<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a11(c) or
Section 240.14a-12
TEXAS INSTRUMENTS INCORPORATED
------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, schedule or registration statement no.:
3) Filing party:
4) Date filed:
Preliminary Copy
[Company Logo] TEXAS INSTRUMENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 18, 1996
We are pleased to invite you to attend the 1996 Annual Meeting of Stockholders
which will be held on Thursday, April 18, 1996 at the North Building Cafeteria
on the Company's property, 13500 North Central Expressway, Dallas, Texas, at
10:00 a.m. (Dallas time). The meeting will be held for the following
purposes:
1. To elect directors for the ensuing year;
2. To consider and act upon a proposal to approve an amendment to the
Company's Restated Certificate of Incorporation for the purpose of
increasing the authorized shares of common stock of the Company from
300,000,000 to 500,000,000;
3. To consider and act upon a board proposal to approve a Texas
Instruments 1996 Long-Term Incentive Plan; and
4. To consider and act upon such other matters as may properly come
before the meeting.
Stockholders of record at the close of business on February 20, 1996 are
entitled to notice of and to vote at the annual meeting.
Stockholders are urged to sign, date and return the enclosed proxy as promptly
as possible. You may revoke your proxy at any time before the shares to which
the proxy relates are voted at the meeting.
By Order of the Board of Directors,
Richard J. Agnich
Senior Vice President,
Secretary and General Counsel
Dallas, Texas
February __, 1996
Preliminary Copy
[Company Logo] TEXAS INSTRUMENTS
EXECUTIVE OFFICES: NORTH BUILDING, 13500 NORTH CENTRAL EXPRESSWAY,
DALLAS, TEXAS
MAILING ADDRESS: POST OFFICE BOX 655474, DALLAS, TEXAS 75265-5474
PROXY STATEMENT
February __, 1996
The board of directors of Texas Instruments Incorporated (the Company or TI) is
requesting your proxy for the Annual Meeting of Stockholders (the Annual
Meeting) on April 18, 1996. By executing and returning the enclosed proxy
card, you authorize the persons named in the proxy to represent you and vote
your shares in connection with the purposes set forth in the Notice of Annual
Meeting.
If you attend the meeting, you may of course vote in person. But, if you are
not present, your shares can be voted only if you have returned a properly
executed proxy. If a proxy in the accompanying form is duly executed and
returned, the shares represented thereby will be voted as specified therein,
and if no specification is made, the shares will be voted in accordance with
the recommendations of the board of directors. You may revoke the proxy at any
time before it is exercised.
ELECTION OF DIRECTORS
Directors are to be elected at the Annual Meeting to hold office until the next
Annual Meeting and until their successors are elected and qualified. Unless
authority to vote for directors is withheld in the proxy, the persons named in
the proxy will vote for the election of the following nominees, who have been
designated by the board of directors: JAMES R. ADAMS, DAVID L. BOREN, JAMES B.
BUSEY IV, GERALD W. FRONTERHOUSE, DAVID R. GOODE, JERRY R. JUNKINS, WILLIAM S.
LEE, WILLIAM B. MITCHELL, GLORIA M. SHATTO, WILLIAM P. WEBER and CLAYTON K.
YEUTTER.
Nominees for Directorship
All of the nominees for directorship are now directors of the Company. While
it is not anticipated that any of the nominees will be unable to serve, if any
nominee is not a candidate for election as a director at the meeting, the proxy
will be voted for the election of a substitute nominee proposed by the present
board of directors or the number of directors will be reduced accordingly.
<PAGE>
[Photo of J.R. Adams] JAMES R. ADAMS Director
Chair, Board Organization and Nominating
Committee; member, Audit and Compensation
Committees.
Group president, SBC Communications Inc. from
1992 until retirement in July 1995; president
and chief executive officer of Southwestern
Bell Telephone Company, 1988-92.
[Photo of D. L. Boren] DAVID L. BOREN Director
Member, Audit, Finance and Stockholder
Relations and Public Policy Committees.
President of the University of Oklahoma
since 1994. U.S. Senator, 1979-1994;
Governor of Oklahoma, 1975-1979. Director,
AMR Corporation and Phillips Petroleum
Company; trustee, Yale University.
[Photo of J.B. Busey IV] JAMES B. BUSEY IV Director
Member, Board Organization and Nominating,
Finance, Stockholder Relations and Public
Policy and Trust Review Committees.
President and chief executive officer of Armed
Forces Communications and Electronics
Association since 1992. Deputy Secretary,
Department of Transportation, 1991-1992;
Administrator, Federal Aviation
Administration, 1989-91; retired from U.S.
Navy as Admiral in 1989. Director,
Association of Naval Aviation, Curtiss-Wright
Corporation and S.T. Research Corporation;
trustee, MITRE Corporation.
[Photo of G.W. Fronterhouse] GERALD W. FRONTERHOUSE Director
Chair, Trust Review Committee; member, Audit,
Compensation and Finance Committees.
Investments. Former chief executive officer
(1985-88) of First RepublicBank Corporation.
President and director, Hoblitzelle
Foundation; trustee, Southwestern Medical
Foundation and Children's Medical Foundation.
2
[Photo of D. R. Goode] DAVID R. GOODE Director
Member, Board Organization and Nominating and
Compensation Committees.
Chairman of the board and chief executive
officer of Norfolk Southern Corporation since
1992; also, president since 1991. Director,
Caterpillar, Inc., Georgia-Pacific
Corporation and TRINOVA Corporation; member,
The Business Roundtable; trustee, Hollins
College.
[Photo of J.R. Junkins] JERRY R. JUNKINS Chairman of the Board,
President and Chief Executive Officer
Chair, Benefit Plans and Finance Committees;
member, Board Organization and Nominating
Committee.
Chairman of the board since 1988; president
and chief executive officer of the Company
since 1985. Joined the Company in 1959;
elected vice president in 1977 and executive
vice president in 1982. Director,
Caterpillar Inc., Minnesota Mining and
Manufacturing Company and The Procter &
Gamble Company; cochairman, The Business
Roundtable; member, The Business Council and
National Academy of Engineering; trustee,
Southern Methodist University.
[Photo: W.S. Lee] WILLIAM S. LEE Director
Chair, Compensation Committee; member, Audit,
Board Organization and Nominating and Finance
Committees.
Chairman emeritus of Duke Power Company;
chairman of the board and chief executive
officer of Duke Power Company from 1982, and
president from 1989, until retirement in April
1994. Director, J.P. Morgan & Co.
Incorporated, Morgan Guaranty Trust Company of
New York, Knight-Ridder, Inc. and The Liberty
Corporation; member, The Business Council and
National Academy of Engineering.
3
[Photo: W.B. Mitchell] WILLIAM B. MITCHELL Vice Chairman
Member, Benefit Plans and Finance Committees.
Vice chairman of the Company since 1993.
Joined the Company in 1961; elected vice
president in 1984 and executive vice president
in 1987. Chairman, American Electronics
Association.
[Photo: G.M. Shatto] GLORIA M. SHATTO Director
Chair, Stockholder Relations and Public Policy
Committee; member, Compensation Committee.
