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Texas Instruments Incorporated
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Notice of annual meeting of
stockholders
April 16, 2009
Dear Stockholder:
You are cordially invited to attend the 2009 annual meeting of stockholders on Thursday, April 16, 2009, at the cafeteria on our property at 12500 TI Boulevard, Dallas, Texas, at 10:00 a.m. (Dallas time). At the meeting we will:
Stockholders of record at the close of business on February 17, 2009, are entitled to vote at the annual meeting.
We urge you to vote your shares as promptly as possible by: (1) accessing the Internet web site, (2) calling the toll-free number or (3) signing, dating and mailing the enclosed proxy.
Sincerely, | ||
Joseph F. Hubach |
Dallas, Texas
March 5,
2009
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 51 ]
Table of contents |
Voting procedures | 52 |
Election of directors | 52 |
Nominees for directorship | 52 |
Director nomination process | 54 |
Communications with the board | 54 |
Corporate governance | 54 |
Annual meeting attendance | 54 |
Director independence | 54 |
Directors ages, service and stock ownership | 56 |
Board organization | 56 |
Board and committee meetings | 56 |
Committees of the board | 57 |
Director compensation | 59 |
Executive compensation | 61 |
Compensation discussion and analysis | 61 |
Compensation Committee report | 71 |
2008 summary compensation table | 71 |
Grants of plan-based awards in 2008 | 73 |
Outstanding equity awards at fiscal year-end 2008 | 74 |
2008 option exercises and stock vested | 77 |
2008 pension benefits | 78 |
2008 non-qualified deferred compensation | 79 |
Potential payments upon termination or change in control | 81 |
Audit Committee report | 85 |
Proposal to ratify appointment of independent registered public accounting firm | 85 |
Proposal to approve the Texas Instruments 2009 Long-Term Incentive Plan | 86 |
Proposal to approve the Texas Instruments 2009 Director Compensation Plan | 88 |
Equity compensation plan information | 90 |
Stockholder proposal | 91 |
Additional information | 92 |
Voting securities | 92 |
Security ownership of certain beneficial holders | 92 |
Security ownership of management | 92 |
Related person transactions | 93 |
Compensation committee interlocks and insider participation | 94 |
Cost of solicitation | 94 |
Stockholder proposals for 2010 | 94 |
Quorum requirement | 95 |
Vote required | 95 |
Benefit plan voting | 95 |
Section 16(a) beneficial ownership reporting compliance | 95 |
Telephone and Internet voting | 95 |
Stockholders sharing the same address | 96 |
Electronic delivery of proxy materials | 96 |
Exhibit A Texas Instruments 2009 Long-Term Incentive Plan | A-1 |
Exhibit B Texas Instruments 2009 Director Compensation Plan | B-1 |
Proxy statement | ||
March 5, 2009 |
Executive offices
12500 TI Boulevard, Dallas, Texas
75243
Mailing Address: P. O. Box 660199,
Dallas, Texas 75266-0199
Voting procedures
TIs board of directors requests
your proxy for the annual meeting of stockholders on April 16, 2009. If you sign
and return the enclosed proxy, or vote by telephone or on the Internet, you
authorize the persons named in the proxy to represent you and vote your shares
for the purposes mentioned in the notice of annual meeting. This proxy statement
and related proxy are being distributed on or about March 5, 2009. If you come
to the meeting, you can of course vote in person. But if you dont come to the
meeting, your shares can be voted only if you have returned a properly signed
proxy or followed the telephone or Internet voting instructions. If you sign and
return your proxy but do not give voting instructions, the shares represented by
that proxy will be voted as recommended by the board of directors. You can
revoke your authorization at any time before the shares are voted at the
meeting.
Election of directors
Directors are elected at the annual
meeting to hold office until the next annual meeting and until their successors
are elected and qualified. The board of directors has designated the following
persons as nominees: JAMES R. ADAMS, DAVID L. BOREN, DANIEL A. CARP, CARRIE S.
COX, DAVID R. GOODE, STEPHEN P. MACMILLAN, PAMELA H. PATSLEY, WAYNE R. SANDERS,
RUTH J. SIMMONS, RICHARD K. TEMPLETON and CHRISTINE TODD
WHITMAN.
If
you return a proxy that is not otherwise marked, your shares will be voted FOR
each of the nominees.
Nominees for directorship
All of the nominees for directorship
are now directors of the company. If any nominee becomes unable to serve before
the meeting, the people named as proxies may vote for a substitute or the number
of directors will be reduced accordingly.
[ 52 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Directors
JAMES R. ADAMS
Director | ||
DAVID L. BOREN
Director | ||
DANIEL A. CARP
Director | ||
CARRIE S. COX
Director | ||
DAVID R. GOODE
Director | ||
STEPHEN P. MACMILLAN
Director |
PAMELA H. PATSLEY Director Chair, Audit Committee. Executive chairman, MoneyGram International, Inc. Senior executive vice president of First Data Corporation, 2000-2007; president of its subsidiaries First Data International, 2002-2007 and First Data Merchant Services, 2000-2002. President and chief executive officer of Paymentech, Inc., 1991-2000. Director, Dr. Pepper Snapple Group, Inc., Molson Coors Brewing Company and Tolleson Wealth Management, Inc.; southwestern region trustee and governor, Boys and Girls Clubs of America. | ||
WAYNE R. SANDERS
Director | ||
RUTH J. SIMMONS
Director | ||
RICHARD K. TEMPLETON
Chairman | ||
CHRISTINE TODD WHITMAN
Director |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 53 ]
Director nomination process
The board is responsible for approving nominees for election as
directors. To assist in this task, the board has designated a standing
committee, the Governance and Stockholder Relations Committee (the Committee),
which is responsible for reviewing and recommending nominees to the board. The
Committee is comprised solely of independent directors as defined by the rules
of the New York Stock Exchange (NYSE) and the boards corporate governance
guidelines. Our board of directors has adopted a written charter for the
Committee. It can be found on our web site at
www.ti.com/corporategovernance.
It is a long-standing policy of the board
to consider prospective board nominees recommended by stockholders. A
stockholder who wishes to recommend a prospective board nominee for the
Committees consideration can write to the Secretary of the Governance and
Stockholder Relations Committee, Texas Instruments Incorporated, Post Office Box
655936, MS 8658, Dallas, Texas 75265-5936. The Committee will evaluate the
stockholders prospective board nominee in the same manner as it evaluates other
nominees.
In evaluating prospective nominees,
the Committee looks for the following minimum qualifications, qualities and
skills:
Stockholders, non-employee directors,
management and others may submit recommendations to the Committee. The board
prefers a mix of experience among its members to maintain a diversity of
viewpoints. For example, some board members may have spent much of their careers
in business, some in government and some in academia. The boards current size
is within the desired range as stated in the boards corporate governance
guidelines.
Mr. MacMillan was elected to the
Board on September 18, 2008. He is the only non-management director nominee for
the 2009 annual meeting of stockholders who is standing for election by the
stockholders for the first time. A search firm retained by the company to assist
the Committee in identifying and evaluating potential nominees initially
identified Mr. MacMillan as a potential director candidate. The search firm
conducted research to identify viable candidates, based on qualifications and
skills the Committee determined that candidates should possess. It then
conducted further research on the candidates in whom the Committee had the most
interest. The firm is no longer on retainer.
Communications with the
board
Stockholders and others who
wish to communicate with the board as a whole, or to individual directors, may
write to them at: P. O. Box 655936, MS 8658, Dallas, Texas 75265-5936. All
communications sent to this address will be shared with the board or the
individual director, if so addressed.
Corporate
governance
The board has a
long-standing commitment to responsible and effective corporate governance. The
boards corporate governance guidelines, the charters of the boards committees,
TIs code of business conduct and our code of ethics for its chief executive
officer and senior financial officers are available on our web site at
www.ti.com/corporategovernance. Stockholders may request copies of these
documents free of charge by writing to Texas Instruments Incorporated, P.O. Box
660199, MS 8657, Dallas, Texas, 75266-0199, Attn: Investor Relations.
Annual meeting
attendance
It is a policy of the
board to encourage directors to attend each annual meeting of stockholders. Such
attendance allows for direct interaction between stockholders and board members.
In 2008, all directors attended TIs annual meeting of stockholders.
Director
independence The board has adopted the following standards for determining independence. | ||
A. |
In no event will a director be considered independent if: | |
1. |
He or she is a current partner of or is employed by the companys independent auditors; or | |
2. |
An immediate family member of the director is (a) a current partner of the companys independent auditors or (b) currently employed by the companys independent auditors and personally works on the companys audit. |
[ 54 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
B. | In no event will a director be considered independent if, within the preceding three years: | |
1. | He or she was employed by the company (except in the capacity of interim chairman of the board, chief executive officer or other executive officer) or any of its subsidiaries; | |
2. | He or she received more than $120,000 during any twelve-month period in direct compensation from TI (other than (a) director and committee fees and pension or other forms of deferred compensation and (b) compensation received for former service as an interim chairman of the board, chief executive officer or other executive officer); | |
3. | An immediate family member of the director was employed as an executive officer by the company or any of its subsidiaries; | |
4. | An immediate family member of the director received more than $120,000 during any twelve-month period in direct compensation from TI (excluding compensation as a non-executive officer employee of the company); | |
5. | He or she was (but is no longer) a partner or employee of the companys independent auditors and personally worked on the companys audit within that time; | |
6. | An immediate family member of the director was (but is no longer) a partner or employee of the companys independent auditors and personally worked on the companys audit within that time; | |
7. | He or she was an executive officer of another company, at which any of TIs current executive officers at the same time served on that companys compensation committee; | |
8. | An immediate family member of the director was an executive officer of another company at which any of TIs current executive officers at the same time served on that companys compensation committee; | |
9. | He or she was, and remains at the time of the determination, an executive officer or employee of a company that made payments to, or received payments from, TI for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2 percent of the other companys consolidated gross revenues for its last completed fiscal year (for purposes of this standard, charitable contributions are not considered payments); or | |
10. | An immediate family member of the director was, and remains at the time of the determination, an executive officer of a company that made payments to, or received payments from, TI for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2 percent of the other companys consolidated gross revenues for its last completed fiscal year (for purposes of this standard, charitable contributions are not considered payments). | |
C. | Audit Committee members may not accept any consulting, advisory or other compensatory fee from TI, other than in their capacity as members of the board or any board committee. Compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with TI (provided that such compensation is not contingent in any way on continued service). | |
D. | The following relationships will not be considered material relationships with the company for the purpose of determining director independence: | |
1. | A director is an employee, director or trustee of a charitable organization and TI or the TI Foundation makes discretionary contributions to that organization that are less than the greater of $50,000 or 2 percent of the organizations latest publicly available consolidated gross revenue. | |
2. | A director is an employee, director or trustee of another entity that is indebted to TI or to which TI is indebted, and the total amount of either companys indebtedness to the other is less than 2 percent of the total consolidated assets of the entity he or she serves as an executive officer, director or trustee. | |
For any other relationship, the determination of whether it is
material, and consequently whether the director involved is independent,
will be made by directors who satisfy the independence criteria set forth
in this section. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 55 ]
Directors ages, service and stock
ownership
The table below shows the
directors ages and beneficial ownership of common stock of the company and the
year each became a director.
Common Stock | |||||
Director | Ownership at | ||||
Director | Age | Since | December 31, 2008* | ||
J. R. Adams | 69 | 1989 | 454,075 | ||
D. L. Boren | 67 | 1995 | 90,524 | ||
D. A. Carp | 60 | 1997 | 150,134 | ||
C. S. Cox | 51 | 2004 | 41,639 | ||
D. R. Goode | 68 | 1996 | 147,833 | ||
S. P. MacMillan | 45 | 2008 | 3,649 | ||
P. H. Patsley | 52 | 2004 | 51,260 | ||
W. R. Sanders | 61 | 1997 | 128,038 | ||
R. J. Simmons | 63 | 1999 | 113,742 | ||
R. K. Templeton | 50 | 2003 | 5,574,472 | ||
C. T. Whitman | 62 | 2003 | 56,911 |
* Included in the common stock ownership shown above are:
Shares Credited | Shares Credited | ||||||
Shares | to 401(k) and | Restricted | to Deferred | ||||
Obtainable | Profit Sharing | Stock Units | Compensation | ||||
Director | within 60 Days | Accounts | (in shares) (1) | Account (2) | |||
J. R. Adams | 106,500 | 3,430 | 23,512 | 28,734 | |||
D. L. Boren | 59,000 | | 27,880 | 3,644 | |||
D. A. Carp | 106,500 | | 13,664 | 29,970 | |||
C. S. Cox | 31,500 | | 7,000 | | |||
D. R. Goode | 106,500 | | 18,632 | 22,701 | |||
S. P. MacMillan | | | 2,000 | 649 | |||
P. H. Patsley | 31,500 | | 7,000 | 12,760 | |||
W. R. Sanders | 106,500 | | 14,600 | 1,338 | |||
R. J. Simmons | 86,500 | | 13,000 | 14,242 | |||
R. K. Templeton | 4,825,446 | 11,498 | 670,000 | | |||
C. T. Whitman | 46,500 | | 7,000 | 3,411 |
(1) | The non-employee directors restricted stock units granted before 2007 are settled in TI stock generally upon the directors termination of service provided he or she has served at least eight years or has reached the companys retirement age for directors. Restricted stock units granted after 2006 are settled in TI stock generally upon the fourth anniversary of the grant date. |
(2) | The shares in deferred compensation accounts are issued following the directors termination of service. |
Excludes shares held by a family member if a director has disclaimed beneficial ownership. Each director owns less than 1 percent of TIs common stock. No director has pledged shares of TI common stock. |
Board organization
Board and committee
meetings
During 2008, the board held
nine meetings. The board has three standing committees described below. The
committees of the board collectively held 22 meetings in 2008. Overall
attendance at board and committee meetings was approximately 98
percent.
Non-employee directors of the board meet in executive session at each
regularly scheduled meeting and at such other times as the Governance and
Stockholder Relations Committee recommends. The chair of the appropriate board
committee acts as chair at executive sessions at which the principal item to be
considered is within the scope of authority of his or her committee or, if there
is no single principal item, the chair of the Governance and Stockholder
Relations Committee acts as chair.
[ 56 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Committees of the
board | |
| |
The board has determined that all
members of the Audit Committee are financially literate and have financial
management expertise, as the board has interpreted such qualifications in
its business judgment. In addition, the board has designated Ms. Patsley
as the audit committee financial expert as defined in the Securities
Exchange Act of 1934, as
amended. Compensation Committee. The Compensation Committee consists of three independent directors. From January 1, 2008, to April 17, 2008, the committee members were Mr. Carp (Chair), Ms. Simmons and Ms. Whitman. Since April 18, 2008, the committee members have been Mr. Carp (Chair), Ms. Cox and Mr. Goode. The committee is responsible for: | |
| |
| |
| |
The Compensation Committee holds regularly scheduled meetings, reports its activities to the board, and consults with the board before setting annual executive compensation. During 2008, the committee met eight times. Please see page 71 for a report of the committee. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 57 ]
In
performing its functions, the committee is supported by the companys Human
Resources organization. The committee has the authority to retain any advisors
it deems appropriate to carry out its responsibilities. The committee retained
Pearl Meyer & Partners as its compensation consultant for the 2008
compensation cycle. The committee instructed the consultant to advise it
directly on executive compensation philosophy, strategies, pay levels,
decision-making processes and other matters within the scope of the committees
charter. Additionally, the committee instructed the consultant to assist the
companys Human Resources organization in its support of the committee in these
matters with such items as peer-group assessment, analysis of the executive
compensation market, and compensation
recommendations.
The Compensation Committee
considers it important that its compensation consultants objectivity not be
compromised by other business engagements with the company or its management. In
support of this belief, the committee adopted a policy in June 2007 on
compensation consultants. A copy of the policy may be found on
www.ti.com/corporategovernance. During 2008, neither the consultant nor any of
its affiliates performed services for TI other than pursuant to the engagement
by the committee.
The Compensation Committee considers executive
compensation in a multistep process that involves the review of market
information, performance data and possible compensation levels over several
meetings leading to the annual determinations in January. Before setting
executive compensation, the committee reviews the total compensation and
benefits of the executive officers and considers the impact that their
retirement, or termination under various other scenarios, would have on their
compensation and benefits.
The CEO and the
senior vice president responsible for Human Resources, who is an executive
officer, are regularly invited to attend meetings of the committee. The CEO is
excused from the meeting during any discussion of his own compensation. No
executive officer determines his or her own compensation or the compensation of
any other executive officer. As members of the board, the members of the
committee receive information concerning the performance of the company during
the year and interact with our management. During the committees deliberations
on executive compensation, the CEO gives the committee and the board an
assessment of his own performance during the year just ended. He also reviews
the performance of the other executive officers with the committee and makes
recommendations regarding their compensation. The senior vice president
responsible for Human Resources assists in the preparation of and reviews the
compensation recommendations made to the committee other than for her
compensation.
The Compensation Committees
charter provides that it may delegate its power, authority and rights with
respect to TIs long-term incentive plans, employee stock purchase plan and
employee benefit plans to (i) one or more committees of the board established or
delegated authority for that purpose; or (ii) employees or committees of
employees except that no such delegation may be made with respect to
compensation of the companys executive
officers.
Pursuant to that authority, the
Compensation Committee has delegated to a special committee established by the
board the authority to grant a limited number of stock options and restricted
stock units under the companys long-term incentive plans. The sole member of
the special committee is Mr. Templeton. The special committee has no authority
to grant, amend or terminate any form of compensation to TIs executive
officers. The Compensation Committee reviews the grant activity of the special
committee.
Governance and Stockholder Relations Committee. All members of the Governance and Stockholder Relations Committee are independent. From January 1, 2008, to April 17, 2008, the committee members were Mr. Boren (Chair), Mr. Adams and Mr. Goode. Since April 18, 2008, the committee members have been Ms. Simmons (Chair), Mr. Adams and Ms. Whitman. The Governance and Stockholder Relations Committee is generally responsible for: | |
| |
| |
| |
|
|
|
[ 58 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
The Governance and Stockholder Relations Committee met eight times in 2008. The Governance and Stockholder Relations Committee holds regularly scheduled meetings and reports its activities to the board. Please see page 54 for a discussion of stockholder nominations and communications with the board. Director
compensation |
|
The board has determined that grants
of equity compensation to non-employee directors should be timed to occur
when grants are made to our U.S. employees in connection with the annual
compensation review process. Accordingly, equity grants to non-employee
directors are made in January. Please see the discussion regarding the
timing of equity compensation grants in the Compensation Discussion and
Analysis on page 69. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 59 ]
2008 director
compensation
The following table
shows the compensation of all persons who were non-employee members of the board
during 2008 for services in all capacities to TI in 2008, except as otherwise
indicated.
Change in | ||||||||||||||||||
Pension | ||||||||||||||||||
Value and | ||||||||||||||||||
Non equity | Non-qualified | |||||||||||||||||
Fees Earned or | Stock | Option | Incentive Plan | Deferred | All Other | |||||||||||||
Paid in | Awards | Awards | Compensation | Compensation | Compensation | |||||||||||||
Name (1) | Cash ($)(2) | ($)(3) | ($)(4) | ($) | Earnings | ($)(5) | Total ($) | |||||||||||
J. R. Adams | $ | 80,000 | $ | 74,475 | $ | 62,160 | | | $ | 655 | $ | 217,290 | ||||||
D. L. Boren | $ | 83,333 | $ | 74,475 | $ | 62,160 | | | $ | 11,761 | $ | 231,729 | ||||||
D. A. Carp | $ | 90,000 | $ | 74,475 | $ | 62,160 | | | $ | 8,531 | $ | 235,166 | ||||||
C. S. Cox | $ | 80,000 | $ | 74,169 | $ | 62,633 | | | $ | 20 | $ | 216,822 | ||||||
D. R. Goode | $ | 80,000 | $ | 74,475 | $ | 62,160 | | | $ | 11,761 | $ | 228,396 | ||||||
S. P. MacMillan | $ | 22,889 | $ | 45,500 | $ | | | | $ | 20 | $ | 68,409 | ||||||
P. H. Patsley | $ | 100,000 | $ | 74,169 | $ | 62,633 | | | $ | 20 | $ | 236,822 | ||||||
W. R. Sanders | $ | 80,250 | $ | 74,475 | $ | 62,160 | | | $ | 8,531 | $ | 225,416 | ||||||
R. J. Simmons | $ | 86,667 | $ | 74,475 | $ | 62,160 | | | $ | 20 | $ | 223,322 | ||||||
C. T. Whitman | $ | 81,000 | $ | 74,169 | $ | 62,633 | | | $ | 20 | $ | 217,822 |
(1) | Thomas J. Engibous, an executive officer of the company, retired as chairman of the board on April 17, 2008. Mr. Engibous received no additional compensation for his services as a director and is not a named executive officer as defined on page 61. Therefore, SEC rules do not require disclosure of his compensation. |
(2) | Includes amounts deferred at the directors election. |
(3) |
Shown is the expense recognized in TIs 2008 financial statements in accordance with Statement of Financial Accounting Standard (SFAS) 123(R) for all outstanding awards relating to the named individual. In accordance with SEC rules, no estimates were made for forfeitures in calculating these amounts. For individuals who have at least eight years of service, the SFAS 123(R) expense is recognized immediately; consequently, the table includes the full expense of the 2008 restricted stock grant. Except as noted below for Mr. MacMillan, for individuals who have less service, the SFAS 123(R) expense is recognized over a one-year period from date of grant; consequently, the table includes a portion of the expense for the 2007 and 2008 restricted stock grants. The SFAS 123(R) expense for Mr. MacMillans restricted stock unit grant, made upon his initial election to the board in September 2008, was recognized over the remainder of 2008. Ms. Simmons and Messrs. Adams, Boren, Carp, Goode and Sanders have at least eight years of service. For all directors except Mr. MacMillan, the grant date fair value of the restricted stock units granted in 2008 calculated in accordance with SFAS 123(R) is $74,475. The grant date fair value of Mr. MacMillans award calculated in the same manner is $45,500. The discussion of the assumptions used for purposes of calculating the SFAS 123(R) expense and the grant date fair value appears on pages 12-15 of Exhibit 13 to TIs annual report on Form 10-K for the year ended December 31, 2008. The table below shows the aggregate number of shares underlying outstanding restricted stock units held by the named individuals as of December 31, 2008. |
Restricted Stock | |
Name | Units (in shares) |
J. R. Adams | 23,512 |
D. L. Boren | 27,880 |
D. A. Carp | 13,664 |
C. S. Cox | 7,000 |
D. R. Goode | 18,632 |
S. P. MacMillan | 2,000 |
P. H. Patsley | 7,000 |
W. R. Sanders | 14,600 |
R. J. Simmons | 13,000 |
C. T. Whitman | 7,000 |
[ 60 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Each restricted stock unit represents the right to receive one share of TI common stock. For restricted stock units granted prior to 2007, shares are issued at the time of mandatory retirement from the board (age 70) or upon the earlier of termination of service from the board after completing eight years of service or death or disability. For information regarding share issuances under restricted stock units granted after 2006, please see the discussion on page 59. | ||
(4) | Shown is the expense recognized in TIs 2008 financial statements in accordance with SFAS 123(R) for all outstanding grants relating to the named individual. In accordance with SEC rules, no estimates were made for forfeitures in calculating these amounts. For individuals who have at least eight years of service, the expense is recognized over a six-month period; consequently, the table includes the full expense of the 2008 stock option grant. For individuals who have less service, the table includes a portion of the expense for the 2007 and 2008 stock option grants. The grant date fair value of the options granted in 2008 calculated in accordance with SFAS 123(R) is $62,160. The discussion of the assumptions used for purposes of calculating the SFAS 123(R) expense and the grant date fair value appears on pages 12-15 of Exhibit 13 to TIs annual report on Form 10-K for the year ended December 31, 2008. | |
The table below shows the aggregate number of shares underlying outstanding stock options held by the named individuals as of December 31, 2008. |
Name | Options (in shares) | |||
J. R. Adams | 119,000 | |||
D. L. Boren | 71,500 | |||
D. A. Carp | 119,000 | |||
C. S. Cox | 44,000 | |||
D. R. Goode | 119,000 | |||
S. P. MacMillan | | |||
P. H. Patsley | 44,000 | |||
W. R. Sanders | 119,000 | |||
R. J. Simmons | 99,000 | |||
C. T. Whitman | 59,000 |
The terms of these options are set forth on page 59 except that for options granted before November 2006, the exercise price is the average of the high and low price of the companys common stock on the date of grant. | ||
(5) | All Other Compensation in 2008 consists of the annual cost of premiums for travel and accident insurance policies and, for certain individuals, costs related to the Director Award Program. Each director whose service commenced prior to June 20, 2002, is eligible to participate in the Director Award Program, a charitable donation program under which we will contribute a total of $500,000 per eligible director to as many as three educational institutions recommended by the director and approved by us. The contributions are made following the directors death. Directors receive no financial benefit from the program, and all charitable deductions belong to the company. In accordance with SEC rules, we have included the companys annual costs under the program in All Other Compensation of the directors who participate. These costs include third-party administrator fees for the program and premiums on life insurance policies to fund the program. Messrs. Adams, Boren, Carp, Goode and Sanders participate in this program. The cost attributable to each of Messrs. Boren and Goode for their participation in the program was $11,741. For the other participating individuals, the attributable cost was below the $10,000 reporting threshold. |
Executive compensation
Compensation discussion and
analysis This section describes TIs compensation program for executive officers. It will provide insight into the following: |
|
Currently, TI has 14 executive officers. These executives have the broadest job responsibilities and policy-making authority in the company. We hold them accountable for the companys performance and for maintaining a culture of strong ethics. Details of compensation for our CEO, CFO and the three other highest paid individuals who were executive officers in 2008 (collectively called the named executive officers) can be found in the tables beginning on page 72. |
Executive summary |
|
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 61 ]
Compensation
elements
The primary elements of our
executive compensation program are as follows:
Near-term compensation, paid in cash
Element | Purpose | Policy | Terms | |||
Base salary | Basic, least variable form of compensation | Pay slightly below market median in order to weight total compensation to the performance-based elements described below | Paid twice monthly | |||
Profit sharing | Broad-based program designed to emphasize that each employee contributes to the companys profitability and can share in it |
Pay according to a formula that focuses employees on a company goal, and at a level that will affect behavior. Profit sharing is paid in addition to any performance bonus awarded for the year. For the last five years, the formula has been based on company-level annual operating profit margin. The formula was set by the TI board. The committees practice has been not to adjust amounts earned under the formula. |
Payable in a single cash payment shortly after the end of the performance year As in recent years, the formula for 2008 was:
In 2008, TI delivered Margin of 19.5%. As a result, all eligible employees, including executive officers, received profit sharing of 6.75% of base salary. |
[ 62 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Element | Purpose | Policy | Terms | |||
Performance bonus | To motivate executives and reward them according to the companys performance and the executives individual performance |
Bonus is based primarily on one-year and three-year company performance on certain measures (revenue growth percent, operating margin and total shareholder return) as compared to competitors and on our strategic progress in key markets and with customers.1 These factors have been chosen to reflect our near-term financial performance as well as our progress in building long-term shareholder value. If relative company performance is better than last year, then bonuses will generally be higher than last year. If relative performance is the same or lower than last year, bonuses will generally be the same or lower than last year. The committee does not rely on formulas or performance targets or thresholds. Instead it uses its judgment based on its assessment of the factors described above. Our general policy is to pay the bonus under the Texas Instruments Executive Officer Performance Plan (approved by stockholders in 2002). It provides for a bonus of 0.5% of TI consolidated income, as defined in the plan, to each executive officer, subject to the committees authority to reduce the amount to any level it considers appropriate, including $0. The committee reserves the right to pay bonuses outside the plan if it considers it in stockholder interests to do so. |
Determined by the committee and paid in a single payment after the performance year | |||
Long-term compensation, awarded in equity | ||||||
Non-qualified stock options and restricted stock units | Alignment with shareholders; long-term focus; retention, particularly with respect to restricted stock units | We grant a combination of stock options and restricted stock units, targeted at the median level of equity compensation awarded to executives in similar positions at the Comparator Group. | The terms and conditions of stock options and restricted stock units are summarized on pages 76-77. The committees grant-timing policy is described on page 69. |
Comparator
group
The Compensation Committee
considers the market level of compensation when setting the salary, bonuses and
equity compensation of the executive officers. The Committee targets salary
slightly below market median in order to weight total compensation to
performance-based elements. To estimate the market level of pay, the committee
uses information provided by its compensation consultant and TIs Compensation
and Benefits organization about compensation paid to executives in similar
positions at Comparator Group companies.
