, 1994 received an option on that date to purchase 10,500
shares of Common Stock and each Non-Employee Director who was first elected to
the Board after December 7, 1994 received an initial option on the date of his
election to purchase 10,500 shares of Common Stock. In addition, each
Non-Employee Director is entitled to receive an annual option grant of 10,500
shares on each anniversary of the first grant to him under the 1994 Director
Plan. Each option granted under the 1994 Director Plan has an exercise price
equal to the fair market value of the Company's Common
5
<PAGE> 8
Stock on the date of grant and becomes exercisable, subject to the optionee's
continued service as a director of the Company, on a cumulative basis in three
equal annual installments on the succeeding three anniversaries of the date of
grant. During fiscal 1998, options were granted to each of the Non-Employee
Directors for the purchase of 10,500 shares of Common Stock at an exercise price
equal to the fair market value on the date of grant, as follows: Messrs. Doyle,
Moses and Thurow, $29.94 (December 7, 1997); Mr. Saviers, $27.19 (December 10,
1997); and Mr. Holliday, $33.125 (March 11, 1998). As of December 31, 1998,
options for the purchase of a total of 290,500 shares of Common Stock net of
forfeitures had been granted under the 1994 Director Plan.
For information relating to amendment of the 1994 Director Option Plan to
be voted upon at the Meeting, see "APPROVAL OF AMENDMENT TO 1994 DIRECTOR OPTION
PLAN."
TRANSACTIONS WITH RELATED PARTIES
The Company purchases certain products from DuPont. Mr. Holliday is
President of DuPont. During fiscal 1998, the Company purchased an aggregate of
approximately $403,000 of products from DuPont and its affiliates.
The Company sells certain products to Acacia Network, Inc. ("Acacia"). Mr.
Stata is Chairman of the Board of Directors of Acacia and beneficially owns
approximately 42.9% of Acacia's outstanding shares. During fiscal 1998, the
Company sold an aggregate of approximately $361,000 of products to Acacia.
During fiscal 1998, the Company completed the sale of its disk drive IC
business to Adaptec. Mr. Saviers was Chairman, President and Chief Executive
Officer of Adaptec until August 1998. Adaptec paid the Company a cash purchase
price of approximately $27 million. After providing for the write-off of
inventory, fixed assets and other costs incurred to complete the transaction,
the Company recorded a net gain of approximately $13 million. The Company also
entered into other arrangements with Adaptec that provide for payments to the
Company aggregating $13 million, of which $10 million was earned in fiscal 1998,
for assisting Adaptec in research and development efforts.
The Company purchases certain products from Aware. Mr. Fishman was a
director of Aware until May 1998. During fiscal 1998, the Company purchased an
aggregate of approximately $2,729,000 of Aware products.
During fiscal 1998, the Company made donations to MIT in the aggregate
amount of approximately $464,000. Mr. Moses was Provost of MIT until December
1998 and Mr. Thurow is a professor at MIT.
Mr. Stata was a director of Open Market Inc. ("Open Market") until April
1998. During fiscal 1998, the Company purchased an aggregate of approximately
$69,000 of Open Market products and services.
Management and the Board of Directors believe that the aforementioned
business transactions with related parties were effected on terms that were no
less favorable to the Company than could be obtained from unaffiliated third
parties.
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation for each of the last three fiscal years of the Company's Chief
Executive Officer and the Company's four other most highly compensated executive
officers who were serving as executive officers on October 31, 1998
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
------------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS SARS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
------------------ ---- ------ ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jerald G. Fishman 1998 726,277 204,019 211,266 -- 600,000(6) 92,492
President and Chief 1997 660,253 494,684 129,314 -- 270,000(7) 90,208
Executive Officer 1996 621,596 710,453 52,845 -- 300,000(7) 90,913
Ray Stata 1998 422,696 115,973 -- -- 200,000 51,149
Chairman of the Board 1997 507,958 349,091 -- -- 100,000 69,546
1996 595,350 680,419 -- -- 200,000 87,618
Brian P. McAloon 1998 349,511 60,625 52,035 466,375 70,000 37,799
Vice President, Sales 1997 323,622 149,147 28,250 345,000 27,000 38,133
1996 310,475 236,569 11,997 325,000 40,000 37,813
Joseph E. McDonough 1998 327,787 56,857 65,672 466,375 70,000 34,568
Vice President, 1997 302,509 139,477 27,099 345,000 27,000 34,166
Finance and Chief 1996 283,541 216,051 9,872 325,000 40,000 34,159
Financial Officer
Russell K. Johnsen 1998 263,373 45,529 -- 466,375 70,000 26,058
Vice President and 1997 239,430 110,393 -- 345,000 27,000 25,236
General Manager 1996 225,410 150,285 -- 325,000 30,000 25,211
Communications Division
</TABLE>
- ---------------
(1) Amounts shown represent compensation earned by the Named Executive Officers
in the fiscal years presented, including amounts contributed at the election
of these officers to the Company's defined and deferred contribution plans.
(2) Amounts shown as "Other Annual Compensation" represent amounts earned by the
Named Executive Officers at "above market" rates on deferred compensation
for each fiscal year.
