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Proposal to approve the Texas
Instruments 2009 Long-Term Incentive Plan
Since 1965 the company has had in effect key employee incentive plans,
currently consisting of the Texas Instruments 2000 Long-Term Incentive Plan (the
“2000 Plan”), which is used to grant equity compensation to senior managers, and
the Texas Instruments 2003 Long-Term Incentive Plan, which is used to grant
equity compensation to other employees (the “Current Plans”). These plans were
designed to provide an additional incentive for the employees who are key to the
company’s success in the technological and highly competitive markets in which
it operates. The board of directors believes these plans have been effective in
providing such incentive. The board also believes that for the company to
continue to attract and retain outstanding individuals, it must continue to have
incentive plans of these types in place.
The 2000 Plan expires in April 2010. The
company proposes the adoption of a new plan, the Texas Instruments 2009
Long-Term Incentive Plan (the “2009 Plan”), to replace both of the Current
Plans. If stockholders approve the 2009 Plan, the Current Plans will be closed
to further grants. The shares still available for grant under the Current Plans
(approximately 200 million as of December 31, 2008) will not be available for
grant under this plan. If stockholders do not approve the 2009 Plan, it will not
be implemented.
Texas Instruments 2009 Long-Term
Incentive Plan
The proposed 2009 Plan
is attached as Exhibit A to this proxy statement. The principal features of the
2009 Plan are summarized below.
Types of
awards
The 2009 Plan provides for the
grant of the same types of awards as the Current Plans: (1) stock options, (2)
restricted stock and restricted stock units, (3) performance units and (4) other
awards (including stock appreciation rights) valued in whole or in part by
reference to or otherwise based on common stock of the company.
Shares available for
awards
Under the 2009 Plan, the
number of shares of common stock available for issuance will be 75,000,000
shares, subject to adjustment by the Committee (defined below) for stock splits
and other events as set forth in the 2009 Plan, plus any shares under awards
granted under the Current Plans that terminate or are cancelled.
Material features of the 2009
Plan
The 2009 Plan will be
administered by a board committee appointed by the board of directors (the
“Committee”). The Committee will have, among other powers, the power to
interpret and construe any provision of the plan, to adopt rules and regulations
for administering the plan, and to perform other acts relating to the plan,
including, at the Committee’s discretion, the delegation of any administrative
responsibilities. Decisions of the Committee are final and binding on all
parties.
The Committee will have the sole discretion
to grant to eligible participants one or more equity awards, including options,
restricted stock and restricted stock units, performance units, or any
combination thereof. The Committee will have the sole discretion to determine
the number or amount of any award to be granted to any participant. If a
dividend or other distribution, recapitalization, stock split, or other
corporate event or transaction (more fully described in Section 5(e) of the 2009
Plan) affects the shares in such a way that an adjustment is appropriate to
prevent dilution or enlargement of the benefits, or potential benefits, intended
to be made available under the 2009 Plan, then an equitable adjustment shall be
made to: (i) the number and type of shares (or other securities or property)
which may be made the subject of awards, (ii) the number and type of shares (or
other securities or property) subject to outstanding awards, and (iii) the
grant, purchase or exercise price with respect to any award. The Committee may
not take any other action to reduce the exercise price of any option as
established at the time of grant.
Awards will be granted for no cash
consideration, or for minimal cash consideration if required by applicable law.
Awards may provide that upon their exercise the holder will receive cash, stock,
other securities, other awards, other property or any combination thereof, as
the Committee will determine. Any shares of stock deliverable under the 2009
Plan may consist in whole or in part of authorized and unissued shares or
treasury shares.
Except in the case of awards made through
assumption of, or in substitution for, outstanding awards previously granted by
an acquired company, and except as a result of an adjustment event referred to
above, the exercise price of stock under any stock option, the grant price of
any stock appreciation right, and the purchase price of any security which may
be purchased under any other stock-
[ 86 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT
based award will not be less than
100% of the fair market value of the stock or other security on the date of the
grant of the option, right or award. The Committee will determine the times at
which options and other purchase rights may be exercised and the methods by
which and the forms in which payment of the purchase price may be made.