____________________
1 | Total shareholder return refers to the percentage change in the value of a stockholders investment in a company over the relevant time period, as determined by dividends paid and the change in the companys share price during the period. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 63 ]
The committee sets the Comparator Group annually in June for the next compensation cycle. In general, the selected companies (1) are U.S.-based, (2) engage in the semiconductor business or other electronics or information technology activities, and (3) use forms of executive compensation comparable to TIs.
In June 2007, the committee set the Comparator Group for compensation decisions to be made in January 2008 (referred to below as the 2008 Comparator Group). The 2008 Comparator Group consisted of the following 27 companies:
Advanced Micro Devices, Inc. | EMC Corporation | Microsoft Corporation |
Altera Corporation | Fairchild Semiconductor International, Inc. | Motorola, Inc. |
Analog Devices, Inc. | Intel Corporation | National Semiconductor Corporation |
Apple Inc. | Intersil Corporation | NVIDIA Corporation |
Applied Materials, Inc. | Jabil Circuit, Inc. | ON Semiconductor Corporation |
Broadcom Corporation | Linear Technology Corporation | Oracle Corporation |
Cisco Systems, Inc. | LSI Logic Corporation | QUALCOMM Incorporated |
Conexant Systems, Inc. | Maxim Integrated Products, Inc. | Seagate Technology |
Dell Inc. | Microchip Technology Incorporated | Xilinx, Inc. |
The committee used the 2008
Comparator Group for the base salary and equity compensation decisions made in
January 2008.
On the advice
of its compensation consultant, the committee decided that the revenue range of
the Comparator Group should more closely align with that of TI. Accordingly, the
committee approved the following Comparator Group in June 2008 for use in the
compensation decisions to be made in January 2009 (the 2009 Comparator
Group):
Analog Devices, Inc. | Emerson Electric Co. | Seagate Technology |
Apple Inc. | Google Inc. | Sun Microsystems, Inc. |
Applied Materials, Inc. | Intel Corporation | Tyco Electronics Ltd. |
Cisco Systems, Inc. | Motorola, Inc. | Yahoo! Inc. |
Computer Sciences Corporation | NVIDIA Corporation | Western Digital Corporation |
eBay Inc. | Oracle Corporation | Xerox Corporation |
EMC Corporation | QUALCOMM Incorporated |
Eleven of the 20 companies in 2009 Comparator Group were in the 2008 Comparator Group. The two largest companies in terms of revenue in the 2008 Comparator Group, each of which had revenue of approximately four times TIs, were dropped from the Comparator Group, as were thirteen companies that had significantly less revenue than TI. The median revenue and market capitalization of the 2009 Comparator Group was approximately equivalent to TIs. The revenue range of the 2009 Comparator Group was significantly narrower (generally between 1/3 and 3 times TI revenue) than the 2008 Comparator Group.2 In January 2009, the committee considered 2009 Comparator Group data when setting bonuses for 2008 performance.
Analysis of compensation
determinations for 2008
In setting
compensation, the committee applied the same policies to all named executive
officers. The committee determined each named executive officers compensation
separately, without using any formula to set one officers compensation at a
higher or lower level than another officers.
Total compensation Before finalizing the compensation of the executive officers, the committee performed a tally sheet review, i.e., a review covering all elements of compensation. The review included total cash compensation (salary, profit sharing and projected bonus), the grant date fair value of equity compensation, the impact that proposed compensation would have on other compensation elements such as pension, and a summary of benefits that the executives would receive under various termination scenarios. The review enabled the committee to see how various compensation elements relate to one another and what impact its decisions would have on the total earnings opportunity of the executives. In assessing the tally sheet data, the committee did not target a specific level of total compensation or use a formula to allocate compensation among the various elements. Instead, it discussed the data with its compensation consultant and used its judgment in assessing whether the total was consistent with the objectives of the program. Based on this review, the committee determined that the level of compensation was appropriate.
____________________
2 | The statements in this paragraph about revenue and market capitalization reflect the information available to the committee when it made its June 2008 decision. Comparator Group and TI revenue is for the four completed fiscal quarters before June 2008. Market capitalization is as of April 2008. |
[ 64 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Base salary In January 2008, the committee set the base salary of each named executive officer for 2008. In keeping with its strategy, the committee targeted base salary for the named executive officers below the estimated median level of salaries that will be paid to similarly situated executives of the Comparator Group of companies in 2008. As a result of the committees decisions, the 2008 rate of base salary for the officers was as follows:
Officer | 2008 Annual Rate* | Change from 2007 Annual Rate | ||||||
Mr. Templeton | $ | 963,120 | +3.0% | |||||
Mr. March | $ | 465,000 | +6.9% | |||||
Mr. Lowe | $ | 535,020 | +5.9% | |||||
Mr. Ritchie | $ | 448,080 | +3.0% | |||||
Mr. Hames | $ | 463,500 | +3.0% |
* | Effective February 1, 2008. The numbers in this column differ from the Salary column of the Summary Compensation Table on page 72 because (as required by SEC rules) the latter shows salary received in the year 2008, including amounts paid in January 2008 at the prior years annual rate. |
The salary differences among the named executive officers were driven primarily by differences in the market rate of pay for each officer. The increase for Mr. Templeton reflected the expected increase in the market rate of base salary for CEOs. The increase for Mr. March was in response to the rise in CFO compensation that has occurred in recent years. The committee continued to adjust Mr. Lowes salary to the market level for the additional responsibilities he assumed in 2006. The increases for Messrs. Hames and Ritchie reflected the expected increase in the market rate of base salary for executive officers generally.
Equity compensation In
January 2008, the committee granted long-term equity compensation to the named
executive officers using a combination of NQ stock options and restricted stock
units.
The
committees objective was to set equity grants at approximately the median
level, in this case the 40th to 60th percentile, of equity compensation granted
by the 2008 Comparator Group for each of the executive officers. In assessing
the market level of equity compensation, the committee considered information
presented by TIs Compensation and Benefits organization (prepared using data
provided by the committees compensation consultant) on both the value of the
awards and number of shares expected to be granted by the 2008 Comparator Group
to similarly situated executives in
2008.
The
award value was estimated using the same methodology used for financial
accounting. The number of shares was assessed in terms of NQ Equivalents,
which were calculated by treating each option share as 1 NQ Equivalent, and each
restricted stock unit as 3 NQ Equivalents. This 3:1 ratio approximates the
relative accounting expense of granting one restricted stock unit as compared to
an option for one share.
Before setting the awards, the committee also reviewed
the amount of unvested equity compensation held by the officers to assess its
retention value. In making this assessment, the committee used its judgment and
did not apply any formula, threshold or
maximum.
For each of the named executive officers, the committee decided to hold
the number of NQ Equivalents at the same level as in 2007. The committee found
that at the 2007 grant level, the value of each officers award would be at
approximately the market median and the number of NQ Equivalents would still be
competitive with the number of shares expected to be granted by the Comparator
Group to similarly situated
officers.
Based on its review of the retention value of outstanding awards, the
committee concluded that the allocation of shares between stock options and
restricted stock units was still appropriate for purposes of retention and there
was no need to increase or decrease the award from the targeted
level.
Accordingly, the committee awarded to each of the named executive
officers the same number of stock options and restricted stock units as in 2007.
The differences in the equity granted to the named executive officers were
primarily the result of differences in the applicable market level of equity
compensation for their positions, and not the application of any formula
designed to maintain differentials between the
officers.
Please see the Grants of Plan-Based Awards in 2008 table on page 73 for
details concerning the grants, including the grant date fair value of the 2008
awards. The table below is provided to assist the reader in comparing NQ
Equivalent levels in the three reporting years. The grant date fair value of the
2008 awards is shown in the chart on page 68.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 65 ]
Restricted | ||||||||||||||
Stock Options | Stock Units | |||||||||||||
Officer | Year | (in Shares) | (in Shares) | NQ Equivalents | ||||||||||
Mr. Templeton | 2008 | 270,000 | 150,000 | 720,000 | ||||||||||
2007 | 270,000 | 150,000 | 720,000 | |||||||||||
2006 | 350,000 | 150,000 | 800,000 | |||||||||||
Mr. March | 2008 | 85,000 | 35,000 | 190,000 | ||||||||||
2007 | 85,000 | 35,000 | 190,000 | |||||||||||
2006 | 85,000 | 30,000 | 175,000 | |||||||||||
Mr. Lowe | 2008 | 100,000 | 60,000 | 280,000 | ||||||||||
2007 | 100,000 | 60,000 | 280,000 | |||||||||||
2006 | 100,000 | 150,000 | * | 550,000 | * | |||||||||
Mr. Ritchie | 2008 | 100,000 | 50,000 | 250,000 | ||||||||||
2007 | 100,000 | 50,000 | 250,000 | |||||||||||
2006 | 100,000 | 50,000 | 250,000 | |||||||||||
Mr. Hames | 2008 | 75,000 | 45,000 | 210,000 | ||||||||||
2007 | 75,000 | 45,000 | 210,000 | |||||||||||
2006 | 80,000 | 50,000 | 230,000 |
* | Includes a June 2006 retention grant of 100,000 restricted stock units made in connection with his assuming additional responsibilities. |
All grants of equity compensation were made under the Texas Instruments 2000 Long-Term Incentive Plan, which stockholders approved in April 2000. The grants have the terms described on pages 76-77. Bonus In January 2009, the committee set the 2008 bonus compensation for executive officers based on its assessment of 2008 performance. The committee considered the bonus amount specified by the Executive Officer Performance Plan. In deciding whether to reduce that amount, the committee used the following performance measures to assess the company: |
|
|
|
In addition, the committee considered our strategic progress by
reviewing how competitive we are in key markets with our core products and
technologies, as well as the strength of our relationships with key
customers. |
Advanced Micro Devices, Inc. | Intel Corporation | National Semiconductor Corporation |
Altera Corporation | Intersil Corporation | NVIDIA Corporation |
Analog Devices, Inc. | Linear Technology Corporation | ON Semiconductor Corporation |
Broadcom Corporation | LSI Logic Corporation | QUALCOMM Incorporated |
Conexant Systems, Inc. | Marvell Technology Group Ltd. | STMicroelectronics N.V. |
Fairchild Semiconductor International, Inc. | Maxim Integrated Products, Inc. | Xilinx, Inc. |
Infineon Technologies AG | Microchip Technology Incorporated |
These companies include broad-based and niche suppliers that operate in our key markets or offer technology that competes with our products. This list of companies was unchanged from the list used by the committee in January 2008 in assessing TI performance for purposes of setting the bonuses for 2007 performance.
____________________
3 | To the extent the companies had not released financial results for the year or most recent quarter, the committee based its evaluation on estimates and projections of the companies financial results for 2008. |
[ 66 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Overall, the committee determined that TIs performance in 2008 was below
the median of the competitor companies. Specifically, revenue growth was below
the median, operating margin was above the median, and total shareholder return
was below the median. With regard to strategic position, the committee
determined that once again the company strengthened in Analog and Embedded
Processing, due to a broader portfolio of products and deeper relationships with
customers. However, the companys position weakened in cellular basebands for
wireless phones, due both to market conditions and to loss of market share.
After reviewing all these factors, the committee applied its judgment and
determined that, in total, TIs performance in 2008 was below that of the prior
year when the committee determined performance was well above the median of the
competitor companies. As a result, total cash compensation for the named
executive officers for 2008 was 18 to 24 percent lower than for
2007.
Below are details of the committees
assessment.
Revenue and margin |
|
Total shareholder return (TSR) |
|
Strategic progress |
|
Performance summary
1-Year | 3-Years | |||
Revenue growth | -9.6% | 0.4% CAGR | ||
Operating margin | 19.5% | 22.8% average | ||
Return on invested capital (ROIC) | 20.2% | 22.3% average | ||
Dividend rate growth | 10% | 267% | ||
Total shareholder return (TSR) | -52.8% | -20.7% CAGR |
CAGR = compound annual growth rate
ROIC = operating margin x (1 tax rate) / (assets non-debt liabilities)
One-year TSR % = | [(Closing price of the companys stock at year-end 2008, plus dividends paid during 2008) divided by 2007 year-end closing price] minus 1, multiplied by 100 |
Three-year TSR CAGR % = | [(Closing price of the companys stock at year-end 2008, plus dividends paid during 2006 through 2008) divided by 2005 year-end closing price] 1/3 minus 1, multiplied by 100 |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 67 ]
Based on its assessment of company
performance, the committee determined that the bonuses of the named executive
officers for 2008 performance should be approximately 35 percent lower than for
2007. The committee considered the officers individual performance. The
performance of the CEO was judged according to the performance of the company.
For the other officers, the committee also considered the factors described
below in assessing individual performance. In making this assessment, the
committee did not apply any formula or performance targets.
Mr. March is the chief financial
officer. The committee noted the financial management of the
company.
Mr. Lowe is responsible for the companys analog semiconductor product
lines. The committee noted the financial performance of those product lines,
including the companys analog market share, and the position of the operations
strategically and with customers.
Mr. Ritchie is responsible for the companys
semiconductor manufacturing operations. The committee noted the on-time delivery
of products, inventory management and the implementation of manufacturing
process technologies, as well as associated
cost-competitiveness.
Mr. Hames is responsible for the companys Embedded
Processing product lines. The committee noted the financial performance of the
product lines, including the position of the product lines strategically and
with customers.
The committee
determined that this assessment did not warrant a change to its preliminary
bonus determination.
The committee also compared the total cash compensation
(salary, profit sharing and the proposed bonus) for each executive officer
against the total cash compensation that the 2009 Comparator Group was expected
to pay to similarly situated officers. Based on this review, the committee
confirmed that the total cash compensation of the named executive officers was
competitive and consistent with the relative performance of the
company.
Accordingly the bonuses for 2008 performance were set at approximately 35
percent lower than for 2007. The differences in the amounts awarded to the named
executive officers were primarily the result of differences in the officers
level of responsibility and the applicable market level of total cash
compensation expected to be paid to similarly situated officers in the
Comparator Group. The bonus of each named executive officer was paid under the
Executive Officer Performance Plan described on page 63.
Results of the compensation decisions Results of the compensation decisions made by the committee relating to the named executive officers for 2008 are summarized in the following table. This table is provided as a supplement to the Summary Compensation Table on page 72 for investors who may find it useful to see the data presented in this form. Although the committee does not target a specific level of total compensation, it considers information similar to that in the table in order to ensure that the sum of these elements is, in its judgment, in a reasonable range. The principal differences between this table and the Summary Compensation Table are explained in footnote 4 below.4
Equity | ||||||||||||||||||||||||
Compensation | ||||||||||||||||||||||||
Salary | Profit | (Grant Date | ||||||||||||||||||||||
Officer | Year | (Annual Rate) | Sharing | Bonus | Fair Value) | Total | ||||||||||||||||||
Mr. Templeton | 2008 | $ | 963,120 | $ | 64,853 | $ | 1,500,000 | $ | 6,866,100 | $ | 9,394,073 | |||||||||||||
2007 | $ | 935,040 | $ | 95,822 | $ | 2,300,000 | $ | 6,864,300 | $ | 10,195,162 | ||||||||||||||
2006 | $ | 900,000 | $ | 79,070 | $ | 2,300,000 | $ | 8,965,500 | $ | 12,244,570 | ||||||||||||||
Mr. March | 2008 | $ | 465,000 | $ | 31,219 | $ | 425,000 | $ | 1,797,450 | $ | 2,718,669 | |||||||||||||
2007 | $ | 435,000 | $ | 44,248 | $ | 650,000 | $ | 1,814,850 | $ | 2,944,098 | ||||||||||||||
2006 | $ | 380,160 | $ | 33,344 | $ | 650,000 | $ | 1,970,850 | $ | 3,034,354 | ||||||||||||||
Mr. Lowe | 2008 | $ | 535,020 | $ | 35,945 | $ | 730,000 | $ | 2,675,400 | $ | 3,976,365 | |||||||||||||
2007 | $ | 505,020 | $ | 51,661 | $ | 1,100,000 | $ | 2,668,200 | $ | 4,324,881 | ||||||||||||||
2006 | * | $ | 475,200 | $ | 39,730 | $ | 1,100,000 | $ | 5,712,000 | $ | 7,326,930 | |||||||||||||
Mr. Ritchie | 2008 | $ | 448,080 | $ | 30,172 | $ | 520,000 | $ | 2,377,500 | $ | 3,375,752 | |||||||||||||
Mr. Hames | 2008 | $ | 463,500 | $ | 31,210 | $ | 490,000 | $ | 2,006,550 | $ | 2,991,260 | |||||||||||||
2007 | $ | 450,000 | $ | 46,132 | $ | 750,000 | $ | 2,001,150 | $ | 3,247,282 |
4 | This table shows the annual rate of base salary as set by the committee (effective in February of the year). In the Summary Compensation Table, the Salary column shows the actual salary paid in the year. This table has separate columns for profit sharing and bonus. In the Summary Compensation Table, profit sharing and bonus are aggregated in the column for Non- Equity Incentive Plan Compensation, in accordance with SEC requirements. This table shows the grant-date fair value of equity compensation awarded in the year. Please see note 3 to the Grants of Plan-Based Awards in 2008 for information about how grant-date fair value was calculated. In the Summary Compensation Table, the Stock Awards and Option Awards columns show the expense recognized in the companys financial statements for the year under SFAS 123(R) and include past restricted stock unit and stock option grants held by the officer. |
[ 68 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
* | In June 2006, Mr. Lowe received a salary increase and a retention grant of restricted stock units in connection with his assuming additional responsibilities. For 2006, the amounts in the table are: his annual rate of salary as adjusted in June 2006; profit sharing for 2006; grant date fair value of all awards received in 2006; and bonus for 2006. |
For each of the officers, the Total shown in this table is lower for 2008 than for 2007 due to the lower level of total cash compensation primarily as a result of the lower bonus paid for 2008 performance.
Equity
dilution
The Compensation Committees
goal is to keep net annual dilution from equity compensation under 2 percent.
Net annual dilution means the number of shares under equity awards granted by
the committee each year to all employees (net of award forfeitures) as a
percentage of the shares of the companys outstanding common stock. Equity
awards granted in 2008 under the companys equity-compensation program resulted
in net annual dilution of 0.7 percent.
Equity compensation in
2009
Although 2009 equity
compensation decisions would normally be discussed in next years proxy
statement, we are providing the following information so that stockholders are
aware of it as they consider the companys proposal of a new long-term incentive
plan (see page 86 below).
At its January 2009 meeting, the committee approved an
annual grant of stock options and restricted stock units to employees, including
the named executive officers. At the same meeting, the committee also approved a
separate grant to each employee who received an annual grant, again including
the named executive officers. The separate grant was generally for the same
number of shares as the annual grant. The exercise price of the options in both
these grants was the closing price of TI stock on January 29, 2009, the third
trading day after the company released its annual and fourth quarter financial
results for 2008. The details of the grants to the named executive officers have
been reported on Form 4s filed with the
SEC.
The
committee decided on these actions to keep equity compensation competitive with
anticipated market levels and increase the retention and incentive value of
employees outstanding equity compensation. Even with the separate grant, the
Committee expects to be well below its goal of keeping net annual dilution from
equity compensation under 2 percent for 2009. The combined grant-date fair value
of the annual and separate grants to Mr. Templeton is approximately the same as
his 2008 equity compensation.
Policy on equity grant
timing
The Compensation Committee
makes grant decisions for equity compensation at its January meeting each year.
The dates on which these meetings occur are generally set three years in
advance. The January meetings of the board and the committee generally occur in
the week or two before we announce our financial results for the previous
quarter and year.
On occasion, the committee may grant stock options or restricted stock
units to executives at times other than January. For example, it has done so in
connection with job promotions and for purposes of
retention.
We do not back-date stock options or restricted stock units. We do not
accelerate or delay the release of information due to plans for making equity
grants.
In
July 2007, the committee changed its grant-timing policy with effect in January
2008. Under the policy, if the committee meeting falls in the same month as the
release of the companys financial results, the grants approved at the meeting
will be made effective on the later of (i) the meeting day or (ii) the third
trading day after the release of results. Otherwise they will be made effective
on the day of committee action. Previously all grants were made effective on the
day of committee action. The exercise price of stock options continues to be the
closing price of TI stock on the effective date of the grant.
Benefits
Reflecting the companys culture of respect and value for
all employees, the financial and health benefits received by executive officers
are the same as those received by other U.S. employees except for the few
benefits described under the sub-heading Other Benefits below in the last
paragraph of this section.
Retirement
plans
The executive officers
participate in our retirement plans under the same rules that apply to other
U.S. employees. We maintain these plans to have a competitive benefits program
and for retention.
Like other established U.S. manufacturers, we have had a U.S. qualified
defined benefit pension plan for many years. At its origin, the plan was
designed to be consistent with those offered by other employers in the diverse
markets in which we operated, which at the time included consumer and defense
electronics as well as semiconductors and materials products. In order to limit
the cost of the plan, we closed the plan to new participants in 1997. We gave
U.S. employees as of November 1997 the choice to remain in the plan, or to have
their benefits frozen in that plan and begin participating in an enhanced
defined contribution plan. Mr. Templeton chose not to remain in the defined
benefit plan. As a result, his benefits under that plan were frozen in 1997 and
he participates in the enhanced defined contribution plan. The other named
executive officers have continued their participation in the defined benefit
pension plan.
The Internal Revenue Code (IRC) imposes certain limits on the retirement
benefits that may be provided under a qualified plan. To maintain the desired
level of benefits, we have a non-qualified defined benefit pension plan for
participants in the qualified pension plan.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 69 ]
Under the non-qualified plan,
participants receive a benefit that would ordinarily be paid under the qualified
pension plan but for the limitations under the IRC. For additional information
about the defined benefit plans, please see pages
78-79.
Employees accruing benefits in the qualified pension plan, including the
named executive officers other than Mr. Templeton, also are eligible to
participate in a qualified defined contribution plan that provides employer
matching contributions. The enhanced defined contribution plan, in which Mr.
Templeton participates, provides for a fixed employer contribution plus an
employer matching contribution.
Because benefits under the qualified and non-qualified
defined benefit pension plans are calculated on the basis of eligible earnings
(salary and bonus), an increase in salary or bonus may result in an increase in
benefits under the plans. Salary or bonus increases for Mr. Templeton do not
result in greater benefits for him under the companys defined benefit pension
plans because his benefits under those plans were frozen in 1997. The committee
considers the potential effect on the executives retirement benefits when it
sets salary and performance bonus levels.
Deferred
compensation
Any U.S. employee whose
base salary exceeds a certain level may defer the receipt of a portion of his or
her salary, bonus and profit sharing. Rules of the U.S. Department of Labor
require that this plan be limited to a select group of management or highly
compensated employees. The program allows employees to defer the receipt of
their compensation in a tax-efficient manner. Eligible employees include, but
are not limited to, the executive officers. We offer it to be competitive with
the benefits packages offered by other
companies.
Deferred compensation account balances are unsecured and all amounts
remain part of the companys operating assets. The value of the deferred amounts
tracks the performance of investment alternatives selected by the participant.
These alternatives are a subset of those offered to participants in the defined
contribution plans described above. The company does not guarantee any minimum
return on the amounts deferred. In accordance with SEC rules, no earnings on
deferred compensation are shown in the 2008 Summary Compensation Table on page
72 because no above market rates were earned on deferred amounts in
2008.
Employee stock purchase
plan
Our stockholders approved the TI
Employees 2005 Stock Purchase Plan in April 2005. Under the plan, all employees
in the U.S. and certain other countries may purchase a limited number of shares
of the companys common stock at a 15 percent discount. The plan is designed to
offer the broad-based employee population an opportunity to acquire an equity
interest in the company and thereby align their interests with those of
stockholders. Consistent with our general approach to benefit programs,
executive officers are also eligible to participate.
Health-related
benefits
Executive officers are
eligible under the same plans as all other U.S. employees for medical, dental,
vision, disability and life insurance. These benefits are intended to be
competitive with benefits offered in the semiconductor industry.
Other benefits
Executive officers receive only a few benefits that are
not available to all other U.S. employees. These benefits fall into one of two
categories: personal and security.
Personal benefits: We promote
sustained good health by providing a company-paid physical for each executive
officer, and we encourage effective long-term financial planning by providing
financial counseling up to $8,000 per year for each executive officer.
Security: We pay for maintenance
and monitoring of home-security systems for certain executive officers to help
ensure personal safety.
The board of directors has determined that for security reasons, it is in the companys interest to require the CEO to use company aircraft for personal air travel. Because this required use of the aircraft results in taxable income for the CEO, the company reimburses a portion of the tax expense that he incurs as a result of the requirement. Under SEC rules, Mr. Lowe is deemed to have received a personal benefit in 2008, because corporate aircraft incurred additional mileage in picking him up from, or delivering him to, his home outside Dallas in connection with some of his business trips.
Compensation following employment
termination or change in control
None
of the executive officers has an employment contract. Executive officers are
eligible for benefits on the same terms as other U.S. employees upon termination
of employment or a change in control of the company. The current programs are
described under the heading Potential Payments upon Termination or Change in
Control beginning on page 81. None of the few additional benefits that the
executive officers receive continue after the year of termination of employment.
The committee reviews the potential impact of these programs before finalizing
the annual compensation for the named executive officers. The committee did not
raise or lower compensation for 2008 based on this review.
[ 70 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Stock ownership guidelines and
policy against hedging
Our board of
directors has established stock ownership guidelines for executive officers. The
guideline for the CEO is four times base salary or 125,000 shares, whichever is
less. The guideline for other executive officers is three times base salary or
25,000 shares, whichever is less. Executive officers have five years from their
election as executive officers to reach these targets. Directly owned shares and
restricted stock units count toward satisfying the
guidelines.
Short sales of TI stock by our executive officers are prohibited. It is
against TI policy for any employee, including an executive officer, to engage in
trading in puts (options to sell at a fixed price on or before a certain
date), calls (similar options to buy), or other options or hedging techniques
on TI stock.
Consideration of tax and
accounting treatment of compensation
Section 162(m) of the IRC generally denies a deduction to any publicly
held corporation for compensation paid in a taxable year to the companys CEO
and four other highest compensated officers to the extent that the officers
compensation (other than qualified performance-based compensation) exceeds $1
million. The Compensation Committee considers the impact of this deductibility
limit on the compensation that it intends to award. The committee exercises its
discretion to award compensation that does not meet the requirements of Section
162(m) when applying the limits of Section 162(m) would frustrate or be
inconsistent with our compensation policies and/or when the value of the
foregone deduction would not be material. The committee has exercised this
discretion when awarding restricted stock units that vest over time, without
performance conditions to vesting. The committee believes it is in the best
interest of the company and its stockholders that restricted stock unit awards
provide for the retention of our executive officers in all market
conditions.
The Texas Instruments Executive Officer Performance Plan (described on
page 63) is intended to ensure that performance bonuses under the plan are fully
tax deductible under Section 162(m). The committees general policy is to award
bonuses within the plan, although the committee reserves the discretion to pay a
bonus outside the plan if it determines that it is in our stockholders best
interest to do so. It did not exercise this discretion for 2008
performance.
When setting equity compensation, the committee considers the estimated
cost for financial reporting purposes of equity compensation it intends to
grant. Its consideration of the estimated cost of grants made in 2008 is
discussed on pages 64-65 above.
Compensation Committee
report
The Compensation Committee of
the board of directors has furnished the following
report:
The
committee has reviewed and discussed the Compensation Discussion and Analysis
(CD&A) with the companys management. Based on that review and discussion,
the committee has recommended to the board of directors that the CD&A be
included in the companys Annual Report on Form 10-K for 2008 and the companys
proxy statement for the 2009 annual meeting of stockholders.
