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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO. 1-7221
MOTOROLA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-1115800
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1303 EAST ALGONQUIN ROAD, SCHAUMBURG, ILLINOIS 60196
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER (847) 576-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $3 Par Value per Share New York Stock Exchange
Chicago Stock Exchange
Liquid Yield Option Notes due 2009 New York Stock Exchange
Liquid Yield Option Notes due 2013 New York Stock Exchange
Rights to Purchase Junior Participating New York Stock Exchange
Preferred Stock, Series A Chicago Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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
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 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.
[_]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of January 31, 1997 was approximately $39.2 billion (based on
closing sale price of $68.375 per share as reported for the New York Stock
Exchange--Composite Transactions).
The number of shares of the registrant's Common Stock, $3 par value per
share, outstanding as of January 31, 1997 was 593,866,999.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT LOCATION IN FORM 10-K
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Portions of Registrant's Proxy Statement for 1997 Parts I, II, III and IV
Annual Meeting of Stockholders Including Management's
Discussion and Analysis and Consolidated Financial
Statements
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PART I
ITEM 1: BUSINESS
(a) General development of business.
Motorola, Inc. is a corporation organized under the laws of the State of
Delaware as the successor to an Illinois corporation organized in 1928.
Motorola's principal executive offices are located at 1303 East Algonquin
Road, Schaumburg, Illinois 60196 (telephone number: 847-576-5000).
Motorola, Inc., one of the world's leading providers of electronic
equipment, systems, components and services for worldwide markets, is engaged
in the design, manufacture and sale, principally under the Motorola brand, of
a diversified line of such products. These products include two-way land
mobile communication systems, paging and wireless data systems, personal
communications equipment and systems and other forms of electronic
communication systems; subscriber and infrastructure equipment for the
telephone market; cellular mobile and portable telephones and systems;
semiconductors, including integrated circuits, discrete devices and
microprocessor units; information systems products such as modems,
multiplexers and network processors; electronic equipment for military and
aerospace use; electronic engine controls, and other automotive and industrial
electronic equipment; and multifunction computer systems for distributed data
processing and office automation applications. Motorola also provides services
for paging, cellular telephone, shared mobile radio and wireless data.
The term "Motorola" as used hereinafter means Motorola, Inc. or Motorola,
Inc. and its subsidiaries, as the context requires.
(b) Financial information about industry segments.
The response to this section of Item 1 is incorporated by reference to Note
7 of the Notes to the Consolidated Financial Statements contained in the
attachment to Motorola's Proxy Statement for the 1997 annual meeting of
stockholders.
(c) Narrative description of business.
GENERAL SYSTEMS PRODUCTS
The Cellular Subscriber Sector (formerly the Cellular Subscriber Group) and
the Cellular Infrastructure Group design, manufacture, sell, install and
service cellular infrastructure and radiotelephone equipment. In addition, the
Cellular Subscriber Sector resells cellular line service in the U.S., New
Zealand, Germany, France and the U.K. markets. The Network Management Group is
a joint venture partner in cellular operating systems in Argentina, Chile, the
Dominican Republic, Honduras, Hong Kong, India, Israel, Japan, Jordan,
Lithuania, Mexico, Nicaragua, Pakistan, Russia, Thailand, and Uruguay. In
addition, the Network Management Group acts as an investor in Iridium(R)
gateway companies which operate in North America, Central America, South
America and India. The Cellular Infrastructure Group products include
electronic exchanges (i.e., telephone switches), base site controllers and
radio base stations. Radiotelephone products include mobile, portable,
personal and transportable radiotelephones with various options, personal
communications equipment and cordless telephones. Products are marketed
worldwide through original equipment manufacturers, carriers, distributors,
dealers, retailers and, in certain countries, through a direct sales force.
Financing of cellular infrastructure equipment is sometimes offered to
qualifying customers.
Radio frequencies are required to provide cellular services. The allocation
of frequencies is regulated in the United States and other countries
throughout the world, and limited spectrum space is allocated for cellular
services. The growth of the cellular and personal communications industry may
be affected if adequate frequencies are not allocated for its use, or
alternatively, if new technology is not developed to increase capacity on
presently allocated frequencies which may have an effect on the segment's
results.
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The Motorola Computer Group develops, manufactures, sells and services
multi-function computer systems and board level products, together with
operating systems and system enablers based on the Motorola 68000, 88000 and
PowerPC(TM) series microprocessors, including computers compatible with the
Mac(R) OS operating system. These products are sold worldwide to a variety of
customers, some of whom produce computer products which compete with the
Group. The Computer Group's products are marketed to end-users, original
equipment manufacturers, value-added resellers and distributors throughout the
world. The Motorola Computer Group also markets computer products and
peripherals that it does not manufacture.
The segments products are subject to constant changes in technology.
Consequently, the General Systems Products segment has an extensive research
and development program.
The General Systems Products segment's backlog amounted to $2.03 billion at
December 31, 1996 and $1.47 billion at December 31, 1995. The 1996 backlog is
believed to be generally firm, and approximately 94% of that amount is
expected to be shipped during 1997. This forward-looking estimate of the
firmness of such orders is subject to future events which may cause the
percentage of the 1996 backlog actually shipped to change.
The segment has several material customers, worldwide, the loss of any one
or more of which could have a material impact on the results of the segment.
The General Systems Products segment experiences intense competition from
numerous competitors in world-wide markets ranging from some of the world's
largest companies to small, specialized firms. Competitive factors in the
market for the products are price, service, delivery, quality, availability,
warranty, product features, company image, time to market and product and
system performance. An additional factor for the Cellular Infrastructure Group
is vendor financing because customers are looking to equipment vendors as one
additional source of funding. An additional factor for the Motorola Computer
Group products is the availability of software products to address specific
user applications. Participation in a very competitive industry requires a
continuing high level of investment in technology. Management believes that,
looking forward, Motorola's commitment to research and development programs
for improving existing products and developing new products and its
utilization of state-of-the-art technology will allow these businesses to
remain competitive.
