SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
Commission File Number 1-3761
TEXAS INSTRUMENTS INCORPORATED
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(Exact name of Registrant as specified in its charter)
Delaware 75-0289970
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(State of Incorporation) (I.R.S. Employer Identification No.)
13500 North Central Expressway, P.O. Box 655474, Dallas, Texas,75265-5474
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 214-995-3773
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------------------- ------------------------
Common Stock, par value $1.00 New York Stock Exchange
London Stock Exchange
Tokyo Stock Exchange
The Stock Exchanges of
Zurich, Basle and
Geneva
Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $7,365,000,000 as of February 28, 1994.
91,413,156
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(Number of shares of common stock outstanding as of February 28, 1994
Parts I, II and IV hereof incorporate information by reference to the
Registrant's 1993 annual report to stockholders. Part III hereof incorporates
information by reference to the Registrant's proxy statement for the 1994
annual meeting of stockholders.
PART I
ITEM 1. Business.
General
- -------
Texas Instruments Incorporated (hereinafter the "Registrant,"
including subsidiaries except where the context indicates otherwise) is
engaged in the development, manufacture and sale of a variety of products in
the electrical and electronics industry for industrial, government and
consumer markets. These products consist of components, defense electronics
and digital products. The Registrant also produces metallurgical materials.
In addition, the Registrant s patent portfolio has been established as an
ongoing contributor to the Registrant s revenues. The Registrant's business
is based principally on its broad semiconductor technology and application of
this technology to selected electronic end-equipment markets. The Registrant
from time to time considers acquisitions and divestitures which may alter its
business mix. The Registrant may effect one or more such transactions at such
time or times as the Registrant determines to be appropriate.
The information with respect to net revenues, profit and
identifiable assets of the Registrant's industry segments and operations
outside the United States, which is contained in the note to the financial
statements captioned "Industry Segment and Geographic Area Operations" on
pages 30-31 of the Registrant's 1993 annual report to stockholders, is
incorporated herein by reference to such annual report.
Components
- ----------
Components consist of semiconductor integrated circuits (such as
microprocessors/microcontrollers, applications processors, memories, and
digital and linear circuits), semiconductor discrete devices, semiconductor
subassemblies (such as custom modules for specific applications), and
electrical and electronic control devices (such as motor protectors, starting
relays, circuit breakers, thermostats, sensors, and radio-frequency
identification systems).
These components are used in a broad range of products for
industrial end-use (such as computers, data terminals and peripheral
equipment, telecommunications, instrumentation, and industrial motor controls
and automation equipment), consumer end-use (such as televisions, cameras,
automobiles, home appliances, and residential air conditioning and heating
systems) and government end-use (such as defense and space equipment). The
Registrant sells these components primarily to original equipment
manufacturers principally through its own marketing organizations and to a
lesser extent through distributors.
Defense Electronics
- -------------------
Defense electronics consist of radar systems, navigation systems,
infrared surveillance and fire control systems, defense suppression missiles,
other weapon systems (including antitank and interdiction weapons), missile
guidance and control systems, electronic warfare systems, and other defense
electronic equipment. Sales are made primarily to the U.S. government either
directly or through prime contractors.
2
Digital Products
- ----------------
Digital products include software productivity tools, integrated
enterprise information solutions, notebook computers, printers, electronic
calculators and learning aids, and custom engineering and manufacturing
services.
Digital products are used in a broad range of enterprise-wide,
work group and personal information-based applications. The Registrant
markets these products through various channels, including system suppliers,
business equipment dealers, distributors, retailers, and direct sales to end-
users and original equipment manufacturers.
Metallurgical Materials
- -----------------------
Metallurgical materials include clad metals, precision-engineered
parts and electronic connectors for use in a variety of applications such as
appliances, automobiles, electronic components, and industrial and
telecommunications equipment. These metallurgical materials are primarily
sold directly to original equipment manufacturers. This segment also includes
development costs associated with solar cells.
Competition
- -----------
The Registrant is engaged in highly competitive businesses. Its
competitors include several of the largest companies in the United States,
East Asia, particularly Japan, and elsewhere abroad as well as many small,
specialized companies. The Registrant is a significant competitor in each of
its principal businesses. Generally, the Registrant's businesses are
characterized by rapidly changing technology which has, throughout the
Registrant's history, intensified the competitive factors, primarily
performance and price.
Government Sales
- ----------------
Net revenues directly from federal government agencies in the
United States, principally related to the defense electronics segment,
accounted for approximately 12% of the Registrant's net revenues in 1993.
Contracts for government sales generally contain provisions for
cancellation at the convenience of the government. In addition, companies
engaged in supplying military equipment to the government are dependent on
congressional appropriations and administrative allotment of funds, and may be
affected by changes in government policies resulting from various military and
political developments. See "ITEM 3. Legal Proceedings."
Backlog
- -------
The dollar amount of backlog of orders believed by the Registrant
to be firm was $3805 million as of December 31, 1993 and $3733 million as of
December 31, 1992. Approximately 25% of the 1993 backlog (involving defense
electronics) is not expected to be filled within the current fiscal year. The
backlog is significant in the business of the Registrant only as an indication
of future revenues which may be entered on the books of account of the
Registrant.
3
Raw Materials
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The Registrant purchases materials, parts and supplies from a
number of suppliers. In addition, the Registrant produces some materials,
parts and supplies, such as silicon wafers used in the manufacture of
semiconductors, for its own use. The materials, parts and supplies essential
to the Registrant's business are generally available at present and the
Registrant believes at this time that such materials, parts and supplies will
be available in the foreseeable future.
Patents and Trademarks
- ----------------------
The Registrant owns many patents in the United States and other
countries in fields relating to its businesses. The Registrant has developed
a strong, broad-based patent portfolio. The Registrant also has several
agreements with other companies involving license rights and anticipates that
other licenses may be negotiated in the future. The Registrant does not
consider its business materially dependent upon any one patent or patent
license, although taken as a whole, the rights of the Registrant and the
products made and sold under patents and patent licenses are important to the
Registrant's business. As noted above, the Registrant's patent portfolio has
been established as an ongoing contributor to the revenues of the Registrant.
The Registrant continues to earn a significant ongoing stream of royalty
revenue. See "ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "ITEM 3. Legal Proceedings."
The Registrant owns trademarks that are used in the conduct of its
business. These trademarks are valuable assets, the most important of which
are "Texas Instruments" and the Registrant's corporate monogram.
Research and Development
- ------------------------
Expenditures for research and development were $981 million in
1993 compared with $891 million in 1992 and $915 million in 1991. Of these
amounts, $590 million was company funded in 1993, ($470 million in 1992 and
$527 million in 1991), and $391 million in 1993 ($421 million in 1992 and $388
million in 1991) was funded by others, principally the U. S. government.
Seasonality
- -----------
The Registrant's revenues are subject to some seasonal variation.
Employees
- ---------
The information concerning the number of persons employed by the
Registrant at December 31, 1993 on page 34 of the Registrant's 1993 annual
report to stockholders is incorporated herein by reference to such annual
report.
4
ITEM 2. Properties.
The Registrant's principal offices are located at 13500 North
Central Expressway, Dallas, Texas. The Registrant owns and leases plants in
the United States and 17 other countries for manufacturing and related
purposes. The following table indicates the general location of the principal
plants of the Registrant and the industry segments which make major use of
them. Except as otherwise indicated, the principal plants are owned by the
Registrant.
Defense Digital Metallurgical
Components Electronics Products Materials
---------- ----------- -------- -------------
Dallas, Texas X X
Austin, Texas X X
Houston, Texas X
Lewisville, Texas X
Lubbock, Texas X X
McKinney, Texas X
Midland, Texas X
Plano, Texas(1) X X
Sherman, Texas(1) X X
Temple, Texas X
Attleboro, X X
Massachusetts
Almelo, Netherlands X
Bedford, U. K. X
Freising, Germany X
Nice, France X
Avezzano, Italy(2) X
Rieti, Italy(2) X X
Baguio, X
Philippines(3)
Hiji, Japan X
Kuala Lumpur, X
Malaysia(1)
Miho, Japan X
Singapore(3) X
Taipei, Taiwan X
___________
(1)Leased or primarily leased.
(2)Owned, subject to mortgage.
(3)Owned on leased land.
The Registrant's facilities in the United States contained
approximately 19,424,675 square feet as of December 31, 1993, of which
approximately 4,848,720 square feet were leased. The Registrant's facilities
outside the United States contained approximately 6,644,166 square feet as of
December 31, 1993, of which approximately 1,845,190 square feet were leased.
The Registrant believes that its existing properties are in good
condition and suitable for the manufacture of its products. The Registrant's
facilities in Denton, northwest Houston and Abilene, Texas are being marketed
for sale. Otherwise, at the end of 1993, the Registrant utilized
substantially all of the space in its facilities.
Leases covering the Registrant's leased facilities expire at
varying dates generally within the next 15 years. The Registrant anticipates
no difficulty in either retaining occupancy through lease renewals, month-to-
month occupancy or purchases of leased facilities, or replacing the leased
facilities with equivalent facilities.
5
ITEM 3. Legal Proceedings.
On July 19, 1991, the Registrant filed a lawsuit in Tokyo District
Court against Fujitsu Limited ( Fujitsu ) seeking injunctive relief, alleging
that Fujitsu's manufacture and sale of certain DRAMs infringe the Registrant's
Japanese patent on the invention of the integrated circuit (the Kilby
patent). Concurrently, Fujitsu brought a lawsuit in the same court against
the Registrant, seeking a declaration that Fujitsu is not infringing the Kilby
patent. See "ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Registrant is included among a number of U.S. defense
contractors which are currently the subject of U.S. government investigations
regarding alleged procurement irregularities. The Registrant is unable to
predict the outcome of the investigations at this time or to estimate the
kinds or amounts of claims or other actions that could be instituted against
the Registrant. Under present government procurement regulations, such
investigations could lead to a government contractor's being suspended or
debarred from eligibility for awards of new government contracts for an
initial period of up to three years. In the current environment, even matters
that seem limited to disputes about contract interpretation can result in
criminal prosecution. While criminal charges against contractors have
resulted from such investigations, the Registrant does not believe such
charges would be appropriate in its case and has not, at any time, lost its
eligibility to enter into government contracts or subcontracts under these
regulations.
The Registrant is involved in various investigations and
proceedings conducted by the federal Environmental Protection Agency and
certain state environmental agencies regarding disposal of waste materials.
Although the factual situations and the progress of each of these matters
differ, the Registrant believes that in each case its liability will be
limited to sharing clean-up or other remedial costs with other potentially
responsible parties, in amounts that will not have a material adverse effect
upon its financial position or results of operations.
6
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
The following is an alphabetical list of the names and ages of the
executive officers of the Registrant and the positions or offices with the
Registrant presently held by each person named:
Name Age Position
Richard J. Agnich 50 Senior Vice President, Secretary
and General Counsel
William A. Aylesworth 51 Senior Vice President, Treasurer
and Chief Financial Officer
Nicholas K. Brookes 46 Vice President (President, Materials
& Controls Group)
Gary D. Clubb 47 Executive Vice President (President,
Defense Systems & Electronics
Group)
Thomas J. Engibous 41 Executive Vice President (President,
Semiconductor Group)
William F. Hayes 50 Executive Vice President
Jerry R. Junkins 56 Director; Chairman of the Board,
President and Chief Executive
Officer
Marvin M. Lane, Jr. 59 Vice President and Corporate
Controller
David D. Martin 54 Executive Vice President
William B. Mitchell 58 Director; Vice Chairman
Charles F. Nielson 56 Vice President
Elwin L. Skiles, Jr. 52 Vice President
William P. Weber 53 Director; Vice Chairman
Joseph D. Zimmerman 59 Vice President
The term of office of each of the above listed officers is from
the date of his election until his successor shall have been elected and
qualified. Messrs. Brookes, Clubb, Engibous, Hayes, Martin, Mitchell and Weber
were elected to their respective offices of the Registrant on December 2,
1993; the most recent date of election of the other officers was April 15,
1993. Messrs. Agnich, Aylesworth, Junkins, Lane, Martin, Mitchell, Weber and
Zimmerman have served as officers of the Registrant for more than five years.
Messrs. Hayes, Nielson and Skiles have served as officers of the Registrant
since 1991, 1990 and 1992, respectively; and they and Messrs. Brookes, Clubb
and Engibous have been employees of the Registrant for more than five years.
7
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The information which is contained under the caption "Common Stock
Prices and Dividends" on page 38 of the Registrant's 1993 annual report to
stockholders, and the information concerning the number of stockholders of
record at December 31, 1993 on page 34 of such annual report, are incorporated
herein by reference to such annual report.
ITEM 6. Selected Financial Data.
The "Summary of Selected Financial Data" for the years 1989
through 1993 which appears on page 34 of the Registrant's 1993 annual report
to stockholders is incorporated herein by reference to such annual report.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Letter to the Stockholders on pages 3-5 of the Registrant's
1993 annual report to stockholders and the information contained under the
caption Management Discussion and Analysis of Financial Condition and Results
of Operations on pages 35-38 of such annual report are incorporated herein by
reference to such annual report.
On March 1, 1994, the Registrant announced it expects the
worldwide semiconductor market to grow 17 percent to $91 billion in 1994,
compared to $77 billion in 1993. The market grew 29 percent in 1993.
On March 9, 1994, the Registrant announced that it had reached
semiconductor patent-license agreements with Micron Technology Inc. and
Goldstar Electron Co., Ltd. Payments to the Registrant under the agreements
include catch-up payments, which will be reflected in the Registrant's first-
quarter 1994 results, and ongoing royalties throughout the terms of the
licenses (which run through 1998). By reaching agreement with Micron,
Goldstar and 24 other semiconductor companies throughout the world, the
Registrant has substantially completed the "1990 round" of its semiconductor
industry licensing program and can begin to focus on the 1995 round of renewal
discussions which will begin next year.
The agreement with Micron ends litigation between the Registrant and
Micron, reducing the Registrant's semiconductor patent litigation to two
conflicts, that with Fujitsu Limited over the Kilby Patent in Japan and with
four semiconductor manufacturers in the United States over the Registrant's
plastic encapsulation patents.
The litigation in Japan is proceeding to a conclusion, although the
timing of action on the plastic encapsulation lawsuit remains uncertain. The
record in the Fujitsu litigation has been closed and no new arguments will be
heard by the court. A decision is expected before mid-1994. The Registrant
believes the Kilby patent should be enforced by the court. It has to be
recognized, however, that litigation is uncertain by its nature as to timing
and outcome, and that this litigation is in a country which has yet to
establish a clear record for protecting intellectual property.
8
ITEM 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the Registrant at
December 31, 1992 and 1993 and for each of the three years in the period ended
December 31, 1993 and the report thereon of the independent auditors, on pages
20-33 of the Registrant's 1993 annual report to stockholders, are incorporated
herein by reference to such annual report.
The "Quarterly Financial Data" on page 38 of the Registrant's 1993
annual report to stockholders is also incorporated herein by reference to such
annual report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information with respect to directors' names, ages, positions,
term of office and periods of service, which is contained under the caption
"Nominees for Directorship" in the Registrant's proxy statement for the 1994
annual meeting of stockholders, and the information contained in the first two
paragraphs under the caption "Other Matters" in such proxy statement, are
incorporated herein by reference to such proxy statement.
Information concerning executive officers is set forth in Part I
hereof under the caption "Executive Officers of the Registrant."
ITEM 11. Executive Compensation.
The information which is contained under the captions "Directors
Compensation" and "Executive Compensation" in the Registrant's proxy statement
for the 1994 annual meeting of stockholders is incorporated herein by
reference to such proxy statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information concerning (a) the only persons that have reported
beneficial ownership of more than 5% of the common stock of the Registrant,
and (b) the ownership of the Registrant's common stock by the Chief Executive
Officer and the four other most highly compensated executive officers, and all
executive officers and directors as a group, which is contained under the
caption Voting Securities in the Registrant's proxy statement for the 1994
annual meeting of stockholders, is incorporated herein by reference to such
proxy statement. The information concerning ownership of the Registrant's
common stock by each of the directors, which is contained under the caption
Nominees for Directorship in such proxy statement, is also incorporated
herein by reference to such proxy statement.
The aggregate market value of voting stock held by non-affiliates
of the Registrant shown on the cover page hereof excludes the shares held by
the Registrant's directors, some of whom disclaim affiliate status, executive
vice presidents and senior vice presidents. These holdings were considered to
include shares credited to certain individuals' profit sharing accounts.
ITEM 13. Certain Relationships and Related Transactions.
Not applicable.
9
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1 and 2. Financial Statements and Financial Statement Schedules
The financial statements and financial statement
schedules are listed in the index on page 15 hereof.
3. Exhibits
Designation of
Exhibit in
this Report Description of Exhibit
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3(a) Restated Certificate of Incorporation of
the Registrant.
3(b) Certificate of Amendment to Restated
Certificate of Incorporation of the
Registrant.
3(c) Certificate of Amendment to Restated
Certificate of Incorporation of the
Registrant.
3(d) Certificate of Designations relating to the
Registrant's Participating Cumulative
Preferred Stock.
3(e) Certificate of Ownership Merging Texas
Instruments Automation Controls, Inc. into
the Registrant.
3(f) Certificate of Elimination of Designations
of Preferred Stock of the Registrant.
3(g) By-Laws of the Registrant (incorporated by
reference to Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993).
4(a)(i) Rights Agreement dated as of June 17, 1988
between the Registrant and First Chicago
Trust Company of New York, formerly Morgan
Shareholder Services Trust Company, as
Rights Agent, which includes as Exhibit B
the form of Rights Certificate.
4(a)(ii) Assignment and Assumption Agreement dated
as of September 24, 1992 among the
Registrant, First Chicago Trust Company of
New York, formerly Morgan Shareholder
Services Trust Company, and Harris Trust
and Savings Bank (incorporated by reference
to Exhibit 4(a)(i) to the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992).
10
Designation of
Exhibit in
this Report Description of Exhibit
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4(b) The Registrant agrees to provide the
Commission, upon request, copies of
instruments defining the rights of
holders of long-term debt of the Registrant
and its subsidiaries.
10(a)(i) Texas Instruments Annual Incentive
Plan*
10(a)(ii) Texas Instruments Long-Term Incentive
Plan*
10(b)(i) TI Directors Retirement Benefit Plan
(incorporated by reference to Exhibit
10(b)(i) to the Registrant's Annual Report
on Form 10-K for the year 1991).
10(b)(ii) Amendment No. 1 to TI Directors Retirement
Benefit Plan (incorporated by reference to
Exhibit 10(b)(ii) to the Registrant's
Annual Report on Form 10-K for the year
1991).
10(b)(iii) Amendment No. 2 to TI Directors Retirement
Benefit Plan.
10(b)(iv) Amendment No. 3 to TI Directors Retirement
Benefit Plan.
10(b)(v) Amendment No. 4 to TI Directors Retirement
Benefit Plan.
10(b)(vi) Statement of Policy of Registrant s Board
of Directors on Top Officer and Board
Member Retirement Practices.*
11 Computation of earnings per common and
common equivalent share.
12 Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends.
13 Registrant's 1993 Annual Report to
Stockholders. (With the exception of the
items listed in the index to financial
statements and financial statement
schedules herein, and the items referred to
in ITEMS 1, 5, 6, 7 and 8 hereof, the 1993
Annual Report to Stockholders is not to be
deemed filed as part of this report.)
21 List of subsidiaries of the Registrant.
23 Consent of Ernst & Young.
________________
*Executive Compensation Plans and Arrangements:
Texas Instruments Annual Incentive Plan - Exhibit 10(a)(i) to
this Report.
11
Texas Instruments Long-Term Incentive Plan -
Exhibit 10(a)(ii)to this Report.
Statements of Policy of Registrant's Board of Directors on
Top Officer and Board Member Retirement Practices - Exhibit
10(b)(vi) to this Report.
(b) Reports on Form 8-K
A Form 8-K, dated December 13, 1993, and amended by a
Form 8-K/A dated January 7, 1994, included a news release
regarding litigation between the Registrant and Cyrix
Corporation.
12
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TEXAS INSTRUMENTS INCORPORATED
By: JERRY R. JUNKINS
---------------------
Jerry R. Junkins
Chairman of the Board,
President and
Chief Executive Officer
Date: March 18, 1994
13
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on the 18th day of March, 1994.
JAMES R. ADAMS DAVID M. RODERICK
- --------------------------------- ---------------------------------
James R. Adams David M. Roderick
Director Director
JAMES B. BUSEY IV GLORIA M. SHATTO
- --------------------------------- ---------------------------------
James B. Busey IV Gloria M. Shatto
Director Director
GERALD W. FRONTERHOUSE WILLIAM P. WEBER
- --------------------------------- ---------------------------------
Gerald W. Fronterhouse William P. Weber
Director Vice Chairman; Director
JERRY R. JUNKINS CLAYTON K. YEUTTER
- --------------------------------- ---------------------------------
Jerry R. Junkins Clayton K. Yeutter
Chairman of the Board; President; Director
Chief Executive Officer; Director
WILLIAM S. LEE WILLIAM A. AYLESWORTH
- --------------------------------- ---------------------------------
William S. Lee William A. Aylesworth
Director Senior Vice President; Treasurer;
Chief Financial Officer
WILLIAM B. MITCHELL MARVIN M. LANE
- --------------------------------- ---------------------------------
William B. Mitchell Marvin M. Lane, Jr.
Vice Chairman; Director Vice President; Corporate Controller
14
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
Page Reference
--------------
Annual
Report to
Form 10-K Stockholders
--------- ------------
Information incorporated by reference
to the Registrant's 1993 Annual Report
to Stockholders:
Consolidated Financial Statements:
Income for each of the three 20
years in the period ended
December 31, 1993
Balance sheet at December 31, 21
1993 and 1992
Cash flows for each of the 22
three years in the period
ended December 31, 1993
Stockholders' equity for each of 23
the three years in the period
ended December 31, 1993
Notes to financial statements 24-33
Report of Independent Auditors 33
Supplemental Financial Information:
Quarterly financial data (unaudited) 38
Consolidated Schedules for each of the three
years in the period ended December 31, 1993:
I. Marketable securities - other investments 16
V. Property, plant and equipment 17
VI. Accumulated depreciation 18
of property, plant and equipment
VIII. Allowance for losses 19
X. Supplementary income statement 20
information
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
15
Schedule I
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
(In Millions of Dollars)
Year Ended December 31, 1993
Market Value Amount at Which
of Each Issue Security Issue
Principal Cost of at Balance Carried in the
Name of Issuer Amount Each Issue Sheet Date Balance Sheet
- ------------------ --------- ---------- ------------- ---------------
Institutional Cash
Reserves Portfolio $ 308 $ 308 $ 308 $ 308
States of the US
and their Agencies 140 140 140 140
Other 36 36 36 36
-----
TOTAL $ 484
=====
16
Schedule V
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(In Millions of Dollars)
Years Ended December 31, 1993, 1992 and 1991
Deductions
------------------------
Fully
Balance at Depreciated Balance
Beginning Additions Retirements Assets at End
Classification of Year at Cost or Sales Written Off of Year
- ------------------- ---------- --------- ----------- ----------- -------
1993
- ----
Land $ 69 $ 1 $ -- $ -- $ 70
Buildings and
Improvements 1695 98 37 65 1691
Machinery and
Equipment 2670 631 53 389 2859
----- ----- ----- ----- -----
$4434 $ 730 $ 90 $ 454 $4620
===== ===== ===== ===== =====
1992
- ----
Land $ 69 $ -- $ -- $ -- $ 69
Buildings and
Improvements 1711 53 30 39 1695
Machinery and
Equipment 2581 376 44 243 2670
----- ----- ----- ----- -----
$4361 $ 429 $ 74 $ 282 $4434
===== ===== ===== ===== =====
1991
- ----
Land $ 71 $ -- $ 2 $ -- $ 69
Buildings and
Improvements 1691 98 36 42 1711
Machinery and
Equipment 2455 406 38 242 2581
----- ----- ----- ----- -----
$4217 $ 504 $ 76 $ 284 $4361
===== ===== ===== ===== =====
Substantially all depreciation is computed by either the declining balance
method (primarily 150-percent declining method) or the sum-of-the-years-digits
method. Depreciable lives used to calculate depreciation for buildings and
improvements are 5-40 years, and for machinery and equipment 3-10 years.
17
Schedule VI
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(In Millions of Dollars)
Years Ended December 31, 1993, 1992 and 1991
Deductions
-------------------------
Additions Fully
Balance at Charged to Depreciated Balance
Beginning Costs and Retirements Assets at End
Classification of Year Expenses or Sales Written Off of Year
- -------------- ---------- ---------- ----------- ----------- -------
1993
- ----
Buildings and
Improvements $ 786 $ 121 $ 6 $ 65 $ 836
Machinery and
Equipment 1515 496 41 389 1581
----- ----- ----- ----- -----
$2301 $ 617 $ 47 $ 454 $2417
===== ===== ===== ===== =====
1992
- ----
Buildings and
Improvements $ 704 $ 129 $ 8 $ 39 $ 786
Machinery and
Equipment 1303 481 26 243 1515
----- ----- ----- ----- -----
$2007 $ 610 $ 34 $ 282 $2301
===== ===== ===== ===== =====
1991
- ----
Buildings and
Improvements $ 639 $ 126 $ 19 $ 42 $ 704
Machinery and
Equipment 1098 464 17 242 1303
----- ----- ----- ----- -----
$1737 $ 590 $ 36 $ 284 $2007
===== ===== ===== ===== =====
18
Schedule VIII
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
ALLOWANCE FOR LOSSES
(In Millions of Dollars)
Years Ended December 31, 1993, 1992 and 1991
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Deductions of Year
---------- ---------- ---------- -------
1993 $ 34 $ 87 $ 79 $ 42
- ---- ==== ==== ==== ====
1992 $ 45 $ 75 $ 86 $ 34
- ---- ==== ==== ==== ====
1991 $ 45 $ 82 $ 82 $ 45
- ---- ==== ==== ==== ====
Allowance for losses from uncollectible accounts, returns, etc., are deducted
from accounts receivable in the balance sheet.
19
Schedule X
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Millions of Dollars)
Years Ended December 31, 1993, 1992 and 1991
CHARGED TO COSTS AND EXPENSES
-------------------------------
DESCRIPTION 1993 1992 1991
- ----------- ---- ---- ----
Maintenance and Repairs $238 $210 $207
==== ==== ====
Taxes, Other than Payroll
and Income $ 87 $ 90 $ 87
==== ==== ====
20
EXHIBIT INDEX
Designation of
Exhibit in Paper (P) or
this Report Description of Exhibit Electronic (E)
- -------------- ---------------------------------------- --------------
3(a) Restated Certificate of Incorporation of E
the Registrant.
3(b) Certificate of Amendment to Restated E
Certificate of Incorporation of the
Registrant.
3(c) Certificate of Amendment to Restated E
Certificate of Incorporation of the
Registrant.
3(d) Certificate of Designations relating to the E
Registrant's Participating Cumulative
Preferred Stock.
3(e) Certificate of Ownership Merging Texas E
Instruments Automation Controls, Inc. into
the Registrant.
3(f) Certificate of Elimination of Designations E
of Preferred Stock of the Registrant.
3(g) By-Laws of the Registrant (incorporated by
reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
4(a)(i) Rights Agreement dated as of June 17, 1988 E
between the Registrant and First Chicago
Trust Company of New York, formerly Morgan
Shareholder Services Trust Company, as
Rights Agent, which includes as Exhibit B
the form of Rights Certificate.
4(a)(ii) Assignment and Assumption Agreement dated
as of September 24, 1992 among the
Registrant, First Chicago Trust Company of
New York, formerly Morgan Shareholder
Services Trust Company, and Harris Trust
and Savings Bank (incorporated by reference
to Exhibit 4(a)(i) to the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992).