Daniel A. Carp, Chair | Carrie S. Cox | David R. Goode |
2008 summary compensation
table
The table below shows the
compensation of the companys chief executive officer, chief financial officer
and each of the other three most highly compensated individuals who were
executive officers during 2008 (collectively called the named executive
officers) for services in all capacities to the company in 2008. For a
discussion of the amount of a named executive officers salary and bonus in
proportion to his total compensation, please see the Compensation Discussion and
Analysis on pages 61-71.
We believe that our compensation practices are fair and
reasonable. Our executive officers do not have employment contracts. They are
not guaranteed salary increases or bonus amounts. Pension benefits are
calculated on salary and bonus only; the proceeds earned on equity or other
performance awards are not part of the pension calculation. We do not guarantee
a return or provide above-market returns on compensation that has been deferred.
We have not repriced stock options, and we do not grant reload options. We do
not provide excessive perquisites. Those few we do provide do not result in
significant expense for TI. We believe our compensation program holds our
executive officers accountable for the financial and competitive performance of
TI, and for their individual contribution toward that performance.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 71 ]
Change in | ||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||
Non-qualified | ||||||||||||||||||||||||||
Non-equity | Deferred | |||||||||||||||||||||||||
Stock | Option | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||
Name and Principal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | |||||||||||||||||||
Position | Year | ($) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | ($)(8) | Total ($) | |||||||||||||||||
R. K. Templeton | 2008 | $ | 960,780 | | $ | 3,829,281 | $ | 3,726,796 | $ | 1,564,853 | $ | 36,592 | $ | 231,857 | $ | 10,350,159 | ||||||||||
Chairman, President | 2007 | $ | 932,120 | | $ | 3,526,500 | $ | 5,753,975 | $ | 2,395,822 | $ | (7 | ) | $ | 111,417 | $ | 12,719,834 | |||||||||
& Chief Executive | 2006 | $ | 897,500 | | $ | 2,553,000 | $ | 5,703,156 | $ | 2,379,070 | $ | 17,578 | $ | 173,769 | $ | 11,724,073 | ||||||||||
Officer | ||||||||||||||||||||||||||
K. P. March | 2008 | $ | 462,500 | | $ | 862,328 | $ | 871,125 | $ | 456,219 | $ | 385,214 | $ | 31,477 | $ | 3,068,863 | ||||||||||
Senior Vice President | 2007 | $ | 430,430 | | $ | 810,788 | $ | 1,130,591 | $ | 694,248 | $ | 294,365 | $ | 21,758 | $ | 3,382,180 | ||||||||||
& Chief Financial | 2006 | $ | 371,169 | | $ | 669,988 | $ | 1,022,478 | $ | 683,344 | $ | 234,690 | $ | 33,414 | $ | 3,015,083 | ||||||||||
Officer | ||||||||||||||||||||||||||
G. A. Lowe | 2008 | $ | 532,520 | | $ | 2,235,538 | $ | 1,042,531 | $ | 765,945 | $ | 429,163 | $ | 89,471 | $ | 5,095,168 | ||||||||||
Senior Vice President | 2007 | $ | 502,535 | | $ | 2,033,450 | $ | 1,389,313 | $ | 1,151,661 | $ | 318,096 | $ | 7,103 | $ | 5,402,158 | ||||||||||
2006 | $ | 450,970 | | $ | 1,676,175 | $ | 1,311,938 | $ | 1,139,730 | $ | 218,026 | $ | 20,885 | $ | 4,817,724 | |||||||||||
K. J. Ritchie (1) | 2008 | $ | 446,990 | | $ | 1,366,219 | $ | 1,066,194 | $ | 550,172 | $ | 540,851 | $ | 16,836 | $ | 3,987,262 | ||||||||||
Senior Vice President | ||||||||||||||||||||||||||
M. J. Hames (1) | 2008 | $ | 462,375 | | $ | 1,296,684 | $ | 871,844 | $ | 521,210 | $ | 405,104 | $ | 11,652 | $ | 3,568,869 | ||||||||||
Senior Vice President | 2007 | $ | 448,750 | | $ | 1,367,800 | $ | 1,283,016 | $ | 796,132 | $ | 296,953 | $ | 20,389 | $ | 4,213,040 |
(1) | Mr. Ritchie was not a named executive officer in 2006 or 2007. Mr. Hames was not a named executive officer in 2006. | |
(2) | Performance bonuses for 2008 were paid under the Texas Instruments Executive Officer Performance Plan. In accordance with SEC requirements, these amounts are reported in the Non-Equity Incentive Plan Compensation column. | |
(3) | Shown is the expense recognized in the companys financial statements for 2008 under SFAS 123(R) for all outstanding restricted stock unit (RSU) awards held by the named executive officers. This amount consists of the portions of the fair values of RSUs granted in 2004-2008 that were allocated to service provided by the named executive officers during 2008. The discussion of the assumptions used for purposes of the valuation appears on pages 12-15 of Exhibit 13 to TIs annual report on Form 10-K for the year ended December 31, 2008. In accordance with SEC rules, no estimates were made for forfeitures in calculating these amounts. For a description of the grant terms, please see pages 76-77. | |
(4) | Shown is the expense recognized in the companys financial statements for 2008 under SFAS 123(R) for all outstanding options held by the named executive officers. This amount consists of the portions of the fair values of options granted in 2004-2008 that were allocated to service provided by the named executive officers in 2008. The discussion of the assumptions used for purposes of valuation appears on pages 12-15 of Exhibit 13 to TIs annual report on Form 10-K for the year ended December 31, 2008. In accordance with SEC rules, no estimates were made for forfeitures in calculating these amounts. For a description of the grant terms, please see page 76. Mr. Ritchie was the only named executive officer for whom the company incurred retirement-eligible stock-based compensation expense in 2008, as he will become retirement eligible in 2011 (prior to his 2008 option grant becoming fully vested). Exhibit 13 to TIs annual report on Form 10-K also discusses the assumptions used when calculating retirement-eligible stock-based compensation expense. | |
(5) | Consists of performance bonus and profit sharing for 2008. Please see page 68 of the Compensation Discussion and Analysis for the amounts of bonus and profit sharing paid to each of the named executive officers for 2008. | |
(6) | The company does not pay above-market earnings on deferred compensation. Therefore, no amounts are reported in this column for deferred compensation. The amounts in this column represent the change in the actuarial value of the named executive officers benefits under the qualified defined benefit pension plan (TI Employees Pension Plan) and the non-qualified defined benefit pension plan (TI Employees Non-Qualified Pension Plan) from December 31, 2007, through December 31, 2008. This change in the actuarial value is the difference between the 2007 and 2008 present value of the pension benefit accumulated as of year-end by the named executive officer, assuming that benefit is not paid until age 65. Mr. Templetons benefits under the companys pension plans were frozen as of December 31, 1997. |
[ 72 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
(7) | The actuarial value of Mr. Templetons account decreased by $11,314 during 2007. In accordance with SEC rules, this amount has not been included in his total 2007 compensation shown in this table. | |
(8) | In the interest of transparency, the value of perquisites and other personal benefits is provided in this column even if the amount is less than the reporting threshold established by the SEC. The table below shows the value of perquisites and other benefits for 2008. |
Defined | Personal | |||||||||||||||||||||||
Contribution | Unused | Use of | Home | |||||||||||||||||||||
Insurance | 401(k) | Retirement | Vacation | Company | Financial | Executive | Security | |||||||||||||||||
Name | (a) | Contribution | Plan (b) | Time (c) | Aircraft (d) | Counseling | Physical | Monitoring | ||||||||||||||||
R. K. Templeton | $ | 270 | $ | 9,200 | $ 72,495 | | $ | 138,391 | $ | 8,000 | $ | 2,867 | $ | 634 | ||||||||||
K. P. March | $ | 270 | $ | 4,600 | N/A | $ | 23,465 | | $ | 797 | $ | 1,891 | $ | 454 | ||||||||||
G. A. Lowe | $ | 270 | $ | 4,600 | N/A | | $ | 71,678 | $ | 11,183 | (e) | $ | 1,740 | N/A | ||||||||||
K. J. Ritchie | $ | 270 | $ | 4,600 | N/A | $ | 10,289 | | $ | 1,677 | | N/A | ||||||||||||
M. J. Hames | $ | 270 | $ | 4,600 | N/A | $ | 1,558 | | | $ | 5,224 | N/A |
(a) | Consists of payments made in connection with travel and accident policies of $20 and insurance premium contributions of $250 for each of the named executive officers. | ||
(b) | Consists of (i) contributions under the companys enhanced defined contribution retirement plan of $4,600, and (ii) an additional amount of $67,895 accrued by TI to offset IRC limitations on amounts that could be contributed to the enhanced defined contribution retirement plan. All of these amounts are also shown in the Non-qualified Deferred Compensation table on page 79. | ||
(c) | Represents payments for unused vacation time that could not be carried forward. | ||
(d) | The board of directors has determined that for security reasons, it is in TIs interest to require the chief executive officer to use the company aircraft for personal air travel. The amount shown for Mr. Templeton includes $125,640 incremental cost of company-required personal use of aircraft and $12,751 for reimbursement of a portion of the tax related to the incremental cost of company-required personal use of aircraft. We valued the incremental cost of the personal use of company aircraft using a method that takes into account: landing, parking and flight planning services expenses; crew travel expenses; supplies and catering expenses; aircraft fuel and oil expenses per hour of flight; communications costs; a portion of ongoing maintenance; and any customs, foreign permit and similar fees. Because company aircraft are primarily used for business travel, this methodology excludes the fixed costs, which do not change based on usage, such as pilots salaries and the lease cost of the company aircraft. The amount shown for Mr. Lowe was valued using the same methodology. Under SEC rules, Mr. Lowe is deemed to have received a personal benefit in 2008, because corporate aircraft incurred additional mileage in picking him up from, or delivering him to, his home outside Dallas in connection with some of his business trips. He was not reimbursed for any portion of the tax related to his personal use of corporate aircraft. | ||
(e) | Includes amounts for services rendered in 2007 that were not invoiced until 2008. In neither year did services exceed the $8,000 limit. |
Grants of plan-based awards in
2008
The following table shows the
grants of plan-based awards to the named executive officers in 2008.
All Other | All Other | |||||||||||||||||||||||
Estimated Possible Payouts | Estimated Future Payouts | Stock | Option | |||||||||||||||||||||
under Non-equity Incentive | under Equity Incentive | Awards: | Awards: | Exercise | ||||||||||||||||||||
Plan Awards | Plan Awards | Number of | Number of | or Base | Grant Date | |||||||||||||||||||
Shares of | Securities | Price of | Fair Value | |||||||||||||||||||||
Stock or | Underlying | Option | of Stock | |||||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Options | Awards | and Option | ||||||||||||||
Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#)(1) | (#)(2) | ($/Sh) | Awards (3) | |||||||||||||
R. K. Templeton | 1/25/08 | * | * | * | | | | 270,000 | $ | 29.79 | $ | 2,397,600 | ||||||||||||
1/25/08 | 150,000 | $ | 4,468,500 | |||||||||||||||||||||
K. P. March | 1/25/08 | * | * | * | | | | 85,000 | $ | 29.79 | $ | 754,800 | ||||||||||||
1/25/08 | 35,000 | $ | 1,042,650 | |||||||||||||||||||||
G. A. Lowe | 1/25/08 | * | * | * | | | | 100,000 | $ | 29.79 | $ | 888,000 | ||||||||||||
1/25/08 | 60,000 | $ | 1,787,400 | |||||||||||||||||||||
K. J. Ritchie | 1/25/08 | 100,000 | $ | 29.79 | $ | 888,000 | ||||||||||||||||||
1/25/08 | 50,000 | $ | 1,489,500 | |||||||||||||||||||||
M. J. Hames | 1/25/08 | * | * | * | | | | 75,000 | $ | 29.79 | $ | 666,000 | ||||||||||||
1/25/08 | 45,000 | $ | 1,340,550 |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 73 ]
* | TI did not use formulas or pre-set thresholds or multiples to determine incentive awards. Under the terms of the Executive Officer Performance Plan, each named executive officer is eligible to receive a cash bonus equal to 0.5 percent of the companys consolidated income (as defined in the plan). However, the Compensation Committee has the discretion to set bonuses at a lower level if it decides it is appropriate to do so. The committee decided to do so for 2008. | ||
(1) | The stock awards granted to the named executive officers in 2008 were RSU awards. These awards were made under the companys 2000 Long-Term Incentive Plan. For information on the terms and conditions of these RSU awards, please see the discussion beginning on page 76. | ||
(2) | These options were granted under the companys 2000 Long-Term Incentive Plan. For information on the terms and conditions of these options, please see the discussion on page 76. | ||
(3) | Shown is the aggregate grant date fair value computed in accordance with SFAS 123(R) for stock and option awards in 2008. The discussion of the assumptions used for purposes of the valuation appears on pages 12-15 of Exhibit 13 to TIs annual report on Form 10-K for the year ended December 31, 2008. By contrast, the amount shown for stock and option awards in 2008 in the Summary Compensation Table is the amount recognized by the company for financial statement purposes in 2008 for awards granted in 2008 and prior years to the named executive officers. |
None of the options or other equity
awards granted to the named executive officers was repriced or modified by the
company.
For additional information regarding TIs equity compensation grant
practices, please see the Compensation Discussion and Analysis on page
69.
Outstanding equity awards at
fiscal year-end 2008
The following
table shows the outstanding equity awards for each of the named executive
officers as of December 31, 2008.
Option Awards | Stock Awards | |||||||||||||||||||||
Equity | ||||||||||||||||||||||
Incentive | Equity | |||||||||||||||||||||
Equity | Plan | Incentive | ||||||||||||||||||||
Incentive | Awards: | Plan Awards: | ||||||||||||||||||||
Plan | Number of | Market or | ||||||||||||||||||||
Awards: | Unearned | Payout Value | ||||||||||||||||||||
Number of | Number of | Number of | Market Value | Shares, | of Unearned | |||||||||||||||||
Securities | Securities | Securities | Number of | of Shares or | Units or | Shares, Units | ||||||||||||||||
Underlying | Underlying | Underlying | Shares or | Units of Stock | Other | or Other | ||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Units of Stock | That Have Not | Rights That | Rights That | ||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | That Have Not | Vested | Have Not | Have Not | ||||||||||||||
Name | Exercisable | Unexercisable | Options (#) | Price ($) | Date | Vested (#) | ($)(1) | Vested (#) | Vested ($) | |||||||||||||
R. K. Templeton | | 270,000 | (2) | | $ | 29.79 | 1/25/2018 | 150,000 | (6) | $ | 2,328,000 | | | |||||||||
67,500 | 202,500 | (3) | | $ | 28.32 | 1/18/2017 | 150,000 | (7) | $ | 2,328,000 | | | ||||||||||
175,000 | 175,000 | (4) | | $ | 32.55 | 1/19/2016 | 150,000 | (8) | $ | 2,328,000 | | | ||||||||||
375,000 | 125,000 | (5) | | $ | 21.55 | 1/20/2015 | 100,000 | (9) | $ | 1,552,000 | | | ||||||||||
700,000 | | | $ | 32.39 | 1/14/2014 | | | | | |||||||||||||
375,000 | | | $ | 16.25 | 2/20/2013 | | | | | |||||||||||||
625,000 | | | $ | 16.11 | 1/15/2013 | | | | | |||||||||||||
625,000 | | | $ | 26.50 | 1/16/2012 | | | | | |||||||||||||
210,000 | | | $ | 31.30 | 11/29/2011 | | | | | |||||||||||||
325,000 | | | $ | 50.38 | 1/17/2011 | | | | | |||||||||||||
400,000 | | | $ | 55.22 | 1/19/2010 | | | | | |||||||||||||
600,000 | | | $ | 24.90 | 1/20/2009 | | | | | |||||||||||||
K. P. March | | 85,000 | (2) | | $ | 29.79 | 1/25/2018 | 35,000 | (6) | $ | 543,200 | | | |||||||||
21,250 | 63,750 | (3) | | $ | 28.32 | 1/18/2017 | 35,000 | (7) | $ | 543,200 | | | ||||||||||
42,500 | 42,500 | (4) | | $ | 32.55 | 1/19/2016 | 30,000 | (8) | $ | 465,600 | | | ||||||||||
60,000 | 20,000 | (5) | | $ | 21.55 | 1/20/2015 | 25,000 | (9) | $ | 388,000 | | | ||||||||||
120,000 | | | $ | 32.39 | 1/14/2014 | | | | | |||||||||||||
60,000 | | | $ | 16.25 | 2/20/2013 | | | | | |||||||||||||
60,000 | | | $ | 16.11 | 1/15/2013 | | | | | |||||||||||||
100 | | | $ | 29.19 | 2/21/2012 | | | | | |||||||||||||
30,000 | | | $ | 26.50 | 1/16/2012 | | | | | |||||||||||||
12,700 | | | $ | 35.13 | 7/31/2011 | | | | | |||||||||||||
20,000 | | | $ | 50.38 | 1/17/2011 | | | | | |||||||||||||
24,000 | | | $ | 55.22 | 1/19/2010 | | | | | |||||||||||||
15,000 | | | $ | 24.90 | 1/20/2009 | | | | |
[ 74 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Outstanding equity awards at fiscal year-end 2008 (contd) | ||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||
Equity | ||||||||||||||||||||||
Incentive | Equity | |||||||||||||||||||||
Plan | Incentive | |||||||||||||||||||||
Equity | Awards: | Plan Awards: | ||||||||||||||||||||
Incentive | Number of | Market or | ||||||||||||||||||||
Plan Awards: | Unearned | Payout Value | ||||||||||||||||||||
Number of | Number of | Number of | Market Value | Shares, | of Unearned | |||||||||||||||||
Securities | Securities | Securities | Number of | of Shares or | Units or | Shares, Units | ||||||||||||||||
Underlying | Underlying | Underlying | Shares or | Units of Stock | Other | or Other | ||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Units of Stock | That Have Not | Rights That | Rights That | ||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | That Have Not | Vested | Have Not | Have Not | ||||||||||||||
Name | Exercisable | Unexercisable | Options (#) | Price ($) | Date | Vested (#) | ($)(1) | Vested (#) | Vested ($) | |||||||||||||
G. A. Lowe | | 100,000 | (2) | | $ | 29.79 | 1/25/2018 | 60,000 | (6) | $ | 931,200 | | | |||||||||
25,000 | 75,000 | (3) | | $ | 28.32 | 1/18/2017 | 60,000 | (7) | $ | 931,200 | | | ||||||||||
50,000 | 50,000 | (4) | | $ | 32.55 | 1/19/2016 | 50,000 | (8) | $ | 776,000 | | | ||||||||||
75,000 | 25,000 | (5) | | $ | 21.55 | 1/20/2015 | 50,000 | (9) | $ | 776,000 | | | ||||||||||
150,000 | | | $ | 32.39 | 1/14/2014 | 100,000 | (10) | $ | 1,552,000 | | | |||||||||||
125,000 | | | $ | 26.50 | 1/16/2012 | | | | | |||||||||||||
70,000 | | | $ | 31.30 | 11/29/2011 | | | | | |||||||||||||
60,000 | | | $ | 50.38 | 1/17/2011 | | | | | |||||||||||||
80,000 | | | $ | 55.22 | 1/19/2010 | | | | | |||||||||||||
K. J. Ritchie | | 100,000 | (2) | | $ | 29.79 | 1/25/2018 | 50,000 | (6) | $ | 776,000 | | | |||||||||
25,000 | 75,000 | (3) | | $ | 28.32 | 1/18/2017 | 50,000 | (7) | $ | 776,000 | | | ||||||||||
50,000 | 50,000 | (4) | | $ | 32.55 | 1/19/2016 | 50,000 | (8) | $ | 776,000 | | | ||||||||||
75,000 | 25,000 | (5) | | $ | 21.55 | 1/20/2015 | 50,000 | (9) | $ | 776,000 | | | ||||||||||
150,000 | | | $ | 32.39 | 1/14/2014 | | | | | |||||||||||||
90,000 | | | $ | 16.25 | 2/20/2013 | | | | | |||||||||||||
175,000 | | | $ | 16.11 | 1/15/2013 | | | | | |||||||||||||
100 | | | $ | 29.19 | 2/21/2012 | | | | | |||||||||||||
125,000 | | | $ | 26.50 | 1/16/2012 | | | | | |||||||||||||
40,000 | | | $ | 31.30 | 11/19/2011 | | | | | |||||||||||||
50,000 | | | $ | 50.38 | 1/17/2011 | | | | | |||||||||||||
50,000 | | | $ | 55.22 | 1/19/2010 | | | | | |||||||||||||
60,000 | | | $ | 24.90 | 1/20/2009 | | | | | |||||||||||||
M. J. Hames | | 75,000 | (2) | | $ | 29.79 | 1/25/2018 | 45,000 | (6) | $ | 698,400 | | | |||||||||
18,750 | 56,250 | (3) | | $ | 28.32 | 1/18/2017 | 45,000 | (7) | $ | 698,400 | | | ||||||||||
40,000 | 40,000 | (4) | | $ | 32.55 | 1/19/2016 | 50,000 | (8) | $ | 776,000 | | | ||||||||||
75,000 | 25,000 | (5) | | $ | 21.55 | 1/20/2015 | 50,000 | (9) | $ | 776,000 | | | ||||||||||
150,000 | | | $ | 32.39 | 1/14/2014 | | | | | |||||||||||||
125,000 | | | $ | 16.25 | 2/20/2013 | | | | | |||||||||||||
250,000 | | | $ | 16.11 | 1/15/2013 | | | | | |||||||||||||
250,000 | | | $ | 26.50 | 1/16/2012 | | | | | |||||||||||||
100,000 | | | $ | 31.30 | 11/29/2011 | | | | | |||||||||||||
130,000 | | | $ | 50.38 | 1/17/2011 | | | | | |||||||||||||
100,000 | | | $ | 55.22 | 1/19/2010 | | | | |
(1) | Calculated by multiplying the number of restricted stock units by the closing price of TIs common stock on December 31, 2008 ($15.52). | |
(2) | One-quarter of the shares became exercisable on January 25, 2009, and one-quarter of the remaining shares become exercisable on each of January 25, 2010, January 25, 2011, and January 25, 2012. | |
(3) | One-third of the shares became exercisable on January 18, 2009, and one-third of the remaining shares become exercisable on each of January 18, 2010, and January 18, 2011. | |
(4) | One-half of the shares became exercisable on January 19, 2009, and the remaining one-half become exercisable on January 19, 2010. | |
(5) | Became fully exercisable on January 20, 2009. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 75 ]
(6) | Vesting date is January 31, 2012. Dividend equivalents are paid on these restricted stock units. | |
(7) | Vesting date is January 31, 2011. Dividend equivalents are paid on these restricted stock units. | |
(8) | Vesting date is January 29, 2010. Dividend equivalents are not paid on these restricted stock units. | |
(9) | Vested on January 30, 2009. Dividend equivalents were paid on these restricted stock units. | |
(10) | Vesting date is July 30, 2010. Dividend equivalents are not paid on these restricted stock units. |
The Option Awards shown in the table above are non-qualified stock options, each of which represents the right to purchase shares of TI common stock at the stated exercise price. For grants before 2007, the exercise price is the average of the high and low price of TI common stock on the grant date. For grants after 2006, the exercise price is the closing price of TI common stock on the grant date. The term of each option is 10 years unless the option is terminated earlier pursuant to provisions summarized in the chart below and in the paragraph following the chart. Options vest (become exercisable) in increments of 25 percent per year beginning on the first anniversary of the date of the grant. The chart below shows the termination provisions relating to outstanding stock options as of December 31, 2008. The Compensation Committee of the board of directors established these termination provisions to promote employee retention while offering competitive terms.
Employment | Employment Termination (at | |||||||||
Employment | Termination (at Least | Least 6 Months after Grant) | Other | |||||||
Termination Due to | 6 Months after Grant) | with 20 Years of Credited | Employment | Circumstances | ||||||
Death or Permanent | When Retirement | Service, but Not Retirement | Termination for | of Employment | ||||||
Grant | Disability | Eligible | Eligible | Cause | Termination | |||||
Before February 20, 2003 |
Vesting continues; option remains in effect to end of term |
Vesting continues; option remains in effect to end of term |
Vesting continues; option remains in effect to end of term |
Option cancels |
Option remains exercisable for 30 days | |||||
On or after February 20, 2003 |
Vesting continues; option remains in effect to end of term |
Vesting continues; option remains in effect to end of its term |
Option remains in effect to the end of the term; vesting does not continue after employment termination |
Option cancels |
Option remains exercisable for 30 days |
Options may be cancelled if the
grantee competes with TI during the two years after employment termination or
discloses TI trade secrets. In addition, for options received while the grantee
was an executive officer, the company may reclaim (or claw back) profits
earned under grants if the officer engages in such conduct. These provisions are
intended to strengthen retention and provide a reasonable remedy to TI in case
of competition or disclosure of our confidential
information.
The stock option terms also provide that upon a change in control of TI,
the option becomes fully vested to the extent it is then outstanding. Further,
if employment termination (except for cause) has occurred within 30 days before
the change in control, the change in control is deemed to have occurred first.
Change in control is defined as (1) acquisition of 20 percent of TI common
stock other than through a transaction approved by the board of directors, or
(2) change of a majority of the board of directors in a 24-month period unless a
majority of the directors then in office have elected or nominated the new
directors (together, the standard definition). TI stock options have had these
change-in-control terms for many years. They are intended to reduce employee
uncertainty and distraction in the period leading up to a change in control, if
such an event were to occur.
The Stock Awards in the table of Outstanding Equity Awards at Fiscal Year-End 2008 are restricted stock unit (RSU) awards. Each RSU represents the right to receive one share of TI common stock on a stated date (the vesting date) unless the award is terminated earlier under terms summarized below. In general, the vesting date is approximately four years after the grant date. Except for 2006 grants, each RSU includes the right to receive dividend equivalents, which are paid annually in cash at a rate equal to the amount paid to stockholders in dividends. The table below shows the termination provisions of outstanding RSUs as of December 31, 2008.
[ 76 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Employment Termination | Other Circumstances | |||||
Due to Death or Permanent | Employment Termination When | of Employment | ||||
Grant | Disability | Retirement Eligible | Termination | |||
Before January 19, 2006 |
Vesting continues; shares are paid at the scheduled vesting date |
Grant terminates unless the Compensation Committee determines otherwise case-by-case* |
Grant cancels; no shares are issued | |||
On or after January 19, 2006 |
Vesting continues; shares are paid at the scheduled vesting date |
Grant stays in effect and pays out shares at the scheduled vesting date. Number of shares reduced according to the duration of employment over the vesting period** |
Grant cancels; no shares are issued |
* | To date, the Compensation Committee has made no such determination for any of the named executive officers. | |
** | Calculated by multiplying the number of RSUs by a fraction equal to the number of whole 365-day periods from the grant date to the employment termination date (or first day of any bridge leave of absence leading to retirement), divided by the number years in the vesting period. |
These termination provisions are
intended to promote retention. RSU awards made after 2005 contain cancellation
and claw back provisions, like those described above for stock options, in
case of competition with TI or disclosure of TI trade secrets. The terms of
awards after 2005 also provide for full vesting of the award upon a change in
control of TI. Change in control is the standard definition unless the grant is
subject to Section 409A of the Internal Revenue Code, in which event the
definition under Section 409A applies. Section 409A defines a change in control
as a change in the ownership or effective control of a corporation or a change
in the ownership of a substantial portion of the assets of a corporation. These
cancellation, claw back and change-in-control terms were added after 2005 to
conform RSU terms with those of stock options (to the extent permitted by the
Internal Revenue Code) and to achieve the objectives described above in the
discussion of stock options.
In addition to the Stock Awards shown in the
Outstanding Equity Awards at Fiscal Year-End 2008 table above, Mr. Templeton
holds an award of RSUs that was granted in 1995. The award, for 120,000 shares
of TI common stock, vested in 2000. Under the award terms, the shares will be
issued to Mr. Templeton in March of the year after his termination of employment
for any reason. These terms were designed to provide a tax benefit to the
company by postponing the related compensation expense until it was likely to be
fully deductible. In accordance with SEC requirements, this award is reflected
in the 2008 Non-qualified Deferred Compensation table on page 79.
