SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a11(c) or
Section 240.14a-12
TEXAS INSTRUMENTS INCORPORATED
------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which filing fee is calculated and state how it
was determined.
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid: $125.00
2) Form, schedule or registration statement no.: Pre 14A
3) Filing party: Texas Instruments Incorporated
4) Date filed: February 1, 1996
[Company Logo] TEXAS INSTRUMENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 18, 1996
We are pleased to invite you to attend the 1996 Annual Meeting of Stockholders
which will be held on Thursday, April 18, 1996 at the North Building Cafeteria
on the Company's property, 13500 North Central Expressway, Dallas, Texas, at
10:00 a.m. (Dallas time). The meeting will be held for the following
purposes:
1. To elect directors for the ensuing year;
2. To consider and act upon a proposal to approve an amendment to the
Company's Restated Certificate of Incorporation for the purpose of
increasing the authorized shares of common stock of the Company from
300,000,000 to 500,000,000;
3. To consider and act upon a board proposal to approve a Texas
Instruments 1996 Long-Term Incentive Plan; and
4. To consider and act upon such other matters as may properly come
before the meeting.
Stockholders of record at the close of business on February 20, 1996 are
entitled to notice of and to vote at the annual meeting.
Stockholders are urged to sign, date and return the enclosed proxy as promptly
as possible. You may revoke your proxy at any time before the shares to which
the proxy relates are voted at the meeting.
By Order of the Board of Directors,
/s/ RICHARD J. AGNICH
Richard J. Agnich
Senior Vice President,
Secretary and General Counsel
Dallas, Texas
February 28, 1996
[Company Logo] TEXAS INSTRUMENTS
EXECUTIVE OFFICES: NORTH BUILDING, 13500 NORTH CENTRAL EXPRESSWAY,
DALLAS, TEXAS
MAILING ADDRESS: POST OFFICE BOX 655474, DALLAS, TEXAS 75265-5474
PROXY STATEMENT
February 28, 1996
The board of directors of Texas Instruments Incorporated (the Company or TI) is
requesting your proxy for the Annual Meeting of Stockholders (the Annual
Meeting) on April 18, 1996. By executing and returning the enclosed proxy
card, you authorize the persons named in the proxy to represent you and vote
your shares in connection with the purposes set forth in the Notice of Annual
Meeting.
If you attend the meeting, you may of course vote in person. But, if you are
not present, your shares can be voted only if you have returned a properly
executed proxy. If a proxy in the accompanying form is duly executed and
returned, the shares represented thereby will be voted as specified therein,
and if no specification is made, the shares will be voted in accordance with
the recommendations of the board of directors. You may revoke the proxy at any
time before it is exercised.
ELECTION OF DIRECTORS
Directors are to be elected at the Annual Meeting to hold office until the next
Annual Meeting and until their successors are elected and qualified. Unless
authority to vote for directors is withheld in the proxy, the persons named in
the proxy will vote for the election of the following nominees, who have been
designated by the board of directors: JAMES R. ADAMS, DAVID L. BOREN, JAMES B.
BUSEY IV, GERALD W. FRONTERHOUSE, DAVID R. GOODE, JERRY R. JUNKINS, WILLIAM S.
LEE, WILLIAM B. MITCHELL, GLORIA M. SHATTO, WILLIAM P. WEBER and CLAYTON K.
YEUTTER.
Nominees for Directorship
All of the nominees for directorship are now directors of the Company. While
it is not anticipated that any of the nominees will be unable to serve, if any
nominee is not a candidate for election as a director at the meeting, the proxy
will be voted for the election of a substitute nominee proposed by the present
board of directors or the number of directors will be reduced accordingly.
[Photo of J.R. Adams] JAMES R. ADAMS Director
Chair, Board Organization and Nominating
Committee; member, Audit and Compensation
Committees.
Group president, SBC Communications Inc. from
1992 until retirement in July 1995; president
and chief executive officer of Southwestern
Bell Telephone Company, 1988-92.
[Photo of D. L. Boren] DAVID L. BOREN Director
Member, Audit, Finance and Stockholder
Relations and Public Policy Committees.
President of the University of Oklahoma
since 1994. U.S. Senator, 1979-1994;
Governor of Oklahoma, 1975-1979. Director,
AMR Corporation and Phillips Petroleum
Company; trustee, Yale University.
[Photo of J.B. Busey IV] JAMES B. BUSEY IV Director
Member, Board Organization and Nominating,
Finance, Stockholder Relations and Public
Policy and Trust Review Committees.
President and chief executive officer of Armed
Forces Communications and Electronics
Association since 1992. Deputy Secretary,
Department of Transportation, 1991-1992;
Administrator, Federal Aviation
Administration, 1989-91; retired from U.S.
Navy as Admiral in 1989. Director,
Association of Naval Aviation, Curtiss-Wright
Corporation and S.T. Research Corporation;
trustee, MITRE Corporation.
[Photo of G.W. Fronterhouse] GERALD W. FRONTERHOUSE Director
Chair, Trust Review Committee; member, Audit,
Compensation and Finance Committees.
Investments. Former chief executive officer
(1985-88) of First RepublicBank Corporation.
President and director, Hoblitzelle
Foundation; trustee, Southwestern Medical
Foundation and Children's Medical Foundation.
2
[Photo of D. R. Goode] DAVID R. GOODE Director
Member, Board Organization and Nominating and
Compensation Committees.
Chairman of the board and chief executive
officer of Norfolk Southern Corporation since
1992; also, president since 1991. Director,
Caterpillar, Inc., Georgia-Pacific
Corporation and TRINOVA Corporation; member,
The Business Roundtable; trustee, Hollins
College.
[Photo of J.R. Junkins] JERRY R. JUNKINS Chairman of the Board,
President and Chief Executive Officer
Chair, Benefit Plans and Finance Committees;
member, Board Organization and Nominating
Committee.
Chairman of the board since 1988; president
and chief executive officer of the Company
since 1985. Joined the Company in 1959;
elected vice president in 1977 and executive
vice president in 1982. Director,
Caterpillar Inc., Minnesota Mining and
Manufacturing Company and The Procter &
Gamble Company; cochairman, The Business
Roundtable; member, The Business Council and
National Academy of Engineering; trustee,
Southern Methodist University.
[Photo: W.S. Lee] WILLIAM S. LEE Director
Chair, Compensation Committee; member, Audit,
Board Organization and Nominating and Finance
Committees.
Chairman emeritus of Duke Power Company;
chairman of the board and chief executive
officer of Duke Power Company from 1982, and
president from 1989, until retirement in April
1994. Director, J.P. Morgan & Co.
Incorporated, Morgan Guaranty Trust Company of
New York, Knight-Ridder, Inc. and The Liberty
Corporation; member, The Business Council and
National Academy of Engineering.
3
[Photo: W.B. Mitchell] WILLIAM B. MITCHELL Vice Chairman
Member, Benefit Plans and Finance Committees.
Vice chairman of the Company since 1993.
Joined the Company in 1961; elected vice
president in 1984 and executive vice president
in 1987. Chairman, American Electronics
Association.
[Photo: G.M. Shatto] GLORIA M. SHATTO Director
Chair, Stockholder Relations and Public Policy
Committee; member, Compensation Committee.
President of Berry College since 1980.
Director, Becton Dickinson and Company,
Georgia Power Company, K mart Corporation
and The Southern Company.
[Photo: W.P. Weber] WILLIAM P. WEBER Vice Chairman
Member, Benefit Plans and Finance Committees.
Vice chairman of the Company since 1993.
Joined the Company in 1962; elected vice
president in 1979 and executive vice president
in 1984. Chairman, Semiconductor Industry
Association.
[Photo of C.K. Yeutter] CLAYTON K. YEUTTER Director
Chair, Audit Committee; member, Finance,
Stockholder Relations and Public Policy
and Trust Review Committees.
Of counsel, Hogan & Hartson. Counselor to
President Bush for domestic policy during
1992; chairman, Republican National Committee,
1991-92; Secretary, Department of Agriculture,
1989-91; U.S. Trade Representative, 1985-89.
Director, B.A.T. Industries P.L.C.,
Caterpillar Inc., ConAgra, Inc., FMC
Corporation, Lindsay Manufacturing Co.,
Oppenheimer Funds and The Vigoro Corporation.
4
The ages and holdings of common stock of the nominees and the year in which
each became a director are as follows:
Common Stock
Director Ownership at
Nominee Age Since December 31, 1995*
------- --- -------- ------------------
James R. Adams 56 1989 3,264
David L. Boren 54 1995 2,564
James B. Busey IV 63 1992 3,684
Gerald W. Fronterhouse 59 1986 5,291
David R. Goode 55 1996 1,108
Jerry R. Junkins 58 1984 820,531
William S. Lee 66 1990 6,264
William B. Mitchell 60 1990 73,604
Gloria M. Shatto 64 1992 3,264
William P. Weber 55 1984 130,403
Clayton K. Yeutter 65 1992 3,664
- -------------------
*Includes any shares subject to restricted stock unit awards. Also
includes shares subject to acquisition within 60 days by Messrs. Junkins,
Mitchell and Weber for 709,500, 48,500 and 106,500 shares, respectively, and
shares credited to profit sharing stock accounts for Messrs. Junkins, Mitchell
and Weber in the amounts of 10,253, 5,412 and 5,813, respectively. Excludes
shares held by a family member if a director has disclaimed beneficial
ownership. Mr. Goode's holdings are as of February 1, 1996. Each nominee and
director owns less than 1% of the Company's common stock.
