LINEAR TECHNOLOGY CORP /CA/
DEF 14A, 1998-09-25
SEMICONDUCTORS & RELATED DEVICES
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                            SCHEDULE 14A INFORMATION
                                 (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   [ ]

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)(4)  and
          0-11.

          (1)  Title of each class of securities to which transactions  applies:
               _____________________________

          (2)  Aggregate  number of  securities to which  transactions  applies:
               _____________________________

          (3)  Per unit price or other underlying value of transaction  computed
               pursuant to Exchange Act Rule 0-11 (set forth the amount on which
               the filing fee is  calculated  and state how it was  determined):
               _____________________________

          (4)  Proposed maximum aggregate value of transaction: ________________

          (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>


                          LINEAR TECHNOLOGY CORPORATION

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

                    Notice of Annual Meeting of Shareholders
                         To Be Held on November 4, 1998


TO THE SHAREHOLDERS:

     NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting")  of Linear  Technology  Corporation,  a  California  corporation  (the
"Company"),  will be held on November 4, 1998 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 1996 Incentive Stock Option
     Plan to increase the number of shares of Common Stock reserved for issuance
     thereunder by 4,000,000 shares.

         3. To  ratify  the  appointment  of  Ernst & Young  LLP as  independent
     auditors of the Company for the fiscal year ending June 27, 1999.

         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 of the Company's  Common Stock at the close of
business on September 8, 1998, the record date, are entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof.

     All  shareholders  are  cordially  invited to attend the Annual  Meeting in
person.  However, to ensure your representation at the meeting, you are urged to
mark,  sign,  date and return the enclosed proxy card as promptly as possible in
the  postage-prepaid   envelope  enclosed  for  that  purpose.  Any  shareholder
attending  the Annual  Meeting may vote in person even if such  shareholder  has
returned a proxy.


                                        FOR THE BOARD OF DIRECTORS


                                        Arthur F. Schneiderman
                                        Secretary


Milpitas, California
September 25, 1998

- --------------------------------------------------------------------------------
     WHETHER  OR NOT YOU PLAN TO ATTEND THE ANNUAL  MEETING,  PLEASE  SIGN,
     DATE AND RETURN THE  ENCLOSED  PROXY AS  PROMPTLY  AS  POSSIBLE IN THE
     ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------


<PAGE>


                          LINEAR TECHNOLOGY CORPORATION

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

                                 PROXY STATEMENT
                                       FOR
                       1998 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 (the "Annual Meeting") to be held November
4, 1998,  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 28, 1998,  including financial  statements,
were mailed on or about September 25, 1998 to all shareholders  entitled to vote
at the Annual Meeting.

Proxies; Revocability of Proxies

     All shares  entitled to vote and represented by properly  executed  proxies
received  prior to the Annual  Meeting,  and not  revoked,  will be voted at the
Annual Meeting in accordance with the  instructions  indicated on those proxies.
If no  instructions  are  indicated  on a properly  executed  proxy,  the shares
represented  by  that  proxy  will be  voted  as  recommended  by the  Board  of
Directors.  If any other matters are properly presented for consideration at the
Annual  Meeting,  the persons named in the enclosed proxy and acting  thereunder
will have  discretion  to vote on those  matters in  accordance  with their best
judgment.  The Company does not currently anticipate that any other matters will
be raised at the Annual Meeting.

     Any proxy given pursuant to this  solicitation may be revoked by the person
giving it at any time before its use by  delivering  to the Company  (Attention:
Paul Coghlan,  Vice President of Finance and Chief Financial  Officer) a written
notice  of  revocation  or a duly  executed  proxy  bearing  a later  date or by
attending the Annual Meeting and voting in person.

Voting Rights and Solicitation of Proxies

     On all matters  other than the  election of  directors,  each share has one
vote.  Each  shareholder  voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected (which number is currently set at five) multiplied by
the  number  of  shares  held  by  such  shareholder,  or  may  distribute  such
shareholder's  votes  on the same  principle  among  as many  candidates  as the
shareholder  may select.  However,  no shareholder  will be entitled to cumulate
votes unless the  candidate's  name has been placed in  nomination  prior to the
voting, and the shareholder,  or any other shareholder,  has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate votes. If
any shareholder gives such notice, all shareholders may cumulate their votes for
the candidates in nomination.  In the event that  cumulative  voting is invoked,
the proxy  holders  will have the  discretionary  authority  to vote all proxies
received  by them in such a manner as to ensure the  election  of as many of the
Board of  Directors'  nominees  as  possible.  See  "Proposal  One--Election  of
Directors."

     The Company will bear the cost of  soliciting  proxies.  In  addition,  the
Company may reimburse brokerage firms and other persons representing  beneficial
owners of shares for their expenses in forwarding  solicitation material to such
beneficial owners. Solicitation of proxies by mail may be supplemented by one or
more  telephone,  telegram,  facsimile,  e-mail  or  personal  solicitations  by
directors,   officers  or  regular  employees  of  the  Company.  No  additional
compensation will be paid to such persons for such services.

                                        1

<PAGE>


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;  Discretionary  Authority to Vote
on Shareholder Proposals

     Proposals of shareholders of the Company which are intended to be presented
by  such  shareholders  at  the  Company's  1999  Annual  Meeting  ("Shareholder
Proposals")  must be received by the Company no later than May 28, 1999 in order
that they may be included in the proxy  statement and form of proxy  relating to
that meeting.

     The Company may use its  discretionary  voting authority on all Shareholder
Proposals not received by the Company on or prior to August 11, 1999.

Record Date and Voting Securities

     Shareholders  of record at the close of business on  September 8, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual  Meeting.  As
of the Record Date,  76,969,585  shares of the Company's  Common  Stock,  no par
value  (the  "Common  Stock"),  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, 1998, the market value of one share
of Common Stock was $56.09375.  For information  regarding security ownership by
management and by the beneficial  owners of more than five percent of the Common
Stock,  see "Beneficial  Security  Ownership of Directors,  Officers and Certain
Other Beneficial Owners."

                                        2

<PAGE>


                                  PROPOSAL ONE

                              ELECTION OF DIRECTORS

Nominees

     The  Company's  Bylaws  currently  provide  for a board of five  directors.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the  Company's  five  nominees  named below,  all of whom are currently
directors of the Company. In the event that any nominee of the Company is unable
or  declines  to serve as a  director  at the time of the  Annual  Meeting,  the
proxies  will be voted  for any  substitute  nominee  who is  designated  by the
current  Board of  Directors to fill the  vacancy.  It is not expected  that any
nominee  listed below will be unable or will decline to serve as a director.  In
the event that additional  persons are nominated for election as directors,  the
proxy  holders  intend to vote all proxies  received by them in such a manner in
accordance with cumulative  voting as will ensure the election of as many of the
nominees listed below as possible,  and, in such event, the specific nominees to
be voted for will be determined by the proxy  holders.  In any event,  the proxy
holders  cannot  vote for more  than  five  persons.  The term of office of each
person  elected as a director  will  continue  until the next Annual  Meeting of
Shareholders or until his successor has been elected and qualified.

<TABLE>
     The names of the  nominees,  and certain  information  about them,  are set
forth below.

<CAPTION>
    Name of Nominee          Age(1)        Principal Occupation                 Director Since
    ---------------          ------        --------------------                 --------------
<S>                            <C>    <C>                                            <C>
Robert H. Swanson, Jr. .....   60     President and Chief Executive Officer          1981
                                           of the Company

David S. Lee ...............   61     Chairman, Cortelco Systems Holding             1988
                                           Corporation

Leo T. McCarthy ............   68     President, The Daniel Group                    1994

Richard M. Moley ...........   59     Former President and Chief Executive           1994
                                           Officer, StrataCom, Inc.

