SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
Commission File Number 1-3761
TEXAS INSTRUMENTS INCORPORATED
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(Exact name of Registrant as specified in its charter)
Delaware 75-0289970
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(State of Incorporation) (I.R.S. Employer Identification No.)
12500 TI Boulevard, P.O. Box 660199, Dallas, Texas 75266-0199
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 972-995-3773
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, par value $1.00 New York Stock Exchange
The Swiss Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $53,500,000,000 as of January 31, 2002.
1,736,248,062
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(Number of shares of common stock outstanding as of January 31, 2002)
Parts I, II, III and IV hereof incorporate information by reference to the
Registrant's proxy statement for the 2002 annual meeting of stockholders.
PART I
ITEM 1. Business.
General Information
--------------------
Texas Instruments Incorporated ("TI" or the "company," including subsidiaries
except where the context indicates otherwise) is headquartered in Dallas, Texas,
and has manufacturing, design or sales operations in more than 25 countries.
TI's largest geographic markets are in the United States, Asia, Japan and
Europe. TI has been in operation since 1930.
The financial information with respect to TI's business segments and operations
outside the United States, which is contained in the note to the financial
statements captioned "Business Segment and Geographic Area Data" on pages C-25
through C-27 of TI's proxy statement for the 2002 annual meeting of
stockholders, is incorporated herein by reference to such proxy statement.
Semiconductor
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TI is a global semiconductor company and a leading designer and supplier of
digital signal processors and analog integrated circuits, the engines driving
the digitization of electronics. These two types of semiconductor products work
together in digital electronic devices such as digital cellular phones. Digital
signal processors and analog integrated circuits enable a wide range of new
products and features for TI's more than 30,000 customers in commercial,
industrial and consumer markets.
TI also is a world leader in the design and manufacturing of other semiconductor
products. Those products include standard logic devices, application-specific
integrated circuits, reduced instruction-set computing microprocessors,
microcontrollers and digital imaging devices.
The semiconductor business comprised 83% of TI's 2001 revenues. TI's
semiconductor products are used in a diverse range of electronic systems,
including cellular telephones, personal computers, servers, communications
infrastructure equipment, digital cameras, digital audio players, motor
controls, automobiles and digital imaging systems including projector and
television systems. Products are sold to original-equipment manufacturers,
contract manufacturers and distributors. TI's semiconductor patent portfolio has
been established as an ongoing contributor to semiconductor revenues. Revenues
generated from sales to TI's top five semiconductor customers accounted for
approximately 29% of total semiconductor revenues in 2001.
The semiconductor business is intensely competitive, subject to rapid
technological change and pricing pressures, and requires high rates of
investment. TI faces strong competition in all of its semiconductor product
lines. The rapid pace of change and technological breakthroughs constantly
create new opportunities for existing competitors and start-ups, which can
quickly render existing technologies less valuable. In digital signal
processors, TI competes with a growing number of large and small companies, both
U.S.-based and international. New product development capabilities, applications
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support, software knowledge and advanced semiconductor process technology are
the primary competitive factors in this business.
The market for analog integrated circuits is highly fragmented. TI competes with
many large and small companies, both U.S.-based and international. Primary
competitive factors in this business are the availability of innovative designs
and designers, a broad range of process technologies and applications support
and, particularly in the standard products area, price.
Other TI Businesses
-------------------
In addition to semiconductors, TI has two other principal segments. The largest,
representing 12% of TI's 2001 revenues, is Sensors & Controls. This business
sells electrical and electronic controls, sensors and radio-frequency
identification systems into commercial and industrial markets. Typically the top
supplier in targeted product areas, Sensors & Controls faces strong
multinational and regional competitors. The primary competitive factors in this
business are product reliability, manufacturing costs and engineering expertise.
The products of the business are sold to original equipment manufacturers and
distributors. Revenues generated from sales to TI's top five Sensors & Controls
customers accounted for approximately 24% of total Sensors & Controls revenues
in 2001.
Educational & Productivity Solutions (E&PS) represents 5% of TI's 2001 revenues
and is a leading supplier of graphing and educational calculators. This business
sells primarily through retailers and to schools through instructional dealers.
TI's principal competitors in this business are Japan- and U.S.-based companies.
Technology expertise, price and infrastructure for education and market
understanding are primary competitive factors in this business. Revenues
generated from sales to TI's top five E&PS customers accounted for approximately
44% of total E&PS revenues in 2001.
Acquisitions and Divestitures
-------------------------------
From time to time TI considers acquisitions and divestitures that may strengthen
its business portfolio. TI may effect one or more of these transactions at such
time or times as it determines to be appropriate. In the third quarter of 2001,
TI acquired Graychip, a developer of digital up- and down-converters. This
acquisition strengthened TI's product offering for high-speed signal processing
applications such as digital radio, wireless basestations, point-to-point
microwave communications, broadband wireless access, cable modem head-ends, and
digital video systems. Graychip also provided expertise in data conversion
across multiple cellular standards.
Backlog
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The dollar amount of backlog of orders believed by TI to be firm was $1036
million as of December 31, 2001 and $2411 million as of December 31, 2000.
Backlog orders are, under certain circumstances, subject to cancellation. Also,
there is generally a short cycle between order and shipment. Accordingly, the
company believes that its backlog as of any particular date may not be
indicative of revenue for any future period.
3
Raw Materials
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TI purchases materials, parts and supplies from a number of suppliers. The
materials, parts and supplies essential to TI's business are generally available
at present and TI believes at this time that such materials, parts and supplies
will be available in the foreseeable future.
Patents and Trademarks
------------------------
TI owns many patents in the United States and other countries in fields relating
to its business. The company has developed a strong, broad-based patent
portfolio. TI also has several agreements with other companies involving license
rights and anticipates that other licenses may be negotiated in the future. TI
does not consider its business materially dependent upon any one patent or
patent license, although taken as a whole, the rights of TI and the products
made and sold under patents and patent licenses are important to TI's business.
TI owns trademarks that are used in the conduct of its business. These
trademarks are valuable assets, the most important of which are "Texas
Instruments" and TI's corporate monogram.
Research and Development
--------------------------
TI's research and development expense was $1598 million in 2001, compared with
$1747 million in 2000 and $1379 million in 1999. Included is a charge for the
value of acquisition-related purchased in-process research and development of
zero in 2001, $112 million in 2000 and $79 million in 1999.
Seasonality
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TI's revenues and operating results are subject to some seasonal variation.
Employees
---------
The information concerning the number of persons employed by TI at December 31,
2001 on page C-31 of TI's proxy statement for the 2002 annual meeting of
stockholders is incorporated herein by reference to such proxy statement.
Cautionary Statements Regarding Future Results of Operations
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You should read the following cautionary statements in conjunction with the
factors discussed elsewhere in this and other of TI's filings with the
Securities and Exchange Commission (SEC) and in materials incorporated by
reference in these filings. These cautionary statements are intended to
4
highlight certain factors that may affect the financial condition and results of
operations of TI and are not meant to be an exhaustive discussion of risks that
apply to companies with broad international operations, such as TI. Like other
businesses, TI is susceptible to macroeconomic downturns in the United States or
abroad that may affect the general economic climate and performance of TI or its
customers. Similarly, the price of TI's securities is subject to volatility due
to fluctuations in general market conditions, differences in TI's results of
operations from estimates and projections generated by the investment community
and other factors beyond TI's control.
Further Weakening or Delayed Recovery in the Semiconductor Market May Adversely
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Affect TI's Performance.
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TI's semiconductor business represents its largest business segment and the
principal source of its revenues. The semiconductor market has historically been
cyclical and subject to significant economic downturns. After strong growth in
1999 and 2000, the semiconductor market declined significantly in 2001. Further
weakening or delayed recovery in the semiconductor market could adversely affect
TI's results of operations and have an adverse effect on the market price of its
securities. In particular, TI's strategic focus in this business is on the
development and marketing of digital signal processors and analog integrated
circuits. While TI believes that focusing its efforts on digital signal
processors and analog integrated circuits offers the best opportunity for TI to
achieve its strategic goals and that TI has developed, and will continue to
develop, a wide range of innovative and technologically advanced products, the
results of TI's operations may be adversely affected in the future if demand for
digital signal processors or analog integrated circuits decreases or if these
markets or key end-equipment markets such as telecommunications and computers
grow at a pace significantly less than that expected by management.
The Technology Industry is Characterized by Rapid Technological Change that
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Requires TI to Develop New Technologies and Products.
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TI's results of operations depend in part upon its ability to successfully
develop, manufacture and market innovative products in a rapidly changing
technological environment. TI requires significant capital to develop new
technologies and products to meet changing customer demands that, in turn, may
result in shortened product lifecycles. Moreover, expenditures for technology
and product development are generally made before the commercial viability for
such developments can be assured. As a result, there can be no assurance that TI
will successfully develop and market these new products, that the products TI
does develop and market will be well received by customers or that TI will
realize a return on the capital expended to develop such products.
TI Faces Substantial Competition that Requires TI to Respond Rapidly to Product
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Development and Pricing Pressures.
---------------------------------
TI faces intense technological and pricing competition in the markets in which
it operates. TI expects that the level of this competition will increase in the
5
future from large, established semiconductor and related product companies, as
well as from emerging companies serving niche markets also served by TI. Certain
of TI's competitors possess sufficient financial, technical and management
resources to develop and market products that may compete favorably against
those products of TI that currently offer technological and/or price advantages
over competitive products. Competition results in price and product development
pressures, which may result in reduced profit margins and lost business
opportunities in the event that TI is unable to match price declines or
technological, product, applications support, software or manufacturing advances
of its competitors.
TI's Performance Depends upon its Ability to Enforce Its Intellectual Property
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Rights and to Develop or License New Intellectual Property.
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TI benefits from royalties generated from various license agreements that will
generally be in effect through the year 2005. Access to worldwide markets
depends on the continued strength of TI's intellectual property portfolio.
Future royalty revenue depends on the strength of TI's portfolio and enforcement
efforts, and on the sales and financial stability of TI's licensees. TI actively
enforces and protects its intellectual property rights, but there can be no
assurance that TI's efforts will be adequate to prevent the misappropriation or
improper use of the protected technology. Moreover, there can be no assurance
that, as TI's business expands into new areas, TI will be able to independently
develop the technology, software or know-how necessary to conduct its business
or that it can do so without infringing the intellectual property rights of
others. TI may have to rely increasingly on licensed technology from others. To
the extent that TI relies on licenses from others, there can be no assurance
that it will be able to obtain all of the licenses it desires in the future on
terms it considers reasonable or at all.
A Decline in Demand in Certain End-User Markets Could Have a Material Adverse
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Effect on the Demand for TI's Products and Results of Operations.
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TI's customer base includes companies in a wide range of industries, but TI
generates a significant amount of revenues from sales to customers in the
telecommunications and computer-related industries. Within these industries, a
large portion of TI revenues is generated by the sale of digital signal
processors and analog integrated circuits to customers in the cellular phone,
personal computer and communications infrastructure markets. Many of TI's
end-user markets declined significantly in 2001. Further decline in any one or
several of these end-user markets could have a material adverse effect on the
demand for TI's products and its results of operations.
TI's Global Manufacturing, Design and Sales Activities Subject It to Risks
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Associated with Legal, Political, Economic or Other Changes.
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TI operates in more than 25 countries worldwide and in 2001 more than 72% of its
revenues came from sales to locations outside the United States. Operating
internationally exposes TI to changes in the laws or policies, as well as the
6
general economic conditions, security risks and possible disruptions in
transportation networks, of the various countries in which it operates, which
could result in an adverse effect on TI's business operations in such countries
and its results of operations. Also, as discussed in more detail on pages C-12
and C-37 of TI's proxy statement for the 2002 annual meeting of stockholders, TI
uses forward currency exchange contracts to minimize the adverse earnings impact
from the effect of exchange rate fluctuations on the company's non-U.S. dollar
net balance sheet exposures. Nevertheless, in periods when the U.S. dollar
strengthens in relation to the non-U.S. currencies in which TI transacts
business, the remeasurement of non-U.S. dollar transactions can have an adverse
effect on TI's non-U.S. business.
The Loss of or Significant Curtailment of Purchases by any of TI's Largest
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Customers Could Adversely Affect TI's Results of Operations.
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While TI generates revenues from thousands of customers worldwide, the loss of
or significant curtailment of purchases by one or more of its top customers,
including curtailments due to a change in the design or manufacturing sourcing
policies or practices of these customers, or the timing of customer inventory
adjustments may adversely affect TI's results of operations.
TI's Performance Depends on the Availability of Raw Materials and Critical
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Manufacturing Equipment.
-----------------------
Limited or delayed access to key raw materials used in the manufacturing process
or critical manufacturing equipment could adversely impact TI's results of
operations.
TI's Continued Success Depends Upon Its Ability to Retain and Recruit a
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Sufficient Number of Qualified Employees in a Competitive Environment.
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TI's continued success depends on the retention and recruitment of skilled
personnel, including technical, marketing, management and staff personnel.
Experienced personnel in the electronics industry are in high demand and
competition for their skills is intense. There can be no assurance that TI will
be able to successfully retain and recruit the key personnel that it requires.
Available Information
---------------------
TI files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements and
other information filed by TI at the SEC's public reference rooms at 450 Fifth
Street, N.W., Washington, D.C. 20549, or at the SEC offices in New York, New
York and Chicago, Illinois. Please call (800) SEC-0330 for further information
on the public reference rooms. TI's filings are also available to the public
from commercial document retrieval services and at the web site maintained by
the SEC at http://www.sec.gov.
7
ITEM 2. Properties.
TI's principal executive offices are located at 12500 TI Boulevard, Dallas,
Texas. TI owns and leases facilities in the United States and 16 other countries
for manufacturing, design and related purposes. The following table indicates
the general location of TI's principal manufacturing and design operations and
the business segments which make major use of them. Except as otherwise
indicated, these facilities are owned by TI.
Sensors
Semiconductor & Controls E&PS
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Dallas, Texas(1) X X
Houston, Texas X
Sherman, Texas(1)(2) X
Tucson, Arizona X
Attleboro, X X
Massachusetts
Bangalore, India X
Hiji, Japan X
Miho, Japan X
Tokyo, Japan X
Kuala Lumpur, X X
Malaysia(3)
Baguio, X
Philippines(4)
Taipei, Taiwan X
Nice, France X
Freising, Germany X X
Aguascalientes, Mexico X X
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(1) Certain facilities or portions thereof in Dallas and Sherman are leased to
Raytheon Company or Raytheon-related entities in connection with the sale
in 1997 of TI's defense systems and electronics business.
(2) Leased.