Materials used in the segment's operations are generally second-sourced to
ensure a continuity of supply. Occasionally, there are shortages of required
purchased components. Energy necessary for the segment's operations consists
of electricity, natural gas and gasoline, all of which are currently adequate
in supply. The segment's factories are highly automated and therefore,
dependent upon a steady supply of electrical power. Difficulties in obtaining
any of the aforementioned items could affect the segment's results.
The Cellular Subscriber Sector carries reasonable product inventories in
distribution centers to meet customer delivery requirements. As a general
rule, the Cellular Subscriber Sector does not permit customers to return
merchandise. The Cellular Infrastructure Group permits customer returns in
accordance with specific contract terms, and the Motorola Computer Group
permits customers to return products in accordance with practices followed in
the computer industry. The Cellular Subscriber Sector has offered extended
payment terms when necessary to meet competitive offerings. In the Cellular
Infrastructure Group, payment terms are particular to individual contracts, a
majority of which provide for the hold back of certain residual payments until
system acceptance by the customer. For qualifying customers, the Cellular
Infrastructure Group finances equipment purchases under various arrangements.
Credit terms offered by the Motorola Computer Group normally are in accordance
with practices followed in the computer industry. Occasionally, the Motorola
Computer Group uses installment sale agreements and leases which are sold to a
Motorola finance subsidiary.
Patent protection is very important to the cellular business. Reference is
made to the material under the heading "General" for information relating to
patents and trademarks and seasonality of business with respect to this
industry segment.
The segment's headquarters are located in Schaumburg, Illinois. The segment
operates manufacturing facilities in Tempe, Arizona; Arlington Heights,
Grayslake, Harvard, Libertyville and McHenry, Illinois; Ft.
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Worth, Texas; Swindon, England; Easter Inch, Scotland; Flensburg, Germany;
Arad, Israel; Tianjin, China and Campinas, Brazil. The segment also has joint
venture manufacturing operations in Austria and China.
SEMICONDUCTOR PRODUCTS
Semiconductors control and amplify electrical signals and are used in a
broad range of electronic products, including consumer electronic products,
computers, communications equipment, solid-state ignition systems and other
automotive electronic products, major home appliances, industrial controls,
robotics, aircraft, missiles, space vehicles, calculators and automatic
controls.
The semiconductor products manufactured by Motorola's Semiconductor Products
segment include integrated circuit devices (metal-oxide semiconductor and
bipolar) such as high-performance microprocessors, microcontrollers and
peripherals; digital signal processors; dynamic and fast/application-specific
static random access memories; custom and proprietary bipolar and MOS digital-
analog components; emitter-coupled logic; programmable logic devices; deep
submicron CMOS gate array, cell-based and customizable standard products;
rectifiers; zener and tuning diodes; power and small signal transistors; RF
and microwave devices, thyristors, optoelectronics and sensors.
The segment sells its products worldwide to original equipment manufacturers
through its own sales force. Products also are sold through a network of
industrial distributors in the United States. Sales outside the United States
are made through the segment's own sales staff and through independent
distributors. Products manufactured by the segment are also supplied to other
operating units of Motorola. Other businesses of Motorola collectively
constitute the segment's largest customer, and the loss of, or significant
reduction of purchases by them has and could continue to affect the segment's
results. Customers are allowed to return merchandise for the period the longer
of, (i) the product warranty period of the distributor or (ii) three years.
The segment and its results are affected by the cyclical nature of the
semiconductor industry. Available capacity, cyclical customer demands, new
product introduction and aggressive pricing has and could continue to impact
its business and results.
The segment experienced underutilization of certain of its facilities
producing products with reduced market demand. The segment's capacity for
certain other products is being increased to meet current market demand. In
addition the segment supplements its internal manufacturing capacity with
joint venture manufacturing facilities and purchases of products from outside
vendors.
The semiconductor industry is subject to rapid changes in technology, and
requires a high level of capital spending and an extensive research,
development and design program to maintain state-of-the-art technology.
Accordingly, the segment maintains an extensive research and development
program in advanced semiconductor technology.
The segment's backlog amounted to $2.32 billion at December 31, 1996 and
$3.25 billion at December 31, 1995. In addition to a decline due to general
market conditions in 1996, the backlog declined by a significant amount due to
changes in booking procedures implemented throughout 1996. An increasing
number of the segment's customers are converting to schedule sharing, Just-In-
Time warehouses, and inventory minimum-maximum stocking versus the traditional
"order." This causes backlog to decrease, as low as zero in some instances,
while the actual level of demand may stay the same or increase.
The Semiconductor Products segment experiences intense competition from
numerous competitors ranging from large companies offering a full range of
products to small companies specializing in certain segments of the market.
The competitive environment also is changing as a result of increased
alliances between competitors. The segment competes in many markets, including
the telecommunications, personal computer/work station, industrial,
automotive, consumer, computer, government and distributor markets. In 1996,
the segment exited its military business. Due to the multitude of competitors,
price, service, technology, warranty, availability, time to market, product
features, company image and product quality are important factors in
competition. The ability to
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develop new products to meet customer requirements and to meet customer
delivery schedules also are competitive factors. Management believes, looking
forward, that Motorola's commitment to research and development of new
products combined with utilization of state-of-the-art technology should allow
the segment to remain competitive.
The segment is not currently experiencing any shortages in obtaining raw
materials. A significant portion of certain materials and parts used by the
segment is supplied from a single country. With respect to other materials,
the segment is seeking additional sources of supply to minimize the risk of
obtaining materials from only a few sources. Electricity, oil and natural gas
are used extensively in the segment's operations. All of these energy sources
are available in adequate quantities for current needs. Electricity and oil
are the primary energy sources for the segment's foreign operations, and
presently, there are no shortages of these sources although the reliability of
electrical power has been a problem from time to time. Difficulties in
obtaining any of the aforementioned items could affect the segment's results.