Thomas S. Volpe ............   47     General Partner, Volpe Brown Whelan &          1984
                                           Company, LLC

<FN>
- -----------------
(1)  As of September 8, 1998.
</FN>
</TABLE>


     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 Systems
Holding Corporation and Photonics Corporation  (formerly Qume Corporation).  Mr.
Lee is also a Regent of the  University of California.  Currently,  Mr. Lee is a
member  of the  Board  of  Directors  of  Award  Software  International,  Inc.,
Centigram  Communications  Corporation,  Pacific  International  Center for High
Technology  Research  ("PICHTR") and the  California  Chamber of Commerce and is
President of Asian Cultural Teachings.

     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.
He also serves on the Board of  Directors  of two mutual  funds:  the  Parnassus
Fund, a socially  responsible fund with a $300 million  investment  portfolio in
domestic equities and bonds, and Forward Funds,  Inc., a mutual fund with a $100
million  investment  portfolio  in domestic and foreign  equities and bonds.  In
December 1996, Mr. McCarthy was appointed by the United States Senate Leadership
to the nine member National Gambling Impact Study Commission (the "NGISC").  The
NGISC has undertaken a two year study of the economic benefits and/or detriments
of all forms of legal  gambling in the United States and will make its report to
Congress and the President in June 1999.

                                        3

<PAGE>


     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.  ("Cisco"),  a  provider  of  computer  internetworking
solutions,  in July 1996.  Mr. Moley served as a board member and as Senior Vice
President of Cisco until August  1997,  when he became a consultant  and private
investor.  Mr. Moley served in various  executive  positions at ROLM Corporation
("ROLM"),  a  telecommunications  company,  from 1973 to 1986.  Prior to joining
ROLM,  he held  management  positions in software  development  and marketing at
Hewlett-Packard  Company.  Mr.  Moley also serves on the Board of  Directors  of
CIDCO Incorporated, CMC Industries, Inc. and Echelon Corporation.

     Mr. Volpe is Chief Executive Officer of Volpe Brown Whelan & Company,  LLC,
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  also  serves on the  Board of  Directors  of a number  of  privately-held
companies.

Vote Required and Recommendation of Board of Directors

     The five nominees  receiving the highest number of affirmative votes of the
shares  entitled to be voted shall be elected as directors.  Votes withheld will
be counted for purposes of  determining  the presence or absence of a quorum for
the  transaction  of business at the  meeting,  but will not be counted as votes
cast in the election of directors.

     THE COMPANY'S BOARD OF DIRECTORS  UNANIMOUSLY  RECOMMENDS  VOTING "FOR" THE
NOMINEES SET FORTH HEREIN.

                                        4

<PAGE>


                                  PROPOSAL TWO

                     APPROVAL OF AMENDMENT TO THE COMPANY'S
                        1996 INCENTIVE STOCK OPTION PLAN

General

     The Company's 1996 Incentive  Stock Option Plan (the "Plan") was adopted by
the  Board  of  Directors  in  July  1996  and  was  approved  by the  Company's
shareholders  in November  1996. The Plan provides for the granting to employees
of  incentive  stock  options  within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for the granting to employees
and consultants of non-statutory  stock options.  Unless terminated  sooner, the
Plan will terminate automatically in July 2006.

Proposal

     In July 1998,  the Board of Directors  approved an amendment to the Plan to
increase the number of shares reserved for issuance  thereunder by an additional
4,000,000  shares of Common Stock, for an aggregate of 8,000,000 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 Plan.

     THE COMPANY'S BOARD OF DIRECTORS  UNANIMOUSLY  RECOMMENDS  VOTING "FOR" THE
AMENDMENT TO THE PLAN.

Summary of the Plan

     The essential provisions of the Plan are outlined below.

     Administration.  The  Plan is  administered  by the  Board  or a  committee
appointed by the Board (as applicable,  the  "Administrator").  Such a committee
may  consist  of (i) two or more  "non-employee"  directors  in  order  to grant
options to officers and  directors  in  compliance  with Rule 16b-3  promulgated
under the Securities  Exchange Act of 1934 (the  "Exchange  Act") or (ii) two or
more  "outside"  directors  in order to grant  options  intended  to  qualify as
"performance-based compensation" under the tax laws.

     Eligibility;  Limits on  Grants.  Non-statutory  options  may be granted to
employees,  including  officers,  directors and consultants of the Company,  its
parent  or  subsidiaries.  Incentive  stock  options  may  be  granted  only  to
employees, including employee directors and officers. The Administrator approves
the participants,  the time or times at which options are granted and the number
of shares subject to each such grant.

     Limitations.  Section 162(m) of the Code places limits on the deductibility
for  federal  income tax  purposes  of  compensation  paid to certain  executive
officers of the Company.  In order to preserve the  Company's  ability to deduct
the  compensation  income  associated with options granted to such persons,  the
Plan provides that no employee,  director or consultant  may be granted,  in any
fiscal year of the  Company,  options to purchase  more than  500,000  shares of
Common  Stock.  Notwithstanding  this  limit,  however,  in  connection  with an
individual's  initial  employment  with the  Company,  he or she may be  granted
options to purchase up to an additional 500,000 shares of Common Stock.

     Terms  of  Options.  The  terms  of  options  granted  under  the  Plan are
determined by the Administrator. Each option is evidenced by a written agreement
between  the  Company  and the  optionee  to whom such  option is granted and is
subject to the following additional terms and conditions:

         (a) Exercise of the Option: The Administrator determines when an option
     becomes  exercisable  and may  accelerate  the  vesting of any  outstanding
     option.  The purchase  price of the shares to be purchased upon exercise of
     an option may be paid, at the discretion of the Administrator, in cash,

                                        5

<PAGE>


     check,  cashless  exercise,  or other  shares of Common  Stock  (with  some
     restrictions),  or, if specified in the optionee's option agreement,  other
     legally permitted consideration at the discretion of the Administrator.

         (b) Exercise  Price:  The exercise  price of an option is determined by
     the  Administrator  at the time  the  option  is  granted,  provided  that,
     generally in the case of an incentive stock option,  the exercise price may
     not be less than 100% of the fair market  value of the Common  Stock on the
     date the option is granted,  and provided  further  that, in the case of an
     incentive  stock  option  granted to an  employee  who, at the time of such
     grant, owns stock representing more than ten percent of the voting power of
     all  classes of stock of the  Company or any  parent or  subsidiary  of the
     Company,  the  exercise  price may be no less than 110% of the fair  market
     value of the Common Stock on the date the option is granted.

         (c) Termination of Employment:  If an optionee's  status as an employee
     or consultant terminates for any reason other than death or disability,  an
     option  under  the Plan may be  exercised  for  such  period  of time as is
     specified  in the  option  agreement  (generally  ninety  days)  after such
     termination  (but in no event later than the date of expiration of the term
     of the  option)  and may be  exercised  only to the extent  such option was
     exercisable and vested on the date of termination. The option agreement may
     provide for a longer  period of time for the option to be  exercised  after
     the optionee's death or disability. To the extent the option is exercisable
     at the time of such termination,  the optionee (or the optionee's estate or
     the  person who  acquires  the right to  exercise  the option by bequest or
     inheritance) may exercise all or part of the option at any time during such
     time periods.

         (d)  Expiration  of Options:  Options  granted under the Plan expire as
     determined by the Administrator,  but in no event later than ten years from
     the date of  grant.  However,  in the  case of an  incentive  stock  option
     granted  to an  employee  who,  at the  time  of  such  grant,  owns  stock
     representing  more than ten  percent of the voting  power of all classes of
     stock of the Company or any parent or subsidiary  of the Company,  the term
     of the option may not be greater than five years.  Under the form of option
     agreement currently used by the Company, options generally expire ten years
     from the date of grant.

         (e)  Non-transferability of Options:  Unless otherwise specified by the
     Administrator,  options are  non-transferable by the optionee other than by
     will or by the laws of descent or distribution  and are exercisable  during
     the optionee's lifetime only by the optionee.

         (f) Other  Provisions:  The option  agreement  may  contain  such other
     terms,  provisions and conditions which are not inconsistent with the Plan,
     as determined by the Administrator.

