Securities Law & Instruments

Headnote

MRRS - Relief from registrationand prospectus requirements for issuance of securities by foreignissuer to Canadian employees, former employees and permittedtransferees and for related trades in connection with a long-termincentive plan and employee stock purchase plans - Relief fromissuer bid requirements for acquisition by foreign issuer ofshares and awards under such plans - Issuer with de minimisCanadian presence.

Applicable Ontario StatutoryProvisions

Securities Act, R.S.O. 1990,c. S.5, as am., ss. 25(1), 35(1)12(iii), 35(1)(17), 53(1), 72(1)(f)(iii),73(1)(k), 74(1), 93(3)(d) and 104(2)(c).

Applicable Regulations

Regulation made under the SecuritiesAct, R.R.O. 1990, Reg. 1015, as am., s. 183.

Applicable Ontario Rules

Rule 45-503 - Trades to Employees,Executives and Consultants - ss. 2.2, 2.4, 3.3 and 3.5.

Applicable Instrument

Multilateral Instrument 45-102- Resale of Securities - s. 2.14.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO, BRITISH COLUMBIAAND

ALBERTA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TEXAS INSTRUMENTS INCORPORATED

 

MRRS DECISION DOCUMENT

WHEREAS the local securitiesregulatory authority or regulator (the "Decision Maker")in each of Ontario, British Columbia and Alberta (the "Jurisdictions")has received an application from Texas Instruments Incorporated("Texas Instruments" or the "Company") fora decision pursuant to the securities legislation of the Jurisdictions(the "Legislation") that: (i) the requirements containedin the Legislation to be registered to trade in a security (the"Registration Requirements") and the requirement tofile a prospectus and obtain a receipt (the "ProspectusRequirements") (the Registration Requirement and the ProspectusRequirement are, collectively, the "Registration and ProspectusRequirements") will not apply to certain trades in securitiesof Texas Instruments made in connection with the Texas Instruments2000 Long-Term Incentive Plan (the "LTIP"), the TIEmployees 2002 Stock Purchase Plan (the "2002 ESPP"),the TI Employees 1997 Stock Purchase Plan (the "1997 ESPP")(the 2002 ESPP and 1997 ESPP together the "ESPPs",the LTIP and ESPPs are collectively, the "Plans");(ii) the Registration Requirement will not apply to first tradesof shares of common stock acquired under the Plans executedon an exchange or market outside of Canada; and (iii) the requirementscontained in the Legislation relating to the delivery of anoffer and issuer bid circular and any notices of change or variationthereto, minimum deposit periods and withdrawal rights, takingup and paying for securities tendered to an issuer bid, disclosure,restrictions upon purchases of securities, bid financing, identicalconsideration and collateral benefits together with the requirementto file a reporting form within 10 days of an exempt issuerbid and pay a related fee (the "Issuer Bid Requirements")will not apply to certain acquisitions by the Company of Sharespursuant to the LTIP in each of the Jurisdictions;

AND WHEREAS pursuantto the Mutual Reliance Review System for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this application;

AND WHEREAS Texas Instrumentshas represented to the Decision Makers as follows:

1. Texas Instruments is presentlya corporation in good standing incorporated under the lawsof the State of Delaware.

2. Texas Instruments and affiliatesof Texas Instruments ("Texas Affiliates") (TexasInstruments and Texas Affiliates are collectively, the "TexasCompanies") are primarily engaged in the design, manufacture,and sale of semiconductors, sensors and controls, and educationaland productivity solutions.

3. The Company is registeredwith the Securities and Exchange Commission (the "SEC")in the U.S. under the U.S. Securities Exchange Act of 1934(the "Exchange Act") and is not exempt from thereporting requirements of the Exchange Act pursuant to Rule12g-3-2.

4. The Company is not a reportingissuer in any of the Jurisdictions and has no present intentionof becoming a reporting issuer in any of the Jurisdictions.