(3) Approximately half of this site is owned on leased land; the remainder is
leased.
(4) Owned on leased land.
TI's facilities in the United States contained approximately 15,800,000 square
feet as of December 31, 2001, of which approximately 2,400,000 square feet were
leased. TI's facilities outside the United States contained approximately
5,900,000 square feet as of December 31, 2001, of which approximately 1,500,000
square feet were leased.
TI believes that its existing properties are in good condition and suitable for
the manufacture of its products. At the end of 2001, the company utilized
substantially all of the space in its facilities.
Leases covering TI's leased facilities expire at varying dates generally within
the next 10 years. TI anticipates no difficulty in either retaining occupancy
through lease renewals, month-to-month occupancy or purchases of leased
facilities, or replacing the leased facilities with equivalent facilities.
8
ITEM 3. Legal Proceedings.
Italian government auditors have substantially completed a review, conducted in
the ordinary course, of approximately $250 million of grants from the Italian
government to TI's former memory operations in Italy. The auditors have raised a
number of issues relating to compliance with grant requirements and the
eligibility of specific expenses for the grants. As part of a government
reorganization with respect to program contracts, responsibility for review of
the auditor's findings was transferred from the Ministry of the Treasury to the
Ministry of Economics and Finance. Depending on the Ministry of Economics and
Finance's decision, the review may result in a demand from the Italian
government that TI repay a portion of the grants. The company believes that the
grants were obtained and used in compliance with applicable law and contractual
obligations.
TI is involved in various investigations and proceedings conducted by the
federal Environmental Protection Agency and certain state environmental agencies
regarding disposal of waste materials. Although the factual situations and the
progress of each of these matters differ, the company believes that the amount
of its liability will not have a material adverse effect upon its financial
position or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
9
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The information which is contained in the note to the financial statements
captioned "Common Stock Prices and Dividends" on page C-44 of TI's proxy
statement for the 2002 annual meeting of stockholders, and the information
concerning the number of stockholders of record at December 31, 2001 on page
C-31 of such proxy statement, are incorporated herein by reference to such proxy
statement.
ITEM 6. Selected Financial Data.
The "Summary of Selected Financial Data" for the years 1997 through 2001 which
appears on page C-31 of TI's proxy statement for the 2002 annual meeting of
stockholders is incorporated herein by reference to such proxy statement.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information contained under the caption "Management Discussion and Analysis
of Financial Condition and Results of Operations" on pages C-32 through C-42 of
TI's proxy statement for the 2002 annual meeting of stockholders is incorporated
herein by reference to such proxy statement.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Information concerning market risk is contained on pages C-37 and C-38 of
TI's proxy statement for the 2002 annual meeting of stockholders and is
incorporated by reference to such proxy statement.
ITEM 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the company at December 31, 2001 and
2000 and for each of the three years in the period ended December 31, 2001, and
the report thereon of the independent auditors, on pages C-1 through C-30 of
TI's proxy statement for the 2002 annual meeting of stockholders, are
incorporated herein by reference to such proxy statement.
The "Quarterly Financial Data" on pages C-43 and C-44 of TI's proxy statement
for the 2002 annual meeting of stockholders is also incorporated herein by
reference to such proxy statement.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
10
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information with respect to directors' names, ages, positions, term of
office and periods of service, which is contained under the caption "Nominees
for Directorship" in the company's proxy statement for the 2002 annual meeting
of stockholders, is incorporated herein by reference to such proxy statement.
The following is an alphabetical list of the names and ages of the executive
officers of the company and the positions or offices with the company presently
held by each person named:
Name Age Position
William A. Aylesworth 59 Senior Vice President and
Chief Financial Officer
Gilles Delfassy 46 Senior Vice President
Thomas J. Engibous 49 Director, Chairman of the
Board, President and
Chief Executive Officer
Michael J. Hames 43 Senior Vice President
Joseph F. Hubach 44 Senior Vice President,
Secretary and
General Counsel
Chung-Shing (C.S.) Lee 47 Senior Vice President
Stephen H. Leven 50 Senior Vice President
Gregg A. Lowe 39 Senior Vice President
Syrus P. Madavi 52 Senior Vice President
Philip J. Ritter 43 Senior Vice President
Richard J. Schaar 56 Senior Vice President
(President, Educational &
Productivity Solutions)
M. Samuel Self 62 Senior Vice President
Richard K. Templeton 43 Executive Vice President and
Chief Operating Officer (President,
Semiconductor)
Teresa L. West 41 Senior Vice President
Thomas Wroe 51 Senior Vice President
(President, Sensors & Controls)
11
The term of office of the above listed officers is from the date of their
election until their successor shall have been elected and qualified. Messrs.
Lee, Lowe and Ritter were elected to their offices on April 19, 2001, February
21, 2002 and September 20, 2001, respectively; each has been an employee of the
company for more than five years. Mr. Madavi was elected to his office on April
19, 2001 and became an employee of the company in August 2000 in connection with
the company's acquisition of Burr-Brown Corporation. Mr. Madavi had been
president and chief executive officer of Burr-Brown since 1994 and chairman
since 1998. Messrs. Aylesworth, Engibous and Templeton have served as executive
officers of the company for more than five years. Ms. West and Messrs. Leven,
Schaar, Self and Wroe have served as executive officers of the company since
1998 and have been employees of the company for more than five years. Messrs.
Delfassy, Hames and Hubach have served as executive officers of the company
since 2000 and have been employees of the company for more than five years.
ITEM 11. Executive Compensation.
The information which is contained under the captions "Director Compensation"
and "Executive Compensation" in the company's proxy statement for the 2002
annual meeting of stockholders is incorporated herein by reference to such proxy
statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information concerning (a) the only persons that have reported beneficial
ownership of more than 5% of the common stock of TI, and (b) the ownership of
TI's common stock by the Chief Executive Officer and the four other most highly
compensated executive officers, and all executive officers and directors as a
group, which is contained under the caption "Voting Securities" in the company's
proxy statement for the 2002 annual meeting of stockholders, is incorporated
herein by reference to such proxy statement. The information concerning
ownership of TI's common stock by each of the directors, which is contained
under the caption "Nominees for Directorship" in such proxy statement, is also
incorporated herein by reference to such proxy statement.
ITEM 13. Certain Relationships and Related Transactions.
The information which is contained under the caption "Certain Business
Relationships" in the company's proxy statement for the 2002 annual meeting of
stockholders is incorporated herein by reference to such proxy statement.
12
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1 and 2. Financial Statements and Financial Statement Schedules:
The financial statements and financial statement schedules are listed in the
index on page 22 hereof.
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3. Exhibits:
Designation of
Exhibit in
this Report Description of Exhibit
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2 Agreement and Plan of Merger, dated as of June 21, 2000, by
and among the Registrant, Burr-Brown Corporation and Burma
Acquisition Corp. (disclosure schedules omitted; Registrant
agrees to provide the Commission, upon request, copies of
such schedules) (incorporated by reference to Texas
Instruments Tucson Corporation's Current Report on Form 8-K
dated June 22, 2000).
3(a) Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K for the year 1993).
3(b) Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant (incorporated by reference
to Exhibit 3(b) to the Registrant's Annual Report on Form
10-K for the year 1993).
3(c) Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant (incorporated by reference
to Exhibit 3(c) to the Registrant's Annual Report on Form
10-K for the year 1993).
3(d) Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant (incorporated by
reference to Exhibit 3 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996).
3(e) Certificate of Ownership merging Texas Instruments
Automation Controls, Inc. into the Registrant (incorporated
by reference to Exhibit 3(e) to the Registrant's Annual
Report on Form 10-K for the year 1993).
3(f) Certificate of Elimination of Designations of Preferred Stock
of the Registrant (incorporated by reference to Exhibit
3(f) to the Registrant's Annual Report on Form 10-K for the
year 1993).
3(g) Certificate of Ownership and Merger merging Tiburon Systems,
Inc. into the Registrant (incorporated by reference to
Exhibit 4(g) to the Registrant's Registration Statement
No. 333-41919 on Form S-8).
14
3(h) Certificate of Ownership and Merger merging Tartan, Inc.
into the Registrant (incorporated by reference to Exhibit
4(h) to the Registrant's Registration Statement
No. 333-41919 on Form S-8).
3(i) Certificate of Designation relating to the Registrant's
Participating Cumulative Preferred Stock (incorporated
by reference to Exhibit 4(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).
3(j) Certificate of Elimination of Designation of Preferred Stock
of the Registrant (incorporated by reference to Exhibit 3(j)
to the Registrant's Annual Report on Form 10-K for the year
1998).
3(k) Certificate of Ownership and Merger merging Intersect
Technologies, Inc. into the Registrant (incorporated by
reference to Exhibit 3(k) to the Registrant's Annual Report
on Form 10-K for the year 1999).
3(l) Certificate of Ownership and Merger merging Soft Warehouse,
Inc. into the Registrant (incorporated by reference to
Exhibit 3(l) to the Registrant's Annual Report on Form
10-K for the year 1999).
3(m) Certificate of Ownership and Merger merging Silicon Systems,
Inc. into the Registrant (incorporated by reference to Exhibit
3(m) to the Registrant's Annual Report on Form 10-K for the
year 1999).
3(n) Certificate of Amendment to Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3(n)
to the Registrant's Registration Statement on Form S-4
No. 333-41030 filed on July 7, 2000).
3(o) Certificate of Ownership and Merger merging Power Trends,
Inc. with and into the Registrant.
3(p) Certificate of Ownership and Merger merging Amati
Communications Corporation with and into the Registrant.
3(q) By-Laws of the Registrant (incorporated by reference to
Exhibit 3(n) to the Registrant's Annual Report on Form
10-K for the year 1999).
4(a)(i) Rights Agreement dated as of June 18, 1998 between the
Registrant and Harris Trust and Savings Bank as Rights Agent,
which includes as Exhibit B the form of Rights Certificate
(incorporated by reference to Exhibit 1 to the Registrant's
Registration Statement on Form 8-A dated June 23, 1998).
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4(a)(ii) Amendment dated as of September 18, 1998 to the Rights
Agreement (incorporated by reference to Exhibit 2 to the
Registrant's Amendment No. 1 to Registration Statement on
Form 8-A dated September 23, 1998).
4(b) The Registrant agrees to provide the Commission, upon request,
copies of instruments defining the rights of holders of
long-term debt of the Registrant and its subsidiaries.
10(a)(i) Amended and Restated TI Deferred Compensation Plan
(incorporated by reference to Exhibit 10(a)(i) to the
Registrant's Annual Report on Form 10-K for the year 1999).*
10(a)(ii) First Amendment to Restated TI Deferred Compensation Plan
(incorporated by reference to Exhibit 10(a)(ii) to the
Registrant's Annual Report on Form 10-K for the year 1999).*
10(a)(iii) Second Amendment to Restated TI Deferred Compensation Plan
(incorporated by reference to Exhibit 10(a)(iii) to the
Registrant's Annual Report on Form 10-K for the year 1999).*
10(a)(iv) Third Amendment to Restated TI Deferred Compensation Plan
(incorporated by reference to Exhibit 10(a)(iv) to the
Registrant's Annual report on Form 10-K for the year 2000).*
10(a)(v) Fourth Amendment to Restated TI Deferred Compensation Plan.*
10(a)(vi) Severance Benefit Agreement between Burr-Brown Corporation and
Syrus P. Madavi dated October 30, 1996.*
10(a)(vii) Change in Control Severance Benefit Agreement between
Burr-Brown Corporation and Syrus P. Madavi dated
October 30, 1996.*
10(a)(viii) Letter Agreement between Texas Instruments Incorporated and
Syrus P. Madavi dated October 21, 2000.*
10(b)(i) TI Employees Supplemental Pension Plan (incorporated by
reference to Exhibit 10(b)(i) to the Registrant's Annual
Report on Form 10-K for the year 1999).*
10(b)(ii) First Amendment to TI Supplemental Pension Plan (incorporated
by reference to Exhibit 10(b)(ii) to the Registrant's Annual
Report on Form 10-K for the year 1999).*
16
10(c) Texas Instruments Long-Term Incentive Plan (incorporated by
reference to Exhibit 10(a)(ii) to the Registrant's Annual
Report on Form 10-K for the year 1993).*
10(d) Texas Instruments 1996 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996).*
10(e) Texas Instruments 2000 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10(e) to the Registrant's Registration
Statement on Form S-4 No. 333-41030 filed on July 7, 2000).*
10(f) Texas Instruments Executive Officer Performance Plan
(incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997).*
10(g) Texas Instruments Restricted Stock Unit Plan for Directors
(incorporated by reference to Exhibit 10(e) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
10(h) Texas Instruments Directors Deferred Compensation Plan
(incorporated by reference to Exhibit 10(f) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).
10(i) Texas Instruments Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10(i) to the Registrant's
Annual Report on Form 10-K for the year 2000.
10(j) Acquisition Agreement dated as of June 18, 1998 between Texas
Instruments Incorporated and Micron Technology, Inc. (Exhibit C
omitted) (incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated June 18, 1998).
10(k) Second Amendment to Acquisition Agreement dated as of September
30, 1998 between Texas Instruments Incorporated and Micron
Technology, Inc. (incorporated by reference to Exhibit 2.2 to
the Registrant's Current Report on Form 8-K dated October
15, 1998).
10(l) Securities Rights and Restrictions Agreement dated as of
September 30, 1998 between Texas Instruments Incorporated and
Micron Technology, Inc. (incorporated by reference to Exhibit
10(k) to the Registrant's Annual Report on Form 10-K for
the year 1998).
11 Computation of Earnings (Loss) Per Common and Dilutive Potential
Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
17
13 Portions of Registrant's Proxy Statement for 2002 Annual Meeting
of Stockholders Incorporated by Reference Herein (incorporated
by reference to Exhibit C to the Registrant's Proxy Statement
for the 2002 Annual Meeting of Stockholders).
21 List of Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
----------------
* Executive Compensation Plans and Arrangements.
(b) Reports on Form 8-K:
During the quarter ended December 31, 2001, the Registrant filed a report on
Form 8-K dated November 12, 2001, confirming its outlook for the fourth quarter
of 2001 as set forth in the outlook section included in Item 2 of its Form 10-Q
for the quarter ended September 30, 2001.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:
This report includes "forward-looking statements" intended to qualify for the
safe harbor from liability established by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements generally can be identified
by phrases such as TI or its management "believes," "expects," "anticipates,"
"foresees," "forecasts," "estimates" or other words or phrases of similar
import. Similarly, statements herein that describe TI's business strategy,
outlook, objectives, plans, intentions or goals also are forward-looking
statements. All such forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those in
forward-looking statements.