Reference is made to the material under the heading "General" for
information relating to patents and trademarks and seasonality of business
with respect to this industry segment.
The Semiconductor Products segment's headquarters are in Phoenix, Arizona.
Its manufacturing facilities are located in Chandler, Mesa, Phoenix and Tempe,
Arizona; Irvine, California; Research Triangle Park, North Carolina; Austin,
Texas; Tianjin, China; Toulouse, France; Munich, Germany; Kwai Chung and Tai
Po, Hong Kong; Aizu and Sendai, Japan; Seoul, Korea; Geneva, Switzerland; Tel
Aviv, Israel; Kuala Lumpur and Seremban, Malaysia; Guadalajara, Mexico;
Carmona and Manila, the Philippines; Singapore; Chung-Li, Taiwan; and East
Kilbride and South Queensferry, Scotland.
LAND MOBILE PRODUCTS
The Land Mobile Products Sector ("LMPS") designs, manufactures and sells
analog and digital two-way voice and data products and systems for a variety
of worldwide applications.
As a principal supplier of mobile and portable FM two-way radio products and
systems, LMPS provides equipment and systems to meet the communications needs
of individuals and many different types of business, institutional and
governmental organizations. Products of LMPS provide voice and data
communications between vehicles, persons and base stations. Also, LMPS
provides network services for two-way radio subscribers in international
markets through joint ventures.
The principal customers for two-way radio products and systems include
public safety agencies, such as police, fire, highway maintenance departments
and forestry services; petroleum companies; gas, electric and water utilities;
telephone companies; diverse industrial companies; mining companies;
transportation companies such as railroads, airlines, taxicab operations and
trucking firms; institutions, such as schools and hospitals; and companies in
the construction, vending machine and service businesses. Also, there is an
emerging consumer two-way radio market using the products for personal and
family communication needs. These products also are sold and leased to various
federal agencies for many uses. In addition to the federal government, a
material part of the business of LMPS is dependent on one external customer,
the loss of either of which could have a material effect on the segment's
business.
Users of two-way radios are regulated by a variety of governmental and other
regulatory agencies throughout the world. In the United States, users of two-
way radios are licensed by the Federal Communications Commission ("FCC") which
has broad authority to make rules and regulations and prescribe restrictions
and conditions to carry out the provisions of the Communications Act of 1934.
The FCC has authorized two services and specific channels for consumer
applications; the General Mobile Radio Service requires a license for
consumers while the Family Radio Service does not require a license. The FCC's
authority includes, among other things, the power to classify radio stations,
prescribe the nature of the service to be rendered by each class of station,
assign frequencies to the various classes of stations and regulate the kinds
of equipment which may be
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used. Regulatory agencies in other countries have similar types of authority.
Motorola has developed products using trunking and data communications
technologies to enhance spectral efficiencies. The growth and results of the
two-way radio communications industry and the results of the segment may be
materially affected by the rules and regulations adopted by regulatory
agencies, if adequate frequencies are not allocated for its use, or, if new
technology is not developed to increase capacity on presently allocated
frequencies.
LMPS also manufactures and sells signaling and control systems and
communication control centers used in two-way radio operations.
This segment carries on an extensive product development program. Its
products make substantial use of solid-state semiconductor components,
including integrated circuits.
The products manufactured and marketed by LMPS are sold directly through its
own distribution force, or through independent authorized distributors and
dealers and retailers, network service providers and independent commission
sales representatives. Leasing and conditional sale arrangements are also made
available to customers. The direct distribution force also provides systems
engineering and technical services to meet the customer's particular needs.
The customer may choose to install and maintain the equipment with its own
employees, or may obtain installation, service and parts from a network of
Motorola authorized service stations (most of whom are also authorized
dealers) or from other non-Motorola service stations. Some of the leases and
conditional sale contracts entered into by LMPS are sold to several
unaffiliated finance companies and banks on terms which, in some instances,
provide recourse to Motorola with certain limitations. Some leases and
conditional sale contracts are sold to a Motorola finance subsidiary.
Subscriber units are sold directly and through indirect distribution channels.
In certain circumstances, the segment permits customers to return products in
accordance with industry practices.
This segment's backlog amounted to $1.18 billion at December 31, 1996 and
$1.18 billion at December 31, 1995. The 1996 backlog amount is believed to be
generally firm, and approximately 91% of that amount is expected to be shipped
during 1997. This forward-looking estimate of the firmness of such orders is
subject to future events which may cause the percentage of the 1996 backlog
actually shipped to change.
This segment experiences widespread, intense competition from numerous
competitors ranging from some of the world's largest, diversified companies to
foreign state-owned telecommunications companies to many small, specialized
firms. The principal manufacturing operations of many competitors are located
outside of the United States. Competitive factors for LMPS include price,
performance, quality, delivery, service, warranty, technology, product
features and performance, time to market, and availability of systems
engineering, with no one factor being dominant. An additional factor is vendor
financing because customers are looking to equipment vendors as one additional
source of funding. Management believes, looking forward, that Motorola's
commitment to research and development programs for improving existing
products and developing new products and its utilization of state-of-the-art
technology should allow this segment to remain competitive.
Availability of materials and components required by this segment is
relatively dependable and certain, but normal fluctuations in market demand
and supply could cause temporary, selective shortages and affect results. LMPS
operates certain offshore subassembly plants, the loss of one or more of which
could constrain its production capabilities and affect results. Natural gas,
electricity and, to a lesser extent, oil, are the primary sources of energy.
Current supplies of these forms of energy are considered to be adequate for
this segment's United States and foreign operations. However, difficulties in
obtaining any of the aforementioned items could affect the segment's results.
LMPS provides custom products based on assembling basic units into a large
variety of models or combinations. This requires stocking of inventories and
large varieties of piece parts as well as a variety of basic level assemblies
to meet short delivery requirements.
