texas_def14a.htm
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TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 49
 
 
 
 
                           
 
Notice of annual meeting of stockholders
April 15, 2010
 
Dear Stockholder:
 
You are cordially invited to attend the 2010 annual meeting of stockholders on Thursday, April 15, 2010, at the cafeteria on our property at 12500 TI Boulevard, Dallas, Texas, at 10:00 a.m. (Dallas time). At the meeting we will:
Stockholders of record at the close of business on February 16, 2010, are entitled to vote at the annual meeting.
 
We urge you to vote your shares as promptly as possible by: (1) accessing the Internet web site, (2) calling the toll-free number or (3) signing, dating and mailing the enclosed proxy.
 
Sincerely,
Joseph F. Hubach
Senior Vice President,
Secretary and
General Counsel
 
Dallas, Texas
March 4, 2010
 


PAGE 50 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Table of contents
 
Voting procedures 50
Election of directors 50
     Nominees for directorship 50
     Director nomination process 52
     Board diversity and nominee qualifications 52
     Communications with the board 54
     Corporate governance 54
     Annual meeting attendance 54
     Director independence 54
Board organization 55
     Board and committee meetings 55
     Board leadership structure 55
     Committees of the board 56
     Risk oversight by the board 58
Director compensation 58
     2009 director compensation 59
Executive compensation 60
     Compensation discussion and analysis 60
     Compensation Committee report 70
     2009 summary compensation table 70
     Grants of plan-based awards in 2009 72
     Outstanding equity awards at fiscal year-end 2009 73
     2009 option exercises and stock vested   76
     2009 pension benefits 77
     2009 non-qualified deferred compensation   79
     Potential payments upon termination or change in 
          control
80
Audit Committee report   84
Proposal to ratify appointment of independent registered
     public accounting firm 85
Additional information   85
     Voting securities 85
     Security ownership of certain beneficial holders   86
     Security ownership of directors and management 86
     Related person transactions   87
     Compensation committee interlocks and insider 
          participation
88
     Cost of solicitation   88
     Stockholder proposals for 2011 89
     Vote required   89
     Benefit plan voting 89
     Section 16(a) beneficial ownership reporting 
          compliance
  89
     Telephone and Internet voting 89
     Stockholders sharing the same address   90
     Electronic delivery of proxy materials 90


 
 
Proxy statement
March 4, 2010
 
Executive offices
12500 TI BOULEVARD, DALLAS, TEXAS 75243
MAILING ADDRESS: P. O. BOX 660199, DALLAS, TEXAS 75266-0199
 
Voting procedures
TI’s board of directors requests your proxy for the annual meeting of stockholders on April 15, 2010. If you sign and return the enclosed proxy, or vote by telephone or on the Internet, you authorize the persons named in the proxy to represent you and vote your shares for the purposes mentioned in the notice of annual meeting. This proxy statement and related proxy are being distributed on or about March 4, 2010. If you come to the meeting, you can vote in person. If you don’t come to the meeting, your shares can be voted only if you have returned a properly signed proxy or followed the telephone or Internet voting instructions, which can be found on the enclosed proxy. If you sign and return your proxy but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the board of directors. You can revoke your authorization at any time before the shares are voted at the meeting.
 
Election of directors
Directors are elected at the annual meeting to hold office until the next annual meeting and until their successors are elected and qualified. The board of directors has designated the following persons as nominees: RALPH W. BABB, JR., DAVID L. BOREN, DANIEL A. CARP, CARRIE S. COX, DAVID R. GOODE, STEPHEN P. MACMILLAN, PAMELA H. PATSLEY, WAYNE R. SANDERS, RUTH J. SIMMONS, RICHARD K. TEMPLETON and CHRISTINE TODD WHITMAN.
     If you return a proxy that is not otherwise marked, your shares will be voted FOR each of the nominees.
 
Nominees for directorship
All of the nominees for directorship will be directors of the company at the time of the annual meeting. For a discussion of each nominee’s qualifications to serve as a director of the company, please see pages 52-54. If any nominee becomes unable to serve before the meeting, the people named as proxies may vote for a substitute or the number of directors will be reduced accordingly.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 51
 
Directors
 
    
RALPH W. BABB, JR.
Age 61 Director
Member, Audit Committee, effective
March 15, 2010
 
        
PAMELA H. PATSLEY
Age 53
Director since 2004
Chair, Audit Committee
 
     
DAVID L. BOREN
Age 68
Director since 1995
Member, Audit Committee
 
WAYNE R. SANDERS
Age 62
Director since 1997
Member, Audit Committee
 
 
 
DANIEL A. CARP
Age 61
Director since 1997
Chair, Compensation Committee
 
RUTH J. SIMMONS
Age 64
Director since 1999
Chair, Governance and Stockholder
Relations Committee
 
   
CARRIE S. COX
Age 52
Director since 2004
Member, Compensation Committee
 
RICHARD K. TEMPLETON
Age 51
Chairman since 2008 and
director since 2003
 
   
DAVID R. GOODE
Age 69
Director since 1996
Member, Compensation Committee
 
CHRISTINE TODD WHITMAN
Age 63
Director since 2003
Member, Governance and Stockholder
Relations Committee
 
 
STEPHEN P. MACMILLAN
Age 46
Director since 2008
Member, Audit Committee
 
Director not standing for reelection
 
 
JAMES R. ADAMS
Member, Governance and Stockholder
Relations Committee
 



PAGE 52 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Mr. Adams, a highly valued director since 1989, has attained the age of 70 since his last election and is, therefore, ineligible under the company’s by-laws to stand for reelection in 2010.
 
Director nomination process
The board is responsible for approving nominees for election as directors. To assist in this task, the board has designated a standing committee, the Governance and Stockholder Relations Committee (the G&SR Committee), which is responsible for reviewing and recommending nominees to the board. The G&SR Committee is comprised solely of independent directors as defined by the rules of the New York Stock Exchange (NYSE) and the board’s corporate governance guidelines. Our board of directors has adopted a written charter for the G&SR Committee. It can be found on our web site at www.ti.com/corporategovernance.
     It is a long-standing policy of the board to consider prospective board nominees recommended by stockholders. A stockholder who wishes to recommend a prospective board nominee for the G&SR Committee’s consideration can write to the Secretary of the G&SR Committee, Texas Instruments Incorporated, Post Office Box 655936, MS 8658, Dallas, Texas 75265-5936. The G&SR Committee will evaluate the stockholder’s prospective board nominee in the same manner as it evaluates other nominees.
     In evaluating prospective nominees, the G&SR Committee looks for the following minimum qualifications, qualities and skills:
 
     Stockholders, non-employee directors, management and others may submit recommendations to the G&SR Committee.
     Mr. Babb was elected to the board effective March 15, 2010. He is the only director nominee for the 2010 annual meeting of stockholders who is standing for election by the stockholders for the first time. A search firm retained by the company to assist the G&SR Committee in identifying and evaluating potential nominees initially identified Mr. Babb as a potential director candidate. The search firm conducted research to identify a number of potential candidates, based on qualifications and skills the G&SR Committee determined that candidates should possess. It then conducted further research on the candidates in whom the G&SR Committee had the most interest. The board’s current size is within the desired range as stated in the board’s corporate governance guidelines.
 
Board diversity and nominee qualifications
As indicated by the criteria above, the board prefers a mix of background and experience among its members. The board does not follow any ratio or formula to determine the appropriate mix. Rather, it uses its judgment to identify nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standards of board service at the company. The effectiveness of this approach is evidenced by the directors’ participation in the insightful and robust yet collegial deliberation that occurs at board and committee meetings and in shaping the agendas for those meetings.
     As it considered director nominees for the 2010 annual meeting, the board kept in mind that the most important issues it considers typically relate to the company’s strategic direction; succession planning for senior executive positions; the company’s financial performance; the challenges of running a large, complex enterprise, including the management of its risks; major acquisitions and divestitures; and significant capital investment and research and development (R&D) decisions. These issues arise in the context of the company’s operations, which primarily involve the manufacture and sale of semiconductors all over the world into communications, computing, industrial and consumer electronics end markets.
     As described below, each of our director nominees has achieved an extremely high level of success in his or her career, whether at multi-billion dollar worldwide corporate enterprises, major U.S. universities or large governmental organizations. In these positions, each has been directly involved in the challenges relating to setting the strategic direction and managing the financial performance, personnel and processes of large, complex organizations. Each has had exposure to effective leaders and has developed the ability to judge leadership qualities. Each of them (other than the company’s chairman and CEO) has experience in serving on the board of directors of at least one other major corporation, and two have served in high political office, all of which provides additional relevant experience on which each nominee can draw.
     The board in concluding that each nominee should serve as a director relied on the specific experiences and attributes listed below and on the direct personal knowledge (except as to Mr. Babb, who will join the board March 15, 2010) born of previous service on the board, that each of the nominees brings insight and collegiality to board deliberations.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 53
 
Mr. Babb
 
Mr. Boren
 
Mr. Carp
 
Ms. Cox
 
Mr. Goode
 
Mr. MacMillan
 
Ms. Patsley
 
Mr. Sanders
 


PAGE 54 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
Ms. Simmons
Mr. Templeton
 
Ms. Whitman
 
 
Communications with the board
Stockholders and others who wish to communicate with the board as a whole, or to individual directors, may write to them at: P.O. Box 655936, MS 8658, Dallas, Texas 75265-5936. All communications sent to this address will be shared with the board or the individual director, if so addressed.
 
Corporate governance
The board has a long-standing commitment to responsible and effective corporate governance. The board’s corporate governance guidelines (which includes the director independence standards), the charters of each of the board’s committees, TI’s code of business conduct and our code of ethics for our chief executive officer and senior financial officers are available on our web site at www.ti.com/corporategovernance. Stockholders may request copies of these documents free of charge by writing to Texas Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, Texas, 75266-0199, Attn: Investor Relations.
 
Annual meeting attendance
It is a policy of the board to encourage directors to attend each annual meeting of stockholders. Such attendance allows for direct interaction between stockholders and board members. In 2009, all directors attended TI’s annual meeting of stockholders.
 
Director independence
The board has adopted the following standards for determining independence.
A.   In no event will a director be considered independent if:
  1. He or she is a current partner of or is employed by the company’s independent auditors; or
  2.   An immediate family member of the director is (a) a current partner of the company’s independent auditors or (b) currently employed by the company’s independent auditors and personally works on the company’s audit.
B. In no event will a director be considered independent if, within the preceding three years:
  1. He or she was employed by the company (except in the capacity of interim chairman of the board, chief executive officer or other executive officer) or any of its subsidiaries;
  2. He or she received more than $120,000 during any twelve-month period in direct compensation from TI (other than (a) director and committee fees and pension or other forms of deferred compensation and (b) compensation received for former service as an interim chairman of the board, chief executive officer or other executive officer);
  3. An immediate family member of the director was employed as an executive officer by the company or any of its subsidiaries;
  4. An immediate family member of the director received more than $120,000 during any twelve-month period in direct compensation from TI (excluding compensation as a non-executive officer employee of the company);
  5. He or she was (but is no longer) a partner or employee of the company’s independent auditors and personally worked on the company’s audit within that time;
  6. An immediate family member of the director was (but is no longer) a partner or employee of the company’s independent auditors and personally worked on the company’s audit within that time;
  7. He or she was an executive officer of another company, at which any of TI’s current executive officers at the same time served on that company’s compensation committee;
  8. An immediate family member of the director was an executive officer of another company at which any of TI’s current executive officers at the same time served on that company’s compensation committee;



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 55
 
  9.   He or she was, and remains at the time of the determination, an executive officer or employee of a company that made payments to, or received payments from, TI for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2 percent of the other company’s consolidated gross revenues for its last completed fiscal year (for purposes of this standard, charitable contributions are not considered “payments”); or
  10. An immediate family member of the director was, and remains at the time of the determination, an executive officer of a company that made payments to, or received payments from, TI for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2 percent of the other company’s consolidated gross revenues for its last completed fiscal year (for purposes of this standard, charitable contributions are not considered “payments”).
C.   Audit Committee members may not accept any consulting, advisory or other compensatory fee from TI, other than in their capacity as members of the board or any board committee. Compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with TI (provided that such compensation is not contingent in any way on continued service).
D.   The following relationships will not be considered material relationships with the company for the purpose of determining director independence:
  1.   A director is an employee, director or trustee of a charitable organization and TI or the TI Foundation makes discretionary contributions to that organization that are less than the greater of $50,000 or 2 percent of the organization’s latest publicly available consolidated gross revenue.
  2. A director is an employee, director or trustee of another entity that is indebted to TI or to which TI is indebted, and the total amount of either company’s indebtedness to the other is less than 2 percent of the total consolidated assets of the entity he or she serves as an executive officer, director or trustee.
     For any other relationship, the determination of whether it is material, and consequently whether the director involved is independent, will be made by directors who satisfy the independence criteria set forth in this section.
     For purposes of these independence determinations, “immediate family member” will have the same meaning as under the NYSE rules.
     Applying these standards, the board has determined that the following directors have no material relationship with the company other than as a director and are, therefore, independent: Mr. Adams, Mr. Babb, Mr. Boren, Mr. Carp, Ms. Cox, Mr. Goode, Mr. MacMillan, Ms. Patsley, Mr. Sanders, Ms. Simmons and Ms. Whitman.
 
Board organization

Board and committee meetings
During 2009, the board held nine meetings. The board has three standing committees described below. The committees of the board collectively held 27 meetings in 2009. Overall attendance at board and committee meetings was approximately 98 percent.
 
Board leadership structure
In 2009, the board, led by its G&SR Committee, conducted an in-depth review of the board’s leadership structure. This review followed the submission and defeat at the 2009 annual meeting of a stockholder proposal that asked for the board to implement a policy that the position of chairman of the board be held by an independent director.
     The board’s current leadership structure combines the positions of chairman and CEO, and uses a rotating lead director approach whereby the chair of the appropriate board committee leads independent directors’ executive sessions at which the principal item to be discussed is within the scope of authority of his or her committee. If there is no principal item, the chair of the G&SR Committee presides. The board chose this structure to facilitate oversight of management and to fully engage all independent directors. For example, independent directors meet in executive session at each regularly scheduled meeting to voice their observations and to shape future board agendas. Immediately following each session, the director who served as lead notifies the CEO of the independent directors’ assessment of the meeting and desired agenda for future meetings. Each director has an equal stake in the board’s actions and equal accountability to the corporation and its stockholders.
     In its discussions over the course of several months, the board used two questions to guide its considerations: would stockholders be better served and would the board be more effective with a different structure. The board’s discussion included a review of the practices of other companies and insight into the preferences of top stockholders, as gathered from face-to-face dialogue and review of published guidelines. The board also considered how board roles and interactions would change if it established a permanent lead director. In particular, the board noted that implementation of such a model could result in less engagement by independent directors (other than the permanent lead director) than exists under the current model, an outcome considered highly undesirable by the board.
     After candid discussions, the board determined that a change in leadership structure would offer no net benefit to stockholders, and in fact, the current practice of a rotating director is superior in its ability to encourage active involvement, independent thinking and an environment of equal influence among all directors. The board concluded its review by reaffirming its belief that there is no uniform solution for a board leadership structure. Indeed, the company has had varying board leadership models over its history, at times separating the positions of chairman and CEO and at times combining the two. The board believes that the right structure should be informed by the needs and circumstances of the company, its board and its stockholders, and directors should remain adaptable to shaping the leadership structure as those needs change.
 