     Changes in Capitalization.  In the event a change, such as a stock split or
stock dividend payable in Common Stock, is made in the Company's  capitalization
which  results in an exchange of Common Stock for a greater or lesser  number of
shares without receipt of consideration by the Company,  appropriate  adjustment
will be made in the number of shares reserved for issuance under the Plan and in
the number of shares subject to each outstanding  option under the Plan, as well
as in the  price  per  share  of  Common  Stock  covered  by such  option.  Such
adjustment will be made by the Board of Directors, the determination of which is
final,  binding and  conclusive.  In the event of the  proposed  dissolution  or
liquidation of the Company,  options  outstanding  under the Plan will terminate
immediately  prior to such  action.  The  Administrator  may, in its  discretion
provide that each optionee will have the right to exercise all of the optionee's
options,  including  those not  otherwise  exercisable,  until the date ten days
prior to the consummation of the liquidation or dissolution.  In connection with
the proposed sale of all or substantially  all of the assets of the Company,  or
the merger of the Company into another corporation,  each outstanding option may
be assumed or an equivalent option substituted by the successor corporation.  If
the  successor  corporation  refuses  to assume  the  options  or to  substitute
substantially  equivalent options,  the optionee will have the right to exercise
the  option  as  to  all  underlying  stock,   including  shares  not  otherwise
exercisable.  In such event, the Administrator will notify the optionee that the
option is fully  exercisable  for fifteen  days from the date of such notice and
that the option will terminate upon expiration of such period.

                                        6

<PAGE>


     Amendment and Termination of the Plan. The Board of Directors may amend the
Plan  at  any  time,  or  may  terminate  the  Plan,  without  approval  of  the
shareholders;  provided,  however, that shareholder approval is required for any
amendment to the Plan for which shareholder approval would be required under the
Code or other  applicable  rules,  and no action by the  Board of  Directors  or
shareholders may  unilaterally  impair any option  previously  granted under the
Plan.  In any  event,  the  Plan  will  terminate  in  July  2006.  Any  options
outstanding  under  the  Plan  at  the  time  of  its  termination  will  remain
outstanding until they expire by their terms.

Federal Income Tax Consequences of the Plan

     The  following is a summary of the effect of federal  income  taxation with
respect to the grant and exercise of options under the Plan. It does not purport
to be complete and does not discuss the tax consequences of the optionee's death
or the income tax laws of any municipality,  state or foreign country in which a
participant may reside.

     Incentive  Stock  Options.  An optionee who is granted an  incentive  stock
option  will not  recognize  taxable  income  either  at the time the  option is
granted or upon its exercise,  although the exercise is an  adjustment  item for
alternative minimum tax purposes and may subject the optionee to the alternative
minimum tax.  Upon the sale or exchange of shares  acquired upon exercise of the
option  more  than two  years  after  grant  of the  option  and one year  after
exercise,  any gain or loss will be treated as  long-term  capital gain or loss.
Net  capital  gains on shares  held for more  than 12  months  may be taxed at a
maximum federal rate of 20%.  Capital losses are allowed in full against capital
gains  and up to  $3,000  of other  income.  If these  holding  periods  are not
satisfied,  the optionee will recognize  ordinary  income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market  value of the shares at the date of the option  exercise or (ii)
the sale price of the shares.  Any gain or loss  recognized  on such a premature
disposition  of the shares in excess of the amount  treated as  ordinary  income
will be characterized as long-term or short-term capital gain or loss, depending
on the holding period. A different rule for measuring  ordinary income upon such
a premature  disposition may apply if the optionee is an officer,  director,  or
ten percent shareholder of the Company.  Unless limited by Section 162(m) of the
Code,  the Company  will be  entitled  to a deduction  in the same amount as the
ordinary income recognized by the optionee.

     Non-statutory  Stock  Options.  An optionee  will not recognize any taxable
income at the time he or she is granted a non-statutory  stock option.  However,
upon  the  option's  exercise,  the  optionee  will  recognize  taxable  income,
generally  measured  as the excess of the then fair  market  value of the shares
purchased over the exercise price.  Any taxable income  recognized in connection
with an option  exercised  by an optionee who is also an employee of the Company
will be subject to tax  withholding  by the Company.  Unless  limited by Section
162(m) of the Code,  the Company will be entitled to a tax deduction in the same
amount as the ordinary  income  recognized by the optionee.  Upon resale of such
shares by the optionee,  any difference between the sales price and the exercise
price, to the extent not recognized as taxable income as described  above,  will
be treated as capital gain or loss, depending on the holding period. Net capital
gains on shares  held for more than 12 months may be taxed at a maximum  federal
rate of 20%.  Capital losses are allowed in full against capital gains and up to
$3,000 of other income.

Participation in the Plan

     The grant of options under the Plan to eligible  employees and consultants,
including  the  officers  listed in the Summary  Compensation  Table  below,  is
subject to the discretion of the  Administrator.  As of the Record Date, options
to purchase  2,555,575  shares of Common Stock have been granted pursuant to the
Plan, no options have been exercised and 1,455,925  shares remain  available for
future grants.

                                        7

<PAGE>


                                 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 fiscal year
ending June 27, 1999, and recommends that the shareholders vote for ratification
of such appointment.  In the event of a negative vote on such ratification,  the
Board of Directors will reconsider its selection.  Ernst & Young LLP has audited
the Company's  financial  statements  since the fiscal year ended June 30, 1982.
Representatives  of Ernst & Young LLP are  expected  to be present at the Annual
Meeting,  will have the  opportunity  to make a statement and are expected to be
available to respond to appropriate questions from shareholders.

     THE COMPANY'S BOARD OF DIRECTORS  UNANIMOUSLY  RECOMMENDS  VOTING "FOR" THE
RATIFICATION  OF  THE  APPOINTMENT  OF  ERNST  &  YOUNG  LLP  AS  THE  COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 27, 1999.

                                        8

<PAGE>


                   BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS,
                  OFFICERS AND CERTAIN OTHER BENEFICIAL OWNERS

Security Ownership

     The  following  table sets forth certain  information  known to the Company
regarding  the  beneficial  ownership  of the  Company's  Common Stock as of the
Record  Date,  by (a) each  beneficial  owner of more  than 5% of the  Company's
Common Stock, (b) the Company's Chief Executive  Officer and the Com-pany's four
other  most  highly   compensated   executive   officers   during   fiscal  1998
(collectively, the "Named Executive Officers"), (c) each director of the Company
and (d) all directors and executive  officers of the Company as a group.  Except
as otherwise  indicated,  each person has sole voting and investment  power with
respect to all shares shown as beneficially owned, subject to community property
laws where applicable.


                                          Shares Beneficially    Percentage
       Beneficial Owner                          Owned        Beneficially Owned
       ----------------                          -----        ------------------
Janus Capital Corporation(1) ...........        9,429,840          12.2%
     100 Fillmore Street
     Denver, CO 80206-4923

FMR Corp.(2) ...........................        8,104,630          10.5%
     82 Devonshire Street
     Boston, MA 02109

Putnam Investments, Inc.(3) ............        6,640,224           8.6%
     One Post Office Square
     Boston, MA 02109

Robert H. Swanson, Jr.(4) ..............          323,200            *

Robert C. Dobkin(5) ....................          364,658            *

Clive B. Davies(6) .....................          395,564            *

Paul Coghlan(7) ........................          236,112            *

Hans J. Zapf(8) ........................          144,500            *

Thomas S. Volpe(9) .....................           48,000            *

David S. Lee(10) .......................           18,000            *

Leo T. McCarthy(11) ....................           37,000            *

Richard M. Moley(9) ....................           48,000            *

All directors and executive officers as a
  group (14 persons)(4)(5)(6)(12) ......        1,753,534           2.2%

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

  *  Less than one percent of the outstanding Common Stock.