Patent protection is very important to the segment's business. Reference is
made to the material under the heading "General" for information relating to
patents and trademarks with respect to this segment.
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This segment's headquarters are located in Schaumburg, Illinois, with major
manufacturing facilities in Schaumburg, Illinois; Plantation, Florida; Mount
Pleasant, Iowa; Swords, Ireland; Arad, Israel; and Penang, Malaysia.
MESSAGING, INFORMATION AND MEDIA PRODUCTS
Motorola's Messaging, Information and Media Sector ("MIMS") manufactures,
distributes and sells paging subscriber, paging infrastructure, and related
products such as paging software and accessories. MIMS also provides network
services for paging and wireless data and gateway communication subscribers
through wholly-owned and operated businesses as well as domestic and
international joint ventures. It also manufactures and sells modems, analog
and digital transmission devices and other data communication devices. In
addition MIMS manufactures equipment that enable voice, video and high-speed
data communications over cable networks. It also offers handwriting and speech
recognition software for various applications. MIMS provides equipment and
systems to meet the communication needs of many different types of business,
institutional and governmental organizations. Also, there is a growing base of
paging and modem customers using the products for personal and family
communication needs. A majority of the Sector's manufacturing, distribution
and sales occurs outside of the United States.
Radio frequencies are required to provide paging and wireless data
information services. The allocation of frequencies is regulated in the United
States and other countries throughout the world, and limited spectrum space is
allocated for these services. The growth of the paging and wireless data
information industry and this segment's results could be affected if adequate
frequencies are not allocated for its use, or alternatively, if new technology
is not developed to increase capacity on presently allocated frequencies.
The segment's backlog amounted to $775 million at December 31, 1996 and $926
million at December 31, 1995. The 1996 backlog is believed to be generally
firm, and approximately 100% of that amount is expected to be shipped during
1997. This forward-looking estimate of the firmness of such orders is subject
to future events which may cause the percentage of the 1996 backlog actually
shipped to change. Several large paging carriers represent a material part of
the business of the MIMS segment, the loss of one or more of which could have
a material adverse effect on the results of the MIMS segment.
MIMS products are sold through both domestic and international sales
organizations which sell through direct and indirect channels such as
distributors, retailers and value-added resellers.
This segment carries on an extensive product development program. Its
products make substantial use of solid-state semiconductor components,
including integrated circuits.
This segment experiences widespread, intense competition from numerous
competitors ranging from some of the world's largest, diversified companies to
foreign state-owned telecommunications companies to many small, specialized
firms. The principal manufacturing operations of many competitors are located
outside of the United States. Competitive factors for MIMS include, but are
not limited to, price, quality, time-to-market, technology, company image,
service, warranty, product features and availability.
Materials and components required by this segment are relatively dependable
and certain, but normal fluctuations in market demand and supply could cause
temporary, selective shortages. Occasionally, shortages or extended delivery
periods have occurred in various component parts, the effects of which have
generally been industry-wide and short in duration. Natural gas, electricity
and oil are the primary sources of energy. These types of energy are currently
readily available, but difficulties in obtaining any of the aforementioned
items could affect the segment's results.
Patent protection is very important to the segment's business. Reference is
made to the material under the heading "General" for information relating to
patents and trademarks and seasonality with respect to this segment.
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This segment's headquarters are located in Schaumburg, Illinois, with
manufacturing facilities in Lake Zurich, Illinois; Boynton Beach, Florida; Ft.
Worth, Texas; Mansfield, Massachusetts; Huntsville, Alabama; Singapore;
Tianjin, China; Vega Baja, Puerto Rico; and Dublin, Ireland; additionally,
software development and administration offices are located in Alpharetta,
Georgia and Palo Alto, California.
OTHER PRODUCTS
AUTOMOTIVE, ENERGY AND COMPONENTS SECTOR
The Automotive, Energy and Components Sector (formerly the Automotive Energy
and Controls Group) manufactures and sells products in three major categories:
automotive and industrial electronics; energy storage products and systems;
and ceramic and quartz electronic components. The Sector also includes
operations which manufacture electronic ballasts for fluorescent lighting,
radio frequency identification devices and printed circuit boards. The Sector
established a Flat Panel Display Division to develop the next generation of
flat panel displays. The Sector is involved in several joint ventures.
The Sector sells its automotive and industrial electronics products to
original equipment manufacturers, including foreign and domestic automobile
manufacturers, heavy vehicle manufacturers, farm equipment manufacturers and
industrial customers. The energy storage products business and the ceramic and
quartz products business sell primarily to other industry segments within
Motorola, principally the Land Mobile Products, Messaging, Information and
Media Products and General Systems Products segments. A large part of the
Sector's business is dependent upon the business of these other Motorola
industry segments, collectively and two other external customers. The loss of
any of these three customers could have a material adverse effect on the
business of the Sector.
Demand for products is linked to automobile sales in the United States and
other countries where the Sector sells its products. The Sector experiences
competition from numerous global competitors including automobile
manufacturers. Competitive factors in the sale of all of the Sector's products
include price, product quality and performance, supply integrity, quality
reputation, experience, responsiveness and design and manufacturing
technology.
The Sector's backlog amounted to $259 million at December 31, 1996 and $257
million at December 31, 1995. The 1996 backlog is believed to be generally
firm, and approximately 100% of that amount is expected to be shipped during
1997. This forward-looking estimate of the firmness of such orders is subject
to future events which may cause the percentage of the 1996 backlog actually
shipped to change.
All materials used by the Sector have good availability at this time. The
Sector uses electricity and gas in its operations, which are currently
adequate in supply. However, difficulties in obtaining any of the
aforementioned items could affect the Sector's results.
Reference is made to the material under the heading "General" for
information relating to patents and trademarks with respect to this Sector.