Board and Committee Meetings
During 1995, the board held eleven meetings. In addition, the following
committees of the board held the number of meetings indicated: Audit, six;
Benefit Plans, four; Board Organization and Nominating, seven; Compensation,
seven; Finance, five; Stockholder Relations and Public Policy, four; and Trust
Review, five. Overall attendance at board and committee meetings was
approximately 96%.
Committees of the Board
The Audit Committee has the responsibility to make recommendations to the board
with respect to the appointment of the independent public accountants and other
matters. This committee also has the responsibility to approve certain
non-audit services of the independent public accountants; to review the scope
of the annual audit, proposed changes in major accounting policies, reports of
compliance of management and operating personnel with the Company's code of
ethics and other matters; and to report to the board concerning the adequacy of
the Company's system of internal accounting controls, other factors affecting
the integrity of published financial reports and other matters.
5
The Benefit Plans Committee has the responsibility to institute, revise or
terminate incentive plans of the Company other than plans approved by
stockholders, and institute, revise or terminate pension, profit sharing and
other benefit plans, other than any incentive or benefit plan or amendment
thereto that would benefit only officers of the Company or disproportionately
benefit officers more than other employees. This committee also has the
responsibility to report to the board concerning general levels of increases in
compensation for employees, compensation and benefits philosophies and programs
of the Company and other matters.
The Board Organization and Nominating Committee has the responsibility to make
recommendations to the board with respect to nominees to be designated by the
board for election as directors, the structure, size and composition of the
board, compensation of board members, the organization and responsibilities of
board committees and other matters. This committee also has the responsibility
to report to the board concerning the general responsibilities and functions of
the board, a desirable balance of expertise among board members, overall
Company organizational health, with particular reference to succession plans
for top management positions within TI, and other matters.
Any stockholder who wishes to recommend a prospective nominee for the board of
directors for the committee's consideration may write Richard J. Agnich,
Secretary, Board Organization and Nominating Committee, c/o Texas Instruments
Incorporated, Post Office Box 655474, MS 407, Dallas, Texas 75265-5474.
The Compensation Committee has the responsibility to make changes in officers'
compensation and to take actions that are required to be taken by the committee
under the Company's incentive plans, stock option plans, stock option purchase
plans and other employee benefit plans. This committee also has the
responsibility to make recommendations to the board with respect to revisions
in and actions under such plans that are required to be approved by the board,
the institution of plans that benefit only officers of the Company or
disproportionately benefit officers of the Company more than other employees,
the institution of plans permitting the issuance of stock of the Company and
other matters.
The Finance Committee has the responsibility to make recommendations to the
board with respect to the annual capital authorization funding level, issuance
of equity and long-term debt and other matters. This committee also has the
responsibility to approve the annual financing plan and other matters; and to
report to the board concerning developments in financial markets and other
matters.
The Stockholder Relations and Public Policy Committee has the responsibility to
make recommendations to the board with respect to matters bearing on the
relationship between management and stockholders, public issues and other
matters. This committee also has the responsibility to report to the board
concerning the contribution policies of the Company and of the TI Foundation,
revisions in TI's code of ethics and other matters.
The Trust Review Committee has the responsibility to make recommendations to
the board with respect to the selection of trustees of benefit plan trust
funds, assignment of funds to trustees and establishment and amendment of
6
funding policies and methods of benefit plans and other matters. This
committee also has the responsibility to select investment managers and assign
funds to investment managers of benefit plan trust funds; to approve
compensation of trustees and investment managers and other matters; and to
report to the board concerning the performance and adequacy of trustees and
investment managers.
Directors Compensation
Directors who are not employees are annually paid a retainer of $40,000 (one-
half in cash and one-half in restricted stock units described below), a fee of
$7,500 for each committee on which they serve, $2,500 for service as a
committee chair, $2,500 for attendance at the Company's strategic planning
conference, and $2,500 for attendance at the Company's annual planning
conference. Compensation for other designated activities, such as visits to TI
facilities and attendance at certain company events, is provided at the rate of
$1,000 per day. In 1995, the Company made payments (an aggregate of $10,388)
relating to premiums for life, medical, dental, travel and accident insurance
policies covering directors. Subject to certain limitations, directors may
elect that all or part of the cash payments of their fees be deferred until
retirement from the board or other specified times. Deferred fees earn
interest from the Company at a rate (currently based on published interest
rates on certain corporate bonds) determined from time to time by the board.
Effective June 15, 1995, the Company terminated a previously existing
directors' retirement plan and in its place adopted a restricted stock unit
plan for directors (the stock plan). Under the stock plan, new directors are
awarded 1,000 restricted stock units (each for one share of Company common
stock) providing for issuance of Company common stock at the time of retirement
from the board, or upon earlier termination of service from the board after
completing at least eight years of service or because of death or disability.
However, the right to the shares will be forfeited if a director's service
terminates within less than six months after the date of grant for reasons
other than death or disability. Directors in office on the effective date were
granted the same number of restricted stock units (subject to the same
conditions) to replace their interests under the former retirement plan; as a
result of the subsequent two-for-one stock split, those awards were increased
to 2,000 restricted stock units. The stock plan also provides for payment of
fifty percent of the annual retainer for board service (not including retainers
for committee membership or committee chair) to be made in the form of
restricted stock units. The shares under such annual retainer restricted stock
units will be issued upon the termination of the director's service on the
board. Any portion which is unearned because of termination of service during
a year will be forfeited.
Each director who has completed five years of service as a member of the board
of directors, and whose board membership terminates as a result of
ineligibility for reelection after the attainment of a specified age or, in the
case of non-employee directors, as a result of death or disability, will be
eligible to participate in a Director Award Program. The program was
established to promote the Company's interest in supporting educational
institutions. The Company may contribute a total of $500,000 with respect to
each eligible director to up to three eligible educational institutions (or
other charitable institutions approved by the Board Organization and Nominating
7
Committee) recommended by the director and approved by the Company. The
contributions will be made in five annual installments of $100,000 each,
commencing as soon as practicable following the director's death. Directors
derive no financial benefit from the program and all charitable deductions will
accrue solely to the Company.
EXECUTIVE COMPENSATION
Compensation Overview
The Company is committed to building shareholder value through improved
performance and growth. To achieve this objective, TI seeks to create an
environment in which employees recognize that they are valued as individuals
and treated with respect, dignity and fairness.
The Company uses a merit-based system of compensation to encourage individual
employees to achieve their productive and creative potential, and to link
individual financial goals to Company performance. The Company regularly
compares its compensation system with those of competitors and refines its
system as necessary to encourage a motivated and productive work force.
The following tables provide information regarding the compensation of the
Company's chief executive officer and each of the four other most highly
compensated executive officers.
8
Summary Compensation Table
The following table sets forth information with respect to the compensation of
the Company's chief executive officer and each of the four other most highly
compensated executive officers for services in all capacities to the Company
in 1993, 1994 and 1995, except as otherwise indicated.
Annual Compensation Long-Term Compensation
---------------------------------------- ----------------------------------------
Awards Payouts
-------------------------- ------------
Name and Other Annual Restricted Stock Long-Term All Other
Principal Compensation Stock Awards Options (in Incentive Compensation
Position Year Salary Bonus (1) (2) shares)(3) Plan Payouts (4)
- ------------ ---- -------- ------- ------------ ----------- -------------- ------------ -------------
J.R. Junkins 1995 $792,050 $1,750,000 -- 0 130,000 0 $391,979
Chairman, 1994 $700,200 $1,227,600 -- $141,250 110,000 0 $276,714
President & CEO 1993 $691,850 $ 740,000 -- 0 100,000 0 $ 71,032
W.B. Mitchell 1995 $373,750 $ 650,000 -- 0 50,000 0 $165,302
Vice 1994 $359,100 $ 500,000 -- 0 50,000 0 $103,157
Chairman 1993 $348,100 $ 320,000 -- 0 44,000 0 $ 37,248
W.P. Weber 1995 $404,250 $ 750,000 -- 0 50,000 0 $168,272
Vice 1994 $395,000 $ 600,000 -- 0 50,000 0 $110,899
Chairman 1993 $382,800 $ 400,000 -- 0 44,000 0 $ 36,522
T.J. Engibous 1995 $369,750 $1,000,000 -- 0 60,000 0 $145,887
Executive 1994 $306,000 $ 600,000 -- 0 42,000 0 $ 59,565
Vice President 1993 $238,000 $ 275,000 -- 0 24,000 0 $ 20,159
W.F. Hayes 1995 $371,750 $ 700,000 -- 0 50,000 0 $145,654
Executive 1994 $331,350 $ 500,000 -- 0 46,000 0 $ 83,353
Vice President 1993 $277,700 $ 300,000 -- 0 30,000 0 $ 25,752
- ------------------
(1) The dollar value of perquisites and other personal benefits for each
of the named executive officers was less than the established reporting
thresholds.
(2) (a) For purposes of the table, restricted stock units awarded under
the Company's Long-Term Incentive Plan are valued at market on the date of
award.
(b) The restricted stock unit awarded to Mr. Junkins in 1994 provides for
the payment of 4,000 shares (as adjusted to give effect to the 1995 two-for-
one stock split), with 2,000 shares vesting first quarter 1995 and 2,000
shares vesting first quarter 1996. At December 31, 1995, the value of the
2,000 unvested shares was $103,000.
(c) Dividend equivalent payments are paid on restricted stock units at
the same rate as dividends on the Company's common stock.
9
(3) The number of shares granted has been adjusted to give effect to the
1995 two-for-one stock split.