 (1) As reported by Janus  Capital  Corporation  ("Janus")  as of July 10, 1998.
     Includes 7,677,715 shares beneficially owned by Janus Fund. Janus and Janus
     Fund have shared voting power and shared  dispositive power with respect to
     the shares beneficially owned by Janus and Janus Fund.

 (2) As  reported  by FMR Corp.  ("FMR") as of February  14,  1998.  Consists of
     6,815,540  shares  beneficially  owned by  Fidelity  Management  & Research
     Company  ("FMRC"),   1,250,540  shares   beneficially   owned  by  Fidelity
     Management  Trust Company  ("FMTC"),  34,600 shares  beneficially  owned by
     Fidelity International Limited ("FIL") and 24,500 shares beneficially owned
     directly by Edward C. Johnson 3d. FMR has sole voting power with respect to
     959,240 shares and has sole dispositive power with respect to the 8,092,980
     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
     13,500  shares and  shared  voting and  dispositive  power with  respect to
     11,000 shares.

                                        9

<PAGE>


 (3) As reported by Putnam  Investments,  Inc.  ("PI") as of September 17, 1998.
     Consists of 6,500,647  shares held by Putnam  Investment  Management,  Inc.
     ("PIM")  and  139,577  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.  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.

 (4) Includes  163,200  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  160,000  shares
     issuable  pursuant to options  exercisable  within 60 days of  September 8,
     1998.

 (5) Includes 200,158 shares issued in the name of Robert C. Dobkin and Kathleen
     C. Dobkin Trustees of the Dobkin Family Trust W/D/T 9/16/91.  Also includes
     164,500 shares issuable pursuant to options  exercisable  within 60 days of
     September 8, 1998.

 (6) 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  236,500
     shares issuable pursuant to options exercisable within 60 days of September
     8, 1998.

 (7) Includes 217,500 shares issuable pursuant to options  exercisable within 60
     days of September 8, 1998.

 (8) Includes 132,000 shares issuable pursuant to options  exercisable within 60
     days of September 8, 1998.

 (9) Consists of 48,000 shares issuable pursuant to options  exercisable  within
     60 days of September 8, 1998.

(10) Consists of 18,000 shares issuable pursuant to options  exercisable  within
     60 days of September 8, 1998.

(11) Consists of 37,000 shares issuable pursuant to options  exercisable  within
     60 days of September 8, 1998.

(12) Includes  1,200,000 shares issuable pursuant to options  exercisable within
     60 days of September 8, 1998.


Board Meetings and Committees

     The Board of Directors of the Company held a total of four meetings  during
the fiscal year ended June 28, 1998. 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 a total of four  meetings
during the last fiscal year. The Audit  Committee  recommends  engagement of the
Company's independent  auditors,  and is primarily responsible for approving the
services performed by the Company's  independent  auditors and for reviewing and
evaluating  the  Company's  accounting  principles  and its  system of  internal
accounting controls.

     The Compensation  Committee of the Board of Directors currently consists of
directors  Lee,  McCarthy,  Moley and Volpe,  and held a total of four  meetings
during the last fiscal year. The 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
employee stock plans.

Director Compensation

     The Company currently pays each non-employee director an annual retainer of
$20,000 and a fee of $1,500 for each meeting of the Board of Directors attended.

                                       10

<PAGE>


Compensation Committee Interlocks and Insider Participation

     The Company's  Compensation  Committee currently consists of directors Lee,
McCarthy,  Moley and Volpe.  No executive  officer of the Company  served on the
compensation  committee of another entity or on any other committee of the board
of directors of another  entity  performing  similar  functions  during the last
fiscal year.

Section 16(a) Beneficial Ownership Compliance

     Section 16(a) of the Securities  Exchange Act of 1934, as amended ("Section
16(a)"),  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  amendments  thereto and
changes in ownership on Forms 4 or 5 with the Securities and Exchange Commission
(the "SEC") and the  National  Association  of  Securities  Dealers,  Inc.  Such
executive officers,  directors and ten percent shareholders are also required by
SEC rules to furnish  the Company  with  copies of all Section  16(a) forms they
file.

     Based  solely  upon its review of copies of such forms and  amendments,  if
any, received by the Company, or written  representations from certain reporting
persons that no Forms 5 were  required for such  persons,  the Company  believes
that it has complied  with all Section 16(a) filing  requirements  applicable to
its executive officers and directors during the year ended June 28, 1998.

Executive Officer Compensation

     The  following  table sets forth all  compensation  received  for  services
rendered to the Company in all capacities, for the last three fiscal years ended
June 28, 1998, by the Named Executive Officers:

<TABLE>
                                                     Summary Compensation Table

<CAPTION>
                                                                                              Underlying     All Other
Name and Principal Position                         Year       Salary          Bonus(1)         Options    Compensation(2)
- ---------------------------                         ----       ------          --------         -------    ---------------
<S>                                                 <C>     <C>              <C>                 <C>        <C>
Robert H. Swanson, Jr ..........................    1998    $  268,258       $1,273,804          125,000    $   23,790
 President and Chief                                1997       262,260          827,910          200,000        22,139
 Executive Officer                                  1996       234,135          958,361             --          32,936

Clive B. Davies ................................    1998    $  241,662       $  979,622           65,000    $   22,620
 Vice President and                                 1997       224,315          641,303          100,000        21,083
 Chief Operating Officer                            1996       218,621          774,366             --          28,470

Robert C. Dobkin ...............................    1998    $  237,717       $  908,210           95,000    $   22,172
 Vice President, Engineering                        1997       220,683          610,080          150,000        20,372
                                                    1996       215,214          733,649             --          27,933

Paul Coghlan ...................................    1998    $  232,833       $  861,497           45,000    $   21,820
 Vice President, Finance and                        1997       215,620          573,807           70,000        20,379
 Chief Financial Officer                            1996       209,733          697,141             --          26,836

Hans J. Zapf ...................................    1998    $  218,827(3)    $  486,689           40,000    $   22,258
 Vice President, International Sales                1997       231,284(3)       359,278           70,000        20,352
                                                    1996       210,191(3)       407,883             --          27,298

<FN>
- -----------------
(1)  Includes cash profit  sharing and cash bonuses  earned for the fiscal year,
     whether accrued or paid.
(2)  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.
(3)  Includes sales commissions earned by Mr. Zapf for the fiscal year.
</FN>
</TABLE>

                                       11

<PAGE>


Option Grants in Last Fiscal Year

<TABLE>
     The following table shows, as to the Named Officers, information concerning
stock options granted during the year ended June 28, 1998.

<CAPTION>
                                                       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(3)
                                Options        Employees in      Exercise Price     Expiration     ----------------------------
             Name               Granted       Fiscal Year(1)       Per Share         Date(2)           5%             10%
- ------------------------------ ------------   ----------------   ----------------   ------------   ------------   -------------
<S>                             <C>                <C>              <C>              <C>           <C>            <C>        
Robert H. Swanson, Jr. .......  125,000            4.3%             $ 51.875         01/12/08      $4,077,989     $10,334,425
Clive B. Davies ..............   65,000            2.3                51.875         01/12/08       2,120,554       5,373,901
Robert C. Dobkin .............   95,000            3.3                51.875         01/12/08       3,099,271       7,854,163
Paul Coghlan .................   45,000            1.6                51.875         01/12/08       1,468,076       3,720,393
Hans J. Zapf .................   40,000            1.4                51.875         01/12/08       1,304,956       3,307,016

<FN>
- -----------------
(1)  The Company granted to employees  options to purchase  2,875,575  shares of
     Common Stock in fiscal 1998.
(2)  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.
(3)  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--$51.875  per  share--over  the next 10 years,  the resulting  stock
     price at 5% and 10% appreciation  would be  approximately  $84.50 per share
     and approximately $134.55 per share,  respectively.  The 5% and 10% assumed
     annual rates of compounded  stock price  appreciation are mandated by rules
     of  the  Securities  and  Exchange  Commission  and do  not  represent  the
     Company's estimate or projection of future stock price growth.
</FN>
</TABLE>


Option Exercises and Holdings

<TABLE>
     The following table provides  information  with respect to option exercises
in fiscal 1998 by the Named  Executive  Officers and the value of such officers'
unexercised options at June 28, 1998.