President of Berry College since 1980.
Director, Becton Dickinson and Company,
Georgia Power Company, K mart Corporation
and The Southern Company.
[Photo: W.P. Weber] WILLIAM P. WEBER Vice Chairman
Member, Benefit Plans and Finance Committees.
Vice chairman of the Company since 1993.
Joined the Company in 1962; elected vice
president in 1979 and executive vice president
in 1984. Chairman, Semiconductor Industry
Association.
[Photo of C.K. Yeutter] CLAYTON K. YEUTTER Director
Chair, Audit Committee; member, Finance,
Stockholder Relations and Public Policy
and Trust Review Committees.
Of counsel, Hogan & Hartson. Counselor to
President Bush for domestic policy during
1992; chairman, Republican National Committee,
1991-92; Secretary, Department of Agriculture,
1989-91; U.S. Trade Representative, 1985-89.
Director, B.A.T. Industries P.L.C.,
Caterpillar Inc., ConAgra, Inc., FMC
Corporation, Lindsay Manufacturing Co.,
Oppenheimer Funds and The Vigoro Corporation.
4
The ages and holdings of common stock of the nominees and the year in which
each became a director are as follows:
<TABLE>
<CAPTION>
Common Stock
Director Ownership at
Nominee Age Since December 31, 1995<F1>*
------- --- -------- ------------------
<S> <C> <C> <C>
James R. Adams 56 1989 3,264
David L. Boren 54 1995 2,564
James B. Busey IV 63 1992 3,684
Gerald W. Fronterhouse 59 1986 5,291
David R. Goode 55 1996
Jerry R. Junkins 58 1984 820,531
William S. Lee 66 1990 6,264
William B. Mitchell 60 1990 73,604
Gloria M. Shatto 64 1992 3,264
William P. Weber 55 1984 130,403
Clayton K. Yeutter 65 1992 3,664
- - - -------------------
<FN>
<F1>*Includes any shares subject to restricted stock unit awards. Also
includes shares subject to acquisition within 60 days by Messrs. Junkins,
Mitchell and Weber for 709,500, 48,500 and 106,500 shares, respectively, and
shares credited to profit sharing stock accounts for Messrs. Junkins, Mitchell
and Weber in the amounts of 10,253, 5,412 and 5,813, respectively. Mr. Goode's
holdings are as of February 1, 1996. Each nominee and director owns less than
1% of the Company's common stock.
</TABLE>
Board and Committee Meetings
During 1995, the board held eleven meetings. In addition, the following
committees of the board held the number of meetings indicated: Audit, six;
Benefit Plans, four; Board Organization and Nominating, seven; Compensation,
seven; Finance, five; Stockholder Relations and Public Policy, four; and Trust
Review, five. Overall attendance at board and committee meetings was
approximately 96%.
Committees of the Board
The Audit Committee has the responsibility to make recommendations to the board
with respect to the appointment of the independent public accountants and other
matters. This committee also has the responsibility to approve certain
non-audit services of the independent public accountants; to review the scope
of the annual audit, proposed changes in major accounting policies, reports of
compliance of management and operating personnel with the Company's code of
ethics and other matters; and to report to the board concerning the adequacy of
the Company's system of internal accounting controls, other factors affecting
the integrity of published financial reports and other matters.
5
The Benefit Plans Committee has the responsibility to institute, revise or
terminate incentive plans of the Company other than plans approved by
stockholders, and institute, revise or terminate pension, profit sharing and
other benefit plans, other than any incentive or benefit plan or amendment
thereto that would benefit only officers of the Company or disproportionately
benefit officers more than other employees. This committee also has the
responsibility to report to the board concerning general levels of increases in
compensation for employees, compensation and benefits philosophies and programs
of the Company and other matters.
The Board Organization and Nominating Committee has the responsibility to make
recommendations to the board with respect to nominees to be designated by the
board for election as directors, the structure, size and composition of the
board, compensation of board members, the organization and responsibilities of
board committees and other matters. This committee also has the responsibility
to report to the board concerning the general responsibilities and functions of
the board, a desirable balance of expertise among board members, overall
Company organizational health, with particular reference to succession plans
for top management positions within TI, and other matters.
Any stockholder who wishes to recommend a prospective nominee for the board of
directors for the committee's consideration may write Richard J. Agnich,
Secretary, Board Organization and Nominating Committee, c/o Texas Instruments
Incorporated, Post Office Box 655474, MS 407, Dallas, Texas 75265-5474.
The Compensation Committee has the responsibility to make changes in officers'
compensation and to take actions that are required to be taken by the committee
under the Company's incentive plans, stock option plans, stock option purchase
plans and other employee benefit plans. This committee also has the
responsibility to make recommendations to the board with respect to revisions
in and actions under such plans that are required to be approved by the board,
the institution of plans that benefit only officers of the Company or
disproportionately benefit officers of the Company more than other employees,
the institution of plans permitting the issuance of stock of the Company and
other matters.
The Finance Committee has the responsibility to make recommendations to the
board with respect to the annual capital authorization funding level, issuance
of equity and long-term debt and other matters. This committee also has the
responsibility to approve the annual financing plan and other matters; and to
report to the board concerning developments in financial markets and other
matters.
The Stockholder Relations and Public Policy Committee has the responsibility to
make recommendations to the board with respect to matters bearing on the
relationship between management and stockholders, public issues and other
matters. This committee also has the responsibility to report to the board
concerning the contribution policies of the Company and of the TI Foundation,
revisions in TI's code of ethics and other matters.
The Trust Review Committee has the responsibility to make recommendations to
the board with respect to the selection of trustees of benefit plan trust
funds, assignment of funds to trustees and establishment and amendment of
6
funding policies and methods of benefit plans and other matters. This
committee also has the responsibility to select investment managers and assign
compensation of trustees and investment managers and other matters; and to
report to the board concerning the performance and adequacy of trustees and
investment managers.
Directors Compensation
Directors who are not employees are annually paid a retainer of $40,000 (one-
half in cash and one-half in restricted stock units described below), a fee of
$7,500 for each committee on which they serve, $2,500 for service as a
committee chair, $2,500 for attendance at the Company's strategic planning
conference, and $2,500 for attendance at the Company's annual planning
conference. Compensation for other designated activities, such as visits to TI
facilities and attendance at certain company events, is provided at the rate of
$1,000 per day. In 1995, the Company made payments (an aggregate of $10,388)
relating to premiums for life, medical, dental, travel and accident insurance
policies covering directors. Subject to certain limitations, directors may
elect that all or part of the cash payments of their fees be deferred until
retirement from the board or other specified times. Deferred fees earn
interest from the Company at a rate (currently based on published interest
rates on certain corporate bonds) determined from time to time by the board.
Effective June 15, 1995, the Company terminated a previously existing directors
retirement plan and in its place adopted a restricted stock unit plan for
directors (the stock plan). Under the stock plan, new directors are awarded
1,000 restricted stock units (each for one share of Company common stock)
providing for issuance of Company common stock at the time of retirement from
the Board, or upon earlier termination of service from the Board after
completing at least eight years of service or because of death or disability.