(3) The value of restricted stock awards was determined by multiplying the fair
market value of the Company's Common Stock on the date of grant by the
number of shares awarded. As of the end of fiscal 1998, the number and value
of aggregate restricted stock holdings were as follows: 89,998 shares
($1,788,710) by Mr. McAloon, 89,998 shares ($1,788,710) by Mr. McDonough and
105,000 shares ($2,086,875) by Mr. Johnsen.
(4) Each option has an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and generally becomes
exercisable, subject to the optionee's continued service as an employee of
the Company, in three equal installments, on a cumulative basis on the
third, fourth and fifth anniversaries of the date of grant (except as set
forth in notes (6) and (7) below).
(5) Amounts shown as "All Other Compensation" are amounts contributed or accrued
by the Company for each fiscal year for the Named Executive Officers under
the Company's retirement arrangements.
7
<PAGE> 10
(6) Consists of two options with respect to 300,000 shares each, (a) the first
of which becomes exercisable, subject to Mr. Fishman's continued service as
an employee of the Company, in three equal installments, on a cumulative
basis on the third, fourth and fifth anniversaries of the date of grant, and
(b) the second of which is not exercisable until the fifth anniversary of
the date of grant, except that it becomes exercisable after three years (in
three equal installments) in the event that the Company terminates Mr.
Fishman's employment for any reason other than for cause after the third
anniversary but prior to the fifth anniversary of the grant date.
(7) Option is not exercisable until the fifth anniversary of the date of grant.
OPTION GRANT TABLE
The following table sets forth certain information regarding options
granted during the fiscal year ended October 31, 1998 by the Company to the
Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT
NUMBER OF OPTIONS/ ASSUMED ANNUAL
SECURITIES SARS RATES OF STOCK
UNDERLYING GRANTED PRICE APPRECIATION
OPTIONS/ TO EXERCISE FOR OPTION
SARS EMPLOYEES OR BASE TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
(#) YEAR(1) ($/SH)(2) DATE 5%($) 10%($)
---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jerald G. Fishman........... 300,000(4) 2.57 13.25 10/4/08 2,525,873 6,416,210
300,000(5) 2.57 14.75 12/16/07 2,531,074 6,282,165
Ray Stata................... 100,000(4) 0.86 13.25 10/4/08 841,958 2,138,737
100,000(5) 0.86 14.75 12/16/07 843,691 2,094,055
Brian P. McAloon............ 35,000(4) 0.30 13.25 10/4/08 294,685 748,558
35,000(5) 0.30 14.75 12/16/07 295,292 732,919
Joseph E. McDonough......... 35,000(4) 0.30 13.25 10/4/08 294,685 748,558
35,000(5) 0.30 14.75 12/16/07 295,292 732,919
Russell K. Johnsen.......... 35,000(4) 0.30 13.25 10/4/08 294,685 748,558
35,000(5) 0.30 14.75 12/16/07 295,292 732,919
</TABLE>
- ---------------
(1) Calculated based on an aggregate of 11,701,500 options granted under the
Company's 1988 and 1998 Stock Option Plans to employees during fiscal 1998.
(2) The exercise price is equal to the fair market value of the Company's Common
Stock on the date of grant. The Company granted options to employees on two
occasions during fiscal 1998. The first occasion was on December 16, 1997
and the second on September 4, 1998. With respect to the options granted on
the first occasion, on September 8, 1998, the Board of Directors approved a
stock option repricing program pursuant to which the exercise price of all
stock options granted during the period beginning December 1, 1996 and
ending on August 3, 1998 was reduced to $14.75 per share. See "Report of
Directors on Repricing of Stock Options."
(3) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the option term. These values are
calculated based on rules promulgated by the Commission and do not reflect
the Company's
8
<PAGE> 11
estimate or projection of future stock prices. Actual gains, if any, on
stock option exercises will be dependent upon the future performance of the
price of the Company's Common Stock.
(4) Represents options granted pursuant to the Company's 1998 Stock Option Plan.
Options granted to Messrs. Fishman, Stata, McAloon, McDonough and Johnsen
become exercisable on a cumulative basis with respect to one-third of the
shares subject to the option on each of the third, fourth and fifth
anniversaries of the date of grant.
(5) Represents options granted pursuant to the Company's 1988 Stock Option Plan.
The option granted to Mr. Fishman first becomes exercisable in its entirety
on the fifth anniversary of the date of grant, except that it becomes
exercisable after three years (in three equal installments) in the event
that the Company terminates Mr. Fishman's employment for any reason other
than for cause after the third anniversary but prior to the fifth
anniversary of the grant date. Options granted to Messrs. Stata, McAloon,
McDonough and Johnsen become exercisable on a cumulative basis with respect
to one-third of the shares subject to the option on each of the third,
fourth and fifth anniversaries of the date of grant.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning the exercise
of stock options during the fiscal year ended October 31, 1998 by each of the
Named Executive Officers and the number and value of unexercised options held by
each of the Named Executive Officers on October 31, 1998:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS
SHARES OPTIONS AT FISCAL AT FISCAL YEAR-END
ACQUIRED YEAR-END ($)(2)
ON VALUE ----------------- ------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- -------- --------- ----------------- ------------------
<S> <C> <C> <C> <C>
Jerald G. Fishman................. 31,166 905,951 22,014/1,680,000 365,102/11,675,400
Ray Stata......................... 100,000 2,816,900 90,000/ 920,000 866,250/ 7,225,400
Brian P. McAloon.................. 25,000 571,250 31,002/ 222,000 388,318/ 1,560,900
Joseph E. McDonough............... 40,000 964,500 --/ 207,000 --/ 1,400,475
Russell K. Johnsen................ 7,000 167,650 42,500/ 192,000 456,313/ 1,324,500
</TABLE>
- ---------------
(1) Value represents the difference between the closing price of the Common
Stock on the date of exercise and the exercise price, multiplied by the
number of shares acquired on exercise.