<CAPTION>
                   Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values


                                                             Number of Shares Underlying      Value of Unexercised
                                                               Unexercised Options at        In-the-Money Options at
                                   Shares                          Fiscal Year-end             Fiscal Year-end(2)
                                  Acquired        Value     ----------------------------- -----------------------------
             Name                on Exercise   Realized(1)   Exercisable   Unexercisable   Exercisable   Unexercisable
- ------------------------------- ------------- ------------- ------------- --------------- ------------- ---------------
<S>                                <C>         <C>             <C>           <C>           <C>            <C>       
Robert H. Swanson, Jr. ........    75,000      $4,353,125      120,000       285,000       $4,815,000     $7,003,750
Clive B. Davies ...............    40,000       2,660,000      210,000       145,000        9,815,625      3,523,750
Robert C. Dobkin ..............    50,000       2,786,875      125,000       215,000        5,164,375      5,263,750
Paul Coghlan ..................    45,000       3,093,918      199,000       101,000        9,888,216      2,462,250
Hans J. Zapf ..................    27,000       1,735,500      117,000        93,000        5,782,125      2,285,375

<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 Common Stock on the
     Nasdaq  National  Market of  $60.625  per share on June 26,  1998 (the last
     trading day for fiscal 1998), minus the exercise price.
</FN>
</TABLE>

                                       12

<PAGE>


                                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 ("LLTC"),  the Nasdaq National Market ("Nasdaq") 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
Nasdaq and in the  Semiconductor  Index on the last trading day of the Company's
1993 fiscal year. Note that historic stock price  performance is not necessarily
indicative of future stock price performance.


[The  following  descriptive  data  supplied in  accordance  with Rule 304(d) of
Regulation S-T]


         Year                LLTC     Nasdaq     Semiconductor Index
         ----                ----     ------     -------------------
         June 1993  ......    100      100               100
         June 1994  ......    153      100               106
         June 1995  ......    231      133               198
         June 1996  ......    211      168               181
         June 1997  ......    366      205               337
         June 1998  ......    428      269               341

                                       13

<PAGE>


                          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  below-average  performance  for  the  Company  or the  individual
results  in  below-average  total  compensation.   The  focus  is  on  corporate
performance and individual contributions toward that performance.

Compensation Program

     The Company has a comprehensive compensation program which consists of cash
compensation,  both  fixed and  variable,  and  equity-based  compensation.  The
program has four principal  components,  which are intended to attract,  retain,
motivate and reward  executives  who are expected to manage both the  short-term
and long-term success of the Company. These components are:

     Cash-Based Compensation

         Base  Salary--Base  salary is  predicated  on  industry  and peer group
     comparisons and on performance judgments as to the past and expected future
     contribution  of the  individual  executive  officer.  In  general,  salary
     increases  are made  based on median  increases  in  salaries  for  similar
     executives of similar-size companies in the high technology industry.

         Profit Sharing--Profit  sharing payments are distributed  semi-annually
     to all  employees,  including  executives,  from a profit sharing pool. The
     amount of the pool is  largely  determined  by the  magnitude  of sales and
     operating income for the six-month period.  This pool is distributed to all
     eligible  employees based on the ratio of their individual  salary to total
     salaries  for all  employees.  A portion  of this  profit  sharing  is paid
     directly into a 401(k) retirement plan for all employees.

         Bonuses--The  Company has a discretionary  key employee  incentive pool
     pursuant to which executive  officers and a limited number of key employees
     may  receive  semi-annual  cash  bonuses.  Targets  for  sales  growth  and
     operating  income as a percentage of sales  influence the size of the pool.
     Individual  payments are made based on the Company's  achievement  of these
     targets and upon the individual's personal and departmental performance.

     In 1996, the Company  adopted 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  compensated
executive  officers.  In fiscal 1998,  the  participants  were Messrs.  Swanson,
Davies,  Dobkin and  Coghlan.  In fiscal  1999,  the plan will include the Chief
Executive  Officer and each of the Company's four other most highly  compensated
executive officers.

                                       14

<PAGE>


     Equity-Based Compensation

         Stock  Options--Stock  options  are  granted  periodically  to  provide
     additional  incentive  to  executives  and other key  employees  to work to
     maximize  long-term total return to  shareholders.  The options vest over a
     five-year  period to encourage  option holders to continue in the employ of
     the Company.  Over 35% of worldwide  employees have received stock options.
     In granting  options,  the  Compensation  Committee  takes into account the
     number of shares and outstanding options already held by the individual.

Chief Executive Officer Compensation

     The  Committee  uses the same  factors  and  criteria  described  above for
compensation decisions regarding the Chief Executive Officer.

Compensation Limitations for Tax Purposes

     The Committee has considered the potential  impact of Section 162(m) of the
Internal  Revenue Code adopted under the federal Revenue  Reconciliation  Act of
1993.  Section 162(m) generally  disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1 million in any taxable year
for   any   of  the   Named   Executive   Officers,   unless   compensation   is
performance-based. The Company's policy is to qualify, to the extent reasonable,
its executive  officers'  compensation  for  deductibility  under applicable tax
laws. In fiscal 1997, the Company implemented the Senior Executive Bonus Plan in
order to qualify  certain  bonus  payments  to the Named  Executive  Officers as
performance-based compensation under Section 162(m). The Committee believes that
the  implementation  of the Senior  Executive  Bonus Plan enables the Company to
compensate  its executive  officers in accordance  with its  pay-for-performance
philosophy while maximizing the deductibility of such compensation. However, the
Committee  recognizes  that the loss of a tax deduction may be necessary in some
circumstances.

Summary

     The Committee believes that a fair and motivating  compensation program has
played a critical role in the success of the Company. The Committee reviews this
program on an ongoing basis to evaluate its continued effectiveness.


                                        Respectfully submitted by:

                                        The Compensation Committee

                                        David S. Lee
                                        Leo T. McCarthy
                                        Richard M. Moley
                                        Thomas S. Volpe

                                       15

<PAGE>


                                  OTHER MATTERS

     The  Company  knows of no  other  matters  to be  submitted  to the  Annual
Meeting.  If any other matters  properly  come before the Annual  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: September 25, 1998

                                       16

<PAGE>


                                                                      APPENDIX A

________________________________________________________________________________

PROXY                     LINEAR TECHNOLOGY CORPORATION                    PROXY
                      1998 ANNUAL MEETING OF SHAREHOLDERS

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

     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  September 25, 1998,  and hereby
appoints Robert H. Swanson,  Jr. and Paul Coghlan, or either of them, as proxies
and attorneys-in-fact, each with full power to, on behalf and in the name of the
undersigned,   represent  the   undersigned   at  the  1998  Annual  Meeting  of
Shareholders of Linear Technology Corporation to be held on November 4, 1998, 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 postponement or
adjournment  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 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 1996 Incentive Stock Option
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 the other side)

________________________________________________________________________________


                            ^ FOLD AND DETACH HERE ^



ATTENTION:     PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED.  IT IS TO SHOW THE
               TEXT POSITION ON THE FRONT OF THIS PROXY CARD


<PAGE>


<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________________
<S>                                                                  <C>                                            <C>
                                                                                                                    [X]  Please mark
                                                                                                                          your votes
                                                                                                                          as in this
                                                                                                                            example


                                         FOR       WITHHELD
                                         ALL       FROM ALL
1. ELECTION OF DIRECTORS.              NOMINEES    NOMINEES          2. Proposal to approve amendment of the   FOR  AGAINST  ABSTAIN
   NOMINEES:                                                            1996 Incentive Stock Option Plan.      [ ]    [ ]      [ ]
   Robert H. Swanson, Jr.;               [ ]         [ ]
   David S. Lee; Leo T. McCarthy;                                    3. Proposal  to ratify the  appointment
   Richard M. Moley; Thomas S. Volpe                                    of   Ernst  &   Young   LLP  as  the   [ ]    [ ]      [ ]
                                                                        independent auditors of the Company.
   INSTRUCTION: To withhold authority to vote for any
   individual nominee, write that nominee's name in the              In their  discretion,  upon such  other
   space provided below.                                             matter or matters as which may properly
                                                                     come  before  the  meeting  and/or  any
                                                                     postponement of adjournment thereof.
[ ] ______________________________________
    For all nominees except
    as noted above

                                                                                     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 1996  INCENTIVE  STOCK OPTION 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.