(4) During 1995, the Company made payments relating to premiums with
respect to split-dollar life insurance policies in the following amounts:
Mr. Junkins, $70,295; Mr. Mitchell, $19,557; Mr. Weber, $18,981; Mr. Engibous,
$8,123; and Mr. Hayes, $18,662. Also, the Company made payments relating to
premiums with respect to life, travel and accident insurance policies in the
following amounts: Mr. Junkins, $27,146; Mr. Mitchell, $11,435; Mr. Weber,
$6,862; Mr. Engibous, $125; and Mr. Hayes, $2,959.
During 1995, the Company made matching contributions to the cash or deferred
compensation account (401(k)) under the U.S. profit sharing plan in the
following amounts: Mr. Junkins, $3,000; Mr. Mitchell, $3,000; Mr. Weber,
$3,000; Mr. Engibous, $3,000; and Mr. Hayes, $3,000.
For 1995, the profit sharing cash payments and contributions (plus the ERISA
reductions for which the Company will provide an offsetting supplemental
benefit) were as follows: Mr. Junkins, $291,538; Mr. Mitchell, $121,310;
Mr. Weber, $139,429; Mr. Engibous, $134,639; and Mr. Hayes, $121,033.
10
Table of Option Grants in 1995
The following table sets forth details regarding stock options granted to the
named executive officers in 1995. In addition, there are shown the
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock
appreciation of 5% and 10% from the date the options were granted over the
full option term.
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Appreciation for Option Term (10 Years)
--------------------------------------------------------------
5% 10%
------------------------- -------------------------------
Options % Of Total
Granted Options Stock Stock
(in Granted to Exercise Expir- Price (per Price (per
shares) Employees Price(per ation share) share)
Name (1) in 1995 share) Date (2) Gain (2) Gain
- ------------- ------- ---------- -------- -------- --------- -------------- --------- ---------------------
J.R. Junkins 130,000 4.6 $35.63 1/25/05 $ 58.03 $ 2,911,918 $ 92.40 $ 7,380,370
W.B. Mitchell 50,000 1.8 $35.63 1/25/05 $ 58.03 $ 1,119,969 $ 92.40 $ 2,838,604
W.P. Weber 50,000 1.8 $35.63 1/25/05 $ 58.03 $ 1,119,969 $ 92.40 $ 2,838,604
T.J. Engibous 60,000 2.1 $35.63 1/25/05 $ 58.03 $ 1,343,962 $ 92.40 $ 3,406,325
W.F. Hayes 50,000 1.8 $35.63 1/25/05 $ 58.03 $ 1,119,969 $ 92.40 $ 2,838,604
All stockholders $ 58.03 $4,154,071,065(3) $ 92.40 $10,527,231,680(3)
Employees $ 58.03 $ 317,781,180(4) $ 92.40 $ 805,319,902(4)
through TI profit sharing plans
__________
(1) These nonqualified options may become exercisable on a graduated basis
beginning after one year if specified earnings per share levels are attained.
These options are fully exercisable during the ninth and tenth year without
regard to earnings per share and also may become fully exercisable in the
event of a change in control (as defined in the options) of the Company. The
number of shares granted and the exercise price per share have been adjusted
to give effect to the 1995 two-for-one stock split.
Currently, the exercise price may be paid by delivery of already-owned shares
and tax withholding obligations related to exercise may be paid in shares,
subject to certain conditions.
(2) The price of TI common stock at the end of the 10-year term of the
stock options granted at a 5% annual appreciation would be $58.03 and at a 10%
annual appreciation would be $92.40.
11
(3) The gain is based on the fair market value ($35.625 per share) and
number of all the outstanding shares of common stock on January 25, 1995, the
grant date of the options.
(4) The data presented for all employees represents the gain employees
would realize through the appreciation of the stock price of TI stock held in TI
profit sharing plans from the date of grant of the stock options listed
above, assuming 5% and 10% annual appreciation over the 10-year option term.
12
Table of Option Exercises in 1995 and Year-End Option Values
The following table sets forth information with respect to the named executive
officers concerning the exercise of options during 1995, and unexercised
options held as of December 31, 1995.
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, 1995(3) December 31, 1995(2)(3)
Acquired on Value ------------------------- ------------------------
Name Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------------- ----------- ------------- ----------- -------------
J.R. Junkins 200,000 $7,713,500 590,000 210,000 $17,773,100 $3,556,000
W.B. Mitchell 99,500 $2,430,433 0 86,000 $ 0 $1,463,320
W.P. Weber 268,000 $7,048,220 58,000 86,000 $ 1,200,460 $1,463,320
T.J. Engibous 50,250 $1,692,564 0 87,000 $ 0 $1,436,700
W.F. Hayes 37,823 $1,445,103 139,325 80,500 $ 3,809,490 $1,346,540
- ---------------------
(1) These shares were acquired upon the exercise of options granted from
1985 through 1987 in the case of Mr. Junkins; from 1990 through 1994 in the
case of Mr. Mitchell; from 1986 through 1992 in the case of Mr. Weber; from
1990 through 1994 in the case of Mr. Engibous; and from 1986 through 1992 in
the case of Mr. Hayes. The number of shares acquired upon exercise has been
adjusted to give effect to the 1995 two-for-one stock split.
(2) Market value of underlying securities at exercise date or year-end, as
the case may be, minus the exercise price.
(3) Exercisable options or portions thereof relate to options granted
during 1987-1994; unexercisable options or portions thereof relate to options
granted during 1993-1995. The number of shares has been adjusted to give
effect to the 1995 two-for-one stock split.
13
Pension Plan Table
The following table sets forth the approximate annual benefits relating to the
U.S. pension plan that would be payable as of December 31, 1995 under various
assumptions as to average credited earnings (as defined in the plan) and years
of credited service (as defined in the plan) to employees in higher salary
classifications who are 65 years of age as of such date. Benefits are based on
eligible earnings. Eligible earnings include (a) salary as shown in the
summary compensation table and (b) bonus as shown in the summary compensation
table. Other elements of compensation shown in the summary compensation table
or referred to in the footnotes to that table are not included in eligible
earnings.
Estimated Annual Benefits Under Pension Plan for
Specified Years of Credited Service(2)(3)
____________________________________________________________________________________
Average
Credited
Earnings
(1) 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
- ---------- -------- -------- -------- -------- -------- --------- --------
$ 500,000 109,584 146,112 182,640 219,168 255,696 293,196 330,696
$ 600,000 132,084 176,112 220,140 264,168 308,196 353,196 398,196
$ 700,000 154,584 206,112 257,640 309,168 360,696 413,196 465,696
$ 800,000 177,084 236,112 295,140 354,168 413,196 473,196 533,196
$ 900,000 199,584 266,112 332,640 399,168 465,696 533,196 600,696
$1,000,000 222,084 296,112 370,140 444,168 518,196 593,196 668,196
$1,100,000 244,584 326,112 407,640 489,168 570,696 653,196 735,696
$1,200,000 267,084 356,112 445,140 534,168 623,196 713,196 803,196
$1,300,000 289,584 386,112 482,640 579,168 675,696 773,196 870,696
$1,400,000 312,084 416,112 520,140 624,168 728,196 833,196 938,196
$1,500,000 334,584 446,112 557,640 669,168 780,696 893,196 1,005,696
$1,600,000 357,084 476,112 595,140 714,168 833,196 953,196 1,073,196
- --------------------
(1) The average credited earnings is the average of the five consecutive
years of highest earnings.
At December 31, 1995, the named executive officers were credited with the
following years of credited service and had the following average credited
earnings, respectively, under the U.S. pension plan: Mr. Junkins, 37 years,
$1,314,141; Mr. Mitchell, 34 years, $618,095; Mr. Weber, 34 years, $687,551;
Mr. Engibous, 18 years, $477,852; and Mr. Hayes, 28 years, $532,847.
(2) If the amount otherwise payable under the pension plan should be
restricted by the applicable provisions of ERISA, the amount in excess of the
Act's restrictions will be paid by the Company.
(3) The benefits under the plan are computed as single life annuity at age
65. The amounts shown in the table reflect the offset provided in the pension
14
plan under the pension formula adopted July 1, 1989 to comply with the social
security integration requirements. The integration offset is $2,916 for 15
years of credited service, $3,888 for 20 years of credited service, $4,860 for
25 years of credited service, $5,832 for 30 years of credited service, $6,804
for 35 years of credited service, $6,804 for 40 years of credited service and
$6,804 for 45 years of credited service.
Early Retirement Agreements
The Company has a policy providing for optional early retirement agreements for
the chairman of the board, the president and such other personnel as the board
of directors may designate, upon attainment of age 58 and such minimum lengths
of service as the board may specify. Participants enter into early retirement
agreements with the Company which among other things prohibit competition with
the Company until the attainment of age 69. Payments under the agreements are
based on the difference between the retirement benefits the individual is to
receive from the Company's U.S. pension plan and the retirement benefits the
individual would have received from the pension plan had the individual
remained in employment with the Company until the attainment of age 65 at a
rate of compensation equal to the average annual eligible earnings (as defined
in the pension plan) received during the three years immediately preceding
early retirement. The individual may elect payment under the early retirement
agreement in the form of monthly payments for life, monthly payments to the
individual or the individual's estate or survivors until the date of the
individual's 69th birthday, or a 50% joint and survivor's payment.