However, the right to the shares will be forfeited if a director's service
terminates within less than six months after the date of grant for reasons
other than death or disability. Directors in office on the effective date were
granted the same number of restricted stock units (subject to the same
conditions) to replace their interests under the former retirement plan; as a
result of the subsequent two-for-one stock split, those awards were increased
to 2,000 restricted stock units. The stock plan also provides for payment of
fifty percent of the annual retainer for Board service (not including retainers
for committee membership or committee chair) to be made in the form of
restricted stock units. The shares under such annual retainer restricted stock
units will be issued upon the termination of the director's service on the
Board. Any portion which is unearned because of termination of service during
a year will be forfeited.
Each director who has completed five years of service as a member of the board
of directors, and whose board membership terminates as a result of
ineligibility for reelection after the attainment of a specified age or, in the
case of non-employee directors, as a result of death or disability, will be
eligible to participate in a Director Award Program. The program was
established to promote the Company's interest in supporting educational
institutions. The Company may contribute a total of $500,000 with respect to
each eligible director to up to three eligible educational institutions (or
other charitable institutions approved by the Board Organization and Nominating
Committee) recommended by the director and approved by the Company. The
7
contributions will be made in five annual installments of $100,000 each,
commencing as soon as practicable following the director's death. Directors
derive no financial benefit from the program and all charitable deductions will
accrue solely to the Company.
EXECUTIVE COMPENSATION
Compensation Overview
The Company is committed to building shareholder value through improved
performance and growth. To achieve this objective, TI seeks to create an
environment in which employees recognize that they are valued as individuals
and treated with respect, dignity and fairness.
The Company uses a merit-based system of compensation to encourage individual
employees to achieve their productive and creative potential, and to link
individual financial goals to Company performance. The Company regularly
compares its compensation system with those of competitors and refines its
system as necessary to encourage a motivated and productive work force.
The following tables provide information regarding the compensation of the
Company's chief executive officer and each of the four other most highly
compensated executive officers.
8
Summary Compensation Table
The following table sets forth information with respect to the compensation of
the Company's chief executive officer and each of the four other most highly
compensated executive officers for services in all capacities to the Company
in 1993, 1994 and 1995, except as otherwise indicated.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------------- ----------------------------------------
Awards Payouts
-------------------------- ------------
Name and Other Annual Restricted Stock Long-Term All Other
Principal Compensation Stock Awards Options (in Incentive Compensation
Position Year Salary Bonus <F1>(1) <F2>(2) shares)<F3>(3) Plan Payouts <F4>(4)
- - - ------------ ---- -------- ------- ------------ ----------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.R. Junkins 1995 $792,050 $1,750,000 -- 0 130,000 0 $391,979
Chairman, 1994 $700,200 $1,227,600 -- $141,250 110,000 0 $276,714
President & CEO 1993 $691,850 $ 740,000 -- 0 100,000 0 $ 71,032
W.B. Mitchell 1995 $373,750 $ 650,000 -- 0 50,000 0 $155,302
Vice 1994 $359,100 $ 500,000 -- 0 50,000 0 $103,157
Chairman 1993 $348,100 $ 320,000 -- 0 44,000 0 $ 37,248
W.P. Weber 1995 $404,250 $ 750,000 -- 0 50,000 0 $168,272
Vice 1994 $395,000 $ 600,000 -- 0 50,000 0 $110,899
Chairman 1993 $382,800 $ 400,000 -- 0 44,000 0 $ 36,522
T.J. Engibous 1995 $369,750 $1,000,000 -- 0 60,000 0 $145,654
Executive 1994 $306,000 $ 600,000 -- 0 42,000 0 $ 59,565
Vice President 1993 $238,000 $ 275,000 -- 0 24,000 0 $ 20,159
W.F. Hayes 1995 $371,750 $ 700,000 -- 0 50,000 0 $145,887
Executive 1994 $331,350 $ 500,000 -- 0 46,000 0 $ 83,353
Vice President 1993 $277,700 $ 300,000 -- 0 30,000 0 $ 25,752
- - - ------------------
<FN>
<F1>(1) The dollar value of perquisites and other personal benefits for each
of the named executive officers was less than the established reporting
thresholds.
<F2>(2) (a) For purposes of the table, restricted stock units awarded under
the Company's Long-Term Incentive Plan are valued at market on the date of
award.
(b) The restricted stock unit awarded to Mr. Junkins in 1994 provides for
the payment of 4,000 shares (as adjusted to give effect to the 1995 two-for-
one stock split), with 2,000 shares vesting first quarter 1995 and 2,000
shares vesting first quarter 1996. At December 31, 1995, the value of the
2,000 unvested shares was $103,000.
(c) Dividend equivalent payments are paid on restricted stock units at
the same rate as dividends on the Company's common stock.
9
<F3>(3) The number of shares granted has been adjusted to give effect to the
1995 two-for-one stock split.
<F4>(4) During 1995, the Company made payments relating to premiums with
respect to split-dollar life insurance policies in the following amounts:
Mr. Junkins, $70,295; Mr. Mitchell, $19,557; Mr. Weber, $18,981; Mr. Engibous,
$8,123; and Mr. Hayes, $18,662. Also, the Company made payments relating to
premiums with respect to life, travel and accident insurance policies in the
following amounts: Mr. Junkins, $27,146; Mr. Mitchell, $11,435; Mr. Weber,
$6,862; Mr. Engibous, $125; and Mr. Hayes, $2,959.
During 1995, the Company made matching contributions to the cash or deferred
compensation account (401(k)) under the U.S. profit sharing plan in the
following amounts: Mr. Junkins, $3,000; Mr. Mitchell, $3,000; Mr. Weber,
$3,000; Mr. Engibous, $3,000; and Mr. Hayes, $3,000.
For 1995, the profit sharing contributions (plus the ERISA reductions for
which the Company will provide an offsetting supplemental benefit) were as
follows: Mr. Junkins, $291,538; Mr. Mitchell, $131,310; Mr. Weber,
$139,429; Mr. Engibous, $134,639; and Mr. Hayes, $121,033.
10
</TABLE>
Table of Option Grants in 1995
The following table sets forth details regarding stock options granted to the
named executive officers in 1995. In addition, there are shown the
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock
appreciation of 5% and 10% from the date the options were granted over the
full option term.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Appreciation for Option Term (10 Years)
--------------------------------------------------------------
5% 10%
------------------------- -------------------------------
Options % Of Total
Granted Options Stock Stock
(in Granted to Exercise Expir- Price (per Price (per
shares) Employees Price(per ation share) (share)
Name <F1>(1) in 1995 share) Date <F2>(2) Gain <F2>(2) Gain
- - - ------------- ------- ---------- -------- -------- --------- -------------- --------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.R. Junkins 130,000 4.6 $35.63 1/25/05 $ 58.03 $ 2,911,918 $ 92.40 $ 7,380,370
W.B. Mitchell 50,000 1.8 $35.63 1/25/05 $ 58.03 $ 1,119,969 $ 92.40 $ 2,838,604
W.P. Weber 50,000 1.8 $35.63 1/25/05 $ 58.03 $ 1,119,969 $ 92.40 $ 2,838,604
T.J. Engibous 60,000 2.1 $35.63 1/25/05 $ 58.03 $ 1,343,962 $ 92.40 $ 3,406,325
W.F. Hayes 50,000 1.8 $35.63 1/25/05 $ 58.03 $ 1,119,969 $ 92.40 $ 2,838,604
All stockholders $ 58.03 $4,154,071,065<F3>(3) $ 92.40 $10,527,231,680<F3>(3)
Employees $ 58.03 $ 317,781,180<F4>(4) $ 92.40 $ 805,319,902<F4>(4)
through TI profit sharing plans
__________
<FN>
<F1>(1) These nonqualified options may become exercisable on a graduated basis
beginning after one year if specified earnings per share levels are attained.