PAGE 56 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Committees of the board
Audit Committee. The Audit Committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. All members of the Audit Committee are independent under the rules of the NYSE and the board’s corporate governance guidelines. Since January 1, 2009, the committee members have been Ms. Patsley (Chair), Mr. Boren, Mr. MacMillan and Mr. Sanders. Mr. Babb will join the Committee effective March 15, 2010. The Audit Committee is generally responsible for:
 
     The board has determined that all members of the Audit Committee are financially literate and have financial management expertise, as the board has interpreted such qualifications in its business judgment. In addition, the board has designated Ms. Patsley as the Audit Committee financial expert as defined in the Securities Exchange Act of 1934, as amended.
     The Audit Committee met seven times in 2009. The Audit Committee holds regularly scheduled meetings and reports its activities to the board. The committee also continued its long-standing practice of meeting directly with our internal audit staff to discuss the audit plan and to allow for direct interaction between Audit Committee members and our internal auditors. Please see page 84 for a report of the committee.
 
Compensation Committee. The Compensation Committee consists of three independent directors. Since January 1, 2009, the committee members have been Mr. Carp (Chair), Ms. Cox and Mr. Goode. The committee is responsible for:
 
     The Compensation Committee holds regularly scheduled meetings, reports its activities to the board, and consults with the board before setting annual executive compensation. During 2009, the committee met eleven times. Please see page 70 for a report of the committee.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 57
 
     In performing its functions, the committee is supported by the company’s Human Resources organization. The committee has the authority to retain any advisors it deems appropriate to carry out its responsibilities. The committee retained Pearl Meyer & Partners as its compensation consultant for the 2009 compensation cycle. The committee instructed the consultant to advise it directly on executive compensation philosophy, strategies, pay levels, decision-making processes and other matters within the scope of the committee’s charter. Additionally, the committee instructed the consultant to assist the company’s Human Resources organization in its support of the committee in these matters with such items as peer-group assessment, analysis of the executive compensation market, and compensation recommendations.
     The Compensation Committee considers it important that its compensation consultant’s objectivity not be compromised by other business engagements with the company or its management. In support of this belief, the committee adopted a policy in June 2007 on compensation consultants. A copy of the policy may be found on www.ti.com/corporategovernance. During 2009, neither the consultant nor any of its affiliates performed services for TI other than pursuant to the engagement by the committee.
     The Compensation Committee considers executive compensation in a multistep process that involves the review of market information, performance data and possible compensation levels over several meetings leading to the annual determinations in January. Before setting executive compensation, the committee reviews the total compensation and benefits of the executive officers and considers the impact that their retirement, or termination under various other scenarios, would have on their compensation and benefits.
     The CEO and the senior vice president responsible for Human Resources, who is an executive officer, are regularly invited to attend meetings of the committee. The CEO is excused from the meeting during any discussion of his own compensation. No executive officer determines his or her own compensation or the compensation of any other executive officer. As members of the board, the members of the committee receive information concerning the performance of the company during the year and interact with our management. During the committee’s deliberations on executive compensation, the CEO gives the committee and the board an assessment of his own performance during the year just ended. He also reviews the performance of the other executive officers with the committee and makes recommendations regarding their compensation. The senior vice president responsible for Human Resources assists in the preparation of and reviews the compensation recommendations made to the committee other than for her compensation.
     The Compensation Committee’s charter provides that it may delegate its power, authority and rights with respect to TI’s long-term incentive plans, employee stock purchase plan and employee benefit plans to (i) one or more committees of the board established or delegated authority for that purpose; or (ii) employees or committees of employees except that no such delegation may be made with respect to compensation of the company’s executive officers.
     Pursuant to that authority, the Compensation Committee has delegated to a special committee established by the board the authority to grant a limited number of stock options and restricted stock units under the company’s long-term incentive plans. The sole member of the special committee is Mr. Templeton. The special committee has no authority to grant, amend or terminate any form of compensation to TI’s executive officers. The Compensation Committee reviews the grant activity of the special committee.
 
Governance and Stockholder Relations Committee. All members of the G&SR Committee are independent. Since January 1, 2009, the committee members have been Ms. Simmons (Chair), Mr. Adams and Ms. Whitman. The G&SR Committee is generally responsible for:
 
     The G&SR Committee met nine times in 2009. The G&SR Committee holds regularly scheduled meetings and reports its activities to the board. Please see page 52 for a discussion of stockholder nominations and page 54 for a discussion of communications with the board.
 


PAGE 58 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Risk oversight by the board
It is management’s responsibility to assess and manage the various risks TI faces. It is the board’s responsibility to oversee management in this effort. In exercising its oversight, the board has allocated some areas of focus to its committees and has retained areas of focus for itself, as more fully described below.
     Management generally views the risks TI faces as falling into the following categories: strategic, operational, financial and compliance. The board as a whole has oversight responsibility for the company’s strategic and operational risks (e.g., major initiatives, competitive markets and products, sales and marketing, and research and development). Throughout the year the CEO discusses these risks with the board during strategy reviews that focus on a particular business or function. In addition, at the end of the year, the CEO provides a formal report on the top strategic and operational risks.
     TI’s Audit Committee has oversight responsibility for financial risk (such as accounting, finance, internal controls and tax strategy). Oversight responsibility for compliance risk is shared among the board committees. For example, the Audit Committee oversees compliance with the company’s code of conduct and finance- and accounting-related laws and policies, as well as the company’s compliance program itself; the Compensation Committee oversees compliance with the company’s executive compensation plans and related laws and policies; and the G&SR Committee oversees compliance with governance-related laws and policies, including the company’s corporate governance guidelines.
     The Audit Committee oversees the company’s approach to risk management as a whole. It reviews the company’s risk management process at least annually by means of a presentation by the CFO.
 
Director compensation
The G&SR Committee has responsibility for reviewing and making recommendations to the board on compensation for non-employee directors, with the board making the final determination. The committee has no authority to delegate its responsibility regarding director compensation. In carrying out this responsibility it is supported by TI’s Human Resources organization. The CEO, the senior vice president responsible for Human Resources and the Secretary review the recommendations made to the committee. The CEO also votes, as a member of the board, on the compensation of non-employee directors.
     The compensation arrangements in 2009 for the non-employee directors were:
 
     The board has determined that grants of equity compensation to non-employee directors will be timed to occur when grants are made to our U.S. employees in connection with the annual compensation review process. Accordingly, equity grants to non-employee directors are made in January. Please see the discussion regarding the timing of equity compensation grants in the Compensation Discussion and Analysis on page 68.
     Directors are not paid a fee for meeting attendance, but we reimburse non-employee directors for their travel, lodging and related expenses incurred in connection with attending board, committee and stockholders meetings and other designated TI events. In addition, non-employee directors may travel on company aircraft to and from these meetings and other designated events. On occasion, directors’ spouses are invited to attend board events; the spouses’ expenses incurred in connection with attendance at those events are also reimbursed.
     Under the Director Plan, some directors have chosen to defer all or part of their cash compensation until they leave the board (or certain other specified times). These deferred amounts were credited to either a cash account or stock unit account. Cash accounts earn interest from TI at a rate currently based on Moody’s Seasoned Aaa Corporate Bonds. For 2009, that rate was 6.01 percent. Stock unit accounts fluctuate in value with the underlying shares of TI common stock, which will be issued after the deferral period. Dividend equivalents are paid on these stock units. Directors may also defer settlement of the restricted stock units that they receive.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 59
 
     We have arrangements with certain customers whereby our employees may purchase specific consumer products containing TI-manufactured components at discounted pricing. In addition, the TI Foundation has an educational and cultural matching gift program. In both cases, directors are entitled to participate on the same terms and conditions available to employees.
     Non-employee directors are not eligible to participate in any TI-sponsored pension plan.
     In April 2009, stockholders approved the Texas Instruments 2009 Director Compensation Plan (2009 Plan). Director compensation to be paid under the 2009 Plan is the same as described above, except that the change-in-control terms differ. The 2009 Plan contains “double-trigger” change-in-control terms such that a change in control does not, by itself, trigger vesting of grants made under the plan. Instead, termination of service on the board following a change in control is required to trigger vesting.
 
2009 director compensation
The following table shows the compensation of all persons who were non-employee members of the board during 2009 for services in all capacities to TI in 2009, except as otherwise indicated.
 
Change in
Pension
Value and
Non-qualified
Non-equity Deferred
Fees Earned or Stock Option Incentive Plan Compensation All Other
Paid in Awards Awards Compensation   Earnings Compensation
Name (1)       Cash ($)(2)       ($)(3)       ($)(4)       ($)       (5)       ($)(6)       Total ($)
J. R. Adams   $ 82,000 $37,375 $ 38,010       $ 10,655   $ 168,040
D. L. Boren $ 80,000   $37,375 $ 38,010     $ 11,761 $ 167,146
D. A. Carp $ 90,000 $37,375 $ 38,010   $ 8,531 $ 173,916
C. S. Cox $ 81,000 $37,375 $ 38,010 $ 262 $ 20 $ 156,667
D. R. Goode $ 80,000 $37,375 $ 38,010   $ 26,589 $ 181,974
S. P. MacMillan $ 80,000 $37,375 $ 38,010 $ 20 $ 155,405
P. H. Patsley $ 100,000 $37,375 $ 38,010 $ 4,720 $ 180,105
W. R. Sanders $ 80,000 $37,375 $ 38,010 $ 8,531 $ 163,916
R. J. Simmons $ 90,000 $37,375 $ 38,010 $ 352 $ 20 $ 165,757
C. T. Whitman $ 81,000 $37,375 $ 38,010 $ 20 $ 156,405

(1)       Mr. Babb was elected to the board effective March 15, 2010, and accordingly received no compensation for services as a TI director in 2009.
 
(2) Includes amounts deferred at the director’s election.
 
(3)
Shown is the aggregate grant date fair value of awards granted in 2009 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification™ Topic 718, Compensation-Stock Compensation (ASC 718). The discussion of the assumptions used for purposes of calculating the grant date fair value appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2009.
 
The table below shows the aggregate number of shares underlying outstanding restricted stock units held by the named individuals as of December 31, 2009.

Restricted Stock
Name       Units (in shares)
J. R. Adams   26,012  
D. L. Boren 30,380
D. A. Carp 16,164
C. S. Cox 9,500
D. R. Goode 21,132
S. P. MacMillan 4,500
P. H. Patsley 9,500
W. R. Sanders 17,100
R. J. Simmons 15,500
C. T. Whitman 9,500



PAGE 60 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Each restricted stock unit represents the right to receive one share of TI common stock. For restricted stock units granted prior to 2007, shares are issued at the time of mandatory retirement from the board (age 70) or upon the earlier of termination of service from the board after completing eight years of service or death or disability. For information regarding share issuances under restricted stock units granted after 2006, please see the discussion on page 58.
 
(4)      
Shown is the aggregate grant date fair value of awards granted in 2009 calculated in accordance with ASC 718. The discussion of the assumptions used for purposes of calculating the grant date fair value appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2009.
 
The table below shows the aggregate number of shares underlying outstanding stock options held by the named individuals as of December 31, 2009.

Name       Options (in shares)
J. R. Adams 106,000
D. L. Boren 78,500  
D. A. Carp 106,000
C. S. Cox 51,000
D. R. Goode 106,000
S. P. MacMillan   7,000
P. H. Patsley 51,000
W. R. Sanders 106,000
R. J. Simmons 106,000
C. T. Whitman 66,000

The terms of these options are as set forth on page 58 except that for options granted before November 2006, the exercise price is the average of the high and low price of the company’s common stock on the date of grant.
 
(5) SEC rules require the disclosure of earnings on deferred compensation accounts to the extent that the rate of interest exceeds a specified rate (Federal Rate), which is 120 percent of the applicable federal long-term rate with compounding. Under the terms of the Director Plan, deferred compensation cash accounts earn interest at a rate based on Moody’s Seasoned Aaa corporate bonds. For 2009, this interest rate exceeded the Federal Rate by 0.63%. Shown is the amount of interest earned on the directors’ deferred compensation accounts that was in excess of the Federal Rate.
 
(6)       Consists of (a) the annual cost ($20 per director) of premiums for travel and accident insurance policies, (b) contributions under the TI Foundation matching gift program of $10,000, $14,828 and $ 4,700 for Mr. Adams, Mr. Goode and Ms. Patsley, respectively, and (c) for certain individuals, costs related to the Director Award Program. Each director whose service commenced prior to June 20, 2002, is eligible to participate in the Director Award Program, a charitable donation program under which we will contribute a total of $500,000 per eligible director to as many as three educational institutions recommended by the director and approved by us. The contributions are made following the director’s death. Directors receive no financial benefit from the program, and all charitable deductions belong to the company. In accordance with SEC rules, we have included the company’s annual costs under the program in All Other Compensation of the directors who participate. These costs include third-party administrator fees for the program and premiums on life insurance policies to fund the program. Messrs. Adams, Boren, Carp, Goode and Sanders participate in this program.

Executive compensation
 
Compensation discussion and analysis
This section describes TI’s compensation program for executive officers. It will provide insight into the following:
     Currently, TI has 15 executive officers. These executives have the broadest job responsibilities and policy-making authority in the company. We hold them accountable for the company’s performance and for maintaining a culture of strong ethics. Details of compensation for our CEO, CFO and the three other highest paid individuals who were executive officers in 2009 (collectively called the “named executive officers”) can be found in the tables beginning on page 70.

Executive summary


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 61
Compensation elements
The primary elements of our executive compensation program are as follows:
 
Near-term compensation, paid in cash
 
Element       Purpose       Policy       Terms
Base salary Basic, least variable form of compensation Pay slightly below market median in order to weight total compensation to the performance-based elements described below Paid twice monthly
 
Profit sharing Broad-based program designed to emphasize that each employee contributes to the company’s profitability and can share in it
Pay according to a formula that focuses employees on a company goal, and at a level that will affect behavior. Profit sharing is paid in addition to any performance bonus awarded for the year.
 