(2) Value of unexercised in-the-money options represents the difference between
the closing price of the Company's Common Stock on the last business day of
fiscal 1998 and the exercise price of the option, multiplied by the number
of shares subject to the option.
9
<PAGE> 12
REPRICING OF OPTIONS
The following table sets forth certain information concerning the repricing
of stock options held by the Named Executive Officers:
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OF EXERCISE OPTION TERM
SECURITIES STOCK AT PRICE AT REMAINING AT
UNDERLYING TIME OF TIME OF NEW DATE OF
OPTIONS/SARS REPRICING OR REPRICING OR EXERCISE REPRICING OR
REPRICED OR AMENDMENT AMENDMENT PRICE AMENDMENT
NAME DATE AMENDED(#) ($) ($) ($) (IN MONTHS)
---- ------- ------------ ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jerald G. Fishman.............. 9/8/98 300,000 14.75 24.06 14.75 112
President and Chief 9/8/98 270,000 14.75 23.00 14.75 102
Executive Officer
Ray Stata...................... 9/8/98 100,000 14.75 24.06 14.75 112
Chairman of the Board 9/8/98 100,000 14.75 23.00 14.75 102
Brian P. McAloon............... 9/8/98 35,000 14.75 24.06 14.75 112
Vice President, Sales 9/8/98 27,000 14.75 23.00 14.75 102
Joseph E. McDonough............ 9/8/98 35,000 14.75 24.06 14.75 112
Vice President, Finance and 9/8/98 27,000 14.75 23.00 14.75 102
Chief Financial Officer
Russell K. Johnsen............. 9/8/98 35,000 14.75 24.06 14.75 112
Vice President and General 9/8/98 27,000 14.75 23.00 14.75 102
Manager, Communications
Division
</TABLE>
REPORT OF DIRECTORS ON REPRICING OF STOCK OPTIONS
The only repricing of stock options by the Company during the past 10
fiscal years occurred on September 8, 1998, when the Board of Directors of the
Company authorized the following:
- The Company agreed to reprice all stock options granted to employees
during the period beginning December 1, 1996 and ending August 3, 1998
(the "Affected Options"), at such employees' election, by reducing the
stock option exercise price to $14.75, the closing price of the Company's
Common Stock on the New York Stock Exchange on September 8, 1998. The
original stock option exercise prices of the Affected Options ranged from
$22.25 to $34.25 per share.
- The vesting schedule for the Affected Options was reset so that one-third
of the shares subject to the Affected Options would vest on each of
September 8, 2001, September 8, 2002 and September 8, 2003.
- The Affected Options continued to entitle the holders to purchase the
same number of shares covered by the original option grant and remained
exercisable for a period of 10 years from the original grant date.
Upon the recommendation of the Compensation Committee, the Board of
Directors authorized the repricing at its meeting held on September 8, 1998. The
Board of Directors determined that the repricing was necessary to continue to
retain and motivate its employees. During the fall of 1998, the financial
markets experienced widespread volatility, and as a result the potential value
of stock options previously granted to the
10
<PAGE> 13
Company's employees and the economic incentives expected from the grant of stock
options were significantly diminished.
Historically, the Company's stock options have embodied a long-term focus.
Options therefore have generally not been exercisable until the third year after
the grant date and then only in one-third increments after the third, fourth and
fifth years following the grant date. Although the Company has viewed stock
options as a long-term investment, the substantial drop in the value of the
Company's Common Stock during the fall created a significant risk, in the
opinion of Management and the Board of Directors, that key employees would seek
employment at other high technology companies, including competitors, whose
stock prices had also declined, and thereby benefit from the grant of stock
options by their new employers at the then attractive lower price of their
stock. Accordingly, the Board of Directors determined that it was in the best
interests of the Company and its stockholders and employees to reduce the stock
option price for all outstanding stock options, while at the same time
restarting the vesting period for all repriced options so that none of the
repriced options can be exercised until the third year after the repricing date.
Compensation Committee,
Charles O. Holliday, Jr., Chairman
F. Grant Saviers
SEVERANCE AND OTHER AGREEMENTS
The Company has Employee Retention Agreements (the "Agreements") with each
of its 12 current executive officers and with 22 additional key managers. The
Retention Agreements are automatically extended on an annual basis unless the
Company provides at least three months' notice that an agreement will not be
extended. The Retention Agreements provide for severance benefits if either (i)
the employment of the employee is terminated by the Company (other than for
cause or by reason of his death or disability) or by the employee for Good
Reason (as defined in the Retention Agreements) within 24 months after a Change
in Control (as defined in the Retention Agreements) which is approved by the
Board of Directors; or (ii) the employment of the employee terminates or is
terminated for any reason (other than for cause or by reason of his death or
disability) within 12 months after a Change in Control which is not approved by
the Board of Directors. Each Retention Agreement provides that, in the event of
a Potential Change in Control (as defined in the Retention Agreements), the
employee shall not voluntarily resign as an employee, subject to certain
conditions, for at least six months after the occurrence of such Potential
Change in Control.