These options are fully exercisable during the ninth and tenth year without
regard to earnings per share and also may become fully exercisable in the
event of a change in control (as defined in the options) of the Company. The
number of shares granted and the exercise price per share have been adjusted
to give effect to the 1995 two-for-one stock split.
Currently, the exercise price may be paid by delivery of already-owned shares
and tax withholding obligations related to exercise may be paid in shares,
subject to certain conditions.
<F2>(2) The price of TI common stock at the end of the 10-year term of the
stock options granted at a 5% annual appreciation would be $58.03 and at a 10%
annual appreciation would be $92.40.
11
<F3>(3) The gain is based on the fair market value ($35.625 per share) and
number of all the outstanding shares of common stock on January 25, 1995, the
grant date of the options.
<F4>(4) The data presented for all employees represents the gain employees
would realize through the appreciation of the stock price of TI stock held in TI
profit sharing plans from the date of grant of the stock options listed
above, assuming 5% and 10% annual appreciation over the 10-year option term.
</TABLE>
12
Table of Option Exercises in 1995 and Year-End Option Values
The following table sets forth information with respect to the named executive
officers concerning the exercise of options during 1995, and unexercised
options held as of December 31, 1995.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, 1995<F3>(3) December 31, 1995<F2>(2)<F3>(3)
Acquired on Value ------------------------- ------------------------
Name Exercise<F1>(1) Realized<F2>(2) Exercisable Unexercisable Exercisable Unexercisable
- - - ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Junkins 200,000 $7,713,500 590,000 210,000 $17,773,100 $3,556,000
W.B. Mitchell 99,500 $2,430,433 0 86,000 $ 0 $1,463,320
W.P. Weber 268,000 $7,048,220 58,000 86,000 $ 1,200,460 $1,463,320
T.J. Engibous 50,250 $1,692,564 0 87,000 $ 0 $1,436,700
W.F. Hayes 37,823 $1,445,103 139,325 80,500 $ 3,809,490 $1,346,540
- - - ---------------------
<FN>
</TABLE>
<F1>(1) These shares were acquired upon the exercise of options granted from
1985 through 1987 in the case of Mr. Junkins; from 1990 through 1994 in the
case of Mr. Mitchell; from 1986 through 1992 in the case of Mr. Weber; from
1990 through 1994 in the case of Mr. Engibous; and from 1986 through 1992 in
the case of Mr. Hayes. The number of shares acquired upon exercise has been
adjusted to give effect to the 1995 two-for-one stock split.
<F2>(2) Market value of underlying securities at exercise date or year-end, as
the case may be, minus the exercise price.
<F3>(3) Exercisable options or portions thereof relate to options granted
during 1987-1994; unexercisable options or portions thereof relate to options
granted during 1993-1995. The number of shares has been adjusted to give
effect to the 1995 two-for-one stock split.
13
Pension Plan Table
The following table sets forth the approximate annual benefits relating to the
U.S. pension plan that would be payable as of December 31, 1995 under various
assumptions as to average credited earnings (as defined in the plan) and years
of credited service (as defined in the plan) to employees in higher salary
classifications who are 65 years of age as of such date. Benefits are based on
eligible earnings. Eligible earnings include (a) salary as shown in the
summary compensation table and (b) bonus as shown in the summary compensation
table. Other elements of compensation shown in the summary compensation table
or referred to in the footnotes to that table are not included in eligible
earnings.
<TABLE>
<CAPTION>
Estimated Annual Benefits Under Pension Plan for
Specified Years of Credited Service<F2>(2)<F3>(3)
____________________________________________________________________________________
Average
Credited
Earnings
<F1>(1) 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
- - - ---------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000 109,584 146,112 182,640 219,168 255,696 293,196 330,696
$ 600,000 132,084 176,112 220,140 264,168 308,196 353,196 398,196
$ 700,000 154,584 206,112 257,640 309,168 360,696 413,196 465,696
$ 800,000 177,084 236,112 295,140 354,168 413,196 473,196 533,196
$ 900,000 199,584 266,112 332,640 399,168 465,696 533,196 600,696
$1,000,000 222,084 296,112 370,140 444,168 518,196 593,196 668,196
$1,100,000 244,584 326,112 407,640 489,168 570,696 653,196 735,696
$1,200,000 267,084 356,112 445,140 534,168 623,196 713,196 803,196
$1,300,000 289,584 386,112 482,640 579,168 675,696 773,196 870,696
$1,400,000 312,084 416,112 520,140 624,168 728,196 833,196 938,196
$1,500,000 334,584 446,112 557,640 669,168 780,696 893,196 1,005,696
$1,600,000 357,084 476,112 595,140 714,168 833,196 953,196 1,073,196
- - - --------------------
<FN>
<F1>(1) The average credited earnings is the average of the five consecutive
years of highest earnings.
At December 31, 1995, the named executive officers were credited with the
following years of credited service and had the following average credited
earnings, respectively, under the U.S. pension plan: Mr. Junkins, 37 years,
$1,314,141; Mr. Mitchell, 34 years, $618,095; Mr. Weber, 34 years, $687,551;
Mr. Engibous, 18 years, $477,852; and Mr. Hayes, 28 years, $532,847.
<F2>(2) If the amount otherwise payable under the pension plan should be
restricted by the applicable provisions of the ERISA, the amount in excess of
the Act's restrictions will be paid by the Company.
<F3>(3) The benefits under the plan are computed as single life annuity at age
65. The amounts shown in the table reflect the offset provided in the pension
14
plan under the pension formula adopted July 1, 1989 to comply with the social
security integration requirements. The integration offset is $2,916 for 15
years of credited service, $3,888 for 20 years of credited service, $4,860 for
25 years of credited service, $5,832 for 30 years of credited service, $6,804
for 35 years of credited service, $6,804 for 40 years of credited service and
$6,804 for 45 years of credited service.
</TABLE>
Early Retirement Agreements
The Company has a policy providing for optional early retirement agreements for
the chairman of the board, the president and such other personnel as the board
of directors may designate, upon attainment of age 58 and such minimum lengths
of service as the board may specify. Participants enter into early retirement
agreements with the Company which among other things prohibit competition with
the Company until the attainment of age 69. Payments under the agreements are
based on the difference between the retirement benefits the individual is to
receive from the Company's U.S. pension plan and the retirement benefits the
individual would have received from the pension plan had the individual
remained in employment with the Company until the attainment of age 65 at a
rate of compensation equal to the average annual eligible earnings (as defined
in the pension plan) received during the three years immediately preceding
early retirement. The individual may elect payment under the early retirement
agreement in the form of monthly payments for life, monthly payments to the
individual or the individual's estate or survivors until the date of the
individual's 69th birthday, or a 50% joint and survivor's payment.