For the last five years, the formula has been based on company-level annual operating profit margin. The formula was set by the TI board. The committee’s practice has been not to adjust amounts earned under the formula.
 
Payable in a single cash payment shortly after the end of the performance year
 
As in recent years, the formula for 2009 was:
  • Below 10% company-level annual operating profit as a percentage of revenue (“Margin”): No profit sharing
  • At 10% Margin: profit sharing = 2% of base salary
  • At Margin above 10%: profit sharing increases by 0.5% of base salary for each percentage point of Margin between 10% and 24%, and 1% of base salary for each percentage point of Margin above 24%. The maximum profit sharing is 20% of base salary.
In 2009, TI delivered Margin of 19.1%. As a result, all eligible employees, including executive officers, received profit sharing of 6.55% of base salary.



PAGE 62 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Element       Purpose       Policy       Terms
Performance bonus To motivate executives and reward them according to the company’s relative and absolute performance and the executive’s individual performance
Bonus is set to bring total cash compensation (base salary, profit sharing and bonus) to the appropriate level.
 
The appropriate level for total cash is determined primarily on the basis of one-year and three-year company performance on certain measures (revenue growth percent, operating margin and total shareholder return) as compared to competitors and on our strategic progress in key markets and with customers.1 These factors have been chosen to reflect our near-term financial performance as well as our progress in building long-term shareholder value.
 
The committee aims to pay total cash compensation appropriately above median if company performance is above that of competitors, and pay total cash compensation appropriately below the median if company performance is below competitors.
 
The committee does not rely on formulas or performance targets or thresholds. Instead it uses its judgment based on its assessment of the factors described above.
 
Determined by the committee and paid in a single payment after the performance year
 
Long-term compensation, awarded in equity
 
Non-qualified stock options and restricted stock units Alignment with shareholders; long-term focus; retention, particularly with respect to restricted stock units We grant a combination of NQ stock options and restricted stock units, generally targeted at the median level of equity compensation awarded to executives in similar positions at the Comparator Group. The terms and conditions of stock options and restricted stock units are summarized on pages 75-76. The committee’s grant procedures are described on page 68.

Comparator group
The Compensation Committee considers the market level of compensation when setting the salary, bonuses and equity compensation of the executive officers. The committee targets salary slightly below market median in order to weight total compensation to performance-based elements. To estimate the market level of pay, the committee uses information provided by its compensation consultant and TI’s Compensation and Benefits organization about compensation paid to executives in similar positions at Comparator Group companies.
     The committee sets the Comparator Group. In general, the Comparator Group companies (1) are U.S.-based, (2) engage in the semiconductor business or other electronics or information technology activities, and (3) use forms of executive compensation comparable to TI’s.
 
____________________
 
1       “Total shareholder return” refers to the percentage change in the value of a stockholder’s investment in a company over the relevant time period, as determined by dividends paid and the change in the company’s share price during the period. See page 66.



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 63
 
In June 2008, the committee set the Comparator Group for base salary and equity compensation decisions to be made in January 2009. For a discussion of the factors considered by the committee in June 2008, please see page 64 of the company’s 2009 proxy statement. The Comparator Group consisted of the following companies:
 
Analog Devices, Inc. Motorola, Inc.
Apple Inc. NVIDIA Corporation
Applied Materials, Inc. Oracle Corporation
Cisco Systems, Inc. QUALCOMM Incorporated
Computer Sciences Corporation Seagate Technology
eBay Inc. Sun Microsystems, Inc.
EMC Corporation Tyco Electronics Ltd.
Emerson Electric Co. Yahoo! Inc.
Google Inc. Western Digital Corporation
Intel Corporation Xerox Corporation

In June 2009, the committee reviewed the Comparator Group in terms of industry, revenue and market capitalization. TI revenue and market capitalization were at approximately the 40th and 60th percentile, respectively, of the Comparator Group.2 Based on the advice of its compensation consultant, the committee determined that the Comparator Group still appropriately reflected the compensation market. Subsequently the compensation consultant recommended that Sun Microsystems be excluded because of its pending acquisition by Oracle Corporation. The committee followed the recommendation for the bonus decision for 2009 performance, which it made in January 2010.
 
Analysis of compensation determinations for 2009
In setting compensation, the committee applied the same policies to all named executive officers. The committee determined each named executive officer’s compensation separately, without using any formula to set one officer’s compensation at a higher or lower level than another officer’s.
 
Total compensation – Before finalizing the compensation of the executive officers, the committee performed a “tally sheet” review, i.e., a review covering all elements of compensation. The review included total cash compensation (salary, profit sharing and projected bonus), the grant date fair value of equity compensation, the impact that proposed compensation would have on other compensation elements such as pension, and a summary of benefits that the executives would receive under various termination scenarios. The review enabled the committee to see how various compensation elements relate to one another and what impact its decisions would have on the total earnings opportunity of the executives. In assessing the “tally sheet” data, the committee did not target a specific level of total compensation or use a formula to allocate compensation among the various elements. Instead, it discussed the data with its compensation consultant and used its judgment in assessing whether the total was consistent with the objectives of the program. Based on this review, the committee determined that the level of compensation was appropriate.
 
Base salary – In January 2009, the committee held the 2009 base salary of each named executive officer at the same level as in 2008. This decision was in response to the uncertain economic environment. As a result, the 2009 rate of base salary for the named executive officers was as follows:
 
Officer       2009 Annual Rate       Change from 2008 Annual Rate
Mr. Templeton $963,120 0%
Mr. March $465,000 0%
Mr. Lowe $535,020 0%
Mr. Ritchie $448,080 0%
Mr. Delagi $430,020 0%

The salary differences among the named executive officers resulted from differences in 2008 salary rates, which were driven primarily by the market rate of pay for each officer.
 
Equity compensation – In January 2009, the committee granted equity compensation to the named executive officers using a combination of NQ stock options and restricted stock units.
     The committee’s objective was to set the equity grants at approximately the median market level, in this case the 40th to 60th percentile of equity compensation granted by the Comparator Group, for each of the named executive officers. In assessing the market
 
____________________
 
2       The statement in this paragraph about revenue and market capitalization reflects the information available to the committee when it reviewed the Comparator Group in June 2009. Comparator Group and TI revenue is for the four completed fiscal quarters before June 2009. Market capitalization is as of April 2009.



PAGE 64 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
level, the committee considered information presented by TI’s Compensation and Benefits organization (prepared using data provided by the committee’s compensation consultant) on the estimated value of the awards expected to be granted by the Comparator Group to similarly situated executives in 2009.
     The award value was estimated using the same methodology used for financial accounting. The number of shares was determined using “NQ Equivalents,” which were calculated by treating each restricted stock unit as 3 NQ Equivalents and each option share as 1 NQ Equivalent. This 3:1 ratio approximates the relative accounting expense of granting one restricted stock unit as compared with an option for one share.
     Except for Mr. Templeton and Mr. Delagi, the committee decided to grant each of the named executive officers twice the number of NQ Equivalents as he received in 2008. For Mr. Templeton, the committee’s intention was that the estimated grant-date fair value of his 2009 equity compensation be no higher than the grant date fair value of his 2008 equity compensation. As a result, the number of NQ Equivalents for Mr. Templeton was less than twice the number he received in 2009. For Mr. Delagi, who became an executive officer in 2007, the number of NQ Equivalents was more than twice the number he received in 2008, to reflect his increased responsibilities. In each case, the committee determined that the grants at these levels would meet its objective of granting at the median market level as described above.
     For each officer, the committee decided to allocate the NQ Equivalents equally between restricted stock units and options to give equal emphasis to promoting retention, motivating the executive and aligning his interests with those of stockholders.
     Before approving the grants, the committee reviewed the amount of unvested equity compensation held by the officers to assess its retention value. In making this assessment, the committee used its judgment and did not apply any formula, threshold or maximum. This review did not result in an increase or decrease of the awards from the levels described above.
     The exercise price of the options was the closing price of TI stock on January 29, 2009, the third trading day after the company released its annual and fourth quarter financial results for 2008. All grants were made under the 2000 Texas Instruments Long-Term Incentive Plan. All grants have the terms described on pages 75-76.
     The other company employees who received equity compensation in January 2009 saw a percentage increase similar to that granted to the named executive officers. The differences in the equity awards among the named executive officers were primarily the result of differences in the applicable market level of equity compensation for their positions, and not the application of any formula designed to maintain differentials between the officers.
     The grants to the named executive officers are shown in the grants of plan-based awards in 2009 table on page 72. The grant date fair value of the awards is reflected in that table and in the “Stock Awards” and “Option Awards” columns of the summary compensation table on page 71. The table below is provided to assist the reader in comparing NQ Equivalent levels for the awards reported in those tables.
 
Restricted
Stock Options Stock Units Grant Date
Officer       Year       (in Shares)       (in Shares)       NQ Equivalents       Fair Value*
Mr. Templeton 2009   664,461   221,487     1,328,922     $6,919,254
2008 270,000   150,000 720,000   $6,866,100
2007 270,000 150,000 720,000   $6,864,300
 
Mr. March 2009 190,000 63,334 380,000   $1,978,543
2008 85,000 35,000 190,000   $1,797,450
2007 85,000 35,000 190,000   $1,814,850
 
Mr. Lowe 2009 280,000 93,334 560,000   $2,915,743
2008 100,000 60,000 280,000   $2,675,400
2007 100,000 60,000 280,000   $2,668,200
 
Mr. Ritchie 2009 250,000 83,334 500,000   $2,603,343
2008 100,000 50,000 250,000   $2,377,500
 
Mr. Delagi 2009 220,000 73,334 440,000   $2,290,943

*       See notes 3 and 4 to the summary compensation table on page 71 for information on how grant date fair value was calculated.

Bonus – In January 2010, the committee set the 2009 bonus compensation for executive officers based on its assessment of 2009 performance. In setting the bonuses, the committee used the following performance measures to assess the company:


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 65
 
     In addition, the committee considered our strategic progress by reviewing how competitive we are in key markets with our core products and technologies, as well as the strength of our relationships with key customers.
     One-year relative performance on the three measures and one-year strategic progress were the primary considerations in the committee’s assessment of the company’s 2009 performance. In assessing performance, the committee did not use formulas, thresholds or multiples. Because market conditions can quickly change in our industry, thresholds established at the beginning of a year could prove irrelevant by year-end. The committee believes its approach, which assesses the company’s relative performance in hindsight after year-end, gives it the insight to most effectively and critically judge results and encouraged executives to pursue strategies that serve the long-term interests of the company and its shareholders.
     In the comparison of relative performance, the committee used the following companies (the “competitor companies”):3
 
Advanced Micro Devices, Inc. LSI Logic Corporation
Altera Corporation Marvell Technology Group Ltd.
Analog Devices, Inc. Maxim Integrated Products, Inc.
Broadcom Corporation Microchip Technology Incorporated
Conexant Systems, Inc. National Semiconductor Corporation
Fairchild Semiconductor International, Inc. NVIDIA Corporation
Infineon Technologies AG ON Semiconductor Corporation
Intel Corporation QUALCOMM Incorporated
Intersil Corporation STMicroelectronics N.V.
Linear Technology Corporation Xilinx, Inc.

These companies include both broad-based and niche suppliers that operate in our key markets or offer technology that competes with our products. This list of companies was unchanged from the list used by the committee in January 2009 in assessing TI performance for purposes of setting the bonuses for 2008 performance.
 
Assessment of 2009 performance
The committee spent extensive time in December and January reviewing the results of TI’s 2009 performance and strategic progress. Based on that analysis, the committee determined that the company had performed well despite a sharp decline in world markets in the first half of the year and intense uncertainty about the prospects for economic recovery. The committee found that overall, 2009 performance was above the median as compared to the competitor companies listed above, and that management had led a strong and productive effort to use the downturn to focus the company’s people and resources on the markets most likely to grow. This included targeted acquisitions, opportune capacity expansions, emphasis on research and development of new product applications and elimination of unnecessary expenses. The committee noted that relative revenue growth improved each quarter such that it was substantially above median for the fourth quarter and at median for the year; operating margin was in the top quartile for the year; and total shareholder return was slightly below median. With regard to strategic progress, the committee determined that once again the company strengthened its positions in Analog and Embedded Processing (the company’s core businesses) with a broader portfolio of products and deeper relationships with customers. As expected, the company’s revenue from its wireless digital basebands used in cell phones declined, due to its decision to stop development of these commoditizing products and the consequent reduction in market share. After reviewing all these factors, the committee applied its judgment and determined that, in total, TI’s relative performance in 2009 was better than that of the prior year, and as a result, total cash compensation for the named executive officers in 2009 was 3 to 16 percent higher than it was in 2008.
     Below are further details of the committee’s assessment.
 
Revenue and margin
____________________
 
3       To the extent the companies had not released financial results for the year or most recent quarter, the committee based its evaluation on estimates and projections of the companies’ financial results for 2009.



PAGE 66 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Total shareholder return (“TSR”)
Strategic progress
Performance Summary
      1-Year       3-Year
Revenue growth -16.6%   -9.9%  CAGR
Operating margin 19.1%   21.3%  average
Return on invested capital (ROIC) 14.9%   20.1%  average
Dividend rate growth 9%   200%   
Total shareholder return (TSR) 71.9%   -1.7%  CAGR

CAGR = compound annual growth rate
 
ROIC = operating margin x (1 – tax rate) / (assets – non-debt liabilities)
 
One-year TSR % =  (adjusted closing price of the company’s stock at year-end 2009, divided by 2008 year-end adjusted closing price) minus 1. The adjusted closing price is as shown under Historical Prices for the company’s stock on Yahoo Finance and reflects stock splits and reinvestment of dividends.

Three-year TSR CAGR % =  (adjusted closing price of the company’s stock at year-end 2009, divided by 2006 year-end adjusted closing price)1/3 minus 1. Adjusted closing price is as described above.

The committee also considered the level of total cash compensation expected to be paid to similarly situated officers of the Comparator Group companies for 2009. Based on its assessment of company performance and the expected market level of total cash compensation, the committee determined that the bonuses of the named executive officers for 2009 performance should generally be approximately 15 percent higher than for 2008.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 67
 
     Before setting the bonuses for the named executive officers, the committee considered the officers’ individual performance. The performance of the CEO was judged according to the performance of the company. For the other officers, the committee considered the factors described below in assessing individual performance. In making this assessment, the committee did not apply any formula or performance targets.
     