We urge you to carefully consider the following important factors that could
cause actual results to differ materially from the expectations of TI or its
management:
- Market demand for semiconductors, particularly for digital signal
processors and analog chips in key markets, such as
telecommunications and computers.
- TI's ability to develop, manufacture and market innovative products
in a rapidly changing technological environment.
- TI's ability to compete in products and prices in an intensely competitive
industry.
- TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties.
- Timely completion and successful integration of announced acquisitions.
18
- Economic, social and political conditions in the countries in which TI, its
customers or its suppliers operate, including security risks, possible
disruptions in the transportation networks and fluctuations in foreign
currency exchange rates.
- Losses or curtailments of purchases from key customers or the timing of
customer inventory adjustments.
- TI's ability to recruit and retain skilled personnel.
- Availability of raw materials and critical manufacturing equipment.
For a more detailed discussion of these factors see the text under the heading
"Cautionary Statements Regarding Future Results of Operations" in Item 1 of
this report. The forward-looking statements included in this report are made
only as of the date of this report and TI undertakes no obligation to update
the forward-looking statements to reflect subsequent events or circumstances.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ WILLIAM A. AYLESWORTH
--------------------------
William A. Aylesworth
Senior Vice President
and Chief Financial Officer
Date: February 28, 2002
Each person whose signature appears below constitutes and appoints each of
Thomas J. Engibous, William A. Aylesworth and Joseph F. Hubach, or any of them,
each acting alone, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for such person and in his or her
name, place and stead, in any and all capacities in connection with the annual
report on Form 10-K of Texas Instruments Incorporated for the year ended
December 31, 2001, to sign any and all amendments to the Form 10-K, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
19
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof. Pursuant to the requirements
of the Securities Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
the 21st day of February 2002.
Signature Title
/s/ JAMES R. ADAMS Director
------------------------------------
James R. Adams
/s/ DAVID L. BOREN Director
------------------------------------
David L. Boren
/s/ JAMES B. BUSEY IV Director
------------------------------------
James B. Busey IV
/s/ DANIEL A. CARP Director
------------------------------------
Daniel A. Carp
Chairman of the Board;
President; Chief Executive
/s/ THOMAS J. ENGIBOUS Officer; Director
------------------------------------
Thomas J. Engibous
/s/ GERALD W. FRONTERHOUSE Director
------------------------------------
Gerald W. Fronterhouse
/s/ DAVID R. GOODE Director
------------------------------------
David R. Goode
20
/s/ WAYNE R. SANDERS Director
------------------------------------
Wayne R. Sanders
/s/ RUTH J. SIMMONS Director
------------------------------------
Ruth J. Simmons
/s/ WILLIAM A. AYLESWORTH Senior Vice President and
------------------------------------ Chief Financial Officer
William A. Aylesworth
21
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
Page Reference
--------------
Proxy Statement
for the 2002
Annual Meeting
Form 10-K of Stockholders
--------- ---------------
Information incorporated by reference
to the Registrant's Proxy Statement for
the 2002 Annual Meeting of Stockholders
Consolidated Financial Statements:
Operations for each of the three
years in the period ended
December 31, 2001 C-1
Balance sheet at December 31,
2001 and 2000 C-2
Cash flows for each of the
three years in the period
ended December 31, 2001 C-3
Stockholders' equity for
each of the three years in the
period ended December 31, 2001 C-4
Notes to financial statements C-5 - C-29
Report of Independent Auditors C-30
Consolidated Schedule for each of the three years in the period ended December
31, 2001:
II. Allowance for Losses
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
22
Schedule II
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
ALLOWANCE FOR LOSSES
(Millions of Dollars)
Years Ended December 31, 2001, 2000, 1999
Additions
Balance at Charged to Balance
Beginning Operating at End
of Year Results Usage of Year
2001 $54 $50 $(43) $61
=== === ===== ===
2000 $56 $79 $(81) $54
=== === ===== ===
1999 $60 $83 $(87) $56
=== === ===== ===
Allowances for losses from uncollectible accounts, returns, etc., are deducted
from accounts receivable in the balance sheet.
23
Exhibit 3(o)
------------
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
POWER TRENDS, INC.
WITH AND INTO
TEXAS INSTRUMENTS INCORPORATED
Pursuant to Section 253 of the
General Corporation of Law
of the State of Delaware
Texas Instruments Incorporated, a Delaware corporation (the "Company"),
does hereby certify to the following facts relating to the merger (the "Merger")
of Power Trends, Inc., an Illinois corporation (the "Subsidiary"), with and into
the Company, with the Company remaining as the surviving corporation:
FIRST: The Company is incorporated pursuant to the General Corporation Law
of the State of Delaware (the "DGCL"). The Subsidiary is incorporated pursuant
to the laws of the State of Illinois.
SECOND: The Company owns all of the outstanding shares of each class of
capital stock of the Subsidiary.
THIRD: The Board of Directors of the Company, by the following resolutions
duly adopted at a meeting of the Board on April 18, 2001, determined to merge
the Subsidiary with and into the Company pursuant to Section 253 of the DGCL:
RESOLVED, that the Board of Directors of the Company has deemed it
advisable that Power Trends, Inc. (the "Subsidiary") be merged with and
into the Company pursuant to Section 253 of the General Corporation Law of
the State of Delaware and Section 11.30 of the Illinois Business
Corporation Act; and it is
FURTHER RESOLVED, that the Subsidiary be merged with and into the
Company (the "Merger"); and it is
FURTHER RESOLVED, that by virtue of the Merger and without any action on
the part of the holder thereof, each then outstanding share of common stock
of the Company shall remain unchanged and continue to remain outstanding as
one share of common stock of the Company, held by the person who was the
holder of such share of common stock of the Company immediately prior to
the Merger; and it is
FURTHER RESOLVED, that by virtue of the Merger and without any action on
the part of the holder thereof, each then outstanding share of common stock
of the Subsidiary shall be cancelled and no consideration shall be issued
in respect thereof; and it is
FURTHER RESOLVED, that the appropriate officers of the Company be and they
hereby are authorized and directed to make, execute and acknowledge, in the
name and under the corporate seal of the Company, Articles of Merger for
the purpose of effecting the merger and to file the same in the office of
the Secretary of State of the State of Illinois; and it is
FURTHER RESOLVED, that the appropriate officers of the Company be and they
hereby are authorized and directed to make, execute and acknowledge, in the
name and under the corporate seal of the Company, a Certificate of
Ownership and Merger for the purpose of effecting the Merger and to file
the same in the office of the Secretary of State of the State of Delaware,
and to do all other acts and things that may be necessary to carry out and
effectuate the purpose and intent of the resolutions relating to the
Merger; and it is
FURTHER RESOLVED, that the Merger shall be effective on May 31, 2001; and
it is
FURTHER RESOLVED, that the appropriate officers of the Company be, and each
hereby is, authorized on behalf of the Company to do all things and to take
any other actions in furtherance of the foregoing resolutions as such
officer may deem necessary or appropriate.
FOURTH: The Company shall be the surviving corporation of the Merger.
FIFTH: The Restated Certificate of Incorporation of the Company as in
effect Immediately prior to the effective time of the Merger shall be the
Certificate of Incorporation of the surviving corporation.
IN WITNESS WHEREOF, the Company has caused this Certificate of Ownership
and Merger to be executed by its duly authorized officer this 31st day of May,
2001.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ CYNTHIA H. HAYNES
---------------------
Name: Cynthia H. Haynes
Office: Vice President and Assistant
Secretary
Exhibit 3(p)
------------
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
AMATI COMMUNICATIONS CORPORATION
WITH AND INTO
TEXAS INSTRUMENTS INCORPORATED
Pursuant to Section 253 of the
General Corporation of Law
of the State of Delaware
Texas Instruments Incorporated, a Delaware corporation, (the "Company")
does hereby certify to the following facts relating to the merger (the "Merger")
of Amati Communications Corporation, a Delaware corporation, (the "Subsidiary")
with and into the Company, with the Company remaining as the surviving
corporation:
FIRST: The Company is incorporated pursuant to the General Corporation Law
of the State of Delaware (the "DGCL"). The Subsidiary is incorporated pursuant
to the DGCL.
SECOND: The Company owns all of the outstanding shares of each class of
capital stock of the Subsidiary.
THIRD: The Board of Directors of the Company, by the following resolutions
duly adopted at a meeting of the Board on July 19, 2001, determined to merge the
Subsidiary with and into the Company pursuant to Section 253 of the DGCL:
RESOLVED, that the Board of Directors of the Company has deemed it
advisable that Amati Communications Corporation (the "Subsidiary") be
merged with and into the Company pursuant to Section 253 of the General
Corporation Law of the State of Delaware; and it is
FURTHER RESOLVED, that the Subsidiary be merged with and into the Company
(the "Merger"); and it is
FURTHER RESOLVED, that by virtue of the Merger and without any action on
the part of the holder thereof, each then outstanding share of common stock
of the Company shall remain unchanged and continue to remain outstanding as
one share of common stock of the Company, held by the person who was the
holder of such share of common stock of the Company immediately prior to
the Merger; and it is
FURTHER RESOLVED, that by virtue of the Merger and without any action on
the part of the holder thereof, each then outstanding share of common stock
of the Subsidiary shall be cancelled and no consideration shall be issued
in respect thereof; and it is
FURTHER RESOLVED, that the appropriate officers of the Company be and they
hereby are authorized and directed to make, execute and acknowledge, in the
name and under the corporate seal of the Company, a Certificate of
Ownership and Merger for the purpose of effecting the Merger and to file
the same in the office of the Secretary of State of the State of Delaware,
and to do all other acts and things that may be necessary to carry out and
effectuate the purpose and intent of the resolutions relating to the
Merger; and it is
FURTHER RESOLVED, that the Merger shall be effective upon the date of
filing of the Certification of Ownership and Merger with the Secretary of
State of the State of Delaware; and it is
FURTHER RESOLVED, that the appropriate officers of the Company be, and each
hereby is, authorized on behalf of the Company to do all things and to take
any other actions in furtherance of the foregoing resolutions as such
officer may deem necessary or appropriate.
FOURTH: The Company shall be the surviving corporation of the Merger.
FIFTH: The Restated Certificate of Incorporation of the Company as in
effect immediately prior to the effective time of the Merger shall be the
Certificate of Incorporation of the surviving corporation.
IN WITNESS WHEREOF, the Company has caused this Certificate of Ownership
and Merger to be executed by its duly authorized officer this 28th day of
September, 2001.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ DANIEL M. DRORY
-------------------
Name: Daniel M. Drory
Office: Assistant Secretary
Exhibit 10(a)(v)
---------------
FOURTH AMENDMENT
TO RESTATED
TI DEFERRED COMPENSATION PLAN
TEXAS INSTRUMENTS INCORPORATED, a Delaware corporation with its principal
offices in Dallas, Texas (hereinafter referred to as "TI" or the "Company")
hereby adopts this Fourth Amendment to the restated TI Deferred Compensation
Plan (the "Plan").
This Fourth Amendment to the restated TI Deferred Compensation Plan shall
be effective as of the dates specified. Except as hereby amended by this Fourth
Amendment, the Plan, as previously amended, shall continue in full force and
effect.
1. Effective January 1, 1998, the definition appearing as Section 1-4, Benefit
Restoration Account, is amended to correct the cross reference therein from
"Section 3-4" to "Section 3-3."
2. Effective July 1, 2000, Section 1-14 is hereby amended and restated in the
entirety, to read as follows:
"Sec. 1-14. Election Period. "Election Period" means the one or more
periods determined by the Administrator, in its sole discretion, when
Participants may enter into new, or amend existing, Deferred
Compensation Agreements; provided that a Designated Employee may defer
Compensation pursuant to Section 3.2(iv) any time after being
designated for participation as a Designated Employee."
3. Effective April 1, 2001, Section 3-5 is amended and restated in the
entirety, to read as follows:
"Sec. 3-5. Withdrawal of Contributions During a Plan Year, a
Participant may withdraw funds credited to the Participant's Deferred
Compensation Account. A Participant who makes such an election shall
forfeit 10% of the amount withdrawn and the Participant's Deferred
Contribution Account shall be adjusted to reflect such forfeiture.
Withdrawals shall be made as soon as practicable after the
Administrator receives a request for a withdrawal of funds. A
Participant may not withdraw funds credited to the Benefit Restoration
Account until after the date of the Participant's Termination of
Employment, in which event distribution shall be made pursuant to
Section 3-6."
4. Effective April 1, 2001, Section 3-11 is amended and restated in the
entirety, to read as follows:
"Sec. 3-11. Alternate Payee Claims. Any claim against any benefits
hereunder for child support, spousal maintenance, property settlement
or alimony (an "Alternate Payee Claim") shall be treated in the same
manner as would a claim for corresponding benefits under the U.S.
Retirement Plan or the Universal Plan, and shall be subject to all
claims provisions and restrictions of those plans; provided, however,
that the distribution of benefits hereunder in satisfaction of an
Alternate Payee Claim shall be made in a lump-sum payment as soon as
practicable after the determination of the validity of the claim. No
order issued pursuant to an Alternative Payee Claim may require
payment in any other form than a full lump sum distribution equal to
the present value (as determined by the Administrator) of the
Alternate Payee Claim. The Administrator may delegate the
administration of Alternate Payee Claims to the Administration
Committee under the U.S. Retirement Plan or the Universal Plan."
5. Effective April 1, 2001, Section 3-7 (iv) is amended by adding
the following clause at the end of the first sentence thereof:
" ; provided, however, that if the amount credited to the
Participant's Accounts at the time of the Participant's death is less
than $25,000, the entire amount credited to those Accounts shall
distributed in a single lump sum."
6. Effective January 1, 1998, Section 5-2 is hereby amended and
restated in the entirety, to read as follows:
"Sec. 5-2. Number and Selection. The Plan shall be administered by an
Administrator or Administrators appointed by the Compensation
Committee. Each Administrator shall serve without compensation for
services rendered in connection with the administration of this Plan."
7. Effective January 1, 1998, Section 5-4 is hereby amended by
addition of the following sentence at the end:
"The Administrator in its discretion shall determine whether, and to
what extent, Participant accounts will be charged with the expenses of
administration of the Plan. Expenses charged against Participant
accounts shall be charged as adjustments under Section 3-4 and Section
3-7, as applicable. Expenses of the Plan not charged to Participant
accounts shall be paid by TI."
8. Except as amended by this Fourth Amendment, the Company hereby ratifies
the Plan as last amended and restated in the entirety effective
January 1, 1998, and as amended thereafter.
IN WITNESS WHEREOF, Texas Instruments Incorporated has caused this
instrument to be executed by its duly authorized officer.