21
EXHIBIT INDEX
Designation of
Exhibit in Paper (P) or
this Report Description of Exhibit Electronic (E)
- -------------- ---------------------------------------- --------------
4(b) The Registrant agrees to provide the
Commission, upon request, copies of
instruments defining the rights of
holders of long-term debt of the Registrant
and its subsidiaries.
10(a)(i) Texas Instruments Annual Incentive Plan* E
10(a)(ii) Texas Instruments Long-Term Incentive Plan* E
10(b)(i) TI Directors Retirement Benefit Plan
(incorporated by reference to Exhibit
10(b)(i) to the Registrant's Annual Report
on Form 10-K for the year 1991).
10(b)(ii) Amendment No. 1 to TI Directors Retirement
Benefit Plan (incorporated by reference to
Exhibit 10(b)(ii) to the Registrant's
Annual Report on Form 10-K for the year 1991).
10(b)(iii) Amendment No. 2 to TI Directors Retirement E
Benefit Plan.
10(b)(iv) Amendment No. 3 to TI Directors Retirement E
Benefit Plan.
10(b)(v) Amendment No. 4 to TI Directors Retirement E
Benefit Plan.
10(b)(vi) Statement of Policy of Registrant s Board E
of Directors on Top Officer and Board
Member Retirement Practices.*
11 Computation of earnings per common and E
common equivalent share.
12 Computation of Ratio of Earnings to Fixed E
Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends.
22
EXHIBIT INDEX
Designation of
Exhibit in Paper (P) or
this Report Description of Exhibit Electronic (E)
- -------------- ---------------------------------------- --------------
13 Registrant's 1993 Annual Report to E
Stockholders. (With the exception of the
items listed in the index to financial
statements and financial statement
schedules herein, and the items referred to
in ITEMS 1, 5, 6, 7 and 8 hereof, the 1993
Annual Report to Stockholders is not to be
deemed filed as part of this report.)
21 List of subsidiaries of the Registrant. E
23 Consent of Ernst & Young. E
- ---------------
*Executive Compensation Plans and Arrangements:
Texas Instruments Annual Incentive Plan - Exhibit 10(a)(i) to this Report.
Texas Instruments Long-Term Incentive Plan - Exhibit 10(a)(ii) to this Report.
Statements of Policy of Registrant's Board of Directors on Top Officer and
Board Member Retirement Practices - Exhibit 10(b)(vi) to this Report.
23
Exhibit 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
TEXAS INSTRUMENTS INCORPORATED
(Originally incorporated on December 23, 1938
as Geophysical Service Inc.)
This Restated Certificate of Incorporation was duly adopted by Texas
Instruments Incorporated in accordance with the provisions of Sections 242 and
245 of the General Corporation Law of the State of Delaware.
FIRST: The name of the corporation is
TEXAS INSTRUMENTS INCORPORATED
SECOND: The registered office of the Company in the State of Delaware
is located at 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of its registered agent in charge thereof is The Corporation
Trust Company, the address of which is 1209 Orange Street, Wilmington,
Delaware.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Company shall have authority to issue is One Hundred Ten Million (110,000,000)
shares, of which Ten Million (10,000,000) shall be Preferred Stock with a par
value of $25.00 per share, and One Hundred Million (100,000,000) shall be
Common Stock with a par value of $1.00 per share. The Preferred Stock may be
issued in one or more series, from time to time, with each such series to have
such voting powers, full or limited or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing for
the issue of such series adopted by the board of directors of the Company, and
the board of directors is hereby expressly vested with authority, to the full
extent now or hereafter provided by law, to adopt any such resolution or
resolutions.
FIFTH: In addition to the powers now or hereafter conferred by statute
and the by-laws of the Company, the board of directors is also expressly
authorized to:
a. Make, alter or repeal the by-laws of the Company, subject to
the power of the stockholders of the Company having voting power to
alter, amend or repeal by-laws made by the board of directors.
b. Remove at any time any officer elected or appointed by the
board of directors but only by the affirmative vote of a majority of the
whole board of directors. Any other officer of the Company may be
removed at any time by a vote of the board of directors, or by any
committee or superior officer upon whom such power of removal may be
conferred by the by-laws or by the vote of the board of directors.
c. Establish and maintain bonus, profit sharing or other types of
incentive or compensation plans or pension or retirement plans for the
employees (including officers and directors) of the Company and to fix
the amount of the profits to be distributed or shared and to determine
the persons to participate in any such plans and the amounts of their
respective participation or benefits.
SIXTH: No person shall be liable to the Company for any loss or damage
suffered by it on account of any action taken or omitted to be taken by him in
good faith as a director, member of a directors' committee or officer of the
Company, if such person exercised or used the same degree of care and skill as
a prudent man would have exercised or used under the circumstances in the
conduct of his own affairs. Without limitation on the foregoing, any such
person shall be deemed to have exercised or used such degree of care and skill
if he took or omitted to take such action in reliance in good faith upon
advice of counsel for the Company, or the books of account or other records of
the Company, or reports or information made or furnished to the Company by any
officials, accountants, engineers, agents or employees of the Company, or by
an independent public accountant or auditor, engineer, appraiser or other
expert employed by the Company and selected with reasonable care by the board
of directors, by any such committee or by an authorized officer of the
Company.
IN WITNESS WHEREOF, Texas Instruments Incorporated has caused its
corporate seal to be affixed and this Restated Certificate of Incorporation to
be signed by Mark Shepherd, Jr., its Chairman of the Board, and Richard J.
Agnich, its Secretary, this 18th day of April, 1985.
TEXAS INSTRUMENTS INCORPORATED
(Corporate Seal)
By /s/ MARK SHEPHERD, JR.
----------------------
Chairman of the Board
ATTEST:
By /s/ RICHARD J. AGNICH
---------------------
Secretary
Exhibit 3(b)
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
TEXAS INSTRUMENTS INCORPORATED
TEXAS INSTRUMENTS INCORPORATED, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Restated Certificate of Incorporation as
heretofore amended is hereby amended as follows:
1. A new Article Seventh, reading as follows, is hereby added to
the Restated Certificate of Incorporation:
"SEVENTH: A director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the
General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended. Any repeal or modification of
this Article Seventh by the stockholders of the Company shall not
adversely affect any right or protection of a director of the
Company existing hereunder with respect to any act or omission
occurring prior to or at the time of such repeal or modification."
2. A new Article Eighth, reading as follows, is hereby added to
the Restated Certificate of Incorporation:
"EIGHTH: Action shall be taken by the stockholders only at
annual or special meetings of stockholders and stockholders may
not act by written consent."
SECOND: That said amendments have been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, TEXAS INSTRUMENTS INCORPORATED has caused this
Certificate to be signed by Jerry R. Junkins, its President, and attested by
Richard J. Agnich, its Secretary, this 16th day of April, 1987.
TEXAS INSTRUMENTS INCORPORATED
By /s/ JERRY R. JUNKINS
--------------------
Title: President
Attested:
By /s/ RICHARD J. AGNICH
---------------------
Title: Secretary
Exhibit 3(c)
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
TEXAS INSTRUMENTS INCORPORATED
TEXAS INSTRUMENTS INCORPORATED, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the first sentence of Article Fourth of the Restated
Certificate of Incorporation as heretofore amended is hereby amended to read
as follows:
"The total number of shares of all classes of stock which the
Company shall have authority to issue is Three Hundred Ten Million
(310,000,000) shares, of which Ten Million (10,000,000) shall be
Preferred Stock with a par value of $25.00 per share, and Three
Hundred Million (300,000,000) shall be Common Stock with a par
value of $1.00 per share."
SECOND: That said amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, TEXAS INSTRUMENTS INCORPORATED has caused this
Certificate to be signed by Jerry R. Junkins, its President, and attested by
Richard J. Agnich, its Secretary, this 21st day of April, 1988.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ JERRY R. JUNKINS
--------------------
Title: President
Attested:
By: /s/ RICHARD J. AGNICH
---------------------
Title: Secretary
Exhibit 3(d)
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
PARTICIPATING CUMULATIVE PREFERRED STOCK
of
TEXAS INSTRUMENTS INCORPORATED
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, William E. Boisvert, a Vice President, and Clara C. O'Donnell,
Assistant Secretary, of Texas Instruments Incorporated, organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), of the said Company, the said Board of
Directors on June 17, 1988 adopted the following resolution creating a series
of 1,500,000 shares of Preferred Stock designated as Participating Cumulative
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Company in accordance with the provisions of its Certificate
of Incorporation, a series of Preferred Stock of the Company be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Participating Cumulative Preferred Stock" and the number of
shares constituting such series shall be 1,500,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
Participating Cumulative Preferred Stock with respect to dividends, the
holders of shares of Participating Cumulative Preferred Stock, in preference
to the shares of Common Stock, par value $1 per share, of the Company (the
"Common Stock"), and any other stock of the Company junior to the
Participating Cumulative Preferred Stock with respect to dividends, shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash
on the fourth Monday of January, April, July and October in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Participating Cumulative
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Participating Cumulative Preferred Stock. In
the event the Company shall at any time after June 17, 1988 (the "Rights
Declaration Date") (i) declare or pay any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Participating
Cumulative Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior
to such event.
(B) The Company shall declare a dividend or distribution on the
Participating Cumulative Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Participating Cumulative Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Participating Cumulative Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Participating
Cumulative Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares
of Participating Cumulative Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Participating Cumulative Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Participating Cumulative Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of shares of Participating Cumulative Preferred
Stock shall have only the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Participating Cumulative Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders
of shares of Participating Cumulative Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Participating Cumulative Preferred Stock and the holders of shares
of Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Company.
(C) Whenever, at any time, dividends payable on the Participating
Cumulative Preferred Stock shall be in arrears for such number of dividend
periods as shall in the aggregate contain not less than 540 days, the holders
of such series shall have the exclusive right, voting separately as a class
with holders of shares of any one or more other series of preferred stock
ranking on a parity with such series either as to dividends or on the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable, to
elect two directors of the Company at the Company's next annual meeting of
stockholders and at each subsequent annual meeting of stockholders until such
right is terminated as provided in this resolution. At elections for such
directors, each holder of Participating Cumulative Preferred Stock shall be
entitled to one vote for each one-hundredth of a share held (the holders of
shares of any other series of preferred stock ranking on such a parity being
entitled to such number of votes, if any, for each share of stock held as may
be applicable to them). Upon the vesting of such voting right in the holders
of the Participating Cumulative Preferred Stock, the maximum authorized number
of members of the Board of Directors shall automatically be increased by two
and the two vacancies so created shall be filled by vote of the holders of
such series (with the holders of shares of any one or more other series of
preferred stock ranking on such a parity) as hereinafter set forth. The right
of the holders of Participating Cumulative Preferred Stock, voting separately
as a class with the holders of shares of any one or more other series of
preferred stock ranking on such a parity, to elect members of the Board of
Directors of the Company as aforesaid shall continue until such time as all
dividends accumulated on such series shall have been paid in full, at which
time such right shall terminate, except as by law expressly provided, subject
to revesting in the event of each and every subsequent default of the
character above mentioned.
Upon any termination of the right of the holders of the Participating
Cumulative Preferred Stock as a class to vote for directors as herein
provided, the term of office of all directors then in office elected by the
Participating Cumulative Preferred Stock voting as a class shall terminate
immediately. If the office of any director elected by the holders of the
Participating Cumulative Preferred Stock voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification, removal from
office, or otherwise, the remaining director elected by the holders of the
Participating Cumulative Preferred Stock voting as a class may choose a
successor who shall hold office for the unexpired term in respect of which
such vacancy occurred. Whenever the special voting powers vested in the
holders of the Participating Cumulative Preferred Stock as provided in this
resolution shall have expired, the number of directors shall become such
number as may be provided for in the By-Laws, or resolution of the Board of
Directors thereunder, irrespective of any increase made pursuant to the
provisions of this resolution.
(D) Except as set forth herein, holders of Participating Cumulative
Preferred Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with holders
of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Participating Cumulative Preferred Stock as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Participating Cumulative
Preferred Stock outstanding shall have been paid in full, the Company shall
not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Participating Cumulative Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation dissolution or winding up) with the Participating Cumulative
Preferred Stock, except dividends paid ratably on the Participating Cumulative
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Participating Cumulative
Preferred Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Company ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Participating Cumulative
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Participating Cumulative Preferred Stock, or any shares of stock ranking on a
parity with the Participating Cumulative Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Participating
Cumulative Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors, subject to the conditions and restrictions on
issuance set forth in the Certificate of Incorporation.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Participating
Cumulative Preferred Stock unless, prior thereto, the holders of shares of
Participating Cumulative Preferred Stock shall have received $100.00 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that
the holders of shares of Participating Cumulative Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount
to be distributed per share to holders of Common Stock, or (2) to the holders
of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Participating Cumulative Preferred Stock,
except distributions made ratably on the Participating Cumulative Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Company shall at any time after
the Rights Declaration Date declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Participating Cumulative
Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the
shares of Participating Cumulative Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Company shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Participating Cumulative
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Participating Cumulative
Preferred Stock shall not be redeemable.
Section 9. Rank. The Participating Cumulative Preferred Stock shall
rank junior with respect to payment of dividends and on liquidation to all
other series of the Company's preferred stock outstanding on the date hereof
and to all such other series that may be issued after the date hereof except
to the extent that any such other series specifically provides that it shall
rank junior to the Participating Cumulative Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
Company and these resolutions shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Participating Cumulative Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Participating Cumulative Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Participating Cumulative Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Participating Cumulative Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 21st
day of June, 1988.
W.E. BOISVERT
--------------
Vice President
Attest:
CLARA C. O'DONNELL
- -------------------
Assistant Secretary
Exhibit 3(e)
CERTIFICATE OF OWNERSHIP
MERGING
TEXAS INSTRUMENTS AUTOMATION CONTROLS, INC. (MD.DOM.)
INTO
TEXAS INSTRUMENTS INCORPORATED
(PURSUANT TO SECTION 253 OF THE
GENERAL CORPORATION LAW OF DELAWARE)
Texas Instruments Incorporated, a corporation incorporated on the 23rd
day of December, 1938 pursuant to the provisions of the General Corporation
Law of the State of Delaware does hereby certify that this corporation owns
all the capital stock of Texas Instruments Automation Controls, Inc. a
corporation incorporated under the laws of the State of Maryland, and that
this corporation, by a resolution of its board of directors duly adopted at a
meeting held on the 18th day of March, 1988, determined to and did merge into
itself said Texas Instruments Automation Controls, Inc. which resolution is in
the following words to wit:
RESOLVED, that the Company merge into itself its subsidiary, Texas
Instruments Automation Controls, Inc., and assume all of said subsidiary's
liabilities and obligations; and it is
FURTHER RESOLVED, that pursuant to Section 253 of the General
Corporation law of the State of Delaware, a certificate of ownership setting
forth a copy of the resolutions to merge said Texas Instruments Automation
Controls, Inc. into the Company and assume its liabilities and obligations,
and the date of adoption thereof, shall be executed and acknowledged by the
Chairman of the Board, President or any Vice President of the Company, and
attested by the Secretary or Assistant Secretary of the Company, and such
certificate so executed and acknowledged shall be filed in the office of the
Secretary of the State of Delaware, and a certified copy thereof in the office
of the Recorder of Deeds of New Castle County.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by its president and attest by its secretary, and its corporate seal to
be hereto affixed, the 28th day of March, 1988.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ M.M. LANE
--------------
Vice President
ATTEST:
By: /s/ RICHARD J. AGNICH
---------------------
Secretary
Exhibit 3(f)
CERTIFICATE OF ELIMINATION OF
DESIGNATIONS OF PREFERRED STOCK
OF TEXAS INSTRUMENTS INCORPORATED
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
TEXAS INSTRUMENTS INCORPORATED, a corporation organized and
existing under the laws of the State of Delaware, in accordance with the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware, hereby certifies as follows:
1. That the Company filed, in the office of the Secretary of
State of Delaware, certain Certificates of Designations which established the
voting powers, designations, preferences and relative, participating and other
rights, and the qualifications, limitations or restrictions, of the following
series of the Company's preferred stock:
(a) Market Auction Preferred Stock, Series A (750 shares,
$25.00 par value), Market Auction Preferred Stock, Series B (750 shares,
$25.00 par value), and Market Auction Preferred Stock, Series C (750 shares,
$25.00 par value) (collectively, the "MAPS Series A, B and C") ( Certificate
of Designations filed on March 3, 1986);
(b) Market Auction Preferred Stock, Series D (750 shares,
$25.00 par value) (the "MAPS Series D") (Certificate of Designations filed on
April 25, 1986);
(c) Convertible Money Market Cumulative Preferred TM
Stock, Series C-1 (750 shares, $25.00 par value), Convertible Money Market
Cumulative Preferred Stock, Series C- 2 (750 shares, $25.00 par value), and
Convertible Money Market Cumulative Preferred Stock, Series C-3 (750 shares,
$25.00 par value) (collectively, the "CMMP") (Certificate of Designation filed
on March 12, 1987);
(d) Market Auction Preferred Stock, Series A-1 (750
shares, $25.00 par value), Market Auction Preferred Stock, Series B-1 (750
shares, $25.00 par value), and Market Auction Preferred Stock, Series D-1 (750
shares, $25.00 par value) (collectively, the "MAPS Series A-1, B-1 and D-1")
(Certificate of Designations filed on August 9, 1991);
(e) Money Market Cumulative Preferred Stock, Series 1 (712
shares, $25.00 par value) and Money Market Cumulative Preferred Stock, Series
2 (746 shares, $25.00 par value) (collectively, the "MMP") (Certificate of
Designations filed on August 9, 1991); and
(f) Series A Conversion Preferred Stock (3,000,000 shares,
$25.00 par value) (Certificate of Designations filed on September 17, 1991).
2. That no shares of said MAPS Series A, B and C, MAPS Series
D, CMMP, MAPS Series A-1, B-1 and D-1, MMP and Series A Conversion Preferred
Stock are outstanding and no shares thereof will be issued.
3. That, at a duly called meeting of the Board of Directors of
the Company, the following resolution was adopted:
RESOLVED, that the appropriate officers of the Company are hereby
authorized and directed to file a Certificate with the office of
the Secretary of State of Delaware setting forth a copy of this
resolution whereupon all reference to the following series of
stock, no shares of which are outstanding and no shares of which
will be issued, shall be eliminated from the Restated Certificate
of Incorporation, as amended, of the Company: (a) Market Auction
Preferred Stock, Series A, Series B and Series C ($25.00 par
value), as established by a Certificate of Designations filed in
the office of the Secretary of State of Delaware on March 3, 1986;
(b) Market Auction Preferred Stock, Series D ($25.00 par value),
as established by a Certificate of Designations filed in the
office of the Secretary of State of Delaware on April 25, 1986;
(c) Convertible Money Market Cumulative Preferred TM Stock, Series
C-1 ($25.00 par value), Convertible Money Market Cumulative
Preferred Stock, Series C-2 ($25.00 par value), and Convertible
Money Market Cumulative Preferred Stock, Series C-3 ($25.00 par
value), as established by a Certificate of Designation filed in
the office of the Secretary of State of Delaware on March 12,
1987; (d) Market Auction Preferred Stock, Series A-1, Series B-1
and Series D-1 ($25.00 par value), as established by a Certificate
of Designations filed in the office of the Secretary of State of
Delaware on August 9, 1991; (e) Money Market Cumulative Preferred
Stock, Series 1 and Series 2 ($25.00 par value), as established by
a Certificate of Designations filed in the office of the Secretary
of State of Delaware on August 9, 1991; and (f) Series A
Conversion Preferred Stock, ($25.00 par value), as established by
a Certificate of Designations filed in the office of the Secretary
of State of Delaware on September 17, 1991.
4. That, accordingly, all reference to the MAPS Series A, B and
C, MAPS Series D, CMMP, MAPS Series A-1, B-1 and D-1, MMP and Series A
Conversion Preferred Stock of the Company be, and it hereby is, eliminated
from the Restated Certificate of Incorporation, as amended, of the Company.
2
IN WITNESS WHEREOF, TEXAS INSTRUMENTS INCORPORATED has caused this
Certificate to be signed by Richard J. Agnich, Senior Vice President, and
attested by O. Wayne Coon, its Assistant Secretary, as of this 18th day of
March, 1994.
TEXAS INSTRUMENTS INCORPORATED
By: /s/RICHARD J. AGNICH
---------------------
Senior Vice President
ATTEST:
By: /s/O. WAYNE COON
-------------------
Assistant Secretary
Exhibit 4(a)(i)
TEXAS INSTRUMENTS INCORPORATED
and
MORGAN SHAREHOLDER SERVICES TRUST COMPANY,
as Rights Agent
---------------
Rights Agreement
Dated as of June 17, 1988
INDEX
Page
----
Section 1. Certain Definitions.................... 1
Section 2. Appointment of Rights Agent............ 5
Section 3. Issue of Right Certificates............ 5
Section 4. Form of Right Certificates............. 7
Section 5. Countersignature and Registration...... 8
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates............ 9
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights............ 10
Section 8. Cancellation and Destruction of Right
Certificates......................... 13
Section 9. Reservation and Availability of
Capital Stock........................ 13
Section 10. Preferred Stock Record Date............ 16
Section 11. Adjustment of Purchase Price,
Number and Kind of Shares or
Number of Rights..................... 16
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares............ 27
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power.. 28
Section 14. Fractional Rights and Fractional
Shares............................... 31
Section 15. Rights of Action....................... 33
-i-
Page
----
Section 16. Agreement of Right Holders............. 33
Section 17. Right Certificate Holder Not Deemed
a Stockholder........................ 34
Section 18. Concerning the Rights Agent............ 34
Section 19. Merger or Consolidation or Change of
Name of Rights Agent................. 35
Section 20. Duties of Rights Agent................. 36
Section 21. Change of Rights Agent................. 39
Section 22. Issuance of New Right Certificates..... 40
Section 23. Redemption............................. 41
Section 24. Notice of Proposed Actions............. 42
Section 25. Notices................................ 43
Section 26. Supplements and Amendments............. 44
Section 27. Successors............................. 45
Section 28. Determinations and Actions
by the Board of Directors, etc....... 45
Section 29. Benefits of This Agreement............. 45
Section 30. Severability........................... 46
Section 31. Governing Law.......................... 46
Section 32. Counterparts........................... 46
Section 33. Descriptive Headings................... 46
Testimonium and Signatures............................ 47
Exhibit A - Form of Certificate of Designation,
Preferences and Rights of
Participating Cumulative Preferred
Stock
Exhibit B - Form of Right Certificate
-ii-
Page
----
Exhibit C - Summary of Rights to Purchase
Preferred Stock
-iii-
RIGHTS AGREEMENT
----------------
This Rights Agreement dated as of June 17, 1988,
between Texas Instruments Incorporated, a Delaware corpora-
tion (the "Company"), and Morgan Shareholder Services Trust
Company, a New York corporation, as Rights Agent (the "Rights
Agent"),
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on June 17, 1988 the Board of Directors of
the Company authorized and declared a dividend distribution
of one Right (hereafter referred to as a "Right") for each
share of the Common Stock, par value $1 per share, of the
Company outstanding at the close of business on June 30, 1988
(hereinafter referred to as the "Record Date") (other than
shares of such Common Stock held in the Company's treasury on
such date) and has authorized the issuance of one Right (as
such number may hereafter be adjusted pursuant to the provi-
sions of Section 11(p) hereof) in respect of each share of
Common Stock of the Company that shall become outstanding
after the Record Date (whether originally issued or delivered
from the Company's treasury) and on or prior to the earlier
of the Distribution Date and the Expiration Date (as such
terms are hereinafter defined), each Right representing the
right to purchase one one-hundredth of a share of Participat-
ing Cumulative Preferred Stock of the Company having the
rights, powers and preferences set forth in the form of
Certificate of Designation, Preferences and Rights attached
hereto as Exhibit A, upon the terms and subject to the condi-
tions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises
and the mutual agreements herein set forth, the parties
hereby agree as follows:
Section 1. Certain Definitions. For purposes of
this Agreement, the following terms have the meanings indi-
cated;
(a) "Acquiring Person" shall mean any Person
(as hereinafter defined) who or which, together
with all Affiliates (as hereinafter defined) and
Associates (as hereinafter defined) of such Person,
shall be the Beneficial Owner (as hereinafter
defined) of 20% or more of the shares of Common
Stock then outstanding, but shall not include the
Company, any Subsidiary (as hereinafter defined)
of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any
entity (including its Affiliates) organized,
appointed or established for or pursuant to the
terms of any such plan acting solely in its
capacity (or their capacities) under such plan.
(b) "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on the
date hereof.
(c) A Person shall be deemed the "Beneficial
Owner" of, and shall be deemed to "beneficially
own", any securities:
(i) which such Person or any of such
Person's Affiliates or Associates, directly
or indirectly, beneficially owns (as deter-
mined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act
as in effect on the date of this Agreement)
or has the right to dispose of;
(ii) which such Person or any of such
Person's Affiliates or Associates, directly or
indirectly, has (A) the right to acquire
(whether such right is exercisable immediately
or only after the passage of time) pursuant to
any agreement, arrangement or understanding
(whether or not in writing), or upon the
exercise of conversion rights, exchange
rights, rights (other than the Rights), war-
rants or options, or otherwise, provided,
however, that a Person shall not be deemed the
"Beneficial Owner" of or to "beneficially own"
securities tendered pursuant to a tender or
exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or
Associates until such tendered securities are
accepted for payment or exchange; or (B) the
right to vote, including pursuant to any
agreement, arrangement or understanding
(whether or not in writing); provided,
-2-
however, that a Person shall not be deemed the
"Beneficial Owner" of or to "beneficially own"
any security under this clause (B) as a result
of an agreement, arrangement or understanding
to vote such security if such agreement,
arrangement or understanding (1) arises solely
from a revocable proxy given in response to a
public proxy solicitation made pursuant to,
and in accordance with, the applicable rules
and regulations under the Exchange Act and (2)
is not also then reportable by such Person
on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned,
directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with
which such Person or any of such Person's
Affiliates or Associates has any agreement,
arrangement or understanding (whether or not
in writing) for the purpose of acquiring,
holding, voting (except pursuant to a
revocable proxy as described in clause (B) of
subparagraph (ii) of this paragraph (c)) or
disposing of any voting securities of the
Company.
(d) "Business Day" shall mean any day other
than a Saturday, Sunday, or a day on which banking
institutions in the State of New York are
authorized or obligated by law or executive order
to close.
(e) "Close of business" on any given date
shall mean 5:00 P.M., New York City time, on such
date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City
time, on the next succeeding Business Day.
(f) "Common Stock" shall mean the Common
Stock, par value $1 per share, of the Company,
except that "Common Stock" when used with reference
to any Person other than the Company shall mean the
capital stock of such Person with the greatest
voting power, or the equity securities or other
equity interest having power to control or direct
the management, of such Person.
-3-
(g) "Continuing Director" shall mean (i) any
member of the Board of Directors of the Company,
while such Person is a member of the Board, who is
not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a repre-
sentative or nominee of an Acquiring Person or of
any such Affiliate or Associate and was a member of
the Board prior to the time any Person becomes an
Acquiring Person, and (ii) any Person who sub-
sequently becomes a member of the Board, while such
Person is a member of the Board, who is not an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative or nominee of
an Acquiring Person or of any such Affiliate or
Associate, if such Person's nomination for election
or election to the Board is recommended or approved
by a majority of the Continuing Directors.
(h) "Distribution Date" shall have the mean-
ing defined in Section 3 hereof.
(i) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(j) "Preferred Stock" shall mean the Par-
ticipating Cumulative Preferred Stock, par value
$25 per share, of the Company.
(k) "Purchase Price" shall have the meaning
defined in Section 4 hereof.
(l) "Section 11(a)(ii) Event" shall mean the
event described in Section 11(a)(ii).
(m) "Stock Acquisition Date" shall mean the
first date of public announcement (which, for
purposes of this definition, shall include, without
limitation, the filing of a report pursuant to
Section 13(d) under the Exchange Act or pursuant to
a comparable successor statute) by the Company or
an Acquiring Person indicating that an Acquiring
Person has become such.