Mr. March is the chief financial officer. The committee noted the financial management of the company.
     Mr. Lowe is responsible for the company’s analog semiconductor product lines. The committee noted the financial performance of those product lines, including the company’s analog market share, and the position of the operations strategically and with customers.
     Mr. Ritchie is responsible for the company’s semiconductor manufacturing operations. The committee noted the performance of those operations, including their cost-competitiveness and inventory management.
     Mr. Delagi is responsible for the company’s Wireless Business Unit. The committee noted the financial performance of the business unit, including the strategic position of its products.
     The bonuses awarded for 2009 performance are shown in the table below. The differences in the amounts awarded to the named executive officers were primarily the result of differences in the officers’ level of responsibility and the applicable market level of total cash compensation expected to be paid to similarly situated officers in the Comparator Group. The bonus of each named executive officer was paid under the Executive Officer Performance Plan described on pages 70 and 72.
 
Results of the compensation decisions – Results of the compensation decisions made by the committee relating to the named executive officers for 2009 are summarized in the following table. This table is provided as a supplement to the summary compensation table on page 71 for investors who may find it useful to see the data presented in this form. Although the committee does not target a specific level of total compensation, it considers information similar to that in the table to ensure that the sum of these elements is, in its judgment, in a reasonable range. The principal differences between this table and the summary compensation table are explained in footnote 4 below.4
 
Salary Equity Compensation
Officer       Year       (Annual Rate)       Profit Sharing       Bonus       (Grant Date Fair Value)       Total
Mr. Templeton 2009   $ 963,120   $63,084 $ 1,725,000   $ 6,919,254   $ 9,670,458
2008 $ 963,120 $64,853 $ 1,500,000   $ 6,866,100 $ 9,394,073
2007 $ 935,040 $95,822 $ 2,300,000   $ 6,864,300 $ 10,195,162
 
Mr. March 2009 $ 465,000 $30,458 $ 575,000   $ 1,978,543 $ 3,049,001
2008 $ 465,000 $31,219 $ 425,000   $ 1,797,450 $ 2,718,669
2007 $ 435,000 $44,248 $ 650,000   $ 1,814,850 $ 2,944,098
 
Mr. Lowe 2009 $ 535,020 $35,044 $ 775,000   $ 2,915,743 $ 4,260,807
2008 $ 535,020 $35,945 $ 730,000   $ 2,675,400 $ 3,976,365
2007 $ 505,020 $51,661 $ 1,100,000   $ 2,668,200 $ 4,324,881
 
Mr. Ritchie 2009 $ 448,080 $29,349 $ 600,000   $ 2,603,343 $ 3,680,772
2008 $ 448,080 $30,172 $ 520,000   $ 2,377,500 $ 3,375,752
 
Mr. Delagi 2009 $ 430,020 $28,166 $ 550,000   $ 2,290,943 $ 3,299,129

For Mr. Templeton, the “Total” shown in this table is higher for 2009 than for 2008 due to the higher level of total cash compensation as a result of the higher bonus paid to him for 2009 performance. For the other named executive officers, the “Total” shown in this table is higher for 2009 than for 2008 primarily due to the higher grant-date fair value of the equity compensation they received in 2009.
 
____________________
 
4       This table shows the annual rate of base salary as set by the committee (effective in February of the year). In the summary compensation table, the “Salary” column shows the actual salary paid in the year. This table has separate columns for profit sharing and bonus. In the summary compensation table, profit sharing and bonus are aggregated in the column for “Non-equity Incentive Plan Compensation,” in accordance with SEC requirements. Like the summary compensation table, this table shows the grant date fair value of equity compensation awarded in the year. Please see notes 3 and 4 to summary compensation table for information about how grant-date fair value was calculated.



PAGE 68 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
The compensation decisions resulted in the following 2009 compensation mix for the named executive officers:
 
 
 
*Average data for the named executive officers other than Mr. Templeton and Mr. March. Totals may exceed 100 percent due to rounding.

Equity dilution
The Compensation Committee’s goal is to keep net annual dilution from equity compensation under 2 percent. “Net annual dilution” means the number of shares under equity awards granted by the committee each year to all employees (net of award forfeitures) as a percentage of the shares of the company’s outstanding common stock. Equity awards granted in 2009 under the company’s equity-compensation program resulted in 0 percent net annual dilution.
 
Process for equity grants
The Compensation Committee makes grant decisions for equity compensation at its January meeting each year. The dates on which these meetings occur are generally set three years in advance. The January meetings of the board and the committee generally occur in the week or two before we announce our financial results for the previous quarter and year.
     On occasion, the committee may grant stock options or restricted stock units to executives at times other than January. For example, it has done so in connection with job promotions and for purposes of retention.
     We do not back-date stock options or restricted stock units. We do not accelerate or delay the release of information due to plans for making equity grants.
     Under the committee’s policy, if the committee meeting falls in the same month as the release of the company’s financial results, the grants approved at the meeting will be made effective on the later of (i) the meeting day or (ii) the third trading day after the release of results. Otherwise they will be made effective on the day of committee action. The exercise price of stock options is the closing price of TI stock on the effective date of the grant.
 
Recoupment policy
In September 2009, the committee approved a policy concerning recoupment (“clawback”) of executive bonuses and equity compensation. Under the policy, in the event of a material restatement of TI’s financial results due to misconduct, the committee will review the facts and circumstances and take the actions it considers appropriate with respect to the compensation of any executive officer whose fraud or willful misconduct contributed to the need for such restatement. Such action may include (a) seeking reimbursement of any bonus paid to such officer exceeding the amount that, in the judgment of the committee, would have been paid had the financial results been properly reported and (b) seeking to recover profits received by such officer during the twelve months after the restated period under equity compensation awards. All determinations by the committee with respect to this policy are final and binding on all interested parties.
 
Benefits
Reflecting the company’s culture of respect and value for all employees, the financial and health benefits received by executive officers are the same as those received by other U.S. employees except for the few benefits described under the sub-heading Other Benefits below in the last paragraph of this section.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 69
 
Retirement plans
The executive officers participate in our retirement plans under the same rules that apply to other U.S. employees. We maintain these plans to have a competitive benefits program and for retention.
     Like other established U.S. manufacturers, we have had a U.S. qualified defined benefit pension plan for many years. At its origin, the plan was designed to be consistent with those offered by other employers in the diverse markets in which we operated, which at the time included consumer and defense electronics as well as semiconductors and materials products. In order to limit the cost of the plan, we closed the plan to new participants in 1997. We gave U.S. employees as of November 1997 the choice to remain in the plan, or to have their plan benefits frozen (i.e., no benefit increase attributable to years of service or change in eligible earnings) and begin participating in an enhanced defined contribution plan. Mr. Templeton chose not to remain in the defined benefit plan. As a result, his benefits under that plan were frozen in 1997 and he participates in the enhanced defined contribution plan. The other named executive officers have continued their participation in the defined benefit pension plan.
     The Internal Revenue Code (IRC) imposes certain limits on the retirement benefits that may be provided under a qualified plan. To maintain the desired level of benefits, we have non-qualified defined benefit pension plans for participants in the qualified pension plan. Under the non-qualified plans, participants receive benefits that would ordinarily be paid under the qualified pension plan but for the limitations under the IRC. For additional information about the defined benefit plans, please see pages 77-78.
     Employees accruing benefits in the qualified pension plan, including the named executive officers other than Mr. Templeton, also are eligible to participate in a qualified defined contribution plan that provides employer matching contributions. The enhanced defined contribution plan, in which Mr. Templeton participates, provides for a fixed employer contribution plus an employer matching contribution.
     Because benefits under the qualified and non-qualified defined benefit pension plans are calculated on the basis of eligible earnings (salary and bonus), an increase in salary or bonus may result in an increase in benefits under the plans. Salary or bonus increases for Mr. Templeton do not result in greater benefits for him under the company’s defined benefit pension plans because his benefits under those plans were frozen in 1997. The committee considers the potential effect on the executives’ retirement benefits when it sets salary and performance bonus levels.
 
Deferred compensation
Any U.S. employee whose base salary and management responsibility exceed a certain level may defer the receipt of a portion of his or her salary, bonus and profit sharing. Rules of the U.S. Department of Labor require that this plan be limited to a select group of management. The program allows employees to defer the receipt of their compensation in a tax-efficient manner. Eligible employees include, but are not limited to, the executive officers. We offer it to be competitive with the benefits packages offered by other companies.
     Deferred compensation account balances are unsecured and all amounts remain part of the company’s operating assets. The value of the deferred amounts tracks the performance of investment alternatives selected by the participant. These alternatives are a subset of those offered to participants in the defined contribution plans described above. The company does not guarantee any minimum return on the amounts deferred. In accordance with SEC rules, no earnings on deferred compensation are shown in the 2009 summary compensation table on page 71 because no “above market” rates were earned on deferred amounts in 2009.
 
Employee stock purchase plan
Our stockholders approved the TI Employees 2005 Stock Purchase Plan in April 2005. Under the plan, all employees in the U.S. and certain other countries may purchase a limited number of shares of the company’s common stock at a 15 percent discount. The plan is designed to offer the broad-based employee population an opportunity to acquire an equity interest in the company and thereby align their interests with those of stockholders. Consistent with our general approach to benefit programs, executive officers are also eligible to participate.
 
Health-related benefits
Executive officers are eligible under the same plans as all other U.S. employees for medical, dental, vision, disability and life insurance. These benefits are intended to be competitive with benefits offered in the semiconductor industry.
 
Other benefits
Executive officers receive only a few benefits that are not available to all other U.S. employees. Specifically, we promote sustained good health by providing a company-paid physical for each executive officer, and we encourage effective long-term financial planning by providing financial counseling up to $8,000 per year for the CEO and $7,000 per year for the other executive officers. The board of directors has determined that for security reasons, it is in the company’s interest to require the CEO to use company aircraft for personal air travel. The company provides no tax gross-ups for perquisites to any of the executive officers.
 
Compensation following employment termination or change in control
None of the executive officers has an employment contract. Executive officers are eligible for benefits on the same terms as other U.S. employees upon termination of employment or a change in control of the company. The current programs are described under the heading Potential Payments upon Termination or Change in Control beginning on page 80. None of the few additional benefits that the executive officers receive continue after termination of employment, except the amount described above for
 


PAGE 70 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
financial counseling is provided in the following year in the event of retirement. The committee reviews the potential impact of these programs before finalizing the annual compensation for the named executive officers. The committee did not raise or lower compensation for 2009 based on this review.
     In September 2009, the board of directors amended the Texas Instruments 2009 Long-Term Incentive Plan to include new change-in-control terms for equity compensation awarded after 2009. For many years, the company has had single-trigger change-in-control terms, under which options become fully exercisable and shares will be issued under restricted stock units upon a change in control of TI. The plan amendments generally establish double-trigger terms for future grants, under which options become fully exercisable and shares are issued under restricted stock unit awards (to the extent permitted by Section 409A of the IRC) if the grantee is involuntarily terminated within 24 months after a change in control. These terms are intended to encourage employees to remain with the company through a transaction while reducing employee uncertainty and distraction in the period leading up to any such event.
 
Stock ownership guidelines and policy against hedging
Our board of directors has established stock ownership guidelines for executive officers. The guideline for the CEO is four times base salary or 125,000 shares, whichever is less. The guideline for other executive officers is three times base salary or 25,000 shares, whichever is less. Executive officers have five years from their election as executive officers to reach these targets. Directly owned shares and restricted stock units count toward satisfying the guidelines.
     Short sales of TI stock by our executive officers are prohibited. It is against TI policy for any employee, including an executive officer, to engage in trading in “puts” (options to sell at a fixed price on or before a certain date), “calls” (similar options to buy), or other options or hedging techniques on TI stock.
 
Consideration of tax and accounting treatment of compensation
Section 162(m) of the IRC generally denies a deduction to any publicly held corporation for compensation paid in a taxable year to the company’s CEO and four other highest compensated officers to the extent that the officer’s compensation (other than qualified performance-based compensation) exceeds $1 million. The Compensation Committee considers the impact of this deductibility limit on the compensation that it intends to award. The committee exercises its discretion to award compensation that does not meet the requirements of Section 162(m) when applying the limits of Section 162(m) would frustrate or be inconsistent with our compensation policies and/or when the value of the foregone deduction would not be material. The committee has exercised this discretion when awarding restricted stock units that vest over time, without performance conditions to vesting. The committee believes it is in the best interest of the company and its stockholders that restricted stock unit awards provide for the retention of our executive officers in all market conditions.
     The Texas Instruments Executive Officer Performance Plan is intended to ensure that performance bonuses under the plan are fully tax deductible under Section 162(m). The plan, which stockholders approved in 2002, is described on page 72. The committee’s general policy is to award bonuses within the plan, although the committee reserves the discretion to pay a bonus outside the plan if it determines that it is in our stockholders’ best interest to do so. The committee set the bonuses of the named executive officers for 2009 performance at the levels shown on page 67. The bonuses were awarded within the plan.
     When setting equity compensation, the committee considers the estimated cost for financial reporting purposes of equity compensation it intends to grant. Its consideration of the estimated cost of grants made in 2009 is discussed on pages 63-64 above.
 
Compensation Committee report
The Compensation Committee of the board of directors has furnished the following report:
     The committee has reviewed and discussed the Compensation Discussion and Analysis (CD&A) with the company’s management. Based on that review and discussion, the committee has recommended to the board of directors that the CD&A be included in the company’s Annual Report on Form 10-K for 2009 and the company’s proxy statement for the 2010 annual meeting of stockholders.
 