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the board of directors has furnished the
following report on executive compensation paid or awarded to executive
officers for 1995:
The executive compensation program is administered by the Compensation
Committee of the board of directors (the Committee), which is composed of the
individuals listed below (plus Mr. Goode, who joined the Committee subsequent
to the Committee's actions discussed in this report), all of whom are
independent directors of the Company. The program consists of base salaries,
annual incentive awards and long-term compensation. At higher management
levels, the mix of compensation is weighted more to the performance-based
components annual incentive and long-term compensation.
In determining the compensation of the executive officers, the Committee
considered guidelines developed for each component of compensation. As
indicated below, the guidelines took account of compensation practices of
competitor companies (as reported in various surveys administered by national
compensation consulting firms) and the relative performance of TI and
competitor companies. The competitor companies are primarily major high-
technology competitors in one or more of the markets semiconductor, defense and
information technology in which the Company operates. While many of these
companies are included in the S&P High-Technology Composite Index appearing in
the graph regarding total shareholder return on page 20, these companies are
not the same as the companies comprising that index. Each guideline was set
based on the best available data from as many competitor companies as
practicable. The Committee also considered the performance of the executive
officers toward the Company's prior year and long-term strategic objectives; in
this connection, the CEO made recommendations regarding the components of each
executive officer's compensation package except his own.
In its considerations, the Committee did not assign quantitative relative
weights to different factors or follow mathematical formulae. Rather, the
Committee exercised its discretion and made a judgment after considering the
factors it deemed relevant. The Committee's decisions regarding 1995 executive
compensation were designed to: (1) align the interests of executive officers
with the interests of the stockholders by providing performance-based awards;
and (2) allow the Company to compete for and retain executive officers critical
to the Company's success by providing an opportunity for compensation that is
comparable to the levels offered by other companies in our markets.
Section 162(m) of the Internal Revenue Code generally denies a deduction to any
publicly held corporation for compensation paid to a "covered employee" in a
taxable year to the extent that the employee's compensation (other than
qualified performance-based compensation) exceeds $1 million. In December
1995, the Internal Revenue Service published regulations governing the $1
million deductibility cap. Pursuant to those regulations, the Company's
"covered employees" will be those who, at the end of the year, are the chief
executive officer and the four other highest compensated officers of the
Company as determined under the rules of the Securities and Exchange Commission
governing executive compensation disclosure.
16
It is the Committee's policy to consider deductibility under Section 162(m) in
determining compensation arrangements for the Company's "covered employees" and
the Committee intends to optimize the deductibility of compensation to the
extent deductibility is consistent with the objectives of the executive
compensation program. The Committee, however, intends to weigh the benefits of
full deductibility with the objectives of the executive compensation program
and, if the Committee believes to do so is in the best interests of the Company
and its stockholders, will make compensation arrangements which may not be
fully deductible under Section 162(m). Under the transitional rules set forth
in the regulations, all compensation attributable to stock options granted
under the Company's current Long-Term Incentive Plan prior to the Company's
1997 annual meeting is expected to qualify for deductibility under
Section 162(m). The board of directors is presenting a new Long-Term Incentive
Plan for stockholder approval at the 1996 annual meeting. If the new Long-Term
Incentive Plan is approved, grants of options and other awards under the new
Long-Term Incentive Plan are expected to qualify for deductibility under
Section 162(m). The Committee expects that the annual incentive awards granted
to date to the Company's executive officers will, together with their 1996
salaries and any other compensation paid to them in 1996, qualify for
deductibility.
Annual Compensation
Annual compensation (base salary and annual incentive) guidelines were
established such that TI executive officers will receive a level of annual
compensation at, above or below the median annual compensation paid by
competitor companies depending primarily on whether TI's actual return on net
assets (RONA) is at, above or below its internally established performance
threshold, as described below. TI's percent revenue growth relative to the
percent revenue growth of competitor companies was also taken into account in
establishing the guidelines.
Base Salary. Base salary guidelines were established at the median level of
salaries for similarly situated executive officers of competitor companies, or
of organizations within competitor companies, of similar size (in terms of
total revenue). The Committee, in its discretion, determined officer salaries
in January 1995 at what it considered to be appropriate levels after reviewing
performance toward prior year objectives (such as improving production yields,
cycle times, productivity and customer satisfaction) and long-term strategic
objectives (such as increasing market share in the semiconductor business, and
focusing efforts to leverage TI's semiconductor, software and systems
expertise to make major contributions to the critical technologies driving the
digital revolution).
In determining the CEO's base salary, the Committee noted the continued
improvement in the financial performance of the Company. The Committee
considered the level of base salaries of CEOs of competitor companies and the
fact that Mr. Junkins had not received a base salary increase in 1994 and
consequently adjusted Mr. Junkins' salary to $800,400. While this represents
a significant increase, Mr. Junkins' salary remains below the median of CEOs
of competitor companies.
17
Annual Incentive. The Committee granted the CEO an annual incentive award in
March 1995. The award provided for variable payouts depending upon the
Company's actual 1995 RONA and growth in net revenues from 1994 to 1995, and
further provided that the Committee may, in its discretion, reduce the amount
payable under the award based on the Committee's judgment of circumstances at
the time. Incentive awards for the other executive officers were granted in
January 1996. As the performance component of annual compensation, the annual
incentive award varies significantly based on the Company's profitability and
revenue growth and the individual's contribution toward the Company's
performance. The primary performance threshold established for purposes of
determining annual incentive awards for 1995 is stated in terms of RONA. RONA
performance thresholds were established for 1995 taking into account (a) the
Company's 1995 RONA (either estimated or actual depending on the time of the
award) relative to 1995 RONA of competitor companies (as estimated at the time
of the award), and (b) the RONA the Company believes would be likely to
increase shareholder value over the long-term. The guidelines also provide for
an adjustment in the amount of the annual incentive awards based on TI's 1995
percent revenue growth as compared with the 1995 percent revenue growth of
competitor companies (as calculated in accordance with the terms of the award).
In granting the CEO's incentive award in March 1995, the Committee considered
the incentive compensation paid to CEOs of competitor companies and the
Company's RONA and percent revenue growth forecasts relative to the estimated
RONA and percent revenue growth performance of competitor companies. The award
was designed to pay the CEO at, above or below the median incentive paid to
CEOs of competitor companies, depending primarily upon whether TI's 1995 RONA
is at, above or below the Company's internally established performance
threshold. The award provided for an additional payment based on the extent
TI's 1995 percent revenue growth exceeded the percent revenue growth of
competitor companies (as calculated in accordance with the terms of the award),
if the Company's actual 1995 RONA performance met or exceeded the performance
threshold.
While the Company's performance exceeded the RONA threshold established in
March 1995, a review in January 1996 of the markets in which the Company
operated and the RONA performance of competitor companies suggested to the
Committee that the RONA threshold was low. Accordingly, the Committee
adjusted the award to $1,750,000. Mr. Junkins' annual compensation (base
salary plus incentive award) for 1995 exceeded the median for competitor
companies as did the performance of the Company.
Taking into account each executive officer's contributions toward prior year
objectives and the degree to which TI's 1995 RONA performance exceeded the RONA
performance threshold and TI's percent revenue growth exceeded the percent
revenue growth of competitor companies, the Committee granted annual incentive
awards to TI's executive officers (other than the CEO) such that the level of
the officers' annual compensation (base salary plus incentive award) for 1995
exceeded the median of competitors' annual compensation.
Long-Term Compensation
The Committee determined long-term compensation in January 1995. Stock options
constitute TI's primary long-term incentive vehicle. Stock options granted in
18
1995 were granted at 100% of fair market value on the date of grant, have a 10-
year term and do not become exercisable until after eight years, although
exercisability may be accelerated to the extent that earnings per share goals
are achieved (or in the event of a change in control of the Company). Any
value received by the executive officer from an option grant depends completely
upon increases in the price of TI common stock.
Guidelines for awards granted under TI's long-term incentive program were set
with the intention of providing TI executive officers an opportunity for
financial gain equivalent to the median opportunity provided by competitor
companies through all their long-term compensation programs. For this purpose,
the future rate of appreciation of the shares underlying stock-based awards is
assumed to be the same for all companies. Although not considered in
establishing guidelines for stock option grants, the size of prior grants was
considered in administering the guidelines.
The Committee reviewed the guidelines and determined to grant stock options
exceeding the guidelines to each executive officer. The Committee considered
the significant contributions of these executive officers to the development
and implementation of a focused strategic plan for the Company. The Committee
believes that these grants will recognize progress toward accomplishment of the
strategic plan and, since these stock options will result in increased
compensation to the executive officer only if TI's stock price increases, focus
the executive officers on executing the plan and building value for
shareholders.
In determining the CEO's long-term compensation, the Committee reviewed
progress made toward the Company's long-term objectives: accelerate TI's long-
term growth rate, while improving stability in the return on invested capital,
(1) by emphasizing digital signal processing solutions and shared investments
in memory products to reduce volatility in semiconductors; (2) by repositioning
defense systems and electronics for renewed growth, taking advantage of TI's
core defense technologies for commercial applications; and (3) by aggressively
pursuing R&D opportunities for new technologies such as digital light
processing. The Committee determined that the grant of the option to purchase
130,000 shares at a price per share of $35.63 (the market value of TI's common
stock on the date of grant giving effect to the subsequent 2-for-1 stock
split) would, in its judgment, provide the CEO with a competitive financial
opportunity slightly exceeding the median. Until the year 2003, the
exercisability of the option depends primarily on the achievement of specific
earnings per share goals. The CEO's total long-term compensation slightly
exceeded the median long-term compensation provided by competitor companies,
and the CEO's total compensation (annual plus long-term) exceeded the median
total compensation as the performance of the Company exceeded the median of
competitor companies.