(n) "Subsidiary" of any Person shall mean any
other Person of which securities or other ownership
interests having ordinary voting power, in the
absence of contingencies, to elect a majority of
the board of directors or other Persons performing
-4-
similar functions are at the time directly or
indirectly owned by such first Person.
(o) "Triggering Event" shall mean any Section
11(a)(ii) Event or any event described in Section
13(a)(i), (ii) or (iii) hereof.
Section 2. Appointment of Rights Agent. The
Company hereby appoints the Rights Agent to act as agent for
the Company and the holders of the Rights (who, in accordance
with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more
Co-Rights Agents, the respective duties of the Rights Agent
and any Co-Rights Agents shall be as the Company shall deter-
mine.
Section 3. Issue of Right Certificates. (a)
Until the earlier of (i) the close of business on the tenth
day after the Stock Acquisition Date or (ii) the close of
business on the tenth Business Day after the date of the
commencement of a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or
established for or pursuant to the terms of any such plan)
if, upon consummation thereof, such Person would be an
Acquiring Person (including any such date which is after the
date of this Agreement and prior to the issuance of the
Rights; the earlier of such dates being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced
by the certificates for the Common Stock registered in the
names of the holders of the Common Stock (which certificates
for Common Stock shall be deemed also to be Right Certifi-
cates) and not by separate Right Certificates, and (y) the
Rights will be transferable only in connection with the
transfer of the underlying shares of Common Stock. As soon
as practicable after the Company has notified the Rights
Agent of the occurrence of the Distribution Date, the Rights
Agent will send, by first-class, insured, postage prepaid
mail, to each record holder of the Common Stock as of the
close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more
right certificates, in substantially the form of Exhibit B
hereto (the "Right Certificates"), evidencing one Right for
each share of Common Stock so held, subject to adjustment as
-5-
provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made
pursuant to Section 11(p) hereof, at the time of distribution
of the Right Certificates, the Company shall make the neces-
sary and appropriate rounding adjustments (in accordance with
Section 14(a) hereof) so that the Right Certificates repre-
senting only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by
such Right Certificates.
(b) As soon as practicable after the Record Date,
the Company will send a copy of a Summary of Rights to Pur-
chase Preferred Stock, in substantially the form of Exhibit C
hereto (the "Summary of Rights"), by first-class, postage
prepaid mail, to each record holder of the Common Stock as of
the close of business on the Record Date at the address of
such holder shown on the records of the Company. With
respect to certificates for the Common Stock outstanding as
of the Record Date until the Distribution Date (or the ear-
lier redemption, expiration or termination of the Rights),
the Rights will be evidenced by such certificates for the
Common Stock registered in the names of the holders of the
Common Stock and the registered holders of the Common Stock
shall also be registered holders of the associated Rights.
Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the transfer of any
of the certificates for the Common Stock in respect of which
Rights have been issued shall also constitute the transfer of
the Rights associated with the Common Stock represented by
such certificates.
(c) Rights shall be issued in respect of all
shares of Common Stock which are issued or delivered out of
treasury after the Record Date but on or prior to the Dis-
tribution Date (or the earlier redemption, expiration or
termination of the Rights). Certificates for the Common
Stock issued or delivered out of treasury after the Record
Date but on or prior to the earlier of the Distribution Date
or the redemption, expiration or termination of the Rights
shall be deemed also to be certificates for Rights and shall
have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences and entitles
the holder hereof to certain Rights as set
forth in a Rights Agreement between Texas
Instruments Incorporated and Morgan
Shareholder Services Trust Company dated as of
-6-
June 17, 1988 (the "Rights Agreement"), the
terms of which are hereby incorporated herein
by reference and a copy of which is on file at
the principal executive offices of the Com-
pany. Under certain circumstances, as set
forth in the Rights Agreement, such Rights may
be redeemed, may expire, or may be evidenced
by separate certificates and no longer be
evidenced by this certificate. The Company
will mail to the holder of this certificate a
copy of the Rights Agreement without charge
promptly after receipt of a written request
therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued
to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined
in the Rights Agreement), whether currently
held by or on behalf of such Person or by any
subsequent holder, may be null and void.
With respect to such certificates containing the foregoing
legend, until the Distribution Date (or the earlier redemp-
tion, expiration or termination of the Rights) the Rights
associated with the Common Stock represented by such certifi-
cates shall be evidenced by such certificates alone, and the
transfer of any of such certificates shall also constitute
the transfer of the Rights associated with the Common Stock
represented by such certificates.
Section 4. Form of Right Certificates. (a) The
Right Certificates (and the forms of election to purchase and
of assignment and the certificates to be printed on the
reverse thereof) shall be substantially in the form of
Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law, rule
or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed,
or to conform to usage. Subject to the provisions of Section
11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase such
number of one one-hundredths of a share of Preferred Stock
as shall be set forth therein at the price set forth therein
(such exercise price per one one-hundredth of a share, the
"Purchase Price"), but the amount and type of securities
-7-
purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided
herein.
(b) Any Right Certificate issued pursuant to
Section 3(a) or Section 22 hereof that represents Rights
beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a trans-
feree of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A)
a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring
Person has any continuing agreement, arrangement or under-
standing regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is
part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof,
and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible) the follow-
ing legend:
The Rights represented by this Right Certifi-
cate are or were beneficially owned by a
Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring
Person (as such terms are defined in the
Rights Agreement). Accordingly, this Right
Certificate and the Rights represented hereby
may become null and void in the circumstances
specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf
of the Company by its Chairman of the Board, its Presi-
dent or any Vice President, either manually or by fac-
simile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature.
The Right Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of
-8-
the Company whose manual or facsimile signature is
affixed to the Right Certificates shall cease to be such
officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be counter-
signed by the Rights Agent, issued and delivered with
the same force and effect as though the Person who
signed such Right Certificates had not ceased to be such
officer of the Company. Any Right Certificate may be
signed on behalf of the Company by any Person who, at
the actual date of the execution of such Right Certifi-
cate, shall be a proper officer of the Company to sign
such Right Certificate, although at the date of the
execution of this Rights Agreement any such Person was
not such an officer.
(b) Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at its
principal office or offices designated as the
appropriate place for surrender of Right Certificates
upon exercise or transfer, books for registration and
transfer of the Right Certificates issued hereunder.
Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number
of Rights evidenced on its face by each of the Right
Certificates, the certificate number of each of the
Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination
and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to
the close of business on the Expiration Date (as such
term is defined in Section 7(a) hereof), any Right
Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another Right Cer-
tificate or Right Certificates, entitling the registered
holder to purchase a like number of one one-hundredths
of a share of Preferred Stock (or, following a Trigger-
ing Event, Common Stock, other securities, cash or
assets, as the case may be) as the Right Certificate or
Right Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to pur-
chase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or
Certificates shall make such request in writing
-9-
delivered to the Rights Agent, and shall surrender the
Right Certificate or Right Certificates to be trans-
ferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have
completed and signed the certificate contained in the
form of assignment on the reverse side of such Right
Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. There-
upon the Rights Agent shall, subject to Section 4(b),
Section 7(e) and Section 14 hereof, countersign and
deliver to the Person entitled thereto a Right Certifi-
cate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the
Rights Agent of evidence reasonably satisfactory to them
of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to
them, and, at the Company's request, reimbursement to
the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate
if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in
lieu of the Right Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Purchase
Price; Expiration Date of Rights. (a) Subject to Sec-
tion 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without
limitation, the restrictions on exercisability set forth
in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Dis-
tribution Date upon surrender of the Right Certificate,
with the form of election to purchase and the certifi-
cate on the reverse side thereof duly executed, to the
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Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share of
Preferred Stock (or other securities or property, as the
case may be) as to which such surrendered Rights are
then exercisable, at or prior to the earlier of (i) the
close of business on June 17, 1998 (the "Final Expira-
tion Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier
of (i) and (ii) being herein referred to as the "Expira-
tion Date").
(b) The Purchase Price for each one one-
hundredth of a share of Preferred Stock pursuant to the
exercise of a Right shall initially be $200, shall be
subject to adjustment from time to time as provided in
Section 11 and Section 13(a) hereof and shall be payable
in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate
representing exercisable Rights, with the form of elec-
tion to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one one-hundredth
of a share of Preferred Stock (or other shares,
securities or property, as the case may be) to be pur-
chased, and an amount equal to any applicable transfer
tax, in cash, or in the form of a certified check or
money order payment to the order of the Company, the
Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i)(A) requisition from any transfer
agent of the Preferred Stock (or make available, if the
Rights Agent is the transfer agent therefor) certifi-
cates for the total number of one one-hundredths of a
share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company
shall have elected to deposit the total number of shares
of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such
number of one one-hundredths of a share of Preferred
Stock as are to be purchased (in which case certificates
for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii)
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requisition from the Company the amount of cash, if any,
to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof, (iii) promptly after
receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of
the registered holder of such Right Certificate,
registered in such name or names as may be designated by
such holder and (iv) after receipt thereof, promptly
deliver such cash, if any, to or upon the order of the
registered holder of such Right Certificate. In the
event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay
cash and/or distribute other property pursuant to Sec-
tion 11(a) hereof, the Company will make all arrange-
ments necessary so that such other securities, cash
and/or other property are available for distribution by
the Rights Agent, if and when appropriate.
(d) In case the registered holder of any
Right Certificate shall exercise less than all the
Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and
delivered to, or upon the order of, the registered
holder of such Right Certificate, registered in such
name or names as may be designated by such holder,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agree-
ment to the contrary, from and after the first occur-
rence of a Section 11(a)(ii) Event, any Rights benefi-
cially owned by (i) an Acquiring Person or an Associate
or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring
Person becomes such or (iii) a transferee of an Acquir-
ing Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any
Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of
Directors of the Company has determined is part of a
plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section
7(e), shall become null and void without any further
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action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to insure that
the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to
any holder of Right Certificates or other Person as a
result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates and
Associates or any transferee of any of them hereunder.
(f) Notwithstanding anything in this Agree-
ment to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occur-
rence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the
form of election to purchase set forth on the reverse
side of the Right Certificate surrendered for such
exercise and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former Benefi-
cial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request.
Section 8. Cancellation and Destruction of
Right Certificates. All Right Certificates surrendered
for the purpose of exercise, transfer, split up, com-
bination or exchange shall, if surrendered to the Com-
pany or to any of its agents, be delivered to the Rights
Agent for cancellation or in cancelled form, or, if
surrendered to the Rights Agent, shall be cancelled by
it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the
provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other
Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to
the Company, or shall, at the written request of the
Company, destroy such cancelled Right Certificates, and
in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of
Capital Stock. (a) The Company covenants and agrees
that it will cause to be reserved and kept available out
of its authorized and unissued shares of Preferred Stock
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(and, following the occurrence of a Triggering Event,
out of its authorized and unissued shares of Common
Stock or other securities or out of its authorized and
issued shares held in its treasury) the number of shares
of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock or other securities)
that, as provided in this Agreement, including Section
11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the Preferred Stock (and,
following the occurrence of a Triggering Event, Common
Stock and/or other securities) issuable and deliverable
upon the exercise of Rights may be listed on any
national securities exchange, the Company shall use its
best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts
to (i) file, as soon as practicable following the ear-
liest date after the occurrence of a Section 11(a)(ii)
Event as of which the consideration to be delivered by
the Company upon exercise of the Rights has been deter-
mined in accordance with Section 11(a)(iii) hereof, or
as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under
the Securities Act of 1933, as amended (the "Act"), with
respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as
practicable after such filing and (iii) cause such
registration statement to remain effective (with a
prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities and
(B) the date of the expiration of the Rights. The
Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with
the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed
90 days after the date set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability
of the Rights in order to prepare and file such
registration statement and permit it to become effec-
tive. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of
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the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no
longer in effect. Notwithstanding any such provision of
this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted
under applicable law or a registration statement shall
not have been declared effective.
(d) The Company covenants and agrees that it
will take all such action as may be necessary to insure
that all one one-hundredths of a share of Preferred
Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) delivered
upon exercise of Rights shall, at the time of delivery
of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees
that it will pay when due and payable any and all
federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the
Right Certificates and of any certificates for shares of
Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of
any transfer involved in the transfer or delivery of
Right Certificates to a Person other than, or the
issuance or delivery of a number of one one-hundredths
of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in respect of a
name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a
number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the
case may be) in a name other than that of the registered
holder upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by
the holder of such Right Certificate at the time of
surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
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Section 10. Preferred Stock Record Date.
Each Person (other than the Company) in whose name any
certificate for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to
have become the holder of record of such fractional
shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) represented thereby on,
and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date
upon which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of
the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional
or otherwise) on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred
Stock (or Common Stock and/or other securities, as the
case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate shall not be entitled
to any rights of a stockholder of the Company with
respect to shares for which the Rights shall be exer-
cisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price,
Number and Kind of Shares or Number of Rights. The
Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in
this Section 11.
(a)(i) In the event the Company shall at any
time after the date of this Agreement (A) declare a
dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into
a smaller number of shares or (D) issue any shares of
its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is
the continuing or surviving corporation), except as
-16-
otherwise provided in this Section 11(a) and Section
7(e) hereof, the Purchase Price in effect at the time of
the record date for such dividend or of the effective
date of such subdivision, combination or reclassifica-
tion, and the number and kind of shares of Preferred
Stock or capital stock, as the case may be, issuable on
such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be,
which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, he would
have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, com-
bination or reclassification. If an event occurs which
will require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addi-
tion to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that any Person, alone or
together with its Affiliates and Associates or other-
wise, shall become an Acquiring Person, then proper
provision shall promptly be made so that each holder of
a Right, except as provided below and in Section 7(e)
hereof, shall thereafter have a right to receive, upon
exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of
Preferred Stock, such number of shares of Common Stock
of the Company (the "Adjustment Shares") as shall equal
the result obtained by (x) multiplying the then current
Purchase Price by the number of one one-hundredths of a
share of Preferred Stock for which a Right was exer-
cisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event and (y) dividing that product
(which, following such first occurrence, shall there-
after be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by 50% of
the current market price per share of the Common Stock
(determined pursuant to Section 11(d) on the date of the
first occurrence of a Section 11(a)(ii) Event);
provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13 hereof, then
only the provisions of Section 13 hereof shall apply and
-17-
no adjustment shall be made pursuant to this Section
11(a)(ii).
(iii) In the event that the number of shares
of Common Stock which are authorized by the Company's
certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exer-
cise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread") and (B) with
respect to each Right, make adequate provision to sub-
stitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limita-
tion, shares, or units of shares, of preferred stock
which the Board of Directors of the Company has deemed
to have the same value as shares of Common Stock (such
shares of preferred stock, "common stock equivalents")),
(4) debt securities of the Company, (5) other assets or
(6) any combination of the foregoing having an aggregate
value equal to the Current Value, where such aggregate
value has been determined by the Board of Directors of
the Company based upon the advice of a nationally recog-
nized investment banking firm selected by the Board of
Directors of the Company; provided, however, if the
Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within 30
days following the later of the first occurrence of a
Section 11(a)(ii) Event and the first date that the
right to redeem the Rights pursuant to Section 23 hereof
shall expire, then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if
necessary, cash, securities and/or assets in the
aggregate equal in value (as determined by the Board of
Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected
by the Board of Directors of the Company) to the Spread.
If the Board of Directors of the Company shall determine
in good faith that it is likely that sufficient addi-
tional Common Stock could be authorized for issuance
upon exercise in full of the Rights, the 30 day period
set forth above may be extended to the extent necessary,
-18-
but not more than 90 days following the first occurrence
of a Section 11(a)(ii) Event, in order that the Company
may seek shareholder approval for the authorization of
such additional shares (such period as it may be
extended, the "Substitution Period"). To the extent
that the Company determines that some action is to be
taken pursuant to the first and/or second sentences of
this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall
apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek
any authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value
thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time
as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the Common
Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the
Common Stock on the later of the date of the first
occurrence of a Section 11(a)(ii) Event and the first
date that the right to redeem the Rights pursuant to
Section 23 hereof shall expire and the value of any
"common stock equivalent" shall be deemed to have the
same value as the Common Stock on such date.
(b) In case the Company shall fix a record
date for the issuance of rights, options or warrants to
all holders of Preferred Stock entitling them to sub-
scribe for or purchase (for a period expiring within 45
calendar days after such record date) Preferred Stock
(or securities having the same rights, privileges and
preferences as the shares of Preferred Stock ("equiv-
alent preferred stock")) or securities convertible into
Preferred Stock or equivalent preferred stock at a price
per share of Preferred Stock or per share of equivalent
preferred stock (or having a conversion or exercise
price per share, if a security convertible into or
exercisable for Preferred Stock or equivalent preferred
stock) less than the current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately
prior to such date by a fraction, the numerator of which
-19-
shall be the number of shares of Preferred Stock out-
standing on such record date, plus the number of shares
of Preferred Stock which the aggregate offering price of
the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the
aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such
current market price and the denominator of which shall
be the number of shares of Preferred Stock outstanding
on such record date plus the number of additional shares
of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into
which the convertible securities so to be offered are
initially convertible). In case such subscription price
may be paid by delivery of consideration part or all of
which shall be in a form other than cash, the value of
such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose deter-
mination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights
Agent and the holders of Rights. Shares of Preferred
Stock owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made succes-
sively whenever such a record date is fixed; and in the
event that such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record
date for the making of a distribution to all holders of
Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular periodic cash
dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in
stock other than Preferred Stock) or convertible
securities, subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share
of Preferred Stock on such record date, less the fair
market value (as determined in good faith by the Board
-20-
of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent)
of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such convertible
securities, subscription rights or warrants applicable
to one share of Preferred Stock and the denominator of
which shall be such current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred
Stock. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event
that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had
not been fixed.
(d)(i) For the purpose of any computation
hereunder, other than computations made pursuant to
Section 11(a)(iii) hereof, the "current market price"
per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of
such Common Stock for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior
to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of the Common Stock on any date
shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the 10 con-
secutive Trading Days immediately following such date;
provided, however, that in the event that the current
market price per share of the Common Stock is determined
during a period following the announcement by the issuer
of such Common Stock of (A) a dividend or distribution
on such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any sub-
division, combination or reclassification of such Common
Stock, and prior to the expiration of the requisite 30
Trading Day or 10 Trading Day period, as set forth
above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such
case, the "current market price" shall be properly
adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on
-21-
the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal con-
solidated transaction reporting system with respect to
securities listed on the principal national securities
exchange on which the shares of Common Stock are listed
or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization,
the average of the closing bid and asked prices as
furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors
of the Company. If on any such date no market maker is
making a market in the Common Stock, the fair value of
such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading
or traded is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, a Business
Day. If the Common Stock is not publicly held or not so
listed or traded, "current market price" per share shall
mean the fair value per share as determined in good
faith by the Board of Directors of the Company, or, if
at the time of such determination there is an Acquiring
Person, by a majority of the Continuing Directors then
in office, or if there are no Continuing Directors, by a
nationally recognized investment banking firm selected
by the Board of Directors, which determination shall be
described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the "current market price" per share of
Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last sentence
thereof). If the current market price per share of
Preferred Stock cannot be determined in the manner
described in clause (i) of this Section 11(d), the
"current market price" per share of Preferred Stock
-22-
shall be conclusively deemed to be an amount equal to
100 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied
by the current market price per share of the Common
Stock. If neither the Common Stock nor the Preferred
Stock is publicly held or so listed or traded, "current
market price" per share of the Preferred Stock shall
mean the fair value per share as determined in good
faith by the Board of Directors of the Company, or, if
at the time of such determination there is an Acquiring
Person, by a majority of the Continuing Directors then
in office, or if there are no Continuing Directors, by a
nationally recognized investment banking firm selected
by the Board of Directors, which determination shall be
described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes
of this Agreement, the "current market price" of one
one-hundredth of a share of Preferred Stock shall be
equal to the "current market price" of one share of
Preferred Stock divided by 100.
(e) Anything herein to the contrary not-
withstanding, no adjustment in the Purchase Price shall
be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a share of Common Stock or
other share or one-millionth of a share of Preferred
Stock, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required
by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transac-
tion which mandates such adjustment or (ii) the Expira-
tion Date.
(f) In the event that at any time, as a
result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any
Right shall be entitled to receive upon exercise of such
Right any shares of capital stock other than shares of
Preferred Stock, thereafter the number of such other
shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment
-23-
from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect
to the Preferred Stock contained in Section 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect
to the Preferred Stock shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the
Company subsequent to any adjustment made to the Pur-
chase Price hereunder shall evidence the right to pur-
chase, at the adjusted Purchase Price, the number of one
one-hundredths of a share of Preferred Stock purchasable
from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised
its election as provided in Section 11(i), upon each
adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and (c), each Right
outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number
of one one-hundredths of a share of Preferred Stock
(calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of
a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjust-
ment of the Purchase Price.
(i) The Company may elect on or after the
date of any adjustment of the Purchase Price to adjust
the number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each
of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for
which such Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to
such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest ten-
thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall
-24-
make a public announcement of its election to adjust
the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount
of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the
date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be dis-
tributed to holders of record of Right Certificates on
such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which
such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates
held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company,
new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjust-
ment. Right Certificates so to be distributed shall be
issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of
Right Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change
in the Purchase Price or the number of one one-
hundredths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to
express the Purchase Price per one one-hundredth of a
share and the number of shares which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause
an adjustment reducing the Purchase Price below the then
par value of the number of one one-hundredths of a share
of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully
paid and nonassessable such number of one one-hundredths
of a share of Preferred Stock at such adjusted Purchase
Price.
-25-
(l) In any case in which this Section 11
shall require that an adjustment in the Purchase Price
be made effective as of a record date for a specified
event, the Company may elect to defer until the occur-
rence of such event the issuance to the holder of any
Right exercised after such record date the number of
one one-hundredths of a share of Preferred Stock and
other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the
number of one one-hundredths of a share of Preferred
Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive
such additional shares upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled
to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by
this Section 11, as and to the extent that it in its
sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the
Preferred Stock, issuance wholly for cash of any
Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or
securities which by their terms are convertible into or
exchangeable for Preferred Stock, stock dividends or
issuance of rights, options or warrants referred to
hereinabove in this Section 11, hereafter made by the
Company to the holders of its Preferred Stock, shall
not be taxable to such stockholders.
(n) The Company covenants and agrees that it
shall not at any time after the Distribution Date (i)
consolidate with, (ii) merge with or into, or (iii)
sell or transfer to, in one transaction or a series of
related transactions, assets or earning power aggregat-
ing more than 50% of the assets or earning power of the
Company and its Subsidiaries taken as a whole, any
other Person or Persons if (x) at the time of or
immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments
outstanding or agreements or arrangements in effect which
would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to,
-26-
simultaneously with or immediately after such consolidation,
merger or sale, the stockholders of a Person who constitutes, or
would constitute, the "Principal Party" for the purposes of
Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its
Affiliates and Associates.
(o) The Company covenants and agrees that
after the Distribution Date it will not, except as
permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable
that such action will substantially diminish or other-
wise eliminate the benefits intended to be afforded by
the Rights.
(p) Anything in this Agreement to the con-
trary notwithstanding, in the event that the Company
shall at any time after the date hereof and prior to
the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, the number of Rights
associated with each share of Common Stock then out-
standing, or issued or delivered thereafter but prior
to the Distribution Date, shall be proportionately
adjusted so that the number of Rights thereafter
associated with each share of Common Stock following
any such event shall equal the result obtained by
multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event
by a fraction the numerator of which shall be the total
number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and
the denominator of which shall be the total number of
shares of Common Stock outstanding immediately follow-
ing the occurrence of such event.
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares. Whenever an adjustment is
made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate set-
ting forth such adjustment and a brief statement of the
facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for
the Preferred Stock and the Common Stock a copy of such
certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate (or, if prior to the
-27-
Distribution Date, to each holder of a certificate
representing shares of Common Stock) in accordance with
Section 25 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any
adjustment therein contained.
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power. (a) In the event
that, following the Stock Acquisition Date, directly or
indirectly, (i) the Company shall consolidate with, or
merge with and into, any other Person, and the Company
shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) any Person shall
merge with and into the Company, and the Company shall
be the continuing or surviving corporation of such
merger and, in connection with such merger, all or part
of the Common Stock shall be changed into or exchanged
for stock or other securities of any other Person or
cash or any other property, or (iii) the Company shall
sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets
or earning power aggregating more than 50% of the
assets or earning power of the Company and its Sub-
sidiaries (taken as a whole) to any other Person or
Persons, then, and in each such case, proper provision
shall be made so that: (w) each holder of a Right,
except as provided in Section 7(e) hereof, shall there-
after have the right to receive, upon the exercise
thereof at the then current Purchase Price (without
giving effect to any adjustment to the Purchase Price
pursuant to Section 11(b)) in accordance with the terms
of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable shares of
freely tradeable Common Stock of the Principal Party
(as hereinafter defined), not subject to any rights of
call or first refusal, liens, encumbrances or other
claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price (without
giving effect to any adjustment to the Purchase Price
pursuant to Section 11(b)) by the then number of one
one-hundredths of a share of Preferred Stock for which
a Right is exercisable immediately prior to the first
occurrence of any event described in Section 13(a)(i),
(ii) or (iii) hereof (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of any event
referred to in Section 13(a)(i), (ii) or (iii) hereof,
multiplying the number of such 1/100ths of a share for
which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii)
-28-
Event by the Purchase Price in effect immediately prior
to such first occurrence) and dividing that product
(which, following the first occurrence of any event
referred to in Section 13(a)(i), (ii) or (iii), shall
be referred to as the "Purchase Price" for each Right and
for all purposes of this Agreement) by (2) 50% of the current
market price (determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal
Party on the date of consummation of such consolida-
tion, merger, sale or transfer; (x) the Principal
Party shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or trans-
fer, all the obligations and duties of the Company
pursuant to this Agreement; (y) the term "Company"
shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provi-
sions of Section 11 hereof shall apply to such Prin-
cipal Party and (z) such Principal Party shall take
such steps (including, but not limited to, the
authorization and reservation of a sufficient number of
shares of its Common Stock to permit exercise of all
outstanding Rights in accordance with this Section
13(a)) in connection with such consummation as may be
necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean
(1) in the case of any transaction
described in clause (i) or (ii) of the first
sentence of Section 13(a), the Person that is
the issuer of any securities into which
shares of Common Stock of the Company are
converted in such merger or consolidation,
and if no securities are so issued, the
Person that is the other party to the merger
or consolidation; and
(2) in the case of any transaction
described in clause (iii) of the first sen-
tence of Section 13(a), the Person that is
the party receiving the greatest portion of
the assets or earning power transferred
pursuant to such transaction or transactions;
-29-
provided, however, that in any such case, (x) if the
Common Stock of such Person is not at such time and has
not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of
another Person the Common Stock of which is and has
been so registered, "Principal Party" shall refer to
such other Person; and (y) in case such Person is a
Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are
and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market
value.
(c) The Company shall not consummate any
such consolidation, merger, sale or transfer unless the
Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not
been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and
such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of
this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger
or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration
statement under the Act with respect to the
Rights and the securities purchasable upon
exercise of the Rights on an appropriate
form, will use its best efforts to cause such
registration statement to become effective as
soon as practicable after such filing and
will use its best efforts to cause such
registration statement to remain effective
(with a prospectus at all times meeting the
requirements of the Act) until the Expiration
Date; and
(ii) will deliver to holders of the
Rights historical financial statements for
the Principal Party and each of its
Affiliates which comply in all respects with
the requirements for registration on Form 10
under the Exchange Act.
-30-
The provisions of this Section 13 shall similarly apply
to successive mergers or consolidations or sales or
other transfers. If any event described in Section
13(a)(i), (ii) or (iii) shall occur at any time after
the occurrence of a Section 11(a)(ii) Event, the Rights
which have not theretofore been exercised shall there-
after become exercisable in the manner described in
Section 13(a).