2008 option exercises and stock
vested
The following table lists the
number of shares acquired and the value realized as a result of option exercises
by the named executive officers in 2008 and the value of any restricted stock
units that vested in 2008.
Option Awards | Stock Awards | |||||||||
Number of | Number of | |||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | |||||||
Name | on Exercise (#) | on Exercise ($) | on Vesting (#) | on Vesting ($) | ||||||
R. K. Templeton | | | 100,000 | $ | 3,085,000 | |||||
K. P. March | 1,000 | $ | 17,600 | 20,000 | $ | 617,000 | ||||
G. A. Lowe | | | 30,000 | $ | 925,500 | |||||
K. J. Ritchie | | | 30,000 | $ | 925,500 | |||||
M. J. Hames | | | 50,000 | $ | 1,542,500 |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 77 ]
2008 pension
benefits
The following table shows
the present value as of December 31, 2008, of the benefit of the named executive
officers under our qualified defined benefit pension plan (TI Employees Pension
Plan) and non-qualified defined benefit pension plan (TI Employees Non-Qualified
Pension Plan).
Payments | |||||||||
Present | During | ||||||||
Number of | Value of | Last | |||||||
Years Credited | Accumulated | Fiscal | |||||||
Name | Plan Name | Service (#)(2) | Benefit ($)(3) | Year ($) | |||||
R. K. Templeton (1) | TI Employees Pension Plan | 16 | $ | 326,375 | | ||||
TI Employees Non-Qualified Pension Plan | 16 | $ | 240,099 | | |||||
K. P. March | TI Employees Pension Plan | 23 | $ | 304,975 | | ||||
TI Employees Non-Qualified Pension Plan | 23 | $ | 1,076,148 | | |||||
G. A. Lowe | TI Employees Pension Plan | 23 | $ | 323,405 | | ||||
TI Employees Non-Qualified Pension Plan | 23 | $ | 1,194,243 | | |||||
K. J. Ritchie | TI Employees Pension Plan | 29 | $ | 570,574 | | ||||
TI Employees Non-Qualified Pension Plan | 29 | $ | 1,753,211 | | |||||
M. J. Hames | TI Employees Pension Plan | 27 | $ | 469,166 | | ||||
TI Employees Non-Qualified Pension Plan | 27 | $ | 1,344,952 | |
(1) | In 1997, TIs U.S. employees were given the choice between continuing to participate in the defined benefit pension plans or participating in a new enhanced defined contribution retirement plan. Mr. Templeton chose to participate in the defined contribution plan. Accordingly, his accrued pension benefits were frozen as of December 31, 1997. Contributions to the defined contribution plan for Mr. Templetons benefit are included in the 2008 Summary Compensation Table. | |
(2) | Credited service began on the date the officer became eligible to participate in the plan. Eligibility to participate began on the earlier of 18 months of employment, or January 1 following the completion of one year of employment. Accordingly, each of the named executive officers has been employed by TI for longer than the years of credited service shown above. Because Mr. Templetons benefits were frozen as of December 31, 1997, he accumulates no additional years of credited service beyond that date. | |
(3) | The assumptions and valuation methods used to calculate the present value of the accumulated pension benefits shown are the same as those used by TI for financial reporting purposes and are described in Note 12 to Exhibit 13 to TIs annual report on Form 10-K for the year ended December 31, 2008, except that a named executive officers retirement is assumed (in accordance with SEC rules) for purposes of this table to occur at age 65 and no assumption for termination prior to that date is used. The amount of the lump sum benefit earned as of December 31, 2008, is determined using either (i) the Pension Benefit Guaranty Corporation (PBGC) interest assumption of 3.75 percent or (ii) the Pension Protection Act of 2006 (PPA) corporate bond yield interest assumption of 6.14 percent for the TI Employees Pension Plan and 6.16 percent for the TI Employees Non-Qualified Pension Plan, whichever rate produces the higher lump sum amount. A discount rate assumption of 6.14 percent for the TI Employees Pension Plan and 6.16 percent for the TI Employees Non-Qualified Pension Plan were used to determine the present value of the lump sum. |
TI Employees Pension
Plan
The TI Employees Pension Plan is
a qualified defined benefit pension plan. Please see page 69 under the Benefits
heading of the Compensation Discussion and Analysis for a discussion of the
origin and purpose of the plan. Employees who joined the U.S. payroll after
November 30, 1997, are not eligible to participate in this
plan.
A
plan participant is eligible for normal retirement under the terms of the plan
if he is at least 65 years of age with one year of credited service. A
participant is eligible for early retirement if he is at least 55 years of age
with 20 years of employment or 60 years of age with five years of employment.
None of the named executive officers are currently eligible for early or normal
retirement.
A participant may request payment of his accrued benefit at termination
or any time thereafter. Participants may choose a lump sum payment or one of six
forms of annuity. In order of largest to smallest periodic payment, the forms of
annuity are: (i) single life annuity, (ii) 5-year certain and life annuity,
(iii) 10-year certain and life annuity, (iv) qualified joint and 50 percent
survivor annuity, (v) qualified joint and 75 percent survivor annuity, and (vi)
qualified joint and 100 percent survivor annuity. If the participant does not
request payment, he will begin to receive his benefit in April of the year after
he reaches the age of 70½ in the form of annuity required under the
IRC.
The
pension formula for the qualified plan is intended to provide a participant with
an annual retirement benefit equal to 1.5
percent multiplied by the product of (i)
years of credited service and (ii) the average of the five highest consecutive
years of his base salary plus bonus up to a limit imposed by the IRS, less a
percentage (based on his year of birth, when he elects to retire and his years
of service with TI) of the amount of compensation on which his Social Security
benefit is based.
[ 78 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
If an
individual takes early retirement and chooses to begin receiving his annual
retirement benefit at that time, such benefit is reduced by an early retirement
factor. As a result, the annual benefit is lower than the one he would have
received at age 65.
If the participants employment terminates due to
disability, the participant may choose to receive his accrued benefit at any
time prior to age 65. Alternatively, the participant may choose to defer receipt
of the accrued benefit until reaching age 65 and then take a disability benefit.
The disability benefit paid at age 65 is based on salary and bonus, years of
credited service the participant would have accrued to age 65 had he not become
disabled and disabled status.
The benefit payable in the event of death is based on
salary and bonus, years of credited service and age at the time of death, and
may be in the form of a lump sum or annuity at the election of the beneficiary.
The earliest date of payment is the first day of the second calendar month
following the month of death.
Leaves of absence, including a bridge to retirement, are
credited to years of service under the qualified and non-qualified pension
plans. Please see the discussion of leaves of absence on page 84
below.
TI Employees Non-Qualified Pension
Plan
The TI Employees Non-Qualified
Pension Plan is a non-qualified defined benefit pension plan. Please see pages
69-70 under the Benefits heading of the Compensation Discussion and Analysis for
a discussion of the purpose of this plan. As with the qualified defined benefit
pension plan, employees who joined the U.S. payroll after November 30, 1997, are
not eligible to participate in this Plan. Eligibility for normal and early
retirement under this plan is the same as under the qualified plan (please see
page 69). Benefits under this plan are paid in a lump
sum.
A
participants benefit under the non-qualified pension plan is calculated using
the same formula as described above for the TI Employees Pension Plan. However,
the IRS limit on the amount of compensation on which a qualified pension benefit
may be calculated does not apply. Additionally, the IRS limit on the amount of
qualified benefit the participant may receive does not apply to this plan. Once
this non-qualified benefit amount has been determined using the formula
described above, the individuals qualified benefit is subtracted from it. The
resulting difference is multiplied by an age-based factor to obtain the amount
of the lump sum benefit payable to an individual under this non-qualified
plan.
Amounts earned before 2005 will be distributed when payment of the
participants benefit under the qualified pension plan commences. Amounts earned
after 2004 will be distributed subject to the requirements of Section 409A of
the IRC. Because the named executive officers are among the 50 most highly
compensated officers of the company, Section 409A of the IRC requires that they
not receive any lump sum distribution payments under the non-qualified pension
plan before the first day of the seventh month following termination of
employment.
If a participant terminates due to disability, amounts earned prior to
2005 will be distributed when payment of the participants benefit under the
qualified plan commences. For amounts earned after 2004, distribution is
governed by Section 409A of the IRC as discussed above, and the disability
benefit is reduced to reflect the payment of the benefit prior to age
65.
In the
event of death, payment is based on salary and bonus, years of credited service
and age at the time of death and will be in the form of a lump sum. The earliest
date of payment is the first day of the second calendar month following the
month of death.
Balances in this plan are unsecured obligations of the company. For
amounts accrued prior to 2005, in the event of a change in control, the present
value of the individuals benefit would be paid not later than the month
following the month in which the change in control occurred. For such amounts,
the standard definition of a change in control (please see page 76) applied. For
amounts accrued after 2004, the change in control definition required by Section
409A of the IRC applied. For all amounts accrued under this plan, if a sale of
substantially all of the assets of the company occurred, the present value of
the individuals benefit would be distributed in a lump sum as soon as
reasonably practicable following the sale of assets.
2008 non-qualified deferred
compensation
The following table
shows contributions to the named executive officers deferred compensation
account in 2008 and the aggregate amount of his deferred compensation as of
December 31, 2008.
Executive | Registrant | Aggregate | Aggregate | ||||||||||||||||
Contributions | Contributions in | Aggregate Earnings in | Withdrawals/ | Balance at Last | |||||||||||||||
Name | in Last FY ($) | Last FY ($)(2) | Last FY ($) | Distributions ($) | FYE ($) | ||||||||||||||
R. K. Templeton | | $ | 67,895 | $ | (2,557,862 | )(3) | $ | 1,985,760 | (4) | $ | 2,827,134 | (5) | |||||||
K. P. March | | | $ | 1,399 | | $ | 91,750 | ||||||||||||
G. A. Lowe | $ | 255,784 | (1) | | $ | (632,677 | ) | $ | 907,307 | $ | 423,741 | ||||||||
K. J. Ritchie | | | $ | (47,493 | ) | | $ | 43,311 | |||||||||||
M. J. Hames | | | $ | (223,226 | ) | $ | 1,304,754 | $ | 74,741 |
(1) | Amount shown is (a) a portion of Mr. Lowes bonus and profit sharing for 2007, both of which were paid in 2008; and (b) a portion of his 2008 salary. The full amount of the bonus and profit sharing for 2007 was included in the Summary Compensation Table of the companys proxy statement dated March 7, 2008. The full amount of his 2008 salary is included in the Salary column of the 2008 Summary Compensation Table on page 72. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 79 ]
(2) | Company matching contributions pursuant to the defined contribution plan. These amounts are included in the All Other Compensation column of the 2008 Summary Compensation Table on page 72. | |
(3) | Consists of: (a) $49,200 in dividend equivalents paid under the 120,000-share 1995 RSU award discussed on page 77, settlement of which has been deferred until after termination of employment; (b) a $2,145,600 decrease in the value of the RSU award (calculated by subtracting $4,008,000 (the value of the award at year-end 2007) from $1,862,400 (the value of the award at year-end 2008) (in both cases, the number of RSUs is multiplied by the closing price of TI common stock on the last trading date of the year)); and (c) a $461,462 loss in Mr. Templetons deferred compensation account in 2008. Dividend equivalents are paid at the same rate as dividends on the companys common stock. | |
(4) | Dividend equivalents paid on the RSUs discussed in note 3 and a $1,936,560 withdrawal by Mr. Templeton. | |
(5) | Of this amount, $1,862,400 is attributable to Mr. Templetons 1995 RSU award, calculated as described in note 3. The remainder is the balance of his deferred compensation account. |
Please see page 70 for a discussion
of the purpose of the plan. An employees deferred compensation account contains
eligible compensation the employee has elected to defer and contributions by the
company that are in excess of the IRS limits on (i) contributions the company
may make to the enhanced defined contribution plan and (ii) matching
contributions the company may make related to compensation the executive officer
deferred into his deferred compensation
account.
Participants in the deferred compensation plan may choose to defer up to
(i) 25 percent of their base salary, (ii) 90 percent of their performance bonus,
and (iii) 90 percent of profit sharing. In addition, in 2004, participants had a
one-time opportunity to defer up to 100 percent of their non-qualified pension
benefit accrued after 2004. Elections to defer compensation must be made in the
calendar year prior to the year in which the compensation will be
earned.
The
company has determined that the investment alternatives for deferred
compensation balances should generally be the same as the investment
alternatives available under the companys defined contribution plan. These
investment alternatives may be changed at any
time.
During 2008, participants could choose to have their deferred
compensation mirror the performance of one or more of the following mutual
funds, each of which is managed by a third party (these alternatives are a
subset of those offered to participants in the defined contribution plans):
Northern Trust Short Term Investment Fund, Northern Trust Daily Aggregate Bond
Fund Index, Barclays Global Investors Equity Index Fund, Northern Trust Russell
1000 Value Equity Index, Barclays Global Investors Russell 3000 Alpha Tilts,
Northern Trust Russell 2000 Equity Index, Barclays Global Investors Active
International Equity, Barclays Global Investors Lifepath Funds (Lifestyle 2010),
Barclays Global Investors Lifepath Funds (Lifestyle 2020), Barclays Global
Investors Lifepath Funds (Lifestyle 2030) and Barclays Global Investors Lifepath
Funds (Lifestyle 2040). Prior to April 2005, participants could also choose to
have their deferred compensation mirror the performance of TIs common stock;
that choice was eliminated for new deferrals beginning in April
2005.
From
among the available alternatives, participants may change their instructions
relating to their deferred compensation daily, except that instructions to move
compensation out of the TI stock fund are subject to our policy regarding
transactions in TI stock. Earnings on a participants balance are determined
solely by the performance of the investments that the participant has chosen for
his plan balance. The company does not guarantee any minimum return on
investments. A third party administers the companys deferred compensation
program.
Prior to November 1, 2008, for compensation deferred before 2005, the
participant while an employee had the opportunity to request a distribution at
any time subject to a 10 percent reduction in the distribution. After November
1, 2008, a participant may request distribution of amounts deferred before 2005
only in the case of an unforeseen emergency as discussed below. For compensation
deferred after 2004, in the case of an unforeseen emergency, a plan participant
may request a hardship withdrawal. To obtain a hardship withdrawal, a
participant must meet the requirements of Section 409A of the IRC. Except for
these circumstances, a participants balance is paid pursuant to his
distribution election and is subject to applicable IRC
limitations.
Prior to November 1, 2008, for amounts that were contributed by the
company and amounts earned and deferred by the participant before 2005 and
earnings on those amounts (collectively, pre-2005 amounts), termination of
employment with the company triggered distribution of the amount in the
participants account. If the participant had a valid distribution election on
file, TI distributed the amount in his account according to his election. If
there was no valid distribution election on file, TI distributed the entire
amount in the account as soon as possible following his termination of
employment. Prior to November 1, 2008, for amounts that were contributed by TI
and amounts earned and deferred by the executive officer after 2004 and earnings
on those amounts (collectively, post-2004 amounts), if there was no valid
distribution election on file, or if the participant elected to receive a lump
sum distribution on retirement, TI distributed the entire amount in the account
on the first day of the seventh month following termination of employment. If a
participant has elected installment payments, for post-2004 amounts, the first
installment payment can be made no earlier than the first day of the seventh
month following termination of employment. Effective November 1, 2008, the
distribution elections then in effect apply to all deferred amounts.5
____________________
5 | The named executive officers have made the following distribution elections for deferred compensation: Mr. Templeton, lump sum paid in January 2012; Mr. March, lump sum paid in January 2011; Mr. Lowe, lump sum paid in January 2012; Mr. Ritchie, lump sum paid in January 2011; and Mr. Hames, lump sum paid in January 2011. |
[ 80 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
In the event
of the participants death, one-half of the amount in his account will be
immediately paid to his beneficiaries. The remaining half will be paid to his
beneficiaries on or about March 31 of the following
year.
Like the
balances under the non-qualified defined benefit pension plan, deferred
compensation balances are unsecured obligations of the company. If a change in
control occurred, amounts earned and deferred before 2005 would be paid to the
individual not later than the month following the month in which the change in
control occurred. The standard definition of change in control applied. For
amounts earned and deferred after 2004, the participant would receive payment of
his balance not later than the month following the month in which the change in
control as defined in Section 409A of the IRC has occurred.
Potential payments upon
termination or change in control
None
of the named executive officers has an employment contract with the company.
They are eligible for benefits on generally the same terms as other U.S.
employees upon termination of employment or change in control of the company. TI
does not reimburse executive officers for any income or excise taxes that are
payable by the executive as a result of payments relating to termination or
change in control.
Termination
The following programs may result in payments to a named
executive officer whose employment terminates. Most of these programs have been
discussed above in the proxy statement. For a discussion of the impact of these
programs on the compensation decisions for 2008, please see the Compensation
Discussion and Analysis on page 70.
Bonus. Our policies concerning bonus and the timing of payments are described on page 63. Whether a bonus would be awarded, and in what amount, to an executive officer whose employment has terminated would depend on the circumstances of termination. It may be presumed that no bonus would be awarded in the event of a termination for cause. If awarded, bonuses are paid by the company.
Qualified and non-qualified defined benefit pension plans. The purposes of these plans are described on pages 69-70. The formula for determining benefits, the forms of benefit and the timing of payments are described on pages 78-79. The amounts disbursed under the qualified and non-qualified plans are paid, respectively, by the TI Employees Pension Trust and the company.
Deferred compensation. The purpose of this plan is described on page 70. The amounts payable under this program depend solely on the performance of investments that the participant has chosen for his plan balance. The timing of payments is discussed on pages 79-81. Amounts distributed are paid by the company.
Equity compensation. Depending on the circumstances of termination, grantees whose employment terminates may retain the right to exercise previously granted stock options or receive shares under outstanding restricted stock unit (RSU) awards. Please see pages 76-77. Most RSU awards include a right to receive dividend equivalents. The dividend equivalents are paid annually by the company in a single cash payment after the last dividend payment of the year.
Profit sharing. For a description of the purpose of this program, the formula for determining payments and the timing of payments, please see page 62. Like other U.S. employees, if a named executive officer remains employed through the end of the year, he will receive any profit sharing paid for that year. In the event of retirement or commencement of a bridge to retirement, any profit sharing will be paid for the portion of the year worked before retirement or the beginning of the bridge. In the event of termination due to disability or death, the officer or his beneficiaries would receive any profit sharing paid for the year. Profit sharing payments are made by the company.
Time bank. Based on years of employment with the company,
employees accrue hours in a time bank. Time bank hours may be used for paid
absences from the office such as vacation and sick days. Employees receive a
cash payment for any time bank hours still outstanding on termination of
employment. The amount paid is calculated by applying the employees base salary
rate in effect at the time of termination to the number of hours remaining in
the time bank. Time bank payments are made in a lump sum by the company. They
are ordinarily paid no later than what would have been the employees next
regular pay cycle.
The following tables indicate the amounts for which each named executive
officer would have been eligible if his employment had terminated on December
31, 2008, as a result of disability, death, involuntary termination for cause,
resignation, or involuntary termination not for cause. Because none of the
executive officers was eligible to retire as of December 31, 2008, no potential
payments are stated assuming retirement.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 81 ]
Termination due to disability
Qualified | Non-Qualified | |||||||||||||||||||||||||
Defined | Defined | |||||||||||||||||||||||||
Benefit | Benefit | |||||||||||||||||||||||||
Pension | Pension | Deferred | Stock | Profit | Time | |||||||||||||||||||||
Plan | Plan | Compensation | RSUs | Options | Sharing | Bank | ||||||||||||||||||||
Name | Bonus | (2) | (3) | (4) | (5) | (6) | (7) | (8) | Perquisites | Total | ||||||||||||||||
Templeton | (1) | $ | 798,378 | $ | 588,995 | $ | 964,734 | $ | 10,398,400 | | $ | 64,853 | $ | 184,383 | | $ | 12,999,743 | |||||||||
March | (1) | $ | 1,212,470 | $ | 1,947,850 | $ | 91,750 | $ | 1,940,000 | | $ | 31,219 | $ | 92,107 | | $ | 5,315,396 | |||||||||
Lowe | (1) | $ | 1,598,998 | $ | 2,705,327 | $ | 423,741 | $ | 4,966,400 | | $ | 35,945 | $ | 81,693 | | $ | 9,812,104 | |||||||||
Ritchie | (1) | $ | 1,653,134 | $ | 3,118,696 | $ | 43,311 | $ | 3,104,000 | | $ | 30,172 | $ | 79,275 | | $ | 8,028,588 | |||||||||
Hames | (1) | $ | 1,620,617 | $ | 3,106,065 | $ | 74,741 | $ | 2,948,800 | | $ | 31,210 | $ | 88,245 | | $ | 7,869,678 |
(1) | Because the amount of a bonus is subject to the Compensation Committees discretion considering the facts and circumstances of the termination, it is not possible to predict the amount of bonus, if any, the executive officer would have received. |
(2) | The amount shown is the lump sum benefit payable at age 65 to the named executive officer in the event of termination as of December 31, 2008, due to disability, assuming the named executive officer does not request payment of his disability benefit until age 65. The assumptions used in calculating these amounts are the same as the age-65 lump-sum assumptions used for financial reporting purposes for the companys audited financial statements for 2008 and are described in footnote 3 to the 2008 Pension Benefits table on page 78. |
(3) | The amount shown is the lump sum benefit payable at age 65 to the named executive officers in the event of termination due to disability. The assumptions used are the same as those described in note (2) above. |
(4) | Aggregate account value as of December 31, 2008. The amounts shown in the 2008 Non-qualified Deferred Compensation table on page 79 include the amounts shown in this column. |
(5) | Calculated by multiplying the number of outstanding RSUs by the closing price of TI common stock as of December 31, 2008 ($15.52). Because the executive officer will retain his RSU awards in the event of termination and they will continue to vest according to their terms, all outstanding RSUs are assumed to be vested for purposes of this table. Please see the Outstanding Equity Awards at Fiscal Year-End 2008 table on pages 74-75 for the number of unvested RSUs as of December 31, 2008, and page 77 for a discussion of an additional outstanding RSU award held by Mr. Templeton. |
(6) | Calculated as the difference between the grant price of all outstanding in-the-money options and the closing price of TI common stock as of December 31, 2008 ($15.52), multiplied by the number of shares under such options as of December 31, 2008. As of December 31, 2008, no outstanding options were in the money. |
(7) | Amounts earned in 2008. |
(8) | Calculated by multiplying the number of hours remaining in the named executive officers time bank by the applicable base salary rate as of December 31, 2008. |
Termination due to death
Qualified | Non-Qualified | |||||||||||||||||||||||||
Defined | Defined | |||||||||||||||||||||||||
Benefit | Benefit | |||||||||||||||||||||||||
Pension | Pension | Deferred | Stock | Profit | Time | |||||||||||||||||||||
Bonus | Plan | Plan | Compensation | RSUs | Options | Sharing | Bank | |||||||||||||||||||
Name | (1) | (2) | (2) | (3) | (4) | (5) | (6) | (7) | Perquisites | Total | ||||||||||||||||
Templeton | (1) | $ | 194,873 | $ | 143,998 | $ | 964,734 | $ | 10,398,400 | | $ | 64,853 | $ | 184,383 | | $ | 11,951,241 | |||||||||
March | (1) | $ | 187,275 | $ | 663,649 | $ | 91,750 | $ | 1,940,000 | | $ | 31,219 | $ | 92,107 | | $ | 3,006,000 | |||||||||
Lowe | (1) | $ | 210,570 | $ | 781,560 | $ | 423,741 | $ | 4,966,400 | | $ | 35,945 | $ | 81,693 | | $ | 6,499,909 | |||||||||
Ritchie | (1) | $ | 326,441 | $ | 1,007,097 | $ | 43,311 | $ | 3,104,000 | | $ | 30,172 | $ | 79,275 | | $ | 4,590,296 | |||||||||
Hames | (1) | $ | 304,204 | $ | 875,866 | $ | 74,741 | $ | 2,948,800 | | $ | 31,210 | $ | 88,245 | | $ | 4,323,066 |
(1) | See note (1) to the Termination Due to Disability table. |
(2) | Value of the benefit payable in a lump sum to the executive officers beneficiary calculated as required by the terms of the plan assuming the earliest possible payment date. The plan provides that in the event of death, the beneficiary receives 50 percent of the participants accrued benefit, reduced by the age-applicable joint and 50 percent survivor factor. |
[ 82 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
(3) | See note (4) to the Termination Due to Disability table. |
(4) | Calculated by multiplying the number of outstanding RSUs by the closing price of TI common stock as of December 31, 2008 ($15.52). Because the executive officers estate will receive his RSU awards in the event of his death, all outstanding RSUs are assumed to be vested for purposes of this table. Please see the Outstanding Equity Awards at Fiscal Year-End 2008 table on pages 74-75 for the number of unvested RSUs as of December 31, 2008, and see page 77 for a discussion of an additional outstanding RSU award held by Mr. Templeton. |
(5) | See note (6) to the Termination Due to Disability table. |
(6) | Amounts earned in 2008. |
(7) | See note (8) to the Termination Due to Disability table. |
Involuntary termination for cause
Qualified | Non-Qualified | |||||||||||||||||||||||||
Defined | Defined | |||||||||||||||||||||||||
Benefit | Benefit | |||||||||||||||||||||||||
Pension | Pension | Deferred | Profit | Time | ||||||||||||||||||||||
Bonus | Plan | Plan | Compensation | Stock | Sharing | Bank | ||||||||||||||||||||
Name | (1) | (2) | (2) | (3) | RSUs | Options | (5) | (6) | Perquisites | Total | ||||||||||||||||
Templeton | | $ | 376,884 | $ | 278,491 | $ | 964,734 | $ | 1,862,400 | (4) | | $ | 64,853 | $ | 184,383 | | $ | 3,731,745 | ||||||||
March | | $ | 346,974 | $ | 1,229,584 | $ | 91,750 | | | $ | 31,219 | $ | 92,107 | | $ | 1,791,634 | ||||||||||
Lowe | | $ | 394,427 | $ | 1,463,958 | $ | 423,741 | | | $ | 35,945 | $ | 81,693 | | $ | 2,399,764 | ||||||||||
Ritchie | | $ | 637,160 | $ | 1,965,664 | $ | 43,311 | | | $ | 30,172 | $ | 79,275 | | $ | 2,755,582 | ||||||||||
Hames | | $ | 538,698 | $ | 1,551,036 | $ | 74,741 | | | $ | 31,210 | $ | 88,245 | | $ | 2,283,930 |
(1) | It is presumed that in the event of termination for cause no bonus would be awarded. |
(2) | Lump sum value of the December 31, 2008, accrued benefit calculated as required by the terms of the plan assuming the earliest possible payment date. |
(3) | See note (4) to the Termination Due to Disability Table. |
(4) | Calculated by multiplying 120,000 vested RSUs by the closing price of the companys common stock as of December 31, 2008 ($15.52). |
(5) | Amounts earned in 2008. |
(6) | See note (8) to the Termination Due to Disability table. |
Resignation; involuntary termination not for cause
Qualified | Non-Qualified | |||||||||||||||||||||||||
Defined | Defined | |||||||||||||||||||||||||
Benefit | Benefit | |||||||||||||||||||||||||
Pension | Pension | Deferred | Stock | Profit | Time | |||||||||||||||||||||
Bonus | Plan | Plan | Compensation | Options | Sharing | Bank | ||||||||||||||||||||
Name | (1) | (2) | (2) | (3) | RSUs | (5) | (6) | (7) | Perquisites | Total | ||||||||||||||||
Templeton | (1) | $ | 376,884 | $ | 278,491 | $ | 964,734 | $ | 1,862,400 | (4) | | $ | 64,853 | $ | 184,383 | | $ | 3,731,745 | ||||||||
March | (1) | $ | 346,974 | $ | 1,229,584 | $ | 91,750 | | | $ | 31,219 | $ | 92,107 | | $ | 1,791,634 | ||||||||||
Lowe | (1) | $ | 394,427 | $ | 1,463,958 | $ | 423,741 | | | $ | 35,945 | $ | 81,693 | | $ | 2,399,764 | ||||||||||
Ritchie | (1) | $ | 637,160 | $ | 1,965,664 | $ | 43,311 | | | $ | 30,172 | $ | 79,275 | | $ | 2,755,582 | ||||||||||
Hames | (1) | $ | 538,698 | $ | 1,551,036 | $ | 74,741 | | | $ | 31,210 | $ | 88,245 | | $ | 2,283,930 |
(1) | See note (1) to the Termination Due to Disability table. |
(2) | See note (2) to the Involuntary Termination for Cause table. |
(3) | See note (4) to the Termination Due to Disability table. |
(4) | See note (4) to the Involuntary Termination for Cause table. |
(5) | See note (6) to the Termination Due to Disability table. |
(6) | Amounts earned in 2008. |
(7) | See note (8) to the Termination Due to Disability table. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 83 ]
In the case of a resignation pursuant
to a separation arrangement, an executive officer (like other employees above a
certain job grade level) will typically be offered a 12-month paid leave of
absence before termination, in exchange for a non-compete and non-solicitation
commitment and a release of claims against the company. The leave period will be
credited to years of service under the pension plans described above. During the
leave, the executive officers stock options will continue to become exercisable
and his RSUs will continue to vest. Amounts paid to an individual during a paid
leave of absence are not counted when calculating profit sharing and benefits
under the qualified and non-qualified pension plans. During a paid leave of
absence an individual does not continue to accrue time bank hours. He retains
medical and insurance benefits at essentially the same rates as active company
employees during the paid leave of absence period.