William S. Lee, Chair Gerald W. Fronterhouse
James R. Adams Gloria M. Shatto
19
COMPARISON OF TOTAL SHAREHOLDER RETURN
The following graph sets forth TI's total shareholder return as compared to the
S&P 500 Index and the S&P High-Technology Composite Index over a five-year
period, beginning December 31, 1990, and ending December 31, 1995. The total
shareholder return assumes $100 invested at the beginning of the period in TI
Common Stock, the S&P 500 and the S&P High-Technology Composite Index. It
also assumes reinvestment of all dividends.
[A performance graph showing five year cumulative
total return among the Company, the S&P 500 Index
and the S&P High Tech Composite Index appears here.
The coordinates used in the graph appear below.]
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
Texas Instruments $100 $ 83 $128 $176 $210 $292
S&P 500 R $100 $130 $140 $155 $157 $215
S&P R High Tech $100 $114 $119 $146 $170 $245
Composite Index
*Assumes that the value of the investment in TI Common Stock and each index was
$100 on December 31, 1990, and that all dividends were reinvested.
**Year ending December 31.
20
PROPOSAL TO APPROVE AMENDMENT TO RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
The board of directors believes that it is desirable for the stockholders to
consider and act upon a proposal to amend the Company's Restated Certificate of
Incorporation (the Certificate). Pursuant to the proposal, the currently
authorized shares of common stock, $1 par value, will be increased from
300,000,000 to 500,000,000 shares.
Of the 300,000,000 currently authorized shares of common stock, as of
December 31, 1995, 189,526,939 were issued (including 138,129 treasury shares).
Of the remaining 110,473,061 authorized shares of common stock, 21,750,913 were
reserved for issuance in connection with the Company's incentive plans, stock
option plans, stock option purchase plan, profit sharing plans and convertible
subordinated debentures.
Except for shares currently reserved as explained above and shares that may be
reserved in connection with the proposed 1996 Long-Term Incentive Plan
discussed below, the Company does not now have any present plan, understanding
or agreement to issue additional shares of common stock. However, the board
believes that the proposed increase in authorized shares of common stock is
desirable to enhance the Company's flexibility in connection with possible
future actions, such as stock splits, stock dividends, financings, corporate
mergers, acquisitions of property, use in employee benefit plans, or other
corporate purposes. The board will determine whether, when, and on what terms
the issuance of shares of common stock may be warranted in connection with any
of the foregoing purposes.
If the proposed amendment is approved, all or any of the authorized shares of
common stock may be issued without further action by the stockholders and
without first offering such shares to the stockholders for subscription. The
issuance of common stock otherwise than on a pro-rata basis to all holders of
such stock would reduce the proportionate interests of such stockholders.
Pursuant to the proposal, the first sentence of Article Fourth of the
Certificate will be amended to read as follows:
"The total number of shares of all classes of stock which the Company
shall have authority to issue is Five Hundred Ten Million (510,000,000)
shares, of which Ten Million (10,000,000) shall be Preferred Stock with a
par value of $25.00 per share, and Five Hundred Million (500,000,000)
shall be Common Stock with a par value of $1.00 per share."
Other than increasing the authorized shares of common stock from 300,000,000
to 500,000,000, the proposed amendment in no way changes the Certificate.
The board has unanimously adopted resolutions setting forth the proposed
amendment to the Certificate, declaring its advisability and directing that the
proposed amendment be submitted to the stockholders for their approval at the
annual meeting on April 18, 1996. If adopted by the stockholders, the amendment
will become effective upon filing as required by the General Corporation Law of
Delaware.
The board of directors recommends a vote "FOR" the above proposal.
21
PROPOSAL TO APPROVE THE TEXAS INSTRUMENTS
1996 LONG-TERM INCENTIVE PLAN
Since 1965 the Company has had in effect key employee incentive plans,
currently consisting of the Texas Instruments Long-Term Incentive Plan and the
Texas Instruments Annual Incentive Plan. These plans were designed to provide
an additional incentive for those who are key to the Company's success in the
highly technological and competitive businesses in which it operates. The
board of directors believes that 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 at all levels of the Company's
organizations, it must continue to have incentive plans of these types in
place.
The Texas Instruments Annual Incentive Plan (the Annual Plan) provides for
awards, in cash or in common stock of the Company, to be made by the
Compensation Committee (the Committee) of the board of directors out of amounts
credited annually to a reserve within the limits of a formula which was
approved by the stockholders in 1965. Under the formula, the amount credited
to the Reserve each year may not exceed 10% of the amount by which the
Company's net income (as defined) for such year exceeds 6% of net capital (as
defined), but not in excess of the amount paid out as dividends on the common
stock of the Company during such year. No changes to the Annual Plan are
proposed.
The Texas Instruments Long-Term Incentive Plan (the Long-Term Plan) provides
for the grant by the Committee of: (1) stock options, including incentive
stock options meeting the requirements of Section 422 of the Internal Revenue
Code, (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.
As of January 31, 1996, there were only 108,268 shares of the common stock of
the Company remaining available for grant under the Long-Term Plan. The board
of directors recommends that the stockholders approve adoption of a new Texas
Instruments 1996 Long-Term Incentive Plan to replace the existing Long-Term
Plan.
It is anticipated that the 108,268 shares that were available for grant under
the Long-Term Plan at January 31, 1996 will continue to be available for grant
after adoption of the new Texas Instruments 1996 Long-Term Plan unless granted
before such adoption.
Texas Instruments 1996 Long-Term Incentive Plan
The full text of the proposed Texas Instruments 1996 Long-Term Incentive Plan
(the 1996 Plan) is shown on Exhibit A to this proxy statement. The principal
features of the 1996 Plan, which is essentially identical to the existing Long-
Term Plan, are summarized below.
Under the 1996 Plan, the number of shares of common stock available for
granting stock options and other awards during the term of the plan will be
18,500,000 shares, subject to adjustment for stock splits and other events as
22
set forth in the plan. No more than 2,000,000 shares of common stock may be
awarded as restricted stock, restricted stock units or "other-stock based
awards" described below during the term of the plan.
As noted above, the 1996 Plan will permit the granting of: (1) stock options,
including incentive stock options meeting the requirements of Section 422 of
the Internal Revenue Code, (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 will be administered by the Compensation
Committee (the Committee) of the board of directors. The Committee will have
the authority to establish rules for the administration of the plan; to select
the employees to whom awards are granted; to determine the types of awards to
be granted and the number of shares covered by such awards; to set the terms
and conditions of such awards; and to cancel, suspend and amend awards but,
except for stock splits and other events described below, no amendment may
reduce the exercise price of an option. Neither the benefits or amounts that
will be received by the executive officers or others if the plan is approved by
the stockholders nor the benefits or amounts that would have been received by
them for 1995 if the plan had then been in effect may be determined at this
time, since awards under the plan will be at the discretion of the Committee.
The Committee may also determine whether the payment of any proceeds of any
award shall or may be deferred and may authorize payments representing
dividends or interest or their equivalents in connection with any deferred
award.
Any employee of the Company, including any officer or employee-director, will
be eligible to receive awards under the 1996 Plan. There were 59,574 employees
of the Company at December 31, 1995. Directors who are not full-time or part-
time officers or employees will not be eligible to participate in the plan.
Determinations and interpretations with respect to the 1996 Plan will be in the
sole discretion of the Committee, whose determinations and interpretations will
be binding on all interested parties. The Committee may delegate to one or
more officers or managers the right to grant awards and to cancel or suspend
awards with respect to individuals who are not subject to Section 16(b) of the
Securities Exchange Act of 1934, provided that any such delegation will conform
with the requirements of the General Corporation Laws of Delaware. The board
may amend, alter or discontinue the plan at any time provided that stockholder
approval must be obtained for any change that would increase the number of
shares available for awards or that would permit the granting of options or
other stock-based awards encompassing rights to purchase shares at prices below
the fair market value of the common stock, other than as described below.
Awards will be granted for no cash consideration or for such minimal cash
consideration as may be 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 shall
determine. Any shares of stock deliverable under the 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, the exercise
23
price per share of stock purchasable 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-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 such 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, whether
in cash or, at the discretion of the Committee, in whole or in part by the
tendering of stock of the Company or other property having a fair market value
on the date the option or right is exercised equal to the exercise or purchase
price. Determinations of fair market value under the plan will be made in
accordance with methods or procedures established by the Committee.
Restricted stock may provide the recipient all of the rights of a stockholder
of the Company, including the right to vote the shares and to receive any
dividends, provided that neither restricted stock nor restricted stock units
may be transferred by the recipient until certain restrictions established by
the Committee lapse. Upon termination of employment during the restriction
period, all restricted stock and restricted stock units shall be forfeited,
unless the Committee determines otherwise.
Performance units will provide the holder thereof rights valued as determined
by the Committee and payable to, or exercisable by, such holder, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. The Committee is also authorized to
establish the terms and conditions of other stock-based awards.
No award granted under the 1996 Plan may be assigned, transferred, pledged or
otherwise encumbered by the individual to whom it is granted, otherwise than by
will, by designation of a beneficiary, or by the laws of descent and
distribution. Each award shall be exercisable, during such individual's
lifetime, only by such individual, or, if permissible under applicable law, by
such individual's guardian or legal representative.