Section 14. Fractional Rights and Fractional
Shares. (a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution
Date as provided in Section 11(p) hereof, or to dis-
tribute Right Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certifi-
cates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the
current market value of a whole Right shall be the
closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect
to securities listed on the principal national
securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted,
the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such
other system then in use or, if on any such date the
Rights are not quoted by any such organization, the
average of the closing bid and asked prices as fur-
nished by a professional market maker making a market
in the Rights selected by the Board of Directors of the
Company. If on any such date no such market maker is
making a market in the Rights the fair value of the
Rights on such date as determined in good
-31-
faith by the Board of Directors of the Company shall be
used.
(b) The Company shall not be required to
issue fractions of shares of Preferred Stock (other
than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon
exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock). In
lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-hundredth of a share
of Preferred Stock, the Company may pay to the
registered holders of Right Certificates at the time
such Right Certificates are exercised as herein
provided an amount in cash equal to the same fraction
of the current market value of one one-hundredth of a
share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-hundredth of
a share of Preferred Stock shall be one one-hundredth
of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for
the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of any Trigger-
ing Event, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of frac-
tional shares of Common Stock, the Company may pay to
the registered holders of Right Certificates at the
time such Right Certificates are exercised as herein
provided an amount in cash equal to the same fraction
of the current market value of one share of Common
Stock. For purposes of this Section 14(c), the current
market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as deter-
mined pursuant to Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance
of the Rights expressly waives his right to receive any
fractional Rights or any fractional share upon exercise
of Rights, except as permitted by this Section 14.
-32-
Section 15. Rights of Action. All rights of
action in respect of this Agreement are vested in the
respective registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered
holders of Common Stock); and any registered holder of
any Right Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Right Cer-
tificate (or, prior to the Distribution Date, of the
Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate
in the manner provided in such Right Certificate and in
this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach
of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive
relief against actual or threatened violations of the
obligations of, any Person subject to this Agreement.
Section 16. Agreement of Right Holders.
Every holder of a Right by accepting the same consents
and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the
Rights will be transferable only in connection with the
transfer of Common Stock;
(b) after the Distribution Date, the Right
Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the prin-
cipal office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate
certificates fully executed;
(c) subject to Section 6(a) and Section 7(f)
hereof, the Company and the Rights Agent may deem and
treat the Person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing
on the Right Certificates or the associated Common Stock
-33-
certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) hereof, shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agree-
ment to the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder of
a Right or other Person as a result of its inability to
perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory
or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or
otherwise restraining performance of such obligation;
provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted
or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not
Deemed a Stockholder. No holder, as such, of any Right
Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of
the number of one one-hundredths of a share of
Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be con-
strued to confer upon the holder of any Right Certifi-
cate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meet-
ings or other actions affecting stockholders (except as
provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have
been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. (a)
The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the
-34-
administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for,
and to hold it harmless against, any loss, liability,
or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connec-
tion with the acceptance and administration of this
Agreement, including the costs and expenses of defend-
ing against any claim of liability.
(b) The Rights Agent shall be protected and
shall incur no liability for or in respect of any
action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance
upon any Right Certificate or certificate for Common
Stock or for other securities of the Company, instru-
ment of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed,
executed and, where necessary, verified or acknowl-
edged, by the proper Person or Persons.
Section 19. Merger or Consolidation or
Change of Name of Rights Agent. (a) Any corporation
into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be con-
solidated, or any corporation resulting from any merger
or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any cor-
poration succeeding to the corporate trust or stock
transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or
filing of any paper or any further act on the part of
any of the parties hereto, provided that such corpora-
tion would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. In
case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of
the Right Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so counter-
signed; and in case at that time any of the Right
Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and
in all such cases such Right Certificates shall have the
-35-
full force provided in the Right Certificates and in
this Agreement.
(b) In case at any time the name of the
Rights Agent shall be changed and at such time any of
the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right
Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such
Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certifi-
cates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The
Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders
of Right Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the Company), and
the opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter
(including, without limitation, the identity of any
"Acquiring Person" and the determination of "current
market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the
President or any Vice President and by the Treasurer or
any Assistant Treasurer or the Secretary or any Assis-
tant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
-36-
(c) The Rights Agent shall be liable
hereunder only for its own negligence, bad faith or
willful misconduct.
(d) The Rights Agent shall not be liable for
or by reason of any of the statements of fact or reci-
tals contained in this Agreement or in the Right Cer-
tificates (except its countersignature thereof) or be
required to verify the same, but all such statements
and recitals are and shall be deemed to have been made
by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company
of any covenant or condition contained in this Agree-
ment or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the
Rights (including the Rights becoming void pursuant to
Section 7(e) hereof) or any adjustment in the terms of
the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13 or 23, or
the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates
after actual notice of any such adjustment); nor shall
it by any act hereunder be deemed to make any repre-
sentation or warranty as to the authorization or reser-
vation of any shares of Common Stock or Preferred Stock
to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of Common Stock
or Preferred Stock will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be per-
formed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as
may reasonably be required by the Rights Agent for the
carrying out or performing by the Rights Agent of the
provisions of this Agreement.
-37-
(g) The Rights Agent is hereby authorized
and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman
of the Board, the President or any Vice President or
the Secretary or any Assistant Secretary or the
Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instruc-
tions in connection with its duties, and it shall not
be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of
any such officer.
(h) The Rights Agent and any shareholder,
director, officer or employee of the Rights Agent may
buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily inter-
ested in any transaction in which the Company may be
interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though
it were not the Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exer-
cise any of the rights or powers hereby vested in it or
perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and
continued employment thereof.
(j) No provision of this Agreement shall
require the Rights Agent to expend or risk its own
funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable
grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability
is not reasonably assured to it.
(k) If, with respect to any Right Certifi-
cate surrendered to the Rights Agent for exercise or
transfer, the certificate attached to the form of
assignment or form of election to purchase, as the
cases may be, has either not been completed or indicates an
affirmative response to clause 1 and/or 2 thereof, the Rights
-38-
Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the
Company.
Section 21. Change of Rights Agent. The
Rights Agent or any successor Rights Agent may resign
and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company
and to each transfer agent of the Common Stock and
Preferred Stock by registered or certified mail, and,
subsequent to the Distribution Date, to the holders of
the Right Certificates by first-class mail. The Com-
pany may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Stock
and Preferred Stock by registered or certified mail,
and, subsequent to the Distribution Date, to the
holders of the Right Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Com-
pany shall fail to make such appointment within a
period of 30 days after such removal or after it has
been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights
Agent or by the holder of a Right Certificate (who
shall, with such notice, submit his Right Certificate
for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court
of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be
(a) a corporation organized and doing business under
the laws of the United States or of any state of the
United States, in good standing, having a principal
office in the State of New York, which is authorized
under such laws to exercise stock transfer or corporate
trust powers and is subject to supervision or examina-
tion by federal or state authority and which has at the
time of its appointment as Rights Agent a combined
capital and surplus of at least $50,000,000 or (b) an
Affiliate of a corporation described in clause (a) of
this sentence. After appointment, the successor Rights
Agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
-39-
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common
Stock and the Preferred Stock, and, subsequent to the
Distribution Date, mail a notice thereof in writing to
the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certifi-
cates. Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by
its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or
class of shares of stock or other securities or
property purchasable under the Right Certificates made
in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date
and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares
of Common Stock so issued or sold pursuant to the
exercise of warrants, stock options or under or to any
employee plan, profit sharing trust or other arrange-
ment, or upon the exercise, conversion or exchange of
securities outstanding on the date hereof or hereafter
issued by the Company, and (b) may, in any other case,
if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates
representing the appropriate number of Rights in con-
nection with such issuance or sale; provided, however,
that (i) no such Right Certificate shall be issued if,
and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant
risk of material adverse tax consequences to the Com-
pany or the person to whom such Right Certificate would
be issued, and (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjust-
ment shall otherwise have been made in lieu of the
issuance thereof.
-40-
Section 23. Redemption. (a) The Board of
Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business
on the tenth day after the Stock Acquisition Date (or
such later date as a majority of the Continuing Direc-
tors then in office may determine) or (ii) the Final
Expiration Date, elect to redeem all but not less than
all the then outstanding Rights at a redemption price
of $.01 per Right appropriately adjusted to reflect any
stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption
Price"); provided, however, that if the Board of Direc-
tors of the Company authorizes redemption of the Rights
at or after the time a Person becomes an Acquiring
Person, then there must be Continuing Directors then in
office and such authorization shall require the concur-
rence of a majority of such Continuing Directors.
Notwithstanding anything in this Agreement to the
contrary, the Rights shall not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until
such time as the Company's right of redemption
hereunder has expired.
(b) Immediately upon the action of the Board
of Directors of the Company electing to redeem the
Rights, evidence of which shall have been filed with
the Rights Agent, and without any further action and
without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption
Price for each Right so held. Promptly after the
action of the Board of Directors ordering the redemp-
tion of the Rights, the Company shall give notice of
such redemption to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice to
all such holders at their last addresses as they appear
upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value
any Rights at any time in any manner other than that
specifically set forth in this Section 23, and other
than in connection with the purchase, acquisition or
redemption of shares of Common Stock prior to the
Distribution Date.
-41-
Section 24. Notice of Proposed Actions. (a)
In case the Company shall propose, at any time after
the Distribution Date, (i) to pay any dividend payable
in stock of any class to the holders of Preferred Stock
or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of its
Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassifica-
tion of its Preferred Stock (other than a reclassifica-
tion involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person,
or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of
related transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons, or
(v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company
shall give to each holder of a Right, to the extent
feasible and in accordance with Section 25, a notice of
such proposed action, which shall specify the record
date for the purposes of such stock dividend, distribu-
tion of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, trans-
fer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the
holders of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least
20 days prior to the record date for determining
holders of the Preferred Stock for purposes of such
action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by
the holders of Preferred Stock, whichever shall be the
earlier. The failure to give notice required by this
Section 24 or any defect therein shall not affect the
legality or validity of the action taken by the Company
or the vote upon any such action.
-41-
(b) Notwithstanding anything in this Agree-
ment to the contrary, prior to the Distribution Date a
filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the
holders of securities of the Company, including the
Rights, for purposes of this Agreement and no other
notice need be given.
(c) In case any Section 11(a)(ii) Event
shall occur, then, in any such case, (i) the Company
shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with
Section 25 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences
of the event to holders of Rights under Section 11(a)(ii)
hereof and (ii) all references in subsection (a) to
Preferred Stock shall be deemed thereafter to refer
to Common Stock and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands
authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or
made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing
with the Rights Agent) as follows:
Texas Instruments Incorporated
13500 North Central Expressway
Dallas, Texas 75265
Attention: Secretary
Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made
by the Company or by the holder of any Right Certifi-
cate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in
writing with the Company) as follows:
Morgan Shareholder Services Trust Company
30 West Broadway
New York, New York 10007
Attention: Tenders and Exchanges Department
Notices or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to the
holder of any Right Certificate (or, prior to the
Distribution Date, to the holder of any certificate repre-
-43-
senting shares of Common Stock) shall be sufficiently
given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books
of the Company.
Section 26. Supplements and Amendments.
Prior to the Distribution Date and subject to the
penultimate sentence of this Section 26, the Company
and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement
without the approval of any holders of certificates
representing shares of Common Stock. From and after
the Distribution Date and subject to the penultimate
sentence of this Section 26, the Company and the Rights
Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any
holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder (which shortening or
lengthening shall be effective only if there are Con-
tinuing Directors then in office and shall require the
concurrence of a majority of such Continuing Directors
if such supplement or amendment occurs at or after the
time a Person becomes an Acquiring Person) or (iv) to
change or supplement the provisions hereof in any
manner which the Company may deem necessary or
desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, however, that this
Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then
redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to,
the holders of Rights. Upon the delivery of a certifi-
cate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in
compliance with the terms of this Section 26, the
Rights Agent shall execute such supplement or amend-
ment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number
of one one-hundredths of a share of Preferred Stock for
which a Right is exercisable. Prior to the
-44-
Distribution Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the holders
of Common Stock.
Section 27. Successors. All the covenants
and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent shall bind and inure
to the benefit of their respective successors and
assigns hereunder.
Section 28. Determinations and Actions by
the Board of Directors, etc. For all purposes of this
Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time,
including for purposes of determining the particular
percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-
3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act. The Board of Directors of the Com-
pany (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the
exclusive power and authority to administer this Agree-
ment and to exercise all rights and powers specifically
granted to the Board (with, where specifically provided
for herein, the concurrence of the Continuing Direc-
tors) or to the Company, or as may be necessary or
advisable in the administration of this Agreement,
including without limitation, the right and power to
(i) interpret the provisions of this Agreement and (ii)
make all determinations deemed necessary or advisable
for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for
purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the
Board (or, where specifically provided for herein, by
the Continuing Directors) in good faith, shall (x) be
final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other
parties, and (y) not subject to the Board or the Con-
tinuing Directors to any liability to the holders of
the Right.
Section 29. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to
any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Stock) any legal or
-45-
equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date,
the Common Stock).
Section 30. Severability. If any term,
provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected,
impaired or invalidated.
Section 31. GOVERNING LAW. THIS AGREEMENT,
EACH RIGHT AND EACH RIGHT CERTIFICATE ISSUED HEREUNDER
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT THAT THE
RIGHTS AND OBLIGATIONS OF THE RIGHTS AGENT SHALL BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
Section 32. Counterparts. This Agreement may
be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall
together constitute one and the same instrument.
-46-
Section 33. Descriptive Headings. The cap-
tions herein and table of contents hereto are included
for convenience of reference only, do not constitute a
part of this Agreement and shall be ignored in the
construction and interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed, all as of
the day and year first above written.
Attest: TEXAS INSTRUMENTS INCORPORATED
By /s/ CLARA C. O'DONELL By /s/ W.E. BOISVERT
--------------------- ---------------------
Title: Assistant Title: Vice President
Secretary and Treasurer
Attest: MORGAN SHAREHOLDER SERVICES
TRUST COMPANY, as Rights Agent
By /s/ SAL RUSSO By /s/ JOHN BAMBACH
----------------------- ----------------------
Title: Assistant Title: Assistant
Secretary Vice President
-47-
Exhibit A
---------
FORM OF CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
PARTICIPATING CUMULATIVE PREFERRED STOCK
of
TEXAS INSTRUMENTS INCORPORATED
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, William E. Boisvert, a Vice President, and
Clara C. O'Donnell, Assistant Secretary, of Texas Instruments
Incorporated, organized and existing under the General Cor-
poration Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the
Board of Directors by the Restated Certificate of Incorpora-
tion, as amended (the "Certificate of Incorporation"), of the
said Company, the said Board of Directors on June 17, 1988
adopted the following resolution creating a series of
1,500,000 shares of Preferred Stock designated as Participat-
ing Cumulative Preferred Stock:
RESOLVED, that pursuant to the authority vested in
the Board of Directors of this Company in accordance with the
provisions of its Certificate of Incorporation, a series of
Preferred Stock of the Company be and it hereby is created,
and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount. The shares of
such series shall be designated as "Participating Cumulative
Preferred Stock" and the number of shares constituting such
series shall be 1,500,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of
the holders of any shares of any series of Preferred Stock
ranking prior and superior to the Participating Cumulative
Preferred Stock with respect to dividends, the holders of
shares of Participating Cumulative Preferred Stock, in
preference to the shares of Common Stock, par value $1 per
share, of the Company (the "Common Stock"), and any other
stock of the Company junior to the Participating Cumulative
Preferred Stock with respect to dividends, shall be entitled
to receive, when, as and if declared by the Board of Direc-
tors out of funds legally available for the purpose,
quarterly dividends payable in cash on the fourth Monday of
January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a
share of Participating Cumulative Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend pay-
able in shares of Common Stock or a subdivision of the out-
standing shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share
of Participating Cumulative Preferred Stock. In the event
the Company shall at any time after June 17, 1988 (the
"Rights Declaration Date") (i) declare or pay any dividend on
Common Stock payable in shares of Common Stock, (ii) sub-
divide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares
of Participating Cumulative Preferred Stock were entitled
immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(B) The Company shall declare a dividend or dis-
tribution on the Participating Cumulative Preferred Stock as
provided in paragraph (A) above immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been
-2-
declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Participating Cumulative Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumula-
tive on outstanding shares of Participating Cumulative
Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Participating
Cumulative Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination
of holders of shares of Participating Cumulative Preferred
Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on
the shares of Participating Cumulative Preferred Stock in an
amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of
Participating Cumulative Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be no more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. In addition to any
other voting rights required by law, the holders of shares of
Participating Cumulative Preferred Stock shall have only the
following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Participating Cumulative
Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the
Company. In the event the Company shall at any time after
the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) sub-
divide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which
-3-
holders of shares of Participating Cumulative Preferred Stock
were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law,
the holders of shares of Participating Cumulative Preferred
Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Whenever, at any time, dividends payable on
the Participating Cumulative Preferred Stock shall be in
arrears for such number of dividend periods as shall in the
aggregate contain not less than 540 days, the holders of such
series shall have the exclusive right, voting separately as a
class with holders of shares of any one or more other series
of preferred stock ranking on a parity with such series
either as to dividends or on the distribution of assets upon
liquidation, dissolution or winding up and upon which like
voting rights have been conferred and are exercisable, to
elect two directors of the Company at the Company's next
annual meeting of stockholders and at each subsequent annual
meeting of stockholders until such right is terminated as
provided in this resolution. At elections for such direc-
tors, each holder of Participating Cumulative Preferred Stock
shall be entitled to one vote for each one-hundredth of a
share held (the holders of shares of any other series of
preferred stock ranking on such a parity being entitled to
such number of votes, if any, for each share of stock held as
may be applicable to them). Upon the vesting of such voting
right in the holders of the Participating Cumulative
Preferred Stock, the maximum authorized number of members of
the Board of Directors shall automatically be increased by
two and the two vacancies so created shall be filled by vote
of the holders of such series (with the holders of shares of
any one or more other series of preferred stock ranking on
such a parity) as hereinafter set forth. The right of the
holders of the Participating Cumulative Preferred Stock,
voting separately as a class with the holders of shares of
any one or more other series of preferred stock ranking on
such a parity, to elect members of the Board of Directors of
the Company as aforesaid shall continue until such time as
all dividends accumulated on such series shall have been paid
in full, at which time such right shall terminate, except as
by law expressly provided, subject to revesting in the event
-4-
of each and every subsequent default of the character above
mentioned.
Upon any termination of the right of the holders of
the Participating Cumulative Preferred Stock as a class to
vote for directors as herein provided, the term of office of
all directors then in office elected by the Participating
Cumulative Preferred Stock voting as a class shall terminate
immediately. If the office of any director elected by the
holders of the Participating Cumulative Preferred Stock
voting as a class becomes vacant by reason of death, resigna-
tion, retirement, disqualification, removal from office, or
otherwise, the remaining director elected by the holders of
the Participating Cumulative Preferred Stock voting as a
class may choose a successor who shall hold office for the
unexpired term in respect of which such vacancy occurred.
Whenever the special voting powers vested in the holders of
the Participating Cumulative Preferred Stock as provided in
this resolution shall have expired, the number of directors
shall become such number as may be provided for in the By-
Laws, or resolution of the Board of Directors thereunder,
irrespective of any increase made pursuant to the provisions
of this resolution.
(D) Except as set forth herein, holders of Par-
ticipating Cumulative Preferred Stock shall have no special
voting rights and their consent shall not be required (except
to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Participating
Cumulative Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on
shares of Participating Cumulative Preferred Stock outstand-
ing shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the
Participating Cumulative Preferred Stock;
-5-
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking
on a parity (either as to dividends or upon liqui-
dation, dissolution or winding up) with the Par-
ticipating Cumulative Preferred Stock, except
dividends paid ratably on the Participating Cumula-
tive Preferred Stock and all such parity stock on
which dividends are payable or in arrears in
proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Participating
Cumulative Preferred Stock, provided that the
Company may at any time redeem, purchase or other-
wise acquire shares of any such parity stock in
exchange for shares of any stock of the Company
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the
Participating Cumulative Preferred Stock; or
(iv) purchase or otherwise acquire for con-
sideration any shares of Participating Cumulative
Preferred Stock, or any shares of stock ranking on
a parity with the Participating Cumulative
Preferred Stock, except in accordance with a pur-
chase offer made in writing or by publication (as
determined by the Board of Directors) to all
holders of such shares upon such terms as the Board
of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes,
shall determine in good faith will result in fair
and equitable treatment among the respective series
or classes.
(B) The Company shall not permit any subsidiary
of the Company to purchase or otherwise acquire for con-
sideration any shares of stock of the Company unless the
Company could, under paragraph (A) of this Section 4, pur-
chase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of
Participating Cumulative Preferred Stock purchased or other-
wise acquired by the Company in any manner whatsoever shall
be retired and cancelled promptly after the acquisition
-6-
thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock to
be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on
issuance set forth in the Certificate of Incorporation.
Section 6. Liquidation, Dissolution or Winding
Up. Upon any liquidation, dissolution or winding up of the
Company, no distribution shall be made (1) to the holders
of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Par-
ticipating Cumulative Preferred Stock unless, prior thereto,
the holders of shares of Participating Cumulative Preferred
Stock shall have received $100.00 per share, plus an amount
equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such pay-
ment, provided that the holders of shares of Participating
Cumulative Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of
Common Stock, or (2) to the holders of stock ranking on a
parity (either as to dividends or upon liquidation, dissolu-
tion or winding up) with the Participating Cumulative
Preferred Stock, except distributions made ratably on the
Participating Cumulative Preferred Stock and all other such
parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liqui-
dation, dissolution or winding up. In the event the Company
shall at any time after the Rights Declaration Date declare
or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Participating Cumulative
Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case
the Company shall enter into any consolidation, merger,
combination or other transaction in which the shares of
-7-
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such
case the shares of Participating Cumulative Preferred Stock
shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In
the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the out-
standing Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Participating
Cumulative Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption. The shares of Par-
ticipating Cumulative Preferred Stock shall not be
redeemable.
Section 9. Rank. The Participating Cumulative
Preferred Stock shall rank junior with respect to payment of
dividends and on liquidation to all other series of the
Company's preferred stock outstanding on the date hereof and
to all such other series that may be issued after the date
hereof except to the extent that any such other series
specifically provides that it shall rank junior to the Par-
ticipating Cumulative Preferred Stock.
Section 10. Amendment. The Certificate of Incor-
poration of the Company and these resolutions shall not be
amended in any manner which would materially alter or change
the powers, preferences or special rights of the Participat-
ing Cumulative Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or
more of the outstanding shares of Participating Cumulative
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Participating
Cumulative Preferred Stock may be issued in fractions of a
share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights,
-8-
receive dividends, participate in distributions and to have
the benefit of all other rights of holders of Participating
Cumulative Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed
this Certificate and do affirm the foregoing as true under
the penalties of perjury this ___ day of June, 1988.
-------------------------
Vice President
Attest:
----------------------
Assistant Secretary
-9-
Exhibit B
---------
Form of Right Certificate
Certificate No. R- Rights
------------
NOT EXERCISABLE AFTER JUNE 17, 1998 OR EARLIER
IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED
BY THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY OWNED
BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS
RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF THE RIGHTS AGREEMENT.]*
Right Certificate
TEXAS INSTRUMENTS INCORPORATED
This certifies that ____________________, or
registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of June 17, 1988 (the "Rights
Agreement") between Texas Instruments Incorporated, a
Delaware corporation (the "Company"), and Morgan Shareholder
Services Trust Company , a New York corporation (the "Rights
Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights
---------
* The portion of the legend in brackets shall be inserted
only if applicable and shall replace the preceding sentence.
Agreement) and prior to 5:00 P.M. (New York time) on June 17,
1998 at the office or offices of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, non-assessable share of Par-
ticipating Cumulative Preferred Stock (the "Preferred Stock")
of the Company, at a cash purchase price of $200 per one
one-hundredth of a share (the "Purchase Price"), upon presen-
tation and surrender of this Right Certificate with the Form
of Election to Purchase and the related Certificate duly
executed. The number of Rights evidenced by this Right
Certificate (and the number of shares which may be purchased
upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase
Price as of June 17, 1988, based on the Preferred Stock as
constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event
(as such term is defined in the Rights Agreement), if the
Rights evidenced by this Right Certificate are beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate
of any such Acquiring Person (as such terms are defined in
the Rights Agreement), (ii) a transferee of any such Acquir-
ing Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee
of a person who, after such transfer, became an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person,
such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and
after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase
Price and the number and kind of shares of Preferred Stock or
other securities which may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain
events.
This Right Certificate is subject to all of the
terms, provisions and conditions of the Rights Agreement,
which terms, provisions and conditions are hereby incor-
porated herein by reference and made a part hereof and to
which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obliga-
tions, duties and immunities hereunder of the Rights Agent,
the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstan-
ces set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the
-2-
Rights Agent and are also available upon written request to
the Company.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office or offices of the
Rights Agent designated for such purpose, may be exchanged
for another Right Certificate or Right Certificates of like
tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a
share of Preferred Stock as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have
entitled such holder to purchase. If this Right Certificate
shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exer-
cised.
[Subject to the provisions of the Rights Agreement,
the Rights evidenced by this Certificate may be redeemed by
the Board of Directors at a redemption price of $.01 per
Right at any time prior to the close of business on the tenth
day after the Stock Acquisition Date, as such term is defined
in the Rights Agreement, or such later date as a majority of
the Continuing Directors then in office may determine.]*
No fractional shares of Preferred Stock will be
issued upon the exercise of any Right or Rights evidenced
hereby (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock, which may,
at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made,
as provided in the Rights Agreement.
No holder of this Right Certificate shall be
entitled to vote or receive dividends or be deemed for any
purpose the holder of shares of Preferred Stock or of any
other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained
in the Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a stock-
holder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any
corporate action, or, to receive notice of meetings or other
---------
* Insert language in brackets only if Stock Acquisition Date
has not occurred when Right Certificates are distributed.
-3-
actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by
this Right Certificate shall have been exercised as provided
in the Rights Agreement.
This Right Certificate shall not be valid or
obligatory for any purpose until it shall have been counter-
signed by the Rights Agent.
WITNESS the facsimile signature of the proper
officers of the Company and its corporate seal.
Dated as of , 19
---------------- --
Attest: TEXAS INSTRUMENTS INCORPORATED
By
---------------------- ----------------------
Secretary Title:
[seal]
Countersigned:
MORGAN SHAREHOLDER SERVICES TRUST COMPANY,
as Rights Agent
By
--------------------
Authorized Signature
-4-
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
---------------------------------------
hereby sells, assigns and transfers unto
-----------------
----------------------------------------------------------
(Please print name and address of transferee)
----------------------------------------------------------
this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the
----------------------
within Right Certificate on the books of the within-named
Company, with full power of substitution.
Dated: , 19
--------------------- --
---------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
___are ___are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of
the undersigned, it ___ did ___ did not acquire the Rights
evidenced by this Right Certificate from any Person who is,
was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: , 19
---------- -- ------------------------
Signature
NOTICE
------
The signatures to the foregoing Assignment and
Certificate must correspond to the name as written upon the
face of this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever.
-2-
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: Texas Instruments Incorporated
The undersigned hereby irrevocably elects to exer-
cise Rights represented by this Right Certifi-
------------
cate to purchase the shares of Preferred Stock issuable upon
the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for
such shares be issued in the name of and delivered to:
Please insert social security
or other identifying number
----------------------------------------------------------
(Please print name and address)
-----------------------------------------------------------
If such number of Rights shall not be all the
Rights evidenced by this Right Certificate, a new Right
Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
Please insert social security
or other identifying number
-----------------------------------------------------------
(Please print name and address)
-----------------------------------------------------------
-----------------------------------------------------------
Dated: , 19
---------------- --
---------------------------
Signature
Signature Guaranteed:
-2-
Certificate
-----------
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
___ are ___ are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of
the undersigned, it ___ did ___ did not acquire the Rights
evidenced by this Right Certificate from any Person who is,
was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: , 19
---------- -- ------------------------
Signature
NOTICE
------
The signature to the foregoing Election to Purchase
and Certificate must correspond to the name as written upon
the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.