Determinations of fair market value under the 2009 Plan will be made in
accordance with methods or procedures established by the
Committee.
The Committee may impose restrictions on
restricted stock and restricted stock units at its discretion. These
restrictions may lapse as the Committee deems appropriate. Upon termination of
employment during the restriction period, all restricted stock and restricted
stock units will be forfeited, unless the Committee determines
otherwise.
Any performance units granted will vest
upon the attainment of performance goals. The Committee will establish the
performance criteria, the length of the performance period and the form and time
of payment of the award. In addition, the Committee may establish the terms and
conditions of other stock-based awards.
Unless otherwise determined by the
Committee, no award granted under the 2009 Plan may be transferred or otherwise
encumbered by the individual to whom it is granted, other than by will, by
designation of a beneficiary, or by the laws of descent and distribution. During
the individual’s lifetime, each award will be exercisable only by the individual
or by the individual’s guardian or legal representative.
The board of directors may
amend, alter, discontinue or terminate the 2009 Plan or any portion of the plan
any time. However, stockholder approval must be obtained for any plan adjustment
that would increase the number of shares available for awards or any other
material amendment of the 2009
Plan.
No
awards may be granted under the 2009 Plan after the tenth anniversary of the
effective date of the 2009 Plan.
Eligibility and
participation
Any employee of the
company, including any officer or employee-director, will be eligible to receive
awards under the 2009 Plan. Additionally, any individual who provides services
to the company or to an affiliate of the company as an independent contractor is
eligible to receive awards. The company had 29,537 employees as of December 31,
2008. Directors who are not full-time or part-time officers or employees of the
company will not be eligible to participate in the plan.
Plan awards for certain
individuals
Any awards under the 2009
Plan will be at the discretion of the Committee. Therefore, it is not possible
at present to determine the amount or form of any award that will be available
for grant to any individual during the term of the 2009 Plan or that would have
been granted during 2008 had the 2009 Plan been in effect.
Tax matters
Options: Counsel
for the company has advised that a participant will recognize no income under
the Internal Revenue Code upon the receipt of any option award. In the case of
an incentive stock option, if a participant exercises the option during or
within three months of employment and does not dispose of the shares within two
years of the date of grant or one year after the transfer of the shares to the
participant, the participant will be entitled for federal income tax purposes to
treat any profit which may be recognized upon the disposition of the shares as a
long-term capital gain. In contrast, a participant who receives an option under
the plan that is not an incentive stock option or who does not comply with the
conditions noted above will generally recognize ordinary income at the time of
exercise in the amount of the excess, if any, of the fair market value of the
stock on the date of exercise over the option price. If the participant is an
employee, such ordinary income generally is subject to withholding of income and
employment taxes. The company should be entitled to a deduction for federal
income tax purposes equal to the amount of ordinary income, if any, recognized
by a participant who (a) exercises an option that is not an incentive stock
option, or (b) disposes of stock that was acquired pursuant to the exercise of
an incentive stock option prior to the end of the required holding period
described above, except to the extent such deduction is limited by applicable
provisions of the Internal Revenue Code. In the case of incentive stock options,
any excess of the fair market value of the stock at the time of exercise over
the option price would be an item of income for purposes of the participant’s
alternative minimum tax.
Restricted stock
units: Counsel for the company has
advised that a participant will recognize no income under the Internal Revenue
Code upon the receipt of a restricted stock unit award. Upon the settlement of a
restricted stock unit award, participants will recognize ordinary income in the
year of receipt in an amount equal to the fair market value of any shares
received. If the participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the sale of any
shares received, any gain or loss, based on the difference between the sale
price and the fair market value on the date of settlement, will be taxed as
capital gain or loss. The company should be entitled to a deduction for federal
income tax purposes equal to the amount of ordinary income recognized by the
participant on the determination date, except to the extent such deduction is
limited by applicable provisions of the Internal Revenue
Code.
The board of directors recommends a vote “FOR” the Texas Instruments 2009
Long-Term Incentive Plan.
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