Daniel A. Carp, Chair Carrie S. Cox David R. Goode

2009 summary compensation table
The table below shows the compensation of the company’s chief executive officer, chief financial officer and each of the other three most highly compensated individuals who were executive officers during 2009 (collectively called the “named executive officers”) for services in all capacities to the company in 2009. For a discussion of the amount of a named executive officer’s salary and bonus in proportion to his total compensation, please see the Compensation Discussion and Analysis on pages 60-70.
     We believe that our compensation practices are fair and reasonable. Our executive officers do not have employment contracts. They are not guaranteed salary increases or bonus amounts. Pension benefits are calculated on salary and bonus only; the proceeds earned on equity or other performance awards are not part of the pension calculation. We do not guarantee a return or provide above-market returns on compensation that has been deferred. We have not repriced stock options, we do not grant reload options and we do not provide tax gross-ups. We do not provide excessive perquisites. Those few we do provide do not result in significant expense for TI. We believe our compensation program holds our executive officers accountable for the financial and competitive performance of TI, and for their individual contribution toward that performance.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 71
 
Change in
Pension Value
and
Non-equity Non-qualified
Stock Option Incentive Plan Deferred All Other
Name and Principal             Salary      Bonus      Awards      Awards      Compensation      Compensation      Compensation     
Position   Year   ($)   ($)(2) ($)(3)   ($)(4)   ($)(5)   Earnings ($)(6) ($)(8)   Total ($)
R. K. Templeton 2009 $ 963,120   $ 3,311,231 $ 3,608,023 $ 1,788,084 $ 49,566 $ 145,633 $ 9,865,657
     Chairman, President 2008 $ 960,780   $ 4,468,500   $ 2,397,600 $ 1,564,853 $ 36,592   $ 231,857 $ 9,660,182
     & Chief Executive Officer 2007 $ 932,120 $ 4,248,000 $ 2,616,300 $ 2,395,822   (7) $ 111,417 $ 10,303,659
 
K. P. March 2009 $ 465,000 $ 946,843 $ 1,031,700 $ 605,458 $ 327,928 $ 20,646 $ 3,397,575
     Senior Vice President 2008 $ 462,500 $ 1,042,650 $ 754,800   $ 456,219   $ 385,214 $ 31,477   $ 3,132,860
     & Chief Financial Officer 2007 $ 430,430 $ 991,200 $ 823,650 $ 694,248 $ 294,365 $ 21,758 $ 3,255,651
 
G. A. Lowe 2009 $ 535,020 $ 1,395,343 $ 1,520,400 $ 810,044 $ 378,384 $ 15,693 $ 4,654,884
     Senior Vice President 2008 $ 532,520 $ 1,787,400 $ 888,000 $ 765,945 $ 429,163 $ 89,471 $ 4,492,499
2007 $ 502,535 $ 1,699,200 $ 969,000 $ 1,151,661 $ 318,096 $ 7,103 $ 4,647,595
 
K. J. Ritchie (1) 2009 $ 448,080 $ 1,245,843 $ 1,357,500 $ 629,349 $ 418,897 $ 11,506 $ 4,111,175
     Senior Vice President 2008 $ 446,900 $ 1,489,500 $ 888,000 $ 550,172 $ 540,851 $ 16,836 $ 3,932,259
 
R. G. Delagi (1) 2009 $ 430,020 $ 1,096,343 $ 1,194,600 $ 578,166 $ 252,850 $ 14,694 $ 3,566,673
     Senior Vice President  

(1) Mr. Ritchie was not a named executive officer in 2007. Mr. Delagi was not a named executive officer in 2007 or 2008.
     
(2)       Performance bonuses for 2009 were paid under the Texas Instruments Executive Officer Performance Plan. In accordance with SEC requirements, these amounts are reported in the Non-Equity Incentive Plan Compensation column.
     
(3) Shown is the aggregate grant date fair value of restricted stock unit awards calculated in accordance with ASC 718. The discussion of the assumptions used for purposes of the valuation of the awards granted in 2009 appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2009. For a description of these grant terms, please see pages 75-76. The discussion of the assumptions used for purposes of the valuation of the awards granted in 2008 and 2007 appears respectively in Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2008 (pages 12-15) and to TI’s annual report on Form 10-K for the year ended December 31, 2007 (pages 15 and 23-26).
     
(4) Shown is the aggregate grant date fair value of options calculated in accordance with ASC 718. The discussion of the assumptions used for purposes of the valuation of options granted in 2009 appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2009. For a description of these grant terms, please see pages 75-76. The discussion of the assumptions used for purposes of the valuation of the awards granted in 2008 and 2007 appears respectively in Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2008 (pages 12-15) and to TI’s annual report on Form 10-K for the year ended December 31, 2007 (pages 15 and 23-26).
     
(5) Consists of performance bonus and profit sharing for 2009. Please see page 67 of the Compensation Discussion and Analysis for the amounts of bonus and profit sharing paid to each of the named executive officers for 2009.
     
(6) The company does not pay above-market earnings on deferred compensation. Therefore, no amounts are reported in this column for deferred compensation. The amounts in this column represent the change in the actuarial value of the named executive officers’ benefits under the qualified defined benefit pension plan (TI Employees Pension Plan) and the non-qualified defined benefit pension plans (TI Employees Non-Qualified Pension Plan and TI Employees Non-Qualified Pension Plan II) from December 31, 2008, through December 31, 2009. This “change in the actuarial value” is the difference between the 2008 and 2009 present value of the pension benefit accumulated as of year-end by the named executive officer, assuming that benefit is not paid until age 65. Mr. Templeton’s benefits under the company’s pension plans were frozen as of December 31, 1997.
     
(7) The actuarial value of Mr. Templeton’s account decreased by $11,314 during 2007. In accordance with SEC rules, this amount has not been included in his total 2007 compensation shown in this table.



PAGE 72 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
(8)       In the interest of transparency, the value of perquisites and other personal benefits is provided in this column even if the amount is less than the reporting threshold established by the SEC. The table below shows the value of perquisites and other benefits for 2009.
 
Defined
  Contribution Unused Personal Use
401(k) Retirement Vacation of Company Financial Executive
Name      Insurance      Contribution      Plan (a)      Time (b)      Aircraft (c)      Counseling      Physical
R. K. Templeton   $ 250   $ 9,800 $55,562   $ 20,767   $ 49,269 $ 8,000 $ 1,985
K. P. March $ 250   $ 4,900   N/A $ 12,340   $ 799     $ 2,357
G. A. Lowe $ 250 $ 4,900 N/A $ 8,281   $ 2,262
K. J. Ritchie $ 250 $ 4,900 N/A $ 4,782 $ 1,574
R. G. Delagi $ 250 $ 4,900 N/A $ 5,830 $ 1,700 $ 2,014

(a)       Consists of (i) contributions under the company’s enhanced defined contribution retirement plan of $4,900, and (ii) an additional amount of $50,662 accrued by TI to offset IRC limitations on amounts that could be contributed to the enhanced defined contribution retirement plan, which amount is also shown in the Non-qualified Deferred Compensation table on page 79.
     
(b) Represents payments for unused vacation time that could not be carried forward.
     
(c) The board of directors has determined that for security reasons, it is in TI’s interest to require the chief executive officer to use the company aircraft for personal air travel. The amount shown for Mr. Templeton is the incremental cost of his personal use of aircraft. We valued this incremental cost using a method that takes into account: landing, parking and flight planning services expenses; crew travel expenses; supplies and catering expenses; aircraft fuel and oil expenses per hour of flight; communications costs; a portion of ongoing maintenance; and any customs, foreign permit and similar fees. Because company aircraft are primarily used for business travel, this methodology excludes the fixed costs, which do not change based on usage, such as pilots’ salaries and the lease cost of the company aircraft. The amount shown for Mr. Lowe was valued using the same methodology. Under SEC rules, Mr. Lowe is deemed to have received a personal benefit in 2009, because corporate aircraft incurred additional mileage in picking him up from, or delivering him to, his home outside Dallas in connection with some of his business trips.
 
Grants of plan-based awards in 2009
The following table shows the grants of plan-based awards to the named executive officers in 2009.
 
                                             All Other      All Other          
Stock Option Exercise
Awards: Awards: or Base
Estimated Possible Payouts Estimated Future Payouts Number of Number of Price of Grant Date
under Non-Equity Incentive under Equity Incentive Shares of Securities Option Fair Value
Date of Plan Awards Plan Awards Stock or   Underlying   Awards of Stock
Grant Committee Threshold Target Maximum Threshold Target Maximum Units Options ($/Sh) and Option
Name Date (1)   Action ($) ($) ($) (#) (#) (#)   (#)(2)   (#)(3)   (4) Awards (5)
Templeton 1/29/09 1/15/09 * * * 664,461   $ 14.95 $ 3,608,023
1/29/09 1/15/09 221,487 $ 3,311,231
March 1/29/09   1/15/09 * * * 190,000 $ 14.95   $ 1,031,700
  1/29/09 1/15/09         63,334   $ 946,843
Lowe 1/29/09 1/15/09 * * *     280,000 $ 14.95   $ 1,520,400
1/29/09 1/15/09   93,334   $ 1,395,343
Ritchie 1/29/09 1/15/09 * * * 250,000 $ 14.95 $ 1,357,500
1/29/09 1/15/09 83,334 $ 1,245,843
Delagi 1/29/09 1/15/09 * * * 220,000 $ 14.95 $ 1,194,600
1/29/09 1/15/09 73,334 $ 1,096,343

*       TI did not use formulas or pre-set thresholds or multiples to determine incentive awards. Under the terms of the Executive Officer Performance Plan, each named executive officer is eligible to receive a cash bonus equal to 0.5 percent of the company’s consolidated income (as defined in the plan). However, the Compensation Committee has the discretion to set bonuses at a lower level if it decides it is appropriate to do so. The committee decided to do so for 2009.
     
(1) In accordance with the grant policy of the Compensation Committee of the board (described on page 68), the grants became effective on the third trading day after the company released its financial results for the fourth quarter and year 2008. The company released these results on January 26, 2009.



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 73
 
(2)       The stock awards granted to the named executive officers in 2009 were RSU awards. These awards were made under the company’s 2000 Long-Term Incentive Plan. For information on the terms and conditions of these RSU awards, please see the discussion beginning on page 75.
     
(3) The options were granted under the company’s 2000 Long-Term Incentive Plan. For information on the terms and conditions of these options, please see the discussion on page 75.
     
(4) The exercise price of the options is the closing price of TI common stock on January 29, 2009.
     
(5) Shown is the aggregate grant date fair value computed in accordance with ASC 718 for stock and option awards in 2009. The discussion of the assumptions used for purposes of the valuation appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2009.
     
None of the options or other equity awards granted to the named executive officers was repriced or modified by the company.
 
     For additional information regarding TI’s equity compensation grant practices, please see the Compensation Discussion and Analysis on page 68.
 
Outstanding equity awards at fiscal year-end 2009
The following table shows the outstanding equity awards for each of the named executive officers as of December 31, 2009.
 
Option Awards Stock Awards
Equity
Incentive Equity
Equity Plan Incentive
Incentive Awards: Plan Awards:
Plan Number of Market or
Awards: Unearned   Payout Value
Number of Number of Number of Market Value Shares, of Unearned
Securities Securities Securities Number of of Shares or Units or Shares, Units
Underlying Underlying Underlying Shares or Units of Stock Other or Other
Unexercised Unexercised Unexercised Option Option Units of Stock That Have Not   Rights That Rights That
Options (#) Options (#) Unearned Exercise Expiration That Have Not Vested Have Not Have Not
Name      Exercisable      Unexercisable      Options (#)      Price ($)      Date      Vested (#)      ($)(1)      Vested (#)      Vested ($)
R. K. Templeton 664,461  (2) $ 14.95 1/29/2019 221,487  (6) $ 5,771,951  
67,500 202,500  (3) $ 29.79 1/25/2018 150,000  (7) $ 3,909,000
135,000   135,000  (4) $ 28.32 1/18/2017 150,000  (8)   $ 3,909,000  
262,500 87,500  (5)   $ 32.55 1/19/2016   150,000  (9) $ 3,909,000
  500,000   $ 21.55 1/20/2015
700,000 $ 32.39   1/14/2014
375,000   $ 16.25 2/20/2013
625,000 $ 16.11 1/15/2013  
625,000 $ 26.50 1/16/2012
210,000 $ 31.30 11/29/2011
325,000 $ 50.38 1/17/2011
400,000 $ 55.22 1/19/2010
 
K. P. March 190,000  (2) $ 14.95 1/29/2019 63,334  (6) $ 1,650,484
21,250 63,750  (3) $ 29.79 1/25/2018 35,000  (7) $ 912,100
42,500 42,500  (4) $ 28.32 1/18/2017 35,000  (8) $ 912,100
63,750 21,250  (5) $ 32.55 1/19/2016 30,000  (9) $ 781,800
80,000 $ 21.55 1/20/2015
120,000 $ 32.39 1/14/2014
60,000 $ 16.25 2/20/2013
60,000 $ 16.11 1/15/2013
100 $ 29.19 2/21/2012
30,000 $ 26.50 1/16/2012
12,700 $ 35.13 7/31/2011
20,000 $ 50.38 1/17/2011
24,000 $ 55.22 1/19/2010



PAGE 74 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Outstanding equity awards at fiscal year-end 2009 (cont’d)
 
Option Awards Stock Awards
Equity
Incentive Equity
Equity Plan Incentive
Incentive Awards: Plan Awards:
Plan Number of Market or
Awards: Unearned   Payout Value
Number of Number of Number of Market Value Shares, of Unearned
Securities Securities Securities Number of of Shares or Units or Shares, Units
Underlying Underlying Underlying Shares or Units of Stock Other or Other
Unexercised Unexercised Unexercised Option Option Units of Stock That Have Not   Rights That Rights That
Options (#) Options (#) Unearned Exercise Expiration That Have Not Vested Have Not Have Not
Name      Exercisable      Unexercisable      Options (#)      Price ($)      Date      Vested (#)      ($)(1)      Vested (#)      Vested ($)
G. A. Lowe 280,000  (2) $ 14.95 1/29/2019 93,334  (6) $ 2,432,284
25,000 75,000  (3) $ 29.79 1/25/2018 60,000  (7) $ 1,563,600
50,000 50,000  (4) $ 28.32 1/18/2017 60,000  (8) $ 1,563,600
75,000 25,000  (5) $ 32.55 1/19/2016 50,000  (9) $ 1,303,000
100,000 $ 21.55 1/20/2015 100,000  (10) $ 2,606,000
150,000 $ 32.39 1/14/2014
125,000 $ 26.50 1/16/2012
70,000 $ 31.30 11/29/2011
60,000 $ 50.38 1/17/2011
80,000 $ 55.22 1/19/2010
 
K. J. Ritchie 250,000  (2) $ 14.95 1/29/2019 83,334  (6) $ 2,171,684
25,000 75,000  (3) $ 29.79 1/25/2018 50,000  (7) $ 1,303,000
50,000 50,000  (4) $ 28.32 1/18/2017 50,000  (8) $ 1,303,000
75,000 25,000  (5) $ 32.55 1/19/2016 50,000  (9) $ 1,303,000
100,000 $ 21.55 1/20/2015
150,000 $ 32.39 1/14/2014
90,000 $ 16.25 2/20/2013
175,000 $ 16.11 1/15/2013
100 $ 29.19 2/21/2012
125,000 $ 26.50 1/16/2012
40,000 $ 31.30 11/29/2011
50,000 $ 50.38 1/17/2011
50,000 $ 55.22 1/19/2010
 
R. G. Delagi 220,000  (2) $ 14.95 1/29/2019 73,334  (6) $ 1,911,084
20,000 60,000  (3) $ 29.79 1/25/2018 40,000  (7) $ 1,042,400
40,000 40,000  (4) $ 28.32 1/18/2017 40,000  (8) $ 1,042,400
56,250 18,750  (5) $ 32.55 1/19/2016 35,000  (9) $ 912,100
75,000 $ 21.55 1/20/2015
100,000 $ 32.39 1/14/2014
100 $ 29.19 2/21/2012
125,000 $ 26.50 1/16/2012
31,650 $ 31.30 11/29/2011
50,000 $ 50.38 1/17/2011
60,000 $ 55.22 1/19/2010



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 75
 
(1) Calculated by multiplying the number of restricted stock units by the closing price of TI’s common stock on December 31, 2009 ($26.06).
     