-3-
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On June 17, 1988, the Board of Directors of Texas
Instruments Incorporated (the "Company") declared a dividend
distribution of one Right for each outstanding share of
Common Stock of the Company to stockholders of record at the
close of business on June 30, 1988. When exercisable, each
Right entitles the registered holder to purchase from the
Company a unit consisting of one one-hundredth of a share (a
"Unit") of Participating Cumulative Preferred Stock, par
value $25 per share (the "Preferred Stock") at a cash pur-
chase price of $200 per Unit (the "Purchase Price"), subject
to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement between the Company and
Morgan Shareholder Services Trust Company, as Rights Agent.
Initially, the Rights will be attached to all
outstanding shares of Common Stock, and no separate Right
Certificates will be distributed. The Rights will separate
from the Common Stock and a Distribution Date will occur upon
the earlier of: (i) 10 days following a public announcement
that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of
20% or more of the outstanding shares of Common Stock (the
"Stock Acquisition Date"), or (ii) 10 business days following
the commencement of a tender offer or exchange offer that
would result in a person or group becoming an Acquiring
Person. Until the Distribution Date (or earlier redemption
or expiration of the Rights), (i) the Rights will be evi-
denced by the Common Stock certificates and will be trans-
ferred with and only with such Common Stock certificates,
(ii) new Common Stock certificates issued after June 30, 1988
will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any cer-
tificates for Common Stock will also constitute the transfer
of the Rights associated with the Common Stock represented by
such certificate.
The Rights are not exercisable until the Distribu-
tion Date and will expire at the close of business on June
17, 1998, unless previously redeemed by the Company as
described below.
As soon as practicable after the Distribution Date,
Right Certificates will be mailed to holders of record of
Common Stock as of the close of business on the Distribution
Date and, thereafter, the separate Right Certificates alone
will represent the Rights. Except as otherwise determined by
the Board of Directors, with certain exceptions, only shares
of Common Stock issued prior to the Distribution Date will be
issued with Rights.
In the event that any Person shall become an
Acquiring Person, proper provision will be made so that each
holder of a Right, other than Rights that are, or (under
certain circumstances specified in the Rights Agreement)
were, beneficially owned by an Acquiring Person (which will
thereafter be void), will thereafter have the right to
receive upon exercise that number of shares of Common Stock
having a market value of two times the Purchase Price of the
Right. In the event that, at any time following the Stock
Acquisition Date, (i) the Company is acquired in a merger or
other business combination transaction or (ii) 50% or more of
the Company's assets or earning power is sold, each holder of
a Right shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a
value equal to two times the Purchase Price of the Right.
The events described in this paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, and the number of Units
of Preferred Stock or other securities or property issuable,
upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassifica-
tion of, the Preferred Stock, (ii) if holders of the
Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at
less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock
of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or war-
rants (other than those referred to above).
With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments
amount to at least 1% of the Purchase Price. No fractional
Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred
Stock on the last trading date prior to the date of exercise.
The Rights may be redeemed in whole, but not in
part, at a price of $.01 per Right by the Board of Directors
at any time until the tenth day after the Stock Acquisition
Date (or such later date as a majority of the Continuing
-2-
Directors (as defined in the Rights Agreement) then in office
may determine). Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will
terminate and thereafter the only right of the holders of
Rights will be to receive the redemption price.
Until a Right is exercised, the holder will have no
rights as a stockholder of the Company (beyond those as an
existing stockholder), including the right to vote or to
receive dividends. While the distribution of the Rights will
not be taxable to stockholders or to the Company, stock-
holders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exer-
cisable for Common Stock (or other consideration) of the
Company or for common stock of an acquiring company as set
forth above.
A copy of the Rights Agreement has been filed with
the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A. A copy of the Rights
Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the
Rights Agreement.
-3-
Exhibit 10(a)(i)
TEXAS INSTRUMENTS ANNUAL INCENTIVE PLAN
As Amended April 15, 1993
The Texas Instruments Annual Incentive Plan is designed to provide an
additional incentive for those employees who are key to the Company's success
in the highly technological and competitive industries in which it operates.
The Plan provides for rewarding certain employees by awards for outstanding
ability and exceptional service based upon the individual's contribution to
the Company.
For purposes of the Plan unless otherwise indicated, the term "Company" shall
mean Texas Instruments Incorporated and its subsidiaries of which sub-
stantially all of the voting stock is owned directly or indirectly by Texas
Instruments.
Eligibility
The employees of the Company eligible to receive awards under the Plan shall
consist of the group of employees (including officers and directors) in
management or other key positions specified for each year by the Committee
described below and such other employees as said Committee may designate for
such year. If an employee takes an approved leave of absence or dies prior to
a determination of awards to be made under the Plan for a year in which the
employee was eligible to receive awards under the Plan, such employee on leave
or the estate of such deceased employee shall be eligible to receive awards
under the Plan for such year. Directors who are not full-time or part-time
officers or employees are not eligible to participate in the Plan.
Administration of Plan
The Plan shall be administered by a Committee of the Board of Directors which
shall be known as the Compensation Committee (the Committee) which 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. No member or alternate member of the
Committee shall be eligible, while a member or alternate member, for
participation in the Plan. 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.
The Committee shall have the full and exclusive right to make awards under
the Plan except as otherwise expressly provided in this Plan. In determining
the selection of recipients and the amount or form of any award, the
Committee shall take into consideration the contribution of the recipients
during the fiscal year to the Company's success and such other factors as the
Committee shall determine. The Committee shall have the authority to consult
with and receive recommendations from officers or other executives of the
Company with regard to these matters.
The Committee may delegate such power, authority and rights with respect to
the administration of the Plan as it deems appropriate to one or more members
of the management of the Company (including, without limitation, a committee
of one or more members of management appointed by the Committee); provided,
however, that the Committee shall have the exclusive right to make awards to
employees who are directors or officers of the Company, and that any
delegation to management shall conform with the requirements of the General
Corporation Law of Delaware, as in effect from time to time.
1
Expenses of Administration
The expenses of the administration of this Plan, including the dividend
equivalents and interest provided in the Plan, shall be borne by the Company
and none of them shall be charged against the Incentive Reserve described
below.
Amendments
The Board of Directors of the Company may, at any time and from time to time,
alter, amend, suspend or terminate the Plan or any part thereof as it may deem
proper and in the best interests of the Company, provided, however, that no
such action shall affect or impair the rights under any award theretofore
granted under the Plan, except that in the case of an employee employed
outside the United States (or his beneficiary) the Board may vary the
provisions of the Plan as it may deem appropriate to conform with local laws,
practices and procedures. Further, unless the stockholders of the Company
shall have first approved thereof, no amendment shall be made which shall
increase the maximum amount which may be credited to the Incentive Reserve
described below in any year.
Awards
Awards may be made from time to time during each year under the Plan by the
Committee or its delegate(s) in amounts which do not exceed the amount then
available in the Incentive Reserve described below. Such awards may be
denominated in cash, in shares of the Company's common stock, or both, and may
be payable in cash or shares, or both, as the Committee may determine.
Scope of the Plan
The Committee shall have the power, in its sole discretion, to determine what
payments to eligible employees shall be deemed to be incentive compensation
for the purposes of this Plan. Awards under the Company's Patent Incentive
Award program shall be deemed not to have been made under this Plan and
payments under the Patent Incentive Award program shall not be charged to the
Incentive Reserve described below. Payments under any incentive plans which
operational organizations of the Company may have from time to time to any
employees who are then eligible to receive awards under this Plan shall be
charged to the Incentive Reserve described below. Special payments to
employees involved in unusual transactions (including, without limitation, a
sale of a portion of the business of the Company) shall not be charged to the
Incentive Reserve described below unless otherwise determined by the
Committee. Nothing in this Plan shall be construed as preventing the Company
from having from time to time incentive or other variable compensation plans
applicable to employees who are not then eligible to participate in this Plan,
and payments of incentive or other variable compensation under such plans to
such employees shall not be charged to the Incentive Reserve described below.
Incentive Reserve
For the calendar year 1965 and each of the calendar years thereafter, the
Board of Directors shall cause to be credited to an Incentive Reserve
(hereinafter called the Reserve) an amount determined as follows:
10% of the amount by which the Company's net income for such year
exceeds 6% of net capital but not in excess of the amount paid out as
dividends on the common stock of the Company during such year, except
that the Board may in its discretion direct that a lesser amount be
credited.
As used in this Plan
1. Net income shall mean the amount reported as net income in the
annual statement of income for the year as shown by the annual report to
stockholders plus interest on long-term debt and amounts credited to
the Reserve for such year.
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2. Net capital shall mean the total of stockholders' equity plus
long-term debt (less current portion) as shown on the balance sheet as
of the end of the year preceding the year for which net income, as
above, is determined plus treasury stock held for the purposes of this
Plan.
As soon as practicable after the end of each year, the Company's independent
auditors shall determine and report to the Board of Directors the maximum
amount creditable to the Reserve for that year under the provisions of this
Plan. After receipt of such auditors' report, the Board shall determine the
amount to be credited to the Reserve for such year and the amount so
determined shall be credited to the Reserve as of the close of the year. The
Committee shall promptly be advised of the amount so credited to the Reserve
and of the total amount available in the Reserve (after deducting any unpaid
installments of incentive awards previously granted).
The Committee shall make a determination of awards to be made under the Plan
for each year at such time or times as the Committee shall deem appropriate.
The aggregate of such awards may be less than, but shall not exceed, the
total amount available in the Reserve, except that, after the end of a year
and prior to the Board's determination of an amount to be credited to the
Reserve for that year, the Committee may make awards in excess of the amount
available in the Reserve if such awards are made payable only if an amount
adequate to cover such awards is first credited to the Reserve for such year.
If the aggregate of the awards determined by the Committee to be made under
the Plan for a given year shall at any time be less than the total amount
available in the Reserve, the Committee may at any time or times determine
that additional awards be made under the Plan for such year, provided that the
aggregate of all awards for such year shall not exceed the total amount
available in the Reserve, and that all awards for such year shall be
determined on or before December 31 of the following year.
If (i) the amount determined and reported by the Company's independent
auditors as the maximum amount creditable to the Reserve for any year shall
for any reason later prove to have been overstated and (ii) the amount
credited to the Reserve at the close of such year was in excess of the revised
maximum amount creditable to the Reserve for that year, then the amount
available at that time or subsequently in the Reserve shall be reduced by the
amount of such excess. Thus excess credits to the Reserve resulting from such
overstatement shall be corrected exclusively by adjustment of the Reserve then
or subsequently available and not by recourse to any person.
Any balance remaining in the Reserve after making awards for any year shall
continue in the Reserve and be available for awards for future years except
to the extent otherwise directed by the Committee. Any payments that are
made by the Company, and any incentive 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 payments made to or incentive 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 charged to
the Reserve.
Payment of Awards
Incentive awards may be made in cash or in Texas Instruments common stock, or
partly in cash and partly in stock as the Committee in its discretion may
determine. Incentive awards made wholly or partly in stock, or any
installments thereof, may be paid wholly or partly in cash as the Committee in
its discretion may determine.
The Company shall make available as and when required a sufficient number of
shares of its common stock for the purpose of this Plan. Such common stock
shall be either authorized and unissued shares or treasury stock.
Authorized and unissued shares and treasury stock shall be valued for the
purpose of awards and charged to the Reserve at the simple average of the
high and the low prices of Texas Instruments common stock on the Composite
Tape on the date the awards are made by the Committee (or if there shall be
no trading on that date, then on the first previous date on which there is
such trading). Authorized and unissued shares and treasury stock shall be
valued for the purpose of payments in cash of awards made in stock, at the
simple average of the high and the low prices of Texas Instruments common
stock on the Composite Tape on the
3
payment date (or if there shall be no trading on that date, then on the first
previous date on which there is such trading).
The Committee may direct the awards to the participants or any of them for
any year to be paid in a single amount or in installments of equal or varying
amounts and may prescribe such terms and conditions concerning payment of such
installments as it deems appropriate, including completion of specific periods
of employment with the Company or achievement of specific goals established by
the Committee, as it deems appropriate, provided that such terms and
conditions are not more favorable to a participant than those expressly set
forth in this Plan. The Committee may determine that dividend equivalents or
interest, as applicable, will be payable with respect to any installments of
any award. The Committee may at any time after an incentive award is made
amend any such direction and may amend or delete any such terms and conditions
concerning payment of installments, if the Committee deems it appropriate.
When the obligation to pay an installment or installments of an award has
terminated for any reason, the amounts relating to such installment or
installments shall be added back to the Reserve and shall be available for
use under this Plan.
Appropriate adjustments in incentive awards payable in Texas Instruments
common stock shall be made to give effect to any mergers, consolidations,
acquisitions, stock splits, or other relevant changes in capitalization
occurring after the effective date of this Plan; however, no fractional shares
shall be distributed.
Payments of awards to employees of subsidiaries of the Company shall be paid
directly by such subsidiaries.
Withholding
Whenever a participant is obligated to pay to the Company an amount required
to be withheld under applicable income tax laws in connection with the payment
of stock pursuant to an award under this Plan, such payment may be made (a)
in cash, or (b) to the extent from time to time approved by the Committee, (i)
in Texas Instruments common stock or (ii) partly in cash and partly in Texas
Instruments common stock. For purposes of any payment in Texas Instruments
common stock, such stock shall be valued at the simple average of the high and
low prices of Texas Instruments common stock on the Composite Tape on the date
that the payment in stock becomes taxable (or if there is no trading on that
date, then on the first previous date on which there is such trading).
4
Exhibit 10(a)(ii)
TEXAS INSTRUMENTS LONG-TERM INCENTIVE PLAN
As Adopted April 15, 1993
The Texas Instruments 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. 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.
(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) "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.
(e) "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.
(f) "Non-Qualified Stock Option" shall mean an option granted under said
paragraph (a) that is not intended to be an Incentive Stock Option.
(g) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(h) "Other Stock-Based Award" shall mean any right granted under paragraph
(d) under the heading "Awards" set forth below.
(i) "Participant" shall mean an employee designated to be granted an Award
under the Plan.
(j) "Performance Unit" shall mean any right granted under paragraph (c)
under the heading "Awards" set forth below.
(k) "Released Securities" shall mean securities that were Restricted
Securities with respect to which all applicable restrictions have
expired, lapsed, or been waived.
(l) "Restricted Securities" shall mean Awards of Restricted Stock or other
Awards under which issued and outstanding Shares are held subject to
certain restrictions.
(m) "Restricted Stock" shall mean any Share granted under paragraph (b)
under the heading "Awards" set forth below.
(n) "Restricted Stock Unit" shall mean any right granted under said
paragraph (b) that is denominated in Shares.
(o) "Shares" shall mean shares of the common stock of the Company, $1.00 par
value.
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.
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
2
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 4,000,000 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 1974, 1984 or
1988 Stock Option Plans, or to which such an Award relates, are
forfeited, or if 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
1,000,000 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 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,
3
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:
(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.
(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
4
Participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted
Stock.
(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.
(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,
5
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 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.
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, 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.
6
(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 Inconsistences
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 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.
7
(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 14, 2003. However,
unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award theretofore granted may extend beyond such date, and the
authority of the Committee 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.
8
Exhibit 10(b)(iii)
Amendment No. 2
to
TI Directors Retirement Benefit Plan
Texas Instruments Incorporated, a Delaware Corporation with its
principal office in Dallas, Texas, hereinafter sometimes referred to as "TI,"
for the purpose of amending the TI Directors Retirement Benefit Plan dated
January 1, 1987, (the "Plan") does hereby agree as follows:
Section 2-2 of Article II of the Plan is hereby amended so as to read as
follows:
"Section 2-2. Amount of Retirement Benefits. The retirement benefits
payable to a Participant under this Plan who retired prior to July 22, 1988
shall be an annual amount of $23,250, and the retirement benefits payable to a
Participant under this Plan who retires, dies or becomes disabled on or after
July 22, 1988 shall be an annual amount equal to sixty percent (60%) of the
annual retainer payable to a Director of TI for the year in which the
Participant's retirement, death or disability occurs."
This amendment shall be effective as of July 22, 1988.
IN WITNESS WHEREOF, this instrument is executed as of the 22nd day of
July, 1988.
TEXAS INSTRUMENTS INCORPORATED
By /s/ WILLIAM F. WHETSEL
----------------------
William F. Whetsel
Exhibit 10(b)(iv)
AMENDMENT NO. 3
to
TI Directors Retirement Benefit Plan
Texas Instruments Incorporated, a Delaware Corporation with its
principal office in Dallas, Texas, hereinafter sometimes referred to as "TI",
for the purpose of amending the TI Directors Retirement Benefit Plan dated
January 1, 1987, and heretofore amended, (the "Plan") does hereby agree as
follows:
"Section 2-1. Eligibility for Retirement Benefits. Each director of TI who
meets the following eligibility requirements (hereinafter called
"Participant") shall be entitled to receive a retirement benefit hereunder:
(a) such Participant ceases to serve as director of TI because
of retirement, death or disability after having completed as
least five (5) years of service as a Director of TI, and
(b) has not at any time received or been entitled to receive, as
a plan participant, any benefits from the TI Employees
Pension Plan or any other retirement benefit plan maintained
by TI or any subsidiary of TI."
This amendment shall be effective as of April 15, 1993.
IN WITNESS WHEREOF, this instrument is executed as of the 28 day of June.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ JERRY R. JUNKINS
--------------------
Jerry R. Junkins
Exhibit 10(b)(v)
AMENDMENT NO. 4
TO
TI DIRECTORS RETIREMENT BENEFIT PLAN
Texas Instruments Incorporated, a Delaware corporation with its
principal office in Dallas, Texas hereinafter sometimes referred to as "TI",
for the purpose of amending the TI Directors Retirement Benefit Plan dated
January 1, 1987 and heretofore amended (the "Plan") does hereby agree that the
Plan is amended in the following respects:
1. Section 2-2 of the Plan is hereby amended so as to read as
follows:
"Section 2-2. Amount of Retirement Benefits. The retirement
benefits payable to Participants under this Plan shall be in the
following amounts: (a) for each Participant who retired prior to
July 22, 1988, an annual amount of $23,250; (b) for (i) each
Participant who retired, died or became totally disabled on or
after July 22, 1988 and prior to February 18, 1994, and (ii) each
Participant who is a Director of TI on February 18, 1994 and who
does not make the election described in (c) below, an annual
amount equal to sixty percent (60%) of the annual retainer payable
to a Director of TI for the year in which the Participant's
retirement, death or total disability occurs and (c) for each
Participant who is a Director of TI on February 18, 1994 and who
elects within the time and manner prescribed by TI not to
participate in life, medical, dental and accident benefit plans
and for each Participant who first becomes a Director of TI after
February 18, 1994, an annual amount equal to seventy-five percent
(75%) of the annual retainer payable to a Director of TI for the
year in which the Participant's retirement, death or total
disability occurs.
2. Section 2-5 of the Plan is hereby amended so as to read as
follows:
"Section 2-5. Duration of Retirement Benefits. Payment of
retirement benefits hereunder shall cease at such time as
retirement benefit payments to the Participant have been made for
the greater of (a) the life of the Participant, or (b) the number
of years equal to the combined number of full years the
Participant served as a Director and as a General Director of TI.
For purposes of this Section, the term "year" shall mean a twelve
(12) consecutive month period, commencing with the first month in
which retirement benefits are paid or the first month of service
as a Director or General Director, as applicable, and each
anniversary of such month."
3. A new Section 2-6, reading as follows, is hereby added to the Plan
immediately following Section 2-5 thereof:
"Section 2-6. Optional Form of Payment. Notwithstanding the
provisions of Section 2-4 and Section 2-5 of this Plan, in the
event a Participant who is entitled to receive retirement benefits
hereunder shall elect at the time and in the manner described
below, all of the retirement benefits payable to such Participant
hereunder shall be paid in the form of a single lump sum payment
equal to the then actuarial present value of such retirement
benefits. The actuarial present value of the retirement benefits
which a Participant is entitled to receive under this Plan shall
be determined for purposes of this Section by use of the actuarial
assumptions for optional forms of retirement benefit being
utilized by the TI Employees Pension Plan for determination of
lump sum distributions at the time when such determination is
made. The election for a single lump sum payment shall be made in
the manner specified by TI and shall be made prior to the date on
which the Participant retires from the Board of Directors of TI,
dies or becomes totally disabled, except that Directors who
retired prior to February 18, 1994 and who as of such date are
receiving benefits under this Plan shall make such election with
respect to the remaining benefits to which such retired Directors
are entitled on or before May 31, 1994".
This Amendment shall be effective as of February 18, 1994.
IN WITNESS WHEREOF, this instrument is executed as of the effective
date.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ RICHARD J. AGNICH
----------------------
Richard J. Agnich
Exhibit 10(b)(vi)
Adopted: 11-28-73
Revised: 11-16-90
STATEMENT OF POLICY
THE BOARD OF DIRECTORS
TEXAS INSTRUMENTS INCORPORATED
TOP OFFICER AND BOARD MEMBER RETIREMENT PRACTICES
The need for an orderly succession of top TI officers is expressed in the
Statement of Policy entitled "Assurance of Organizational Health." As a
stimulus to the desired succession, this Statement of Policy provides for
optional early retirement of some officers and mandatory retirement of all
officers and Board members in accordance with government age discrimination
regulations.
A. POLICY
1. Retirement of all TI officers for whom it is permitted by the Age
Discrimination in Employment Act is mandatory at age 65.
2. A Board member will not be eligible to stand for reelection to the
Board after attaining age 70.
3. The Board of Directors may make available to certain top officers
the option to retire at or any time after attaining age 58. This
option is separate from and in addition to the early retirement
provisions in the TI Employees Pension Plan applicable to all
personnel. Those eligible will include the Chairman of the Board,
the President, and other personnel specified by the Board. In
determining such eligibility, the Board will ordinarily review all
employees in job grades specified by the Board. However, a few
individuals not in such job grades may also be offered the early
retirement option. The Board may specify minimum lengths of
service as a condition of eligibility. Officers other than the
Chairman and the President will be advised of their forthcoming
eligibility at any time after the Board has acted to make the
option available to them (usually after attaining age 53).
Individuals other than the Chairman and the President to whom the
option may be offered will be recommended to the Board by the
Compensation Committee upon the suggestion from the Chairman and
President.
Anyone electing optional early retirement will enter into an
Early Retirement Agreement, which includes a non-compete clause,
and will receive Supplemental Early Retirement Compensation,
determined in accordance with Appendix A made a part of this
statement of policy.
-Retirement...Page 1-
a. Advising Officers of Early Retirement Options. It will be the
responsibility of the Chairman to ensure that any individual
receiving an early retirement option from the Board is so advised
by the officer to whom the individual is responsible in written
form acceptable to the Secretary of the Company.
b. Compensation and Benefits for a Top Officer Exercising Early
Retirement. In addition to the benefits to which a retiree is
entitled under current and future TI benefit programs, an officer
who exercises his or her option to retire early, at age 58 or some
older age, will receive compensation under an Early Retirement
Agreement which provides for supplemental early retirement
payments determined in accordance with Appendix A attached hereto.
c. Early Retirement Agreement. An agreement which includes a non-
compete clause will be entered into with each top officer when he
or she elects early retirement. Such agreement will be
substantially in the form provided in Appendix B attached hereto,
with such changes as may be approved by the Chief Executive
Officer and counsel for TI. Determinations of whether an activity
is or is reasonably expected to be competitive with TI and whether
there would be significant harm to TI from such competition shall
be made by the Chief Executive Officer of TI or his designee after
consulting with counsel for the Company. It will be the
responsibility of the Secretary of the Company to make periodic
appropriate inquiries and advise the Board that the non-compete
clause is not violated.
d. Initiation of Optional Early Retirement. An individual who elects
optional early retirement will be responsible for advising in
written form, acceptable to the Secretary of the Company, the
officer to whom he or she reports of his or her intended date of
early retirement. Such advice should precede the date of
retirement to accomplish sufficiently an orderly succession.
-Retirement...Page 2-
STATEMENT OF POLICY
THE BOARD OF DIRECTORS
TEXAS INSTRUMENTS INCORPORATED
APPENDIX A
TOP OFFICER AND BOARD MEMBER RETIREMENT PRACTICES
SUPPLEMENTAL EARLY RETIREMENT PAYMENTS
Those employees who are designated by the Board for entitlement to
supplemental early retirement payments are entitled to the following upon
retirement in accordance with the Top Officer and Board Member Retirement
Practices statement of policy:
1. Retirement income from TI Employees Pension Trust calculated in
full compliance with the provisions of the TI Employees Pension
Plan in effect at the time of retirement.
2. Retiree medical insurance for the retirees and their eligible
dependents as described in the TI Retiree Medical Insurance
Certificate in effect at the time of retirement.
3. Benefits under any other programs to which they may become
entitled in the future as retirees.
4. Supplemental early retirement payments as described below.
Determination of Supplemental Early Retirement Payments
Calculation of this payment results from the following:
Normal retirement annual benefit at age 65, as defined below
times
Reduction percentage appropriate to attained age at early
retirement from reduction percentage table below
minus
Early retirement annual benefit from the TI Employees Pension
Trust, as defined below
equals
Annual supplemental early retirement payment for life.
Normal retirement annual benefit at age 65 is the benefit which would have
been payable to an individual retiring at age 65 and electing the option of
annual payment for life from the TI Employees Pension Trust, assuming the top
officer would have continued to work to age 65 at a rate of compensation equal
to the average annual eligible earnings during his or her last three years
before retiring.
-Retirement Practices-Appendix A...Page 1-
Reduction percentage appropriate to attained age at early retirement is:
Percentage Appropriate
Age to Attained Age
58 89.5%
59 91.0
60 92.5
61 94.0
62 95.5
63 97.0
64 98.5
65 100.0
Early retirement annual benefit from TI Employees Pension Trust is the annual
retirement benefit for an individual electing the option of single life
annuity annual payments for life from the TI Employees Pension Trust payable
at the individual's early retirement date.
Although the annual supplemental early retirement payment from the calculation
above represents the annual payment payable for life, the employee may, at his
or her option, choose to have the benefit paid through age 68. This adjusted
amount is calculated as follows:
(1) Convert the annual payment if paid for life to a present value
lump sum amount using the same lump sum conversion provision that
is used for converting an annual pension payment for life to a
lump sum payment for the TIer under the TI Pension Plan in effect
at the time of retirement.
(2) Convert the lump sum amount from (1) above to annual payment under
early retirement agreement by multiplying the lump sum amount by
the following factor:
I (1 + I)N
------------
(1 + I)N - 1
Where
I = The annual interest rate used in the lump sum
conversion table described in (1) above.
N = One-twelfth of the number of whole calendar
months which will expire between the date of
the individual's retirement and the TIer's 69th
birthday (N may be an improper fraction).
The payments, whether paid for life or through age 68, are converted to
monthly payments by dividing the annual payment by 12.
If a retiree elects payments through age 68 and should die before attaining
age 69, such payments shall be made to his or her heirs, legatees,
distributees, or personal representatives as if retiree were still living.
-Retirement Practices-Appendix A...Page 2-
If a retiree elects payments for life, he or she may elect a 50% joint and
survivors payment which will be computed by use of the factors in use for
computation of the joint and survivor annuity normal form of benefit payable
under the TI Employees Pension Plan at the TIer's early retirement date.