The Sector's headquarters is located in Northbrook, Illinois. It has
manufacturing operations located in Scottsdale and Tempe, Arizona; San Jose,
California; Atlanta, Georgia; Northbrook, Buffalo Grove, Schaumburg and Vernon
Hills, Illinois; Albuquerque, New Mexico; Elma, New York; Carlisle,
Pennsylvania; Seguin, Texas; Angers, France; Stotfold, England; Singapore;
Tianjin, China; Chung-Li, Taiwan; Penang, Malaysia; Dublin, Ireland; and San
Jose, Costa Rica.
SPACE AND SYSTEMS TECHNOLOGY GROUP
The Space and Systems Technology Group, formerly called the Government and
Space Technology Group, is engaged in the design, development and production
of electronic systems and products, and it competes for a variety of United
States Government projects and commercial business. The Group has diversified
its activities
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by applying its core technologies to commercial opportunities. The Group
provides electronic and communications equipment products that have various
applications based upon customer requirements of the Group's three business
segments: government, commercial and satellite communications.
The government business segment, known as the Government Electronics
Division and Government Systems Operations, primarily performs research,
development and production work under contracts with governmental agencies,
but also conducts independent research and development programs. The
government business segment produces diversified military electronic
equipment, including military communications equipment, radar systems, data
links, display systems, positioning and navigation systems, missile guidance
equipment, electronic ordnance devices and drone electronic systems. The
government business segment has been predominantly dependent upon the United
States Government as its main customer, acting as either a prime contractor or
a subcontractor to other prime contractors. The total loss of all of this
business could have a material adverse effect on the Group's results.
Contracts are secured from United States Government agencies and their
suppliers by negotiation and competitive bidding. Competition has increased
substantially in all aspects of the government business due to a smaller
defense budget and consolidations in the industry. Competitors include large
and small technically competent firms. Some competitors from whom the segment
procured subcontract work in the past are becoming more vertically integrated
and are performing the work previously subcontracted. This Group currently
looking forward expects to continue to meet competition on the basis of price
and quality of product performance.
The Group's Satellite Communications Group (SCG) is developing the
IRIDIUM(R) satellite-based communication system. The IRIDIUM(R) system is a
space-based wireless communications system that is being designed to provide
global digital service to hand-held telephones and related equipment. The
IRIDIUM(R) system involves four components: (1) a constellation of low earth
orbit satellites, (2) centralized system control centers, (3) approximately
ten gateways located throughout the world; and (4) individual subscriber units
for voice, data, facsimile and paging. SCG is the prime contractor under
contracts with Iridium LLC to provide and launch the satellites, construct the
centralized system control centers and gateways; maintain the performance of
the constellation and provide certain computer systems and software for the
system. During the last four years, these contracts have become a significant
portion of the Group's business and are expected to remain a major contributor
to the Group's sales for the next several years. Iridium LLC's failure to make
payments under these contracts or the loss of these contracts could have a
material adverse effect on the Group's and Motorola's results. SCG has entered
into significant subcontracts for portions of the system for which it will
generally remain obligated even if Iridium LLC is unable to satisfy the terms
of its contracts with SCG, including funding. In addition, Motorola has
guaranteed $750 million of Iridium LLC's bank financing which could be
affected by Iridium LLC's failure to make such payments.
SCG also performs research, development, design and manufacturing services
for space-based equipment for government customers.
Total sales for the Group include sales made to a number of free world
governments and corporations. Products of the Group are marketed outside the
United States by a few distributors, by independent representatives and by the
Group's own sales force. In 1996, a small percentage (approximately 5%) of the
Group's business was conducted internationally, primarily through the
government business segment. These sales generally relate to the development
and deployment of defense, security and commercial air traffic management
systems with Canada and selected countries, concentrated in the Asia-Pacific
region.
The Group's backlog amounted to $1.02 billion at December 31, 1996 and $906
million at December 31, 1995. The 1996 backlog is believed to be generally
firm and 72% of that amount is expected to be shipped during 1997. These
shipments could be significantly impacted to the extent that additional
funding is not received by Iridium LLC. All contracts with the United States
Government are subject to cancellation at the convenience of the Government,
and the contracts with Iridium LLC may be terminated by Iridium LLC pursuant
to the terms set forth in the contracts. The forward-looking estimate of the
firmness of the 1996 backlog as discussed above is subject to future events
which may cause the percentage of the 1996 backlog actually shipped to change.
8
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Bookings during 1996 for the Iridium LLC space system contract were delayed
because Iridium LLC needed to obtain additional funding required to continue
to make contractual payments to Motorola. Iridium LLC is negotiating to obtain
additional funding during 1997. If such financing is obtained the orders not
booked related to the space system contract are expected to be booked. There
can be no assurance that Iridium LLC will obtain the additional financing.
Materials used by the Group in its operations are generally available.
Natural gas and electricity are the principal types of energy used, and
availability of both to the Group is currently more than adequate.
Difficulties in obtaining any of the aforementioned items could affect the
Group's results.
Patents continue to become more important as competition increases in a
declining U.S. Government market and as the Group expands commercial
opportunities. Also reference is made to the material under the heading
"General" for information relating to patents and trademarks.
The Group has its headquarters in Scottsdale, Arizona, with manufacturing
facilities in Scottsdale and Chandler, Arizona.
GENERAL
Customers. Motorola is not dependent for a material part of its overall
business upon a single or a very few customers. Approximately 2.9% of
Motorola's total sales and revenues in 1996 were received from various
branches and agencies, including the armed services, of the United States
Government.
All contracts with the United States Government are subject to cancellation
at the convenience of the Government.
Government contractors, including Motorola, are routinely subjected to
numerous audits and investigations, which may be either civil or criminal in
nature. The consequences of these audits and investigations may include
administrative action to suspend business dealings with the contractor and to
exclude it from receiving new business. In addition, Motorola, like other
contractors, is internally reviewing aspects of its government contracting
operations, and, where appropriate, taking corrective actions and making
voluntary disclosures to the Government. From time to time, these audits and
investigations may adversely affect Motorola and its results.