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the board of directors has furnished the
following report on executive compensation paid or awarded to executive
officers for 1995:
The executive compensation program is administered by the Compensation
Committee of the board of directors (the Committee), which is composed of the
individuals listed below, all of whom are independent directors of the Company.
The program consists of base salaries, annual incentive awards and long-term
compensation. At higher management levels, the mix of compensation is weighted
more to the performance-based components annual incentive and long-term
compensation.
In determining the compensation of the executive officers, the Committee
considered guidelines developed for each component of compensation. As
indicated below, the guidelines took account of compensation practices of
competitor companies (as reported in various surveys administered by national
compensation consulting firms) and the relative performance of TI and
competitor companies. The competitor companies are primarily major high-
technology competitors in one or more of the markets semiconductor, defense and
information technology in which the Company operates. While many of these
companies are included in the S&P High-Technology Composite Index appearing in
the graph regarding total shareholder return on page 20, these companies are
not the same as the companies comprising that index. Each guideline was set
based on the best available data from as many competitor companies as
practicable. The Committee also considered the performance of the executive
officers toward the Company's prior year and long-term strategic objectives; in
this connection, the CEO made recommendations regarding the components of each
executive officer's compensation package except his own.
In its considerations, the Committee did not assign quantitative relative
weights to different factors or follow mathematical formulae. Rather, the
Committee exercised its discretion and made a judgment after considering the
factors it deemed relevant. The Committee's decisions regarding 1995 executive
compensation were designed to: (1) align the interests of executive officers
with the interests of the stockholders by providing performance-based awards;
and (2) allow the Company to compete for and retain executive officers critical
to the Company's success by providing an opportunity for compensation that is
comparable to the levels offered by other companies in our markets.
Section 162(m) of the Internal Revenue Code generally denies a deduction to any
publicly held corporation for compensation paid to a "covered employee" in a
taxable year to the extent that the employee's compensation (other than
qualified performance-based compensation) exceeds $1 million. In December
1995, the Internal Revenue Service published regulations governing the $1
million deductibility cap. Pursuant to those regulations, the Company's
"covered employees" will be those who, at the end of the year, are the chief
executive officer and the four other highest compensated officers of the
Company as determined under the rules of the Securities and Exchange Commission
governing executive compensation disclosure.
16
It is the Committee's policy to consider deductibility under Section 162(m) in
determining compensation arrangements for the Company's "covered employees" and
the Committee intends to optimize the deductibility of compensation to the
extent deductibility is consistent with the objectives of the executive
compensation program. The Committee, however, intends to weigh the benefits of
full deductibility with the objectives of the executive compensation program
and, if the Committee believes to do so is in the best interests of the Company
and its stockholders, will make compensation arrangements which may not be
fully deductible under Section 162(m). Under the transitional rules set forth
in the regulations, all compensation attributable to stock options granted
under the Company's current Long-Term Incentive Plan prior to the Company's
1997 annual meeting is expected to qualify for deductibility under
Section 162(m). The board of directors is presenting a new Long-Term Incentive
Plan for stockholder approval at the 1996 annual meeting. If the new Long-Term
Incentive Plan is approved, grants of options under the new Long-Term Incentive
Plan are expected to qualify for deductibility under Section 162(m). The
Committee expects that the annual incentive awards granted to date to the
Company's executive officers will, together with their 1996 salaries and any
other compensation paid to them in 1996, qualify for deductibility.
Annual Compensation
Annual compensation (base salary and annual incentive) guidelines were
established such that TI executive officers will receive a level of annual
compensation at, above or below the median annual compensation paid by
competitor companies depending primarily on whether TI's actual return on net
assets (RONA) is at, above or below its internally established performance
threshold, as described below. TI's percent revenue growth relative to the
percent revenue growth of competitor companies was also taken into account in
establishing the guidelines.
Base Salary. Base salary guidelines were established at the median level of
salaries for similarly situated executive officers of competitor companies, or
of organizations within competitor companies, of similar size (in terms of
total revenue). The Committee, in its discretion, determined officer salaries
in January 1995 at what it considered to be appropriate levels after reviewing
performance toward prior year objectives (such as improving production yields,
cycle times, productivity and customer satisfaction) and long-term strategic
objectives (such as increasing market share in the semiconductor business, and
focusing efforts to leverage TI's semiconductor, software and systems
expertise to make major contributions to the critical technologies driving the
digital revolution).
In determining the CEO's base salary, the Committee noted the continued
improvement in the financial performance of the Company. The Committee
considered the level of base salaries of CEOs of competitor companies and the
fact that Mr. Junkins had not received a base salary increase in 1994 and
consequently adjusted Mr. Junkins' salary to $800,400. While this represents
a significant increase, Mr. Junkins' salary remains below the median of CEOs
of competitor companies.
17
Annual Incentive. The Committee granted the CEO an annual incentive award in
March 1995. The award provided for variable payouts depending upon the
Company's actual 1995 RONA and growth in net revenues from 1994 to 1995, and
further provided that the Committee may, in its discretion, reduce the amount
payable under the award based on the Committee's judgment of circumstances at
the time. Incentive awards for the other executive officers were granted in
January 1996. As the performance component of annual compensation, the annual
incentive award varies significantly based on the Company's profitability and
revenue growth and the individual's contribution toward the Company's
performance. The primary performance threshold established for purposes of
determining annual incentive awards for 1995 is stated in terms of RONA. RONA
performance thresholds were established for 1995 taking into account (a) the
Company's 1995 RONA (either estimated or actual depending on the time of the
award) relative to 1995 RONA of competitor companies (as estimated at the time
of the award), and (b) the RONA the Company believes would be likely to
increase shareholder value over the long-term. The guidelines also provide for
an adjustment in the amount of the annual incentive awards based on TI's 1995
percent revenue growth as compared with the 1995 percent revenue growth of
competitor companies (as calculated in accordance with the terms of the award).
In granting the CEO's incentive award in March 1995, the Committee considered
the incentive compensation paid to CEOs of competitor companies and the
Company's RONA and percent revenue growth forecasts relative to the estimated
RONA and percent revenue growth performance of competitor companies. The award
was designed to pay the CEO at, above or below the median incentive paid to
CEOs of competitor companies, depending primarily upon whether TI's 1995 RONA
is at, above or below the Company's internally established performance
threshold. The award provided for an additional payment based on the extent
TI's 1995 percent revenue growth exceeded the percent revenue growth of
competitor companies (as calculated in accordance with the terms of the award),
if the Company's actual 1995 RONA performance met or exceeded the performance
threshold.
While the Company's performance exceeded the RONA threshold established in
March 1995, a review in January 1996 of the markets in which the Company
operated and the RONA performance of competitor companies suggested to the
Committee that the RONA threshold was low. Accordingly, the Committee
adjusted the award to $1,750,000. Mr. Junkins' annual compensation (base
salary plus incentive award) for 1995 exceeded the median for competitor
companies as did the performance of the Company.