Under the 1996 Plan, if any shares subject to any award under the Long-Term
Plan, or under the 1984 or 1988 Stock Option Plans of the Company are
forfeited, or if any such award terminates without the delivery of shares or
other consideration, the shares previously used for such awards will be
available for future awards under the 1996 Plan. If another company is
acquired by the Company or an affiliate in the future, any awards made and any
of the Company's shares delivered upon the assumption of or in substitution for
outstanding grants made by the acquired company may be deemed to be granted
under the 1996 Plan but, with the exception of grants made to individuals who
are officers and directors of the Company for purposes of Section 16(b) of the
Securities Exchange Act of 1934, will not decrease the number of shares
available for grant under the 1996 Plan. Except for such awards and except to
avoid double counting with respect to certain awards granted in tandem with
other awards granted under the 1996 Plan or under any other plan of the
Company, all awards granted under the 1996 Plan will be counted against the
overall limits on the number of shares available under the 1996 Plan pursuant
to procedures to be specified by the Committee.
If any dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
24
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 so 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 1996 Plan, then the Committee may, in such manner as
it deems equitable, adjust (1) the number and type of shares (or other
securities or property) which thereafter may be made the subject of awards,
(2) the number and type of shares (or other securities or property) subject to
outstanding awards, and (3) the grant, purchase or exercise price with respect
to any award, or may make provision for a cash payment to the holder of an
outstanding award. The Committee will also be authorized, for similar
purposes, to make adjustments in performance unit criteria or in the terms and
conditions of other awards in recognition of unusual or non-recurring events
affecting the Company or its financial statements or of changes in applicable
laws, regulations or accounting principles. 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. Nothing contained in the plan shall prevent the Company or any
affiliate from adopting or continuing in effect other or additional
compensation arrangements.
It is intended that awards under the 1996 Plan to any "covered employees" as
defined in Section 162(m) of the Internal Revenue Code will qualify as
performance-based compensation under Section 162(m) so as to preserve the
deductibility of any compensation in excess of $1 million paid to any "covered
employees." Accordingly, the plan provides that members of the Committee must
be "outside directors" as defined in Section 162(m) and regulations thereunder,
that options on no more than 500,000 shares may be granted to a participant in
a year, that no more than 50,000 shares may be granted to a participant in a
year under other awards denominated in stock, that no more than $5,000,000 may
be paid to a participant in a year under all other awards under this Plan and
that awards other than options or stock appreciation rights to individuals
expected by the Committee to be "covered employees" and recipients of over
$1 million in compensation must provide that payment will be subject to
achievement of a defined level of one or more of the following performance
measures: (i) return on net assets, (ii) revenue growth, (iii) return on
invested capital, (iv) total shareholder return, (v) earnings per share,
(vi) cycle time improvements, (vii) manufacturing process yield, (viii) net
revenue per employee, or (ix) market share, all as defined in the plan.
No awards may be granted under the 1996 Plan after April 18, 2006.
Tax Consequences
Counsel for the Company has advised that, in the case of an incentive stock
option, if an optionee 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 of the option or one year after the transfer of such shares to the
optionee, the optionee will be entitled for federal income tax purposes to
treat any profit which may be realized upon the disposition of the shares as a
long-term capital gain. In contrast, a person who receives an option under the
25
plan which is not an incentive stock option or otherwise does not comply with
the conditions noted above will generally realize 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. 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 individual's alternative minimum tax.
Counsel for the Company has also advised that a person who receives a grant of
an option, whether it is an incentive stock option or an option which is not an
incentive stock option, will not be in receipt of taxable income under the
Internal Revenue Code upon the making of the grant. The Company will not be
allowed any deduction for federal income tax purposes upon the grant or
exercise of incentive stock options (assuming compliance by the optionee with
the conditions noted above). 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 an optionee who (a) exercises an option which is not an incentive
stock option, or (b) disposes of stock acquired pursuant to the exercise of an
incentive stock option prior to the end of the required holding period
described in the immediately preceding paragraph.
The Board of Directors recommends a vote "FOR" the Texas Instruments 1996 Long-
Term Incentive Plan.
ADDITIONAL INFORMATION
Financial Statements
This proxy statement has been preceded or accompanied by the Annual Report for
the fiscal year ended December 31, 1995. The consolidated financial statements
and auditor's report on pages 26-39, the management discussion and analysis of
financial condition and results of operations on pages 3-7 and 22-25, and
information concerning the quarterly financial data on page 39 of the Annual
Report are incorporated herein by reference.
Voting Securities
As of February 20, 1996, there were outstanding 189,451,815 shares of the
Company's common stock, which is the only class of capital stock entitled to
vote at the meeting. Each holder of common stock is entitled to 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 20, 1996 will be entitled to
vote at the meeting or any adjournment thereof.
26
The following table sets forth certain information concerning (a) the only
persons that have reported beneficial ownership of more than 5% of the common
stock of the Company, and (b) the ownership of the Company's common stock by
the named executive officers, and all executive officers and directors as a
group.
Shares Owned At Percent of
Name and Address December 31, 1995 Class
- -------------------------------- ----------------- ----------
Bankers Trust New York Corporation 20,777,997(1) 11%
280 Park Avenue
New York, NY 10017
Jerry R. Junkins 820,531(2) *
William B. Mitchell 73,604(2) *
William P. Weber 130,403(2) *
Thomas J. Engibous 57,295(2) *
William F. Hayes 208,934(2) *
All executive officers and 1,899,908(2)(3) 1%
directors as a group
____________________
*Less than 1%.
(1) Includes 17,095,662 shares held in profit sharing stock accounts of the
Company's employees under the U.S. profit sharing trust served by Bankers Trust
Company of the Southwest, a subsidiary of Bankers Trust New York Corporation,
as trustee. Under the terms of the trust, the trustee votes the shares in each
employee's account in accordance with the employee's wishes.
(2) Includes shares subject to acquisition within 60 days by Messrs.
Junkins, Mitchell, Weber, Engibous and Hayes for 709,500, 48,500, 106,500,
46,800 and 183,325 shares, respectively, and shares credited to profit sharing
stock accounts for Messrs. Junkins, Mitchell, Weber, Engibous and Hayes in the
amounts of 10,253, 5,412, 5,813, 1,895 and 3,455, respectively. Excludes
shares held by a family member if a director or officer has disclaimed
beneficial ownership.
(3) Includes (a) 1,513,699 shares subject to acquisition within 60 days,
and (b) 49,690 shares credited to profit sharing stock accounts.
27
Cost of Solicitation
The solicitation is made on behalf of the board of directors of the Company.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, the Company will make arrangements with brokerage houses
and other custodians, nominees and fiduciaries to send proxies and proxy
material to their principals and will reimburse them for their expenses in so
doing. Officials and regular employees of the Company, without additional
compensation, may solicit proxies personally, by telephone or telegram, from
some stockholders if proxies are not promptly received. In addition, the
Company has retained Georgeson & Company, Inc. to assist in the solicitation of
proxies at a cost of $15,000 plus out-of-pocket expenses.
28
Vote Required
The eleven nominees for election as directors at the 1996 Annual Meeting of
Stockholders who receive the greatest number of votes cast at that meeting by
the holders of the Company's common stock entitled to vote at that meeting, a
quorum being present, shall become directors at the conclusion of the
tabulation of votes. A majority vote of the outstanding common stock is
necessary for the adoption of the proposed charter amendment. An affirmative
vote of the holders of a majority of the voting power of the Company's common
stock, present in person or represented by proxy and entitled to vote at the
meeting, a quorum being present, is necessary to approve any other matters as
may properly come before the meeting. Under Delaware law and the Company's
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, and 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.
Other Matters
The firm of Ernst & Young LLP has been selected by the board of directors,
pursuant to the recommendation of its Audit Committee, as independent auditors
for the Company. Representatives of such firm are expected to be present, and
to be available to respond to appropriate questions, at the annual meeting.
They will have the opportunity to make a statement if they desire to do so;
they have indicated that, as of this date, they do not desire to do so.
Section 16(a) of the Securities Exchange Act of 1934 requires certain persons,
including the Company's directors and executive officers, to file reports with
the Securities and Exchange Commission regarding beneficial ownership of
certain equity securities of the Company. During 1995, because of an
inadvertent clerical error at the Company, one of Mr. Mitchell's reports was
filed late.
By Order of the Board of Directors,
/s/ RICHARD J. AGNICH
Richard J. Agnich
Senior Vice President,
Secretary and General Counsel
Dallas, Texas
February 28, 1996
29
Graphic and Image Information Appendix
Photos of the directors appear to the left of each director's biographical
information on pages 2, 3 and 4.
A performance graph showing five year cumulative total return among the
Company, the S&P 500 Index and the S&P High-Tech Composite Index appears on
page 20. The coordinates used in the graph also appear on page 20.
30
EXHIBIT A
TEXAS INSTRUMENTS 1996 LONG-TERM INCENTIVE PLAN
As Adopted April 18, 1996
The Texas Instruments 1996 Long-Term Incentive 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.
For purposes of the Plan, unless otherwise indicated, the term "Company" shall
mean Texas Instruments Incorporated and its subsidiaries of which
substantially all of the voting stock is owned directly or indirectly by Texas
Instruments.
Eligibility
Any employee of the Company, including any officer or employee-director, shall
be eligible to be designated a Participant (defined below). Directors who are
not full-time or part-time officers or employees are not eligible to be
designated Participants.