Backlog. Motorola's aggregate backlog position, including the backlog
position of subsidiaries through which some of its business units operate, as
of the end of the last two fiscal years, was approximately as follows:
<TABLE>
<S> <C>
December 31, 1996........................................... $7.59 billion
December 31, 1995........................................... $7.99 billion
</TABLE>
The orders supporting the 1996 backlog amounts shown in the foregoing table
are believed to be generally firm, and approximately 99% of orders on hand at
December 31, 1996 are expected to be shipped during 1997. However, this is a
forward-looking estimate of the amount expected to be shipped, and future
events may cause the percentage actually shipped to change.
The Semiconductor Products segment's backlog position has declined due to
various factors described in Item 1(c). This decline affected Motorola's
overall backlog position in 1996.
Motorola uses the percentage-of-completion method to recognize revenues and
costs associated with most long-term contracts. For contracts involving
certain technologies, revenues and profits, or parts thereof, are deferred
until technological feasibility is established and customer acceptance is
obtained. For other product sales, revenue is recognized at the time of
shipment, and reserves are established for price protection and cooperative
marketing programs with distributors.
Research and Development. Throughout its history, Motorola has relied, and
continues to rely, primarily on its research and development programs for the
development of new products and its production engineering
9
<PAGE>
capabilities for the improvement of existing products. Technical data and
product application ideas are exchanged among Motorola's industry segments on
a regular basis. Research and development expenditures relating to new product
development or product improvement, other than customer-sponsored contracts,
were approximately $2,394 million in 1996, $2,197 million in 1995 and $1,860
million in 1994.
In addition, research funded under customer-sponsored contracts amounted to
approximately $758 million in 1996, $546 million in 1995 and $601 million in
1994.
Approximately 15,800 professional employees were engaged in such research
activities (including customer-sponsored contracts) during 1996.
Patents and Trademarks. Motorola owns 8,420 patents in the United States and
8,298 in foreign countries. These foreign patents are counterparts of
Motorola's United States patents. During 1996, Motorola was granted 1,225
United States patents. Many of the patents owned by Motorola are used in its
operations or licensed for use by others, and Motorola is licensed to use
certain patents owned by others. In some instances, certain of the patents
licensed by Motorola to others have generated significant amounts of revenue
to Motorola.
Motorola considers its trademark "MOTOROLA" and the "M" symbol to be
valuable assets. These are protected through trademark registrations. Other
trademarks of Motorola are protected and registered in the relevant markets,
but are used only on limited product lines.
Environmental Quality. Motorola operations are from time to time the
subjects of investigations, conferences, discussions and negotiations with
various federal, state and local environmental agencies with respect to the
discharge or cleanup of hazardous waste and compliance by those operations
with environmental laws and regulations. The balance of the response to this
section of Item 1 is incorporated by reference to Note 6 of the Notes to the
Consolidated Financial Statements under the caption "Environmental and Legal"
and the information contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations under the caption "Environmental
Matters" contained in the attachment to Motorola's Proxy Statement for the
1997 annual meeting of stockholders.
Miscellaneous. At December 31, 1996, there were approximately 139,000
employees of Motorola and its subsidiaries. The business of Motorola and its
industry segments is taking on certain seasonal characteristics: the
Semiconductor Products segment has tended to have stronger, seasonally-
adjusted sales in the first half of the year; and sales of products, such as
cellular telephones and pagers, in consumer markets tend to increase in the
fourth quarter. An increase or decrease in large system orders in the Cellular
Infrastructure Group and the Land Mobile Products segment could cause the
volatility of orders, revenues and profits recognized in any particular
period.
Business Risk Factors. Except for historical matters, the matters discussed
in this Form 10-K are forward-looking statements that involve risks and
uncertainties. Forward-looking statements include, but are not limited to,
statements under the following headings; (i) "General Systems Products," about
the allocation of frequencies, development of technologies, expected shipments
during 1997, the loss of material customers and competitiveness through
research and development and technology; (ii) "Semiconductor Products," about
the loss of or reduction in purchases by customers, capacity, cyclical
customer demands, new product introductions and aggressive pricing, expected
shipments during 1997, competitiveness through research and development and
technology and sources of supplies; (iii) "Land Mobile Products," about the
loss of material customers, the allocation and regulations of frequencies,
expected shipments during 1997, competitiveness through research and
development and technology and the availability of supplies; (iv) "Messaging,
Information and Media Products," about the allocation of frequencies,
development of technologies, the loss of material customers and expected
shipments during 1997; (v) "Automotive, Energy and Components Sector," about
the loss of material
10
<PAGE>
customers, expected shipments during 1997 and the availability of supplies;
(vi) "Space and Systems Technology Group," about the loss of material
customers, competitiveness, the impact of Motorola's investment in Iridium
LLC, expected shipments during 1997 and the availability of supplies; and
(vii) "General," about expected shipments during 1997, seasonality, large
system orders, and the growth from products.
Motorola wishes to caution readers that in addition to the important factors
described elsewhere in this Form 10-K, the following important factors, among
others, sometimes have affected, and in the future could affect, Motorola's
actual results and could cause Motorola's actual consolidated results during
1997, and beyond, to differ materially from those expressed in any forward
looking statements made by, or on behalf of, Motorola:
. Motorola's actions in connection with continued and increasing price and
product competition in many product areas, including, but not limited to
semiconductor products, cellular subscriber products and modems;
deficiencies in certain product segments, particularly cellular
telephones and modems;
. Difficulties or delays in the development, production, testing and
marketing of products, including, but not limited to, a failure to ship
new products and technologies when anticipated, including, but not
limited to, two-way and voice paging, Code Division Multiple Access
(CDMA) for cellular and Personal Communication Systems (PCS), wireless
local loop, telephony and high-speed data for cable and integrated
dispatch radio, the failure of customers to accept these products or
technologies when planned, any defects in products and a failure of
manufacturing economies to develop when planned;
. Risk related to the loss of material customers of one or more of
Motorola's businesses, including the unexpected loss of sales and market
perception, particularly because of the trend towards increasingly large
system contracts for the Cellular Infrastructure Group and the Land
Mobile Products Sector.