The Retention Agreements provide for the following severance benefits: (i)
a lump-sum payment equal to 200% of the sum of the employee's annual base salary
plus the aggregate cash bonuses paid or awarded to him in respect of the four
fiscal quarters preceding his termination (299% in the case of 11 of the 34
employees who are parties to such agreements, including Messrs. Stata, Fishman,
McAloon, McDonough and Johnsen); and (ii) the continuation of life, disability,
dental, accident and group health insurance benefits for a period of 24 months.
In addition, to the extent that payments to the employee pursuant to his
Retention Agreement (together with any other payments or benefits, such as the
accelerated vesting of stock options or restricted stock awards, received by the
employee in connection with a Change in Control) would result in the triggering
of the provisions of Sections 280G and 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Retention Agreement provides for the payment
of an additional amount such that the employee receives, net of excise taxes,
the amount he would have been entitled to receive in the absence of the excise
tax provided in Section 4999 of the Code.
11
<PAGE> 14
The Company's Employee Change in Control Severance Policy and Senior
Management Change in Control Severance Policy provide each employee of the
Company (other than those who are party to Retention Agreements) with a lump-sum
severance payment, based on length of service with the Company, in the event of
the termination of his or her employment under certain circumstances within 18
months after a Change in Control (as defined in such policies). Such severance
payments range from a minimum of two weeks of annual base salary (for an hourly
employee with less than five years of service) to a maximum of 104 weeks of base
salary plus an amount equal to the aggregate cash bonuses paid or awarded to the
employee in respect of the four fiscal quarters preceding termination (for a
senior management employee with at least 21 years of service).
In addition to the foregoing agreements and policies, certain of the
Company's stock option and restricted stock awards provide for immediate vesting
of some or all outstanding awards upon any "Change in Control" (as defined in
such plans) of the Company.
REPORT OF THE COMPENSATION COMMITTEE
The Company's executive compensation program is designed to attract, retain
and reward executives who are responsible for leading the Company in achieving
its business objectives. The Compensation Committee makes decisions each year
regarding executive compensation, including annual base salaries, bonus awards
and stock option grants and restricted stock awards. All executive officers are
reviewed by the full Board of Directors. This report is submitted by the
Compensation Committee and addresses the compensation policies for fiscal 1998
as they affected each of the executive officers.
Compensation Philosophy
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. The Company's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program includes both motivational and
retention-related compensation components. Bonuses are included to encourage
effective performance relative to current plans and objectives. Stock options
are included to promote longer-term focus, to help retain key contributors and
to more closely align their interests with those of stockholders.
In executing its compensation policy, the Company seeks to relate
compensation with the Company's financial performance and business objectives,
reward high levels of individual performance and tie a significant portion of
total executive compensation to both the annual and long-term performance of the
Company. While compensation survey data are useful guides for comparative
purposes, the Company believes that a successful compensation program also
requires the application of judgment and subjective determinations of individual
performance, and to that extent, the Compensation Committee applies judgment in
reconciling the program's objectives with the realities of retaining valued
employees.
Executive Compensation Program
Annual compensation for the Company's executives consists of three
principal elements: base salary, cash bonus and equity in the form of stock
options and restricted stock awards.
- CASH COMPENSATION
Annual cash compensation consists of two elements: base salary and
bonus. In setting the annual cash compensation for Company executives, the
Compensation Committee reviews compensation for comparable positions in a
group of approximately 20 companies selected by the Committee for
12
<PAGE> 15
comparison purposes. Most of these companies are engaged in the manufacture
and sale of semiconductor devices, instruments and computer software. The
Company also regularly compares its pay practices with other leading
companies through reviews of survey and proxy data.
Increases in annual base salary are based on a review and evaluation
of the performance of the operation or activity for which the executive has
responsibility, the impact of that operation or activity on the Company and
the skills and experience required for the job, coupled with a comparison
of these elements with similar elements for other executives both within
and outside the Company.
The cash bonus is tied directly to the attainment of financial
performance targets approved by the Board of Directors. The ratio of bonus
("variable" pay) to base salary ("fixed" pay) varies significantly across
the levels in the organization to reflect the ability of the individual to
impact the performance of the Company and to absorb the risk of variable
pay. The cash bonus is dependent solely on corporate performance.
All of the Company's employees, including its executive officers,
participated in the Company's bonus plan (the "Bonus Plan") in fiscal 1998,
except those employees on commission plans or in some non-U.S. locations.
The purpose of the Bonus Plan is to recognize and reward the contribution
of all employees in achieving the Company's goals and objectives. In fiscal
1998, the Bonus Plan provided for the payment of a semi-annual cash bonus
based on the average of the Company's revenue growth over the same period
in the prior year and the Company's Operating Profit Before Taxes ("OPBT")
as a percentage of sales. Each employee, including executives, is assigned
a Bonus Target, calculated as a percentage of such employee's base salary,
determined by comparing competitive data by position. Depending on revenue
growth and OPBT levels achieved, the cash bonus is paid as a multiple of
the Bonus Target, ranging from zero to a maximum of 2.5.