                                                                                     In their discretion,  upon such other matter or
                                                                                     matters  which may  properly  come  before  the
                                                                                     meeting and/or any  postponement or adjournment
                                                                                     thereof.


Signature(s) _____________________________________________________________________         Dated _________________________________
Signature(s) of Shareholder or Authorized Signatory
This Proxy should be marked, dated, signed by the shareholder(s) exactly as his or her name appears hereon, and returned promptly in
the enclosed  envelope.  Persons  signing in a fiduciary  capacity  should so by signing and printing name and by printing title. If
shares are held by joint tenants or as community  property,  both should sign.
____________________________________________________________________________________________________________________________________

                                                      ^ FOLD AND DETACH HERE ^
</TABLE>



ATTENTION:     PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED.  IT IS TO SHOW THE
               TEXT POSITION ON THE BACK OF THIS PROXY CARD


<PAGE>


                                                                      APPENDIX B

                          LINEAR TECHNOLOGY CORPORATION
                        1996 INCENTIVE STOCK OPTION PLAN


         1. Purposes of the Plan. The purposes of this Stock Plan are:

               o  to  attract  and  retain  the  best  available  personnel  for
                  positions of substantial responsibility,

               o  to provide  additional  incentive to Employees,  Directors and
                  Consultants, and

               o  to promote the success of the Company's business.

         Options  granted  under  the Plan may be  Incentive  Stock  Options  or
Non-statutory  Stock Options,  as determined by the Administrator at the time of
grant.

         2. Definitions. As used herein, the following definitions shall apply:

               (a)  "Administrator"  means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.

               (b)  "Applicable  Laws"  means the  requirements  relating to the
administration  of stock option  plans under U. S. state  corporate  laws,  U.S.
federal and state securities laws, the Internal Revenue Code, any stock exchange
or  quotation  system on which  the  Common  Stock is  listed or quoted  and the
applicable  laws of any foreign  country or  jurisdiction  where Options are, or
will be, granted under the Plan.

               (c) "Board" means the Board of Directors of the Company.

               (d) "Internal  Revenue  Code" means the Internal  Revenue Code of
1986, as amended.

               (e) "Committee"  means a committee of Directors  appointed by the
Board in accordance with Section 4 of the Plan.

               (f) "Common Stock" means the Common Stock of the Company.

               (g) "Company" means Linear Technology  Corporation,  a California
corporation.

               (h) "Consultant" means any person,  including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.

               (i) "Director" means a member of the Board.



<PAGE>


               (j) "Disability" means total and permanent  disability as defined
in Section 22(e)(3) of the Internal Revenue Code.

               (k)  "Employee"   means  any  person,   including   Officers  and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service  Provider shall not cease to be an Employee in the case of (i) any leave
of absence  approved by the Company or (ii) transfers  between  locations of the
Company or between the Company,  its Parent,  any Subsidiary,  or any successor.
For purposes of Incentive  Stock Options,  no such leave may exceed ninety days,
unless  reemployment  upon  expiration of such leave is guaranteed by statute or
contract.  If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option  held by the  Optionee  shall cease to be treated as an  Incentive  Stock
Option and shall be treated for tax purposes as a  Non-statutory  Stock  Option.
Neither  service as a Director  nor payment of a  director's  fee by the Company
shall be sufficient to constitute "employment" by the Company.

               (l) "Exchange Act" means the Securities  Exchange Act of 1934, as
amended.

               (m) "Fair  Market  Value"  means,  as of any  date,  the value of
Common Stock determined as follows:

                       (i) If the  Common  Stock is  listed  on any  established
stock exchange or a national  market system,  including  without  limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing bid price for such stock as quoted on
such  exchange  or system for the last  market  trading day prior to the time of
determination,  as reported in The Wall Street  Journal or such other  source as
the Administrator deems reliable;

                       (ii)  If  the  Common  Stock  is  regularly  quoted  by a
recognized  securities  dealer but  selling  prices are not  reported,  the Fair
Market  Value of a Share of Common  Stock shall be the mean between the high bid
and low asked prices for the Common  Stock on the last market  trading day prior
to the day of  determination,  as reported  in The Wall  Street  Journal or such
other source as the Administrator deems reliable;

                       (iii) In the  absence  of an  established  market for the
Common  Stock,  the Fair Market Value shall be  determined  in good faith by the
Administrator.

               (n) "Incentive  Stock Option" means an Option intended to qualify
as an incentive  stock option  within the meaning of Section 422 of the Internal
Revenue Code and the regulations promulgated thereunder.

               (o) "Non-statutory  Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

                                       -2-

<PAGE>


               (p)  "Notice  of Grant"  means a  written  or  electronic  notice
evidencing  certain  terms and  conditions of an  individual  Option grant.  The
Notice of Grant is part of the Option Agreement.

               (q)  "Officer"  means a person who is an  officer of the  Company
within  the  meaning  of  Section  16 of the  Exchange  Act  and the  rules  and
regulations promulgated thereunder.

               (r) "Option" means a stock option granted pursuant to the Plan.

               (s) "Option Agreement" means an agreement between the Company and
an Optionee  evidencing the terms and conditions of an individual  Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.

               (t) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.

               (u) "Optioned Stock" means the Common Stock subject to an Option.

               (v) "Optionee" means the holder of an outstanding  Option granted
under the Plan.

               (w)  "Parent"  means  a  "parent  corporation,"  whether  now  or
hereafter existing, as defined in Section 424(e) of the Internal Revenue Code.

               (x) "Plan" means this 1996 Incentive Stock Option Plan.

               (y) "Rule  16b-3"  means  Rule 16b-3 of the  Exchange  Act or any
successor to Rule 16b-3,  as in effect when  discretion is being  exercised with
respect to the Plan.

               (z) "Section 16(b)" means Section 16(b) of the Exchange Act.

               (aa)   "Service   Provider"   means  an  Employee,   Director  or
Consultant.

               (bb) "Share"  means a share of the Common  Stock,  as adjusted in
accordance with Section 13 of the Plan.

               (cc) "Subsidiary" means a "subsidiary  corporation",  whether now
or hereafter  existing,  as defined in Section  424(f) of the  Internal  Revenue
Code.

        3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum  aggregate number of Shares which may be optioned and sold
under the Plan is 8,000,000 Shares. The Shares may be authorized,  but unissued,
or reacquired Common Stock.

                                       -3-

<PAGE>


               If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased  Shares which were subject thereto shall become available for future
grant or sale  under  the Plan  (unless  the  Plan  has  terminated);  provided,
however, that Shares that have actually been issued under the Plan, whether upon
exercise of an Option or Right,  shall not be returned to the Plan and shall not
become available for future distribution under the Plan.

        4. Administration of the Plan.

               (a)     Procedure.

                       (i)  Multiple  Administrative  Bodies.  The  Plan  may be
administered by different Committees with respect to different groups of Service
Providers.

                       (ii) Section 162(m). To the extent that the Administrator
determines  it  to  be  desirable  to  qualify  Options  granted   hereunder  as
"performance-based  compensation"  within the  meaning of Section  162(m) of the
Internal  Revenue Code, the Plan shall be  administered by a Committee of two or
more "outside  directors"  within the meaning of Section  162(m) of the Internal
Revenue Code.