. The ability of the semiconductor industry to sustain a rebound and the
ability of Motorola's semiconductor business to capitalize on that
rebound and compete in the highly competitive semiconductor business.
Factors that could affect Motorola's ability to compete are production
inefficiencies and higher costs related to underutilized facilities, both
wholly-owned and joint venture facilities; shortage of manufacturing
capacity; start-up expenses, inefficiencies and delays and increased
depreciation costs in connection with the capital investments in 1997 for
facilities in Korea, China, Arizona and Texas; competitive factors, such
as rival chip architectures, mix of products, acceptance of new products
and price pressures; risk of inventory obsolescence due to shifts in
market demand; and the effect of lower orders from Motorola's other
businesses such as the Cellular Subscriber Sector and the Automotive,
Energy and Components Sector;
. The risks related to the Iridium(R) project including: the ability of
investors to timely obtain licenses and sign agreements for, and to
market, the service, to timely receive and, as appropriate, operate and
sell telecommunications equipment and to otherwise timely finance and
operate a successful telecommunications business; the successful and
timely orbiting of the project's low-earth orbit satellites and the
successful and timely operation of such satellites and related ground
equipment; the ability of Iridium LLC to raise the significant funds it
needs during at least the next few years to continue to make contractual
payments to Motorola and to make debt payments and otherwise operate,
including raising needed funds in early 1997; the outcome of Motorola's
and Iridium's negotiations to increase Iridium LLC's bank financing and
Motorola's guarantee; the risks associated with the large Iridium systems
contracts and the financial risk to Motorola under those contracts,
including the difficulty in projecting costs associated with those
contracts; the market acceptance (both on its own and when compared to
possible competitors) of what is expected to be the first worldwide
global satellite-based communications service and of the related
equipment; and the significant technological and other risks associated
with the development and commercial operation of the project, including
any software and support systems-related risks;
. The effects of, and changes in, laws and regulations, other activities of
governments, agencies and similar organizations, including, but not
limited to, those affecting frequency, use and availability of spectrum
authorizations and licensing; and
11
<PAGE>
. The costs and other effects of legal and administrative cases and
proceedings (whether civil, such as environmental and product-related,
or criminal), settlements and investigations, claims, and changes in
those items, and developments or assertions by or against Motorola
relating to intellectual property rights and intellectual property
licenses.
Certain portions of Motorola's Proxy Statement for the 1997 annual meeting
of stockholders with Management's Discussion and Analysis and Consolidated
Financial Statement are incorporated by reference into this Form 10-K. There
are additional important factors included therein, including those beginning
on page F-8 of the attachment to Motorola's Proxy Statement for the 1997
annual meeting of stockholders, that sometimes have affected, and in the
future could affect, Motorola's actual results and could cause Motorola's
actual consolidated results during 1997, and beyond, to differ materially from
those expressed in any forward-looking statements made by, or on behalf of,
Motorola.
(d) Financial information about foreign and domestic operations and export
sales.
Domestic export sales to third parties were $3.74 billion in 1996, $3.59
billion in 1995 and $2.97 billion in 1994. Domestic export sales to affiliates
were $6.31 billion in 1996, $6.64 billion in 1995 and $4.40 billion in 1994.
The remainder of the response to this section of Item 1 is incorporated by
reference to Note 7 of the Notes to the Consolidated Financial Statements and
the "1996 Compared With 1995" and "1995 Compared With 1994" sections of
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the attachment to Motorola's Proxy Statement for the
1997 annual meeting of stockholders.
IRIDIUM(R) is a registered trademark and service mark of Iridium LLC.
ITEM 2: PROPERTIES
Motorola's principal executive offices are located at 1303 East Algonquin
Road, Schaumburg, Illinois 60196. Its other major facilities in the United
States are located in Arlington Heights, Buffalo Grove, Grayslake, Harvard,
Lake Zurich, Libertyville, Northbrook, Schaumburg and Vernon Hills, Illinois;
Elma, New York; Phoenix, Chandler, Scottsdale, Mesa and Tempe, Arizona;
Boynton Beach and Plantation, Florida; Atlanta, Georgia; Austin, Ft. Worth and
Seguin, Texas; Mount Pleasant, Iowa; Mansfield, Massachusetts; Huntsville,
Alabama; Research Triangle Park, North Carolina; Albuquerque, New Mexico;
Carlisle, Pennsylvania; and Irvine and San Jose, California. Motorola also
operates manufacturing facilities or sales offices in 39 other countries. (See
"Narrative Description of Business" for information regarding the location of
the principal manufacturing facilities for each industry segment.) Motorola
owns 129 facilities (manufacturing, sales, service and office, 73 of which are
located in the United States and 56 of which are located in other countries.
Motorola leases 505 such facilities, 305 of which are located in the United
States and 200 of which are located in other countries.
Motorola generally considers the productive capacity of the plants operated
by each of its industry segments adequate and suitable for the requirements of
each of such segments. New semiconductor product manufacturing facilities in
Korea, China, Arizona and Texas are under construction and a new facility for
Cellular handsets is under construction in Jaguariuna, Brazil.
The extent of utilization of such manufacturing facilities varies from plant
to plant and from time to time during the year.