-Retirement Practices-Appendix A...Page 3-
STATEMENT OF POLICY
THE BOARD OF DIRECTORS
TEXAS INSTRUMENTS INCORPORATED
APPENDIX B
TOP OFFICER AND BOARD MEMBER RETIREMENT PRACTICES
Those employees who have been offered and elected optional early retirement
under the Top Officer and Board Member Retirement Practices statement of
policy will enter into an early retirement agreement, a sample of which is as
follows:
EARLY RETIREMENT AGREEMENT
This Agreement, made this _____ day of __________, 19__, by Texas Instruments
Incorporated (hereinafter ("TI") and _________________________________
(hereinafter "Retiree") witnesseth:
Recitals
A. Retiree has been employed by TI for approximately _______ years
and has acquired sensitive information concerning TI's business and financial
policies, practices and plans;
B. Retiree is eligible for early retirement pursuant to the terms of
TI's pension plan and expects to take early retirement on _____________, 19__,
at which time Retiree will be entitled to retirement benefits including profit
sharing and pension benefits;
C. TI desires Retiree to refrain from competition with TI after
retirement;
D. Retiree is willing to refrain from competition with TI in
accordance with the terms hereof.
Covenants
Now, therefore, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
1. From the date hereof through ______* Retiree shall not, without
the prior approval of TI, (i) as partner, director, officer, employee or
consultant, engage in any activity which is or is reasonably expected to be
competitive to TI; (ii) have an ownership interest in any such competing or
potentially competing business whose stock is not publicly traded; or (iii)
own more than five percent of the outstanding stock in any such competing or
potentially competing business whose stock is publicly traded. It is the
intent of the Retiree and TI to limit the instances in which this paragraph
will prohibit Retiree from participating in economic activities which might be
in competition with TI to those activities which would cause significant harm
to TI.
* Date immediately prior to date of 69th birthday.
-Retirement Practices-Appendix B...Page 1-
2. TI shall pay to Retiree __________ monthly payments of
$______________ each beginning on ____________, 19__, and ending with a final
payment on ____________, 19__. This is in addition to any benefits payable
under TI's Pension Plan or other benefit plan. If Retiree should die prior to
attaining age 69, payment shall be made to Retiree's heirs, legatees,
distributees, or personal representatives as if Retiree were still living.
3. Retiree and TI agree that if Retiree, during retirement, engages
in any business activity which competes substantially with the business of TI,
the Retiree shall forfeit all rights to any future payments he or she would
have received under this agreement. The TI Board of Directors will in its
sole and absolute discretion determine at any time what business activities
compete substantially with the business of TI and also may waive the
provisions of this paragraph.
4. Retiree shall not be an employee of TI hereunder. Retiree shall
upon request of TI, unless prevented by valid reasons such as health, act as a
consultant to TI as an independent contractor for such periods of time (not
exceeding the equivalent of _______ days per year) as TI shall request, at
such rates of compensation as TI and Retiree shall mutually agree upon.
5. Retiree shall keep confidential, shall not use for his or her own
benefit and shall not disclose to others any nonpublic TI information learned
by Retiree in the course of his or her activities as a former employee of TI.
IN WITNESS WHEREOF, the parties hereto have executed these presents on
the date set forth above.
TEXAS INSTRUMENTS INCORPORATED
- --------------------------- By: --------------------------
Retiree
-Retirement Practices-Appendix B...Page 2-
EXHIBIT 11
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
PRIMARY AND FULLY DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per-share amounts.)
Years Ended December 31
-----------------------------------
1993 1992 1991
-------- -------- ---------
Income (loss) before cumulative effect of accounting changes ..... $476,226 $247,001 $(409,214)
Less preferred dividends accrued:
Market auction preferred ..................................... (2,043) (7,617) (15,638)
Money market preferred ....................................... (2,028) (4,723) (3,938)
Convertible money market preferred ........................... - - (6,931)
Series A conversion preferred ................................ (16,097) (25,118) (7,116)
Add:
Dividends on series A conversion preferred
shares assumed converted ................................... 16,097 - -
Interest, net of tax and profit sharing effect, on
convertible debentures assumed converted ................... 2,681 3,945 -
-------- -------- ---------
Adjusted income (loss) before cumulative effect
of accounting changes .......................................... 474,836 213,488 (442,837)
Cumulative effect of accounting changes .......................... (4,173) - -
Adjusted net income (loss) ....................................... $470,663 $213,488 $(442,837)
======== ======== =========
Earnings (loss) per Common and Common Equivalent Share:
- -------------------------------------------------------
Weighted average common shares outstanding ....................... 85,950 82,324 81,970
Weighted average common equivalent shares:
Stock option and compensation plans .......................... 1,323 373 -
Convertible debentures ....................................... 2,413 2,614 -
Series A conversion preferred ................................ 3,920 - -
-------- -------- ---------
Weighted average common and common equivalent shares ........... 93,606 85,311 81,970
======== ======== =========
Earnings (loss) per Common and Common Equivalent Share:
Income (loss) before cumulative effect of accounting changes ... $ 5.07 $ 2.50 $ (5.40)
Cumulative effect of accounting changes ........................ (0.04) - -
Net income (loss) .............................................. $ 5.03 $ 2.50 $ (5.40)
Earnings (loss) per Common Share Assuming Full Dilution:
- --------------------------------------------------------
Weighted average common shares outstanding ....................... 85,950 82,324 81,970
Weighted average common equivalent shares:
Stock option and compensation plans .......................... 1,394 859 -
Convertible debentures ....................................... 2,413 2,614 -
Series A conversion preferred ................................ 3,920 - -
-------- -------- ---------
Weighted average common and common equivalent shares ........... 93,677 85,797 81,970
======== ======== =========
Earnings (loss) per Common Share Assuming Full Dilution:
Income (loss) before cumulative effect of accounting changes ... $ 5.07 $ 2.49 $ (5.40)
Cumulative effect of accounting changes ........................ (0.05) - -
Net income (loss) .............................................. $ 5.02 $ 2.49 $ (5.40)
/TABLE
EXHIBIT 12
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in millions)
1989 1990 1991 1992 1993
----- ----- ----- ----- -----
Income (loss) before income taxes
and fixed charges:
Income (loss) before cumulative
effect of accounting changes,
interest expense on loans,
capitalized interest amortized,
and provision for income taxes ...... $ 387 $ 14 $(250) $ 433 $ 755
Add interest attributable to
rental and lease expense ............ 47 50 43 42 38
----- ----- ----- ----- -----
$ 434 $ 64 $(207) $ 475 $ 793
===== ===== ===== ===== =====
Fixed charges:
Total interest on loans (expensed
and capitalized) .................... $ 38 $ 47 $ 59 $ 57 $ 55
Interest attributable to rental
and lease expense ................... 47 50 43 42 38
----- ----- ----- ----- -----
Fixed charges ............................. $ 85 $ 97 $ 102 $ 99 $ 93
===== ===== ===== ===== =====
Combined fixed charges and
preferred stock dividends:
Fixed charges ......................... $ 85 $ 97 $ 102 $ 99 $ 93
Preferred stock dividends
(adjusted as appropriate to a
pretax equivalent basis) ............ 47 36 34 55 29
----- ----- ----- ----- -----
Combined fixed charges and
preferred stock dividends ........... $ 132 $ 133 $ 136 $ 154 $ 122
===== ===== ===== ===== =====
Ratio of earnings to fixed charges ........ 5.1 * * 4.8 8.5
===== ===== ===== ===== =====
Ratio of earnings to combined
fixed charges and preferred
stock dividends ......................... 3.3 ** ** 3.1 6.5
===== ===== ===== ===== =====
* Not meaningful. The coverage deficiency was $33 million in 1990 and $309 million in 1991.
** Not meaningful. The coverage deficiency was $69 million in 1990 and $343 million in 1991.
/TABLE
Exhibit 13
----------
TO THE STOCKHOLDERS OF TEXAS INSTRUMENTS:
Strong performance in TI's semiconductor business led the company to one of
the best financial years in its history. Earnings per share doubled from 1992
on a 15 percent increase in revenues. The company set records for revenues,
profits and earnings per share in 1993.
Financial Summary
- -----------------
TI's net revenues for 1993 were $8523 million, compared with $7440 million in
1992. Essentially all of the increase was in semiconductor revenues, with
strength across all major product lines and in all major geographic regions.
Profit from operations was $728 million in 1993, up 73 percent from $420
million in 1992. Higher semiconductor operating profits and higher royalties
accounted for virtually all of the increase. Results for 1993 include a
profit-sharing accrual of $83 million. There was no accrual for profit
sharing in 1992. Net income for the year was $472 million, compared with $247
million in 1992. Earnings per share were $5.03, compared with $2.50 per share
in 1992. Results for the year include royalty revenues of $521 million,
compared with $391 million in 1992. Profit after tax return on assets (PAT
ROA) was 8.1 percent, compared with 4.1 percent in 1992. This represents
substantial progress toward our goal of achieving a sustainable 8-10 percent
PAT ROA to increase shareholder value.
Results Validate Strategies
- ---------------------------
In the last few years, we have taken actions to reposition our businesses in
the marketplace and streamline operations across TI. The improvement in our
financial performance shows that our strategies are working:
- -- About one-half of our semiconductor revenues are from differentiated
products. We believe TI's semiconductor revenues grew faster than the
market in 1993 for the second consecutive year. TI is gaining share in
microprocessors. We are the acknowledged leader in the rapidly growing
digital signal processor market, and we have a strong position in the
market for linear mixed-signal devices. TI's bipolar business is
shifting to advanced system logic, with new differentiated products for
emerging markets in computers, consumer electronics and
telecommunications.
- -- Our defense business is handling a difficult restructuring job
exceptionally well, and continues to maintain stable margins and meet
TI's goal for return on assets. We are continuing to size for a smaller
market, and we are winning new contracts and exploring opportunities for
strategic growth.
- -- Our information technology activity is focused on building a major
business in software productivity tools and applications. The financial
performance of this business in 1993 was below expectations. We
continue to strengthen our product position in client/server software.
We have moderated the planned growth rate for this business to focus on
achieving acceptable profitability.
- -- Our materials and controls business has invested in several
opportunities that could add substantial growth. The TIRIS(TM) radio-
frequency identification system was adopted by Ford in Europe for auto
security. The TIRIS system is an excellent example of applying our
technology in creative ways to open new markets.
- -- We are becoming known as a valued business partner in every region of
the world. We strengthened our position as the number one foreign
supplier to the Japanese semiconductor market in 1993. Our revenues in
the Asia-Pacific
3
region have doubled in the past two years and grew significantly faster
than the market in 1993. In Europe, we are building a strong position
in semiconductors for the telecommunications market based on alliances
with the market leaders.
- -- We have established a mechanism for nurturing potentially breakthrough
opportunities that fall outside our current businesses. We've made
substantial investments to develop the digital micromirror device
(DMD)(TM) technology. We are still assessing the business potential for
this technology, but it could offer a significant opportunity for the
future.
Pursuing Operational Excellence
- -------------------------------
We could not have achieved these results without making significant changes in
the way we operate. Our success has come from the efforts of thousands of
teams of TIers, dedicated to quality and willing to make the changes necessary
to improve processes and satisfy our customers.
We believe there is a strong correlation between commitment to total quality
and improvement in financial measures such as profitability and cash flow.
Our semiconductor business has consistently achieved greater than 90 percent
on-time delivery performance and has reduced manufacturing cycle times by more
than half in the last two years. Customer recognition of these achievements
has resulted in more than 100 quality awards in that time, including the Total
Quality Excellence Award from Ford. The reduction in cycle time and other
operational improvements contributed significantly to the increase in
semiconductor revenues in 1993. In addition, they also have resulted in
improved cash flow and lower inventories relative to revenues. In what we
believe to be a record for the industry, TECH Semiconductor, the joint-venture
facility in Singapore, achieved volume production of four-megabit DRAMs in
December, only three months after initial qualification. Our defense
electronics business, a 1992 winner of the Malcolm Baldrige National Quality
Award, consistently turns in strong financial performance. As part of its
strategy for achieving business excellence, TI Europe has adopted the European
Foundation for Quality Management (EFQM) criteria, which are similar to the
Baldrige criteria and accepted by European customers. This focus on cycle
time and quality has contributed to greater productivity for TI as a whole,
with net revenues per person improving by about 40 percent in the last two
years.
Building for the Future
- -----------------------
In addition to turning in record financial performance, we are also doing the
things needed for the future. In late 1993, we combined our consumer and
peripheral products businesses to create a new operation focused on products
that enhance personal productivity. While this required a pretax charge in
the fourth quarter, we expect the consolidation, when fully implemented, to
result in annual savings of about $25 million through more efficient
operations and combined marketing channels. We will continue to streamline
operations as necessary in all of our businesses.
At the same time, we have added and converted resources to take advantage of
new market opportunities. With higher royalties, we were able to increase
research and development (R&D) investments by $120 million in 1993, to $590
million. We expect to increase these investments to about $700 million in
1994, with most of the increase supporting new semiconductor technologies. We
have also strengthened our patent evaluation and filing process. In the past
three years, TI has received about 1,200 new patents. Several of these are in
technology areas that we believe will be important to the future of the
electronics industry, including video graphics, signal processing, memory
modules, and advanced semiconductor packaging. We believe these new patents
strengthen our intellectual property portfolio for the future.
We also invested $730 million in capital in 1993. We began construction of a
new wafer-fabrication facility in Dallas. The initial phase is expected to
reduce sharply the time required to get new semiconductor products from
research to vol-
4
ume production. Capital expenditures in 1994 are expected to be about $1
billion, primarily for expansion of submicron CMOS semiconductor capacity,
including investments in the new Dallas facility.
New TI Leadership Structure
- ---------------------------
Building on what we have accomplished in the last few years, and to prepare
for the next phase of growth, we established a new leadership structure for
the company in December 1993. We created an Office of the Chief Executive,
and a Strategy Leadership Team composed of TI senior officers. This team will
be the focal point for key decisions in the company. This structure embodies
a management philosophy based on teamwork and partnership. It gives top
managers more time to spend with customers, it promotes faster and better
decisions, and it will help us build a more integrated, global company that
can take full advantage of growth opportunities around the world.
Outlook
- -------
For 1994, we believe world semiconductor demand will grow in line with the
long-term trend of about 15 percent, as the major economies of the world
continue to experience low inflation rates and increased capital spending to
improve productivity. While weakness in the economies of Japan and Germany
will restrain the pace of near-term market growth, the strength of U.S.
electronics and the emergence of new markets in Asia provide sufficient
opportunities to continue steady growth in our semiconductor business.
For the longer term, conservative capacity additions relative to revenues and
continued tight control of semiconductor inventories by end-equipment
manufacturers should lead to greater stability for the semiconductor industry.
This means more orderly growth around the long-term trend line. Such an
environment would provide the opportunity to continue our emphasis on
operational improvements and productivity gains, helping to achieve our goal
for return on assets.
In defense electronics, we expect to see continued market decline in 1994,
with a dampening effect on TI's defense revenues.
Because of actions taken in the last several years, TI today is much more
competitive in world markets. Our priorities for 1994 are to implement the
new leadership and organization changes, to achieve further improvement in
total cycle time and quality, and to continue improving our productivity.
Success in these areas will contribute to achieving our goal of a sustainable
8-10 percent profit after tax return on assets. We believe this level of
performance provides an appropriate return to our shareholders while allowing
us to reinvest in the business, achieve continually higher levels of customer
satisfaction, and build an increasingly productive, rewarding work
environment.
Jerry R. Junkins
Chairman, President and
Chief Executive Officer
Dallas, Texas
January 28, 1994
5
Consolidated Financial Statements
Texas Instruments Incorporated and Subsidiaries
(In millions of dollars, except per-share amounts.)
For the years ended December 31
-------------------------------
Income 1993 1992 1991
- ---------------------------------------------------------------------------
Net revenues .............................. $8,523 $7,440 $6,784
------ ------ ------
Operating costs and expenses:
Cost of revenues ......................... 6,274 5,720 5,662
General, administrative and marketing .... 1,247 1,170 1,277
Employees' retirement and profit
sharing plans .......................... 274 130 94
------ ------ ------
Total .................................. 7,795 7,020 7,033
------ ------ ------
Profit (loss) from operations ............. 728 420 (249)
Other income (expense) net ................ 15 -- (14)
Interest on loans ......................... 47 51 41
------ ------ ------
Income (loss) before provision for
income taxes and cumulative effect of
accounting changes ....................... 696 369 (304)
Provision for income taxes ................ 220 122 105
------ ------ ------
Income (loss) before cumulative effect
of accounting changes .................... 476 247 (409)
Cumulative effect of accounting changes ... (4) -- --
------ ------ ------
Net income (loss) ......................... $ 472 $ 247 $ (409)
====== ====== ======
Net income (loss), less dividends
accrued on preferred stock ............... $ 452 $ 210 $ (443)
====== ====== ======
Earnings (loss) per common and common
equivalent share:
Income (loss) before cumulative effect
of accounting changes .................. $ 5.07 $ 2.50 $(5.40)
Cumulative effect of accounting changes .. (0.04) -- --
------ ------ ------
Net income (loss) ........................ $ 5.03 $ 2.50 $(5.40)
====== ====== ======
See accompanying notes.
20
December 31
------------------
Balance Sheet 1993 1992
- ----------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents ................................... $ 404 $ 356
Short-term investments ...................................... 484 503
Accounts receivable, less allowance for losses of
$42 million in 1993 and $34 million in 1992 ............... 1,218 975
Inventories (net of progress billings) ...................... 822 734
Prepaid expenses ............................................ 55 53
Deferred income taxes ....................................... 331 5
------ ------
Total current assets ...................................... 3,314 2,626
------ ------
Property, plant and equipment at cost ........................ 4,620 4,434
Less accumulated depreciation ............................... (2,417) (2,301)
------ ------
Property, plant and equipment (net) ....................... 2,203 2,133
------ ------
Deferred income taxes ........................................ 237 152
Other assets ................................................. 239 274
------ ------
Total assets ................................................. $5,993 $5,185
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current portion long-term debt ............ $ 211 $ 54
Accounts payable and accrued expenses ....................... 1,495 1,460
Income taxes payable ........................................ 120 93
Accrued retirement and profit sharing contributions ......... 158 36
Dividends payable ........................................... 17 22
------ ------
Total current liabilities ................................. 2,001 1,665
------ ------
Long-term debt ............................................... 694 909
Accrued retirement costs ..................................... 739 324
Deferred credits and other liabilities ....................... 244 340
Stockholders' equity:
Preferred stock, $25 par value. Authorized - 10,000,000
shares.
Market auction preferred (stated at liquidation value).
Shares issued and outstanding: 1992 - 750 ............... -- 75
Money market preferred (stated at liquidation value).
Shares issued and outstanding: 1992 - 746 ............... -- 75
Series A conversion preferred, stated at par value
(liquidation value: 1992 - $324 million). Shares issued
and outstanding: 1992 - 2,778,500 ....................... -- 69
Participating cumulative preferred. None issued .......... -- --
Common stock, $1 par value. Authorized - 300,000,000
shares. Shares issued: 1993 - 90,919,314;
1992 - 82,703,207 ......................................... 91 83
Paid-in capital ............................................. 932 770
Retained earnings ........................................... 1,307 916
Less treasury common stock at cost.
Shares: 1993 - 102,522; 1992 - 103,863 .................. (5) (4)
Other ....................................................... (10) (37)
------ ------
Total stockholders' equity ............................... 2,315 1,947
------ ------
Total liabilities and stockholders' equity ................... $5,993 $5,185
====== ======
See accompanying notes.
21
Consolidated Financial Statements
Texas Instruments Incorporated and Subsidiaries
(In millions of dollars, except per-share amounts.)
For the years ended December 31
-------------------------------
Cash Flows 1993 1992 1991
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) before cumulative
effect of accounting changes ................ $ 476 $ 247 $ (409)
Depreciation .................................. 617 610 590
Deferred income taxes ......................... (59) (93) 42
Net currency exchange losses .................. 4 3 9
(Increase) decrease in working capital
(excluding cash and cash equivalents,
short-term investments, deferred income
taxes, loans payable and current
portion long-term debt, and dividends
payable):
Accounts receivable ........................ (258) (111) 11
Inventories ................................ (88) 50 55
Prepaid expenses ........................... (3) 1 1
Accounts payable and accrued expenses ...... 37 (16) 53
Income taxes payable ....................... 27 52 10
Accrued retirement and profit sharing
contributions ............................ 94 12 19
Increase in noncurrent accrued retirement
costs ....................................... 21 39 91
Other ......................................... 66 7 (55)
------ ------ ------
Net cash provided by operating activities ...... 934 801 417
Cash flows from investing activities:
Additions to property, plant and equipment .... (730) (429) (504)
(Increase) decrease in short-term investments.. 19 (354) (140)
Proceeds from sales of businesses ............. -- 48 111
------ ------ ------
Net cash used in investing activities .......... (711) (735) (533)
Cash flows from financing activities:
Additions to loans payable .................... 35 92 79
Payments on loans payable ..................... (72) (61) (84)
Additions to long-term debt ................... 14 150 356
Payments on long-term debt .................... (15) (117) (173)
Proceeds from issuance of preferred stock ..... -- -- 314
Redemptions of auction-rate preferred stock ... (150) (146) (225)
Dividends paid on common and preferred stock .. (86) (98) (90)
Sales and other common stock transactions ..... 100 25 11
Other ......................................... 6 (2) (15)
------ ------ ------
Net cash provided by (used in) financing
activities .................................... (168) (157) 173
Effect of exchange rate changes on cash ........ (7) (5) (8)
------ ------ ------
Net increase (decrease) in cash and cash
equivalents ................................... 48 (96) 49
Cash and cash equivalents at beginning of year.. 356 452 403
------ ------ ------
Cash and cash equivalents at end of year ....... $ 404 $ 356 $ 452
====== ====== ======
See accompanying notes.
22
Market Auction/ Series A
Money Market* )Conversion Treasury
Preferred Preferred Common Paid-In Retained Common
Stockholders' Equity Stock Stock Stock Capital Earnings Stock Other
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1990 ........... $ 521 $ -- $ 82 $ 491 $1,269 $ (5) $ --
1991
- ----
Net loss ........................... (409)
Dividends declared on:
Market auction preferred stock ... (14)
Money market preferred stock* .... (12)
Series A conversion preferred
stock ($3.31 per share) ........ (9)
Common stock ($.72 per share) .... (59)
Redemptions of auction-rate
preferred stock .................. (225)
Series A conversion preferred
stock issued ..................... 69 245
Common stock issued on exercise
of stock options ................. 10 3
Other stock transactions, net ...... (2)
------ ------ ------ ------ ------ ------ ------
Balance, December 31, 1991 ........... 296 69 82 746 766 (4) --
1992
- ----
Net income ......................... 247
Dividends declared on:
Market auction preferred stock ... (8)
Money market preferred stock ..... (4)
Series A conversion preferred
stock ($9.04 per share) ........ (25)
Common stock ($.72 per share) .... (60)
Redemptions of auction-rate
preferred stock .................. (146)
Common stock issued on exercise
of stock options ................. 1 15 3
Other stock transactions, net ...... 9 (3)
Pension liability adjustment ....... (37)
------ ------ ------ ------ ------ ------ ------
Balance, December 31, 1992 ........... 150 69 83 770 916 (4) (37)
1993
- ----
Net income ......................... 472
Dividends declared on:
Market auction preferred stock ... (2)
Money market preferred stock ..... (2)
Series A conversion preferred
stock ($5.45 per share) ........ (14)
Common stock ($.72 per share) .... (63)
Redemptions of auction-rate
preferred stock .................. (150)
Redemptions of Series A conversion
preferred stock .................. (69) 6 63
Common stock issued:
To profit sharing trusts ......... 13
On exercise of stock options ..... 2 67 2
Other stock transactions, net ...... 19 (3)
Pension liability adjustment ....... 27
------ ------ ------ ------ ------ ------ ------
Balance, December 31, 1993 ........... $ -- $ -- $ 91 $ 932 $1,307 $ (5) $ (10)
====== ====== ====== ====== ====== ====== ======
* Convertible money market preferred stock prior to August 9, 1991.
See accompanying notes.
23
Notes to Financial Statements
Accounting Policies and Practices
- ------------------------------------------------------------------------------
Effective January 1, 1993, the company adopted two new accounting standards:
SFAS No. 106, which requires the accrual of expected retiree health care
benefit costs during the employees' working careers, and SFAS No. 109, which
requires increased recording of deferred income tax assets. This resulted in
a charge of $294 million ($3.14 per share) for SFAS No. 106 and a credit of
$290 million ($3.10 per share) for SFAS No. 109, for the cumulative effect of
the accounting changes.
The consolidated financial statements include the accounts of all
subsidiaries. Intercompany balances and transactions have been eliminated.
The U.S. dollar is the functional currency for financial reporting. With
regard to accounts recorded in currencies other than U.S. dollars, current
assets (except inventories), deferred income taxes, other assets, current
liabilities and long-term liabilities are remeasured at exchange rates in
effect at year end. Inventories, property, plant and equipment and
depreciation thereon are remeasured at historic exchange rates. Revenue and
expense accounts other than depreciation for each month are remeasured at the
appropriate month-end rate of exchange. Net currency exchange gains and
losses from remeasurement and currency exchange contracts to hedge exposure
are charged or credited to income currently. Gains and losses from currency
and interest exchange contracts to hedge specific transactions are included in
the measurement of the related transactions.
Inventories are stated at the lower of cost, current replacement cost or
estimated realizable value. Cost is generally computed on a currently
adjusted standard (which approximates current average costs) or average basis
except for the cost of certain inventories of metals and metal products, which
are computed on the LIFO basis.
For the years 1993, 1992 and 1991, royalty revenue of $521 million, $391
million and $256 million is included in net revenues. Royalty revenue is
recognized by the company upon fulfillment of its contractual obligations and
determination of a fixed royalty amount, or, in the case of ongoing royalties,
upon sale by the licensee of royalty-bearing products, as estimated by the
company.
Substantially all depreciation is computed by either the declining-
balance method (primarily 150 percent declining method) or the sum-of-the-
years-digits method. Fully depreciated assets are written off against
accumulated depreciation.
Earnings (loss) per common and common equivalent share are based on
average common and common equivalent shares outstanding (93,605,749 shares,
85,310,690 shares and 81,970,372 shares for 1993, 1992 and 1991). Shares
issuable upon exercise of dilutive stock options and upon conversion of
dilutive conversion preferred stock and convertible debentures are included in
average common and common equivalent shares outstanding. In computing per-
share earnings, "net income, less dividends accrued on preferred stock" is
increased by $19 million and $4 million in 1993 and 1992 for dividends and
interest (net of tax and profit sharing effect) on the conversion preferred
stock and convertible debentures considered dilutive common stock equivalents.
Short-Term Investments
- ------------------------------------------------------------------------------
Short-term investments consist primarily of commercial paper, notes and short-
term U.S. government securities with original maturities beyond three months
stated at cost, which approximates market value. Similar items with original
maturities of three months or less are considered cash equivalents.
Inventories
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------
1993 1992
------ ------
Raw materials and purchased parts .................... $ 244 $ 251
Work in process ...................................... 557 576
Finished goods ....................................... 250 197
------ ------
Inventories before progress billings ................. 1,051 1,024
Less progress billings ............................... (229) (290)
------ ------
Inventories (net of progress billings) ............... $ 822 $ 734
====== ======
Approximately 34% and 43% of the December 31, 1993 and 1992, inventories
before progress billings related to long-term contracts.
Revenues under long-term fixed price and fixed-price incentive contracts
are recognized as deliveries are made or as performance targets are achieved.
Revenues under cost-reimbursement contracts are recorded as costs are incurred
and include estimated earned fees.
Inventories related to long-term contracts are stated at actual production
costs, including manufacturing overhead and special tooling and engineering
costs, reduced by amounts identified with revenues recognized on units
delivered or with progress completed. Such inventories are reduced by
charging any amounts in excess of estimated realizable value to cost of
revenues. The costs attributed to units delivered under long-term contracts
are based on the estimated average cost of all units to be produced under
existing firm orders and are determined under the learning curve concept,
which anticipates a predictable decrease in unit costs as tasks and production
techniques become more efficient through repetition. Production costs
included in inventories in excess of the estimated cost of in-process
inventories (on the basis of estimated average cost of all units to be
produced) were not material.