In the case of a separation arrangement in
which the paid leave of absence expires when the executive officer will be at
least 50 years old and have at least 15 years of employment with the company,
the separation arrangement will typically include an unpaid leave of absence, to
commence at the end of the paid leave and end when the executive officer has
reached the earlier of age 55 with at least 20 years of employment or age 60
(bridge to retirement). The bridge to retirement will be credited to years of
service under the qualified and non-qualified defined benefit plans described
above. The executive officer will not receive profit sharing or accrue time bank
hours for the period he is on a bridge to retirement, but he will retain medical
and insurance benefits at essentially the same rates as active TI
employees.
Change in
control
We have no program, plan or
arrangement providing benefits triggered by a change in control except as
described below. In fact, the only consequences of a change in control are the
acceleration of payment of existing balances and the full vesting of outstanding
equity awards.
A
change in control would have triggered payment of the balances under the
non-qualified defined benefit plan and the deferred compensation plan. Please
see pages 79 and 81 for a discussion of the purpose of change in control
provisions relating to the non-qualified defined benefit plan and the deferred
compensation plan as well as the circumstances and the timing of
payment.
Please
see pages 76-77 for further information concerning change in control provisions
relating to stock options and RSU awards.
For a
discussion of the impact of these programs on the compensation decisions for
2008, please see page 70.
The following table indicates the amounts that would have been triggered for each executive officer had there been a change in control as of December 31, 2008. The actual amounts that would be paid out can only be determined at the time the change in control occurs.
Non-Qualified | |||||||||||||||||||||||
Qualified | Defined | ||||||||||||||||||||||
Defined | Benefit | ||||||||||||||||||||||
Benefit | Pension | Deferred | Stock | ||||||||||||||||||||
Bonus | Pension | Plan | Compensation | RSUs | Options | Profit | Time | ||||||||||||||||
Name | (1) | Plan | (2) | (3) | (4) | (5) | Sharing | Bank | Perquisites | Total | |||||||||||||
Templeton | (1) | 0 | $ | 278,491 | $ | 964,734 | $ | 6,984,000 | | | | | $ | 8,227,225 | |||||||||
March | (1) | 0 | $ | 1,229,584 | $ | 91,750 | $ | 1,552,000 | | | | | $ | 2,873,334 | |||||||||
Lowe | (1) | 0 | $ | 1,463,958 | $ | 423,741 | $ | 4,190,400 | | | | | $ | 6,078,099 | |||||||||
Ritchie | (1) | 0 | $ | 1,965,664 | $ | 43,311 | $ | 2,328,000 | | | | | $ | 4,336,975 | |||||||||
Hames | (1) | 0 | $ | 1,551,036 | $ | 74,741 | $ | 2,172,800 | | | | | $ | 3,798,577 |
(1) | See note (1) to the Termination Due to Disability table. |
(2) | Lump sum value of the December 31, 2008 accrued benefit calculated as required by the terms of the plan assuming the earliest possible payment date. |
(3) | Aggregate account value as of December 31, 2008. The amounts shown in the 2008 Non-qualified Deferred Compensation table on page 79 include the amounts shown in this column. |
(4) | A change in control affects only RSUs awarded after January 18, 2006. Calculated by multiplying the number of RSUs granted after January 18, 2006, by the closing price of the companys common stock as of December 31, 2008 ($15.52). |
(5) | Upon a change in control meeting the standard definition (please see page 76), all outstanding options become immediately exercisable. Calculated as the difference between the grant price of in-the-money options not already exercisable and the closing price of the companys common stock as of December 31, 2008 ($15.52), multiplied by the number of those options as of December 31, 2008. As of December 31, 2008, no outstanding options were in-the-money. |
[ 84 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Audit Committee
report
The Audit Committee of the
board of directors has furnished the following report:
As noted in the committees
charter, TI management is responsible for preparing the companys financial
statements. The companys independent registered public accounting firm is
responsible for auditing the financial statements. The activities of the
committee are in no way designed to supersede or alter those traditional
responsibilities. The committees role does not provide any special assurances
with regard to TIs financial statements, nor does it involve a professional
evaluation of the quality of the audits performed by the independent registered
public accounting firm.
The committee has reviewed and discussed with management
and the independent accounting firm, as appropriate, (1) the audited financial
statements and (2) managements report on internal control over financial
reporting and the independent accounting firms related
opinions.
The committee has discussed with the independent registered public
accounting firm, Ernst & Young, the matters required to be discussed by
Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended (AICPA Professional
Standards, Vol. 1. AU
Section 380), as adopted by the Public Company Accounting Oversight
Board.
The committee has received the written
disclosures and the letter from the independent registered public accounting
firm required by the applicable requirements of the Public Company Accounting
Oversight Board, regarding the independent registered public accounting firms
communications with the Audit Committee concerning independence, and has
discussed with Ernst & Young the firms independence.
Based on the review and
discussions referred to above, the committee recommended to the board of
directors that the audited financial statements be included in the companys
Annual Report on Form 10-K for 2008 for filing with the SEC.
Pamela H. Patsley, Chair David L. Boren Stephen P. MacMillan Wayne R. Sanders |
Proposal to ratify appointment of
independent registered public accounting firm
The Audit Committee of the board has appointed Ernst
& Young LLP to be TIs independent registered public accounting firm for
2009.
The board asks the stockholders to
ratify the appointment of Ernst & Young. If the stockholders do not ratify
the appointment, the Audit Committee will consider whether it should appoint
another independent registered public accounting
firm.
Representatives of Ernst & Young are expected to be present, and to
be available to respond to appropriate questions, at the annual meeting. They
have the opportunity to make a statement if they desire to do so; they have
indicated that, as of this date, they do not.
The company has paid fees to Ernst & Young for the services described
below:
Audit fees. Ernst & Youngs Audit Fees were $7,277,000 in 2008 and $6,785,000 in 2007. The services provided in exchange for these fees were our annual audit, including the audit of internal control over financial reporting, reports on Form 10-Q, and statutory audits required internationally.
Audit-related fees. In addition to the Audit Fees, the company paid Ernst & Young $556,000 in 2008 and $586,000 in 2007. The services provided in exchange for these fees included employee benefit plan audits, a grant certification audit, access to Ernst & Youngs online research tool, an environmental certification audit, an energy-usage certification audit for a non-U.S. subsidiary and a research and development certification audit for a non-U.S. subsidiary.
Tax fees. Ernst & Youngs fees for professional services rendered for tax compliance (preparation and review of non-U.S. tax returns), tax advice and tax planning (including expatriate tax services) were $495,000 in 2008 and $503,000 in 2007.
All other fees. Ernst & Youngs fees for all other professional services rendered were $38,000 in 2008 and $21,000 in 2007 for audit services for the TI Foundation, as well as for various training programs.
Pre-approval
policy. The Audit Committee is required
to pre-approve the audit and non-audit services to be performed by the
independent registered public accounting firm in order to assure that the
provision of such services does not impair the firms independence.
Annually the independent registered public accounting
firm and the Director of Internal Audits present to the Audit Committee services
expected to be performed by the firm over the next 12 months. The Audit
Committee reviews and, as it deems appropriate, pre-approves those services. The
services and estimated fees are presented to the Audit Committee for
consideration in the following categories: Audit, Audit-Related, Tax and All
Other (each as defined in Schedule 14A of the Securities Exchange Act of 1934).
For each service listed in those categories, the Committee receives detailed
documentation indicating the specific services to be provided. The term of any
pre-approval is 12 months from the date of pre-approval, unless the Audit
Committee specifically provides for a different period. The Audit Committee
reviews on at least a quarterly basis the services provided to date by the firm
and the fees incurred for those services. The Audit Committee may revise the
list of pre-approved services and related fees from time to time, based on
subsequent determinations.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 85 ]
In
order to respond to time-sensitive requests for services that may arise between
regularly scheduled meetings of the Audit Committee, the Committee has delegated
pre-approval authority to its Chair (the Audit Committee does not delegate to
management its responsibilities to pre-approve services). The Chair reports
pre-approval decisions to the Audit Committee and seeks ratification of such
decisions at the Audit Committees next scheduled meeting.
The Audit Committee or its
Chair pre-approved all services provided by Ernst & Young during 2008,
except for certain training representing 45 percent ($17,000) of All Other Fees
for 2008, for which the pre-approval requirement is waived under SEC rules due
to the de minimis amount. The Chair approved the provision of these services
after the fact, and all approvals by the Chair were subsequently ratified by the
Audit Committee.
The board of directors
recommends a vote FOR ratification of the appointment of Ernst & Young LLP
as the companys independent registered public accounting firm for 2009.
Proposal to approve the Texas
Instruments 2009 Long-Term Incentive Plan
Since 1965 the company has had in effect key employee incentive plans,
currently consisting of the Texas Instruments 2000 Long-Term Incentive Plan (the
2000 Plan), which is used to grant equity compensation to senior managers, and
the Texas Instruments 2003 Long-Term Incentive Plan, which is used to grant
equity compensation to other employees (the Current Plans). These plans were
designed to provide an additional incentive for the employees who are key to the
companys success in the technological and highly competitive markets in which
it operates. The board of directors believes these plans have been effective in
providing such incentive. The board also believes that for the company to
continue to attract and retain outstanding individuals, it must continue to have
incentive plans of these types in place.
The 2000 Plan expires in April 2010. The
company proposes the adoption of a new plan, the Texas Instruments 2009
Long-Term Incentive Plan (the 2009 Plan), to replace both of the Current
Plans. If stockholders approve the 2009 Plan, the Current Plans will be closed
to further grants. The shares still available for grant under the Current Plans
(approximately 200 million as of December 31, 2008) will not be available for
grant under this plan. If stockholders do not approve the 2009 Plan, it will not
be implemented.
Texas Instruments 2009 Long-Term
Incentive Plan
The proposed 2009 Plan
is attached as Exhibit A to this proxy statement. The principal features of the
2009 Plan are summarized below.
Types of
awards
The 2009 Plan provides for the
grant of the same types of awards as the Current Plans: (1) stock options, (2)
restricted stock and restricted stock units, (3) performance units and (4) other
awards (including stock appreciation rights) valued in whole or in part by
reference to or otherwise based on common stock of the company.
Shares available for
awards
Under the 2009 Plan, the
number of shares of common stock available for issuance will be 75,000,000
shares, subject to adjustment by the Committee (defined below) for stock splits
and other events as set forth in the 2009 Plan, plus any shares under awards
granted under the Current Plans that terminate or are cancelled.
Material features of the 2009
Plan
The 2009 Plan will be
administered by a board committee appointed by the board of directors (the
Committee). The Committee will have, among other powers, the power to
interpret and construe any provision of the plan, to adopt rules and regulations
for administering the plan, and to perform other acts relating to the plan,
including, at the Committees discretion, the delegation of any administrative
responsibilities. Decisions of the Committee are final and binding on all
parties.
The Committee will have the sole discretion
to grant to eligible participants one or more equity awards, including options,
restricted stock and restricted stock units, performance units, or any
combination thereof. The Committee will have the sole discretion to determine
the number or amount of any award to be granted to any participant. If a
dividend or other distribution, recapitalization, stock split, or other
corporate event or transaction (more fully described in Section 5(e) of the 2009
Plan) affects the shares in such a way that an adjustment is appropriate to
prevent dilution or enlargement of the benefits, or potential benefits, intended
to be made available under the 2009 Plan, then an equitable adjustment shall be
made to: (i) the number and type of shares (or other securities or property)
which may be made the subject of awards, (ii) the number and type of shares (or
other securities or property) subject to outstanding awards, and (iii) the
grant, purchase or exercise price with respect to any award. The Committee may
not take any other action to reduce the exercise price of any option as
established at the time of grant.
Awards will be granted for no cash
consideration, or for minimal cash consideration if required by applicable law.
Awards may provide that upon their exercise the holder will receive cash, stock,
other securities, other awards, other property or any combination thereof, as
the Committee will determine. Any shares of stock deliverable under the 2009
Plan may consist in whole or in part of authorized and unissued shares or
treasury shares.
Except in the case of awards made through
assumption of, or in substitution for, outstanding awards previously granted by
an acquired company, and except as a result of an adjustment event referred to
above, the exercise price of stock under any stock option, the grant price of
any stock appreciation right, and the purchase price of any security which may
be purchased under any other stock-
[ 86 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
based award will not be less than
100% of the fair market value of the stock or other security on the date of the
grant of the option, right or award. The Committee will determine the times at
which options and other purchase rights may be exercised and the methods by
which and the forms in which payment of the purchase price may be made.
Determinations of fair market value under the 2009 Plan will be made in
accordance with methods or procedures established by the
Committee.
The Committee may impose restrictions on
restricted stock and restricted stock units at its discretion. These
restrictions may lapse as the Committee deems appropriate. Upon termination of
employment during the restriction period, all restricted stock and restricted
stock units will be forfeited, unless the Committee determines
otherwise.
Any performance units granted will vest
upon the attainment of performance goals. The Committee will establish the
performance criteria, the length of the performance period and the form and time
of payment of the award. In addition, the Committee may establish the terms and
conditions of other stock-based awards.
Unless otherwise determined by the
Committee, no award granted under the 2009 Plan may be transferred or otherwise
encumbered by the individual to whom it is granted, other than by will, by
designation of a beneficiary, or by the laws of descent and distribution. During
the individuals lifetime, each award will be exercisable only by the individual
or by the individuals guardian or legal representative.
The board of directors may
amend, alter, discontinue or terminate the 2009 Plan or any portion of the plan
any time. However, stockholder approval must be obtained for any plan adjustment
that would increase the number of shares available for awards or any other
material amendment of the 2009
Plan.
No
awards may be granted under the 2009 Plan after the tenth anniversary of the
effective date of the 2009 Plan.
Eligibility and
participation
Any employee of the
company, including any officer or employee-director, will be eligible to receive
awards under the 2009 Plan. Additionally, any individual who provides services
to the company or to an affiliate of the company as an independent contractor is
eligible to receive awards. The company had 29,537 employees as of December 31,
2008. Directors who are not full-time or part-time officers or employees of the
company will not be eligible to participate in the plan.
Plan awards for certain
individuals
Any awards under the 2009
Plan will be at the discretion of the Committee. Therefore, it is not possible
at present to determine the amount or form of any award that will be available
for grant to any individual during the term of the 2009 Plan or that would have
been granted during 2008 had the 2009 Plan been in effect.
Tax matters
Options: Counsel
for the company has advised that a participant will recognize no income under
the Internal Revenue Code upon the receipt of any option award. In the case of
an incentive stock option, if a participant exercises the option during or
within three months of employment and does not dispose of the shares within two
years of the date of grant or one year after the transfer of the shares to the
participant, the participant will be entitled for federal income tax purposes to
treat any profit which may be recognized upon the disposition of the shares as a
long-term capital gain. In contrast, a participant who receives an option under
the plan that is not an incentive stock option or who does not comply with the
conditions noted above will generally recognize ordinary income at the time of
exercise in the amount of the excess, if any, of the fair market value of the
stock on the date of exercise over the option price. If the participant is an
employee, such ordinary income generally is subject to withholding of income and
employment taxes. The company should be entitled to a deduction for federal
income tax purposes equal to the amount of ordinary income, if any, recognized
by a participant who (a) exercises an option that is not an incentive stock
option, or (b) disposes of stock that was acquired pursuant to the exercise of
an incentive stock option prior to the end of the required holding period
described above, except to the extent such deduction is limited by applicable
provisions of the Internal Revenue Code. In the case of incentive stock options,
any excess of the fair market value of the stock at the time of exercise over
the option price would be an item of income for purposes of the participants
alternative minimum tax.
Restricted stock
units: Counsel for the company has
advised that a participant will recognize no income under the Internal Revenue
Code upon the receipt of a restricted stock unit award. Upon the settlement of a
restricted stock unit award, participants will recognize ordinary income in the
year of receipt in an amount equal to the fair market value of any shares
received. If the participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the sale of any
shares received, any gain or loss, based on the difference between the sale
price and the fair market value on the date of settlement, will be taxed as
capital gain or loss. The company should be entitled to a deduction for federal
income tax purposes equal to the amount of ordinary income recognized by the
participant on the determination date, except to the extent such deduction is
limited by applicable provisions of the Internal Revenue
Code.
The board of directors recommends a vote FOR the Texas Instruments 2009
Long-Term Incentive Plan.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 87 ]
Proposal to approve the Texas
Instruments 2009 Director Compensation Plan
The companys 2003 Director Compensation Plan (the 2003 Plan) governs
equity compensation of the companys non-employee directors and provides them
with the opportunity to defer their compensation. This plan was designed to
attract and retain qualified individuals to serve as directors of the company
and to increase the proprietary and vested interest of directors in the growth
and performance of the company. The board believes that the 2003 Plan has been
effective in achieving these objectives and that the company continues to need a
plan of this type.
The 2003 Plan expires in April 2010. As of December 31, 2008, there were
approximately 1.4 million shares of common stock available for grant under the
2003 Plan. The board of directors recommends that stockholders approve the
adoption of the Texas Instruments 2009 Director Compensation Plan (the 2009
Director Plan). If the 2009 Director Plan is approved, no further awards will
be made under the 2003 Plan. As discussed in more detail below, the 2003 Plan
will continue to govern compensation that was earned and deferred prior to
January 1, 2005. No additional amounts will be able to be deferred into the 2003
Plan. If stockholders do not approve the 2009 Director Plan, it will not be
implemented.
The
full text of the proposed 2009 Director Plan is shown on Exhibit B to this proxy
statement. The principal features of the 2009 Director Plan are summarized
below.
Types of
awards
The 2009 Director Plan
provides for the grant of the same types of awards as the 2003 Plan: (1) stock
options, (2) restricted stock and restricted stock units, (3) performance units
and (4) other awards (including stock appreciation rights) valued in whole or in
part by reference to or otherwise based on common stock of the
company.
Shares available for
awards
Under the 2009 Director Plan,
the number of shares of common stock available for issuance will be 2,000,000,
subject to adjustment by the Administrator (defined below) for stock splits and
other events as set forth in the 2009 Director Plan, plus any shares under
awards granted under the 2009 Director Plan that terminate or are
cancelled.
Material features of the 2009
Director Plan
The 2009 Director Plan
will be administered by the board or a committee of directors appointed by the
board (the Administrator). The Administrator will have, among other powers,
the power to interpret and construe any provision of the plan, to adopt rules
and regulations for administering the plan, and to perform other acts relating
to the plan. Decisions of the Administrator are final and binding on all
parties.
The
2009 Director Plan provides that each non-employee director will receive an
annual grant of a non-qualified option to purchase 7,000 shares of TI common
stock and an annual grant of 2,500 restricted stock units. The options will
become exercisable in four equal annual installments commencing on the first
anniversary date of the grant and expire not more than ten years after the date
of grant.
In
addition, each eligible director who is initially elected or appointed after the
effective date of the 2009 Director Plan will receive a one-time grant of 2,000
restricted stock units under the 2009 Director Plan. Each restricted stock unit
will be paid or settled by the issuance of one share of TI common stock as soon
as practicable after the fourth anniversary of the date of grant. It is expected
that all options granted under the Plan will be non-qualified options for U.S.
tax purposes.
If
a dividend or other distribution, recapitalization, stock split, or other
corporate event or transaction (more fully described in Section 5(d) of the 2009
Director Plan) affects the shares in such a way that an adjustment is
appropriate to prevent dilution or enlargement of the benefits, or potential
benefits, intended to be made available under the 2009 Director Plan, then an
equitable adjustment shall be made to: (i) the number and type of shares (or
other securities or property) which may be made the subject of awards, (ii) the
number and type of shares (or other securities or property) subject to
outstanding awards, and (iii) the grant, purchase or exercise price with respect
to any award. The Administrator may not take any other action to reduce the
exercise price of any option as established at the time of
grant.
Awards
will be granted for no cash consideration, or for minimal cash consideration if
required by applicable law. Awards may provide that upon their exercise the
holder will receive cash, stock, other securities, other awards, other property
or any combination thereof, as the Administrator will determine. Any shares of
stock deliverable under the 2009 Director Plan may consist in whole or in part
of authorized and unissued shares or treasury
shares.
The
exercise price of stock under any stock option, the grant price of any stock
appreciation right, and the purchase price of any security that may be purchased
under any other stock-based award will not be less than 100 percent of the fair
market value (as defined in the 2009 Director Plan) of the stock or other
security on the date of the grant of the option, right or
award.
Unless
otherwise determined by the Administrator, no award granted under the 2009
Director Plan may be transferred or otherwise encumbered by the individual to
whom it is granted, other than by will, by designation of a beneficiary, or by
the laws of descent and distribution. During the individuals lifetime, each
award will be exercisable only by the individual or by the individuals guardian
or legal representative.
[ 88 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
The
board of directors may amend, alter, discontinue or terminate the 2009 Director
Plan or any portion of the plan any time. However, stockholder approval must be
obtained for any plan adjustment that would increase the number of shares
available for awards or any other material amendment of the 2009 Director
Plan.
No awards
may be granted under the 2009 Director Plan after the tenth anniversary of the
effective date of the 2009 Director Plan.
Each
director will be able to elect, with respect to any year, that all or any
portion of his or her eligible cash compensation and restricted stock unit grant
be deferred in accordance with the terms of the 2009 Director Plan. Each
director will be able to elect that his or her deferred compensation for any
year be credited to a cash account, a stock unit account or any combination
thereof.
New plan benefits
Texas Instruments 2009 Director Compensation Plan | ||
Participant | Number of Shares Subject to Options | Restricted Stock Units |
Non-Employee Director Group(1) | 70,000(2) | 25,000(3) |
(1) | As a result of deferral elections made for 2008: seven non-employee directors deferred a total of $400,733 of their cash compensation (equivalent to 17,382 restricted stock units) into stock unit accounts under the 2003 Plan; five directors deferred receipt of their restricted stock units granted in 2008; one director deferred $2,966 in interest on her cash account; and cash dividends and dividend equivalents on restricted stock units in the amount of $67,402 were paid into non-employee director stock unit accounts during 2008. |
(2) | Each non-employee director would have received an option to purchase 7,000 shares of TI common stock had the Plan been in effect in 2008. |
(3) | Each non-employee director would have received a grant of 2,500 restricted stock units had the plan been in effect in 2008. The 2009 Director Plan also provides for additional benefits in the form of other stock-based awards. To date, these types of awards have not been utilized and the non-employee directors would not have been eligible for automatic grant of any such awards. In addition, as set forth in note (1), 17,382 restricted stock units were credited to Directors deferred compensation accounts in 2008. Therefore, the related benefits the non-employee directors may have received or will in the future receive under these terms of the 2009 Director Plan are not determinable. |
Tax matters
Counsel for the company has advised that a participant
who receives a grant of an option or a restricted stock unit will not be in
receipt of taxable income under the Internal Revenue Code upon the making of the
grant. A participant who receives an option under the 2009 Director Plan will
generally recognize ordinary income at the time of exercise in the amount of the
excess, if any, of the fair market value of the stock on the date of exercise
over the option price. Upon payment or settlement of a restricted stock unit
award in cash or stock, the participant will recognize ordinary income equal to
the value of any cash or shares received.
Counsel for the company has also advised
that the company will not be allowed any deduction for federal income tax
purposes upon the grant of options or restricted stock units. The company will
be entitled to a deduction for federal income tax purposes in an amount equal to
the ordinary income, if any, realized by a participant who exercises an option.
Also, the company will be entitled to a deduction for federal income tax
purposes at the same time as, and in an amount equal to, the recognition of
ordinary income by a participant in respect of restricted stock unit awards
under the 2009 Director Plan and the settlement thereof.
Counsel for the company has
further advised that a participant will not be deemed to have received any
taxable income under the Internal Revenue Code as a result of a deferral
election until the participant receives a distribution. When a distribution is
made from a cash account or stock unit account, the participant will recognize
ordinary income equal to the value of any cash and shares received. The company
will be entitled to a deduction for federal income tax purposes at the time a
distribution is made from a cash account or stock unit account in an amount
equal to the income recognized by the
participant.
The board of directors recommends a vote FOR the Texas Instruments 2009
Director Compensation Plan.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 89 ]
Equity compensation plan
information
The following table sets
forth information about the companys equity compensation plans as of December
31, 2008:
Number of | |||||||||
Number of | Securities | ||||||||
Securities | Remaining | ||||||||
to be Issued Upon | Weighted-Average | Available | |||||||
Exercise of | Exercise Price of | for Future | |||||||
Outstanding | Outstanding | Issuance | |||||||
Options, | Options, | under Equity | |||||||
Warrants and | Warrants and | Compensation | |||||||
Plan Category | Rights | Rights | Plans | ||||||
Equity compensation plans | |||||||||
approved by security holders | 120,221,106 | (1) | $ | 33.55 | (2) | 90,851,474 | (3) | ||
Equity compensation plans | |||||||||
not approved by security holders | 72,347,886 | (4) | $ | 27.11 | (2) | 152,727,260 | (5) | ||
Total | 192,568,992 | $ | 31.22 | 243,578,734 |
(1) |
Includes shares of TI common stock to be issued under the Texas Instruments 2000 Long-Term Incentive Plan and predecessor plans, the Texas Instruments 2003 Director Compensation Plan and the TI Employees 2005 Stock Purchase Plan. Excludes the following: |
| |
(2) | Restricted stock units and stock units credited to directors deferred compensation accounts are settled in shares of TI common stock on a one-for-one basis. Accordingly, such units have been excluded for purposes of computing the weighted-average exercise price. |
(3) | Shares of TI common stock available for issuance under the Texas Instruments 2000 Long-Term Incentive Plan, the Texas Instruments 2003 Director Compensation Plan and the TI Employees 2005 Stock Purchase Plan. |
(4) | Includes shares to be issued under the Texas Instruments 2003 Long-Term Incentive Plan, a plan for non-management employees; executive officers and approximately 200 managers of the company are ineligible to receive awards under the plan. The plan authorizes the grant of: (1) stock options, (2) restricted stock and restricted stock units, (3) performance units and (4) other awards (including stock appreciation rights) valued in whole or in part by reference to or otherwise based on common stock of the company. The plan is administered by a board committee appointed by the board of directors consisting entirely of independent directors (the Committee). The Committee has the sole discretion to grant to eligible participants one or more equity awards and to determine the number or amount of any award. Except in the case of awards made through assumption of, or in substitution for, outstanding awards previously granted by an acquired company, and except as a result of an adjustment event such as a stock split, the exercise price under any stock option, the grant price of any stock appreciation right, and the purchase price of any security that may be purchased under any other stock-based award under the plan will not be less than 100 percent of the fair market value of the stock or other security on the effective date of the grant of the option, right or award. |
Also includes shares to be issued under the Texas Instruments Directors Deferred Compensation Plan, the Texas Instruments Restricted Stock Unit Plan for Directors and the Texas Instruments Stock Option Plan for Non-Employee Directors. These plans were replaced by the Texas Instruments 2003 Director Compensation Plan, and no further grants may be made under them. | |
(5) | Shares of TI common stock available for issuance under the Texas Instruments 2003 Long-Term Incentive Plan. Stockholders have approved all other active equity compensation plans of the company. |
[ 90 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Stockholder
proposal
A stockholder submitted a
proposal for consideration at the 2009 annual meeting. The name and address of
the stockholder will be furnished promptly upon request made to the company.