Texas Instruments Incorporated
By: /s/ STEPHEN H. LEVEN
--------------------
Stephen H. Leven
Its: Senior Vice President - Human Resources
Exhibit 10(a)(vi)
-----------------
SEVERANCE BENEFIT AGREEMENT
---------------------------
SEVERANCE BENEFIT AGREEMENT (the "Agreement") executed this 30th day of October
1996 (the "Effective Date") by and between BURR-BROWN CORPORATION, a Delaware
corporation (the "Company"), and SYRUS P. MADAVI, the Company's President and
Chief Executive Officer (the "Executive").
R E C I T A L S
- - - - - - - -
A. The Executive is currently employed on an "at-will" basis by the Company
as the Company's President and Chief Executive Officer.
B. The Company and the Executive wish to enter into a formal agreement
under which the Executive will be provided with certain defined severance
benefits in the event his employment were to terminate under specified
circumstances.
NOW THEREFORE, the Company and Executive mutually agree as follows:
ARTICLE ONE
DEFINITIONS
-----------
For purposes of this Agreement, the following definitions shall be in
effect:
1.1 AVERAGE ANNUAL COMPENSATION means the sum of the following dollar
amounts: (i) the average rate of base salary in effect for the Executive over
the three (3)-year period ending with the date of Executive's termination of
employment with the Company plus (ii) the average bonus earned or accrued by
Executive on the basis of corporate and personal performance over the three (3)
fiscal years of the Company immediately preceding the fiscal year of Executive's
termination, whether or not the actual payment of those bonuses occurred within
that three (3)-year period.
1.2 BENEFICIARY means any person or persons designated from time to time by
Executive pursuant to Section 5.2 to receive any benefits under this Agreement
which may become due and payable to Executive following his death.
1.3 BOARD means the Board of Directors of the Company.
1.4 COMPETE means directly or indirectly to engage in activities for,
render services to, or otherwise participate in the ownership (other than
ownership of less than five percent (5%) of the outstanding equity or capital or
profit interests in any entity) of, any business competitive with any line of
business engaged in by the Company.
1.5 CONFIDENTIAL INFORMATION means any non-public proprietary or
confidential information of the Company or its parent or subsidiary companies,
including (without limitation) trade secrets; customer lists and information
concerning vendors, suppliers, licensors or licensees; records or research,
proposals, reports, methods, techniques, financial information and other data,
and other non-public information regarding the Company and its parent or
subsidiary companies or the existing and planned businesses, properties or
affairs of the Company and its parent or subsidiary companies.
1.6 CONTRACT PAYOUT EVENT means any one of the following events, as
further detailed in ARTICLE FOUR:
(i) the termination of Executive's employment by reason of his
death;
(ii) the termination of Executive's employment by reason of his Long-Term
Disability;
(iii) the termination of Executive's employment by the Company for
Justifiable Reason; or
(iv) the Company's termination of Executive's employment Without Cause.
Should the Executive's employment be terminated by the Company for
Misconduct or should the Executive voluntarily terminate his employment with the
Company, then no benefits shall become payable under this Agreement in
connection with such termination, and such termination shall not constitute a
Contract Payout Event.
1.7 HEALTH CARE COVERAGE means the continued health care coverage under the
Company's group health plans to which Executive and his eligible dependents will
become entitled under this Agreement upon a Contract Payout Event.
1.8 JUSTIFIABLE REASON means the Company's termination of Executive's
employment for one or more of the following reasons: (i) Executive's willful
refusal to carry out the reasonable directives of the Board or (ii) Executive's
failure to correct one or more material performance deficiencies within a
reasonable period after receipt of written notice from the Board identifying
those deficiencies. The reasonableness of the correction period for the
identified deficiencies shall be determined on the basis of the nature and scope
of those particular deficiencies.
2
1.9 LONG-TERM DISABILITY shall have the meaning assigned to that term from
time to time in the disability income policy or policies which the Company is to
maintain on behalf of Executive pursuant to the provisions of Section 4.3.
1.10 MISCONDUCT means Executive's (i) commission of any act of fraud,
dishonesty or embezzlement; (ii) commission of any other willful and malicious
act which has a materially adverse financial impact upon the Company; (iii)
habitual neglect of his duties by reason of substance abuse or other repeated
unexcused absences; or (iv) conviction of a felony which has a materially
adverse financial impact upon the Company.
1.11 NEW OPTION means any option to purchase shares of the Company's common
stock which is granted to Executive at any time after the Effective Date by the
Company and which remains outstanding at the time Executive's employment with
the Company terminates.
1.12 PLAN means the Company's 1993 Stock Incentive Plan, as amended from
time to time, and any successor equity incentive plan maintained by the Company.
1.13 WITHOUT CAUSE means the Company's termination of Executive's
employment for any reason other than Misconduct or Justifiable Reason.
3
ARTICLE TWO
GENERAL PROVISIONS
-------------------
2.1 TERM. This Agreement shall remain in effect through December 31, 1999.
The term of this Agreement shall be automatically renewed for each subsequent
calendar year during which Executive continues in the Company's employ, unless
the Company terminates this Agreement as of the first day of any calendar year
beginning after December 31, 1999 by providing Executive with written notice of
such termination at least one hundred (180) days prior to the start of that
calendar year. In the event the Company elects to so terminate this Agreement,
then the following provisions shall become effective:
- The Company and Executive shall in good faith. negotiate a new
severance benefits agreement to replace this Agreement, effective as
of the termination date of this Agreement.
- If agreement cannot be reached as to the terms and conditions of such
a replacement agreement, then Executive shall have the right to
terminate his employment within six (6) months after the termination
date of this Agreement and shall thereupon become entitled to
severance benefits to be reasonably agreed upon by the Company and
Executive on the basis of severance packages in effect for
similarly-situated chief executive officers in the industry.
2.2 OPTION GRANTS. Any New Options granted to Executive under the Plan
during the term of this Agreement shall incorporate the following terms and
provisions:
- Each Option shall become immediately exercisable for twenty percent
(20%) of the number of option shares for which the Option is not
otherwise at the time exercisable should Executive's employment
terminate by reason of his death
- Each Option shall become immediately exercisable for fifty percent
(50%) of the number of option shares for which the Option is not
otherwise at the time exercisable should Executive's employment
terminate by reason of his Long-Term Disability.
- Each Option shall become immediately exercisable for eighty percent
(80%) of the number of option shares for which the Option is not
otherwise at the time exercisable should the Company terminate
Executive's employment Without Cause.
4
- Each Option shall continue to vest and become exercisable for one or
more installments of the underlying option shares for so long as
Executive renders services to the Company as an officer, employee,
non-employee Board member or an independent consultant (including
services rendered pursuant to the consulting arrangement set forth in
Section 3.2).
- Each Option shall remain exercisable for a period of twelve (12)
months following the termination of Executive's employment in
connection with a Contract Payout Event, but in no event beyond the
expiration date of the option term.
5
ARTICLE THREE
COVENANTS AND CONSULTING AGREEMENT
----------------------------------
3.1 COVENANTS. Executive shall be subject to the following covenants and
obligations:
3.1.1 RETURN OF DOCUMENTS. Upon the termination of Executive's employment
for any reason, Executive shall promptly relinquish and return to the Company
all Confidential Information and all files, correspondence, memoranda, diaries
and other records, minutes, notes, manuals, papers and other documents and data,
however prepared or memorialized, and all copies thereof, belonging to or
relating to the business of the Company, that are in Executive's custody or
control, whether or not they contain Confidential Information.
3.1.2 NON-COMPETITION COVENANT. While employed by the Company, Executive
shall not Compete or plan or prepare to Compete with the Company. To the extent
obligated pursuant to the provisions of ARTICLE FOUR, Executive shall not, for a
period of twelve (12) months following the termination of his employment,
Compete with any line of business in which (i) the Company is engaged at the
time his employment terminates or (ii) the Company is preparing to engage
pursuant to plans or proposals approved by the Board prior to such termination.
3.1.3 NON-SOLICITATION COVENANT. For a period of twenty-four (24) months
following the termination of Executive's employment with the Company for any
reason, Executive shall not, directly or indirectly, solicit the services of any
Company employees or otherwise induce or attempt to induce any Company employees
to sever their employment relationship with the Company.
3.1.4 SCOPE AND DURATION: SEVERABILITY. The Company and Executive
understand and agree that the scope and duration of the covenants contained in
this Section 3.1 are reasonable both in time and geographical area and are
fairly necessary to protect the business of the Company. Such covenants shall
survive the termination of Executive's employment, except that the Section 3.1.2
non-competition covenant shall remain in effect following such termination of
employment only to extent required pursuant to the provisions of ARTICLE FOUR.
It is further agreed that such covenants shall be regarded as divisible and
shall be operative as to time and geographical area to the extent that they may
be made so operative, and should any portion of such covenants be declared
invalid or unenforceable, the validity and enforceability of the remainder shall
not be affected.
6
3.1.5 ASSIGNMENT. Except as otherwise provided to the contrary in ARTICLE
FOUR, Executive agrees that the covenants contained in this Section 3.1 shall
inure to the benefit of any successor or assign of the Company, with the same
force and effect as if such covenant had been made by Executive with such
successor or assign.
3.2 CONSULTING AGREEMENT. Upon the termination of Executive's
employment-other than in connection with (i) a voluntary termination by
Executive under Section 4.5 or (ii) a termination by the Company for Misconduct,
Executive hereby agrees to make himself available to perform, for a period not
to exceed twelve (12) months following such termination of employment, such
consulting services for the Company within his area of expertise as may from
time to time be reasonably requested by the Board, and the Company may not
terminate the consulting arrangement during such twelve (12)-month other than
for Misconduct or a breach by Executive of his non-competition covenant under
Section 3.1.2. However, Executive shall not be required to perform more than ten
(10) hours of consulting services per month during the period of such consulting
arrangement.
3.2.1 COMPENSATION Executive shall not receive any cash compensation for
the consulting services rendered pursuant to this Section 3.2 if Executive is
otherwise to receive salary continuation payments (or disability income
payments) under ARTICLE FOUR in connection with his termination of employment.
However, if Executive is required under Section 3.2 to render one or more hours
of consulting services following a termination of employment in which he is not
entitled to any salary continuation payments (or disability income payments)
under ARTICLE FOUR, then Executive shall receive cash compensation for such
services at the hourly rate to be negotiated in good faith with the Company at
the time of each project assignment.
3.2.2 EXPENSE REIMBURSEMENT. Executive shall be entitled to reimbursement
of all reasonable out-of-pocket expenses incurred in connection with the
performance of his consulting services pursuant to this Section 3.2 upon
presentation to the Company of appropriate documentation evidencing those
expenses.
7
ARTICLE FOUR
PAYOUT OF CONTRACT BENEFITS
---------------------------
4.1 TERMINATION OF EMPLOYMENT. Executive's employment may be terminated by
either Executive or the Company at any time for the reasons and with the
consequences set out below. In the event of such termination, Executive may
become entitled to certain severance benefits under this Agreement in accordance
with the provisions of this ARTICLE FOUR.
4.2 DEATH. Executive's employment shall terminate upon his death.
4.2.1 SEVERANCE BENEFITS. In such event, the Company shall provide the
following severance benefits:
- Salary continuation payments at the monthly rate of base salary in
effect for Executive at the time of his death shall be paid to
Executive's designated Beneficiary for a period of three (3) months
following the date of Executive's death. The payments shall be made in
accordance with the Company's normal payroll practices and shall be
subject to the Company's collection of all applicable withholding
taxes.
- The Company shall, at its expense, provide Executive's surviving
spouse and other eligible dependents with continued Health Care
Coverage until the earlier of (i) eighteen (18) months after the date
of Executive's death or (ii) the first date that such individuals are
covered under another employer's health benefit program which provides
substantially the same level of benefits without exclusion for
pre-existing medical conditions. Such coverage will be in full
satisfaction of any continued health care coverage to which
Executive's surviving spouse or dependents would otherwise be entitled
pursuant to the requirements of Code Section 4980B by reason of
Executive's termination of employment ("COBRA Continuation Coverage").
4.3 LONG-TERM DISABILITY. Either the Company or Executive may terminate
Executive's employment, upon thirty (30) days prior written notice, by reason of
his Long-Term Disability. Any such termination by the Company, however, shall be
subject to the Company's compliance with the applicable requirements of the
Americans with Disabilities Act.
8
4.3.1 COVENANTS. Following such termination of employment, Executive shall
remain subject to the covenants and obligations set forth in Section 3.1 and
Section 3.2 (but only the extent Executive is physically able to perform any
consulting services in accordance therewith).
4.3.2 DISABILITY INCOME. Executive shall be entitled to receive short-term
and long-term disability income benefits from the following sources in
connection with the termination of his employment under this Section 4.3:
- Executive shall be entitled to receive short-term disability benefits
in the form of salary continuation payments, at one hundred percent
(100%) of his base salary, for the first six (6) months of his
disability period. Such payments shall be made pursuant to the terms
of the Company's Short-Term Disability Income Plan, and Executive's
eligibility for such payments shall be determined solely in accordance
with the terms of that Plan.
- Upon the expiration of the salary continuation period under the
Short-Term Disability Income Plan, Executive shall become entitled to
receive salary continuation payments in the monthly amount of
Twenty-Five Thousand Dollars ($25,000.00) pursuant to the terms of the
special long-term disability income policies which the Company shall
maintain on Executive's behalf. Such monthly payments shall continue
until the earliest to occur of (i) Executive's attainment of age sixty
five (65) or (ii) his failure to qualify for continued disability
income payments under the terms of those policies or (iii) his return
to full-time employment with the Company or other business entity in
substantially the same position he held immediately prior to his
disability. Should Executive's attainment of age sixty five (65) be
the earliest event, then such salary continuation payments shall be
reduced to the amount of Fifteen Thousand Dollars ($15,000.00) per
month and shall continue at that level until the earliest to occur of
(i) Executive's death or (ii) his failure to qualify for continued
disability income payments under the terms of those policies or (iii)
his return to full-time employment with the Company or other business
entity in substantially the same position he held immediately prior to
his disability.
The long-term disability income policies shall be purchased from one or
more insurance companies mutually acceptable to the Company and Executive,
and all premiums on those policies shall be paid by the Company. The
Company shall, throughout the term of this Agreement, continue to maintain
the existing long-term income policies currently in effect for Executive.