The replacement cost of LIFO inventories exceeded the carrying cost, which
was immaterial, by approximately $29 million at December 31, 1993, and $30
million at December 31, 1992.
24
To secure access to additional semiconductor plant capacity, TI entered
into three joint ventures formed to construct and operate semiconductor
manufacturing capacity. Upon formation of the ventures TI contributed
technology and cash to acquire minority interests and entered into long-term
inventory purchase commitments with each joint venture. Under the agreements,
TI purchases the output of the ventures at prices based upon percentage
discounts from TI's average selling prices. Certain venturers have the right
to buy a portion of the output from TI. Under certain circumstances, TI may
increase its ownership and potentially acquire a majority interest in the
ventures. Under the ventures' financing arrangements, the venturers have
provided certain debt and other guarantees. At December 31, 1993 and 1992, TI
was contingently liable for an aggregate of $43 million and $61 million of
such guarantees. Inventory purchases from the ventures aggregated $356
million and $66 million in 1993 and 1992. Receivables from and payables to
the ventures were $6 million and $45 million at December 31, 1993, and $4
million and $15 million at December 31, 1992. Purchases prior to 1992 were
insignificant. TI purchases are expected to increase in 1994.
Property, Plant and Equipment at Cost
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------
Depreciable Lives 1993 1992
----------------- ------ ------
Land ............................ $ 70 $ 69
Buildings and improvements ...... 5-40 years 1,691 1,695
Machinery and equipment ......... 3-10 years 2,859 2,670
------ ------
Total ........................... $4,620 $4,434
====== ======
Interest incurred on loans in 1993, 1992 and 1991 was $55 million, $57
million and $59 million. Of these amounts, $8 million in 1993, $6 million in
1992 and $18 million in 1991 were capitalized.
Authorizations for property, plant and equipment expenditures in future
years were approximately $603 million at December 31, 1993, and $302 million
at December 31, 1992.
Accounts Payable and Accrued Expenses
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------
1993 1992
------ ------
Accounts payable ...................................... $ 543 $ 459
Advance payments from commercial
and defense contract customers ...................... 130 152
Accrued salaries, wages, severance
and vacation pay .................................... 291 273
Other accrued expenses and liabilities ................ 531 576
------ ------
Total ................................................. $1,495 $1,460
====== ======
Long-Term Debt and Lines of Credit
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------
1993 1992
------ ------
2.75% convertible subordinated
debentures due 2002 .................................. $ 200 $ 200
9.0% notes due 1999 ................................... 150 150
9.0% notes due 2001 ................................... 150 150
9.25% notes due 2003 .................................. 150 150
8.75% notes due 2007 .................................. 150 150
5.56% to 6.10% Italian lira mortgage notes
(53% swapped for 1.60% U.S. dollar obligation) ....... 95 106
Other ................................................. 10 19
------ ------
905 925
Less current portion long-term debt ................... 211 16
------ ------
Long-term debt ........................................ $ 694 $ 909
====== ======
The convertible subordinated debentures may be redeemed at the company's
option at specified prices, and may be redeemed at the holder's option at par
during a 30-day period beginning in September 1994. The debentures are
convertible at the holder's option into an aggregate 2,413,273 shares of TI
common stock at a common stock conversion price of $82.875 per share.
The coupon rates for the notes due 1999, 2001 and 2003 have been swapped
for commercial paper-based variable rates through March 1995 for an effective
interest rate of approximately 6.4% and 6.5% as of December 31, 1993 and 1992.
The 9.0% notes due 1999 may be redeemed at par, at the company's option,
beginning in July 1996. The Italian lira mortgage notes, and related swaps,
are due in installments through 2003. The mortgage notes are collateralized
by real estate and equipment.
Interest paid on loans (net of amounts capitalized as a component of
construction costs) was $54 million in 1993, $51 million in 1992 and $33
million in 1991.
Aggregate maturities of long-term debt due during the four years
subsequent to December 31, 1994, are as follows:
Millions of Dollars
-------------------
1995 ................................................. $ 11
1996 ................................................. 13
1997 ................................................. 13
1998 ................................................. 14
At December 31, 1993 and 1992, the fair value of long-term debt, based on
current interest rates, was approximately $998 million and $965 million,
compared with the carrying amount of $905 million and $925 million.
Unused lines of credit for short-term financing were approximately $569
million at December 31, 1993 and $595 million at December 31, 1992. Of these
amounts, $470 million and $477 million were available to support commercial
paper borrowings.
25
Notes to Financial Statements
Financial Instruments and Risk Concentration
- -----------------------------------------------------------------------------
Financial instruments: In addition to the swaps discussed in the preceding
note, the company has forward currency exchange contracts outstanding totaling
$239 million at December 31, 1993 and 1992, to hedge exposure and transactions
denominated in European and East Asian currencies. At December 31, 1993 and
1992, the settlement values of these swaps and forward contracts, based on
current market rates, were not significant. These financial instruments are
designed to minimize exchange rate risks and financing costs in the regular
course of business.
The company has an agreement to sell, on a revolving basis, up to $175
million of an undivided percentage ownership interest in a designated pool of
accounts receivable, with limited recourse. Accounts receivable are shown net
of $175 million at December 31, 1993 and 1992, representing receivables sold.
The comparable amount for December 31, 1991 is $175 million. The related
discount expense, which varies with commercial paper rates, is included in
other income (expense) net. The agreement expires November 1995 and may be
terminated earlier by either party under certain circumstances.
Risk concentration: Financial instruments which potentially subject the
company to concentrations of credit risk are primarily cash investments and
accounts receivable. The company places its cash investments in investment
grade, short-term debt instruments and limits the amount of credit exposure to
any one commercial issuer. Concentrations of credit risk with respect to the
receivables are limited due to the large number of customers in the company s
customer base, and their dispersion across different industries and geographic
areas. The company maintains an allowance for losses based upon the expected
collectibility of all accounts receivable, including receivables sold.
Stockholders' Equity
- ------------------------------------------------------------------------------
The company is authorized to issue 10,000,000 shares of preferred stock. The
following series of preferred stock have been issued:
Market auction preferred stock: On August 9, 1991, all outstanding shares
were exchanged on a one-for-one basis for new market auction preferred stock
with a higher maximum dividend rate. In November 1993, all of the remaining
$75 million of these shares were redeemed by the company at their
liquidation value of $100,000 per share. Dividends, which were cumulative,
were set every 49 days through auction procedures. The dividend rates (per
annum) averaged 3.2%, 5.3% and 6.5% in 1993, 1992 and 1991. Dividends
declared per share averaged $2,564, $5,239 and $6,230 in 1993, 1992 and 1991.
Money market preferred stock: The shares outstanding prior to August 9,
1991 were convertible into TI common stock; on August 9, 1991, all such shares
were exchanged on a one-for-one basis for new non-convertible money market
preferred stock with a higher maximum dividend rate. In October 1993, all of
the remaining $74.6 million of these shares were redeemed by the company at
their liquidation value of $100,000 per share. Dividends, which were
cumulative, were set every 49 days through auction procedures. The dividend
rates (per annum) averaged 3.4%, 5.4% and 6.6% in 1993, 1992 and 1991.
Dividends declared per share averaged $2,729, $5,138 and $6,520 in 1993, 1992
and 1991.
Series A conversion preferred stock: Each Series A conversion preferred
share was represented by four depositary shares, for a total of 11,114,000
depositary shares. The depositary shares were redeemable, at the company's
option, in exchange for TI common stock having a market value equal to a
predetermined call price specified by the date of redemption. In a series of
three redemptions of approximately equal numbers of shares, the company
redeemed all of its Series A Conversion Preferred Stock and related depositary
shares during 1993. In exchange for the aggregate 11,114,000 depositary
shares redeemed, the company issued the following number of shares of TI
common stock: 2,412,829 on June 25; 2,025,024 on September 10; and 1,828,665
on September 27.
Each outstanding share of the company's common stock carries a stock
purchase right. Under certain circumstances, each right may be exercised to
purchase one one-hundredth of a share of the company's participating
cumulative preferred stock for $200. Under certain circumstances following
the acquisition of 20% or more of the company's outstanding common stock by an
acquiring person (as defined in the rights agreement), each right (other than
rights held by an acquiring person) may be exercised to purchase common stock
of the company or a successor company with a market value of twice the $200
exercise price. The rights, which are redeemable by the company at 1 cent per
right, expire in June 1998.
Research and Development Expense
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
Research and development expense ........... $ 590 $ 470 $ 527
Other Income (Expense) Net
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
Interest income ........................... $ 31 $ 30 $ 28
Other income (expense) net ................ (16) (30) (42)
------ ------ ------
Total ..................................... $ 15 $ -- $ (14)
====== ====== ======
26
Stock Options
- ------------------------------------------------------------------------------
The company has stock options outstanding to participants under the Texas
Instruments Long-Term Incentive Plan, approved by stockholders on April 15,
1993. Options are also outstanding under the 1974, 1984 and 1988 Stock Option
Plans; however, no further options may be granted under these plans. Under
all these stockholder-approved plans, the exercise price per share may not be
less than 100 percent of the fair market value on the date of the grant.
Options granted become exercisable in such amounts, at such intervals and
subject to such terms and conditions as determined by the compensation
committee of the board of directors.
Under the Long-Term Incentive Plan, the company may grant stock options,
including incentive stock options; restricted stock and restricted stock
units; performance units; and other stock-based awards, including stock
appreciation rights. The plan provides for the issuance of 4,000,000 shares
of the company's common stock; in addition, if any option under the 1974, 1984
or 1988 Stock Option Plans terminates, then any unissued shares subject to the
terminated option become available for granting awards under the plan. No
more than 1,000,000 shares of common stock may be awarded as restricted stock,
restricted stock units or other stock-based awards under the plan.
The company also has stock options outstanding under an Employees Stock
Option Purchase Plan approved by stockholders in 1988. The plan provides for
options to be offered to all eligible employees in amounts based on a
percentage of the employee's prior year's compensation. If the optionee
authorizes and does not cancel payroll deductions which, with interest, will
be equal to or greater than the purchase price, options granted become
exercisable 14 months, and expire not more than 27 months, from date of grant.
Stock option transactions during 1993, 1992 and 1991 were as follows:
Long-Term
Incentive Employees
and Stock Stock Option Option
Option Purchase Price Range
Plans Plan Per Share
--------- --------- ---------------
Balance, Dec. 31, 1990 ............ 3,792,718 842,893 $25.34 - $60.57
Granted .......................... 867,500 690,532*
Terminated ....................... 109,315 547,871*
Exercised** ...................... 228,608 151,763 $25.34 - $47.63
--------- ---------
Balance, Dec. 31, 1991 ............ 4,322,295 833,791 $25.34 - $60.57
Granted .......................... 834,450 591,300*
Terminated ....................... 93,859 404,427*
Exercised** ...................... 255,409 218,441 $25.34 - $44.75
--------- ---------
Balance, Dec. 31, 1992 ............ 4,807,477 802,223 $30.73 - $60.57
Granted .......................... 860,000 438,803*
Terminated ....................... 159,150 85,734*
Exercised** ...................... 1,056,079 636,986 $32.82 - $54.61
--------- ---------
Balance, Dec. 31, 1993 ............ 4,452,248 518,306 $30.73 - $65.69
========= =========
Exercisable at Dec. 31, 1992 ...... 1,787,563 246,686
Exercisable at Dec. 31, 1993 ...... 751,920 106,105
* Excludes options offered but not accepted.
** Includes previously unissued shares and treasury shares of 1,636,199 and
56,866; 398,288 and 75,562; and 317,814 and 62,557; for 1993, 1992 and
1991.
At year-end 1993, 3,461,225 shares were available for future grants under
the Long-Term Incentive Plan and 2,051,062 shares under the Employees Stock
Option Purchase Plan approved in 1988. As of year-end 1993, 8,159,647 shares
were reserved for issuance under the company's stock option and incentive
plans and 2,569,368 shares were reserved for issuance under the Employees
Stock Option Purchase Plan approved in 1988.
The company acquires its common stock from time to time for use in
connection with exercise of stock options and other stock transactions.
Treasury shares acquired in 1993, 1992 and 1991 were 55,525 shares, 77,339
shares and 61,006 shares. Previously unissued common shares issued under the
Annual Incentive Plan in 1993, 1992 and 1991 were 103,926 shares, 68,860
shares and 36,389 shares.
Profit Sharing and Retirement Plans
- -----------------------------------------------------------------------------
The company provides various incentive plans for employees, including general
profit sharing and savings programs as well as an annual incentive plan for
key employees. The company also provides pension and retiree health care
benefit plans in the U.S. and pension plans in certain non-U.S. locations.
Profit sharing: Profit sharing expense was $83 million in 1993. There
was no profit sharing expense in 1992 or 1991. Under the plans, unless
otherwise provided by local law, the company and certain of its subsidiaries
contribute a portion
27
Notes to Financial Statements
of their net profits according to certain formulas, but not to exceed the
lesser of 25% of consolidated income (as defined) before profit sharing and
income taxes or 15% of the compensation of eligible participants. Unless
otherwise provided by local law, such contributions are invested in TI common
stock.
Except in the event of company contributions in stock, investments in TI
common stock are made by the trustees through purchases of outstanding shares
or through purchases of shares offered from time to time by the company. The
board of directors has authorized the issuance of previously unissued shares
for purposes of the plans; 712,404 of such shares were available for future
issuance at December 31, 1993.
The trustees of the profit sharing plans purchased 626,670 outstanding
shares of TI common stock in 1993 (105,688 shares in 1992 and 310,256 shares
in 1991) and 209,464 previously unissued shares in 1993 (none in 1992 and
1991).
Savings program: The company provides a matched savings program whereby
U.S. employees' contributions of up to 4% of their salary are matched by the
company at the rate of 50 cents per dollar. Contributions are subject to
statutory limitations. The contributions may be invested in several
investment funds including TI common stock. The company's expense under this
program was $21 million in 1993, $20 million in 1992 and $22 million in 1991.
U.S. pension plan: The company has a defined benefit plan covering most
U.S. employees with benefits based on years of service and employee's
compensation. The plan is a career-average-pay plan which has been amended
periodically in the past to produce approximately the same results as a final-
pay type plan. The board of directors of the company has expressed an intent
to make such amendments in the future, circumstances permitting, and the
expected effects of such amendments have been considered in calculating U.S.
pension expense. The company's funding policy is to contribute to the plan at
least the minimum amount required by ERISA. Plan assets consist primarily of
common stock, U.S. government obligations, commercial paper and real estate.
Pension expense of the U.S. plan includes the following components:
Millions of Dollars
--------------------------------
1993 1992 1991
------ ------ ------
Service cost - benefits earned
during the period ...................... $ 59 $ 58 $ 51
Interest cost on projected benefit
obligation ............................. 72 70 69
Return on plan assets
Actual return .......................... (99) (45) (167)
Deferral ............................... 44 (10) 97
Net amortization ........................ (2) (5) (11)
------ ------ ------
U.S. pension expense .................... $ 74 $ 68 $ 39
====== ====== ======
The funded status of the U.S. plan was as follows:
Millions of Dollars
-------------------
1993 1992
------- ------
Actuarial present value at Dec. 31 of:
Vested benefit obligation .................... $ (655) $ (459)
======= ======
Accumulated benefit obligation ............... $ (717) $ (576)
======= ======
Projected benefit obligation ................. $(1,026) $ (937)
Plan assets at fair value ..................... 783 691
------- ------
Projected benefit obligation in excess of
plan assets .................................. (243) (246)
Unrecognized net asset from initial
application of SFAS 87 ....................... (90) (103)
Unrecognized net loss ......................... 43 80
Unrecognized prior service cost ............... 46 50
------- ------
Accrued pension at Dec. 31 .................... (244) (219)
Less current portion .......................... 40 30
------- ------
Accrued U.S. pension costs .................... $ (204) $ (189)
======= ======
The projected benefit obligations for 1993 and 1992 were determined using
assumed discount rates of 7.0% and 8.0% and assumed average long-term pay
progression rates of 4.25% and 6.7%. The assumed long-term rate of return
on plan assets was 9.0%.
Non-U.S. pension plans: Retirement coverage for non-U.S. employees of the
company is provided, to the extent deemed appropriate, through separate plans.
Retirement benefits are based on years of service and employee's compensation,
generally during a fixed number of years immediately prior to retirement.
Funding policies are based on local statutes. Plan assets consist primarily
of common stock, government obligations and corporate bonds.
Pension expense of the non-U.S. plans includes the following components:
Millions of Dollars
-------------------------------
1993 1992 1991
------ ------ ------
Service cost - benefits earned
during the period ...................... $ 44 $ 38 $ 31
Interest cost on projected benefit
obligations ............................ 28 23 18
Return on plan assets
Actual return .......................... (50) 1 (30)
Deferral ............................... 25 (24) 13
Net amortization ........................ 8 4 1
------ ------ ------
Non-U.S. pension expense ................ $ 55 $ 42 $ 33
====== ====== ======
28
The funded status of the non-U.S. plans was as follows:
Millions of Dollars
---------------------
1993 1992
------ ------
Actuarial present value at Sept. 30 of:
Vested benefit obligations .................. $ (365) $ (307)
====== ======
Accumulated benefit obligations ............. $ (429) $ (366)
====== ======
Projected benefit obligations ............... $ (621) $ (465)
Plan assets at fair value .................... 342 264
------ ------
Projected benefit obligations in excess of
plan assets ................................. (279) (201)
Unrecognized net liabilities from initial
application of SFAS 87 ...................... 25 27
Unrecognized net loss ........................ 157 87
Unrecognized prior service cost .............. 10 12
------ ------
Accrued non-U.S. pension at Sept. 30 ......... (87) (75)
Additional minimum liability ................. (24) (47)
Adjustments from Sept. 30 to Dec. 31 ......... 2 1
Less prepaid pension costs at Dec. 31 ........ 18 19
------ ------
Accrued pension at Dec. 31 ................... (127) (140)
Less current portion ......................... 7 5
------ ------
Accrued non-U.S. pension costs ............... $ (120) $ (135)
====== ======
The range of assumptions used for the non-U.S. plans reflects the
different economic environments within the various countries. The projected
benefit obligations were determined using a range of assumed discount rates of
4.75% to 9.0% in 1993 and 5.75% to 9.0% in 1992 and a range of assumed average
long-term pay progression rates of 4.0% to 7.0% in 1993 and 4.5% to 7.0% in
1992. The range of assumed long-term rates of return on plan assets was 8.0%
to 10.0%. Accrued pension at December 31 includes approximately $79 million
in 1993 and 1992 for two non-U.S. plans that are not funded. Pension
accounting rules require recognition in the balance sheet of an additional
minimum pension liability equal to the excess of the accumulated benefit
obligation over the value of the plan assets. A corresponding amount is
recognized as an intangible asset, not to exceed the amount of unrecognized
prior service cost, with the balance recorded as a reduction of stockholders'
equity. As of December 31, 1993 and 1992, the company has recorded an
additional non-U.S. minimum pension liability of $24 million and $47 million
and an equity reduction of $10 million and $37 million.
Retiree health care benefit plan: The company's U.S. employees are
currently eligible to receive, during retirement, specified company-paid
medical benefits. The plan is contributory and premiums are adjusted
annually. For employees retiring on or after January 5, 1993, the company has
specified a maximum annual amount per retiree, based on years of service, that
it will pay toward retiree medical premiums. For employees who retired prior
to that date, the company maintains a consistent level of cost sharing between
the company and the retiree. The company is pre-funding the plan obligation
in amounts determined at the discretion of management. Plan assets consist
primarily of common stock, U.S. government obligations, commercial paper, and
state and local government obligations.
Effective January 1, 1993, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires
the accrual of expected retiree health care benefit costs during the
employees' working careers, instead of when the claims are incurred. The
company recorded an accumulated postretirement benefit obligation of $454
million and a related deferred income tax asset of $160 million, which
resulted in a $294 million charge ($3.14 per share) for the cumulative effect
of the accounting change. Retiree health care benefit expense in 1992 and
1991 was computed on a claims-incurred basis.
Expense of the retiree health care benefit plan includes the following
components:
Millions of Dollars
-------------------
1993
------
Service cost - benefits earned
during the period ............................... $ 6
Interest cost on accumulated postretirement
benefit obligation .............................. 35
Return on plan assets
Actual return ................................... (1)
Deferral ........................................ 1
------
Retiree health care benefit expense .............. $ 41
======
The funded status of the plan was as follows:
Millions of Dollars
-------------------
1993
------
Actuarial present value at Dec. 31 of accumulated
postretirement benefit obligation:
Retirees ........................................ $ (396)
Fully eligible employees ........................ (14)
Other employees ................................. (117)
------
(527)
------
Plan assets at fair value ........................ 8
------
Accumulated postretirement benefit obligation
in excess of plan assets ........................ (519)
Unrecognized net loss ............................ 63
------
Accrued at Dec. 31 ............................... (456)
Less current portion ............................. 41
------
Accrued retiree health care benefit costs ........ $ (415)
======
Retiree health care benefit amounts were determined using health care cost
trend rates of 11.0% for 1994 decreasing to 6.0% by 1999, and an assumed
discount rate of 7.0%.
29
Notes to Financial Statements
Increasing the health care cost trend rates by 1% would have increased the
accumulated postretirement benefit obligation at December 31, 1993 by $39
million and 1993 plan expense by $5 million. A trust holding a portion of the
plan assets is subject to federal income taxes at a 39.6% rate. The assumed
long-term rate of return on plan assets, after taxes, was 7.3%. Retiree
health care benefit expense was $24 million in 1992 and $21 million in 1991.
Employment-reduction programs: During 1991, the company implemented
special voluntary and involuntary employment-reduction programs and as a
result incurred pretax charges of $130 million in the second quarter, $55
million in the third quarter and $45 million in the fourth quarter of that
year. The company recognized a $25 million pretax gain from the settlement of
the related pension obligation in the fourth quarter of 1991.
Industry Segment and Geographic Area Operations
- -----------------------------------------------------------------------------
The company is engaged in the development, manufacture and sale of a variety
of products in the electrical and electronics industry for industrial,
government and consumer markets. These products consist of components
(semiconductors, such as integrated circuits, discrete devices and
subassemblies, and electrical and electronic control devices); defense
electronics (such as radar systems, navigation systems, infrared surveillance
and fire control systems, defense suppression missiles, missile guidance and
control systems, and electronic warfare systems); and digital products (such
as software productivity tools, integrated enterprise information solutions,
notebook computers, printers, electronic calculators and learning aids, and
custom manufacturing services). In fourth quarter 1992, the company sold its
commercial multiuser minicomputer systems and service operations. In October
1991, the sale of substantially all the company's industrial automation and
control systems business was completed. Both of these operations were part of
the digital products segment. The company also produces metallurgical
materials (including clad metals, precision-engineered parts and electronic
connectors).
The company's business is based principally on its broad semiconductor
technology and application of this technology to selected electronic end-
equipment markets.
Industry segment and geographic area profit (loss) is not equivalent to
income (loss) before provision for income taxes and cumulative effect of
accounting changes due to exclusion of general corporate expenses, net
interest, currency exchange gains and losses, and other items along with
elimination of unrealized profit in assets. Profit sharing expense is
allocated to segment results based on payroll costs. Royalty revenue from
patent license agreements is included in the U.S. geographic net revenues and
(except for royalty revenue from microcomputer system patent license
agreements, which is included in the digital products segment) is principally
included in the components segment.
Identifiable assets are those associated with segment or geographic area
operations, excluding unallocated cash and short-term investments, internal
company receivables and deferred income taxes. Generally, revenues between
industry segments and between geographic areas are based on prevailing market
prices or an approximation thereof.
Industry Segment Net Revenues
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
Components
Trade ................................ $5,091 $3,982 $3,421
Intersegment ......................... 66 47 49
------ ------ ------
5,157 4,029 3,470
------ ------ ------
Defense Electronics
Trade ................................ 1,842 1,990 1,933
Intersegment ......................... 14 14 17
------ ------ ------
1,856 2,004 1,950
------ ------ ------
Digital Products
Trade ................................ 1,454 1,345 1,306
Intersegment ......................... 4 5 22
------ ------ ------
1,458 1,350 1,328
------ ------ ------
Metallurgical Materials
Trade ................................ 126 116 121
Intersegment ......................... 19 22 22
------ ------ ------
145 138 143
------ ------ ------
Eliminations and other ................ (93) (81) (107)
------ ------ ------
Total ................................. $8,523 $7,440 $6,784
====== ====== ======
Net revenues directly from federal government agencies in the United
States, principally related to the defense electronics segment, were $1,031
million in 1993, $1,172 million in 1992 and $1,127 million in 1991.
Industry Segment Profit (Loss)
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
Components ............................ $ 689 $ 340 $ (188)
Defense Electronics ................... 188 194 111
Digital Products ...................... 34 27 (52)
Metallurgical Materials ............... (4) 3 2
Eliminations and corporate items ...... (211) (195) (177)
------ ------ ------
Income (loss) before provision for
income taxes and cumulative effect of
accounting changes ................... $ 696 $ 369 $ (304)
====== ====== ======
30
Industry Segment Identifiable Assets
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
Components ............................ $3,016 $2,695 $2,817
Defense Electronics ................... 821 842 946
Digital Products ...................... 718 633 562
Metallurgical Materials ............... 68 57 73
Eliminations and corporate items ...... 1,370 958 611
------ ------ ------
Total ................................. $5,993 $5,185 $5,009
====== ====== ======
Industry Segment Property, Plant and Equipment
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
Depreciation 1993 1992 1991
- ------------ ------ ------ ------
Components ............................ $ 462 $ 457 $ 426
Defense Electronics ................... 104 110 122
Digital Products ...................... 23 24 28
Metallurgical Materials ............... 10 10 10
Eliminations and corporate items ...... 18 9 4
------ ------ ------
Total ................................. $ 617 $ 610 $ 590
====== ====== ======
Millions of Dollars
------------------------------
Additions 1993 1992 1991
- --------- ------ ------ ------
Components ............................ $ 545 $ 314 $ 383
Defense Electronics ................... 92 74 67
Digital Products ...................... 37 13 24
Metallurgical Materials ............... 16 8 10
Eliminations and corporate items ...... 40 20 20
------ ------ ------
Total ................................. $ 730 $ 429 $ 504
====== ====== ======
The following geographic area data includes revenues, costs and expenses
generated by and assets employed in operations located in each area:
Geographic Area Net Revenues
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
United States
Trade ................................ $5,314 $4,829 $4,401
Interarea ............................ 449 407 366
------ ------ ------
5,763 5,236 4,767
------ ------ ------
Europe
Trade ................................ 1,281 1,249 1,116
Interarea ............................ 238 186 102
------ ------ ------
1,519 1,435 1,218
------ ------ ------
East Asia
Trade ................................ 1,860 1,307 1,187
Interarea ............................ 1,223 1,058 874
------ ------ ------
3,083 2,365 2,061
------ ------ ------
Other Areas
Trade ................................ 68 62 80
Interarea ............................ 51 32 25
------ ------ ------
119 94 105
------ ------ ------
Eliminations .......................... (1,961) (1,690) (1,367)
------ ------ ------
Total ................................. $8,523 $7,440 $6,784
====== ====== ======
Geographic Area Profit (Loss)
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
United States ......................... $ 743 $ 581 $ 99
Europe ................................ 33 (24) (207)
East Asia ............................. 63 (28) (41)
Other Areas ........................... -- (5) (8)
Eliminations and corporate items ...... (143) (155) (147)
------ ------ ------
Income (loss) before provision for
income taxes and cumulative effect of
accounting changes ................... $ 696 $ 369 $ (304)
====== ====== ======
/TABLE
Geographic Area Identifiable Assets
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
United States ......................... $2,589 $2,378 $2,340
Europe ................................ 897 887 1,012
East Asia ............................. 1,310 1,105 1,176
Other Areas ........................... 42 40 48
Eliminations and corporate items ...... 1,155 775 433
------ ------ ------
Total ................................. $5,993 $5,185 $5,009
====== ====== ======
Income Taxes
- ----------------------------------------------------------------------------
Effective January 1, 1993, the company adopted SFAS No. 109, "Accounting for
Income Taxes," which requires increased recording of deferred income tax
assets. As a result, the company recorded additional deferred income tax
assets of $203 million, after a valuation allowance of $404 million, and
reduced deferred income tax liabilities by $87 million, which resulted in a
$290 million credit ($3.10 per share) for the cumulative effect of the
accounting change.