Taking into account each executive officer's contributions toward prior year
objectives and the degree to which TI's 1995 RONA performance exceeded the RONA
performance threshold and TI's percent revenue growth exceeded the percent
revenue growth of competitor companies, the Committee granted annual incentive
awards to TI's executive officers (other than the CEO) such that the level of
the officers' annual compensation (base salary plus incentive award) for 1995
exceeded the median of competitors' annual compensation.
Long-Term Compensation
The Committee determined long-term compensation in January 1995. Stock options
constitute TI's primary long-term incentive vehicle. Stock options granted in
18
1995 were granted at 100% of fair market value on the date of grant, have a 10-
year term and do not become exercisable until after eight years, although
exercisability may be accelerated to the extent that earnings per share goals
are achieved (or in the event of a change in control of the Company). Any
value received by the executive officer from an option grant depends completely
upon increases in the price of TI common stock.
Guidelines for awards granted under TI's long-term incentive program were set
with the intention of providing TI executive officers an opportunity for
financial gain equivalent to the median opportunity provided by competitor
companies through all their long-term compensation programs. For this purpose,
the future rate of appreciation of the shares underlying stock-based awards is
assumed to be the same for all companies. Although not considered in
establishing guidelines for stock option grants, the size of prior grants was
considered in administering the guidelines.
The Committee reviewed the guidelines and determined to grant stock options
exceeding the guidelines to each executive officer. The Committee considered
the significant contributions of these executive officers to the development
and implementation of a focused strategic plan for the Company. The Committee
believes that these grants will recognize progress toward accomplishment of the
strategic plan and, since these stock options will result in increased
compensation to the executive officer only if TI's stock price increases, focus
the executive officers on executing the plan and building value for
shareholders.
In determining the CEO's long-term compensation, the Committee reviewed
progress made toward the Company's long-term objectives: accelerate TI's long-
term growth rate, while improving stability in the return on invested capital,
(1) by emphasizing digital signal processing solutions and shared investments
in memory products to reduce volatility in semiconductors; (2) by repositioning
defense systems and electronics for renewed growth, taking advantage of TI's
core defense technologies for commercial applications; and (3) by aggressively
pursuing R&D opportunities for new technologies such as digital light
processing. The Committee determined that the grant of the option to purchase
130,000 shares at a price per share of $35.63 (the market value of TI's common
stock on the date of grant giving effect to the subsequent 2-for-1 stock
split) would, in its judgment, provide the CEO with a competitive financial
opportunity slightly exceeding the median. Until the year 2003, the
exercisability of the option depends primarily on the achievement of specific
earnings per share goals. The CEO's total long-term compensation slightly
exceeded the median long-term compensation provided by competitor companies,
and the CEO's total compensation (annual plus long-term) exceeded the median
total compensation as the performance of the Company exceeded the median of
competitor companies.
William S. Lee, Chair Gerald W. Fronterhouse
James R. Adams Gloria M. Shatto
19
COMPARISON OF TOTAL SHAREHOLDER RETURN
The following graph sets forth TI's total shareholder return as compared to the
S&P 500 Index and the S&P High-Technology Composite Index over a five-year
period, beginning December 31, 1990, and ending December 31, 1995. The total
shareholder return assumes $100 invested at the beginning of the period in TI
Common Stock, the S&P 500 and the S&P High-Technology Composite Index. It
also assumes reinvestment of all dividends.
[A performance graph showing five year cumulative
total return among the Company, the S&P 500 Index
and the S&P High Tech Composite Index appears here.
The coordinates used in the graph appear below.]
<TABLE>
<CAPTION>
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C>
Texas Instruments $100 $ 83 $128 $176 $210 $292
S&P 500 $100 $130 $140 $155 $157 $215
S&P High Tech $100 $114 $119 $146 $170 $245
Composite Index
</TABLE>
*Assumes that the value of the investment in TI Common Stock and each index was
$100 on December 31, 1990, and that all dividends were reinvested.
**Year ending December 31.
20
PROPOSAL TO APPROVE AMENDMENT TO RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
The board of directors believes that it is desirable for the stockholders to
consider and act upon a proposal to amend the Company's Restated Certificate of
Incorporation (the Certificate). Pursuant to the proposal, the currently
authorized shares of common stock, $1 par value, will be increased from
300,000,000 to 500,000,000 shares.
Of the 300,000,000 currently authorized shares of common stock, as of
December 31, 1995, 189,526,939 were issued (including 138,129 treasury shares).
Of the remaining 110,473,061 authorized shares of common stock, 21,750,913 were
reserved for issuance in connection with the Company's incentive plans, stock
option plans, stock option purchase plan, profit sharing plans and convertible
subordinated debentures.
Except for shares currently reserved as explained above and shares that may be
reserved in connection with the proposed 1996 Long-Term Incentive Plan
discussed below, the Company does not now have any present plan, understanding
or agreement to issue additional shares of common stock. However, the board
believes that the proposed increase in authorized shares of common stock is
desirable to enhance the Company's flexibility in connection with possible
future actions, such as stock splits, stock dividends, financings, corporate
mergers, acquisitions of property, use in employee benefit plans, or other
corporate purposes. The board will determine whether, when, and on what terms
the issuance of shares of common stock may be warranted in connection with any
of the foregoing purposes.
If the proposed amendment is approved, all or any of the authorized shares of
common stock may be issued without further action by the stockholders and
without first offering such shares to the stockholders for subscription. The
issuance of common stock otherwise than on a pro-rate basis to all holders of
such stock would reduce the proportionate interests of such stockholders.
Pursuant to the proposal, the first sentence of Article Fourth of the
Certificate will be amended to read as follows:
"The total number of shares of all classes of stock which the Company
shall have authority to issue is Five Hundred Ten Million (510,000,000)
shares, of which Ten Million (10,000,000) shall be Preferred Stock with a
par value of $25.00 per share, and Five Hundred Million (500,000,000)
shall be Common Stock with a par value of $1.00 per share."
Other than increasing the authorized shares of common from 300,000,000 to
500,000,000, the proposed amendment in no way changes the Certificate.
The board has unanimously adopted resolutions setting forth the proposed
amendment to the Certificate, declaring its advisability and directing that the
proposed amendment be submitted to the stockholders for their approval at the
annual meeting on April 18, 1996. If adopted by the stockholders, the amendment
will become effective upon filing as required by the General Corporation Law of
Delaware.
The board of directors recommends a vote "FOR" the above proposal.
21
PROPOSAL TO APPROVE THE TEXAS INSTRUMENTS
1996 LONG-TERM INCENTIVE PLAN
Since 1965 the Company has had in effect key employee incentive plans,
currently consisting of the Texas Instruments Long-Term Incentive Plan and the
Texas Instruments Annual Incentive Plan. These plans were designed to provide
an additional incentive for those who are key to the Company's success in the
highly technological and competitive businesses in which it operates. The
board of directors believes that these plans have been effective in providing
such incentive. The board also believes that, for the Company to continue to
attract and retain outstanding individuals at all levels of the Company's
organizations, it must continue to have incentive plans of these types in
place.