- EQUITY OWNERSHIP
Total compensation at the executive level also includes long-term
incentives afforded by stock options and restricted stock awards. The
purpose of the Company's stock ownership program is to (i) reinforce the
mutuality of long-term interests between employees and the stockholders;
and (ii) to assist in the attraction and retention of critically important
key executives, managers and individual contributors, mostly engineers, who
are essential to the Company's success.
The design of the Company's stock programs includes longer vesting
periods to optimize the retention value of these options and to orient the
Company's managers to longer-term success. Generally, stock options vest in
three equal installments on a cumulative basis on the third, fourth and
fifth anniversaries of the date of grant. Restricted stock awards vest 100%
after five years. Generally, if employees leave the Company before these
vesting periods, they forfeit the unvested portions of these awards. While
the Company believes that these longer vesting periods are in the best
interest of stockholders, they tend to increase the number of options
outstanding compared to companies with shorter vesting schedules.
The size of stock option awards is generally intended to reflect the
significance of the executive's current and anticipated contributions to
the Company. The exercise price of options granted by the Company is set at
100% of the fair market value per share on the date of grant. Prior to
determining the fiscal 1998 option grants to the Company's executives (as
described below), the Compensation Committee reviewed survey information of
the stock option programs of competitors and other companies with
comparable capitalizations. The value realizable from exercisable options
is dependent upon the extent to which the Company's performance is
reflected in the price of the Company's Common Stock at any particular
point in time. However, the decision as to whether such value will be
realized
13
<PAGE> 16
through the exercise of an option in any particular year is primarily
determined by each individual within the limits of the vesting schedule,
and not by the Compensation Committee.
The Company's 1991 Restricted Stock Plan provides for the award of
restricted stock for a nominal, if any, purchase price. Shares awarded
under the plan are subject, for a period of five years (the "Restricted
Period"), to certain restrictions upon transfer and provisions relating to
forfeiture in the event of termination of employment. If the employment of
a recipient of an award is terminated prior to the end of the Restricted
Period for any reason other than death or disability, all shares of Common
Stock covered by the award must be offered promptly for resale by the
recipient to the Company at the original purchase price per share. Since
the restricted shares are issued at nominal consideration, the entire value
of the shares will constitute additional compensation to the individual at
the time of vesting.
Chief Executive Officer Fiscal 1998 Compensation
Mr. Fishman, in his capacity as President and Chief Executive Officer, is
also eligible to participate in the same executive compensation program
available to the Company's other senior executives. The Compensation Committee
has set Mr. Fishman's total annual compensation, including compensation derived
from the Company's bonus program and stock option program, at a level it
believes to be competitive with other companies in the industry.
During fiscal 1998, Mr. Fishman's annual base salary was increased $67,200
from $672,000 to $739,200. He was awarded a fiscal 1998 bonus of $204,019 which
represented approximately 43% of his Bonus Target (based on a target bonus of
65% of his base salary received during fiscal 1998), reflecting the Company's
attainment of revenue growth of 12% and OPBT of 10% for the first half of fiscal
1998. No bonus was paid during the second half of fiscal 1998.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation over $1 million paid to its chief executive officer
or any one of its four other most highly compensated executive officers.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. The Company has limited the number of shares
subject to stock options which may be granted to Company employees in a manner
that complies with the performance-based requirements of Section 162(m). While
the Committee does not currently intend to qualify the Bonus Plan as a
performance-based plan, it will continue to monitor the impact of Section 162(m)
on the Company.
Compensation Committee,
Charles O. Holliday, Jr., Chairman
F. Grant Saviers
14
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Holliday and Saviers,
neither of whom has been an officer or employee of the Company at any time.
The Company purchases certain products from DuPont. During fiscal 1998, Mr.
Holliday was President and Chief Executive Officer of DuPont and is now Chairman
and Chief Executive Officer of DuPont. During fiscal 1998, the Company purchased
an aggregate of approximately $403,000 of products from DuPont and its
affiliates.
During fiscal 1998, the Company completed the sale of its disk drive IC
business to Adaptec. Mr. Saviers was Chairman, President and Chief Executive
Officer of Adaptec until August 1998. Adaptec paid the Company a cash purchase
price of approximately $27 million. After providing for the write-off of
inventory, fixed assets and other costs incurred to complete the transaction,
the Company recorded a net gain of approximately $13 million. The Company also
entered into other arrangements with Adaptec that provide for payments to the
Company aggregating $13 million, of which $10 million was earned in fiscal 1998,
for assisting Adaptec in research and development efforts.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee, except that Mr. Stata serves as a member of the Executive Committee
and the Salary Subcommittee of the Executive Committee of MIT and Mr. Moses, who
was Provost of MIT until December 1998, serves as a member of the Company's
Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or written representations from persons required to file such reports
("Reporting Persons"), the Company believes that all such filings required to be
made by such Reporting Persons were timely made in accordance with the
requirements of the Exchange Act, except that Mr. Doyle and Mr. Holliday each
failed to file one report on a timely basis with respect to one transaction.