Such policies shall, however, be reviewed at least annually in terms of the
financial stability of the insurer, and the Company shall use its best
efforts to obtain replacement policies from one or more other
financially-solvent insurance companies, to the extent the insurance
9
company issuing one or more of the current policies is deemed by the
Company or Executive to pose an unacceptable risk of insolvency. However,
should Executive be unable to qualify to qualify for coverage under one or
more replacement policies needed to provide the benefits contemplated by
this Section 4.3.2, then Executive's entitlement to disability income
payments hereunder shall be reduced to the actual dollar amount of the
income payments provided by the remaining policies and shall be reduced to
zero if there are no remaining policies.
Executive shall look exclusively to the Company's Short-Term Disability
Income Plan and any long-term disability income policies maintained on his
behalf pursuant to this Section 4.3.2 for the payment of his disability
benefits hereunder, and the Company shall have no obligation to provide any
long-term disability income payments out of the Company's own funds and
shall not be the guarantor of the disability income benefits contemplated
by this Section 4.3.2.
4.3.3 HEALTH CARE COVERAGE. The Company shall, at its expense, provide
Executive and his eligible dependents with continued Health Care Coverage until
the earliest to occur of (i) the Executive's death or (ii) the first date that
such individuals are covered under another employer's health benefit program
which provides substantially the same level of benefits without exclusion for
pre-existing medical conditions or (iii) his return to full-time employment with
the Company or other business entity in substantially the same position he held
immediately prior to his disability. The period of such Company-paid coverage
shall be credited against any period of COBRA Continued Care Coverage to which
Executive and his eligible dependents may, at their sole cost, be entitled by
reason of Executive's termination of employment and shall not be in addition to
such period of COBRA Continued Care Coverage.
4.4 TERMINATION BY THE COMPANY FOR MISCONDUCT. The Company may terminate
Executive's employment for Misconduct.
4.4.1 NO CONTRACT BENEFITS. Should Executive's employment be terminated for
Misconduct, Executive shall have no right to receive any severance benefits
under this Agreement. However, Executive shall be entitled to receive (i) any
unpaid compensation earned for services rendered through the date of such
termination and (ii) any accrued but unpaid vacation benefits or sick days.
4.4.2 COVENANTS. Following such termination for Misconduct, Executive shall
comply with his covenants and obligations under Section 3.1 but shall not be
subject to any consulting agreement under Section 3.2.
4.5 VOLUNTARY TERMINATION BY EXECUTIVE. Executive may, upon thirty (30)
days prior written notice to the Company, voluntarily terminate his employment
at any time.
10
4.5.1 NO CONTRACT BENEFITS. Following Executive's termination of employment
under this Section 4.5, Executive shall have no right to receive any severance
benefits under this Agreement, but he and his eligible dependents shall be
entitled, at their sole cost, to receive COBRA Continuation Coverage. In
addition, Executive shall be entitled to receive (i) any unpaid compensation
earned for services rendered through the date of such termination and (ii) any
accrued but unpaid vacation benefits or sick days.
4.5.2 COVENANTS. Following such termination of employment, Executive shall
comply with his covenants and obligations under Section 3.1 (other than Section
3.1.2) but shall not be subject to any consulting agreement under Section 3.2.
4.6 TERMINATION BY THE COMPANY FOR JUSTIFIABLE REASON. The Company may
terminate Executive's employment at any time for Justifiable Reason.
4.6.1 SEVERANCE BENEFITS. Upon the Company's termination of Executive's
employment under this Section 4.6, the Company shall provide the following
severance benefits:
- Executive shall be entitled to receive an immediate lump sum severance
payment equal to one (1) times his Average Annual Compensation. The
payment shall be made within thirty (30) days following the
Executive's termination date and shall be subject to the Company's
collection of all applicable withholding taxes
- Executive shall be entitled to receive salary continuation payments,
at the monthly rate of base salary in effect for him at the time of
his termination of employment, for a period of twelve (12) months. The
payments shall be made in accordance with the Company's normal payroll
practices and shall be subject to the Company's collection of all
applicable withholding taxes. Payments shall commence with the first
payday following Executive's termination date. However, should
Executive obtain a position of full-time employment during the salary
continuation period, then the dollar amount of the salary continuation
payments shall be reduced by the salary earned by Executive during
such period for services rendered to his new employer.
- The Company shall, at its expense, provide Executive and his eligible
dependents with continued Health Care Coverage until the earlier of
(i) twelve (12) months after the Executive's termination date or (ii)
the first date that such individuals are covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions. The period of such Company-paid coverage shall be
credited against any period of COBRA Continued Care Coverage to which
11
Executive and his eligible dependents may, at their sole cost, be
entitled by .reason of Executive's termination of employment and shall
not be in addition to such period of COBRA Continued Care Coverage.
4.6.2 COVENANTS. Following the termination of Executive's employment
pursuant to this Section 4.6, Executive shall comply with all his covenants and
obligations under Section 3.1 and Section 3.2.
4.7 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate
Executive's employment at any time Without Cause.
4.7.1 SEVERANCE BENEFITS. Upon the Company's termination of Executive's
employment under this Section 4.7, the Company shall provide the following
severance benefits:
- Executive shall be entitled to receive an immediate lump sum severance
payment equal to one (1) times his Average Annual Compensation. The
payment shall be made within thirty (30) days following the
Executive's termination date and shall be subject to the Company's
collection of all applicable withholding taxes.
- Executive shall be entitled to receive an additional benefit in an
amount equal to one (1) times his Average Annual Compensation. This
additional benefit shall be paid in equal increments over a twelve
(12)-month period in accordance with the Company's normal payroll
practices and shall be subject to the Company's collection of all
applicable withholding taxes. Payment shall commence with the first
payday following Executive's termination date.
- The Company shall, at its expense, provide Executive and his eligible
dependents with continued Health Care Coverage until the earlier of
(i) twelve (12) months after the date of Executive's termination or
(ii) the first date that such individuals are covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions. The period of such Company-paid coverage shall be credited
against any period of COBRA Continued Care Coverage to which Executive
and his eligible dependents may, at their sole cost, be entitled by
reason of Executive's termination of employment and shall not be in
addition to such period of COBRA Continued Care Coverage.
12
4.7.2 Covenants. Following the termination of Executive's employment
pursuant to this Section 4.7, Executive shall comply with all his covenants and
obligations under Sections 3.1 and 3.2.
13
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
------------------------
5.1 TERMINATION OF HEALTH COVERAGE. Any Health Care Coverage to which
Executive or his eligible dependents may become entitled pursuant to the
provisions of ARTICLE FOUR or any COBRA Continuation Coverage to which such
individuals are otherwise entitled by law shall immediately terminate upon the
occurrence of any of the following events:
- Executive and his eligible dependents become covered under another
employer's health benefit program, which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions;
- The individual fails to pay the applicable premium for the Health Care
Coverage prior the expiration of any applicable grace period following
the due date for such premium;
- Any Company-paid coverage will immediately terminate should the
Executive fail to perform his obligations under ARTICLE THREE, to the
extent those obligations are applicable pursuant to the provisions of
ARTICLE FOUR following his termination of employment; or
- The Company discontinues all health care coverage programs for active
employees.
5.2 DESIGNATION OF BENEFICIARY. Executive may designate from time to time
the person or persons who are to be his designated Beneficiary under this
Agreement. Each such designation shall be evidenced by a written, signed
document delivered to the Company's Corporate Secretary, and each new
designation shall automatically supersede and revoke the prior existing
designation. In the absence of any such designation, the Beneficiary shall be
the Executive's estate.
5.3 ENTIRE AGREEMENT. This Agreement, together with the contemporaneous
Change in Control Severance Benefit Agreement between the Company and Executive
(the "Change in Control Benefit Agreement"), contains the entire agreement and
understanding between Executive and the Company regarding the severance benefits
to which Executive may become entitled upon his cessation of employment and
supersedes and replaces all prior contracts, understandings and representations
(whether oral or written) regarding the terms and conditions of such severance
benefits. Neither this Agreement nor the Change in Control Benefit Agreement may
be modified except by a writing executed by both Executive and the Company.
14
5.4 ASSIGNMENT BY THE COMPANY. This Agreement shall be binding upon and
shall inure to the benefit of any successors or assigns of the Company. As used
in this Agreement, the term "successor" includes any person or group of persons
acting in concert who at any time in any form or manner acquires all or
substantially all of the assets or business of the Company or more than thirty
(30%) of the outstanding voting securities of the Company. Accordingly, this
Agreement, together with the Change in Control Benefit Agreement, shall
continue in full force and effect following any such assignment to the successor
entity.
5.5. GENERAL CREDITOR STATUS The benefits to which Executive may become
entitled under this Agreement (except those attributable to his options) shall
be paid, when due, from the general assets of the Company. The right of the
Executive (or his Beneficiary) to receive any such payments shall at all times
be that of a general creditor of the Company and will have no priority over the
claims of other general creditors of the Company.
5.6. DEATH. Should Executive die before receipt of all benefits to which he
may become entitled under this Agreement, then the payment of such benefits
shall be made, on the due date or dates hereunder had Executive survived, to his
Beneficiary. Should Executive die before he has exercised all his outstanding
vested Options, then each such Option may be exercised, during the applicable
exercise period in effect for such Option, by the executors or administrators of
Executive's estate or by the Person to whom the Option is transferred pursuant
to the Executive's will or in accordance with the laws of inheritance.
5.7. MISCELLANEOUS. The provisions of this Agreement shall be construed and
interpreted under the laws of the State of Arizona. If any provision of this
Agreement as applied to any party or to any circumstance should be adjudged by a
court of competent jurisdiction to be void or unenforceable for any reason, the
invalidity of that provision shall in no way affect (to the maximum extent
permissible by law) the application of such provision under circumstances
different from those adjudicated by the court, the application of any other
provision of this Agreement, or the enforceability or invalidity of this
Agreement as a whole.
5.8 ARBITRATION. Any controversy which may arise between Executive and the
Company with respect to the construction, interpretation or application of any
of the terms, provisions or conditions of this Agreement or any monetary-claim
arising from or relating to this Agreement shall be submitted to final and
binding arbitration in Tucson, Arizona in accordance with the rules of the
American Arbitration Association then in effect.
15
5.9. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement shall
confer upon Executive any right to continue in the employment of the Company for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company or Executive, which rights are hereby expressly
reserved by each, to terminate Executive's employment at any time for any reason
whatsoever, with or without cause.
5.10 NOTICES. Any notice provided for by this Agreement and any other
notice, demand, designation or communication which either party may wish to send
to the other ("Notices") shall be in writing and shall be deemed to have been
properly given if served by (i) personal delivery, (ii) registered or certified
mail, return receipt requested in a sealed envelope, postage and other charges
prepaid, or (iii) telegram, telecopy, telex, facsimile or other similar form of
transmission followed by delivery pursuant to clause (i) or (ii), in each case
addressed to the party for which such Notice is intended as follows:
If to the Company: Board of Directors
Burr-Brown Corporation
6730 South Tucson Boulevard
Tucson, AZ 85706
FAX: (520) 746-7752
If to Executive: Syrus P. Madavi
__________________
__________________
FAX: (520)_________
5.10.1 CHANGE OF ADDRESS. Any address or specified in this Section 5.10 may
be changed by a Notice given by the addressee to the other party in accordance
with this Section 5.10.
5.10.2 EFFECTIVE DATE OF NOTICE. All Notices shall be given and effective
as of the date of personal delivery thereof or the date of receipt set forth on
the return receipt. The inability to deliver because of a changed address of
which no Notice was given or rejection or other refusal to accept any Notice
shall be deemed to be the receipt of the Notice as of the date of such inability
to deliver or rejection or refusal to accept.
16
IN WITNESS WHEREOF, this Severance Benefit Agreement has been executed and
delivered by the parties as of the date first set forth above.
/s/ SYRUS P. MADAVI
-----------------------------
Syrus P. Madavi, Executive
BURR-BROWN CORPORATION
By: /s/ THOMAS R. BROWN, JR.
------------------------
Title: Chairman of the Board
17
Exhibit 10(a)(vii)
------------------
CHANGE IN CONTROL SEVERANCE BENEFIT AGREEMENT
---------------------------------------------
CHANGE IN CONTROL SEVERANCE BENEFIT AGREEMENT (the "Agreement") executed this
30th day of October 1996 (the "Effective Date") by and between BURR-BROWN
CORPORATION, a Delaware corporation (the "Company"), and SYRUS P. MADAVI, the
Company's President and Chief Executive Officer (the "Executive").
R E C I T A L S
- - - --- - - -
A. The Executive is currently employed on an "at-will" basis by the Company
as the Company's President and Chief Executive Officer.
B. The Company and the Executive wish to enter into a formal agreement
under which the Executive will be provided with certain defined severance
benefits in the event his employment were to terminate under specified
circumstances following a change in control or ownership of the Company.
NOW THEREFORE, the Company and Executive mutually agree as follows:
ARTICLE ONE
DEFINITIONS
-----------
For purposes of this Agreement, the following definitions shall be in effect:
1.1 ACTUAL FIVE-YEAR AVERAGE COMPENSATION means Executive's average W-2
wages and other compensation received from the Company for the five (5) calendar
years completed immediately prior to the calendar year in which a Parachute
Event occurs. Any W-2 wages or other compensation for a partial year of
employment with the Company will be annualized, in accordance with the frequency
with which such wages are paid during such partial year, before inclusion within
Executive's Actual Five-Year Average Compensation. If any of Executive's
compensation from the Company during such five (5)-year or shorter period was
not included in his W-2 wages for U.S. income tax purposes because such
compensation was excludible from income as foreign earned income under Code
Section 911 or as pre-tax income under Code Section 125 or 402(g), then such
compensation shall nevertheless be included in Executive's Actual Five-Year
Average Compensation to the same extent as if it were part of his W-2 wages.
1.2 AVERAGE ANNUAL COMPENSATION means the sum of the following dollar
amounts: (i) the average rate of base salary in effect for the Executive over
the three (3)-year period ending with the date of his termination of employment
with the Company or, if greater, over the three (3) year period ending
immediately prior to the Parachute Event plus (ii) the average bonus earned or
accrued by Executive on the basis of corporate and personal performance over the
three (3) fiscal years of the Company immediately preceding the fiscal year of
Executive's termination, or if greater, over the three (3)-year, period
immediately preceding the fiscal year of the Parachute Event, whether or not the
actual payment of those bonuses occurred within that three (3) year period.
1.3 BENEFICIARY means any person or persons designated from time to time by
Executive pursuant to Section 6.2 to receive any benefits under this Agreement
which may become due and payable to Executive following his death.