5. Texas Instruments CanadaLimited, a wholly owned subsidiary of Texas Instruments, isnot a reporting issuer in any of the Jurisdictions and hasno present intention of becoming a reporting issuer in anyof the Jurisdictions.

6. The authorized share capitalof Texas Instruments consists of 2,410,000,000 shares of commonstock ("Shares"); 10,000,000 shares of PreferredStock ("Preferred Shares"). As of March 31, 2002,there were 1,734,397,724 Shares and no Preferred Shares issuedand outstanding.

7. The Shares are listed onthe New York Stock Exchange (the "NYSE").

8. Texas Instruments usesthe services of one or more agent(s)/broker(s) under the Plans(each an "Agent"). Initially UBS PaineWebber Inc.("UBS") has been appointed as an agent/broker inconnection with the LTIP. Computershare Trust Company, Inc.is the administrator for the ESPPs and, as administrator,it uses Computershare Securities Corporation ("Computershare")as the agent/broker for the ESPPs. In addition, with respectto the ESPPs, Broadcort Capital Corporation ("Broadcort")(an institutional arm of Merrill Lynch, Pierce, Fenner &Smith Incorporated ("Merrill Lynch"), executes thepurchase and sale orders for the Shares. UBS, Broadcort, Computershareand Merrill Lynch are registered under applicable U.S. securitiesor banking legislation to trade in securities. None of theseAgents are registered to conduct retail trades in the Jurisdictions.If the current agent/brokers were replaced, or if additionalagents/brokers were appointed, Texas Instruments would notexpect the successor or additional agents/brokers to be soregistered in the Jurisdictions.

9. The Agents' role in thePlans may include: (a) assisting with the administration ofthe Plans including providing record-keeping services; (b)facilitating the exercise of Options (as defined below), orother Awards (as defined below) which are exercisable forShares (including cashless and stock-swap exercises); (c)holding Shares issued under the Plans on behalf of Participants(as defined below), Former Participants (as defined below)and Permitted Transferees (as defined below); (d) facilitatingthe cancellation and surrender of Awards as permitted underthe Plans; (e) facilitating the resale of the Shares issuedin connection with the Plans and (f) facilitating the mechanismsas set out in the Plans for the payment of withholding taxes.

10. The purpose of the LTIPis to enhance the ability of the Company to attract and retainexceptionally qualified individuals and to encourage themto acquire a proprietary interest in the growth and performanceof the Company. The purpose of the ESPPs is to encourage inall employees a proprietary interest in the Company.

11. Subject to adjustmentas described in the Plans, the maximum number of Shares thatmay be issued pursuant to the Plans are: 40,000,000 Sharesunder the 1997 ESPP; 20,000,000 Shares under the 2002 ESPP;and 120,000,000 Shares under the LTIP, plus any Shares remainingfor grant of awards under the 1996 Long-Term Incentive Plan,predecessor to the LTIP.

12. The LTIP permits grantsof options ("Options") on Shares, restricted stock("Restricted Stock"), restricted stock units ("RestrictedStock Units"), performance units ("Performance Units")and other stock-based awards including stock appreciationrights and rights to dividends and dividend equivalents ("OtherStock-Based Awards") (Options, Shares, Restricted Stock,Restricted Stock Units, Performance Units, and Other Stock-BasedAwards are, collectively, "Awards") to employeesof the Texas Companies. Employees of Texas Companies receivingAwards will be referenced as "LTIP Participants".

13. Under the ESPPs, employeesof the Texas Companies are offered an opportunity to purchaseShares by means of applying accumulated payroll deductionsto the purchase of Shares at a discount price determined inaccordance with the terms of the ESPPs. Employees of TexasCompanies participating in the ESPP will be referenced as"ESPP Participants".

14. Employees of the TexasCompanies eligible to participate in the Plans will not beinduced to purchase Shares or to exercise Awards by expectationof employment or continued employment.

15. As of February 16, 2002,there were approximately forty-seven (47) Participants residentin Ontario, seven (7) Participants resident in Alberta andtwo (2) Participants resident in British Columbia.