Compensation Committee
The Plan shall be administered by a Committee of the Board of Directors which
shall be known as the Compensation Committee (the "Committee"). The
Committee shall be appointed by a majority of the whole Board and shall
consist of not less than three directors. The Board may designate one or more
directors as alternate members of the Committee who may replace any absent or
disqualified member at any meeting of the Committee. A director may serve as
a member or alternate member of the Committee only during periods in which he
is a "disinterested person" as described in Rule 16b-3 under the Securities
Exchange Act of 1934, as in effect from time to time ("Rule 16b-3"). No
member or alternate member of the Committee shall be eligible, while a member
or alternate member, for participation in the Plan. In addition, a director
may serve as a member or alternate member of the Committee only during periods
in which he is an "outside" director as described in Section 162(m) of the
Internal Revenue Code of 1986 and regulations promulgated thereunder. The
Committee shall have full power and authority to construe, interpret and
administer the Plan. It may issue rules and regulations for administration of
the Plan. It shall meet at such times and places as it may determine. A
majority of the members of the Committee shall constitute a quorum and all
decisions of the Committee shall be final, conclusive and binding upon all
parties, including the Company, the stockholders and the employees.
Definitions
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Award" shall mean any Option, Restricted Stock, Restricted Stock Unit,
Performance Unit or Other Stock-Based Award granted under the Plan.
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(b) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Cycle Time Improvement" shall mean a reduction of the actual time a
specific process relating to a product or service of the Company takes to
accomplish.
(e) "Earnings Per Share" shall mean earnings per share calculated in
accordance with Generally Accepted Accounting Principles.
(f) "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.
(g) "Incentive Stock Option" shall mean an option granted under paragraph (a)
under the heading "Awards" set forth below that is intended to meet the
requirements of Section 422 of the Code, or any successor provision
thereto.
(h) "Manufacturing Process Yield" shall mean the good units produced as a
percent of the total units processed.
(i) "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 of its business units during a time period.
(j) "Net Revenue Per Employee" in a period shall mean net revenue divided by
the average number of employees of the Company, with average defined as
the sum of the number of employees at the beginning and ending of the
period divided by two.
(k) "Non-Qualified Stock Option" shall mean an option granted under said
paragraph (a) that is not intended to be an Incentive Stock Option.
(l) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(m) "Other Stock-Based Award" shall mean any right granted under paragraph (d)
under the heading "Awards" set forth below.
(n) "Participant" shall mean an employee designated to be granted an Award
under the Plan.
(o) "Performance Unit" shall mean any right granted under paragraph (c) under
the heading "Awards" set forth below.
(p) "Released Securities" shall mean securities that were Restricted
Securities with respect to which all applicable restrictions have expired,
lapsed, or been waived.
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(q) "Restricted Securities" shall mean Awards of Restricted Stock or other
Awards under which issued and outstanding Shares are held subject to
certain restrictions.
(r) "Restricted Stock" shall mean any Share granted under paragraph (b) under
the heading "Awards" set forth below.
(s) "Restricted Stock Unit" shall mean any right granted under said paragraph
(b) that is denominated in Shares.
(t) "Return On Common Equity" for a period shall mean net income less
preferred stock dividends divided by total shareholders equity, less
amounts, if any, attributable to preferred stock.
(u) "Return On Net Assets" for a period shall mean net income less preferred
stock dividends 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.
(v) "Revenue Growth" shall mean the percentage change in revenue (as defined
in Statement of Financial Accounting Concepts No. 6, published by the
Financial Accounting Standards Board) from one period to another.
(w) "Shares" shall mean shares of the common stock of the Company, $1.00 par
value.
(x) "Total Shareholder Return" shall mean the sum of the appreciation in the
Company's stock price and dividends paid on the common stock of the
Company over a given period of time.
Administration of Plan
The Plan shall be administered by the Committee. 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 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 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; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan.
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Unless otherwise determined by the Committee, the amounts of any dividend
equivalents or interest determined by the Committee to be payable with respect
to any Awards shall not be counted against the aggregate number of shares
available for granting Awards under the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time, and shall be
final, conclusive and binding upon all persons, including the Company, any
Participant, any holder or beneficiary of any Award, any stockholder and any
employee of the Company.
Shares Available for Awards
Subject to adjustment as provided below:
(a) Number of Shares Available
(i) Overall. The number of Shares available for granting Awards
(including Awards of Restricted Stock and Restricted Stock Units
and Other Stock-Based Awards) under the Plan during the term of
the Plan shall be 18,500,000 shares. If, after the effective
date of the Plan, any Shares covered by an award granted under
the Plan, or by an option granted under the Company's 1984 or
1988 Stock Option Plans, or an award granted under the Company's
Long-Term Incentive Plan adopted April 15, 1993, or to which such
an award relates, are forfeited, or if such an Award or such an
option otherwise terminates without the delivery of Shares or of
other consideration, then the Shares covered by such award or
option, or to which such award relates, or the number of Shares
otherwise counted against the aggregate number of Shares
available under the Plan with respect to such award, to the
extent of any such forfeiture or termination, shall again be, or
shall become, available for granting awards under the Plan to the
extent permitted by Rule 16b-3.
(ii) Additional Restriction. The maximum number of Shares that may be
awarded under paragraph (b), "Restricted Stock and Restricted
Stock Units", and paragraph (d), "Other Stock-Based Awards",
under the heading "Awards" below during the term of the Plan
shall be 2,000,000 shares.
(b) Accounting for Awards
For purposes of this section:
(i) If an Award is denominated in Shares, the number of Shares
covered by such Award, or to which such Award relates, shall be
counted on the date of grant of such Award against the aggregate
number of Shares available for granting Awards under the Plan;
and
(ii) Awards not denominated in Shares shall be counted against the
aggregate number of Shares available for granting Awards under
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the Plan in such amount and at such time as the Committee shall
determine under procedures adopted by the Committee consistent
with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from) other Awards may be counted
or not counted under procedures adopted by the Committee in order to avoid
double counting. Any Shares that are delivered by the Company, and any Awards
that are granted by, or become obligations of, the Company, through the
assumption by the Company of, or in substitution for, outstanding awards
previously granted by an acquired company shall not, except in the case of
Awards granted to employees who are officers or directors of the Company for
purposes of Section 16 of the Securities Exchange Act of 1934, as amended, be
counted against the Shares available for granting Awards under the Plan.
(c) Sources of Shares Deliverable Under Awards
Any Shares delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(d) Adjustments
In the event that the Committee shall determine 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
determined by the Committee to be 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, in such manner as it may
deem equitable, 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, (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 or, if deemed appropriate, make provision for
a cash payment to the holder of an outstanding Award; provided, however, in
each case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would cause
the Plan to violate Section 422(b)(1) of the Code or any successor provision
thereof; and provided further, that the number of Shares subject to any Award
denominated in Shares shall always be a whole number.
Awards
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions, in either case not inconsistent with the provisions of
the Plan, as the Committee shall determine:
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(i) Exercise Price. The purchase price per Share purchasable under
an Option shall be determined by the Committee; provided,
however, that, except in the case of Options granted through
assumption of, or in substitution for, outstanding awards
previously granted by an acquired company, such purchase price
shall not be less than the Fair Market Value of a Share on the
date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee.
(iii) Time and Method of Exercise. 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.
(iv) Incentive Stock Options. 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.
(b) Restricted Stock and Restricted Stock Units
(i) Issuance. The Committee is hereby authorized to grant Awards of
Restricted Stock and Restricted Stock Units to Participants.
(ii) Restrictions. 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. However, the minimum vesting period for Restricted
Stock Units granted under this Plan shall be three years.
(iii) Registration. Any 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.
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(iv) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment (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.
Unrestricted Shares, evidenced in such manner as the Committee
shall deem appropriate, shall be delivered to the holder of
Restricted Stock promptly after such Restricted Stock shall
become Released Securities.
(c) Performance Units. The Committee is hereby authorized to grant
Performance Units to Participants. 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.
(d) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Participants such other Awards (including, without limitation, stock
appreciation rights) 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 paragraph (d) 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 Awards granted through assumption of, or in
substitution for, outstanding awards previously granted by an acquired
company, not be less than the Fair Market Value of such Shares or other
securities as of the date such purchase right is granted.
(e) General.
(i) No Cash Consideration for Awards. Awards shall be granted for no
cash consideration or for such minimal cash consideration as may
be required by applicable law.
A-7
(ii) Awards May Be Granted Separately or Together. 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.
(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan, payments or transfers to be made by the Company upon the
grant, exercise or payment 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 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 the grant or crediting of dividend
equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards. No Award (other than Released
Securities), 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 (or, in the case of an Award of Restricted
Securities, to the Company); 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 to any Award
upon the death of the Participant. Each Award, and each right
under any Award, shall be exercisable during the Participant's
lifetime only by the Participant or, if permissible under
applicable law, by the Participant's guardian or legal
representative. No Award (other than Released Securities), 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.
(v) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, however, that in
no event shall the term of any Incentive Stock Option exceed a
period of ten years from the date of its grant.
(vi) Share Certificates. 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
A-8
of the Securities and Exchange Commission, any stock exchange
upon which such Shares or other securities are then listed, and
any applicable Federal or state 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.
(vii) Performance Measures for Selected Awards. Every award other
than an option or stock appreciation right to a member of the
Executive Group (defined below) 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,
as determined by the Committee, of one or more of the following
performance measures, as determined by the Committee: (i) return
on net assets, (ii) revenue growth, (iii) return on common
equity, (iv) total shareholder return, (v) earnings per share,
(vi) cycle time improvement, (vii) manufacturing process yield,
(viii) net revenue per employee or (ix) market share. The
"Executive Group" shall include every person who, at the time
such pre-established formula is determined, is expected by the
Committee to be both (a) a "covered employee" as defined in
Section 162(m) of the Code as of the end of the taxable year in
which payment of the award may be deducted by the Company, and
(b) the recipient of compensation of more than $1,000,000 for
that taxable year. For awards in the form of options or stock
appreciation rights, no more than 500,000 shares can be granted
under this Plan to any participant in any one year. For other
awards denominated in stock, no more than 50,000 shares can be
granted under this Plan to any participant in any one year. For
all other awards, no more than $5,000,000 can be paid under this
Plan to any participant in any one year.