The board of directors opposes the
proposal for the reasons stated after the proposal.
The proposal reads as
follows:
Resolved:
Shareholders request that the Board of Directors take the
necessary steps to establish a policy or amend the corporate by-laws to require
that, whenever possible and subject to any presently existing contractual
obligations, the Chairman of the Board be an independent member of the board who
has not served as an executive officer of the company.
Supporting
statement:
Members of the board of
directors are elected to represent shareholders interests and pursue the
creation of long-term shareholder value. To fulfill this responsibility
effectively, a substantial percentage of board members should be independent and
accountable to all shareholders.
Increasingly, shareholders are concluding that board
leadership should be independent, so as to strengthen board integrity and
accountability. We believe the Chairman of the Board should be in an independent
director who is neither a former or current executive of the
company.
The board is responsible for providing strategic direction, guidance and
oversight. A CEO is responsible for the management and operation of a company. A
CEO should not be directing, guiding or overseeing himself. Additionally, the
skills that make for a good CEO are not necessarily the skills that provide
appropriate management of the board of
directors.
An independent Chairman is better able to oversee the executives of the
company without management conflicts and establish a board agenda that promotes
shareholders interests. This, in turn, can lead to a more effective board of
directors.
An independent Chairman can also
enhance relationships with investors and instill greater investor
confidence.
We seek to establish an appropriate balance of power between the board
and management. We recognize that different board structures can produce
effective independent board leadership, and many companies that do not have an
independent Chairman of the Board have established a position of lead or
presiding independent director whose responsibilities are intended to ensure
that the board provides independent oversight of management and the CEO.
Although most companies of the size of our company have adopted either a single
lead director or independent chair position, we note that our company has not
established either position, and thus, we believe it is critical that the
Chairman be independent.
An increasing number of companies are recognizing that
the separation of the Chairman of the Board and Chief Executive Officer is a
matter of sound corporate governance. Current estimates are that 45% of S&P
1500 companies have separated the positions, and 17% have identified independent
Chairmen.
We urge our company to take steps to promote shareholders interests. We
urge a vote FOR this resolution.
The board of directors recommends
a vote AGAINST the above stockholder proposal for the following
reasons: The directors recommend a vote AGAINST the above stockholder proposal because they believe the current structure of the board uniquely provides for a more effective and inclusive form of governance. Specifically: |
|
Discussion:
The board maintains a long-standing commitment to
responsible and effective corporate governance. A critical example of its
commitment is the long practice of having a substantial majority of independent
directors. Our independent directors are leaders in industry, education and
government, and they have not reached their positions without exercising their
own critical thought and sound judgment. They do not leave these skills at the
TI boardroom door. Collegial, yet rigorous, debate and disagreement at board
meetings are common. Their independence is defined not just by satisfying
various objective criteria, but also by how the directors relate to one another
and TIs management.
The board chose its current structure and practices to
facilitate oversight of management and to fully engage the independent
directors. For example, our independent directors meet in executive session at
each regularly scheduled meeting to voice their observations and to shape future
board agendas. Immediately following each session, the director who served as
chair notifies the CEO of the independent directors assessment of the meeting
and desired agenda for future meetings. Thus does the board have the opportunity
to take up issues it believes are important. In addition, each independent
director is aware of his or her ability to call a special meeting of the board.
These agenda-setting and governance roles would, under the terms of the
proposal, be performed only by the chairman instead of by each of TIs
independent directors.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 91 ]
With
these practices, each director has an equal stake in the boards actions and
equal accountability to the corporation and its stockholders. Both of these
benefits would be lost if the policy sought by the proponent is
implemented.
Finally, the board believes that it is in the best position to determine
the structure through which it fulfills its fiduciary obligations, a flexibility
the proposal would eliminate. The board regularly monitors corporate governance
practices and thoughtfully and deliberately implements the practices that will
best ensure the success of the company. Consequently, corporate governance at TI
has evolved over time, adapting to meet the needs of TI and its stockholders and
will continue to do so as both TI and its board change in the years ahead. The
board has separated the roles of Chairman and CEO before when deemed
appropriate, and it would do so again if the situation warranted. However, the
board has concluded that the existing structure benefits both TI and its
stockholders more than the structure advocated by the stockholder
proposal.
Additional information
Voting securities
As of February 17, 2009,
1,273,392,222 shares of the companys common stock were outstanding. This is the
only class of capital stock entitled to vote at the meeting. Each holder of
common stock has one vote for each share held. As stated in the notice of
meeting, holders of record of the common stock at the close of business on
February 17, 2009, may vote at the meeting or any adjournment of the
meeting.
Security ownership of certain
beneficial owners
The following
table shows the only person who has reported beneficial ownership of more than 5
percent of the common stock of the company. Persons generally beneficially own
shares if they have the right to either vote those shares or dispose of them.
More than one person may be considered to beneficially own the same
shares.
Shares Owned at | Percent | ||||
Name and Address | December 31, 2008 | of Class | |||
Capital World Investors (1) | |||||
333 South Hope Street | |||||
Los Angeles, CA 90071 | 66,663,000(2) | 5.1 | % |
(1) | A division of Capital Research and Management Company (CRMC). | |
(2) | TI understands that Capital World Investors is deemed to be the beneficial owner of these shares as a result of CRMC acting as an investment advisor to various investment companies. Capital World Investors has sole voting power for 20,293,000 shares and sole dispositive power for 66,663,000 shares. |
Security ownership of
management
The following table shows
the beneficial ownership of TI common stock by the named executive officers and
all executive officers and directors as a group.
Shares Owned at | Percent | ||||
Name | December 31, 2008 | of Class | |||
R. K. Templeton (1) | 5,574,742 | * | |||
K. P. March (1) | 684,165 | * | |||
G. A. Lowe (1) | 1,061,105 | * | |||
K. J. Ritchie (1) | 1,204,947 | * | |||
M. J. Hames (1) | 1,559,084 | * | |||
All executive officers and directors as a group (2) | 15,336,615 | 1.20 | % |
* | less than 1 percent | |
(1) | Included in shares owned at December 31, 2008: |
Shares Credited | Restricted | ||||||||
to 401(k) and | Stock | ||||||||
Shares Obtainable | Profit Sharing | Units | |||||||
Executive Officer | within 60 Days | Accounts | (in shares) | ||||||
R. K. Templeton | 4,825,446 | 11,498 | 670,000 | ||||||
K. P. March | 549,746 | 1,854 | 125,000 | ||||||
G. A. Lowe | 735,446 | 3,574 | 320,000 | ||||||
K. J. Ritchie | 990,100 | 8,064 | 200,000 | ||||||
M. J. Hames | 1,321,250 | 7,204 | 190,000 |
[ 92 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Each named executive officer has sole voting and sole investment power with respect to the shares owned. | ||||
(2) | Includes: | |||
(a) | 12,254,700 shares obtainable within 60 days; | |||
(b) | 71,172 shares credited to 401(k) and profit sharing stock accounts; | |||
(c) | 2,372,091 shares subject to restricted stock unit awards; for the terms of these restricted stock units, please see pages 59-61 and 76-77. | |||
(d) | 117,451 shares credited to certain non-employee directors deferred compensation accounts; shares in deferred compensation accounts are issued following a directors termination of service. | |||
Excludes shares held by a family member if a director or executive officer has disclaimed beneficial ownership. No director or executive officer has pledged shares of TI common stock. |
Related person transactions Because we believe that company transactions with directors and executive officers of TI or with persons related to TI directors and executive officers present a heightened risk of creating or appearing to create a conflict of interest, we have a written related person transaction policy that has been approved by the board of directors. The policy states that TI directors and executive officers should obtain the approvals specified below in connection with any related person transaction. The policy applies to transactions in which: | ||||
1. | TI or any TI subsidiary is or will be a participant; | |||
2. | The amount involved exceeds or is expected to exceed $100,000 in a fiscal year; and | |||
3. | Any of the following (a related person) has or will have a direct or indirect interest: | |||
(a) | A TI director or executive officer, or an Immediate Family Member of a director or executive officer; | |||
(b) | A stockholder owning more than 5 percent of the common stock of TI or an Immediate Family Member of such stockholder, or, if the 5 percent stockholder is not a natural person, any person or entity designated in the Form 13G or 13D filed under the SEC rules and regulations by the 5 percent stockholder as having an ownership interest in TI stock (individually or collectively, a 5 percent holder); or | |||
(c) | An entity in which someone listed in (a) or (b) above has a 5 percent or greater ownership interest, by which someone listed in (a) or (b) is employed, or of which someone listed in (a) or (b) is a director, principal or partner. | |||
For purposes of the policy, an Immediate Family Member is any
child, stepchild, parent, stepparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law
or any person (other than a tenant or employee) sharing the household of a
TI director, executive officer or 5 percent
holder. |
Approval required
Arrangement involving: | Approval required by: | |
Executive officer who is also a member of the TI board, an Immediate Family Member of such person, or an entity in which any of the foregoing has a 5 percent or greater ownership interest | Governance and Stockholder Relations Committee | |
Chief compliance officer, any of his or her Immediate Family Members, or an entity in which any of the foregoing has a 5 percent or greater ownership interest | Governance and Stockholder Relations Committee | |
Any other director or executive officer, an Immediate Family Member of such person, or an entity in which any of the foregoing has a 5 percent or greater ownership interest | Chief compliance officer in consultation with the Chair of the Governance and Stockholder Relations Committee | |
A 5 percent holder | Governance and Stockholder Relations Committee |
No member of the Governance and Stockholder Relations Committee will participate in the consideration of a related person arrangement in which such member or any of his or her Immediate Family Members is the related person.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 93 ]
The
approving body or persons will consider all of the relevant facts and
circumstances available to them, including (if applicable) but not limited to:
the benefits to the company of the arrangement; the impact on a directors
independence; the availability of other sources for comparable products or
services; the terms of the arrangement; and the terms available to unrelated
third parties or to employees generally. The primary consideration is whether
the transaction between TI and the related person (a) was the result of undue
influence from the related person or (b) could adversely influence or appear to
adversely influence the judgment, decisions or actions of the director or
executive officer in meeting TI responsibilities or create obligations to other
organizations that may come in conflict with responsibilities to
TI.
No
related person arrangement will be approved unless it is determined to be in, or
not inconsistent with, the best interests of the company and its stockholders,
as the approving body or persons shall determine in good
faith.
The
chief compliance officer will provide periodic reports to the committee on
related person transactions. Any related person transaction brought to the
attention of the chief compliance officer or of which the chief compliance
officer becomes aware that is not approved pursuant to the process set forth
above shall be terminated as soon as
practicable.
Joseph F. Hubach, senior vice president, secretary, general counsel and
chief compliance officer of the company, is the brother of Francis P. Hubach,
Jr., who was a partner of the law firm of Jones Day in 2008. The company, whose
relationship with Jones Day began before Mr. J. Hubach joined the company,
engaged the services of Jones Day during 2008. Mr. F. Hubach provided no
services to the company. Mr. F. Hubach retired from Jones Day as of December 31,
2008. In accordance with TIs policy, the committee reviewed the details of this
relationship and, having determined that Mr. F. Hubach has no material interest,
direct or indirect, in the transactions between TI and Jones Day, approved the
continued engagement of Jones Day by the company. Mr. J. Hubach did not
participate in any discussions regarding this matter. Given the determination
that Mr. F. Hubach has no material interest, this relationship is not a related
person transaction. However, TI discloses it in the interest of
transparency.
Compensation committee interlocks
and insider participation
During
2008, Mr. Carp, Ms. Cox, Mr. Goode, Ms. Simmons and Ms. Whitman served on the
Compensation Committee. No committee member (i) was an officer or employee of
TI, (ii) was formerly an officer of TI, or (iii) had any relationship requiring
disclosure under the SECs rules governing disclosure of related person
transactions (Item 404 of Regulation S-K). No executive officer of TI served as
a director or member of the compensation committee of another entity, one of
whose directors or executive officers served as a member of our board of
directors or a member of the Compensation Committee.
Cost of
solicitation
The solicitation is made
on behalf of our board of directors. TI will pay the cost of soliciting these
proxies. We will reimburse brokerage houses and other custodians, nominees and
fiduciaries for reasonable expenses they incur in sending these proxy materials
to you if you are a beneficial holder of our
shares.
Without receiving additional compensation, officials and regular
employees of TI may solicit proxies personally, by telephone, fax or e-mail from
some stockholders if proxies are not promptly received. We have also hired
Georgeson Inc. to assist in the solicitation of proxies at a cost of $12,000
plus out-of-pocket expenses.
Stockholder proposals for
2010
If you wish to submit a proposal
for possible inclusion in TIs 2010 proxy material, we must receive your notice,
in accordance with rules of the SEC, on or before November 5, 2009. Proposals
are to be sent to: Texas Instruments Incorporated, 12500 TI Boulevard, MS 8658,
Dallas, Texas, 75243, Attn:
Secretary.
If you wish to submit a proposal at the 2010 annual meeting (but not seek
inclusion of the proposal in the companys proxy material), we must receive your
notice, in accordance with the companys by-laws, on or before January 16,
2010.
All
suggestions from stockholders concerning the companys business are welcome and
will be carefully considered by TIs management. To ensure that your suggestions
receive appropriate review, the Governance and Stockholder Relations Committee
from time to time reviews correspondence from stockholders and managements
responses. Stockholders are thereby given access at the board level without
having to resort to formal stockholder proposals. Generally, the board prefers
you present your views in this manner rather than through the process of formal
stockholder proposals. Please see page 54 for information on contacting the
board.
[ 94 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Quorum
requirement
A quorum of stockholders
is necessary to hold a valid meeting. If at least a majority of the shares of TI
stock issued and outstanding and entitled to vote are present in person or by
proxy, a quorum will exist.
Vote required
For all matters submitted at the meeting, including the
election of directors, an affirmative vote of the majority of the shares present
in person or by proxy and entitled to vote thereon is necessary for
approval.
We do not expect any matters to be presented for a vote at the annual
meeting other than (1) the election of directors, (2) the proposal to ratify the
appointment of the companys independent registered public accounting firm for
2009, (3) the proposal to approve the Texas Instruments 2009 Long-Term Incentive
Plan, (4) the proposal to approve the Texas Instruments 2009 Director
Compensation Plan and (5) the stockholder proposal. If you grant a proxy, the
persons named in the proxy will have the discretion to vote your shares on any
additional matters properly presented for a vote at the
meeting.
Under Delaware law and the companys Restated Certificate of
Incorporation and by-laws, the aggregate number of votes entitled to be cast by
all stockholders present in person or represented by proxy at the meeting,
whether those stockholders vote FOR, AGAINST or abstain from voting, will be
counted for purposes of determining the minimum number of affirmative votes
required for approval of such matters. The total number of votes cast FOR each
of these matters will be counted for purposes of determining whether sufficient
affirmative votes have been cast. An abstention from voting on a matter by a
stockholder present in person or represented by proxy at the meeting has the
same legal effect as a vote AGAINST the matter even though the stockholder or
interested parties analyzing the results of the voting may interpret such a vote
differently. TI has appointed independent inspectors of election to tabulate the
voting for the meeting.
Benefit plan
voting
If you are a participant in
the TI Contribution and 401(k) Savings Plan, or the TI 401(k) Savings Plan, you
are a named fiduciary under the plans and are entitled to direct the voting of
shares allocable to your accounts under these plans. The trustee administering
your plan will vote your shares in accordance with your instructions. If you
wish to instruct the trustee on the voting of shares held for your accounts, you
should do so by April 13, 2009, in the manner described in the notice of
meeting.
Additionally, participants under the plans are designated as named
fiduciaries for the purpose of voting TI stock held under the plans for which
no voting direction is received. TI shares held by the TI 401(k) savings plans
for which no voting instructions are received by April 13, 2009, will be voted
in the same proportions as the shares in the plans for which voting instructions
have been received by that date.
Section 16(a) beneficial ownership
reporting compliance
Section 16(a) of
the Securities Exchange Act of 1934 requires certain persons, including the
companys directors and executive officers, to file reports with the SEC
regarding beneficial ownership of certain equity securities of the company.
During 2008, all reports were timely filed.
Telephone and Internet voting
Registered stockholders and
benefit plan participants. Stockholders
with shares registered directly with Computershare (TIs transfer agent) and
participants who beneficially own shares in a TI benefit plan may vote
telephonically by calling (800) 690-6903 (within the U.S. and Canada only,
toll-free) or via the Internet at
www.proxyvote.com.
The telephone and Internet voting procedures are designed
to authenticate stockholders identities, to allow stockholders to give their
voting instructions and to confirm that stockholders instructions have been
recorded properly. TI has been advised by counsel that the telephone and
Internet voting procedures, which have been made available through Broadridge
Investor Communication Solutions, Inc., are consistent with the requirements of
applicable law.
Stockholders with shares registered in the name of a brokerage firm or bank. A number of brokerage firms and banks offer telephone and Internet voting options. These programs may differ from the program provided to registered stockholders and benefit plan participants. Check the information forwarded by your bank, broker or other holder of record to see which options are available to you.
Stockholders voting via the Internet should understand that there may be costs associated with electronic access, such as usage charges from telephone companies and Internet access providers, that must be borne by the stockholder.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 95 ]
Stockholders sharing the same
address
To reduce the expenses of
delivering duplicate proxy materials, we are taking advantage of the SECs
householding rules that permit us to deliver only one set of proxy materials
to stockholders who share an address unless otherwise requested. If you share an
address with another stockholder and have received only one set of proxy
materials, you may request a separate copy of these materials at no cost to you
by calling Investor Relations at (972) 995-3773 or by writing to Texas
Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, TX 75266-0199, Attn:
Investor Relations. For future annual meetings, you may request separate voting
materials, or request that we send only one set of proxy materials to you if you
are receiving multiple copies, by calling (800) 542-1061 or writing to Investor
Relations at the address given above.
Electronic delivery of proxy
materials
As an alternative to
receiving printed copies of these materials in future years, we are pleased to
offer stockholders the opportunity to receive proxy mailings electronically. To
request electronic delivery, please vote via the Internet at www.proxyvote.com
and, when prompted, enroll to receive or access proxy materials electronically
in future years. After the meeting date, stockholders holding shares through a
broker or bank may request electronic delivery by visiting
www.icsdelivery.com/ti and entering information for each account held by a bank
or broker. If you are a registered stockholder and would like to request
electronic delivery, please visit www-us.computershare.com/investor or call TI
Investor Relations at (972) 995-3773 for more information. If you are a
participant in a TI benefit plan and would like to request electronic delivery,
please call TI Investor Relations for more information.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 16, 2009. This 2009 proxy statement and the companys 2008 annual report are accessible at: www.proxyvote.com.
Sincerely, | |
Joseph F.
Hubach Senior Vice President, Secretary and General Counsel |
March 5, 2009
Dallas,
Texas
[ 96 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
Directions and other annual meeting information
Directions
From DFW airport: Take the North Airport exit to IH-635E. Take IH-635E to the Greenville Avenue exit. Turn right (South) on Greenville. Turn right (West) on Forest Lane. Texas Instruments will be on your right at the second traffic light. Please use the North entrance to the building.
From Love Field airport: Take Mockingbird Lane East to US-75N (Central Expressway). Travel North on 75N to the Forest Lane exit. Turn right (East) on Forest Lane. You will pass two traffic lights. At the third light, the entrance to Texas Instruments will be on your left. Please use the North entrance to the building.
Parking
There will be reserved parking for all visitors at the
North Lobby. Visitors with special needs requiring assistance will be
accommodated at the South Lobby entrance.
Security
Please be advised that TIs security policy forbids
weapons, cameras and audio/video recording devices inside TI buildings. All bags
will be subject to search upon entry into the building.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 97 ]
EXHIBIT A
TEXAS INSTRUMENTS 2009 LONG-TERM INCENTIVE PLAN
Dated
April 16, 2009
SECTION 1.
PURPOSE.