16. All necessary securitiesfilings have been made in the U.S. in order to offer the Plansto participants resident in the U.S.

17. A prospectus preparedaccording to U.S. securities laws describing the terms andconditions of the LTIP will be delivered to each LTIP Participantwho receives an Award under the LTIP. Similarly, a prospectusprepared according to U.S. securities laws describing theterms and conditions of the ESPP will be delivered to eachESPP Participant who is eligible to participate in the ESPP.The annual reports, proxy materials and other materials TexasInstruments provides to its U.S. shareholders will be providedor made available upon request to LTIP Participants and ESPPParticipants (together "Participants") residentin the Jurisdictions who acquire and retain Shares under thePlans at substantially the same time and in substantiallythe same manner as such documents would be provided to U.S.shareholders.

18. The Plans are administeredby the board of directors (the "Board") of TexasInstruments or a committee appointed by the Board (the "Committee").

19. In order to exercise anOption under the LTIP, an optionee must submit a written noticeof exercise to Texas Instruments or to the Agent identifyingthe Option, the number of Shares being purchased and the methodof payment, or this information may be communicated to theAgent telephonically.

20. The LTIP provides thaton exercise of Options, the payment of the exercise pricein order to acquire the Shares may be made: (a) in cash; (b)by the surrender of Shares owned by the Option holder to theCompany for cancellation or deposit in treasury ("Stock-SwapExercises") or to the Agent for resale; (c) by a combinationof the foregoing; or (d) such other consideration and methodof payment permitted by the Committee at an exercise pricedetermined in accordance with the terms of the LTIP.

21. Options started underthe LTIP will vest and will be exercisable as specified inthe Option agreement as determined by the Committee. The exerciseprice for each Option shall be established in the discretionof the Board provided that the exercise price per Share shallnot be less than the Fair Market Value (as defined in theLTIP) of a Share on the effective date of grant of the Option.

22. The Committee will fixthe term of each Option. The Option holder will choose thedate of exercise.

23. Restricted Stock and RestrictedStock Units will be subject to such restrictions as the LTIPor the Committee may impose. Unless otherwise determined bythe Committee, upon termination of employment for any reasonall Restricted Stock and Restricted Stock Units still subjectto restriction will be forfeited and reacquired by the Company("Award Forfeitures").

24. Performance Units becomepayable to a LTIP Participant upon the achievement of specifiedperformance goals during specified performance periods. APerformance Unit may be denominated or payable in cash, Shares,other securities, other Awards, or other property. The performancegoals to be achieved during any performance period, the lengthof any performance period, the amount of any Performance Unitgranted and the amount of any payment or transfer to be madepursuant to any Performance Unit will be determined by theCommittee.

25. The Committee will determinethe terms and conditions of Other Stock Based Awards. Sharesor other securities granted under Other Stock Based Awardswill be purchased for such consideration in an amount andin a form as determined by the Committee, which considerationwill not be less than the Fair Market Value of such Sharesor other securities as of the date such purchase right isgranted.

26. The Committee shall havethe power and authority to cancel, forfeit and suspend anyAward under the LTIP in its discretion, except that such actionshall require consent of the affected Participant if suchaction would adversely affect the rights of such Participantunder any outstanding Award ("Award Surrenders").

27. Texas Instruments hasthe right to deduct applicable taxes from any payment underthe LTIP by withholding, at the time of delivery or vestingof cash or Shares under the LTIP, an appropriate amount ofcash or Shares ("Share Withholding Exercises") ora combination thereof for a payment of taxes required by lawor to take such other action as may be necessary in the opinionof Texas Instruments or the Committee to satisfy the obligationsfor the withholding of such taxes based on minimum withholdingrates.

28. Awards and rights underthe Plans are not transferable by a Participant other thanby will or beneficiary designation or by the laws of intestacyunless otherwise provided for by the Committee.