                       (iii)  Rule  16b-3.  To the extent  desirable  to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder  shall be structured to satisfy the  requirements  for exemption under
Rule 16b-3.

                       (iv) Other Administration.  Other than as provided above,
the Plan  shall be  administered  by (A) the  Board  or (B) a  Committee,  which
committee shall be constituted to satisfy Applicable Laws.

               (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee,  subject to the specific duties  delegated
by the Board to such Committee,  the Administrator shall have the authority,  in
its discretion:

                       (i) to determine the Fair Market Value;

                       (ii) to select the Service  Providers to whom Options may
be granted hereunder;

                       (iii) to  determine  the number of shares of Common Stock
to be covered by each Option granted hereunder;

                       (iv) to  approve  forms of  agreement  for use  under the
Plan;

                                       -4-

<PAGE>


                       (v)  to   determine   the  terms  and   conditions,   not
inconsistent with the terms of the Plan, of any Option granted  hereunder.  Such
terms and conditions  include,  but are not limited to, the exercise price,  the
time or times when Options may be exercised  (which may be based on  performance
criteria),  any vesting acceleration or waiver of forfeiture  restrictions,  and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto,  based in each case on such factors as the  Administrator,  in
its sole discretion, shall determine;

                       (vi) to reduce  the  exercise  price of any Option to the
then  current  Fair Market  Value if the Fair Market  Value of the Common  Stock
covered  by such  Option  shall  have  declined  since the date the  Option  was
granted;

                       (vii)  to institute an Option Exchange Program;

                       (viii) to construe  and  interpret  the terms of the Plan
and awards granted pursuant to the Plan;

                       (ix)  to   prescribe,   amend  and   rescind   rules  and
regulations  relating to the Plan,  including rules and regulations  relating to
sub-plans  established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

                       (x) to modify or amend each  Option  (subject  to Section
15(c)  of the  Plan),  including  the  discretionary  authority  to  extend  the
post-termination  exercisability  period of  Options  longer  than is  otherwise
provided for in the Plan;

                       (xi)  to  allow  Optionee  to  satisfy   withholding  tax
obligations  by  electing  to have the  Company  withhold  from the Shares to be
issued upon  exercise  of an Option  that number of Shares  having a Fair Market
Value equal to the amount required to be withheld.  The Fair Market Value of the
Shares to be withheld  shall be determined on the date that the amount of tax to
be withheld is to be  determined.  All  elections  by an Optionee to have Shares
withheld for this purpose  shall be made in such form and under such  conditions
as the Administrator may deem necessary or advisable;

                       (xii) to authorize any person to execute on behalf of the
Company  any  instrument  required  to effect the grant of an Option  previously
granted by the Administrator;

                       (xiii) to make all other determinations  deemed necessary
or advisable for administering the Plan.

               (c)  Effect  of  Administrator's  Decision.  The  Administrator's
decisions,  determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

                                       -5-

<PAGE>


        5.  Eligibility.  Non-statutory  Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.

        6.     Limitations.

               (a) Each Option shall be  designated  in the Option  Agreement as
either an  Incentive  Stock Option or a  Non-statutory  Stock  Option.  However,
notwithstanding  such designation,  to the extent that the aggregate Fair Market
Value  of  the  Shares  with  respect  to  which  Incentive  Stock  Options  are
exercisable  for the first time by the Optionee  during any calendar year (under
all plans of the Company and any Parent or Subsidiary)  exceeds  $100,000,  such
Options shall be treated as  Non-statutory  Stock Options.  For purposes of this
Section 6(a),  Incentive  Stock Options shall be taken into account in the order
in which  they  were  granted.  The Fair  Market  Value of the  Shares  shall be
determined as of the time the Option with respect to such Shares is granted.

               (b) Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing  the Optionee's  relationship  as a Service
Provider  with  the  Company,  nor  shall  they  interfere  in any way  with the
Optionee's  right or the Company's  right to terminate such  relationship at any
time, with or without cause.

               (c) The following limitations shall apply to grants of Options:

                       (i) No Service  Provider shall be granted,  in any fiscal
year of the Company, Options to purchase more than 500,000 Shares.

                       (ii) In  connection  with his or her initial  service,  a
Service Provider may be granted Options to purchase up to an additional  500,000
Shares  which  shall not count  against  the limit set forth in  subsection  (i)
above.

                       (iii)  The  foregoing   limitations   shall  be  adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.

                       (iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described  in Section  13),  the  cancelled  Option will be counted  against the
limits set forth in  subsections  (i) and (ii) above.  For this purpose,  if the
exercise  price of an Option is reduced,  the  transaction  will be treated as a
cancellation of the Option and the grant of a new Option.

        7. Term of Plan.  Subject  to  Section  19 of the Plan,  the Plan  shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.

                                       -6-

<PAGE>


        8. Term of Option. The term of each Option shall be stated in the Option
Agreement.  In the case of an Incentive Stock Option, the term shall be ten (10)
years  from the date of grant or such  shorter  term as may be  provided  in the
Option Agreement.  Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive  Stock Option is granted,  owns stock
representing  more than ten percent  (10%) of the voting power of all classes of
stock of the  Company or any  Parent or  Subsidiary,  the term of the  Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Option Agreement.

        9.     Option Exercise Price and Consideration.

               (a) Exercise  Price.  The per share exercise price for the Shares
to be issued  pursuant  to  exercise  of an Option  shall be  determined  by the
Administrator, subject to the following:

                       (i) In the case of an Incentive Stock Option

                              (A)  granted to an  Employee  who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting  power of all  classes of stock of the Company or any Parent
or  Subsidiary,  the per Share  exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

                              (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

                       (ii) In the case of a Non-statutory Stock Option, the per
Share exercise price shall be determined by the Administrator.  In the case of a
Non-statutory   Stock   Option   intended   to  qualify  as   "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.

                       (iii)  Notwithstanding  the  foregoing,  Options  may  be
granted  with a per Share  exercise  price of less than 100% of the Fair  Market
Value per  Share on the date of grant  pursuant  to a merger or other  corporate
transaction.

               (b) Waiting Period and Exercise  Dates.  At the time an Option is
granted,  the Administrator  shall fix the period within which the Option may be
exercised and shall determine any conditions  which must be satisfied before the
Option may be exercised.

               (c) Form of Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option,  including the method
of payment.  In the case of an Incentive Stock Option,  the Administrator  shall
determine  the  acceptable  form of  consideration  at the time of  grant.  Such
consideration may consist entirely of:

                                       -7-

<PAGE>


                       (i) cash;

                       (ii) check;

                       (iii) promissory note;

                       (iv)  other  Shares  which  (A) in  the  case  of  Shares
acquired  upon  exercise of an option,  have been owned by the Optionee for more
than six months on the date of  surrender,  and (B) have a Fair Market  Value on
the date of surrender equal to the aggregate  exercise price of the Shares as to
which said Option shall be exercised;

                       (v)  consideration   received  by  the  Company  under  a
cashless  exercise  program  implemented  by the Company in connection  with the
Plan;

                       (vi) a reduction  in the amount of any Company  liability
to  the  Optionee,  including  any  liability  attributable  to  the  Optionee's
participation  in  any   Company-sponsored   deferred  compensation  program  or
arrangement;

                       (vii)  any  combination  of  the  foregoing   methods  of
payment; or

                       (viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.

        10. Exercise of Option.

               (a) Procedure for Exercise;  Rights as a Shareholder.  Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the  Administrator and set
forth in the Option  Agreement.  Unless the  Administrator  provides  otherwise,
vesting of Options granted  hereunder shall be suspended during any unpaid leave
of absence. An Option may not be exercised for a fraction of a Share.