The Texas Instruments 2009
Long-Term Incentive Plan is intended as a successor plan to the Companys 2000
Long-Term Incentive Plan, 2003 Long-Term Incentive Plan and the predecessors
thereto. This Plan is designed to enhance the ability of the Company to attract
and retain exceptionally qualified individuals and to encourage them to acquire
a proprietary interest in the growth and performance of the Company.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth in this Section 2. Any definition of a performance measure used in connection with an Award described by Section 11(f) shall have the meaning commonly ascribed to such term by generally acceptable accounting principles as practiced in the United States. | |||
(a) | Affiliate shall mean (i) any entity that, directly or indirectly, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee. | ||
(b) | Award shall mean any Option, award of Restricted Stock, Restricted Stock Unit, Performance Unit or Other Stock-Based Award granted under the Plan. | ||
(c) | Award Agreement shall mean any written agreement, contract or other instrument or document evidencing an Award granted under the Plan, which may, but need not, be executed or acknowledged by a Participant. An Award Agreement may be in electronic form. | ||
(d) | Board shall mean the board of directors of the Company. | ||
(e) | Cash Flow for a period shall mean net cash provided by operating activities. | ||
(f) | Code shall mean the Internal Revenue Code of 1986, as amended from time to time. | ||
(g) | Committee shall mean a committee of the Board designated by the Board to administer the Plan. Unless otherwise determined by the Board, the Compensation Committee designated by the Board shall be the Committee under the Plan. | ||
(h) | Company shall mean Texas Instruments Incorporated, together with any successor thereto. | ||
(i) | Cycle Time shall mean the actual time a specific process relating to a product or service of the Company takes to accomplish. | ||
(j) | Earnings Before Income Taxes shall mean income from continuing operations plus provision for income taxes. | ||
(k) | Earnings Before Income Taxes, Depreciation and Amortization or EBITDA shall mean income from continuing operations plus (i) provision for income taxes, (ii) depreciation expense and (iii) amortization expense. | ||
(l) | Earnings Per Share for a period shall mean diluted earnings per common share from continuing operations before extraordinary items. | ||
(m) | Executive Group shall mean every person who is expected by the Committee to be both (i) a covered employee as defined in Section 162(m) of the Code as of the end of the taxable year in which an amount related to or arising in connection with the Award may be deducted by the Company, and (ii) the recipient of taxable compensation of more than $1,000,000 for that taxable year. | ||
(n) | Fair Market Value shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. | ||
(o) | Free Cash Flow for a period shall mean net cash provided by operating activities of continuing operations less additions to property, plant and equipment. | ||
(p) | Gross Profit for a period shall mean net revenue less cost of revenue. | ||
(q) | Gross Profit Margin for a period shall mean Gross Profit divided by net revenue. | ||
(r) | Incentive Stock Option shall mean an option granted under Section 6 that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto. | ||
(s) | Manufacturing Process Yield shall mean the good units produced as a percent of the total units processed. | ||
(t) | Market Share shall mean the percent of sales of the total available market in an industry, product line or product attained by the Company or one or more of its business units, product lines or products during a time period. | ||
(u) | Net Revenue Per Employee in a period shall mean net revenue divided by the average number of employees, with average defined as the sum of the number of employees at the beginning and ending of the period divided by two. | ||
(v) | Non-Qualified Stock Option shall mean an option granted under Section 6 that is not intended to be an Incentive Stock Option. | ||
(w) | Option shall mean an Incentive Stock Option or a Non-Qualified Stock Option. | ||
(x) | Other Stock-Based Award shall mean any right granted under Section 10. | ||
(y) | Participant shall mean an individual granted an Award under the Plan. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ A-1 ]
(z) | Performance Unit shall mean any right granted under Section 8. | ||
(aa) | Plan shall mean this Texas Instruments 2009 Long-Term Incentive Plan. | ||
(bb) | Operating Profit shall mean revenue less (i) cost of revenue, (ii) research and development expense and (iii) selling, general and administrative expense. | ||
(cc) | Restricted Stock shall mean any Share granted under Section 7. | ||
(dd) | Restricted Stock Unit shall mean a contractual right granted under Section 7 that is denominated in Shares, each of which represents a right to receive the value of a Share (or a percentage of such value, which percentage may be higher than 100%) on the terms and conditions set forth in the Plan and the applicable Award Agreement. | ||
(ee) | Return on Assets for a period shall mean net income divided by average total assets, with average defined as the sum of the amount of assets at the beginning and ending of the period divided by two. | ||
(ff) | Return on Capital for a period shall mean net income divided by stockholders equity. | ||
(gg) | Return on Common Equity for a period shall mean net income divided by total stockholders equity, less amounts, if any, attributable to preferred stock. | ||
(hh) | Return on Invested Capital for a period shall mean net income divided by the sum of stockholders equity and long-term debt. | ||
(ii) | Return on Net Assets for a period shall mean net income divided by the difference of average total assets less average non-debt liabilities, with average defined as the sum of assets or liabilities at the beginning and ending of the period divided by two. | ||
(jj) | Revenue Growth shall mean the percentage change in revenue from one period to another. | ||
(kk) | Shares shall mean shares of the common stock of the Company, $1.00 par value. | ||
(ll) | Stock Appreciation Right or SAR shall mean any right granted pursuant to Section 9 to receive, upon exercise by the Participant, the excess of (i) the Fair Market Value of one Share on the date of exercise or any date or dates during a specified period before the date of exercise over (ii) the grant price of the right, which grant price, except in the case of Substitute Awards, shall not be less than the Fair Market Value of one Share on the date of grant of the right. | ||
(mm) | Substitute Awards shall mean Awards granted in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or with which the Company combines. | ||
(nn) | Total Stockholder Return shall mean the sum of the appreciation in stock price and dividends paid on common stock over a given period of time. |
SECTION 3. ELIGIBILITY. | |||
(a) | Any individual who is employed by the Company or any Affiliate, and any individual who provides services to the Company or any Affiliate as an independent contractor, including any officer or employee-director, shall be eligible to be selected to receive an Award under the Plan. | ||
(b) | An individual who has agreed to accept employment by, or to provide services to, the Company or an Affiliate shall be deemed to be eligible for Awards hereunder as of commencement of employment. | ||
(c) | Directors who are not full-time or part-time officers or employees are not eligible to receive Awards hereunder. | ||
(d) | Holders of options and other types of Awards granted by a company acquired by the Company or with which the Company combines are eligible for grant of Substitute Awards hereunder. |
SECTION 4. ADMINISTRATION. | |||
(a) | The Plan shall be administered by the Committee. The Committee shall be appointed by the Board. A director may serve as a member or alternate member of the Committee only during periods in which the director is (i) independent within the meaning of the rules of the New York Stock Exchange and the Companys director independence standards and (ii) an outside director as described in Section 162(m) of the Code. | ||
(b) | Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards (including Substitute Awards) to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights, or other matters are to be calculated in connection with) Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards, or other property, or canceled, forfeited or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine, consistent with Section 11(g), whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan, including adopting sub-plans and addenda for Participants outside the United States to achieve favorable tax results or facilitate compliance with applicable laws; (ix) determine whether and to what extent Awards should comply or continue to comply with any requirement of statute or regulation; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. |
[ A-2 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
(c) | All decisions of the Committee shall be final, conclusive and binding upon all parties, including the Company, the stockholders and the Participants. | ||
SECTION 5. SHARES AVAILABLE FOR AWARDS. | |||
(a) | Subject to adjustment as provided in this Section 5, the number of Shares available for issuance under the Plan shall be 75,000,000 shares. Notwithstanding the foregoing and subject to adjustment as provided in Section 5(e), no Participant may receive Options and SARs under the Plan in any calendar year that relate to more than 4,000,000 Shares. | ||
(b) | If, after the effective date of the Plan, (i) any Shares covered by an Award, or to which such an Award relates, are forfeited or (ii) any Award expires or is cancelled or otherwise terminated, then the number of Shares available for issuance under the Plan shall increase, to the extent of any such forfeiture, expiration, cancellation or termination. For purposes of this Section 5(b), awards and options granted under any previous option or long-term incentive plan of the Company (other than a Substitute Award granted under any such plan) shall be treated as Awards. For the avoidance of doubt, the number of Shares available for issuance under the Plan shall not be increased by: (i) the withholding of Shares as a result of the net settlement of an outstanding Option or SAR; (ii) the delivery of Shares to pay the exercise price or withholding taxes relating to an Award; or (iii) the repurchase of Shares on the open market using the proceeds of an Options exercise. | ||
(c) | Any Shares underlying Substitute Awards shall not be counted against the Shares available for granting Awards. | ||
(d) | Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, of treasury Shares or of both. | ||
(e) | In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall equitably adjust any or all of (i) the number and type of Shares (or other securities or property) which thereafter may be made the subject of Awards, including the aggregate and individual limits specified in Section 5(a), (ii) the number and type of Shares (or other securities, cash or property) subject to outstanding Awards, and (iii) the grant, purchase, or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number. Any such adjustment with respect to a stock right outstanding under the Plan, as defined in Section 409A of the Code, shall be made in a manner that is intended to avoid the imposition of any additional tax or penalty under Section 409A. | ||
SECTION 6. OPTIONS. | |||
(a) | The Committee is hereby authorized to grant Options to Participants with the terms and conditions described in this Section 6 and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine. | ||
(b) | The purchase price per Share under an Option shall be determined by the Committee; provided, however, that, except in the case of Substitute Awards, such purchase price shall not be less than the Fair Market Value of a Share on the date of grant of such Option. | ||
(c) | The term of each Option shall be fixed by the Committee but shall not exceed 10 years; provided, however, that the Committee may provide for a longer term to accommodate regulations in non-U.S. jurisdictions that require a minimum exercise or vesting period following a Participants death to achieve favorable tax results or comply with local law. | ||
(d) | The Committee shall determine the time or times at which an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other Awards, or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. | ||
(e) | The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder, but the Company makes no representation that any options will qualify, or continue to qualify as an Incentive Stock Option and makes no covenant to maintain Incentive Stock Option status. | ||
SECTION 7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS. | |||
(a) | The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the terms and conditions described in this Section 7 and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine. | ||
(b) | Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ A-3 ]
(c) | Any share of Restricted Stock granted under the Plan may be evidenced in such manner as the Committee may deem appropriate including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. | ||
(d) | Except as otherwise determined by the Committee, upon termination of employment or cessation of the provision of services (as determined under criteria established by the Committee) for any reason during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units still, in either case, subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. | ||
SECTION 8. PERFORMANCE UNITS. | |||
(a) | The Committee is hereby authorized to grant Performance Units to Participants with terms and conditions as the Committee shall determine not inconsistent with the provisions of the Plan. | ||
(b) | Subject to the terms of the Plan, a Performance Unit granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards, or other property and (ii) shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Unit, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Unit granted and the amount of any payment or transfer to be made pursuant to any Performance Unit shall be determined by the Committee. | ||
SECTION 9. STOCK APPRECIATION RIGHTS (SARs). | |||
(a) | The Committee is hereby authorized to grant SARs to Participants with terms and conditions as the Committee shall determine not inconsistent with the provisions of the Plan. | ||
(b) | The term of each SAR shall be fixed by the Committee but shall not exceed 10 years; provided, however, that the Committee may provide for a longer term to accommodate regulations in non-U.S. jurisdictions that require a minimum exercise or vesting period following a Participants death. | ||
SECTION 10. OTHER STOCK-BASED AWARDS. The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares) as are deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 10 shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, Shares, other securities, other Awards, or other property, or any combination thereof, as the Committee shall determine, the value of which consideration, as established by the Committee, shall, except in the case of Substitute Awards, not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. | |||
SECTION 11. GENERAL PROVISIONS APPLICABLE TO AWARDS. | |||
(a) | Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. | ||
(b) | Awards may, in the discretion of the Committee, be granted either alone or in addition to or in tandem with any other Award or any award granted under any other plan of the Company. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company, may be granted either at the same time as or at a different time from the grant of such other Awards or awards. | ||
(c) | Subject to the terms of the Plan, payments or transfers to be made by the Company upon the grant, exercise or settlement of an Award may be made in such form or forms as the Committee shall determine including, without limitation, cash, Shares, other securities, other Awards, or other property, or any combination thereof, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with Section 11(g) and rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or, with respect only to Awards other than Options and SARs, the grant or crediting of dividend equivalents in respect of installment or deferred payments. | ||
(d) | Unless the Committee shall otherwise determine, (i) no Award, and no right under any such Award, shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant, and to receive any property distributable, with respect |
[ A-4 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
to any Award upon the death of the Participant; (ii) each Award, and each right under any Award, shall be exercisable during the Participants lifetime only by the Participant or, if permissible under applicable law, by the Participants guardian or legal representative; and (iii) no Award, and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company. The provisions of this paragraph shall not apply to any Award which has been fully exercised, earned or paid, as the case may be, and shall not preclude forfeiture of an Award in accordance with the terms thereof. | |||
(e) | All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable Federal, state or foreign securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. | ||
(f) | Every Award (other than an Option or SAR) to a member of the Executive Group that the Committee intends to constitute qualified performance-based compensation for purposes of Section 162(m) of the Code shall include a pre-established formula, such that payment, retention or vesting of the Award is subject to the achievement during a performance period or periods, as determined by the Committee, of a level or levels, on an absolute basis or relative to other companies, as determined by the Committee, of one or more of the following performance measures: (i) Cash Flow, (ii) Cycle Time, (iii) Earnings Before Income Taxes, (iv) Earnings Per Share, (v) EBITDA, (vi) Free Cash Flow, (vii) Gross Profit, (viii) Gross Profit Margin, (ix) Manufacturing Process Yield, (x) Market Share, (xi) net income, (xii) Net Revenue Per Employee, (xiii) Operating Profit, (xiv) Return on Assets, (xv) Return on Capital, (xvi) Return on Common Equity, (xvii) Return on Invested Capital, (xviii) Return on Net Assets, (xix) Revenue Growth or (xx) Total Stockholder Return. For any Award subject to any such pre-established formula, no more than $5,000,000 can be paid in satisfaction of such Award to any Participant, provided, however, that if the performance formula relating to such Award is expressed in Shares, the maximum limit shall be 4,000,000 Shares in lieu of such dollar limit. | ||
(g) | Unless the Committee expressly determines otherwise in the Award Agreement, any Award of an Option, SAR, or Restricted Stock is intended to qualify as a stock right exempt under Section 409A of the Code, and the terms of the Award Agreement and any related rules and procedures adopted by the Committee shall reflect such intention. Unless the Committee expressly determines otherwise in the Award Agreement, with respect to any other Award that would constitute deferred compensation within the meaning of Section 409A of the Code, the Award Agreement shall set forth the time and form of payment and the election rights, if any, of the holder in a manner that is intended to avoid the imposition of additional taxes and penalties under Section 409A. The Company makes no representation or covenant that any Award granted under the Plan will comply with Section 409A. | ||
(h) | The Committee shall not have the authority to provide in any Award granted hereunder for the automatic award of an Option upon the exercise or settlement of such Award. | ||
SECTION 12. AMENDMENT AND TERMINATION. | |||
(a) | Unless otherwise expressly provided in an Award Agreement or in the Plan, the Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, however, that no such amendment, alteration, suspension, discontinuation or termination shall be made without (i) stockholder approval if such approval is necessary to comply with the listing requirements of the New York Stock Exchange or (ii) the consent of the affected Participants, if such action would adversely affect the rights of such Participants under any outstanding Award. Notwithstanding anything to the contrary herein, the Committee may amend the Plan in such manner as may be necessary to enable the Plan to achieve its stated purposes in any jurisdiction outside the United States in a tax-efficient manner and in compliance with local rules and regulations. | ||
(b) | The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate, any Award theretofore granted, prospectively or retroactively, without the consent of any relevant Participant or holder or beneficiary of an Award, provided, however, that (i) no such action shall impair the rights of any affected Participant or holder or beneficiary under any Award theretofore granted under the Plan; (ii) except as provided in Section 5(e), no such action shall reduce the exercise price of any Option or SAR established at the time of grant thereof; and (iii) except in connection with a corporate transaction involving the Company (including an event described in Section 5(e)), an Option or SAR may not be terminated in exchange for (x) a cash amount greater than the excess, if any, of the Fair Market Value of the underlying Shares on the date of cancellation over the exercise price times the number of Shares outstanding under the Award, (y) another Option or SAR with an exercise price that is less than the exercise price of the cancelled Option or SAR, or (z) any other type of Award. Notwithstanding the foregoing, the Committee may terminate Awards granted in any jurisdiction outside the United States prior to their expiration date for consideration determined by the Committee when, in the Committees judgment, the administrative burden of continuing Awards in such locality outweighs the benefit to the Company. Any such action taken with respect to an Award intended to be a stock right exempt under Section 409A of the Code shall be consistent with the requirements for exemption under Section 409A, and any such action taken with respect to an Award that constitutes deferred |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ A-5 ]
compensation under Section 409A shall be in compliance with the requirements of Section 409A. The Committee also may modify any outstanding Awards to comply with Section 409A without consent from Participants. The Company makes no representation or covenant that any action taken pursuant to this Section 12(b) will comply with Section 409A. | ||
(c) |
The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. Any such action taken with respect to an Award intended to be a stock right exempt under Section 409A of the Code shall be consistent with the requirements for exemption under Section 409A, and any such action taken with respect to an Award that constitutes deferred compensation under Section 409A shall be in compliance with the requirements of Section 409A. However, the Company makes no representation or covenants that Awards will comply with Section 409A. | |
(d) |
The Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. | |
SECTION 13. MISCELLANEOUS. | ||
(a) |
No employee, independent contractor, Participant or other person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of employees, independent contractors, Participants, or holders or beneficiaries of Awards, either collectively or individually, under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. | |
(b) |
The Committee may delegate to another committee of the Board, one or more officers or managers of the Company, or a committee of such officers or managers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify, waive rights with respect to, alter, discontinue, suspend or terminate Awards held by, employees who are not officers or directors of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended; provided, however, that any such delegation to management shall conform with the requirements of the General Corporation Law of Delaware, as in effect from time to time. | |
(c) |
The Company shall be authorized to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards, or other property) of withholding taxes (including income tax, social insurance contributions, payment on account and other taxes) due in respect of an Award, its exercise, or any payment or transfer of Shares, cash or property under such Award or under the Plan and to take such other action (including, without limitation, providing for elective payment of such amounts in cash, Shares, other securities, other Awards or other property by the Participant) as may be necessary in the opinion of the Company to satisfy all obligations of the Company for the payment of such taxes. | |
(d) |
Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. | |
(e) |
The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ or service of the Company or any Affiliate. Further, the Company or the applicable Affiliate may at any time dismiss a Participant from employment or terminate the services of an independent contractor, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement or in any other agreement binding the parties. | |
(f) |
If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. | |
(g) |
Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company. | |
(h) |
No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. |
[ A-6 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
SECTION 14. EFFECTIVE DATE OF THE
PLAN.
The Plan shall be effective as
of the date of its approval by the stockholders of the Company.
SECTION 15. TERM OF THE PLAN.
No Award shall be granted under the
Plan after the tenth anniversary of the effective date. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date, and the authority of
the Committee and the Board under Section 12 to amend, alter, adjust, suspend,
discontinue, or terminate any such Award, or to waive any conditions or rights
under any such Award, and to amend the Plan, shall extend beyond such
date.
SECTION 16. GOVERNING LAW.
The Plan shall be construed in
accordance with and governed by the laws of the State of Texas without giving
effect to the principles of conflict of laws thereof.
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ A-7 ]
EXHIBIT B
TEXAS INSTRUMENTS 2009 DIRECTOR COMPENSATION
PLAN
Dated April 16, 2009
SECTION 1.
PURPOSE.
The Texas Instruments 2009
Director Compensation Plan (the Plan) is intended as a successor plan to the
Companys 2003 Director Compensation Plan (2003 Plan). This Plan is designed
to attract and retain qualified individuals to serve as directors of the Company
and to increase the proprietary and vested interest of such directors in the
growth and performance of the Company. This Plan is effective for Awards granted
on or after the Effective Date. With respect to Deferred Compensation, as of the
Effective Date, the Post-2004 Accounts (as defined in the 2003 Plan) of the
participants in the 2003 Plan are hereby merged into the Deferred Compensation
accounts under this Plan and the amounts in those Accounts shall be governed
thereafter by the terms of this Plan. Any elections made under Section 8 of the
2003 Plan shall remain applicable to and shall govern the Deferred Compensation
Accounts of this Plan unless changed by the Participant in accordance with the
terms of this Plan.
SECTION 2.
DEFINITIONS. | ||
(a) | Account means a Cash Account or Stock Unit Account established under Section 9 of the Plan. | |
(b) | Administrator means the Board or a committee of directors designated by the Board to administer the Plan. | |
(c) | Award means any Option, Restricted Stock Unit, Stock Appreciation Right or other stock-based award under the Plan. | |
(d) | Award Agreement means any written agreement, contract or other instrument or document evidencing any Award granted under the Plan, which may, but need not, be executed or acknowledged by a Director. An Award Agreement may be in electronic form. | |
(e) | Board means the Board of Directors of the Company, as constituted from time to time. | |
(f) | Cash Account means the bookkeeping accounts established or maintained pursuant to Section 9(b)(i) on behalf of each Director who elects pursuant to Section 9(b) to have any of his or her Deferred Compensation credited to a cash account. | |
(g) | Change in Control means an event when (i) any Person, alone or together with its Affiliates and Associates or otherwise, shall become an Acquiring Person otherwise than pursuant to a transaction or agreement approved by the Board prior to the time the Acquiring Person became such, or (ii) a majority of the Board shall change within any 24-month period unless the election or the nomination for election by the Companys stockholders of each new director has been approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period. For the purposes hereof, the terms Person, Affiliates, Associates and Acquiring Person shall have the meanings given to such terms in the Rights Agreement dated as of June 17, 1998, between the Company and Harris Trust and Savings Bank. Notwithstanding the foregoing, if a Restricted Stock Unit granted under this Plan is or becomes subject to Section 409A of the Code, then with respect to such Restricted Stock Unit Change in Control means a change in control event as to the Company, as defined in Section 409A of the Code and the regulations thereunder. | |
(h) | Code means the Internal Revenue Code of 1986, as amended. | |
(i) | Company means Texas Instruments Incorporated, together with any successor thereto. | |
(j) | Deferred Cash Compensation means that portion of any Directors Eligible Compensation that is payable in cash and that he or she elects pursuant to Section 9(a) to be deferred in accordance with this Plan. | |
(k) | Deferred Compensation means that portion of any Directors Eligible Compensation that he or she elects pursuant to Section 9(a) to be deferred in accordance with this Plan. | |
(l) | Deferred Compensation Account means a Cash Account or Stock Unit Account containing amounts earned and deferred under this Plan or the 2003 Plan and Restricted Stock Units, the receipt of which a Director has elected to defer. | |
(m) | Director means a member of the Board who is not an employee of the Company or any subsidiary thereof. | |
(n) | Effective Date means the date this Plan is approved by stockholders of the Company. | |
(o) | Eligible Compensation means (i) the cash portion of any compensation payable by the Company to a Director for his or her services as a Director but shall not include any reimbursement by the Company of expenses incurred by a Director incidental to attendance at a meeting of the Companys stockholders, the Board, or any committee of the Board, or of any other expense incurred on behalf of the Company, (ii) any Restricted Stock Units granted by the Company to a Director for his or her services as a Director, and (iii) any dividend equivalents paid on Restricted Stock Units pursuant to Section 7(f). | |
(p) | Fair Market Value means the closing price of the Shares on the date specified (or, if there is no trading on the New York Stock Exchange on such date, then on the first previous date on which there is such trading) as reported in New York Stock Exchange Composite Transactions in The Wall Street Journal or by WSJ.com or Bloomberg L.P., or if unavailable, then by reference to any other source as may be deemed appropriate by the G&SR Committee. | |
(q) | G&SR Committee means the Governance and Stockholder Relations Committee of the Board or any successor committee. | |
(r) | Option means an option granted under Section 6. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ B-1 ]
(s) | Participant means an individual who has received an Award or established an Account under the Plan. | ||
(t) | Plan means this Texas Instruments 2009 Director Compensation Plan. | ||
(u) | Restricted Stock Unit means a contractual right granted under Section 7 that is denominated in Shares, each of which represents a right to receive a Share on the terms and conditions set forth in the Plan and the applicable Award Agreement. | ||
(v) | Secretary means the Secretary of the Company. | ||
(w) | Separation from Service means a termination of services provided by a Participant as a member of the Board or of the board of directors of any other member of the controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company (for purposes of this Section 2(w), the controlled group members other than the Company are referred to collectively as ERISA Affiliates), whether such termination is voluntary or involuntary, as determined by the Administrator in accordance with Treas. Reg. §1.409A-1(h). In determining whether a Participant has experienced a Separation from Service as a member of the Board or of a board of directors of an ERISA Affiliate, the following provisions shall apply: | ||
(i) | If a Director also provides services to the Company or any ERISA Affiliate as an employee at the time of his Separation from Service as a member of the Board, the services such Participant provides as an employee shall not be taken into account in determining whether the Participant has a Separation from Service as a Director for purposes of this Plan (provided that this Plan is not, at the time of such determination, aggregated under Treas. Reg. §1.409A-1(c)(2)(ii) with any plan in which the Participant participates as an employee). | ||
(ii) | A Participant shall be considered to have experienced a termination of services when the facts and circumstances indicate that the Participant, the Company and each ERISA Affiliate reasonably anticipate that the Participant will perform no further services for the Company or any ERISA Affiliate as a member of the Board (or the board of directors of any ERISA Affiliate), and the Participants term as a member of the Board has expired. | ||
(iii) | If a Director is also providing additional services to the Company as an independent contractor, he or she cannot have a Separation from Service for purposes of Section 409A of the Code until he or she has separated from service both as a Director and as an independent contractor. | ||
(x) | Shares shall mean shares of the common stock of the Company, $1.00 par value. | ||
(y) | Specified Employee means any Participant who is determined to be a key employee (as defined under Section 416(i) of the Code without regard to paragraph (5) thereof) for the applicable period, as determined annually by the Administrator in accordance with Treas. Reg. §1.409A-1(i). In determining whether a Participant is a Specified Employee, the following provisions shall apply: | ||
(i) | Identification of the individuals who fall within the above-referenced definition of key employee shall be based upon the 12-month period ending on each December 31st (referred to below as the identification date). In applying the applicable provisions of Code Section 416(i) to identify such individuals, compensation shall be determined in accordance with Treas. Reg. §1.415(c)2(a) without regard to (i) any safe harbor provided in Treas. Reg. §1.415(c)-2(d), (ii) any of the special timing rules provided in Treas. Reg. §1.415(c)-2(e), and (iii) any of the special rules provided in Treas. Reg. §1.415(c)-2(g); and | ||
(ii) | Each Participant who is among the individuals identified as a key employee in accordance with part (i) of this Section 2(y) shall be treated as a Specified Employee for purposes of this Plan if such Participant experiences a Separation from Service during the 12-month period that begins on the April 1st following the applicable identification date. | ||
(z) | Stock Appreciation Right or SAR means a right granted pursuant to Section 8 to receive, upon exercise by the | ||
Participant, the excess of (i) the Fair Market Value of one Share on the date of exercise or any date or dates during a specified period before the date of exercise over (ii) the grant price of the right, which grant price shall not be less than the Fair Market Value of one Share on the date of grant of the right. | |||
(aa) | Stock Unit Account means the bookkeeping accounts established, pursuant to Section 9(b)(ii), on behalf of each Director who elects, pursuant to Section 9(b), to have any of his or her Deferred Cash Compensation credited to a stock unit account. | ||
(bb) | Unforeseeable Emergency means a severe financial hardship to the Participant resulting from (i) an illness or accident of the Participant or the Participants spouse, beneficiary, or dependent (as defined in Section 152 of the Code, without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B) of the Code), (ii) loss of the Participants property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participants control, all as determined by the Administrator based on the relevant facts and circumstances and as provided for in Treas. Reg. §1.409A-3(i)(3) or any successor provision. | ||
(cc) | Year means a calendar year. |
SECTION 3.
ELIGIBILITY.
Each Director shall be
eligible to defer Eligible Compensation and to receive Awards under the
Plan.
[ B-2 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
SECTION 4.
ADMINISTRATION.
This Plan shall be
administered by the Administrator. Subject to the terms of the Plan and
applicable law, the Administrator shall have full power and authority to: (i)
interpret, construe and administer the Plan and any instrument or agreement
relating to, or Award granted or Accounts established under, the Plan; (ii)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it deems appropriate for the proper administration of the Plan; and
(iii) make any other determination and take any other action that it deems
necessary or desirable for the administration of this Plan. All decisions of the
Administrator shall be final, conclusive and binding upon all parties, including
the Company, the stockholders and the Directors.
SECTION 5. SHARES SUBJECT TO THE PLAN. | ||
(a) | Subject to adjustment as provided in this Section 5, the number of Shares available for issuance under the Plan shall be 2,000,000 Shares. | |
(b) | If, after the effective date of the Plan, (i) any Shares covered by an Award or Stock Unit Account, or to which such an Award relates, are forfeited, or (ii) if an Award or Account expires or is cancelled or is otherwise terminated without the delivery of Shares, then such Shares, to the extent of any such forfeiture, expiration, cancellation, or termination, shall again be, or shall become, available for issuance under the Plan. For purposes of this Section, awards and options granted under any previous director compensation plan of the Company shall be treated as Awards, and accounts established under any such plan shall be treated as Accounts. For the avoidance of doubt, the number of Shares available for issuance under the Plan shall not be increased by: (1) the withholding of Shares as a result of the net settlement of an outstanding Option; (2) the delivery of Shares to pay the exercise price or withholding taxes relating to an Award; or (3) the repurchase of Shares on the open market using the proceeds of an Options exercise. | |
(c) | Any Shares delivered pursuant to an Award or Stock Unit Account may consist, in whole or in part, of authorized and unissued Shares, of treasury Shares or of both. | |
(d) | In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Administrator shall equitably adjust any or all of (i) the number of outstanding Restricted Stock Units, (ii) the number and type of Shares credited to Stock Unit Accounts, (iii) the number and type of Shares subject to Options and SARs, (iv) the exercise price with respect to any Option or SAR or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Option or SAR, and (v) the aggregate limit specified in Section 5(a); provided, however, that no fractional Restricted Stock Units or Shares shall be issued or outstanding hereunder. Any such adjustment with respect to a Stock Right outstanding under the Plan as defined in Section 409A of the Code, shall be made in a manner that is intended to avoid imposition of any additional tax or penalty under Section 409A. |
SECTION 6.