(2)       One-quarter of the shares became exercisable on January 29, 2010, and one-third of the remaining shares become exercisable on each of January 29, 2011, January 29, 2012, and January 29, 2013.
     
(3) One-third of the shares became exercisable on January 25, 2010, and one-half of the remaining shares become exercisable on each of January 25, 2011, and January 25, 2012.
     
(4) One-half of the shares became exercisable on January 18, 2010, and the remaining one-half become exercisable on January 18, 2011.
     
(5) Became fully exercisable on January 19, 2010.
     
(6) Vesting date is January 31, 2013. Dividend equivalents are paid on these restricted stock units.
     
(7) Vesting date is January 31, 2012. Dividend equivalents are paid on these restricted stock units.
     
(8) Vesting date is January 31, 2011. Dividend equivalents are paid on these restricted stock units.
     
(9) Vested on January 29, 2010. Dividend equivalents were not paid on these restricted stock units.
     
(10) Vesting date is July 30, 2010. Dividend equivalents are not paid on these restricted stock units.
 
The “Option Awards” shown in the table above are non-qualified stock options, each of which represents the right to purchase shares of TI common stock at the stated exercise price. For grants before 2007, the exercise price is the average of the high and low price of TI common stock on the grant date. For grants after 2006, the exercise price is the closing price of TI common stock on the grant date. The term of each option is 10 years unless the option is terminated earlier pursuant to provisions summarized in the chart below and in the paragraph following the chart. Options vest (become exercisable) in increments of 25 percent per year beginning on the first anniversary of the date of the grant. The chart below shows the termination provisions relating to outstanding stock options as of December 31, 2009. The Compensation Committee of the board of directors established these termination provisions to promote employee retention while offering competitive terms.
 
Employment Employment Termination
Employment Termination (at Least (at Least 6 Months after Grant) Other
Termination Due to 6 Months after Grant) with 20 Years of Credited Employment Circumstances
Death or Permanent When Retirement Service, but Not Retirement Termination for of Employment
Grant     Disability     Eligible     Eligible     Cause     Termination
Before
February 20, 2003   Vesting Vesting continues;   Vesting continues; option Option cancels   Option remains
continues; option   option remains in remains in effect to end of     exercisable for
  remains in effect effect to end of term term 30 days
to end of term
On or after
February 20, 2003 Vesting Vesting continues; Option remains in Option cancels Option remains
continues; option option remains in effect to the end of exercisable for
remains in effect effect to end of the term; vesting does 30 days
to end of term its term not continue after
employment termination  

Options may be cancelled if the grantee competes with TI during the two years after employment termination or discloses TI trade secrets. In addition, for options received while the grantee was an executive officer, the company may reclaim (or “claw back”) profits earned under grants if the officer engages in such conduct. These provisions are intended to strengthen retention and provide a reasonable remedy to TI in case of competition or disclosure of our confidential information.
     The stock option terms also provide that upon a change in control of TI, the option becomes fully vested to the extent it is then outstanding. Further, if employment termination (except for cause) has occurred within 30 days before the change in control, the change in control is deemed to have occurred first. “Change in control” is defined as (1) acquisition of 20 percent of TI common stock other than through a transaction approved by the board of directors, or (2) change of a majority of the board of directors in a 24-month period unless a majority of the directors then in office have elected or nominated the new directors (together, the “standard definition”). TI stock options have had these change-in-control terms for many years. They were intended to reduce employee uncertainty and distraction in the period leading up to a change in control, if such an event were to occur.
 
The “Stock Awards” in the table of outstanding equity awards at fiscal year-end 2009 are restricted stock unit (RSU) awards. Each RSU represents the right to receive one share of TI common stock on a stated date (the “vesting date”) unless the award is terminated earlier under terms summarized below. In general, the vesting date is approximately four years after the grant date. Except for 2006 grants,
 


PAGE 76 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
each RSU includes the right to receive dividend equivalents, which are paid annually in cash at a rate equal to the amount paid to stockholders in dividends. The table below shows the termination provisions of outstanding RSUs as of December 31, 2009.
 
Employment Termination Other Circumstances
Due to Death or Permanent Employment Termination of Employment
Grant Disability       When Retirement Eligible       Termination
Before
January 19, 2006* Vesting continues; shares Grant terminates unless Grant cancels; no
are paid at the scheduled the Compensation Committee shares are issued
vesting date determines otherwise
case-by-case**  
On or after
January 19, 2006 Vesting continues; shares Grant stays in effect and pays   Grant cancels; no
are paid at the scheduled out shares at the scheduled shares are issued
vesting date   vesting date. Number of
shares reduced according to
the duration of employment
over the vesting period***  

* Each of these grants vested on January 29, 2010.
     
** The Compensation Committee made no such determination for any of the named executive officers.
     
***       Calculated by multiplying the number of RSUs by a fraction equal to the number of whole 365-day periods from the grant date to the employment termination date (or first day of any bridge leave of absence leading to retirement), divided by the number years in the vesting period.
 
These termination provisions are intended to promote retention. RSU awards made after 2005 contain cancellation and clawback provisions like those described above for stock options. The terms of RSU awards made during 2006-2009 also provide for full vesting of the award upon a change in control of TI. Change in control is the standard definition unless the grant is subject to Section 409A of the IRC, in which event the definition under Section 409A applies. Section 409A defines a change in control as a change in the ownership or effective control of a corporation or a change in the ownership of a substantial portion of the assets of a corporation. These cancellation, “clawback” and change-in-control terms were added to conform RSU terms with those of stock options (to the extent permitted by the IRC) and to achieve the objectives described above in the discussion of stock options.
     In September 2009, the board of directors amended the company’s long-term incentive plan (the Texas Instruments 2009 Long-Term Incentive Plan) to include new change-in-control terms for RSUs and options granted after 2009. For a description of these new terms, see page 70. In addition, the Compensation Committee adopted in September 2009 a clawback policy applicable to, among other things, equity compensation for the named executive officers. For a description of the policy, see page 68.
     In addition to the “Stock Awards” shown in the outstanding equity awards at fiscal year-end 2009 table above, Mr. Templeton holds an award of RSUs that was granted in 1995. The award, for 120,000 shares of TI common stock, vested in 2000. Under the award terms, the shares will be issued to Mr. Templeton in March of the year after his termination of employment for any reason. These terms were designed to provide a tax benefit to the company by postponing the related compensation expense until it was likely to be fully deductible. In accordance with SEC requirements, this award is reflected in the 2009 non-qualified deferred compensation table on page 79.
 
2009 option exercises and stock vested
The following table lists the number of shares acquired and the value realized as a result of option exercises by the named executive officers in 2009 and the value of any restricted stock units that vested in 2009.
 
Option Awards Stock Awards
Number of Number of
Shares Acquired       Value Realized       Shares Acquired       Value Realized
Name on Exercise (#) on Exercise ($) on Vesting (#) on Vesting ($)
R. K. Templeton 100,000 $ 1,495,000  
K. P. March     25,000 $ 373,750
G. A. Lowe   50,000 $ 747,500
K. J. Ritchie 50,000 $ 747,500
R. G. Delagi 50,000 $ 337,500 25,000 $ 373,750



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 77
 
2009 pension benefits
The following table shows the present value as of December 31, 2009, of the benefit of the named executive officers under our qualified defined benefit pension plan (TI Employees Pension Plan) and non-qualified defined benefit pension plans (TI Employees Non-Qualified Pension Plan (which governs amounts earned before 2005) and TI Employees Non-Qualified Pension Plan II (which governs amounts earned after 2004)).
 
Payments
Present During
Number of Value of Last
Years Credited Accumulated Fiscal
Name       Plan Name       Service (#)       Benefit ($)(5)       Year ($)
R. K. Templeton (1) TI Employees Pension Plan 16  (2) $ 356,958
TI Employees Non-Qualified Pension Plan 16  (2) $ 259,082
K. P. March TI Employees Pension Plan   24  (2) $ 361,085  
TI Employees Non-Qualified Pension Plan 19  (3)   $ 157,150
TI Employees Non-Qualified Pension Plan II 24  (4) $ 1,190,816
G. A. Lowe   TI Employees Pension Plan 24  (2) $ 369,036
TI Employees Non-Qualified Pension Plan   19  (3) $ 226,107
TI Employees Non-Qualified Pension Plan II 24  (4) $ 1,300,890
K. J. Ritchie TI Employees Pension Plan 30  (2) $ 641,862
TI Employees Non-Qualified Pension Plan 25  (3) $ 452,036
TI Employees Non-Qualified Pension Plan II 30  (4) $ 1,648,783
R. G. Delagi TI Employees Pension Plan 24  (2) $ 342,017
TI Employees Non-Qualified Pension Plan 19  (3) $ 173,690
TI Employees Non-Qualified Pension Plan II 24  (4) $ 671,045

(1)       In 1997, TI’s U.S. employees were given the choice between continuing to participate in the defined benefit pension plans or participating in a new enhanced defined contribution retirement plan. Mr. Templeton chose to participate in the defined contribution plan. Accordingly, his accrued pension benefits under the qualified and non-qualified plans were frozen (i.e., they will experience no increase attributable to years of service or change in eligible earnings) as of December 31, 1997. Contributions to the defined contribution plan for Mr. Templeton’s benefit are included in the 2009 summary compensation table.
     
(2) Credited service began on the date the officer became eligible to participate in the plan. Eligibility to participate began on the earlier of 18 months of employment, or January 1 following the completion of one year of employment. Accordingly, each of the named executive officers has been employed by TI for longer than the years of credited service shown above.
     
(3) Credited service began on the date the executive officer became eligible to participate in the TI Employees Pension Plan as described in note 2 above and ceased at December 31, 2004.
     
(4) Credited service began on the date the named executive officer became eligible to participate in the TI Employees Pension Plan as described in note 2 above.
     
(5) The assumptions and valuation methods used to calculate the present value of the accumulated pension benefits shown are the same as those used by TI for financial reporting purposes and are described in note 9 in Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2009, except that a named executive officer’s retirement is assumed (in accordance with SEC rules) for purposes of this table to occur at age 65 and no assumption for termination prior to that date is used. The amount of the lump sum benefit earned as of December 31, 2009, is determined using either (i) the Pension Benefit Guaranty Corporation (PBGC) interest assumption of 3.50 percent or (ii) the Pension Protection Act of 2006 (PPA) corporate bond yield interest assumption of 6.00 percent for the TI Employees Pension Plan and 6.09 percent for the TI Employees Non-Qualified Pension Plans, whichever rate produces the higher lump sum amount. A discount rate assumption of 6.00 percent for the TI Employees Pension Plan and 6.09 percent for the non-qualified pension plans were used to determine the present value of each lump sum.
 
TI Employees Pension Plan
The TI Employees Pension Plan is a qualified defined benefit pension plan. Please see page 69 under the Benefits heading of the Compensation Discussion and Analysis for a discussion of the origin and purpose of the plan. Employees who joined the U.S. payroll after November 30, 1997, are not eligible to participate in this plan.
     A plan participant is eligible for normal retirement under the terms of the plan if he is at least 65 years of age with one year of credited service. A participant is eligible for early retirement if he is at least 55 years of age with 20 years of employment or 60 years of age with five years of employment. None of the named executive officers are currently eligible for early or normal retirement.
 


PAGE 78 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
     A participant may request payment of his accrued benefit at termination or any time thereafter. Participants may choose a lump sum payment or one of six forms of annuity. In order of largest to smallest periodic payment, the forms of annuity are: (i) single life annuity, (ii) 5-year certain and life annuity, (iii) 10-year certain and life annuity, (iv) qualified joint and 50 percent survivor annuity, (v) qualified joint and 75 percent survivor annuity, and (vi) qualified joint and 100 percent survivor annuity. If the participant does not request payment, he will begin to receive his benefit in April of the year after he reaches the age of 70½ in the form of annuity required under the IRC.
     The pension formula for the qualified plan is intended to provide a participant with an annual retirement benefit equal to 1.5 percent multiplied by the product of (i) years of credited service and (ii) the average of the five highest consecutive years of his base salary plus bonus up to a limit imposed by the IRS, less a percentage (based on his year of birth, when he elects to retire and his years of service with TI) of the amount of compensation on which his Social Security benefit is based.
     If an individual takes early retirement and chooses to begin receiving his annual retirement benefit at that time, such benefit is reduced by an early retirement factor. As a result, the annual benefit is lower than the one he would have received at age 65.
     If the participant’s employment terminates due to disability, the participant may choose to receive his accrued benefit at any time prior to age 65. Alternatively, the participant may choose to defer receipt of the accrued benefit until reaching age 65 and then take a disability benefit. The disability benefit paid at age 65 is based on salary and bonus, years of credited service the participant would have accrued to age 65 had he not become disabled and disabled status.
     The benefit payable in the event of death is based on salary and bonus, years of credited service and age at the time of death, and may be in the form of a lump sum or annuity at the election of the beneficiary. The earliest date of payment is the first day of the second calendar month following the month of death.
     Leaves of absence, including a bridge to retirement, are credited to years of service under the qualified pension plan. Please see the discussion of leaves of absence on page 83 below.
 