1.4 BOARD means the Board of Directors of the Company.
1.5 CHANGE OF CONTROL means a change of ownership or control of the Company
(other than a Hostile Take-Over under Section 1.12) effected pursuant to one or
more of the following events:
(i) the acquisition by any person (or any group of related persons acting
in concert) of beneficial ownership (as defined in Rule 13d-3 under
the Securities Exchange Act) of securities of the Company possessing
more than fifty percent (50%) of the total combined voting power of
the Company's then outstanding securities; or
(ii) a merger or consolidation in which securities of the Company
possessing more than fifty percent (50%) of the total combined voting
power of the Company's then outstanding securities are transferred to
a person or persons different from the persons holding those
securities immediately prior to such merger or consolidation; or
(iii) the sale of all or substantially all of the Company's assets in
complete liquidation or dissolution of the Company.
1.6 CODE means the Internal Revenue Code of 1986 as amended.
1.7 COMPETE means directly or indirectly to engage in activities for,
render services to or otherwise participate in the ownership (other than
ownership of less than five percent (5%) of the outstanding equity or capital or
profit interests in any entity) of any business competitive with any line of
business engaged in by the Company.
2
1.8 CONFIDENTIAL INFORMATION means any non-public proprietary or
confidential information of the Company or its parent or subsidiary companies,
including (without limitation) trade secrets; customer lists and information
concerning vendors, suppliers, licensors or licensees; records or research,
proposals, reports, methods, techniques, financial information and other data,
and other non-public information regarding the Company and its parent or
subsidiary companies or the existing and planned businesses, properties or
affairs of the Company and its parent or subsidiary companies.
1.9 CONSTRUCTIVE TERMINATION means Executive's resignation from employment
with the Company at any time after a Change in Control but within six (6) months
after the occurrence of one or more of the following events:
(i) the assignment to Executive of any duties of materially lesser status,
dignity and character than his duties on the Effective Date, or a
substantial reduction in the nature or status of his responsibilities
from those in effect on the Effective-Date;
(ii) a greater than ten percent (10%) reduction in Executive's level of
compensation (including base salary, fringe benefits and target
bonuses (to the extent those targets are expressed as a percentage of
base salary) under any Company performance-based incentive plans);
(iii) a relocation of Executive's principal place of employment by more
than fifty (50) miles; or
Any reduction in compensation which occurs in connection with an across-the
board reduction in the level of compensation payable to the Company's executive
officers or senior management shall not constitute grounds for a clause (ii)
resignation, unless implemented within twelve (12) months after a Change in
Control.
1.10 CONTRACT PAYOUT EVENT means any one of the following events which
transpire after a Change in Control or Hostile Take-Over, as further detailed in
ARTICLE FOUR:
(i) Executive's voluntary termination of employment within two (2) years
after the effective date of such Change in Control or Hostile
Take-Over;
(ii) Executive's termination of employment within six (6) months after an
event of Constructive Termination; or
(iii) the Company's termination of Executive's employment Without Cause.
3
1.11 HEALTH CARE COVERAGE means the continued health care coverage under
the Company's group health plans to which Executive and his eligible dependents
will become entitled under this Agreement upon a Contract Payout Event.
1.12 HOSTILE TAKE-OVER means either of the following events:
(i) the acquisition by any person (or related group of persons), whether
by tender or exchange offer made directly to the Company's
stockholders, private purchases from one or more of the Company's
stockholders, open market purchases or any other transaction, of
beneficial ownership of securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities pursuant to a tender offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept, or
(ii) a change in the composition of the Board over a period of twenty-four
(24) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (a) have been
Board members continuously since the beginning of such period or (b)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (a) who were still in office at the time such election or
nomination was approved by the Board.
1.13 JUSTIFIABLE REASON means the Company's termination of Executive's
employment for one or more of the following reasons: (i) Executive's willful
refusal to carry out the reasonable directives of the Board or (ii) Executive's
failure to correct one or more material performance deficiencies within a
reasonable period after receipt of written notice from the Board identifying
those deficiencies. The reasonableness of the correction period for the
identified deficiencies shall be determined on the basis of the nature and scope
of those particular deficiencies.
1.14 MISCONDUCT means Executive's (i) commission of any act of fraud,
dishonesty or embezzlement; (ii) commission of any other willful and malicious
act which has a materially adverse financial impact upon the Company; (iii)
habitual neglect of his duties by reason of substance abuse or other repeated
unexcused absences; or (iv) conviction of a felony which has a materially
adverse financial impact upon the Company.
1.15 OPTION means any option to purchase shares of the Company's common
stock granted to Executive by the Company and outstanding at the time of a
Parachute Event.
4
1.16 OPTION PARACHUTE PAYMENT means, with respect to each Option
accelerated in whole or in part in connection with a Parachute Event or the
subsequent termination of Executive's employment, the portion of that Option
deemed to be a parachute payment under Code Section 280G and the Treasury
Regulations issued thereunder. The portion of such Option which is categorized
as an Option Parachute Payment shall be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable
Treasury Regulations and shall include an appropriate dollar adjustment to
reflect the lapse of Executive's obligation to remain in the Company's employ as
a condition to the vesting of the accelerated installment. In no event, however,
shall the Option Parachute Payment attributable to any Option (or accelerated
installment) exceed the spread (the excess of the fair market value of the
accelerated option shares over the option exercise price payable for those
shares) existing at the time of acceleration.
1.17 OTHER PARACHUTE PAYMENT means any payment in the nature of
compensation (other than an Option Parachute Payment) which is made to Executive
in connection with a Parachute Event or the subsequent termination of his
employment and which accordingly qualifies as a parachute payment within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder.
1.18 PARACHUTE EVENT means a Change in Control or Hostile Take-Over, to the
extent such transaction constitutes a change in ownership or control of the
Company under Code Section 280G and the Treasury Regulations issued thereunder.
1.19 PRESENT VALUE means the value, determined as of the date of the
applicable Parachute Event, of any payment in the nature of compensation to
which Executive becomes entitled in connection with either the Parachute Event
or the subsequent termination of his employment. The Present Value of each such
payment shall be determined in accordance with the provisions of Code Section
280G(d)(4), utilizing a discount rate equal to one hundred twenty percent (120%)
of the applicable Federal rate in effect at the time of such determination,
compounded semi-annually to the effective date of the Parachute Event.
1.20 PLAN means the Company's 1993 Stock Incentive Plan, as amended from
time to time, and any successor equity incentive plan maintained by the Company.
1.21 SEVERANCE BENEFIT AGREEMENT means the Severance Benefit Agreement
which the Company and Executive will execute contemporaneously with this
Agreement or any successor or replacement agreement, to the extent any such
agreement is in effect at the time.
1.22 WITHOUT CAUSE means the Company's termination of Executive's
employment for any reason other than Misconduct or Justifiable Reason.
5
ARTICLE TWO
GENERAL PROVISIONS
------------------
2.1 TERM. This Agreement shall remain in effect through December 31, 1999.
The term of this Agreement shall be automatically renewed for each subsequent
calendar year during which Executive continues in the Company's employ, unless
the Company terminates this Agreement as of the first day of any calendar year
beginning after December 31, 1999 by providing Executive with written notice of
such termination at least one hundred (180) days prior to the start of that
calendar year. In the event the Company elects to so terminate this Agreement
prior to a Change in Control or Hostile Take-Over, then the following provisions
shall become effective:
- The Company and Executive shall in good faith negotiate a new change
in control severance benefits agreement to replace this Agreement,
effective as of the termination date of this Agreement.
- If agreement cannot be reached as to the terms and conditions of such
a replacement agreement, then Executive shall have the right to
terminate his employment within six (6) months after the termination
date of this Agreement and shall thereupon become entitled to
severance benefits to be reasonably agreed upon by the Company and
Executive on the basis of severance packages in effect for
similarly-situated chief executive officers in the industry.
If the Company elects to terminate this Agreement after a Change in Control
or Hostile Take-Over, then Executive shall, upon his termination of employment
within six (6) months after the effective date on which this Agreement is so
terminated, be treated as if his termination of employment were a termination by
the Company Without Cause, and all the provisions of Section 4.3 shall
accordingly apply to such termination of employment.
2.2 OPTION GRANTS. Any new Options granted to Executive under the Plan
during the term of this Agreement shall incorporate the following terms and
provisions:
- Each Option shall become immediately exercisable for all of the option
shares as fully-vested shares upon a Change in Control in which that
Option is not assumed by the successor entity (or the parent company).
Any Option so assumed in a Change in Control shall subsequently become
exercisable for all the option shares as fully-vested shares if
Executive's employment is terminated within two (2) years after such
Change in Control either by the Company Without Cause or by Executive
in connection with a Constructive Termination.
6
- Each Option shall, subject to the benefit limitations of ARTICLE FIVE,
become immediately exercisable for all of the option shares as
fully-vested shares upon the occurrence of a Hostile Take-Over.
- Each Option shall remain exercisable for a period of twelve (12)
months following the termination of Executive's employment in
connection with a Contract Payout Event, but in no event beyond the
expiration date of the option term.
7
ARTICLE THREE
COVENANTS AND CONSULTING AGREEMENT
-------------------------------------
3.1 COVENANTS. Executive shall be subject to the following covenants and
obligations:
3.1.1 RETURN OF DOCUMENTS. Upon the termination of Executive's employment
for any reason, Executive shall promptly relinquish and return to the Company
all Confidential Information and all files, correspondence, memoranda, diaries
and other records, minutes, notes, manuals, papers and other documents and data,
however prepared or memorialized, and all copies thereof, belonging to or
relating to the business of the Company, that are in Executive's custody or
control, whether or not they contain Confidential Information.
3.1.2 NON-COMPETITION COVENANT. While employed by the Company, Executive
shall not Compete or plan or prepare to Compete with the Company. To the extent
obligated pursuant to the provisions of ARTICLE FOUR. Executive shall not, for a
period of twelve (12) months following the termination of his employment,
Compete with any line of business in which (i) the Company is engaged at the
time his employment terminates or (ii) the Company is preparing to engage
pursuant to plans or proposals approved by the Board prior to such termination.
3.1.3 NON-SOLICITATION COVENANT. For a period of twenty-four (24) months
following the termination of Executive's employment with the Company for any
reason other than in connection with a Hostile Take-Over, Executive shall not,
directly or indirectly, solicit the services of any Company employees or
otherwise induce or attempt to induce any Company employees to sever their
employment relationship with the Company.
3.1.4 SCOPE AND DURATION; SEVERABILITY. The Company and Executive
understand and agree that the scope and duration of the covenants contained in
this Section 3.1 are reasonable both in time and geographical area and are
fairly necessary to protect the business of the Company. Such covenants shall
survive the termination of Executive's employment, except that the Section 3.1.2
non-competition covenant shall remain in effect following such termination of
employment only to extent required pursuant to the provisions of ARTICLE FOUR.
It is further agreed that such covenants shall be regarded as divisible and
shall be operative as to time and geographical area to the extent that they may
be made so operative, and should any portion of such covenants be declared
invalid or unenforceable, the validity and enforceability of the remainder shall
not be affected.
8
3.1.5 ASSIGNMENT. Except as otherwise provided to the contrary in ARTICLE
FOUR, Executive agrees that the covenants contained in this Section 3.1 shall
inure to the benefit of any successor or assign of the Company, with the same
force and effect as if such covenant had been made by Executive with such
successor or assign.
3.2 CONSULTING AGREEMENT. Should Executive's employment terminate within
two (2) years following a Change in Control, then Executive shall make himself
available to perform, for a period not to exceed twelve (12) months following
such termination of employment, such consulting services for the Company within
his area of expertise as may from time to time be reasonably requested by the
Board, and the Company may not terminate the consulting arrangement during such
twelve (12)-month other than for Misconduct or breach by Executive of his
non-competition covenant under Section 3.1.2. However, Executive shall not be
required to perform more than ten (10) hours of consulting services per month
during the period of such consulting arrangement. Such consulting, agreement
shall not be applicable in the event Executive's employment terminates after a
Hostile Take-Over.
3.2.1 COMPENSATION. Executive shall not receive any cash compensation for
the consulting services rendered pursuant to this Section 3.2 if Executive is
otherwise to receive salary continuation payments under ARTICLE FOUR in
connection with his termination of employment. However, should Executive be
required under Section 3.2 to render one or more hours of consulting services
following a termination of employment in which he is not entitled to any salary
continuation payments under ARTICLE FOUR, then Executive shall receive cash
compensation for such services at the hourly rate to be negotiated in good faith
with the Company at the time of each project assignment.
3.2.2 EXPENSE REIMBURSEMENT. Executive shall be entitled to reimbursement
of all reasonable out-of-pocket expenses incurred in connection with the
performance of his consulting services pursuant to this Section 3.2 upon
presentation to the Company of appropriate documentation evidencing those
expenses.
3.3 CONSIDERATION FOR COVENANTS AND CONSULTING AGREEMENT. Should
Executive's employment terminate in connection with a Change in Control, then
the value of his non-competition covenant under Section 3.1.2 and his consulting
agreement under Section 3.2 shall be determined by independent appraisal, and
the severance benefits payable to Executive under ARTICLE FOUR shall, to the
extent of such appraised value, be allocated as reasonable compensation for such
covenant and consulting agreement. Executive and the Company shall, within ten
(10) business days following such Change in Control, select an independent third
party (either an experienced tax counsel or a nationally recognized accounting
firm) to perform the appraisal required under this Section 3.3. Should Executive
and the Company be unable to mutually agree upon the selection of such third
party, then Executive shall designate a nationally recognized accounting firm to
perform such appraisal, provided such firm has not previously served as the
9
Company's independent auditors or provided prior tax advice to Executive on
personal matters.
10
ARTICLE FOUR
PAYOUT OF CONTRACT BENEFITS
---------------------------
4.1 CHANGE OF CONTROL. Executive may voluntarily terminate his employment
in connection with a Change of Control, provided such termination is, pursuant
to written notice delivered to the Company, effected within two (2) years after
such Change in Control.
4.1.1 COVENANTS. Following such termination of employment, Executive shall
comply with all his covenants and obligations under Sections 3.1 and 3.2.
4.1.2 SEVERANCE BENEFITS. Upon the termination of Executive's employment in
connection with the Change in Control, the Company shall provide the following
severance benefits:
- Executive shall be entitled to receive an immediate lump sum severance
payment equal to one (1) times his Average Annual Compensation. The
payment shall be made within thirty (30) days following the
Executive's termination date and shall be subject to the Company's
collection of all applicable withholding taxes.
- Executive shall be entitled to receive an additional benefit in an
amount equal to one (1) times his Average Annual Compensation. This
additional benefit shall be paid in equal increments over a twelve
(12)-month period in accordance with the Company's normal payroll
practices and shall be subject to the Company's collection of all
applicable withholding taxes. Payment shall commence with the first
payday following Executive's termination date.