The Texas Instruments Annual Incentive Plan (the Annual Plan) provides for
awards, in cash or in common stock of the Company, to be made by the
Compensation Committee (the Committee) of the board of directors out of amounts
credited annually to a reserve within the limits of a formula which was
approved by the stockholders in 1965. Under the formula, the amount credited
to the Reserve each year may not exceed 10% of the amount by which the
Company's net income (as defined) for such year exceeds 6% of net capital (as
defined), but not in excess of the amount paid out as dividends on the common
stock of the Company during such year. No changes to the Annual Plan are
proposed.
The Texas Instruments Long-Term Incentive Plan (the Long-Term Plan) provides
for the grant by the Committee of: (1) stock options, including incentive
stock options meeting the requirements of Section 422 of the Internal Revenue
Code, (2) restricted stock and restricted stock units, (3) performance units
and (4) other awards (including stock appreciation rights) valued in whole or
in part by reference to or otherwise based on common stock of the Company.
As of January 31, 1996, there were only 108,268 shares of the common stock of
the Company remaining available for grant under the Long-Term Plan. The board
of directors recommends that the stockholders approve adoption of a new Texas
Instruments 1996 Long-Term Incentive Plan to replace the existing Long-Term
Plan.
It is anticipated that the 108,268 shares that were available for grant under
the Long-Term Plan at January 31, 1996 will continue to be available for grant
after adoption of the new Texas Instruments 1996 Long-Term Plan unless granted
before such adoption.
Texas Instruments 1996 Long-Term Incentive Plan
The full text of the proposed Texas Instruments 1996 Long-Term Incentive Plan
(the 1996 Plan) is shown on Exhibit A to this proxy statement. The principal
features of the 1996 Plan, which is essentially identical to the existing Long-
Term Plan, are summarized below.
Under the 1996 Plan, the number of shares of common stock available for
granting stock options and other awards during the term of the plan will be
18,500,000 shares, subject to adjustment for stock splits and other events as
22
set forth in the plan. No more than 2,000,000 shares of common stock may be
awarded as restricted stock, restricted stock units or "other stock based
awards" described below during the term of the plan.
As noted above, the 1996 Plan will permit the granting of: (1) stock options,
including incentive stock options meeting the requirements of Section 422 of
the Internal Revenue Code, (2) restricted stock and restricted stock units,
(3) performance units and (4) other awards (including stock appreciation
rights) valued in whole or in part by reference to or otherwise based on common
stock of the Company. The plan will be administered by the Compensation
Committee (the Committee) of the board of directors. The Committee will have
the authority to establish rules for the administration of the plan; to select
the employees to whom awards are granted; to determine the types of awards to
be granted and the number of shares covered by such awards; to set the terms
and conditions of such awards; and to cancel, suspend and amend awards but,
except for stock splits and other events described below, no amendment may
reduce the exercise price of an option. Neither the benefits or amounts that
will be received by the executive officers or others if the plan is approved by
the stockholders nor the benefits or amounts that would have been received by
them for 1995 if the plan had then been in effect may be determined at this
time, since awards under the plan will be at the discretion of the Committee.
The Committee may also determine whether the payment of any proceeds of any
award shall or may be deferred and may authorize payments representing
dividends or interest or their equivalents in connection with any deferred
award.
Any employee of the Company, including any officer or employee-director, will
be eligible to receive awards under the 1996 Plan. There were 59,574 employees
of the Company at December 31, 1995. Directors who are not full-time or part-
time officers or employees will not be eligible to participate in the plan.
Determinations and interpretations with respect to the 1996 Plan will be in the
sole discretion of the Committee, whose determinations and interpretations will
be binding on all interested parties. The Committee may delegate to one or
more officers or managers the right to grant awards and to cancel or suspend
awards with respect to individuals who are not subject to Section 16(b) of the
Securities Exchange Act of 1934, provided that any such delegation will conform
with the requirements of the General Corporation Laws of Delaware. The board
may amend, alter or discontinue the plan at any time provided that stockholder
approval must be obtained for any change that would increase the number of
shares available for awards or that would permit the granting of options or
other stock-based awards encompassing rights to purchase shares at prices below
the fair market value of the common stock, other than as described below.
Awards will be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that
upon their exercise the holder will receive cash, stock, other securities,
other awards, other property or any combination thereof, as the Committee shall
determine. Any shares of stock deliverable under the plan may consist in whole
or in part of authorized and unissued shares or treasury shares.
Except in the case of awards made through assumption of, or in substitution
for, outstanding awards previously granted by an acquired company, the exercise
23
price per share of stock purchasable under any stock option, the grant price of
any stock appreciation right, and the purchase price of any security which may
be purchased under any other stock-based award will not be less than 100% of
the fair market value of the stock or other security on the date of the grant
of such option, right or award. Options and other purchase rights shall be
exercised by payment in full of the purchase price, either in cash or, at the
discretion of the Committee, in whole or in part by the tendering of stock of
the Company or other consideration having a fair market value on the date the
option or right is exercised equal to the exercise or purchase price.
Determinations of fair market value under the plan will be made in accordance
with methods or procedures established by the Committee.
Restricted stock may provide the recipient all of the rights of a stockholder
of the Company, including the right to vote the shares and to receive any
dividends, provided that neither restricted stock nor restricted stock units
may be transferred by the recipient until certain restrictions established by
the Committee lapse. Upon termination of employment during the restriction
period, all restricted stock and restricted stock units shall be forfeited,
unless the Committee determines otherwise.
Performance units will provide the holder thereof rights valued as determined
by the Committee and payable to, or exercisable by, such holder, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. The Committee is also authorized to
establish the terms and conditions of other stock-based awards.
No award granted under the 1996 Plan may be assigned, transferred, pledged or
otherwise encumbered by the individual to whom it is granted, otherwise than by
will, by designation of a beneficiary, or by the laws of descent and
distribution. Each award shall be exercisable, during such individual's
lifetime, only by such individual, or, if permissible under applicable law, by
such individual's guardian or legal representative.
Under the 1996 Plan, if any shares subject to any award under the Long-Term
Plan, or under the 1984 or 1988 Stock Option Plans of the Company are
forfeited, or if any such award terminates without the delivery of shares or
other consideration, the shares previously used for such awards will be
available for future awards under the 1996 Plan. If another company is
acquired by the Company or an affiliate in the future, any awards made and any
of the Company's shares delivered upon the assumption of or in substitution for
outstanding grants made by the acquired company may be deemed to be granted
under the 1996 Plan but, with the exception of grants made to individuals who
are officers and directors of the Company for purposes of Section 16(b) of the
Securities Exchange Act of 1934, will not decrease the number of shares
available for grant under the 1996 Plan. Except for such awards and except to
avoid double counting with respect to certain awards granted in tandem with
other awards granted under the 1996 Plan or under any other plan of the
Company, all awards granted under the 1996 Plan will be counted against the
overall limits on the number of shares available under the 1996 Plan pursuant
to procedures to be specified by the Committee.