TI Employees Non-Qualified Pension Plans
TI has two non-qualified pension plans: the TI Employees Non-Qualified Pension Plan (Plan I), which governs amounts earned before 2005; and the TI Employees Non-Qualified Pension Plan II (Plan II), which governs amounts earned after 2004. Each is a non-qualified defined benefit pension plan. Please see page 69 under the Benefits heading of the Compensation Discussion and Analysis for a discussion of the purpose of the plans. As with the qualified defined benefit pension plan, employees who joined the U.S. payroll after November 30, 1997, are not eligible to participate in Plan I or Plan II. Eligibility for normal and early retirement under these plans is the same as under the qualified plan (please see page 77). Benefits are paid in a lump sum.
     A participant’s benefits under Plan I and Plan II are calculated using the same formula as described above for the TI Employees Pension Plan. However, the IRS limit on the amount of compensation on which a qualified pension benefit may be calculated does not apply. Additionally, the IRS limit on the amount of qualified benefit the participant may receive does not apply to these plans. Once this non-qualified benefit amount has been determined using the formula described above, the individual’s qualified benefit is subtracted from it. The resulting difference is multiplied by an age-based factor to obtain the amount of the lump sum benefit payable to an individual under the non-qualified plans.
     Amounts under Plan I will be distributed when payment of the participant’s benefit under the qualified pension plan commences. Amounts under Plan II will be distributed subject to the requirements of Section 409A of the IRC. Because the named executive officers are among the 50 most highly compensated officers of the company, Section 409A of the IRC requires that they not receive any lump sum distribution payment under Plan II before the first day of the seventh month following termination of employment.
     If a participant terminates due to disability, amounts under Plan I will be distributed when payment of the participant’s benefit under the qualified plan commences. For amounts under Plan II, distribution is governed by Section 409A of the IRC, and the disability benefit is reduced to reflect the payment of the benefit prior to age 65.
     In the event of death, payment under both plans is based on salary and bonus, years of credited service and age at the time of death and will be in the form of a lump sum. The earliest date of payment is the first day of the second calendar month following the month of death.
     Balances in the plans are unsecured obligations of the company. For amounts under Plan I, in the event of a change in control, the present value of the individual’s benefit would be paid not later than the month following the month in which the change in control occurred. For such amounts, the standard definition of a change in control (please see page 75) applies. For all amounts accrued under this plan, if a sale of substantially all of the assets of the company occurred, the present value of the individual’s benefit would be distributed in a lump sum as soon as reasonably practicable following the sale of assets. For amounts under Plan II, no distribution of benefits is triggered by a change in control.
     Leaves of absence, including a bridge to retirement, are credited to years of service under the non-qualified pension plans. For a discussion of leaves of absence, please see page 83 below.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 79
 
2009 non-qualified deferred compensation
The following table shows contributions to the named executive officer’s deferred compensation account in 2009 and the aggregate amount of his deferred compensation as of December 31, 2009.
 
Executive Registrant Aggregate Aggregate
Contributions Contributions in Aggregate Earnings in Withdrawals/ Balance at Last
Name in Last FY ($)       Last FY ($)(2)       Last FY ($)       Distributions ($)       FYE ($)
R. K. Templeton $ 50,662 $ 1,517,017  (3) $ 54,000  (4) $ 4,340,803  (5)
K. P. March       $ 752     $ 92,491  
G. A. Lowe $ 195,145  (1)     $ 115,398 $ 734,272
K. J. Ritchie $ 29,750   $ 73,051
R. G. Delagi $ 17,957 $ 42,607  

(1)       Amount shown is (a) a portion of Mr. Lowe’s bonus and profit sharing for 2008, both of which were paid in 2009; and (b) a portion of his 2009 salary. The full amount of the bonus and profit sharing for 2008 was included in the summary compensation table of the company’s proxy statement dated March 5, 2009. The full amount of his 2009 salary is included in the Salary column of the 2009 summary compensation table on page 71.
     
(2)   Company matching contributions pursuant to the defined contribution plan. These amounts are included in the All Other Compensation column of the 2009 summary compensation table on page 71.
     
(3)   Consists of: (a) $54,000 in dividend equivalents paid under the 120,000-share 1995 RSU award discussed on page 76, settlement of which has been deferred until after termination of employment; (b) a $1,264,800 increase in the value of the RSU award (calculated by subtracting $1,862,400 (the value of the award at year-end 2008) from $3,127,200 (the value of the award at year-end 2009) (in both cases, the number of RSUs is multiplied by the closing price of TI common stock on the last trading date of the year)); and (c) a $198,217 gain in Mr. Templeton’s deferred compensation account in 2009. Dividend equivalents are paid at the same rate as dividends on the company’s common stock.
     
(4)   Dividend equivalents paid on the RSUs discussed in note 3.
     
(5)   Of this amount, $3,127,200 is attributable to Mr. Templeton’s 1995 RSU award, calculated as described in note 3. The remainder is the balance of his deferred compensation account.
 
Please see page 69 for a discussion of the purpose of the plan. An employee’s deferred compensation account contains eligible compensation the employee has elected to defer and contributions by the company that are in excess of the IRS limits on (i) contributions the company may make to the enhanced defined contribution plan and (ii) matching contributions the company may make related to compensation the executive officer deferred into his deferred compensation account.
     Participants in the deferred compensation plan may choose to defer up to (i) 25 percent of their base salary, (ii) 90 percent of their performance bonus, and (iii) 90 percent of profit sharing. Elections to defer compensation must be made in the calendar year prior to the year in which the compensation will be earned.
     The company has determined that the investment alternatives for deferred compensation balances should generally be the same as the investment alternatives available under the company’s defined contribution plan. These investment alternatives may be changed at any time.
     During 2009, participants could choose to have their deferred compensation mirror the performance of one or more of the following mutual funds, each of which is managed by a third party (these alternatives are a subset of those offered to participants in the defined contribution plans): Northern Trust Short Term Investment Fund, Northern Trust Daily Aggregate Bond Fund Index, Barclays Global Investors Equity Index Fund, Northern Trust Russell 1000 Value Equity Index, Northern Trust Russell 1000 Growth Equity Index, Northern Trust Russell 2000 Equity Index, Barclays Global Investors Active International Equity, Barclays Global Investors Lifepath Funds (Lifestyle 2010), Barclays Global Investors Lifepath Funds (Lifestyle 2020), Barclays Global Investors Lifepath Funds (Lifestyle 2030) and Barclays Global Investors Lifepath Funds (Lifestyle 2040). In May, the Barclay’s Global Investors Active International Equity Fund was replaced by the Barclay’s Global Investors International Equity Index Fund. Effective December 1, 2009, (the date BlackRock, Inc. completed its acquisition of Barclays Global Investors) funds managed by Barclays were replaced with the following: BlackRock Equity Index Fund, BlackRock (EAFE) (Europe, Australia, Far East) Equity Index Fund, BlackRock Lifepath Index 2010 Fund, BlackRock Lifepath Index 2020 Fund, BlackRock Lifepath Index 2030 Fund, and BlackRock Lifepath Index 2040 Fund. The BlackRock Lifepath Index 2050 Fund and the BlackRock Lifepath Index Retirement Fund (which replaced the BlackRock Lifepath Index 2010 Fund) were added as investment options effective January 1, 2010. Prior to April 2005, participants could also choose to have their deferred compensation mirror the performance of TI’s common stock. Effective January 1, 2010, the TI stock fund was removed as an investment option and prior to its removal any amounts invested in the TI stock fund were automatically reinvested in the appropriate Lifepath fund based on each participant’s assumed retirement age.
 


PAGE 80 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
     From among the available alternatives, participants may change their instructions relating to their deferred compensation daily. Earnings on a participant’s balance are determined solely by the performance of the investments that the participant has chosen for his plan balance. The company does not guarantee any minimum return on investments. A third party administers the company’s deferred compensation program.
     A participant may request distribution from the plan in the case of an unforeseeable emergency. To obtain an unforeseeable emergency withdrawal, a participant must meet the requirements of Section 409A of the IRC. Otherwise, a participant’s balance is paid pursuant to his distribution election and is subject to applicable IRC limitations.
     Amounts contributed by the company, and amounts earned and deferred by the participant for which there is a valid distribution election on file, will be distributed in accordance with the participant’s election. Amounts for which no valid distribution election is on file will be distributed three years from the date of deferral.5
     In the event of the participant’s death, the earliest date of payment is the first day of the second calendar month following the month of death.
     Like the balances under the non-qualified defined benefit pension plans, deferred compensation balances are unsecured obligations of the company. For amounts earned and deferred prior to 2010, a change in control does not trigger a distribution under the plan. For amounts earned and deferred after 2009, distribution occurs, to the extent permitted by Section 409A of the IRC, if the participant is involuntarily terminated within 24 months after a change in control.
 
Potential payments upon termination or change in control
None of the named executive officers has an employment contract with the company. They are eligible for benefits on generally the same terms as other U.S. employees upon termination of employment or change in control of the company. TI does not reimburse executive officers for any income or excise taxes that are payable by the executive as a result of payments relating to termination or change in control.
 
Termination
The following programs may result in payments to a named executive officer whose employment terminates. Most of these programs have been discussed above in the proxy statement. For a discussion of the impact of these programs on the compensation decisions for 2009, please see the Compensation Discussion and Analysis on pages 69-70.
 
Bonus. Our policies concerning bonus and the timing of payments are described on page 62. Whether a bonus would be awarded, and in what amount, to an executive officer whose employment has terminated would depend on the circumstances of termination. It may be presumed that no bonus would be awarded in the event of a termination for cause. If awarded, bonuses are paid by the company.
 
Qualified and non-qualified defined benefit pension plans. The purposes of these plans are described on page 69. The formula for determining benefits, the forms of benefit and the timing of payments are described on pages 77-78. The amounts disbursed under the qualified and non-qualified plans are paid, respectively, by the TI Employees Pension Trust and the company.
 
Deferred compensation plan. The purpose of this plan is described on page 69. The amounts payable under this program depend solely on the performance of investments that the participant has chosen for his plan balance. The timing of payments is discussed on pages 79-80. Amounts distributed are paid by the company.
 
Equity compensation. Depending on the circumstances of termination, grantees whose employment terminates may retain the right to exercise previously granted stock options and receive shares under outstanding restricted stock unit (RSU) awards. Please see pages 75-76. Most RSU awards include a right to receive dividend equivalents. The dividend equivalents are paid annually by the company in a single cash payment after the last dividend payment of the year.
 
Profit sharing. For a description of the purpose of this program, the formula for determining payments and the timing of payments, please see page 61. Like other U.S. employees, if a named executive officer remains employed through the end of the year, he will receive any profit sharing paid for that year. In the event of retirement or commencement of a bridge to retirement, any profit sharing will be paid for the portion of the year worked before retirement or the beginning of the bridge. In the event of termination due to disability or death, the officer or his beneficiaries would receive any profit sharing paid for the year. Profit sharing payments are made by the company.
 
Time bank. Based on years of employment with the company, employees accrue hours in a time bank. Time bank hours may be used for paid absences from the office such as vacation and sick days. Employees receive a cash payment for any time bank hours still outstanding on termination of employment. The amount paid is calculated by applying the employee’s base salary rate in effect at the

____________________
 
5       The named executive officers have made the following distribution elections for deferred compensation: Mr. Templeton, lump sum paid in January 2012; Mr. March, lump sum paid in January 2011; Mr. Lowe, lump sum paid in January 2012; Mr. Ritchie, lump sum paid in January 2011; and Mr. Delagi, lump sum paid in January 2012.



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 81
 
time of termination to the number of hours remaining in the time bank. Time bank payments are made in a lump sum by the company. They are ordinarily paid no later than what would have been the employee’s next regular pay cycle.
 
Perquisites. Financial counseling is available to executive officers in the year after retirement. Otherwise, no perquisites continue after termination of employment.
 
     The following tables indicate the amounts for which each named executive officer would have been eligible if his employment had terminated on December 31, 2009, as a result of disability, death, involuntary termination for cause, resignation, or involuntary termination not for cause. Because none of the executive officers was eligible to retire as of December 31, 2009, no potential payments are stated assuming retirement.
 
Termination due to disability
 
Non- Non-
Qualified Qualified Qualified
Defined Defined Defined
Benefit Benefit Benefit
Pension Pension Pension Deferred Stock Profit Time
Plan Plan Plan II Compensation RSUs Options Sharing Bank
Name   Bonus   (2)   (3)   (4)   (5)   (6)   (7)   (8)   (9)   Total
Templeton (1) $ 807,461 $ 609,677 $ 128,200    $ 1,213,603    $ 20,626,151 $ 19,534,662 $ 63,084 $ 220,407 $ 43,203,245
March (1) $ 1,315,084 $ 349,792   $ 2,463,516 $ 92,491 $ 4,256,484 $ 3,657,300   $ 30,458 $ 89,424 $ 12,254,549
Lowe (1) $ 1,674,965 $ 654,107 $ 1,920,940 $ 734,272 $ 9,468,484   $ 3,561,800 $ 35,044 $ 73,874 $ 18,123,486
Ritchie (1)   $ 1,716,946 $ 926,549 $ 3,296,868 $ 73,051 $ 6,080,684 $ 5,852,650 $ 29,349 $ 81,860 $ 18,057,957
Delagi (1) $ 1,661,638 $ 522,241 $ 1,012,075 $ 42,607 $ 4,907,984 $ 2,782,450 $ 28,166 $ 77,734 $ 11,034,895

(1)      Because the amount of a bonus is subject to the Compensation Committee’s discretion considering the facts and circumstances of the termination, it is not possible to predict the amount of bonus, if any, the executive officer would have received.
     
(2) The amount shown is the lump sum benefit payable at age 65 to the named executive officer in the event of termination as of December 31, 2009, due to disability, assuming the named executive officer does not request payment of his disability benefit until age 65. The assumptions used in calculating these amounts are the same as the age-65 lump-sum assumptions used for financial reporting purposes for the company’s audited financial statements for 2009 and are described in footnote 5 to the 2009 pension benefits table on page 77.
     
(3) The amount shown is the lump sum benefit payable at age 65 to the named executive officers in the event of termination due to disability. The assumptions used are the same as those described in note 2 above.
     
(4) The amount shown is the lump sum benefit payable at separation of service (as defined in the plan) in the event of termination due to disability. The assumptions used are the same as those described in note 2 above.
     
(5) Aggregate account value as of December 31, 2009. The amounts shown in the 2009 non-qualified deferred compensation table on page 79 include the amounts shown in this column.
     
(6) Calculated by multiplying the number of outstanding RSUs by the closing price of TI common stock as of December 31, 2009 ($26.06). Because the executive officer will retain his RSU awards in the event of termination and they will continue to vest according to their terms, all outstanding RSUs are assumed to be vested for purposes of this table. Please see the outstanding equity awards at fiscal year-end 2009 table on pages 73-74 for the number of unvested RSUs as of December 31, 2009, and page 76 for a discussion of an additional outstanding RSU award held by Mr. Templeton.
     
(7) Calculated as the difference between the grant price of all outstanding in-the-money options and the closing price of TI common stock as of December 31, 2009 ($26.06), multiplied by the number of shares under such options as of December 31, 2009.
     
(8) Amounts earned in 2009.
     
(9) Calculated by multiplying the number of hours remaining in the named executive officer’s time bank by the applicable base salary rate as of December 31, 2009.
 