- The Company shall, at its expense, provide Executive and his eligible
dependents with continued Health Care Coverage until the earlier of
(i) twelve (12) months after the Executive's termination date or (ii)
the first date that such individuals are covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions. The period of such Company-paid coverage shall be credited
against any period of COBRA Continued Care Coverage to which Executive
and his eligible dependents may, at their sole cost, be entitled by
reason of Executive's termination of employment and shall not be in
addition to such period of COBRA Continued Care Coverage.
11
4.2 CONSTRUCTIVE TERMINATION. Executive may, following a Change in Control,
terminate his employment within six (6) months after any event qualifying as a
Constructive Termination under Section 1.9.
4.2.1 COVENANTS. Following such termination of employment, Executive shall
comply with all his covenants and obligations under Sections 3.1 and 3.2.
4.2.2 SEVERANCE BENEFITS. Upon Executive's termination of employment under
this Section 4.7, the Company shall provide the following severance benefits:
- Executive shall be entitled to receive an immediate lump sum severance
payment equal to two (2) times his Average Annual Compensation. The
payment shall be made within thirty (30) days following the
Executive's termination date and shall be subject to the Company's
collection of all applicable withholding taxes.
- Executive shall be entitled to receive an additional benefit in an
amount equal to one (1) times his Average Annual Compensation. This
additional benefit shall be paid in equal increments over a twelve
(12)-month period in accordance with the Company's normal payroll
practices and shall be subject to the Company's collection of all
applicable withholding taxes. Payment shall commence with the first
payday following Executive's termination date.
- The Company shall, at its expense, provide Executive and his eligible
dependents with continued Health Care Coverage until the earlier of
(i) twelve (12) months after the Executive's termination date or (ii)
the first date that such individuals are covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions. The period of such Company-paid coverage shall be credited
against any period of COBRA Continued Care Coverage to which Executive
and his eligible dependents may, at their sole cost, be entitled by
reason of Executive's termination of employment and shall not be in
addition to such period of COBRA Continued Care Coverage.
4.3 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may, at any time
following a Change in Control, terminate Executive's employment Without Cause.
4.3.1 SEVERANCE BENEFITS. Upon the Company's termination of Executive's
employment under this Section 4.3, the Company shall provide the following
severance benefits:
12
- Executive shall be entitled to receive an immediate lump sum severance
payment equal to three (3) times his Average Annual Compensation. The
payment shall be made within thirty (30) days following the
Executive's termination date and shall be subject to the Company's
collection of all applicable withholding taxes.
- Executive shall be entitled to receive an additional benefit in an
amount equal to one (1) times his Average Annual Compensation. This
additional benefit shall be paid in equal increments over a twelve
(12)-month period in accordance with the Company's normal payroll
practices and shall be subject to the Company's collection of all
applicable withholding taxes. Payment shall commence with the first
payday following Executive's termination date.
- The Company shall, at its expense, provide Executive and his eligible
dependents with continued Health Care Coverage until the earlier of
(i) twelve (12) months after the date of Executive's termination or
(ii) the first date that such individuals are covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions. The period of such Company-paid coverage shall be credited
against any period of COBRA Continued Care Coverage to which Executive
and his eligible dependents may, at their sole cost, be entitled by
reason of Executive's termination of employment and shall not be in
addition to such period of COBRA Continued Care Coverage.
4.3.2 COVENANTS. Following the termination of Executive's employment
pursuant to this Section 4.3, Executive shall comply with all his covenants and
obligations under Sections 3.1 and 3.2.
4.4 HOSTILE TAKEOVER. Executive may terminate his employment in connection
with a Hostile Takeover, provided such termination is, pursuant to written
notice delivered to the Company, effected within two (2) years after such
Hostile Takeover.
4.4.1 COVENANTS. Following such termination of employment, Executive shall
have no obligation to perform his covenants under Section 3.1.2 or his
consulting agreement under Section 3.2.
4.4.2 SEVERANCE BENEFITS. Upon the termination of Executive's employment in
connection with the Hostile Take-Over, the Company shall provide the following
severance benefits:
13
- Executive shall, within ten (10) business days following his
termination of employment, receive a lump sum payment equal to two (2)
times his Average Annual Compensation. Such lump sum payment shall be
subject to the Company's collection of all applicable withholding
taxes.
- The Company shall, at its expense, provide Executive and his eligible
dependents with continued Health Care Coverage until the earlier of
(i) twelve (12) months after the Executive's termination date or (ii)
the first date that such individuals are covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions. The period of such Company-paid coverage shall be credited
against any period of COBRA Continued Care Coverage to which Executive
and his eligible dependents may, at their sole cost, be entitled by
reason of Executive's termination of employment and shall not be in
addition to such period of COBRA Continued Care Coverage.
4.4.3 OPTION ACCELERATION. Whether or not Executive terminates his
employment pursuant to this Section 4.4, all Options outstanding at the time of
the Hostile Takeover shall, subject to the benefit limitations of ARTICLE FIVE,
vest and become exercisable for all of the underlying shares of the Company's
common stock immediately prior to the effective date of such Hostile Takeover.
Executive may exercise his Options for such vested shares at any time until the
earlier of (i) the specified expiration date of the option term or (ii) the
expiration of the twelve (12)-month period measured from his termination date,
and any Options not exercised prior to the applicable expiration date shall
lapse.
14
ARTICLE FIVE
BENEFIT LIMITATION
-------------------
5.1. LIMITATION ON SEVERANCE BENEFITS. In the event of a Parachute Event,
the following limitations shall become applicable to the benefits payable to
Executive pursuant to this Agreement:
5.1.1 BENEFIT REDUCTION. If the Parachute Event constitutes a Change in
Control, then the dollar amount of the severance benefits to which Executive
becomes entitled under ARTICLE FOUR shall be reduced to the extent necessary to
assure that the present value of those payments will not, when added to the
present value of the Option Parachute Payment and Other Parachute Payments to
which Executive may also be entitled upon such Change in Control, exceed 2.99
times Executive's Actual Five-Year Average Compensation (the "Parachute Limit").
Any acceleration of Executive's unvested Options, whether at the time of the
Change in Control or upon the subsequent termination of Executive's employment
within two (2) years after such Change in Control, shall only be limited to the
extent necessary to provide Executive with the maximum after-tax benefit
available, after taking into account any parachute excise tax which might
otherwise be payable by Executive under Code Section 4999 (and any analogous
State income tax provision) with respect to his total benefit package. However,
if the Parachute Event constitutes a Hostile Take-Over, then no reduction shall
be made to the Executive's severance benefits under ARTICLE FOUR and no
limitation shall be imposed upon the acceleration of Executive's outstanding
Options, except to the extent (if any) necessary to provide Executive with the
maximum after-tax benefit available, after taking into account any parachute
excise tax which might otherwise be payable by Executive under Code Section 4999
(and any analogous State income tax provision) with respect to his total benefit
package.
5.1.2 RESOLUTION OF DISPUTES. Should there arise any dispute between
Executive and the Company as to whether one or more benefits to which Executive
becomes entitled (whether under this Agreement, the Options or otherwise) in
connection with a Parachute Event constitute Option Parachute Payments or Other
Parachute Payments, such dispute is to be resolved as follows:
- In the event temporary, proposed or final Treasury Regulations in
effect at the time under Code Section 280G specifically address the
status of such benefits or the method for their valuation, the
characterization afforded to such benefits by the Regulations,
together with the methods prescribed for their valuation, shall be
controlling.
- In the event such Regulations do not address the status of the
benefits in dispute, the matter shall be submitted for resolution to
independent counsel mutually acceptable to Executive and the Company
15
("Independent Counsel"). The resolution reached by Independent Counsel
shall be final and controlling. However, should the Independent
Counsel determine that the status of the benefits in dispute can be
resolved through the obtainment of a private letter ruling from the
Internal Revenue Service, a formal and proper request for such ruling
shall be prepared and submitted by Independent Counsel, and the
determination made by the Internal Revenue Service in the issued
ruling shall be controlling. All expenses incurred in connection with
the retention of Independent Counsel and (if applicable) the
preparation and submission of the ruling request shall be paid by the
Company.
- The present value of each Option Parachute Payment and each of the
Other Parachute Payments (including any salary continuation payments
and Health Care Coverage under ARTICLE FOUR) shall be determined in
accordance with the provisions of Code Section 280G(d)(4) and the
Treasury Regulations issued thereunder.
5.1.3 HOLD-BACK OF BENEFITS. Any severance benefits to which Executive may
become entitled under ARTICLE FOUR shall not be paid to Executive until any
amounts in dispute under Section 5.1.2 have been resolved in accordance
herewith. However, any portion of such severance benefits which would not
otherwise exceed the benefit limitation of Section 5.1.1 even if all amounts in
dispute under Section 5.1.2 were to be resolved against Executive shall be paid
to Executive in accordance with the applicable provisions of ARTICLE FOUR
5.1.4 OVERRIDING LIMITATION. Executive shall in all events be entitled to
receive the full amount of his severance benefits under ARTICLE FOUR, to the
extent those benefits, when added to the present value of his Option Parachute
Payment and Other Parachute Payments (excluding such severance benefits), will
nevertheless qualify as reasonable compensation within the standards established
under Code Section 280G(b)(4).
16
ARTICLE SIX
MISCELLANEOUS PROVISIONS
------------------------
6.1 TERMINATION OF HEALTH COVERAGE. Any Health Care Coverage to which
Executive or his eligible dependents may become entitled pursuant to the
provisions of ARTICLE FOUR or any COBRA Continuation Coverage to which such
individuals are otherwise entitled by law shall immediately terminate upon the
occurrence of any of the following events:
- Executive and his eligible dependents become covered under another
employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical
conditions;
- The individual fails to pay the applicable premium for the Health Care
Coverage prior the expiration of any applicable grace period following
the due date for such premium;
- Any Company-paid coverage will immediately terminate should the
Executive-fail to perform his obligations under ARTICLE THREE, to the
extent those obligations are applicable pursuant to the provisions of
ARTICLE FOUR following his termination of employment; or
- The Company discontinues all health care coverage programs for active
employees.
6.2 DESIGNATION OF BENEFICIARY. Executive may designate from time to time
the person or persons who are to be his designated Beneficiary under this
Agreement. Each such designation shall be evidenced by a written, signed
document delivered to the Company's Corporate Secretary, and each new
designation shall automatically supersede and revoke the prior existing
designation. In the absence of any such designation, the Beneficiary shall be
the Executive's estate.
6.3 ENTIRE AGREEMENT. This Agreement, together with the Severance Benefit
Agreement (to the extent in effect at the time), contains the entire agreement
and understanding between Executive and the Company regarding the severance
benefits to which Executive may become entitled upon his cessation of employment
and supersedes and replaces all prior contracts, understandings and
representations (whether oral or written) regarding the terms and conditions of
such severance benefits. Neither this Agreement nor the Severance Benefit
Agreement may be modified except by a writing executed by both Executive and the
Company.
17
6.4 ASSIGNMENT BY THE COMPANY. This Agreement shall be binding upon and
shall inure to the benefit of any successors or assigns of the Company. As used
in this Agreement, the term "successor" includes any person or group of persons
acting in concert who at any time in any form or manner acquires all or
substantially all of the assets or business of the Company or more than thirty
(30%) of the outstanding voting securities of the Company. Accordingly, this
Agreement, together with the Severance Benefit Agreement (to the extent
otherwise in effect at the time), shall continue in full force and effect
following any such assignment to the successor entity.
6.5. GENERAL CREDITOR STATUS. The benefits to which Executive may become
entitled under this Agreement (except those attributable to his Options) shall
be paid, when due, from the general assets of the Company. The right of the
Executive (or his Beneficiary) to receive any such payments shall at all times
be that of a general creditor of the Company and will have no priority over the
claims of other general creditors of the Company.
6.6. DEATH. Should Executive die before receipt of all benefits to which he
may become entitled under this Agreement, then the payment of such benefits
shall be made, on the due date or dates hereunder had Executive survived, to his
Beneficiary. Should Executive die before he has exercised all his outstanding
vested Options, then each such Option may be exercised, during the applicable
exercise period in effect for such Option, by the executors or administrators of
Executive's estate or by the Person to whom the Option is transferred pursuant
to the Executive's will or in accordance with the laws of inheritance.
6.7. MISCELLANEOUS. The provisions of this Agreement shall be construed and
interpreted under the laws of the State of Arizona. If any provision of this
Agreement as applied to any party or to any circumstance should be adjudged by a
court of competent jurisdiction to be void or unenforceable for any reason, the
invalidity of that provision shall in no way affect (to the maximum extent
permissible by law) the application of such provision under circumstances
different from those adjudicated by the court, the application of any other
provision of this Agreement, or the enforceability or invalidity of this
Agreement as a whole.
6.8 ARBITRATION. Any controversy which may arise between Executive and the
Company with respect to the construction, interpretation or application of any
of the terms, provisions or conditions of this Agreement or any monetary claim
arising from or relating to this Agreement shall be submitted to final and
binding arbitration in Tucson, Arizona in accordance with the rules of the
American Arbitration Association then in effect.
18
6.9 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement shall
confer upon Executive any right to continue in the employment of the Company for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company or Executive, which rights are hereby expressly
reserved by each, to terminate Executive's employment at any time for any reason
whatsoever, with or without cause.
6.10 NOTICES. Any notice provided for by this Agreement and any other
notice, demand, designation or communication which either party may wish to send
to the other ("Notices") shall be in writing and shall be deemed to have been
properly given if served by (i) personal delivery, (ii) registered or certified
mail, return receipt requested in a sealed envelope, postage and other charges
prepaid, or (iii) telegram, telecopy, telex, facsimile or other similar form of
transmission followed by delivery pursuant to clause (i) or (ii) in each case
addressed to the party for which such Notice is intended as follows:
If to the Company: Board of Directors
Burr-Brown Corporation
6730 South Tucson Boulevard
Tucson, AZ 85706
FAX: (520) 746-7752
If to Executive: Syrus P. Madavi
_________________
_________________
FAX: (520)________
6.10.1 CHANGE OF ADDRESS. Any address or specified in this Section 6.10 may
be changed by a Notice given by the addressee to the other party in accordance
with this Section 6.10.
6.10.2 EFFECTIVE DATE OF NOTICE. All Notices shall be given and effective
as of the date of personal delivery thereof or the date of receipt set forth on
the return receipt. The inability to deliver because of a changed address of
which no Notice was given or rejection or other refusal to accept any Notice
shall be deemed to be the receipt of the Notice as of the date of such inability
to deliver or rejection or refusal to accept.
19
IN WITNESS WHEREOF, this Severance Benefit Agreement has been executed and
delivered by the parties as of the date first set forth above.