15
<PAGE> 18
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock since October 31, 1993 with the cumulative total return
for the Standard & Poor's 500 Index and the Standard & Poor's Technology Sector
Index. This graph assumes the investment of $100 on October 30, 1993 in the
Company's Common Stock, the Standard & Poor's 500 Index and the Standard &
Poor's Technology Sector Index and assumes dividends are reinvested. Measurement
points are at October 31 for each respective year.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ANALOG DEVICES, INC., THE S&P 500 INDEX
AND S&P TECHNOLOGY SECTOR
[ANALOG DEVICES INC. PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
'ANALOG DEVICES, INC.' S&P 500 S&P TECHNOLOGY SECTOR
---------------------- ------- ---------------------
<S> <C> <C> <C>
10/31/93 100.00 100.00 100.00
10/31/94 160.67 103.87 121.38
10/31/95 243.54 131.33 183.82
10/31/96 262.92 162.98 222.40
10/31/97 412.08 215.32 324.28
10/31/98 267.98 262.66 430.47
</TABLE>
* $100 INVESTED ON 10/31/93 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDED OCTOBER 31.
16
<PAGE> 19
APPROVAL OF AMENDMENT TO 1992 EMPLOYEE
STOCK PURCHASE PLAN
THE AMENDMENT
The 1992 Employee Stock Purchase Plan (the "Purchase Plan") allows the
Company to encourage stock ownership by its employees who reside in the United
States. The Company also has an International Employee Stock Purchase Plan (the
"International Plan") which provides similar opportunities for the Company's
employees who reside outside the United States. On December 9, 1998, the Board
of Directors adopted, subject to stockholder approval, an amendment to the
Purchase Plan which would increase the number of shares reserved for issuance
thereunder from 4,800,000 to 6,800,000. As of December 31, 1998, 4,442,636
shares had been issued under the Purchase Plan, leaving a balance of 357,364
shares. The Company has 500,000 shares reserved for issuance under its
International Plan. The Board of Directors believes it is in the best interest
of the Company to continue to encourage employee stock ownership by its
employees.
ADMINISTRATION AND ELIGIBILITY
The Purchase Plan is administered by the Compensation Committee, which is
authorized to designate subsidiaries entitled to participate in the plan, to
decide questions of eligibility and to make rules and regulations for the
administration and interpretation of the plan.
With certain exceptions, all employees who reside in the United States,
including officers, employed by the Company or its subsidiaries for at least
three months on the applicable offering commencement date are eligible to
participate in the Purchase Plan. The Company currently has approximately 3,700
eligible employees residing in the United States. No nominee for director (who
is not also an employee) or any other Non-Employee Director is eligible to
purchase shares under the plan.
OFFERINGS AND PURCHASE PRICE OF SHARES
The Company has made seven annual offerings under the Purchase Plan and the
Board of Directors has approved two additional annual offering periods which
will commence, respectively, on June 1, 1999 and June 1, 2000. During each
annual offering, the maximum number of shares which may be purchased by a
participating employee is determined on the first day of the offering period
under a formula whereby 85% of the market value of a share of Common Stock on
the first day of the offering period is divided into an amount equal to 12% of
such employee's current regular salary (annualized). Although all offerings to
date have been made on an annual basis, the Purchase Plan allows for semiannual
offering periods. In the event of a semiannual offering, the maximum number of
shares which could be purchased by a participating employee would be determined
on the first day of the offering period under a formula whereby 85% of the
market value of a share of Common Stock on the first day of the offering period
would be divided into an amount equal to 6% of such employee's current regular
salary (annualized). An employee may elect to have up to 10% deducted from his
or her regular salary (as adjusted) for this purpose. The price at which the
employee's option is exercised is the lower of (i) 85% of the closing price of
the Common Stock on the New York Stock Exchange on the day that an offering
commences or (ii) 85% of the closing price on the day that the offering
terminates.
AMENDMENT OF THE PURCHASE PLAN
The Board of Directors may modify or amend the Purchase Plan in any respect
without stockholder approval, unless such stockholder approval is required (i)
under Section 423 of the Code, (ii) under Rule 16b-3 of the Securities Exchange
Act of 1934, or (iii) under any applicable listing requirements.
17
<PAGE> 20
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
Purchase Plan and with respect to the sale of Common Stock acquired under the
Purchase Plan.
Tax Consequences to Participants
In general, a participant will not recognize taxable income upon enrolling
in the Purchase Plan or upon purchasing shares of Common Stock at the end of an
offering. Instead, if a participant sells Common Stock acquired under the
Purchase Plan at a sale price that exceeds the price at which the participant
purchased the Common Stock, then the participant will recognize taxable income
in an amount equal to the excess of the sale price of the Common Stock over the
price at which the participant purchased the Common Stock. A portion of that
taxable income will be ordinary income, and a portion may be capital gain.
If the participant sells the Common Stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced (the "Grant Date"), then the participant will be taxed as follows. If
the sale price of the Common Stock is higher than the price at which the
participant purchased the Common Stock, then the participant will recognize
ordinary compensation income in an amount equal to the lesser of:
(i) fifteen percent of the fair market value of the Common Stock on
the Grant Date; and
(ii) the excess of the sale price of the Common Stock over the price
at which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after acquiring
it or within two years after the Grant Date (a "Disqualifying Disposition"),
then the participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the price at which the participant purchased the
Common Stock. The participant will also recognize capital gain in an amount
equal to the excess of the sale price of the Common Stock over the fair market
value of the Common Stock on the date that it was purchased, or capital loss in
an amount equal to the excess of the fair market value of the Common Stock on
the date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the participant
has held the Common Stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
Common Stock for a shorter period.