PAGE 82 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Termination due to death
 
Non- Non-
Qualified Qualified Qualified
Defined Defined Defined
Benefit Benefit Benefit
Pension Pension Pension Deferred Stock Profit Time
Plan Plan Plan II Compensation RSUs Options Sharing Bank
Name    Bonus    (2)    (2)    (2)    (3)    (4)    (5)    (6)    (7)    Total
Templeton (1)   $ 212,612 $ 153,336 $ 3,771   $ 1,213,603   $ 20,626,151 $ 19,534,662 $ 63,084 $ 220,407 $ 42,027,626
March (1)   $ 221,761 $ 95,999 $ 746,095 $ 92,491 $ 4,256,484   $ 3,657,300 $ 30,458 $ 89,424 $ 9,190,012
Lowe (1) $ 238,451 $ 145,091 $ 862,482 $ 734,272 $ 9,468,484 $ 3,561,800 $ 35,044   $ 73,874   $ 15,119,498
Ritchie (1)   $ 367,837 $ 256,866 $ 966,307 $ 73,051 $ 6,080,684 $ 5,852,650 $ 29,349 $ 81,860 $ 13,708,604
Delagi (1)   $ 230,267 $ 116,786 $ 464,240 $ 42,607 $ 4,907,984 $ 2,782,450 $ 28,166 $ 77,734 $ 8,650,234

(1) See note 1 to the Termination Due to Disability table.
     
(2)      Value of the benefit payable in a lump sum to the executive officer’s beneficiary calculated as required by the terms of the plan assuming the earliest possible payment date. The plan provides that in the event of death, the beneficiary receives 50 percent of the participant’s accrued benefit, reduced by the age-applicable joint and 50 percent survivor factor.
     
(3) See note 5 to the Termination Due to Disability table.
     
(4) Calculated by multiplying the number of outstanding RSUs by the closing price of TI common stock as of December 31, 2009 ($26.06). All outstanding RSUs are assumed to be vested for purposes of this table. Please see the Outstanding Equity Awards at Fiscal Year-End 2009 table on pages 73-74 for the number of unvested RSUs as of December 31, 2009, and see page 76 for a discussion of an additional outstanding RSU award held by Mr. Templeton.
     
(5) See note 7 to the Termination Due to Disability table.
     
(6) Amounts earned in 2009.
     
(7) See note 9 to the Termination Due to Disability table.
 
Involuntary termination for cause
 
Non- Non-
Qualified Qualified Qualified
Defined Defined Defined
Benefit Benefit Benefit
Pension Pension Pension Deferred Profit Time
   Bonus    Plan    Plan    Plan II    Compensation       Stock    Sharing    Bank   
Name (1)   (2)   (2)   (2)   (3)   RSUs Options (5)   (6)   Total
Templeton $ 410,618 $ 296,033 $ 7,384    $ 1,213,603    $ 3,127,200  (4) $ 63,084 $ 220,407 $ 5,338,329
March $ 409,971 $ 177,057 $ 1,379,838 $ 92,491 $ 30,458 $ 89,424 $ 2,179,239
Lowe $ 445,546 $ 271,991 $ 1,610,495 $ 734,272 $ 35,044   $ 73,874 $ 3,171,222
Ritchie $ 717,305 $ 500,959 $ 1,884,494 $ 73,051 $ 29,349 $ 81,860 $ 3,287,018
Delagi $ 416,788 $ 210,917 $ 840,803 $ 42,607 $ 28,166 $ 77,734 $ 1,617,015

(1) It is presumed that in the event of termination for cause no bonus would be awarded.
     
(2)      Lump sum value of the December 31, 2009, accrued benefit calculated as required by the terms of the plan assuming the earliest possible payment date.
     
(3) See note 5 to the Termination Due to Disability Table.
     
(4) Calculated by multiplying 120,000 vested RSUs by the closing price of the company’s common stock as of December 31, 2009 ($26.06).
     
(5) Amounts earned in 2009.
     
(6) See note 9 to the Termination Due to Disability table.
 


TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 83
 
Resignation; involuntary termination not for cause
 
Non- Non-
Qualified Qualified Qualified
Defined Defined Defined
Benefit Benefit Benefit
Pension Pension Pension Deferred Stock Profit Time
Plan Plan Plan II Compensation Options Sharing Bank
Name   Bonus   (2)   (2)   (2)   (3)   RSUs   (5)   (6)   (7)   Total
Templeton (1)   $ 410,618 $ 296,033 $ 7,384    $ 1,213,603    $ 3,127,200  (4) $ 12,152,500 $ 63,084 $ 220,407 $ 17,490,829
March (1)   $ 409,971   $ 177,057   $ 1,379,838   $ 92,491 $ 1,546,400 $ 30,458 $ 89,424   $ 3,725,639
Lowe   (1)   $ 445,546 $ 271,991 $ 1,610,495 $ 734,272     $ 451,000   $ 35,044   $ 73,874 $ 3,622,222
Ritchie (1)   $ 717,305 $ 500,959 $ 1,884,494 $ 73,051   $ 3,075,150 $ 29,349 $ 81,860 $ 6,362,168
Delagi (1)   $ 416,788 $ 210,917 $ 840,803 $ 42,607 $ 338,250 $ 28,166 $ 77,734 $ 1,955,265

(1) See note 1 to the Termination Due to Disability table.
     
(2) See note 2 to the Involuntary Termination for Cause table.
     
(3) See note 5 to the Termination Due to Disability table.
     
(4) See note 4 to the Involuntary Termination for Cause table.
     
(5)      Calculated as the difference between the grant price of all exercisable in-the-money options and the closing price of TI common stock as of December 31, 2009 ($26.06), multiplied by the number of shares under such options as of December 31, 2009.
     
(6) Amounts earned in 2009.
     
(7) See note 9 to the Termination Due to Disability table.
 
In the case of a resignation pursuant to a separation arrangement, an executive officer (like other employees above a certain job grade level) will typically be offered a 12-month paid leave of absence before termination, in exchange for a non-compete and non-solicitation commitment and a release of claims against the company. The leave period will be credited to years of service under the pension plans described above. During the leave, the executive officer’s stock options will continue to become exercisable and his RSUs will continue to vest. Amounts paid to an individual during a paid leave of absence are not counted when calculating profit sharing and benefits under the qualified and non-qualified pension plans. During a paid leave of absence an individual does not continue to accrue time bank hours. He retains medical and insurance benefits at essentially the same rates as active company employees during the paid leave of absence period.
     In the case of a separation arrangement in which the paid leave of absence expires when the executive officer will be at least 50 years old and have at least 15 years of employment with the company, the separation arrangement will typically include an unpaid leave of absence, to commence at the end of the paid leave and end when the executive officer has reached the earlier of age 55 with at least 20 years of employment or age 60 (bridge to retirement). The bridge to retirement will be credited to years of service under the qualified and non-qualified defined benefit plans described above. The executive officer will not receive profit sharing or accrue time bank hours for the period he is on a bridge to retirement, but he will retain medical and insurance benefits at essentially the same rates as active TI employees. For the effect of a bridge to retirement on equity compensation, please see the discussion on page 76.
 
Change in control
We have no program, plan or arrangement providing benefits triggered by a change in control except as described below. In fact, the only consequences of a change in control are the acceleration of payment of existing balances and the full vesting of certain outstanding equity awards.
     A change in control at December 31, 2009, would have triggered payment of the balance under the TI Employees Non-Qualified Pension Plan and a portion of the balance under the deferred compensation plan. Please see pages 78 and 80 for a discussion of the purpose of change in control provisions relating to the non-qualified defined benefit plans and the deferred compensation plan as well as the circumstances and the timing of payment.
     Please see pages 75-76 for further information concerning change in control provisions relating to stock options and RSU awards.
     For a discussion of the impact of these programs on the compensation decisions for 2009, please see pages 69-70.
 


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The following table indicates the amounts that would have been triggered for each executive officer had there been a change in control as of December 31, 2009. The actual amounts that would be paid out can only be determined at the time the change in control occurs.
 
Non-
Qualified Non-
Qualified Defined Qualified
Defined Benefit Defined
Benefit Pension Benefit Deferred Stock
Pension Plan Pension Compensation RSUs Options Profit Time
Name    Bonus    Plan    (2)    Plan II    (3)    (4)    (5)    Sharing    Bank    Total
Templeton (1)   $ 296,033    $ 2,491,843    $ 20,626,151 $ 7,382,162 $ 30,796,189
March (1) $ 177,057 $ 79,321 $ 4,256,484 $ 2,110,900 $ 6,623,762
Lowe (1) $ 271,991 $ 1,133,482 $ 9,468,484 $ 3,110,800 $ 13,984,757
Ritchie (1) $ 500,959 $ 66,026 $ 6,080,684 $ 2,777,500 $ 9,425,169
Delagi (1) $ 210,917 $ 59,405 $ 4,907,984 $ 2,444,200 $ 7,622,506

(1) See note 1 to the Termination Due to Disability table.
     
(2) Lump sum value of the December 31, 2009, accrued benefit calculated as required by the terms of the plan assuming the earliest possible payment date.
     
(3) Shown is the amount earned and deferred prior to 2005. See page 80 for a discussion of the effect of a change in control on an executive officer’s deferred compensation account.
     
(4) Calculated by multiplying the number of outstanding RSUs by the closing price of the company’s common stock as of December 31, 2009 ($26.06).
     
(5)      Upon a change in control meeting the standard definition (please see page 75), all outstanding options granted before 2010 become immediately exercisable. Calculated as the difference between the grant price of in-the-money options not already exercisable and the closing price of the company’s common stock as of December 31, 2009 ($26.06), multiplied by the number of those options as of December 31, 2009.
 
Audit Committee report
 
The Audit Committee of the board of directors has furnished the following report:
     As noted in the committee’s charter, TI management is responsible for preparing the company’s financial statements. The company’s independent registered public accounting firm is responsible for auditing the financial statements. The activities of the committee are in no way designed to supersede or alter those traditional responsibilities. The committee’s role does not provide any special assurances with regard to TI’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the independent registered public accounting firm.
     The committee has reviewed and discussed with management and the independent accounting firm, as appropriate, (1) the audited financial statements and (2) management’s report on internal control over financial reporting and the independent accounting firm’s related opinions.
     The committee has discussed with the independent registered public accounting firm, Ernst & Young, the required communications specified by auditing standards together with guidelines established by the SEC and the Sarbanes-Oxley Act.
     The committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board, regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young the firm’s independence.
     Based on the review and discussions referred to above, the committee recommended to the board of directors that the audited financial statements be included in the company’s Annual Report on Form 10-K for 2009 for filing with the SEC.
 
Pamela H. Patsley, Chair      David L. Boren      Stephen P. MacMillan      Wayne R. Sanders



TEXAS INSTRUMENTS 2010 PROXY STATEMENT n PAGE 85
 
Proposal to ratify appointment of independent registered public accounting firm
 
The Audit Committee of the board has appointed Ernst & Young LLP to be TI’s independent registered public accounting firm for 2010.
     The board asks the stockholders to ratify the appointment of Ernst & Young. If the stockholders do not ratify the appointment, the Audit Committee will consider whether it should appoint another independent registered public accounting firm.
     Representatives of Ernst & Young are expected to be present, and to be available to respond to appropriate questions, at the annual meeting. They have the opportunity to make a statement if they desire to do so; they have indicated that, as of this date, they do not.
    
The company has paid fees to Ernst & Young for the services described below:
 
Audit fees. Ernst & Young’s Audit Fees were $6,774,000 in 2009 and $7,277,000 in 2008. The services provided in exchange for these fees were our annual audit, including the audit of internal control over financial reporting, reports on Form 10-Q, and statutory audits required internationally.
 
Audit-related fees. In addition to the Audit Fees, the company paid Ernst & Young $563,000 in 2009 and $556,000 in 2008. The services provided in exchange for these fees included employee benefit plan audits, access to Ernst & Young’s online research tool, environmental certification audits, energy-usage certification audits for two non-U.S. subsidiaries and a research and development certification audit for a non-U.S. subsidiary.
 
Tax fees. Ernst & Young’s fees for professional services rendered for tax compliance (preparation and review of tax returns), tax advice and tax planning (including expatriate tax services) were $407,000 in 2009 and $495,000 in 2008.
 
All other fees. Ernst & Young’s fees for all other professional services rendered were $22,000 in 2009 and $38,000 in 2008 for audit services for the TI Foundation, as well as for various training programs.
 
Pre-approval policy. The Audit Committee is required to pre-approve the audit and non-audit services to be performed by the independent registered public accounting firm in order to assure that the provision of such services does not impair the firm’s independence.
 
     Annually the independent registered public accounting firm and the Director of Internal Audits present to the Audit Committee services expected to be performed by the firm over the next 12 months. The Audit Committee reviews and, as it deems appropriate, pre-approves those services. The services and estimated fees are presented to the Audit Committee for consideration in the following categories: Audit, Audit-Related, Tax and All Other (each as defined in Schedule 14A of the Securities Exchange Act of 1934). For each service listed in those categories, the Committee receives detailed documentation indicating the specific services to be provided. The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee reviews on at least a quarterly basis the services provided to date by the firm and the fees incurred for those services. The Audit Committee may revise the list of pre-approved services and related fees from time to time, based on subsequent determinations.
     In order to respond to time-sensitive requests for services that may arise between regularly scheduled meetings of the Audit Committee, the Committee has delegated pre-approval authority to its Chair (the Audit Committee does not delegate to management its responsibilities to pre-approve services). The Chair reports pre-approval decisions to the Audit Committee and seeks ratification of such decisions at the Audit Committee’s next scheduled meeting.
    
The Audit Committee or its Chair pre-approved all services provided by Ernst & Young during 2009.
 
     The board of directors recommends a vote “FOR” ratification of the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2010.
 
Additional information
 
Voting securities
As of February 16, 2010, 1,241,951,662 shares of the company’s common stock were outstanding. This is the only class of capital stock entitled to vote at the meeting. Each holder of common stock has one vote for each share held. As stated in the notice of meeting, holders of record of the common stock at the close of business on February 16, 2010, may vote at the meeting or any adjournment of the meeting.
 


PAGE 86 n TEXAS INSTRUMENTS 2010 PROXY STATEMENT
 
Security ownership of certain beneficial owners
The following table shows the only person who has reported beneficial ownership of more than 5 percent of the common stock of the company. Persons generally “beneficially own” shares if they have the right to either vote those shares or dispose of them. More than one person may be considered to beneficially own the same shares.
 
Shares Owned at Percent
Name and Address      December 31, 2009      of Class
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022 67,452,365  (1) 5.38 %
 
(1)      TI understands that BlackRock, Inc. has sole dispositive power and sole voting power for these shares.
 
Security ownership of directors and management
The following table shows the beneficial ownership of TI common stock by directors, nominees for director, the named executive officers and all executive officers, directors and nominees as a group. Each director, nominee and named executive officer has sole voting and sole investment power with respect to the shares owned. The table excludes shares held by a family member if a director, nominee or executive officer has disclaimed beneficial ownership. No director, nominee or executive officer has pledged shares of TI common stock.
 
     Shares Owned at      Percent
Name December 31, 2009 of Class
Directors and Nominees (1)
J. R. Adams. 158,971 *
R. W. Babb, Jr. *
D. L. Boren