This excerpt taken from the TXN DEF 14A filed Mar 11, 2005.
PROPOSAL TO APPROVE THE TI EMPLOYEES 2005 STOCK PURCHASE PLAN
The full text of the proposed TI Employees 2005 Stock Purchase Plan is shown on Exhibit B to this proxy statement. The principal features of the Plan are summarized below. The terms of the Plan are substantially similar to those of the TI Employees 2002 Stock Purchase Plan that was approved by stockholders at TIs 2002 Annual Meeting of Stockholders. The TI Employees 2005 Stock Purchase Plan has been slightly modified from the TI Employees 2002 Stock Purchase Plan to give the Compensation Committee of the board of directors greater flexibility in administering the Plan.
Plan Provisions. Each year during the term of the TI Employees 2005 Stock Purchase Plan, unless the Compensation Committee determines otherwise, TI will make one or more offers to each eligible employee of options to purchase TI common stock through voluntary payroll deductions. Each eligible employee will be entitled to purchase up to a number or dollar amount of shares as the Compensation Committee may determine (but not exceeding the amount specified in Section 423(b) of the Internal Revenue Code) for any offering. The option price for each offering will be determined by the Compensation Committee and will not be less than (1) 85% of fair market value on the date of grant or (2) 85% of fair market value on the date the option is exercised, whichever is lower. The date of grant will be as determined by the Compensation Committee. The fair market value of TI stock will be determined by such method or procedure as established by the Compensation Committee.
The expiration date of the options will be determined for each offering by the Compensation Committee but will not in any event be later than 27 months from the date of grant of the option. The
No more than 40,000,000 shares of TI common stock may be sold pursuant to the TI Employees 2005 Stock Purchase Plan, subject to adjustments as described below. Up to 3,000,000 additional shares of TI common stock that were authorized for sale under the TI Employees 2002 Stock Purchase Plan and that remain available for sale on the effective date of the TI Employees 2005 Stock Purchase Plan may be sold pursuant to the TI Employees 2005 Stock Purchase Plan. No offerings under the TI Employees 2002 Stock Purchase Plan will be made following the completion of any offering pending on the effective date of the TI Employees 2005 Stock Purchase Plan. In the event that the Compensation Committee determines that an adjustment is appropriate by reason of any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of the company, issuance of warrants or other rights to purchase shares or other securities of the company, or other similar corporate transaction or event, it shall adjust any or all of (1) the number and type of shares that may be made subject to options, (2) the number and type of shares subject to outstanding options, and (3) the grant, purchase or exercise price with respect to any option.
Either authorized and unissued shares or issued shares reacquired by the company may be made subject to options under the Plan. Any shares not purchased prior to the termination of an option may be again subjected to an option under the Plan. An employee will not be granted an option under the Plan if the employee, immediately after the option is granted, owns stock having 5% or more of the total combined voting power or value of all classes of stock of the company. No employee will be granted an option that permits the employee to accrue rights to purchase stock under all employee stock purchase plans of the company at a rate that exceeds $25,000 (or such other maximum as may be prescribed from time to time under the Internal Revenue Code) of fair market value of such stock (determined at the date of grant) for each calendar year in which the option is outstanding at any time in accordance with the provisions of Section 423(b)(8) of the Internal Revenue Code. No offering may be made under the Plan after April 21, 2015.
On or prior to the date of grant, the Compensation Committee will determine the effect of an employees termination of employment during the term of the offering. An option granted under the Plan may not be transferred except by will or the laws of descent and distribution and, during the lifetime of the employee to whom granted, may be exercised only for the benefit of the employee.
All shares purchased under an option will be paid for in full at the time the option is exercised by transfer of the purchase price from the employees payroll deduction account.
Plan Benefits. Each executive officer qualifies for participation under the Plan and may be eligible to annually purchase up to $25,000 worth of the companys stock at a discount below the market price. However, participation in the Plan is voluntary and dependent upon each executive officers election to participate, and the benefit of participating will depend on the terms of the offerings (if any) and fair market value of the stock on the Exercise Day. Accordingly, future benefits that would
Tax Consequences. The Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. However, TI does not undertake to maintain such status throughout the term of the Plan.
In accordance with SEC rules, the following description of tax matters relating to the TI Employees 2005 Stock Purchase Plan is provided. In general, a participant has no taxable event at the time of grant of an option or at the time of exercise of an option, but will realize taxable income at the time the participant sells the shares acquired under the Plan.
If the participant observes certain holding period requirements, the participants gain on sale will generally be taxed at capital gains rates, except that in certain circumstances a portion of the participants gain will be treated as ordinary income. Those circumstances will generally occur if the exercise price of the shares is established as a percentage less than 100% of the fair market value of the shares at the beginning of the offering period, or if at the beginning of the period it is unknown what the exercise price will be, for example, if the exercise price can be determined only on the Exercise Day. The participants ordinary income will not be greater than the excess, if any, of the fair market value of the shares at the time of grant over the exercise price (or, if lower, the actual proceeds of sale over the actual purchase price of the shares). If the exercise price is a function of the value of the shares on the Exercise Day, the exercise price will be determined as if the option was exercised at the time of grant for purposes of calculating this limit. If the participant sells the shares only after satisfying the holding period requirements, the company will not be entitled to a deduction.
If the participant sells the shares before satisfying the holding period requirements, then the participant will realize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the stock on the Exercise Day. The company will be entitled to a corresponding deduction. The remainder of the proceeds of sale will be taxed at capital gains rates.