Income (Loss) before Provision for Income Taxes and Cumulative Effect of
- ------------------------------------------------------------------------
Accounting Changes
- ------------------
Millions of Dollars
-----------------------------------------
Geographic area
profit (loss)
------------------ Elims. &
U.S. Non-U.S. corp. items Total
----- -------- ----------- -------
1993 ........................ $ 743 $ 96 $ (143) $ 696
1992 ........................ 581 (57) (155) 369
1991 ........................ 99 (256) (147) (304)
With the exception of interarea elimination of unrealized profit in
assets, which increased $1 million in 1993, decreased $20 million in 1992, and
decreased $23 million in 1991, the remaining corporate items consist primarily
of general corporate expenses which are applicable to both U.S. and non-U.S.
operations. These expenses, as well as U.S. research and development costs
allocated to non-U.S. operations, are generally deductible for tax purposes in
the U.S.
31
Notes to Financial Statements
Provision (Credit) for Income Taxes
- ----------------------------------------------------------------------------
Income tax amounts for 1993 were computed based on SFAS No. 109; amounts for
1992 and 1991 were computed based on the prior accounting standard, SFAS No.
96.
Millions of Dollars
-----------------------------
U.S. Non-U.S. Total
----- -------- -----
1993
- ----
Current ................................. $ 183 $ 96 $ 279
Deferred ................................ (42) (17) (59)
----- ----- -----
Total ................................... $ 141 $ 79 $ 220
===== ===== =====
1992
- ----
Current ................................. $ 152 $ 63 $ 215
Deferred ................................ (97) 4 (93)
----- ----- -----
Total ................................... $ 55 $ 67 $ 122
===== ===== =====
1991
- ----
Current ................................. $ 7 $ 56 $ 63
Deferred ................................ 40 2 42
----- ----- -----
Total ................................... $ 47 $ 58 $ 105
===== ===== =====
Principal reconciling items from income tax computed at the statutory
federal rate follow.
Millions of Dollars
------------------------------
1993 1992 1991
------ ------ ------
Computed tax at statutory rate .............. $ 244 $ 125 $ (103)
Effect of increase in tax rate on net
deferred tax assets ........................ (17) -- --
Effect of change in valuation allowance ..... (2) -- --
Effect of non-U.S. rates .................... (3) 33 119
Increase (decrease) in unrecognized
deferred tax benefits ...................... -- (34) 89
Research and experimentation tax credits .... (8) (2) --
Other ....................................... 6 -- --
------ ------ ------
Total provision for income taxes ............ $ 220 $ 122 $ 105
====== ====== ======
/TABLE
Provision has been made for deferred taxes on undistributed earnings of
non-U.S. subsidiaries to the extent that dividend payments from such companies
are expected to result in additional tax liability. The remaining
undistributed earnings (approximately $525 million at December 31, 1993) have
been indefinitely reinvested; therefore, no provision has been made for taxes
due upon remittance of these earnings. Determination of the amount of
unrecognized deferred tax liability on these unremitted earnings is not
practicable.
The primary components of deferred income tax assets and liabilities
at December 31 were as follows:
Millions of Dollars
-------------------
1993
------
Deferred income tax assets:
Accrued retirement costs (pension and
retiree health care) ............................ $ 262
Inventories and related reserves ................. 183
Accrued expenses ................................. 168
Long-term contracts .............................. 63
Non-U.S. loss carryforwards ...................... 181
Other ............................................ 168
------
1,025
------
Less valuation allowance .......................... (350)
------
675
------
Deferred income tax liabilities:
Property, plant and equipment .................... (81)
Other ............................................ (66)
------
(147)
------
Net deferred income tax asset ..................... $ 528
======
At December 31, 1993, the net deferred income tax asset of $528 million
was presented in the balance sheet, based on tax jurisdiction, as deferred
income tax assets of $568 million and deferred income tax liabilities of $40
million.
Temporary differences at December 31, 1992 consisted primarily of
inventory reserves and other reserves not yet deducted for tax purposes,
differences in depreciation rates and long-term contract valuation amounts,
and undistributed earnings of non-U.S. subsidiaries.
The company has aggregate non-U.S. tax loss carryforwards of approximately
$425 million. Of this amount, $395 million expires through the year 2003 and
$30 million has no expiration.
Income taxes paid were $231 million, $108 million and $22 million for
1993, 1992 and 1991.
32
Rental Expense and Lease Commitments
- ------------------------------------------------------------------------------
Rental and lease expense was $132 million in 1993, $143 million in 1992 and
$145 million in 1991. The company conducts certain operations in leased
facilities and also leases a portion of its data processing and other
equipment. The lease agreements frequently include purchase and renewal
provisions and require the company to pay taxes, insurance and maintenance
costs.
At December 31, 1993, the company was committed under non-cancelable
leases with minimum rentals in succeeding years as follows:
Non-cancelable Leases
- ----------------------------------------------------------------------------
Millions of Dollars
-------------------
1994 ............................................ $ 94
1995 ............................................ 84
1996 ............................................ 68
1997 ............................................ 49
1998 ............................................ 42
Later years ..................................... 249
Report of Ernst & Young, Independent Auditors
- ------------------------------------------------------------------------------
The Board of Directors
Texas Instruments Incorporated
We have audited the accompanying consolidated balance sheet of Texas
Instruments Incorporated and subsidiaries (the Company) at December 31, 1993
and 1992, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Texas
Instruments Incorporated and subsidiaries at December 31, 1993 and 1992, and
the results of its operations and cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in the "Profit Sharing and Retirement Plans" and "Income
Taxes" notes to the financial statements, in 1993 the Company changed its
method of accounting for retiree health care benefits and income taxes.
Ernst & Young
Dallas, Texas
January 28, 1994
33
Summary of Selected Financial Data
Years ended December 31 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
Millions of Dollars
Net revenues ..................... $8,523 $7,440 $6,784 $6,567 $6,522
Operating costs and expenses ..... 7,795 7,020 7,033 6,593 6,203
------ ------ ------ ------ ------
Profit (loss) from operations .... 728 420 (249) (26) 319
Other income (expense) net........ 15 -- (14) 29 59
Interest on loans ................ 47 51 41 24 23
------ ------ ------ ------ ------
Income (loss) before provision
for income taxes and cumulative
effect of accounting changes..... 696 369 (304) (21) 355
Provision for income taxes ....... 220 122 105 18 63
------ ------ ------ ------ ------
Income (loss) before cumulative
effect of accounting changes .... 476 247 (409) (39) 292
Cumulative effect of accounting
changes ......................... (4) -- -- -- --
------ ------ ------ ------ ------
Net income (loss) ................ $ 472 $ 247 $ (409) $ (39) $ 292
====== ====== ====== ====== ======
- ------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share:
Income (loss) before cumulative
effect of accounting changes ... $ 5.07 $ 2.50 $(5.40) $ (.92) $ 3.04
Cumulative effect of accounting
changes ........................ (0.04) -- -- -- --
------ ------ ------ ------ ------
Net income (loss) ............... $ 5.03 $ 2.50 $(5.40) $ (.92) $ 3.04
====== ====== ====== ====== ======
Dividends declared per
common share .................... .72 .72 .72 .72 .72
- ------------------------------------------------------------------------------
Average common and common
equivalent shares outstanding
during year, in thousands ....... 93,606 85,311 81,970 81,614 84,934
- ------------------------------------------------------------------------------
As of December 31 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
Millions of Dollars
Working capital .................. $1,313 $ 961 $ 813 $ 826 $1,144
Property, plant and
equipment (net) ................. 2,203 2,133 2,354 2,480 2,130
Total assets ..................... 5,993 5,185 5,009 5,048 4,804
Long-term debt ................... 694 909 896 715 617
Stockholders' equity ............. 2,315 1,947 1,955 2,358 2,485
- ------------------------------------------------------------------------------
Employees ........................ 59,048 60,577 62,939 70,318 73,854
Stockholders of record ........... 29,129 31,479 35,162 36,268 36,096
See Notes to Financial Statements and Management Discussion and Analysis of
Financial Condition and Results of Operations.
34
Supplemental Financial Information
Management Discussion and Analysis of
Financial Condition and Results of Operations
- ------------------------------------------------------------------------------
The management discussion and analysis of the company's financial condition
and results of operations consists of the letter to stockholders set forth on
pages 3 through 5 of this report and the following additional information:
1993 Results of Operations Compared with 1992
- ------------------------------------------------------------------------------
TI's orders for 1993 were $8595 million, up 12 percent from $7645 million
in 1992. Significantly higher semiconductor orders in the components segment
were the primary contributor to the change.
TI's net revenues for 1993 were $8523 million, compared with $7440 million
in 1992. Essentially all of the increase was in semiconductor revenues in the
components segment, resulting primarily from new products and increased
shipments. Royalty revenues for the year were $521 million, up 33 percent
from 1992. The increase was primarily the result of new agreements with
personal computer manufacturers covering TI's computer systems patents and
higher shipments by licensees under TI's semiconductor patents. Profit from
operations was $728 million in 1993, up 73 percent from $420 million in 1992.
Higher semiconductor operating profits and higher royalties accounted for
virtually all of the increase. Results for 1993 include a profit-sharing
accrual of $83 million. There was no accrual for profit sharing in 1992.
The income tax provision for 1993 is for U.S. and non-U.S. taxes, net of a
third-quarter increase in deferred tax assets for the effect of the increase
in the U.S. statutory rate. TI's income tax rate for the year was 31.6
percent. The fourth-quarter tax rate was 33.9 percent.
TI's orders for the fourth quarter of 1993 were $2247 million, compared
with $2211 million for the same period in 1992. Higher semiconductor orders
in the components segment and a sharp increase in notebook computer orders in
the digital products segment offset a decline in defense electronics orders.
Net revenues for the fourth quarter of 1993 were $2374 million, up 19
percent from the fourth quarter of 1992. Most of the increase was in
semiconductor revenues, resulting from new products and, to a lesser extent,
increased shipments and higher semiconductor prices. Profit from operations
increased 75 percent to $198 million, from $113 million in the same period of
1992. The improvement was in the components segment, reflecting improved
semiconductor operating results and higher royalties. Semiconductor margins
continued their pattern of consistent improvement and were at double-digit
levels in the fourth quarter of 1993.
Fourth-quarter 1993 results include an accrual of $31 million for profit
sharing and a pretax charge of $23 million related to the consolidation of
TI's consumer and peripheral products businesses. There were no profit-
sharing accruals or consolidation charges in the fourth quarter of 1992. Net
income in the fourth quarter of 1993 was $134 million, and earnings per share
were $1.42, compared with net income of $78 million and earnings per share of
$0.80 in the fourth quarter of 1992. Royalty revenues in the fourth quarter
of 1993 were $133 million, compared with $89 million in the same period of
1992. Virtually all of the royalty revenues in the fourth quarter of 1993
were related to licensee shipments during the quarter.
TI's backlog of unfilled orders as of December 31, 1993, was $3805 million,
up $72 million from the end of 1992, as increases in semiconductor backlog
more than offset a decline in defense electronics. Backlog was down $126
million from the end of the third quarter of 1993 because of a decline in
defense electronics backlog.
TI-funded R&D was $590 million for 1993 and $170 million for the fourth
quarter, compared with $470 million and $121 million for the same periods of
1992. Customer-funded R&D was $391 million in 1993, compared with $421
million in 1992.
Capital expenditures were $730 million in 1993 and $218 million in the
fourth quarter, compared with $429 million and $147 million in the same
periods of 1992.
Depreciation for 1993 was $617 million, compared with $610 million in 1992,
and $167 million in the fourth quarter of 1993, compared with $156 million in
the same period of 1992. Depreciation in 1994 is expected to be about $700
million.
Components Segment
Orders in the components segment were up 32 percent for the year, and revenues
up 28 percent, from 1992. Components segment profit doubled from 1992, with
semiconductor operating improvement accounting for virtually all of the
increase.
For the fourth quarter of 1993, orders in the components segment were up 30
percent over the same period of 1992, with strong increases in semiconductor
orders. Segment revenues were up 33 percent from the same period of a year
ago, reflecting higher semiconductor revenues. Segment profit increased
substantially over the fourth quarter of 1992 because of improved
semiconductor operating performance and higher royalties.
Defense Electronics Segment
In TI's defense electronics segment, 1993 orders were down 26 percent from
1992 because Operation Desert Storm replenishment orders were not repeated in
1993. Revenues were down 7 percent from 1992, primarily because of reduced
shipments of the High-Speed Antiradiation Missile. Margins for the year were
essentially flat with 1992.
Fourth-quarter 1993 orders in defense electronics were down 48 percent from
the fourth quarter of 1992 because of the absence of Desert Storm-related
orders. Revenues were down 4 percent from the fourth quarter of 1992.
Revenues were up substantially from the third quarter of 1993, reflecting
shipments that were delayed from the third quarter and
35
the phasing of low-margin programs. Margins remained stable from the fourth
quarter of 1992.
Digital Products Segment
Orders in TI's digital products segment were up 11 percent in 1993, and
revenues up 8 percent, compared with 1992. Excluding the effect of the 1992
sale of TI's multiuser minicomputer systems and service operations to Hewlett-
Packard, 1993 orders were up 25 percent, and revenues up 24 percent, over
1992. The segment operated at a profit for the year 1993, as royalty revenues
more than offset operating losses.
For the fourth quarter of 1993, orders in the digital segment were up 26
percent, and revenues were up 15 percent, from the same period of 1992.
Before the effect of the $23 million consolidation charge, the segment was
essentially at breakeven in the fourth quarter of 1993, as royalty revenues
offset a loss in consumer products.
Metallurgical Materials Segment
In the metallurgical materials segment, orders were up 12 percent, and
revenues were up 5 percent, from 1992. The segment operated at a small loss
for the year, primarily because of increased investments in new technologies,
including solar energy. In the fourth quarter of 1993, orders were up 11
percent, and revenues were up 11 percent, from the same period of 1992. The
segment operated at a small loss in the fourth quarter of 1993.
Intellectual Property
During 1993, TI reached new semiconductor patent-license agreements with
Hyundai Electronics Industries Co., Ltd. and Nippon Steel Semiconductor
Corporation. We also reached computer systems patent-license agreements with
personal computer manufacturers including Compaq Computer Corporation, Daewoo
Electronics Company, Ltd., Daewoo Telecom Co., Ltd., Dell Computer
Corporation, Gateway 2000, Inc., Hyundai, Packard Bell Electronics, Inc.,
Toshiba Corporation, and Zenith Data Systems.
Litigation in Japan continues with Fujitsu Limited regarding TI s Japanese
patent on the invention of the integrated circuit (the Kilby patent). TI is
seeking damages and injunctive relief, and Fujitsu is seeking a declaration
that Fujitsu products do not infringe the Kilby patent. TI is also in
litigation in the United States with other companies concerning its patents
relating to semiconductors and computer systems.
Negotiations with additional potential semiconductor and personal-computer
licensees are ongoing. These negotiations by their nature are not predictable
as to outcome or timing, and results may vary depending on the parties
relative patent posture, the use by each party of the other s patents, the
sales volume of each party, and other factors. TI continues to earn a
significant ongoing stream of royalty revenue.
Financial Condition
- -----------------------------------------------------------------------------
TI's financial condition continued to strengthen in 1993. The company made
further progress toward management's goal of reducing TI's debt-to-total-
capital ratio and generated positive cash flow net of additions to property,
plant and equipment.
During 1993, cash and cash equivalents plus short-term investments increased
by $29 million to $888 million as of December 31, 1993. Cash provided by
operating activities net of additions to property, plant and equipment was a
positive $204 million for the year. In addition, the company raised $77
million of cash through the sale of common stock in conjunction with employee
benefit plans. TI's debt-to-total-capital ratio was .28 at the end of the
year, down .01 from the third quarter and down .05 from year-end 1992. TI's
goal is to reduce this ratio to about .25.
In a series of three redemptions of approximately equal numbers of shares, the
company redeemed all of its Series A Conversion Preferred Stock and related
depositary shares during 1993. In exchange for the aggregate 11,114,000
depositary shares redeemed, the company issued the following number of shares
of TI common stock: 2,412,829 on June 25; 2,025,024 on September 10; and
1,828,665 on September 27. At the end of the third quarter, the company
classified as a current liability its $200 million of 2.75 percent convertible
subordinated debentures due 2002, since these debentures may be redeemed at
the holder's option, by prior notice, during a 30-day period beginning
September 29, 1994. In anticipation of this potential redemption, the company
is considering various financing alternatives.
On October 19 and November 2, 1993, the company redeemed its remaining two
series of auction-rate preferred stock (liquidation value $74.6 million and
$75.0 million, respectively) at liquidation value plus accrued and unpaid
dividends.
Effective January 1, 1993, the company adopted a new FASB statement, SFAS No.
106, which requires the accrual of expected retiree health care benefit costs
during the employees' working careers, instead of when the claims are
incurred. The company recorded an accumulated postretirement benefit
obligation of $454 million and a related deferred income tax asset of $160
million, which resulted in a $294 million charge ($3.14 per share) for the
cumulative effect of the accounting change. In 1993, pretax expense for this
benefit plan was $41 million. The aggregate pension and retiree health care
benefit expense is expected to be somewhat lower in 1994 than in 1993, as the
effect of lower interest rates is more than offset by the effect of favorable
investment returns, fewer employees and changes in other assumptions. In
1992, pretax expense for retiree health care, on a claims-incurred basis, was
$24 million. The company is partially funding the plan obligation.
36
Supplemental Financial Information
Also adopted effective January 1, 1993, was SFAS No. 109, which requires
increased recording of deferred income tax assets. As a result, the company
recorded additional deferred income tax assets of $203 million, after a
valuation allowance of $404 million, and reduced deferred income tax
liabilities by $87 million, which resulted in a $290 million credit ($3.10 per
share) for the cumulative effect of the accounting change.
The net effect of the two cumulative accounting change amounts was a $4
million charge ($0.04 per share).
At December 31, 1993, the company had deferred income tax assets of $568
million, after a valuation allowance of $350 million, and deferred income tax
liabilities of $40 million. The valuation allowance reflects the company's
assessment regarding the realizability of certain non-U.S. deferred income tax
assets. The balance of the deferred income tax assets is considered
realizable based on carryback potential, existing taxable temporary
differences, and expectation of future income levels comparable to recent
results. Such future income levels are not assured because of the nature of
the company's businesses which are generally characterized by rapidly changing
technology and intense competition. The company evaluates realizability of
the deferred income tax assets quarterly.
The company maintains unused lines of credit to support commercial paper
borrowing and to provide additional liquidity. Unused lines of credit were
approximately $569 million at December 31, 1993. Of this amount, $470 million
was available to support commercial paper borrowing.
Authorizations for future capital expenditures were approximately $603 million
at December 31, 1993. In view of greater semiconductor demand, we plan to
increase capital expenditures in 1994 to about $1 billion, from $730 million
in 1993. The funds will be supplied by cash from operations and existing cash
balances.
The company believes that its financial condition provides the foundation for
continued support of the programs essential to TI's future.
1992 Results of Operations Compared with 1991
- ------------------------------------------------------------------------------
TI's orders for 1992 were $7645 million, up 14 percent from $6725 million in
1991. Significantly higher semiconductor orders in components were the
primary contributor to the change, along with replenishment orders in defense
electronics resulting from Operation Desert Storm.
TI's net revenues for 1992 were $7440 million, compared with $6784
million in 1991. Increased semiconductor revenues, across all major product
lines, were the largest contributor to this change. Profit from operations was
$420 million in 1992, compared with a loss from operations of $249 million in
1991. Operating results improved in every TI business as a result of cost
savings and operating improvements, with the largest gain in semiconductors.
For 1991, charges for cost reductions, net of a pension settlement gain in the
fourth quarter, were $240 million.
Net income for 1992 was $247 million, compared with a net loss of $409
million in 1991.
The income tax provision for 1992 was for U.S. and non-U.S. taxes, net
of an increase in deferred tax assets. For 1991, the provision was primarily
for non-U.S. taxes and a decrease in deferred tax assets.
TI's backlog of unfilled orders as of December 31, 1992, was $3733
million, up $156 million from the end of 1991, primarily because of increases
in semiconductor backlog and replenishment orders in defense electronics.
TI-funded R&D was $470 million in 1992, compared with $527 million in
1991. Customer-funded R&D was $421 million in 1992, compared with $388
million in 1991.
Capital expenditures were $429 million in 1992, compared with $504
million in 1991.
Depreciation for 1992 was $610 million, compared with $590 million in
1991.
Components Segment
Orders in the components segment were up 20 percent for the year, and revenues
up 16 percent, from 1991. Semiconductor operating results were substantially
improved from 1991, as a result of increased shipments, especially in
application-specific products; benefits from the cost reductions initiated in
1991; and operating improvements in memory. The 1991 segment results included
charges of $121 million for cost reductions.
Defense Electronics Segment
In TI's defense electronics segment, 1992 orders were up 10 percent, and
revenues were up 3 percent, from 1991. Margins in defense electronics were
essentially stable in 1992 compared with the previous year, after adjusting
for the 1991 cost-reduction charge of $67 million.
Digital Products Segment
Orders in TI's digital products segment were up 1 percent in 1992, and
revenues up 2 percent, compared with 1991. The 1991 results included charges
of $31 million for cost reductions. The segment operated at a profit in 1992.
Metallurgical Materials Segment
In the metallurgical materials segment, orders and revenues in 1992 were both
down 4 percent from 1991. Revenues were affected by sluggish world economies
and resulting weakness in key markets. Profits in 1992 were restrained by
new-venture investments for solar energy.
Intellectual Property
Net revenues for 1992 included royalty revenues of $391 million, compared with
$256 million in 1991. The increase in 1992 took into consideration new
semiconductor patent-license agreements with Mitsubishi Electric Corporation;
Sanyo Electric Co., Ltd.; and six other Japanese semiconductor manufacturers.
37
Supplemental Financial Information
Inflation
- ------------------------------------------------------------------------------
Within the limits of generally accepted accounting principles, the company
believes its financial statements tend to reasonably match current levels of
costs with revenues of the period, except for depreciation. To the extent
current costs of fixed assets exceed historical costs, depreciation on an
inflation-adjusted basis would be greater than historical cost depreciation.
Common Stock Prices and Dividends
- -----------------------------------------------------------------------------
TI common stock is listed on the New York Stock Exchange and traded
principally in that market. In addition, TI common stock is listed on the
London and Tokyo stock exchanges and in Switzerland on the Zurich, Geneva and
Basel stock exchanges. The table below shows the high and low prices of TI
common stock on the composite tape as reported by The Wall Street Journal and
the dividends paid per common share for each quarter during the past two
years.
Quarter
--------------------------------------------
1st 2nd 3rd 4th
- -----------------------------------------------------------------------------
Stock prices:
1993 High .................... $63.38 $72.38 $84.25 $76.50
Low ..................... 45.75 51.63 65.88 55.75
1992 High .................... 40.50 38.88 45.00 52.25
Low ..................... 30.00 31.50 35.50 39.00
Dividends paid:
1993 ......................... $ .18 $ .18 $ .18 $ .18
1992 ......................... .18 .18 .18 .18
Quarterly Financial Data
- ------------------------------------------------------------------------------
1993 Millions of Dollars, Except Per-Share Amounts
---------------------------------------------
1st 2nd 3rd 4th
- ------------------------------------------------------------------------------
Net revenues ...................... $1,884 $2,105 $2,161 $2,374
Gross profit ...................... 477 548 609 615
Profit from operations ............ 140 173 218 198
Income before provision
for income taxes and cumulative
effect of accounting changes ..... 129 169 196 202
Income before cumulative effect
of accounting changes ............ 85 112 146 134
Net income ........................ 81 112 146 134
Earnings per common and
common equivalent share:
Income before cumulative effect
of accounting changes ........... $ .89 $ 1.18 $ 1.54 $ 1.42
Net income ....................... .85 1.18 1.54 1.42
==============================================================================
1992 Millions of Dollars, Except Per-Share Amounts
---------------------------------------------
1st 2nd 3rd 4th
- ------------------------------------------------------------------------------
Net revenues ...................... $1,694 $1,867 $1,892 $1,987
Gross profit ...................... 370 449 451 449
Profit from operations ............ 63 128 116 113
Income before provision
for income taxes ................. 63 109 88 110
Net income ........................ 40 72 57 78
Earnings per common and
common equivalent share .......... $ .35 $ .73 $ .58 $ .80
==============================================================================
Effective January 1, 1993, the company adopted two new accounting
standards: SFAS No. 106, which requires accrual of expected retiree health
care benefit costs during the employees' working careers, and SFAS No. 109,
which requires increased recording of deferred income tax assets. This
resulted in a first quarter charge of $294 million ($3.12 per share) for SFAS
No. 106 and a credit of $290 million ($3.08 per share) for SFAS No. 109, for
the cumulative effect of the accounting changes.
Earnings per common and common equivalent share are based on average
common and common equivalent shares outstanding (94,154,923 shares and
95,713,491 shares for the fourth quarters of 1993 and 1992) and "net income,
less dividends accrued on preferred stock" ($133 million and $69 million for
the fourth quarters of 1993 and 1992). In computing per-share earnings, "net
income, less dividends accrued on preferred stock" is increased by $1 million
and $7 million for the fourth quarters of 1993 and 1992 for dividends and
interest (net of tax and profit sharing effect) on the conversion preferred
stock and convertible debentures considered dilutive common stock equivalents.
_____________________
DMD and TIRIS are registered trademarks of Texas Instruments Incorporated.
38
Exhibit 21
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
LIST OF SUBSIDIARIES OF THE REGISTRANT
The following are current subsidiaries of the Registrant.
Subsidiary and Name Under Which Business is Done Where Organized
Texas Instruments Deutschland G.m.b.H. Germany
Texas Instruments Equipamento Electronico Portugal
(Portugal) Lda.
Texas Instruments France S.A. France
Texas Instruments Holland B.V. Netherlands
Texas Instruments Hong Kong Limited Hong Kong
Texas Instruments Italia S.p.A. Italy
Texas Instruments Japan Limited Japan
Texas Instruments Limited United Kingdom
Texas Instruments Malaysia Sdn. Bhd. Malaysia
Texas Instruments (Philippines) Incorporated Delaware
Texas Instruments Singapore (Pte) Limited Singapore
Texas Instruments Taiwan Limited Taiwan
TI Information Engineering Limited United Kingdom
Note: The names of other subsidiaries of the Registrant are not
listed herein since the additional subsidiaries considered in the
aggregate as a single subsidiary do not constitute a significant
subsidiary as defined by Rule 1.02(v) of Regulation S-X.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Texas Instruments Incorporated and subsidiaries of our report dated
January 28, 1994, included in the 1993 Annual Report to Stockholders of Texas
Instruments Incorporated.
Our audits also included the financial statement schedules of Texas
Instruments Incorporated listed in Item 14(a). These schedules are the
responsibility of the Registrant's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
We also consent to the incorporation by reference in the following
registration statements, and in the related prospectuses thereto, of our
report dated January 28, 1994 with respect to the consolidated financial
statements and consolidated schedules of Texas Instruments Incorporated,
included in or incorporated by reference in this Annual Report on Form 10-K
for the year ended December 31, 1993: Registration Statement No. 33-61154 on
Form S-8, Registration Statement No. 33-21407 on Form S-8, Registration
Statement No. 33-42172 on Form S-8, Registration Statement No. 33-18509 on
Form S-3, and Registration Statement No. 33-48840 on Form S-3.
ERNST & YOUNG
Dallas, Texas
March 18, 1994