                       An Option  shall be  deemed  exercised  when the  Company
receives:  (i) written or electronic  notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment  for the Shares  with  respect to which the  Option is  exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator  and permitted by the Option Agreement and the Plan. Shares issued
upon  exercise of an Option  shall be issued in the name of the  Optionee or, if
requested  by the  Optionee,  in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate  entry on the books
of the Company or of a duly authorized transfer agent of the Company),  no right
to vote or receive  dividends or any other rights as a  shareholder  shall exist
with respect to the Optioned Stock,  notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares  promptly  after the
Option is exercised. No adjustment will be made for a

                                       -8-

<PAGE>


dividend  or other  right  for which  the  record  date is prior to the date the
Shares are issued, except as provided in Section 13 of the Plan.

                       Exercising  an Option in any manner  shall  decrease  the
number of Shares  thereafter  available,  both for  purposes of the Plan and for
sale  under the  Option,  by the  number  of  Shares  as to which the  Option is
exercised.

               (b)  Termination of  Relationship  as a Service  Provider.  If an
Optionee ceases to be a Service  Provider,  other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is  specified  in the Option  Agreement to the extent that the Option is
vested on the date of termination  (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option  Agreement,  the Option shall remain  exercisable
for three (3) months  following the Optionee's  termination.  If, on the date of
termination,  the  Optionee  is not vested as to his or her entire  Option,  the
Shares  covered by the unvested  portion of the Option shall revert to the Plan.
If, after  termination,  the Optionee does not exercise his or her Option within
the time specified by the  Administrator,  the Option shall  terminate,  and the
Shares covered by such Option shall revert to the Plan.

               (c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of  termination  (but in no event
later than the  expiration of the term of such Option as set forth in the Option
Agreement).  In the absence of a  specified  time in the Option  Agreement,  the
Option shall remain  exercisable for twelve (12) months following the Optionee's
termination.  If, on the date of  termination,  the Optionee is not vested as to
his or her entire  Option,  the Shares  covered by the  unvested  portion of the
Option shall revert to the Plan.  If, after  termination,  the Optionee does not
exercise his or her Option within the time  specified  herein,  the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

               (d)  Death of  Optionee.  If an  Optionee  dies  while a  Service
Provider, the Option may be exercised within such period of time as is specified
in the Option  Agreement  (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person  who  acquires  the  right to  exercise  the  Option by  bequest  or
inheritance,  but only to the  extent  that the  Option is vested on the date of
death.  In the absence of a specified time in the Option  Agreement,  the Option
shall  remain  exercisable  for twelve  (12)  months  following  the  Optionee's
termination.  If, at the time of death,  the Optionee is not vested as to his or
her entire  Option,  the Shares  covered by the  unvested  portion of the Option
shall  immediately  revert to the  Plan.  The  Option  may be  exercised  by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or  distribution.  If the Option is not so exercised  within the time  specified
herein, the Option shall terminate,  and the Shares covered by such Option shall
revert to the Plan.

                                       -9-

<PAGE>


               (e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option  previously  granted based on
such terms and conditions as the  Administrator  shall establish and communicate
to the Optionee at the time that such offer is made.

        11.  Non-Transferability of Options.  Unless determined otherwise by the
Administrator,  an  Option  may not be sold,  pledged,  assigned,  hypothecated,
transferred,  or disposed of in any manner  other than by will or by the laws of
descent  or  distribution  and may be  exercised,  during  the  lifetime  of the
Optionee,   only  by  the  Optionee.   If  the  Administrator  makes  an  Option
transferable,  such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

        12. Adjustments Upon Changes in Capitalization,  Dissolution,  Merger or
Asset Sale.

               (a) Changes in Capitalization.  Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each  outstanding  Option,  and the number of shares of Common  Stock which have
been  authorized for issuance under the Plan but as to which no Options have yet
been  granted  or which  have been  returned  to the Plan upon  cancellation  or
expiration of an Option,  as well as the price per share of Common Stock covered
by each such  outstanding  Option,  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  issued  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 issuance 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.

               (b)  Dissolution  or  Liquidation.  In the event of the  proposed
dissolution or liquidation of the Company,  the Administrator  shall notify each
Optionee as soon as  practicable  prior to the  effective  date of such proposed
transaction.  The Administrator in its discretion may provide for an Optionee to
have the right to exercise  his or her Option  until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the  Option  would not  otherwise  be  exercisable.  In  addition,  the
Administrator  may provide that any Company  repurchase option applicable to any
Shares  purchased  upon exercise of an Option shall lapse as to all such Shares,
provided the proposed  dissolution or liquidation takes place at the time and in
the manner contemplated.  To the extent it has not been previously exercised, an
Option will terminate  immediately  prior to the  consummation  of such proposed
action.

               (c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
or right substituted by the successor corporation or

                                      -10-

<PAGE>


a Parent or  Subsidiary  of the  successor  corporation.  In the event  that the
successor  corporation  refuses  to assume or  substitute  for the  Option,  the
Optionee shall fully vest in and have the right to exercise the Option as to all
of the Optioned  Stock,  including  Shares as to which it would not otherwise be
vested or exercisable. If an Option becomes fully vested and exercisable in lieu
of assumption or  substitution  in the event of a merger or sale of assets,  the
Administrator  shall notify the Optionee in writing or  electronically  that the
Option  shall be fully vested and  exercisable  for a period of thirty (30) days
from the date of such notice, and the Option shall terminate upon the expiration
of such  period.  For the  purposes  of this  paragraph,  the  Option  shall  be
considered  assumed if,  following  the merger or sale of assets,  the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the  Option  immediately  prior to the merger or sale of assets,  the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by  holders of Common  Stock for each Share held on
the effective date of the  transaction  (and if holders were offered a choice of
consideration,  the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided,  however, that if such consideration received
in the  merger or sale of assets is not  solely  common  stock of the  successor
corporation  or its  Parent,  the  Administrator  may,  with the  consent of the
successor  corporation,  provide for the  consideration  to be received upon the
exercise of the Option,  for each Share of Optioned Stock subject to the Option,
to be solely  common stock of the successor  corporation  or its Parent equal in
fair market value to the per share  consideration  received by holders of Common
Stock in the merger or sale of assets.

        13.  Date of  Grant.  The date of grant of an Option  shall be,  for all
purposes,  the date on which the Administrator makes the determination  granting
such Option,  or such other later date as is  determined  by the  Administrator.
Notice  of the  determination  shall  be  provided  to each  Optionee  within  a
reasonable time after the date of such grant.

        14. Amendment and Termination of the Plan.

               (a) Amendment and  Termination.  The Board may at any time amend,
alter, suspend or terminate the Plan.

               (b) Shareholder  Approval.  The Company shall obtain  shareholder
approval of any Plan  amendment to the extent  necessary and desirable to comply
with Applicable Laws.

               (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or  termination  of the Plan shall impair the rights of any Optionee,
unless mutually  agreed  otherwise  between the Optionee and the  Administrator,
which  agreement  must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers  granted to it hereunder  with respect to options  granted  under the
Plan prior to the date of such termination.

                                      -11-

<PAGE>


        15. Conditions Upon Issuance of Shares.

               (a) Legal Compliance.  Shares shall not be issued pursuant to the
exercise of an Option  unless the  exercise of such Option and the  issuance and
delivery of such Shares shall comply with  Applicable  Laws and shall be further
subject  to the  approval  of  counsel  for the  Company  with  respect  to such
compliance.

               (b) Investment Representations. 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.

        16.  Inability  to Obtain  Authority.  The  inability  of the Company to
obtain authority from any regulatory body having  jurisdiction,  which authority
is deemed by the  Company's  counsel to be necessary to the lawful  issuance and
sale of any Shares  hereunder,  shall  relieve the Company of any  liability  in
respect of the failure to issue or sell such  Shares as to which such  requisite
authority shall not have been obtained.

        17.  Reservation of Shares.  The Company,  during the term of this Plan,
will at all times reserve and keep  available  such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

        18. Shareholder  Approval.  The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted.  Such  shareholder  approval shall be obtained in the manner and to the
degree required under Applicable Laws.

                                      -12-



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