OPTIONS. | ||
(a) | Price and Term of Options. The purchase price per share of Shares deliverable upon the exercise of each Option shall be 100% of the Fair Market Value per share of the Shares on the date the Option is granted. In each Year, the effective date for the annual grant of options to the Companys executive officers by the Compensation Committee of the Board (or any successor committee) shall be the date Options are granted; provided that in any Year in which the Compensation Committee does not grant options to any of the Companys executive officers in connection with the annual compensation review process, then the effective date of the first options granted by the Compensation Committee in such Year shall be the date Options are granted. Each Option shall have a term not to exceed ten years from the date of grant. | |
(b) | Payment. The Secretary shall determine the method or methods by which, and the form or forms, including, without limitation, cash, Shares, or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect to an Option may be made or deemed to have been made. | |
(c) | Exercisability. Subject to Sections 6(d) and 6(e), Options shall become exercisable in four equal annual installments commencing on the first anniversary date of the grant. | |
(d) | Change in Control. In the event of a Change in Control, the provisions of Sections 6(c) and 6(e) shall not apply (except for Section 6(e)(iv)(B), which shall apply) and Options outstanding under the Plan shall be immediately exercisable in full and continue to full term. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ B-3 ]
(e) | Termination of Service as a Director. Except under the circumstances described in Section 6(d), the effect of a Participants termination of service as a member of the Board shall be as follows: | |||
(i) | Termination for cause: All outstanding Options held by the Participant shall be canceled immediately upon termination. | |||
(ii) | Death: All outstanding Options held by the Participant shall continue to full term, becoming exercisable in accordance with Section 6(c), and shall be exercisable by such Participants heirs or legal representatives. | |||
(iii) | Permanent disability, termination after 8 years of service, or termination for reason of ineligibility to stand for reelection under the Companys By-Laws: All outstanding Options held by the Participant shall continue to full term, becoming exercisable in accordance with Section 6(c). | |||
(iv) | Other: For any termination other than those specified above, all outstanding Options held by the Participant shall be exercisable for 30 days after the date of termination, only to the extent that such Options were exercisable on the date of termination, except as follows: | |||
(A) | If the Participant dies within 30 days after his or her termination, then such Participants heirs may exercise the Options for a period of up to one year after the Participants death, but only to the extent any unexercised portion was exercisable on the date of termination. | |||
(B) | If the Participants termination occurs within 30 days before the effective date of a Change in Control, then the Change in Control will be deemed to have occurred first and the Options outstanding shall be immediately exercisable in full by the Participant as of the date of the Change in Control and continue to full term. | |||
(f) | Option Agreement. Each Option granted hereunder shall be evidenced by an Award Agreement with the Company, which shall contain the terms and provisions set forth herein and shall otherwise be consistent with the provisions of the Plan. |
SECTION 7. RESTRICTED STOCK
UNITS. | |||
(a) | Effective Date of Annual Grant. In each Year, the effective date for the annual grant of restricted stock units to the Companys executive officers by the Compensation Committee of the Board (or any successor committee) shall be the date Restricted Stock Units are granted annually under (ii) of the first paragraph of this Section; provided that in any Year in which the Compensation Committee does not grant restricted stock units to any of the Companys executive officers in connection with the annual compensation review process, then the effective date of the first restricted stock units granted by the Compensation Committee in such Year shall be the date such Restricted Stock Units are granted. | ||
(b) | Vesting and Settlement. Subject to Section 7(c) and subject to a Directors election to defer the settlement of Restricted Stock Units pursuant to Section 9, the shares covered by the Restricted Stock Units shall be paid or settled as soon as practicable after the fourth anniversary of the date of grant. | ||
(c) | Change in Control. In the event of a Change in Control, the provisions of Sections 7(b) and (d) shall not apply (except for Section 7(d)(iv), which shall apply), any election by a Director to defer settlement of Restricted Stock Units pursuant to Section 9 shall be cancelled and any Restricted Stock Units outstanding under this Plan shall vest and be paid immediately. | ||
(d) | Termination of Service as a Director. The effect of a Participants termination of service as a member of the Board shall be as follows: | ||
(i) | Death. All outstanding Restricted Stock Units held by the Participant shall continue to full term subject to the other terms and conditions of this Plan, and shares shall be issued to such Participants heirs at such times and in such manner as if the Participant were still a member of the Board. | ||
(ii) | Permanent disability, termination after 8 years of service, or termination for reason of ineligibility to stand for reelection under the Companys By-Laws. All outstanding Restricted Stock Units held by the Participant shall continue to full term subject to the other terms and conditions of this Plan, and shares shall be issued to such Participant at such times and in such manner as if the Participant were still a member of the Board. | ||
(iii) | Other. For any termination other than those specified above, all outstanding Restricted Stock Units held by the Participant shall terminate and become void without any shares being issued, except as provided in Section 7(c). | ||
(iv) | If a Participants termination of service (other than for cause) occurs within 30 days of a Change in Control, then the Change in Control shall be deemed to have occurred first and the provisions of Section 7(c) shall apply. | ||
(e) | Restricted Stock Unit Agreement. Each Restricted Stock Unit Award granted under this Section 7(a) shall be evidenced by an Award Agreement with the Company, which shall contain the terms and conditions set forth herein and shall otherwise be consistent with the provisions of this Plan. | ||
(f) | Right to Dividend Equivalents. Each recipient of Restricted Stock Units under this Plan shall have the right, during the period when such Restricted Stock Units are outstanding and prior to the termination, forfeiture or payment or settlement thereof, to receive dividend equivalents equal to the amount or value of any cash or other distributions or dividends payable on the same |
[ B-4 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
number of Shares. The Company shall accumulate dividend equivalents on each dividend payment date and, unless a Director has elected to defer receipt of such dividend equivalents pursuant to Section 9, pay such accumulated amounts without interest in December of each fiscal year, but no later than March 15 of the calendar year following the calendar year in which the related dividend is declared. | ||
(g) | Issuance of Shares. A stock certificate or certificates shall be registered and issued or other indicia of ownership of shares shall be issued, in the name or for the benefit of the holder of Restricted Stock Units and delivered to such holder as soon as practicable after such Restricted Stock Units have become payable or settleable in accordance with the terms of the Plan. |
SECTION 8. STOCK APPRECIATION RIGHTS (SARs). | ||
(a) | SARs may be granted to Directors with such terms and conditions as the Administrator shall determine not inconsistent with the provisions of the Plan. | |
(b) | The term of each SAR shall be fixed by the Administrator but shall not exceed 10 years. |
SECTION 9. DEFERRED COMPENSATION. | ||||
(a) | Deferral Election. Each Director may elect, with respect to any Year, that all or any percentage of his or her Eligible Compensation be deferred in accordance with the terms of this Plan. | |||
(b) | Cash Compensation Investment Alternatives. Each Director may elect that his or her Deferred Cash Compensation for any Year be credited to a Cash Account or a Stock Unit Account or to any combination thereof. | |||
(i) | Cash Accounts. | |||
(A) | The Company shall establish and maintain, as appropriate, separate unfunded Cash Accounts for each Director who has elected that any portion of his or her Deferred Cash Compensation be credited to a Cash Account. | |||
(B) | As of the date on which any amount of a Directors Deferred Cash Compensation becomes payable, his or her Cash Account shall be credited with an amount equal to that portion of such Deferred Cash Compensation as such Director has elected be credited to his or her Cash Account. | |||
(C) | As of the last day of each month, interest on each Cash Account shall be credited on the average of the balances on the first and last day of such month. Interest shall be credited at a rate equivalent to the average yield on corporate bonds rated Aaa by Moodys Investors Service on September 30 of the preceding Year (or if there is no such yield reported for such date, then on the next preceding date for which such a yield is reported) as published in Federal Reserve Statistical Release H.15, or at such other rate that would qualify as a reasonable rate of interest as defined by Section 409A of the Code, as may be determined by the G&SR Committee for each Year. | |||
(ii) | Stock Unit Accounts. | |||
(A) | The Company shall establish and maintain, as appropriate, separate unfunded Stock Unit Accounts for each Director who has elected that any portion of his or her Deferred Cash Compensation be credited to a Stock Unit Account. | |||
(B) | As of each date on which any amount of a Directors Deferred Cash Compensation becomes payable, his or her Stock Unit Account shall be credited with that number of units as are equal to the number of full or fractional Shares as could be purchased at the Fair Market Value on the first trading day preceding such date with the portion of such Deferred Cash Compensation as such Director has elected be credited to his or her Stock Unit Account. | |||
(C) | As of the payment date for each dividend on Shares declared by the Board, there shall be credited to each Stock Unit Account that number of units as are equal to the number of full or fractional Shares as could be purchased at the Fair Market Value on the first trading day preceding the payment date for such dividend with an amount equal to the product of: (i) the dividend per share, and (ii) the number of units in such Stock Unit Account immediately prior to the record date for such dividend. | |||
(c) | Restricted Stock Units. Each Director may elect to defer all or a portion of any Restricted Stock Unit Award. | |||
(d) | Dividend Equivalents. Each Director may elect to defer all or a portion of any dividend equivalents paid on Restricted Stock Units. | |||
(e) | Time of Election. An election to defer all or any portion of Eligible Compensation for any Year shall be made in writing in the form (Election Form) prescribed by the Secretary. The Election Form shall contain the Participants elections as to the time of distribution of any compensation so deferred. | |||
(i) | A Participant may elect that his or her Deferred Compensation be distributed at the time or times indicated below: | |||
(A) | Entire balance to be distributed immediately after Separation from Service for any reason other than death; | |||
(B) | Entire balance to be distributed a number of months, as specified by the Participant on the Election Form, after Separation from Service for any reason other than death, but not later than ten years following such Separation from Service; | |||
(C) | Approximately equal monthly installments for a number of months, as specified by the Participant on the Election Form, commencing the month after Separation from Service for any reason other than death, provided that distribution shall be completed not later than ten years following such Separation from Service; or |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ B-5 ]
(D) | A percentage of the entire balance to be paid on certain dates, with such percentages and dates specified by the Participant on the Election Form, provided that distribution shall commence no earlier than Separation from Service for any reason other than death, and shall be completed not later than ten years following such Separation from Service. | |||
(ii) | A Participant may revoke an election as to the time of distribution and substitute a new election therefore by submitting an Election Form to the Secretary in accordance with the following criteria: | |||
(A) | Any new election regarding the time of distribution must result in a minimum of five (5) years lapse between the currently applicable distribution date and the new date of distribution (as determined in accordance with the Regulations under Section 409A of the Code); and (B) the election must be made at least twelve (12) months prior to the date of distribution that would otherwise have been applicable. | |||
(iii) | Except as hereinafter provided, to be effective, an Election Form relating to payments for a Year, or to Restricted Stock Units that may be granted in such Year, must be received by the Secretary on or before December 31 of the preceding Year. In the case of a Directors initial election to the Board, the initial Election Form must be received not more than 30 days following his or her election to the Board and, if received within such 30-day period, the Election Form shall be effective only for Eligible Compensation earned after the election becomes irrevocable pursuant to Section 9(f). The time of election and the time of distribution shall comply in all respects with the applicable requirements of Section 409A of the Code. | |||
(f) | Irrevocability of Election. A Directors election to defer all or any portion of his or her Eligible Compensation for any Year and a revocation and substitution of an election regarding the time of distribution shall be irrevocable upon receipt by the Secretary of a completed Election Form from the Director. | |||
(g) | Form of Distributions. | |||
(i) | Distributions of amounts credited to each Participants Cash Account shall be made in cash. | |||
(ii) | Distributions of units credited to each Participants Stock Unit Account shall be made by issuing to such Participant an equivalent number of Shares. | |||
(iii) | Distribution of Shares relating to vested Restricted Stock Units the Participant has elected to defer shall be made by issuing to such Participant the whole number of Shares attributable to such vested Restricted Stock Units. | |||
Notwithstanding the foregoing, no fractional shares will be issued and any fractional unit will be distributed by payment of cash in the amount represented by such fractional unit based on the Fair Market Value on the date preceding the date of payment. | ||||
(h) | Time of Distributions. | |||
(i) | Normal
Distributions. Except as otherwise
hereinafter provided, distributions from a Participants Deferred
Compensation Account shall be made (Y) on the first day of the month
following such Participants Separation from Service on the Board for any
reason other than death, or (Z) at such later time as the Participant has
elected on his or her Election Form in accordance with the terms of this
Plan. Notwithstanding the foregoing, no distribution may be made to a Specified Employee before the date that is six months after the date of Separation from Service or, if earlier, the date of death. | |||
(ii) | Early
Distributions. An earlier
distribution may be made upon a finding that the Participant is suffering
from an Unforeseeable Emergency. A withdrawal on account of Unforeseeable
Emergency may not be made to the extent that such emergency is or may be
relieved (A) through reimbursement or compensation from insurance or
otherwise, (B) by liquidation of the Participants assets, to the extent
the liquidation of such assets would not cause severe financial hardship,
or (C) by cessation of deferrals under the
Plan. Withdrawal because of an Unforeseeable Emergency must be limited to the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution), as determined by the Administrator, in its sole discretion. The Participant must apply in writing for a payment upon an Unforeseeable Emergency, using the form prescribed by the Administrator. The Administrator retains the sole and absolute discretion to grant or deny a payment upon an Unforeseeable Emergency. In the event of approval of a payment upon an Unforeseeable Emergency, the Participants outstanding deferral elections under the Plan shall be cancelled. | |||
(i) | Death of Participant. Notwithstanding the foregoing, in the event of the death of a Participant prior to receipt by such Participant of the full amount of cash and number of shares to be distributed from his or her Deferred Compensation Account, all such cash and/or shares will be distributed to the beneficiary or beneficiaries designated by the Participant, or if no beneficiary has been designated, to the Participants estate as soon as practicable following the month in which the death occurred. Shares to be distributed to the Participant in connection with deferred Restricted Stock Units shall also be distributed as described in the preceding sentence but in no event earlier than the fourth anniversary of the date of grant. |
[ B-6 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
(j) | Certain Rights Reserved by the Company. In the event that, pursuant to Section 11, the Company suspends, modifies or terminates this Plan, the Company shall have the right to distribute to each Participant all amounts in such Participants Cash Account or Shares equivalent to units in such Participants Stock Unit Account, including, in the case of Stock Unit Accounts, the right to distribute cash equivalent to the units in such Accounts and all Shares attributable to vested Restricted Stock Units that a Participant has elected to defer, provided that any such suspension, modification or termination may be effected without penalty under Section 409A of the Code. | |
(k) | Certain Affiliations. In the event that a Participant terminates his or her membership on the Board and becomes affiliated with a government agency, all amounts in such Participants Cash Account, shares equivalent to units in such Participants Stock Unit Account and Shares attributable to Restricted Stock Units that such Participant has elected to defer will be distributed to the Participant if such payment is necessary to avoid violation of any applicable federal, state, local or foreign ethics or conflict of interest law or if necessary to comply with an ethics agreement with the federal government. |
SECTION 10. OTHER
STOCK-BASED AWARDS. SECTION 11. AMENDMENT AND
TERMINATION. | ||
(a) | Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan, including, without limitation, the number of shares subject to Awards granted pursuant to Sections 6, 7 and 8, without the consent of any stockholder, Participant, other holder or beneficiary of any Award, or other person; provided, however, that no such amendment, alteration, suspension, discontinuation or termination shall be made without (i) stockholder approval if such approval is necessary to comply with the listing requirements of the New York Stock Exchange or (ii) the consent of the affected Participants, if such action would adversely affect the rights of such Participants under any outstanding Award; and provided further, that no such amendment or alteration shall increase the aggregate number of shares that may be issued under the Plan except as provided in Section 5(d). In addition, any such amendment shall be in compliance with Section 409A of the Code. The Administrator may modify any outstanding Awards to comply with Section 409A without consent from Participants. Notwithstanding any other provision of the Plan or any Award Agreement, no amendment, alteration, suspension, discontinuation or termination of the Plan or any Award Agreement shall be made that would (1) permit Options or SARs to be granted with a per Share exercise price of less than the Fair Market Value of a Share on the date of grant thereof or (2) except as provided in Section 5(d), (w) reduce the exercise price of any Option or SAR established at the time of grant thereof, (x) be treated as a repricing under U.S. generally accepted accounting principles (GAAP), (y) cancel an Option or SAR in exchange for another Option, SAR, restricted stock unit or any other Award, or (z) terminate an Option or SAR in exchange for a cash amount equal to or greater than the excess, if any, of the Fair Market Value of the underlying Shares on the date of cancellation over the exercise price times the number of Shares outstanding under the Award. A cancellation and exchange described in clause (y) of the immediately preceding sentence is prohibited regardless of whether the option, SAR, restricted stock unit or other equity is delivered simultaneously with the cancellation and regardless of whether the cancellation and exchange are treated as a repricing under GAAP or are voluntary on the part of the Participant. | |
(b) | Correction of Defects, Omissions and Inconsistencies. The Administrator may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. |
SECTION 12. GENERAL PROVISIONS. | ||
(a) | No Rights of Stockholders. Neither a Participant nor a Participants legal representative shall be, or have any of the rights and privileges of, a stockholder of the Company in respect of any Shares issuable under the Plan in connection with any Award or Account, in whole or in part, unless and until certificates or other indicia of ownership of such shares shall have been issued. |
TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ B-7 ]
(b) | Limits of Transfer of Awards. No Award and no right under any such Award, shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or by the laws of descent and distribution. During the Participants lifetime, rights under an Award shall be exercisable only by the Participant, or if permissible under applicable law, by the Participants guardian or legal representative. | |
(c) | No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. | |
(d) | Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware without giving effect to the principles of conflict of laws thereof. | |
(e) | Severability. If any provision of the Plan or any Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person, Award or Account, or would disqualify the Plan or any Award under any law deemed applicable by the Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. | |
(f) | No Trust or Fund Created. Neither the Plan nor any Award or Account shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any person acquires a right to receive an Award or Account, or Shares pursuant to an Award or Account, from the Company pursuant to this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. | |
(g) | Accounts Unsecured. Until distributed, all amounts credited to any Cash Accounts or represented by units credited to any Stock Unit Account shall be property of the Company, available for the Companys use, and subject to the claims of general creditors of the Company. The rights of any Participant or beneficiary to distributions under this Plan are not subject to anticipation, alienation, sale, transfer, assignment, or encumbrance, and shall not be subject to the debts or liabilities of any Participant or beneficiary. | |
(h) | Withholding. The Company shall be authorized to withhold from any Awards granted or any transfer made under any Award or under the Plan or from any dividend equivalents to be paid on Restricted Stock Units the amount (in cash, Shares, other securities, or other property) of any taxes required to be withheld in respect of a grant, exercise, payment or settlement of an Award or any payment of dividend equivalents under Restricted Stock Units or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations of the Company for the payment of any such taxes. | |
(i) | No Right to Continued Board Membership. The grant of an Award or establishment of an Account shall not be construed as giving a Participant the right to be retained as a director of the Company. The Board may at any time fail or refuse to nominate a Participant for election to the Board, and the stockholders of the Company may at any election fail or refuse to elect any Participant to the Board free from any liability or claim under this Plan or any Award or Account. | |
(j) | 409A Compliance. The Company makes no representations or covenants that any Award granted or Deferred Compensation arrangement maintained under the Plan will comply with Section 409A of the Code. |
SECTION 13. EFFECTIVE DATE OF THE
PLAN.
The Plan shall be effective as
of the date of its approval by the stockholders of the Company.
SECTION 14. TERM OF THE
PLAN.
No Award shall be granted or
compensation deferred under the Plan after the tenth anniversary of the
Effective Date of the Plan. However, unless otherwise expressly provided in the
Plan or in an applicable Award Agreement, any Award granted or Account
established prior to the termination of the Plan may extend beyond such date,
and the authority of the Committee and the Board under Section 11 to amend,
alter, adjust, suspend, discontinue, or terminate any such Award or Account, or
to waive any conditions or rights thereunder, shall extend beyond such
date.
[ B-8 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
For registered shares, your proxy must be received by 11:59 P.M.
(Eastern Daylight Time) on April 15, 2009.
For shares
allocable to a benefit plan account, your proxy must be received by 11:59 P.M.
(Eastern Daylight Time) on April 13, 2009.
VOTE BY
INTERNET - www.proxyvote.com
Use the Internet to transmit your
voting instructions and for electronic delivery of information until 11:59 P.M.
Eastern Daylight Time on April 13, 2009 (for shares allocable to a benefit plan
account) or April 15, 2009 (for registered shares). Have your proxy card in hand
when you access the web site and follow the instructions to obtain your records
and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
If you would like to reduce the costs incurred by Texas
Instruments Incorporated in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access stockholder
communications electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions until 11:59 P.M. Eastern Time on April 13, 2009 (for shares
allocable to a benefit plan account) or April 15, 2009 (for registered shares).
Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or return
it to Texas Instruments Incorporated, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | TXINS1 | KEEP THIS PORTION FOR YOUR RECORDS |
|
DETACH AND RETURN THIS PORTION ONLY | |
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED. |
TEXAS INSTRUMENTS INCORPORATED | ||||||
Election of Directors | ||||||
The board of directors of Texas Instruments Incorporated recommends a vote "FOR" each of the nominees for director |
|
|||||||
For | Against | Abstain | ||||||
1. | Election of Directors -
Nominees: 1A) J. R. Adams |
o | o | o | ||||
1B) D. L. Boren | o | o | o | |||||
1C) D. A. Carp | o | o | o | |||||
1D) C. S. Cox | o | o | o | |||||
1E) D. R. Goode | o | o | o | |||||
1F) S. P. MacMillan | o | o | o | |||||
1G) P. H. Patsley | o | o | o | |||||
1H) W. R. Sanders | o | o | o | |||||
1I) R. J. Simmons | o | o | o | |||||
1J) R. K. Templeton | o | o | o | |||||
1K) C. T. Whitman | o | o | o |
Vote on Proposals | |||||||
The Board of Directors recommends a vote "FOR" proposals 2, 3 and 4 | For | Against | Abstain | ||||
2. | Board proposal to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for 2009. | o | o | o | |||
3. | Board proposal to approve a Texas Instruments 2009 Long-Term Compensation Plan. | o | o | o | |||
4. | Board proposal to approve a Texas Instruments 2009 Director Compensation Plan. | o | o | o | |||
The Board of Directors recommends a vote "AGAINST" proposal 5 |
|||||||
5. | Stockholder proposal regarding separation of roles of chairman and CEO. | o | o | o | |||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 16, 2009
You are invited to attend the 2009 annual meeting of stockholders on Thursday, April 16, 2009, at the cafeteria on our property at 12500 TI Boulevard, Dallas, Texas, at 10:00 a.m. (Dallas time). At the meeting, we will consider the election of directors, the ratification of the appointment of Ernst & Young LLP as the Companys independent registered public accounting firm for 2009, a board proposal to approve a Texas Instruments 2009 Long-Term Incentive Plan, a board proposal to approve a Texas Instruments 2009 Director Compensation Plan, a stockholder proposal, and such other matters as may properly come before the meeting.
Electronic Delivery of Proxy Materials
We are pleased to offer stockholders the opportunity to receive future proxy mailings by e-mail. To request electronic delivery, please vote via the Internet at www.proxyvote.com and, when prompted, enroll to receive proxy materials electronically in future years.
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The 2009 Notice and Proxy Statement and 2008 Annual Report are also available at www.proxyvote.com.
TXINS2 |
PROXY FOR ANNUAL MEETING TO BE HELD APRIL 16, 2009
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints DANIEL A. CARP, PAMELA H. PATSLEY, RUTH J. SIMMONS, RICHARD K. TEMPLETON, or any one or more of them, the true and lawful attorneys of the undersigned with power of substitution, to vote as proxies for the undersigned at the annual meeting of stockholders of Texas Instruments Incorporated to be held in Dallas, Texas, on April 16, 2009, at 10:00 a.m. (Dallas time) and at any or all adjournments thereof, according to the number of shares of common stock that the undersigned would be entitled to vote if then personally present, in the election of directors, upon the board proposals, upon the stockholder proposal, and upon other matters properly coming before the meeting. If no contrary indication is made, this proxy will be voted FOR the election of each director nominee and the board proposals and AGAINST the stockholder proposal. If other matters come before the meeting, this proxy will be voted in the discretion of the named proxies.
Should you have an account in the TI Contribution and 401(k) Savings Plan or the TI 401(k) Savings Plan, this proxy represents the number of TI shares allocable to that plan account as well as other shares registered in your name. As a "named fiduciary" under the plans for TI shares allocable to that plan account and for shares for which no voting instructions are received, this proxy will serve as voting instructions for The Northern Trust Company, trustee for the plans, or its designee. The plans provide that the trustee will vote each participants shares in accordance with the participants instructions. If the trustee does not receive voting instructions for TI shares under the plans by April 13, 2009, those shares will be voted, in accordance with the terms of plans, in the same proportion as the shares for which voting instructions have been received. If other matters come before the meeting, the named proxies will vote plan shares on those matters in their discretion.
IMPORTANT On the reverse side of this card are procedures on how to vote the shares.
Please consider voting by Internet or telephone.
TEXAS INSTRUMENTS INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
RECORD DATE: February 17,
2009
MEETING DATE: April 16, 2009
CUSIP NUMBER: 882508104
You are cordially invited to attend the 2009 annual meeting of Stockholders on Thursday, April 16, 2009, at the cafeteria on our property at 12500 TI Boulevard, Dallas, Texas, at 10:00 a.m. (Dallas time). At the meeting, we will consider the election of directors, a board proposal to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for 2009, a board proposal to approve a Texas Instruments 2009 Long-Term Incentive Plan, a board proposal to approve a Texas Instruments 2009 Director Compensation Plan, a stockholder proposal, and such other matters as may properly come before the meeting.
You are enrolled to receive stockholder communications via the Internet. This e-mail contains instructions for accessing the Texas Instruments 2009 Proxy Statement and Annual Report for 2008 and for voting your shares.
Please read the instructions carefully before proceeding.
VOTING YOUR SHARES AND VIEWING THE PROXY MATERIALS- Please review the Proxy Statement and Annual Report before voting. The Proxy Statement discusses the proposals to be voted on.
You can enter your voting instructions and view the shareholder material at the following Internet site. If your browser supports secure transactions you will be automatically directed to a secure site.
http://www.proxyvote.com/0012345678901
Registered shares must be voted by 11:59 p.m. (Eastern Daylight Time) on April 15, 2009. Shares allocable to a Texas Instruments (TI) benefit plan must be voted by 11:59 p.m. (Eastern Daylight Time) on April 13, 2009.
To enter your vote you will need the following:
CONTROL NUMBER:
012345678901
YOUR 4-DIGIT PIN NUMBER
If you are a TI employee-stockholder, your PIN is the last 4 digits of your Social Security Number (unless you have taken steps to change your PIN). For other stockholders, your PIN is the 4-digit PIN you enrolled with at the time you elected to receive electronic delivery (unless you have taken steps to change your PIN).
If you would like to cancel your enrollment, or change your e-mail address or PIN, please go to http://www.InvestorDelivery.com. You will need the enrollment number below, and your four-digit PIN. If you have forgotten your PIN, you can have it sent to your enrolled e-mail address by going to http://www.InvestorDelivery.com.
Your InvestorDelivery Enrollment
Number is:
M012345678901
This e-mail covers TI shares registered directly in your name and TI shares allocable to employee benefit plan(s). Should you have an account in the TI Contribution and 401(k) Savings Plan or the TI 401(k) Savings Plan, this proxy represents the number of TI shares allocable to the plan account as well as other shares registered in your name. As a "named fiduciary" under the plans for TI shares allocable to the plan account and for shares for which no voting instructions are received, this proxy will serve as voting instructions for The Northern Trust Company, trustee for the plans, or its designee. The plans provide that the trustee will vote each participant's shares in accordance with the participant's instructions. If the trustee does not receive voting instructions for TI shares under the plans by April 13, 2009, those shares will be voted, in accordance with the terms of the plans, in the same proportion as the shares for which voting instructions have been received. If other matters come before the meeting, the named proxies will vote plan shares on those matters in their discretion.
If you receive more than one e-mail or a proxy card in addition to this e-mail, it generally means that your holdings are listed under other names or different spellings of your name, and you must vote under all e-mails and any proxy cards to vote all shares.
You may also view the proxy materials at:
Annual Report
(PDF)
http://materials.proxyvote.com/882508
Annual Report
(HTML)
http://investor.ti.com/2008annualreport/index.html
Proxy Statement
(PDF)
http://materials.proxyvote.com/882508
Proxy Statement
(HTML)
http://investor.ti.com/2009proxy/index.html
To view the proxy materials, you
may need Adobe Acrobat Reader, which is available at the following Internet
site:
http://www.adobe.com/products/acrobat/readstep2.html
There are no charges for any of the services referenced herein. There may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, that must be borne by the stockholder.
PAPER COPIES - You may receive paper copies of the Proxy Statement and Annual Report free of charge by calling Investor Relations at (972) 995-3773 or by writing to Texas Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, TX 75266-0199, Attn: Investor Relations.
March 6, 2009 | |
TEXAS INSTRUMENTS INCORPORATED | |
|
|
Meeting Material(s) | |
2009 Annual Meeting of Shareholders Thursday, April 16, 2009 For holders as of: 02/17/2009 Cusip: 882508-104 |
|
As your vote is very important, we recommend that all voting instructions be received at least one business day prior to the voting cut-off time stated in the proxy materials. Scroll down for proxy instructions and voting.
To vote via telephone, call 1-800-690-6903.
PROXY BALLOT |
TEXAS INSTRUMENTS INCORPORATED
2009 Annual Meeting of
Shareholders
To be held on 04/16/2009
for holders of record as of 02/17/2009
PROXY FOR ANNUAL MEETING TO
BE HELD APRIL 16, 2009
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints DANIEL A. CARP, PAMELA H. PATSLEY, RUTH J. SIMMONS, RICHARD K. TEMPLETON, or any one or more of them, the true and lawful attorneys of the undersigned with power of substitution, to vote as proxies for the undersigned at the annual meeting of stockholders of Texas Instruments Incorporated to be held in Dallas, Texas, on April 16, 2009, at 10:00 a.m. (Dallas time) and at any or all adjournments thereof, according to the number of shares of common stock that the undersigned would be entitled to vote if then personally present, in the election of directors, upon the board proposals, upon the stockholder proposal, and upon other matters properly coming before the meeting. If no contrary indication is made, this proxy will be voted FOR the election of each director nominee and the board proposals and AGAINST the stockholder proposal. If other matters come before the meeting, this proxy will be voted in the discretion of the named proxies.
Should you have an account in the TI Contribution and 401(k) Savings Plan or the TI 401(k) Savings Plan, this proxy represents the number of TI shares allocable to that plan account as well as other shares registered in your name. As a "named fiduciary" under the plans for TI shares allocable to that plan account and for shares for which no voting instructions are received, this proxy will serve as voting instructions for The Northern Trust Company, trustee for the plans, or its designee. The plans provide that the trustee will vote each participants shares in accordance with the participants instructions. If the trustee does not receive voting instructions for TI shares under the plans by April 13, 2009, those shares will be voted, in accordance with the terms of plans, in the same proportion as the shares for which voting instructions have been received. If other matters come before the meeting, the named proxies will vote plan shares on those matters in their discretion.
IMPORTANT On the reverse side of this card are procedures on how to vote the shares.
Please consider voting by
Internet or telephone.
Recommendations of the Board of Directors:
Choose this option if you would like to vote your shares with the recommendations of the Board of Directors. See below or refer to the proxy statement for details on the recommendations.
Vote with the Board's Recommendations |
Proposal(s) | Recommendations of
the Board of Directors |
Vote Options | |
1A | ELECTION OF DIRECTOR: J.R. ADAMS | For | ¡ For ¡ Against ¡ Abstain |
1B | ELECTION OF DIRECTOR: D.L. BOREN | For | ¡ For ¡ Against ¡ Abstain |
1C | ELECTION OF DIRECTOR: D.A. CARP | For | ¡ For ¡ Against ¡ Abstain |
1D | ELECTION OF DIRECTOR: C.S. COX | For | ¡ For ¡ Against ¡ Abstain |
1E | ELECTION OF DIRECTOR: D.R. GOODE | For | ¡ For ¡ Against ¡ Abstain |
1F | ELECTION OF DIRECTOR: S.P. MACMILLAN | For | ¡ For ¡ Against ¡ Abstain |
1G | ELECTION OF DIRECTOR: P.H. PATSLEY | For | ¡ For ¡ Against ¡ Abstain |
1H | ELECTION OF DIRECTOR: W.R. SANDERS | For | ¡ For ¡ Against ¡ Abstain |
1I | ELECTION OF DIRECTOR: R.J. SIMMONS | For | ¡ For ¡ Against ¡ Abstain |
1J | ELECTION OF DIRECTOR: R.K. TEMPLETON | For | ¡ For ¡ Against ¡ Abstain |
1K | ELECTION OF DIRECTOR: C.T. WHITMAN | For | ¡ For ¡ Against ¡ Abstain |
02 | BOARD PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009. | For | ¡ For ¡ Against ¡ Abstain |
03 | BOARD PROPOSAL TO APPROVE A TEXAS INSTRUMENTS 2009 LONG-TERM COMPENSATION PLAN. | For | ¡ For ¡ Against ¡ Abstain |
04 | BOARD PROPOSAL TO APPROVE A TEXAS INSTRUMENTS 2009 DIRECTOR COMPENSATION PLAN. | For | ¡ For ¡ Against ¡ Abstain |
05 | STOCKHOLDER PROPOSAL REGARDING SEPARATION OF ROLES OF CHAIRMAN AND CEO. | Against | ¡ For ¡ Against ¡ Abstain |