29. Following the terminationof a Participant's relationship with the Texas Companies forreasons of disability, retirement, termination, change ofcontrol or any other reason (such Participants are "FormerParticipants"), and where Awards have been transferredby will or pursuant to a beneficiary designation or the lawsof intestacy or otherwise on the death of a Participant ("PermittedTransferees"), the Former Participants and PermittedTransferees will continue to have rights in respect of thePlans ("Post-Termination Rights").

30. Post-Termination Rightsmay include, among other things: (a) the right to continuedvesting and to exercise Awards for a period determined inaccordance with the grant terms and the LTIP; (b) the rightto receive Shares under the ESPPs and in certain limited circumstances,to purchase Shares under the ESPPs on the purchase date nextfollowing such termination; (c) the right to receive paymentof accumulated payroll deductions in his or her account, withoutinterest under the ESPPs; and (d) the right to sell Sharesacquired under the Plans.

31. Post-Termination Rightswill only be effective where such rights accrued while theParticipant had a relationship with the Texas Companies.

32. As there is no marketfor the Shares in Canada and none is expected to develop,it is expected that the resale by Participants, Former Participantsand Permitted Transferees of the Shares acquired under thePlans will be effected through the NYSE.

33. As of March 11, 2002,Canadian resident shareholders did not own (as record owners),directly or indirectly, more than 10% of the issued and outstandingShares and do not represent in number more than 10% of theshareholders of Texas Instruments. If at any time during thecurrency of the Plans, Canadian shareholders of Texas Instrumentshold of record, in the aggregate, greater than 10% of thetotal number of issued and outstanding Shares or if such shareholdersrepresent in number more than 10% of all shareholders of TexasInstruments, Texas Instruments will not grant further Awardswithout first applying to the relevant Jurisdictions for anorder with respect to further trades to and by Participantsin that Jurisdiction in respect of the Shares acquired underthe Plans.

34. Pursuant to the LTIP,the acquisition of Awards and Shares by the Company in thefollowing circumstances may constitute an "issuer bid":Stock Swap Exercises, Share Withholding Exercises, Award Surrendersand Award Forfeitures involving Shares.

35. The issuer bid exemptionsin the Legislation may not be available for such acquisitionsby the Company since such acquisitions may occur at a pricethat is not calculated in accordance with the "marketprice," as that term is defined in the Legislation andmay be made from Permitted Transferees.

36. The Legislation of allof the Jurisdictions does not contain exemptions from theProspectus and Registration Requirements for all the intendedtrades in Awards under the Plans.

37. Where the Agents sellShares on behalf of Participants, Former Participants andPermitted Transferees, the Agents, Participants, Former Participantsand Permitted Transferees may not be able to rely upon theexemptions from the Registration Requirement contained inthe Legislation of the Jurisdictions.

AND WHEREAS pursuantto the System, this Decision Document evidences the decisionof each Decision Maker (collectively, the "Decision");

AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdictionto make the Decision has been met;

THE DECISION of the DecisionMakers pursuant to the Legislation is that:

(a) the Registration andProspectus Requirements will not apply to any trade or distributionof Awards made in connection with the Plans, including tradesor distributions involving Texas Instruments or its affiliates,the Agent, Participants, Former Participants or PermittedTransferees, provided that the first trade in Shares acquiredunder the Plans pursuant to this Decision will be deemeda distribution or primary distribution to the public underthe Legislation unless the conditions in subsection 2.14(1)of Multilateral Instrument 45-102 "Resale of Securities"are satisfied;

(b) the first trade by Participants,Former Participants or Permitted Transferees in Shares acquiredpursuant to the Plans, including first trades effected throughthe Agent, will not be subject to the Registration Requirement,provided such first trade is executed through a stock exchangeor market outside of Canada; and

(c) the Issuer Bid Requirementswill not apply to the acquisition by Texas Instruments ofAwards and or Shares from Participants, Former Participantsor Permitted Transferees in connection with the Plans providedsuch acquisitions are made in accordance with the provisionsof the Plans.

July 4, 2002.

"Robert W. Korthals"                    "HaroldP. Hands"