/s/ SYRUS P. MADAVI
--------------------------
Syrus P. Madavi, Executive
BURR-BROWN CORPORATION
/s/ THOMAS R. BROWN, JR.
By: -----------------------
Title: Chairman of the Board
20
Exhibit 10(a)(viii)
-------------------
TEXAS INSTRUMENTS
October 24, 2000
To: Mr. Syrus Madavi
Re: Letter Agreement
This letter confirms our agreement on the following matters with respect to your
employment with Texas Instruments Incorporated or any of its Subsidiaries
("Company").
Effective 1/1/01, you shall receive a base salary at an annual rate of $425,000,
payable in accordance with the applicable payroll practices and subject to
increases at the sole discretion of TI. You will be eligible to participate in
employee benefit plans generally provided to similarly situated employees in
accordance with the terms thereof from time to time. You will be entitled to and
shall abide by all applicable employment and personnel policies in effect from
time to time.
In recognition of both your continued employment for one year post-close of the
Burr-Brown acquisition, and your agreement to the competitive and
non-solicitation restrictions in your existing Change in Control Severance
Benefit Agreement dated October 30, 1996, the Company will pay you a Special
Payment. The Special Payment ("Special Payment") will be $3.5 million less
compensation paid to you or for your benefit (including base salary, profit
sharing and retirement plan contributions other than your salary deferral
contributions) with respect to the period 1/1/01 through 8/23/01. This Special
Payment will be paid to you in four (4) substantially equal installments payable
on 11/30/00, 2/28/01, 5/31/01 and 8/31/01. In the event you resign before one of
the payment dates listed above, you will not be eligible for the remaining
Special Payment(s). In case of Involuntary termination, however, all remaining
payments will become due and payable to you on the respective payment dates. The
amount of the fourth Special Payment installment may be estimated by the Company
in anticipation of your profit sharing entitlement for the period of 1/1 through
8/23 of year 2001. You agree to reimburse the Company for any overpayment of the
fourth Special Payment no later than 30 days after you are notified of any such
overpayment. The Company agrees to pay you for any underpayment of the Special
Payment no later than 3/31/02. The four Special Payment installments will not be
considered eligible earnings for purposes of TI profit sharing, 401 (k) and
other retirement benefits.
For the portion of the calendar year after August 24, 2001, you will be entitled
to receive a prorated bonus equal to at least 80% of the normal performance
bonus paid in cash to respect of such period to TI's 5th highest paid executive
officer, as will be reported in TI's 2002 proxy statement. This bonus will be
paid during the first quarter of 2002 provided you are employed by the Company
on the payment date. For example, if TI's 5th highest executive officer at the
end of 2001 earned a normal performance bonus of $100,000 for all of 2001, then
you will receive a bonus of at least $28,274 ($100,000 x.8 x 129/365).
For year 2002, you will be entitled to receive a bonus equal to at least 80% of
the normal performance bonus paid in crash in respect of such period to TI's 5th
highest paid executive officer, as will be reported In TI's 2003 proxy
statement. Should you terminate before 8/15/02, you will not be eligible to
receive such bonus. Should your employment be terminated after 8/15/02 but
before the end of the year, your bonus would be prorated to reflect 2002
calendar days employed. This bonus will be paid during the first quarter of
2003. Beginning 1/1/2003, you will be eligible, during your continued
employment, to participate in the Company's normal bonus programs as
commensurate with similarly situated employees.
Upon your agreement to the terms of this letter, we will recommend to the
Compensation Committee of the Board of Directors of TI that you immediately be
awarded a non-qualified option under the Texas Instruments 2000 Long-Term
Incentive Plan (the "Plan") to purchase an aggregate of 250,000 shares of common
stock of TI, par value of $1.00 ("TI Stock'), at an exercise price equal to the
fair market value of TI Stock as of the date of grant. Each stock option shall
have a term of ten (10) years and shall vest 50% on 11/01/01 and 50% on 8/01/02,
provided you remain employed by the Company on each date. The vested portion of
such stock option shall be exercisable for the remainder of the full term
regardless of your termination of employment. The Company agrees that your
option agreement will not include any provisions requiring a repayment to the
company for any profit (spread between Option Price and market price of the TI
Stock on the date of exercise) realized from the exercising of such options. The
stock options will include a non-competition provision for the same period and
with respect to the same companies as set forth in the last paragraph of this
letter. The stock options granted pursuant to this paragraph shall be subject to
the remainder of the terms of the Plan. The stock options granted pursuant to
this paragraph will not fully vest upon your termination of employment as a
result of the change of control in connection with the Burr-Brown acquisition.
As a condition of continued employment with the Company, you shall promptly
execute and deliver to the Company an Employee Trade Secrets Information
Acknowledgement, an Assignment of Invention and Company Information Agreement, a
Release of Records and such other documents as TI reasonably may require from
time to time with respect to its new employees or similarly situated employees,
if you have not otherwise done so.
Effective beginning six months after August 24, 2000, should either you or the
Company terminate your employment, such termination will be considered Without
Cause for the purpose of severance calculation as outlined in your Change In
Control Severance Benefit Agreement. It is agreed that the options granted to
you by Burr-Brown, which remain unvested, will vest in full upon such
termination, given that such termination occurs on or before August 23, 2002.
For purposes of clarification. It is agreed that with regard to the acceleration
of vesting of options, any services performed as a consultant will not
constitute employment.
The Change In Control Severance Benefit Agreement dated October 30, 1996 Is
modified as provided in the immediately preceding paragraph. To the extent there
may be a conflict, the terms of this letter will govern. This letter, also,
supercedes and voids your June 20, 2000 letter agreement signed by Tom Engibous.
In addition to your obligations under the aforesaid severance agreement, you
agree not to provide services, directly or indirectly, as an employee or
otherwise for a period of one year following your termination of employment to
Analog Devices, Incorporated, Linear Technology Corporation & Maxim Integrated
Products, Incorporated.
Very truly yours,
TEXAS INSTRUMENTS INCORPORATED
/s/ RICHARD K. TEMPLETON
------------------------
Richard K. Templeton
Chief Operating Officer
Executive Vice President
I agree to the foregoing terms and conditions:
/s/ SYRUS MADAVI 10-24-2000
---------------- ----------
Syrus Madavi Date
Exhibit 11
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
EARNINGS (LOSS) PER COMMON AND DILUTIVE POTENTIAL COMMON SHARE
(Millions of Dollars, Except Per-share Amounts)
Years ended December 31
-----------------------
2001 2000 1999
---- ---- ----
Income (loss) before cumulative effect of an
accounting change .. . . . . . . . . . . . . . . $ (201) $ 3,087 $ 1,451
Add: Interest, net of tax effect, on convertible
debentures assumed converted . . . . . . . -- 6 --
----------- ----------- ----------
Adjusted income (loss) before cumulative
effect of an accounting change . . . . . . . . . (201) 3,093 1,451
Cumulative effect of an accounting change. . . . . -- (29) --
----------- ----------- ----------
Adjusted net income (loss) . . . . . . . . . . . . $ (201) $ 3,064 $ 1,451
=========== =========== ==========
Diluted earnings (loss) per common and dilutive
potential common share:
Weighted average common shares outstanding
(in thousands) . . . . . . . . . . . . . . . . . 1,734,506 1,717,484 1,680,282
Weighted average dilutive potential common
shares:
Stock option and compensation plans. . . . . . -- 69,367 69,377
Convertible debentures . . . . . . . . . . . . -- 4,779 --
----------- ----------- ----------
Weighted average common and dilutive potential
common shares. . . . . . . . . . . . . . . . . . 1,734,506 1,791,630 1,749,659
=========== =========== ==========
Diluted earnings (loss) per common share:
Income (loss) before cumulative effect
of an accounting change. . . . . . . . . . . . $ (.12) $ 1.73 $ .83
Cumulative effect of an accounting change. . . . -- (.02) --
----------- ----------- ----------
Net income (loss) .. . . . . . . . . . . . . . . $ (.12) $ 1.71 $ .83
=========== =========== ==========
Basic earnings (loss) per common share:
Weighted average common shares outstanding
(in thousands) . . . . . . . . . . . . . . . . . 1,734,506 1,717,484 1,680,282
=========== =========== ==========
Basic earnings (loss) per common share:
Income (loss) before cumulative effect
of an accounting change. . . . . . . . . . . . $ (.12) $ 1.80 $ .86
Cumulative effect of an accounting change. . . . -- (.02) --
----------- ----------- ----------
Net income (loss) .. . . . . . . . . . . . . . . $ (.12) $ 1.78 $ .86
=========== =========== ==========
Exhibit 12
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Income from continuing operations
before income taxes plus fixed charges
and amortization of capitalized
interest less interest capitalized. . . ($316) $4,702 $2,205 $815 $973
==== ====== ====== ==== ====
Fixed charges:
Total interest on loans (expensed
and capitalized). . . . . . . . . . $74 $98 $84 $86 $115
Interest attributable to rental
and lease expense . . . . . . . . . 33 32 30 41 44
--- --- --- --- ---
Fixed charges . . . . . . . . . . . . . . $107 $130 $114 $127 $159
==== ==== ==== ==== ====
Ratio of earnings to fixed charges. . . . * 36.2 19.3 6.4 6.1
==== ==== === ===
*The ratio is not meaningful. The coverage deficiency was $423 million in 2001.
Exhibit 21
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
LIST OF SUBSIDIARIES OF THE REGISTRANT
The following are current subsidiaries of the Registrant.
Subsidiary and Name Under Which Business is Done Where Organized
------------------------------------------------ ---------------
Auto Circuits, Inc. Massachusetts
Automotive Sensors & Controls Dresden GmbH Germany
Benchmarq Microelectronics Corporation of South Korea Delaware
Burr-Brown AG Switzerland
Burr-Brown Europe Limited United Kingdom
Burr-Brown Foreign Sales Corporation Barbados
Burr-Brown International Holding Corporation Delaware
Burr-Brown Ltd. Cayman Islands
Burr-Brown Pte Ltd. Singapore
Butterfly Communications Inc. Delaware
European Engineering and Technologies S.p.A. Italy
Fast Forward Technologies Limited United Kingdom
ICOT International Limited United Kingdom
I.I.I. Foreign Sales Corporation Barbados
Intelligent Instrumentation GmbH Germany
Intelligent Instrumentation, Inc. Arizona
Intelligent Instrumentation S.A. France
Intelligent Instrumentation S.R.L. Italy
Silicon Systems (Singapore) Pte Ltd. Singapore
Telogy Networks, Inc. Delaware
Texas Instrumentos Eletronicos do Brasil Limitada Brazil
Texas Instruments A/S, Denmark Denmark
Texas Instruments Asia Limited Delaware
Texas Instruments Australia Pty Limited Australia
Texas Instruments Automotive Sensors and Controls Delaware
San Jose Inc.
Texas Instruments (Bahamas) Limited Bahamas
Texas Instruments Belgium S.A. Belgium
Texas Instruments Burlington Incorporated Delaware
Texas Instruments Business Expansion GmbH Germany
Texas Instruments Canada Limited Canada
Texas Instruments (China) Company Limited China
Texas Instruments China Incorporated Delaware
Texas Instruments Copenhagen ApS Denmark
Texas Instruments de Mexico, S. de R.L. de C.V. Mexico
Texas Instruments Deutschland GmbH Germany
Texas Instruments Electronic Systems Sdn. Bhd. Malaysia
Texas Instruments Espana, S.A. Spain
Texas Instruments Finance GmbH & Co. KG Germany
Texas Instruments Foreign Sales Corporation Barbados
Texas Instruments France S.A. France
Texas Instruments Gesellschaft m.b.H. Austria
Texas Instruments Holland B.V. Netherlands
Texas Instruments Hong Kong Limited Hong Kong
Texas Instruments (India) Private Limited India
Texas Instruments Insurance (Bermuda) Limited Bermuda
Texas Instruments International Capital Corporation Delaware
Texas Instruments International (Overseas) Limited United Kingdom
Texas Instruments International Trade Corporation Delaware
Texas Instruments (Ireland) Limited Ireland
Texas Instruments Israel Ltd. Israel
Texas Instruments Italia S.p.A. Italy
Texas Instruments Japan Limited Japan
Texas Instruments Korea Limited Korea
Texas Instruments Limited United Kingdom
Texas Instruments Malaysia Sdn. Bhd. Malaysia
Texas Instruments Oy Finland
Texas Instruments Palo Alto Incorporated California
Texas Instruments (Philippines) Incorporated Delaware
Texas Instruments Richardson LLC Delaware
Texas Instruments San Diego Incorporated California
Texas Instruments Santa Rosa Incorporated California
Texas Instruments (Shanghai) Co., Ltd. China
Texas Instruments Singapore (Pte) Limited Singapore
Texas Instruments Supply Company Texas
Texas Instruments Taiwan Limited Taiwan
Texas Instruments Trade & Investment Company S.A. Panama
Texas Instruments Tucson Corporation Delaware
TI Europe Limited United Kingdom
TI Information Engineering International Incorporated Delaware
TI Mexico Trade, S.A. de C.V. Mexico
TI (Philippines), Inc. Philippines
Unitrode Corporation Maryland
Unitrode Electronics Asia Limited Hong Kong
Unitrode Electronics GmbH Germany
Unitrode Electronics (Singapore) Pte Ltd. Singapore
Unitrode-Maine Maine
Exhibit 23
----------
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Texas Instruments Incorporated of our report dated January 28, 2002, included
in the proxy statement for the 2002 annual meeting of stockholders of Texas
Instruments Incorporated.
Our audits also included the financial statement schedule of Texas Instruments
Incorporated listed in Item 14(a). This schedule is the responsibility of the
Registrant's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the following registration
statements, and in the related prospectuses thereto, of our report dated January
28, 2002 with respect to the consolidated financial statements and schedule of
Texas Instruments Incorporated, included in or incorporated by reference in this
Annual Report on Form 10-K for the year ended December 31, 2001: Registration
Statements (Forms S-8) No. 33-61154, No. 33-21407 (as amended), No. 33-42172,
No. 33-54615, No. 333-07127 (as amended), No. 333-41913, No. 333-41919, No.
333-31319, No.333-31321 (as amended), No. 333-31323, No. 333-48389, and
No. 333-44662, and Registration Statements (Forms S-3) No. 333-03571,
No. 333-93011, No. 333-37208, and No. 333-44572 (as amended), and Registration
Statements (Forms S-4) No. 333-89433, No. 333-89097, No. 333-87199,
No. 333-80157, and No. 333-41030 (as amended).
Dallas, Texas ERNST & YOUNG LLP
February 27, 2002