If any dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
24
combination, repurchase, or exchange of shares or other securities of the
Company, issuance of warrants or other rights to purchase shares or other
securities of the Company, or other similar corporate transaction or event
affects the shares so that an adjustment is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the 1996 Plan, then the Committee may, in such manner as
it deems equitable, adjust (1) the number and type of shares (or other
securities or property) which thereafter may be made the subject of awards,
(2) the number and type of shares (or other securities or property) subject to
outstanding awards, and (3) the grant, purchase or exercise price with respect
to any award, or may make provision for a cash payment to the holder of an
outstanding award. The Committee will also be authorized, for similar
purposes, to make adjustments in performance unit criteria or in the terms and
conditions of other awards in recognition of unusual or non-recurring events
affecting the Company or its financial statements or of changes in applicable
laws, regulations or accounting principles. The Committee may correct any
defect, supply any omission, or reconcile any inconsistency in the plan or any
award in the manner and to the extent it shall deem desirable to carry the plan
into effect. Nothing contained in the plan shall prevent the Company or any
affiliate from adopting or continuing in effect other or additional
compensation arrangements.
It is intended that awards under the 1996 Plan to any "covered employees" as
defined in Section 162(m) of the Internal Revenue Code will qualify as
performance-based compensation under Section 162(m) so as to preserve the
deductibility of any compensation in excess of $1 million paid to any "covered
employees." Accordingly, the plan provides that members of the Committee must
be "outside directors" as defined in Section 162(m) and regulations thereunder,
that options on no more than 500,000 shares may be granted to a participant in
a year, that awards other than options or stock appreciation rights to
individuals expected by the Committee to be "covered employees" and recipients
of over $1 million in compensation may not exceed $5,000,000 in a year and must
provide that payment will be subject to achievement of a defined level of one
or more of the following performance measures: (i) return on net assets,
(ii) revenue growth, (iii) return on invested capital, (iv) return on common
equity, (v) total shareholder return, (vi) earnings per share, (vii) cycle time
improvements, (viii) manufacturing process yield, (ix) net revenue per
employee, (x) cost of capital or (xi) market share, all as defined in the plan.
No awards may be granted under the 1996 Plan after April 18, 2006.
Tax Consequences
Counsel for the Company has advised that, in the case of an incentive stock
option, if an optionee exercises the option during or within three months of
employment and does not dispose of the shares within two years of the date of
grant of the option or one year after the transfer of such shares to the
optionee, the optionee will be entitled for federal income tax purposes to
treat any profit which may be realized upon the disposition of the shares as a
long-term capital gain. In contrast, a person who receives an option under the
plan which is not an incentive stock option or otherwise does not comply with
the conditions noted above will generally realize ordinary income, at the time
of exercise, in the amount of the excess, if any, of the fair market value of
25
the stock on the date of exercise over the option price. In the case of
incentive stock options, any excess of the fair market value of the stock at
the time of exercise over the option price would be an item of income for
purposes of the individual's alternative minimum tax.
Counsel for the Company has also advised that a person who receives a grant of
an option, whether it is an incentive stock option or an option which is not an
incentive stock option, will not be in receipt of taxable income under the
Internal Revenue Code upon the making of the grant. The Company will not be
allowed any deduction for federal income tax purposes upon the grant or
exercise of incentive stock options (assuming compliance by the optionee with
the conditions noted above). The Company will be entitled to a deduction for
federal income tax purposes in an amount equal to the ordinary income, if any,
realized by an optionee who (a) exercises an option which is not an incentive
stock option, or (b) disposes of stock acquired pursuant to the exercise of an
incentive stock option prior to the end of the required holding period
described in the immediately preceding paragraph.
The Board of Directors recommends a vote "FOR" the Texas Instruments 1996 Long-
Term Incentive Plan.
ADDITIONAL INFORMATION
Financial Statements
This proxy statement has been preceded or accompanied by the Annual Report for
the fiscal year ended December 31, 1995. The consolidated financial statements
and auditor's report on pages _____, the management discussion and analysis of
financial condition and results of operations on pages _____ and _____ , and
information concerning the quarterly financial data on page _____ of the Annual
Report are incorporated herein by reference.
Voting Securities
As of February 20, 1996, there were outstanding ____________ shares of the
Company's common stock, which is the only class of capital stock entitled to
vote at the meeting. Each holder of common stock is entitled to one vote for
each share held. As stated in the Notice of Meeting, holders of record of the
common stock at the close of business on February 20, 1996 will be entitled to
vote at the meeting or any adjournment thereof.
26
The following table sets forth certain information concerning (a) the only
persons that have reported beneficial ownership of more than 5% of the common
stock of the Company, and (b) the ownership of the Company's common stock by
the named executive officers, and all executive officers and directors as a
group.
<TABLE>
<CAPTION>
Shares Owned At Percent of
Name and Address December 31, 1995 Class
- - - -------------------------------- ----------------- ----------
<S> <C> <C>
Bankers Trust New York Corporation xxxxxxx<F1>(1) x.x%
280 Park Avenue
New York, NY 10017
Jerry R. Junkins 820,531<F2>(2) <F4>*
William B. Mitchell 73,604<F2>(2) <F4>*
William P. Weber 130,403<F2>(2) <F4>*
Thomas J. Engibous 57,725<F2>(2) <F4>*
William F. Hayes 208,934<F2>(2) <F4>*
All executive officers and 1,900,776<F3>(3) 1%
directors as a group
____________________
<FN>
<F4>*Less than 1%.
<F1>(1) Includes __________ shares held in profit sharing stock accounts of the
Company's employees under the U.S. profit sharing trust served by Bankers Trust
Company of the Southwest, a subsidiary of Bankers Trust New York Corporation,
as trustee. Under the terms of the trust, the trustee votes the shares in each
employee's account in accordance withe shares represented
thereby will be voted in accordance with the vote of the majority of the
shares on which voting instructions are received from other
participants, except that the Trustee is not permitted under the TI
Employees Universal Profit Sharing Plan to vote shares of TI stock
attributable to Tax Credit Employee Stock Ownership Accounts unless
voting instructions have been received.
(over)
PLEASE MARK YOUR CHOICE IN OVAL IN THE FOLLOWING MANNER USING DARK INK
ONLY: [ / ]
________________________________________________________________________
The board of directors of TI recommends a vote FOR the election of
directors and the two board proposals.
Draft of
For All
1. Election of Directors For Withheld Except Nominee(s)
Written Below
Nominees: J.R. Adams, D.L. Boren, [ ] [ ] [ ]______________
J.B. Busey IV, G.W. Fronterhouse,
D.R. Goode, J.R. Junkins, W.S. Lee,
W.B. Mitchell, G.M. Shatto,
W.P. Weber and C.K. Yeutter.
2. Proposal regarding increasing the For Against Abstain
Company's authorized common stock. [ ] [ ] [ ]
3. Proposal regarding adoption of For Against Abstain
Texas Instruments 1996 Long-Term [ ] [ ] [ ]
Incentive Plan.
Dated __________________________, 1996
______________________________________________
Signature
NOTE: Please sign exactly as name appears on the
. front side. When signing as executor,
administrator, attorney, trustee or guardian,
etc., please give your full title.
</TABLE>