Amendment and Termination
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may amend,
alter, suspend, discontinue or terminate the Plan, without the consent of any
share owner, Participant, other holder or beneficiary of an Award, or other
person; provided, however, that, no such action shall impair the rights under
any Award theretofore granted under the Plan and that, notwithstanding any
other provision of the Plan or any Award Agreement, without the approval of
the stockholders of the Company no such amendment, alteration, suspension,
discontinuation or termination shall be made that would:
(i) Increase the total number of Shares available for Awards under
the Plan, except as provided under the heading "Shares Available
for Awards" above; or
(ii) permit Options or other Stock-Based Awards encompassing rights to
purchase Shares to be granted with per Share grant, purchase,
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or exercise prices of less than the Fair Market Value of a Share
on the date of grant thereof, except to the extent permitted
in paragraphs (a) or (d) under the heading "Awards" above.
(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, 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 that no such action shall impair the rights of any relevant
Participant or holder or beneficiary under any Award theretofore granted under
the Plan; and provided further that, except as provided for in paragraph (d)
under the heading "Shares Available for Awards" above and in paragraph (c)
below, no such action shall reduce the exercise price of any Option.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in paragraph (d) under the heading "Shares Available for
Awards" above) affecting the Company, or the financial statements of the
Company, or 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.
(d) Correction of Defects, Omissions and Inconsistencies. 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.
General Provisions
(a) No Rights to Awards. No employee, 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, Participants, or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards
need not be the same with respect to each recipient.
(b) Delegation. The Committee may delegate to 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, that any delegation to
management shall conform with the requirements of the General Corporation Law
of Delaware, as in effect from time to time.
(c) Withholding. 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
the amount (in cash, Shares, other securities, other Awards, or other
property) of withholding taxes due in respect of an Award, its exercise, or
any payment or transfer under such Award or under the Plan and to take such
A-10
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 for the payment of such taxes.
(d) 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.
(e) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company.
Further, the Company may at any time dismiss a Participant from employment,
free from any liability, or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.
(f) 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 and applicable Federal law.
(g) Severability. 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.
(h) No Trust or Fund Created. 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.
(i) No Fractional Shares. 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.
Effective Date of the Plan
The Plan shall be effective as of the date of its approval by the stockholders
of the Company.
Term of the Plan
No Award shall be granted under the Plan after April 18, 2006. 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
A-11
authority of the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award, or to waive any conditions or rights under any such
Award, and the authority of the Board of Directors of the Company to amend the
Plan, shall extend beyond such date.
A-12
TI EMPLOYEES UNIVERSAL PROFIT SHARING PLAN
LETTER TO ACCOMPANY VOTING INSTRUCTIONS FORM
ANNUAL MEETING OF STOCKHOLDERS
April 18, 1996
February 28, 1996
TO: Participants in TI's Universal Profit Sharing Plan
The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement
and Instructions to Trustee on Voting relate to shares of common stock of Texas
Instruments Incorporated held by the Trustee for your profit sharing accounts.
As noted in the Proxy Statement, the TI board of directors has designated the
following nominees for election to the board for the ensuing year: JAMES R.
ADAMS, DAVID L. BOREN, JAMES B. BUSEY IV, GERALD D. FRONTERHOUSE, DAVID R.
GOODE, JERRY R. JUNKINS, WILLIAM S. LEE, WILLIAM B. MITCHELL, GLORIA M. SHATTO,
WILLIAM P. WEBER and CLAYTON K. YEUTTER. Biographies of the nominees appear in
the Proxy Statement. In addition, the two board proposals set forth in the
Proxy Statement are expected to be presented at the annual meeting. The board
of directors of TI recommends a vote FOR the election of directors and the two
board proposals.
The Trustee is required to vote the whole shares held for each of your accounts
(and whole and fractional shares held for Tax Credit Employee Stock Ownership
Accounts) in accordance with your instructions. If you wish to instruct the
Trustee on voting of whole shares held for your accounts (and whole and
fractional shares held for Tax Credit Employee Stock Ownership Accounts), you
should complete and sign the "Instructions to Trustee on Voting" form enclosed
and return it in the addressed, postage-free envelope by April 15, 1996.
In the event that you do not instruct the Trustee on voting the whole shares
held for your accounts (except Tax Credit Employee Stock Ownership Account
shares) by April 15, 1996 in the manner provided in this letter, the Trustee
will vote such shares in accordance with the vote of the majority of the
shares for which the Trustee receives voting instructions from other
participants. Fractional shares and unallocated shares held for accounts other
than Tax Credit Employee Stock Ownership Accounts will be voted in the same
manner. In accordance with plan provisions, the Trustee will vote the shares
held for each Tax Credit Employee Stock Ownership Account (generally 2 to 15
whole shares per account) only as specifically instructed by participants by
April 15, 1996.
NOTE: If you own TI shares in your own name, a Proxy for those shares will be
sent to you in a separate package.
Chuck Nielson
Vice President, Human Resources
PROXY PROXY
PROXY FOR ANNUAL MEETING TO BE HELD APRIL 18, 1996
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints JAMES R. ADAMS, JERRY R. JUNKINS, GLORIA M.
SHATTO, 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 18, 1996, at 10:00 a.m. (Dallas time) and at
any or all adjournments thereof, according to the number of shares of common
stock which the undersigned would be entitled to vote if then personally
present, in the election of directors and upon other matters properly coming
before the meeting.
IMPORTANT-This Proxy must be signed and dated on the reverse side.
Draft of
TEXAS INSTRUMENTS
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [/]
_____________________________________________________________________________
The board of directors recommends a vote FOR the election of directors and the
two board proposals.
For All
1. Election of Directors For Withheld Except Nominee(s)
Written Below
Nominees: J.R. Adams, D.L. Boren, [ ] [ ] [ ]______________
J.B. Busey IV, G.W. Fronterhouse,
D.R. Goode, J.R. Junkins,
W.S. Lee, W.B. Mitchell,
G.M. Shatto, W.P. Weber
and C.K. Yeutter.
2. Proposal regarding increasing the For Against Abstain
Company's authorized common stock. [ ] [ ] [ ]
3. Proposal regarding adoption of For Against Abstain
Texas Instruments 1996 Long-Term [ ] [ ] [ ]
Incentive Plan.
If no contrary indication is made, this proxy
will be voted FOR the election of each board
nominee and FOR the board proposals.
Dated __________________________, 1996
______________________________________________
Signature
______________________________________________
Signature
NOTE: Please sign exactly as name appears hereon. For joint accounts both
owners should sign. When signing as executor, administrator, attorney,
trustee or guardian, etc., please give your full title.
INSTRUCTIONS TO TRUSTEE ON VOTING
TI COMMON STOCK
HELD UNDER THE
TI EMPLOYEES UNIVERSAL PROFIT SHARING PLAN
PLEASE VOTE AND SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED ENVELOPE
These voting instructions are requested in conjunction
with a proxy solicitation by the Board of Directors
of Texas Instruments Incorporated.
[participant identifying information]
I hereby instruct Bankers Trust Company of the Southwest as Trustee of the TI
Employees Universal Profit Sharing Trust ("Trust") to vote in person or by
proxy, at the annual meeting of stockholders of Texas Instruments Incorporated
("TI") on April 18, 1996, or any adjournments thereof, the whole shares
of TI common stock ("TI stock") held in the TI Stock Fund under the
Trust which are attributable to my Universal Profit Sharing Account and
CODA Account and the whole and fractional shares of TI Stock held in the
TI Stock Fund which are attributable to my Tax Credit Employee Stock
Ownership Account in the manner indicated on the reverse side of this
form with respect to each item identified thereon.
The Trustee will vote the shares represented by this voting instructions
form if properly signed and received by April 15, 1996. If no
instructions are specified on a signed form, the shares represented
thereby will be voted in accordance with the vote of the majority of the
shares on which voting instructions are received from other
participants, except that the Trustee is not permitted under the TI
Employees Universal Profit Sharing Plan to vote shares of TI stock
attributable to Tax Credit Employee Stock Ownership Accounts unless
voting instructions have been received.
(over)
PLEASE MARK YOUR CHOICE IN OVAL IN THE FOLLOWING MANNER USING DARK INK
ONLY: [ / ]
________________________________________________________________________
The board of directors of TI recommends a vote FOR the election of
directors and the two board proposals.
Draft of
For All
1. Election of Directors For Withheld Except Nominee(s)
Written Below
Nominees: J.R. Adams, D.L. Boren, [ ] [ ] [ ]______________
J.B. Busey IV, G.W. Fronterhouse,
D.R. Goode, J.R. Junkins, W.S. Lee,
W.B. Mitchell, G.M. Shatto,
W.P. Weber and C.K. Yeutter.
2. Proposal regarding increasing the For Against Abstain
Company's authorized common stock. [ ] [ ] [ ]
3. Proposal regarding adoption of For Against Abstain
Texas Instruments 1996 Long-Term [ ] [ ] [ ]
Incentive Plan.
Dated __________________________, 1996
______________________________________________
Signature
NOTE: Please sign exactly as name appears on the
front side. When signing as executor,
administrator, attorney, trustee or guardian,
etc., please give your full title.