Tax Consequences to the Company
The offering of Common Stock under the Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor the
sale of Common Stock acquired under the Purchase Plan will have any tax
consequences to the Company except that the Company will be entitled to a
business-expense deduction with respect to any ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m) of the Code.
18
<PAGE> 21
BOARD RECOMMENDATION
The Board of Directors believes approval of the amendment to the Purchase
Plan is in the best interests of the Company and its stockholders and recommends
a vote FOR its approval.
APPROVAL OF AMENDMENT TO 1994 DIRECTOR OPTION PLAN
THE AMENDMENT
Under the terms of the 1994 Director Option Plan (the "1994 Director Plan")
each newly elected non-employee director ("Non-Employee Director") receives a
grant of a stock option to purchase 10,500 shares of Common Stock ("Initial
Grant") upon his or her election to the Board. On December 9, 1998, the Board of
Directors adopted, subject to stockholder approval, an amendment to the 1994
Director Plan which would increase the number of shares of Common Stock
underlying the Initial Grant from 10,500 to 30,000. The Board of Directors
believes that the amendment is in the best interest of the Company in that it
will enhance the Company's ability to attract qualified candidates to serve as
Non-Employee Directors.
ADMINISTRATION; ELIGIBILITY AND NUMBER OF SHARES
The Board supervises and administers the 1994 Director Plan. Directors of
the Company who are not employees of the Company or any subsidiary of the
Company are eligible to participate in the 1994 Director Plan.
Under the terms of the 1994 Director Plan each Non-Employee Director in
office on December 7, 1994 was granted an option to purchase 10,500 shares of
Common Stock and each Non-Employee Director elected thereafter received an
Initial Grant to purchase 10,500 shares of Common Stock on the date of his
election to the Board of Directors. Each Non-Employee Director also receives an
annual option grant to purchase an additional 10,500 shares of Common Stock on
each anniversary of his initial option grant. The proposed amendment will not
affect the annual option grant which will continue at 10,500 shares.
A total of 550,000 shares of Common Stock is authorized to be issued under
the 1994 Director Plan. Options for an aggregate of 290,500 shares of Common
Stock, net of forfeitures, have been granted under the 1994 Director Plan since
the adoption of the Plan on December 7, 1994, leaving a balance of 259,500
shares of Common Stock available for future option grants.
TERMS OF OPTIONS
Each option granted under the 1994 Director Plan has an exercise price
equal to the fair market value of the Common Stock on the date of grant and is
exercisable on a cumulative basis in annual installments of one-third each on
the succeeding three anniversaries of the date of grant. The exercisability of
an option is conditioned upon continuous service as a director, or employee of
the Company in the event that a Non-Employee Director terminates his service as
a director to become an employee of the Company.
The exercise price of each option may be paid in cash or check payable to
the order of the Company, by the delivery of Common Stock of the Company already
owned by the optionee having a fair market value equal in amount to the exercise
price of the options being exercised, or a combination of such methods of
payment. Each option granted is not transferable except by the laws of descent
and distribution or pursuant to a qualified domestic relations order (as defined
in the Code). If the optionee becomes disabled or dies while serving as a
director, the option will vest in full and the optionee or his or her
representative may exercise the option in full during the year following his or
her disability or death. If the optionee ceases to be a director by reason of
retirement of the optionee as a director at the retirement age determined by the
Company or by
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reason of the Company's failure to nominate the optionee for reelection as a
director (excluding such director's refusal to serve as a director), each option
granted under the 1994 Director Plan then held by such director will be
exercisable for the number of shares then vested and exercisable plus the shares
which would otherwise become vested and exercisable at the date of the next
succeeding anniversary of the date of grant. No option may be exercised more
than ten years after the date of grant.
CHANGE IN CONTROL
The 1994 Director Plan provides that in the event of a Change in Control of
the Company, all options outstanding as of the date that such Change in Control
occurs shall become exercisable in full, including non-vested options. A Change
in Control occurs if: (i) any person becomes a beneficial owner of 50% or more
of the Company's outstanding shares of Common Stock, subject to certain
specified exceptions; (ii) if and when a majority of the members of the Board is
comprised of individuals who were not members of the Board on July 1, 1992
("Controlling Directors") or who were not nominated or elected subsequent to
that date by at least a majority of the Controlling Directors; (iii) the
Company's stockholders approve (A) a merger or consolidation involving the
Company unless the owners of the Company's voting stock immediately prior to
such event own more than 50% of the surviving company's outstanding voting stock
immediately after such event; (B) a merger or consolidation effected to
implement a recapitalization unless no person acquires 30% or more of the
outstanding voting power of the Company; (C) a plan of complete liquidation; or
(D) an agreement for the sale or disposition of all or substantially all of the
Company's assets.
AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the 1994 Director Plan or
review or amend it in any respect whatsoever; provided, however, that without
approval of the stockholders of the Company no revision or amendment by the
Board may change the number of shares subject to the 1994 Director Plan, change
the designation of the class of directors eligible to receive options, or
materially increase the benefits accruing to participants under the 1994
Director Plan. The Plan may not be amended more than once in any six-month
period.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
1994 Director Plan and with respect to the sale of Common Stock acquired under
the 1994 Director Plan.
Tax Consequences to Participants
A participant will not recognize taxable income upon the grant of an option
under the 1994 Director Plan. Nevertheless, a participant generally will
recognize ordinary compensation income upon the exercise of the option in an
amount equal to the excess of the fair market value of the Common Stock acquired
through the exercise of the option (the "Option Stock") on the exercise date
over the exercise price.
A participant will have a tax basis for any Option Stock equal to the
exercise price plus any income recognized with respect to the option. Upon
selling Option Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the Option
Stock and the participant's tax basis in the Option Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
Option Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss if the participant has held the Option Stock for
a shorter period.
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Tax Consequences to the Company
The grant of an option under the 1994 Director Plan will have no tax
consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1994 Director Plan.
BOARD RECOMMENDATION
The Board of Directors believes that the approval of the amendment to the
1994 Director Plan is in the best interests of the Company and its stockholders
and recommends a vote FOR its approval.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Ernst & Young LLP, independent auditors, as auditors of the
Company for the fiscal year ending October 30, 1999. Although stockholder
approval of the Board of Directors' selection of Ernst & Young LLP is not
required by law, the Board of Directors believes that it is advisable to give
stockholders an opportunity to ratify this selection. If this proposal is not
approved at the Meeting, the Board of Directors will reconsider its selection of
Ernst & Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to do
so and will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Meeting. However, if any other matters are properly presented to the
Meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. The
Company has engaged Corporate Investor Communications, Inc. ("CIC") to assist
with the solicitation of proxies. The Company expects to pay CIC less than
$10,000 for such services. In addition to solicitations by mail, CIC and the
Company's directors, officers and regular employees, without additional
remuneration, may solicit proxies by telephone, telegraph and personal
interviews. Brokers, custodians and fiduciaries will be requested to forward
proxy soliciting material to the owners of stock held in their names. The
Company will reimburse banks and brokers for their reasonable out-of-pocket
expenses incurred in connection with the distribution of proxy materials.
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DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Norwood, Massachusetts not later than October 9, 1999 for inclusion in the
proxy statement for that meeting.
In connection with the 2000 Annual Meeting of Stockholders, if the Company
does not receive notice of a matter or proposal to be considered by December 23,
1999, then the persons appointed by the Board of Directors to act as the proxies
for such annual meeting will be allowed to use their discretionary voting
authority with respect to any such matter or proposal at such annual meeting, if
such matter or proposal is raised at such annual meeting.
By Order of the Board of Directors,
PAUL P. BROUNTAS, Clerk
February 5, 1999
MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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SKU #520-PS-99
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Appendix
ANAO7B DETACH HERE
- -------------------------------------------------------------------------------
PROXY
ANALOG DEVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS - MARCH 9, 1999
The undersigned, revoking all prior proxies, hereby appoints Ray Stata,
Jerald G. Fishman and Paul P. Brountas, and each of them, with full power of
substitution, as proxies to represent and vote as designated hereon, all shares
of stock of Analog Devices, Inc. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders of the Company
to be held at the Hilton at Dedham Place, 25 Allied Drive, Dedham,
Massachusetts 02026, on Tuesday, March 9, 1999, at 10:00 a.m. (Local Time) and
at any adjournment thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(Continued and to be signed on reverse side)
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE.
- --------------- ---------------
SEE REVERSE SEE REVERSE
SIDE SIDE
- --------------- ---------------
<PAGE> 30
ANALOG DEVICES, INC.
One Technology Way
P.O. Box 9106
Norwood, MA 02062-9106
ANAO7A DETACH HERE
- -------------------------------------------------------------------------------
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
UNLESS OTHERWISE INSTRUCTED, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSALS SET FORTH BELOW.
<TABLE>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Election of Class III Directors for a term of three 2. To approve an amendment to the
years (for all nominees except as marked below). Company's 1992 Employee Stock [ ] [ ] [ ]
Purchase Plan to Increase the number
Nominees : John L. Doyle and Ray Stata of shares reserved for issuance
thereunder from 4,800,00 to
FOR WITHHELD MARK HERE 6,800,000.
IF YOU PLAN TO
[ ] [ ] ATTEND THE [ ]
MEETING FOR AGAINST ABSTAIN
3. To approve an amendment to the
MARK HERE Company's 1994 Director Option Plan [ ] [ ] [ ]
FOR ADDRESS [ ] to increase the number of shares of
CHANGE AND Common Stock underlying the initial
NOTE BELOW option grant to newly elected
non-employee directors from 10,500 to
[ ] 30,000.
---------------------------------------
For both nominees except as noted above FOR AGAINST ABSTAIN
4. To ratify the selection by the Board
of Directors of Ernst & Young LLP as [ ] [ ] [ ]
the Company's independent auditors
for the fiscal year ending
October 30, 1999.
5. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys and
corporate officers should add their titles.
Signature: _________________________________ Date: ____________ Signature: _________________________________ Date: ____________
</TABLE>