ITEM 3: LEGAL PROCEEDINGS
Motorola is a named defendant in seven cases arising out of alleged
groundwater, soil and air pollution in Phoenix and Scottsdale, Arizona. On
January 29, 1997, plaintiffs dismissed their appeal in Camelhead Equities et
al. v. Motorola et al., a suit filed on June 1, 1993, for business losses by
four failed real estate development limited partnerships alleging that
groundwater contamination caused property damage and the failure of their real
12
<PAGE>
estate development, and this matter is concluded. McIntire et al. v. Motorola,
and Farr v. Motorola are pending in the U.S. District Court for the District
of Arizona. Baker et al. v. Motorola et al., Lofgren et al. v. Motorola et
al., Bentancourt et al. v. Motorola et al., Ford et al. v. Motorola et al. and
Wilkins et al. v. Motorola et al. are pending in the Arizona Superior Court,
Maricopa County. The McIntire lawsuit, filed on December 20, 1991, involves
approximately 925 plaintiffs (325 personal injury, 125 property damage, and
475 personal injury and property damage) who allege that the operations of
Motorola at several facilities in Phoenix and Scottsdale, Arizona have caused
property damage and health problems by contaminating the soil, groundwater and
air in the area surrounding those facilities. Farr is a personal injury and
wrongful death case, filed on November 17, 1995, based on like allegations of
environmental contamination. The Baker lawsuit, filed on February 11, 1992, is
a class action, involving six representative individual named plaintiffs,
alleging that Motorola and 28 other defendants contaminated the soil, air and
groundwater in the Phoenix/Scottsdale area, diminishing property values and
exposing members of the class to possible adverse health effects. On August
24, 1994, the Baker court certified two classes, a property damage class
consisting of all persons who were residents, property owners or lessees of
property which overlies, or is adjacent to, the alleged groundwater pollution,
and a medical monitoring class consisting of all persons who resided in
Phoenix and/or Scottsdale for more than one year continuously during the years
between 1955 and 1989, and who received potable drinking water containing
trichloroethylene at a level equal to or exceeding 2.0 parts per billion, on
average. The Lofgren, Bentancourt, Ford and Wilkins lawsuits, filed on April
6, 1993, July 16, 1993, June 10, 1994 and July 19, 1995, respectively, have
been consolidated. The consolidated cases involve more than 200 plaintiffs,
alleging that Motorola and about 30 other defendants contaminated the soil,
air and groundwater in the Phoenix/Scottsdale area, causing health problems.
All seven lawsuits seek compensatory and punitive damages. The McIntire
complaint includes personal injury and property damage claims and seeks
injunctive relief. The Baker complaint seeks damages for medical monitoring
and alleges claims for property, business and economic loss and seeks
declaratory and injunctive relief.
Motorola and several of its directors and officers are named defendants in a
consolidated alleged class action for alleged violations of Section 10(b) and
20(a) of the Securities Exchange Act and SEC Rule 10b-5, Kaufman, et al. v.
Motorola, Inc. et al., which was filed on May 19, 1995 and is pending in the
U.S. District Court for the Northern District of Illinois. Plaintiffs maintain
that Motorola and the individual defendants inflated the price of Motorola
stock by failing to timely disclose a buildup of cellular phone inventory with
its distributors. Plaintiffs propose a class period of November 4, 1994
through February 17, 1995, and seek an unspecified amount of damages.
A class action, In Re Nextel Communications Securities Litigation, against
Nextel Communications, Inc., certain of its officers and directors and
Motorola for alleged violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5, is pending in the United States
District Court for the District of New Jersey. The pending complaint, a
consolidation of cases previously filed against Nextel, was filed on July 11,
1995 and maintains that the defendants artificially inflated the price of
Nextel common stock through a series of alleged misrepresentations and
omissions. Plaintiffs propose a class period of July 22, 1993 through January
10, 1995 and seek an unspecified amount of monetary damages.
Motorola is a defendant in several cases arising out of Motorola's
manufacture and sale of portable cellular telephones. In Verb, et al. v.
Motorola, Inc., et al., a purported economic loss class action by purchasers
of portable cellular phones against Motorola and seven other corporate
defendants filed on February 1, 1993, the Illinois Appellate Court in 1996
affirmed the Cook County, Illinois Circuit Court's dismissal of the case;
plaintiffs have petitioned for leave to appeal to the Illinois Supreme Court.
Schiffner v. Motorola, Inc., filed on March 3, 1995 in the Circuit Court of
Cook County, Illinois, is another economic loss purported class action by
purchasers of portable cellular phones. Jerald P. Busse, et al. v. Motorola,
Inc. et al., filed on October 26, 1995 in the Circuit Court of Cook County,
Illinois, Chancery Division, is a purported class action alleging that
defendants have failed to adequately warn consumers of the alleged dangers of
cellular telephones and challenging ongoing safety studies.
13
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Crist v. Motorola, Inc. et al., filed on August 20, 1993 in the Circuit
Court of Cook County, Illinois, Ward v. Motorola, Inc., et al., filed on
October 4, 1994 in the State Court of Fulton County, Georgia, Wright v.
Motorola, et al., filed on March 2, 1995 in the Circuit Court of Cook County,
Illinois, Kane, et al., v. Motorola, Inc., et al., filed on December 13, 1993
in the Circuit Court of Cook County, Illinois, and Rittman, et al. v.
Motorola, Inc., et al., 151st District Court of Harris County, Texas,
originally filed on August 31, 1995 in Tarrant County, Texas, are cases where
individuals allege that brain cancer was caused by or aggravated by the use of
a cellular telephone. In Ward, the Georgia Court of Appeals has ruled that
summary judgment should be entered on behalf of Motorola and plaintiffs have
petitioned for certiorari to the Georgia Supreme Court. The stay entered in
the Wright, Kane and Crist cases after the ruling in the Verb case in 1996 has
been lifted based on the Illinois Appellate Court decision in the Verb case.
Pennsylvania Bancshares, Inc. et al. v. Motorola, Inc., et al., filed on
October 10, 1995 in the Court of Common Pleas, Montgomery County,
Pennsylvania, is a purported class action wherein it is alleged that Motorola,
Inc. systematically engages in deceptive trade practices, including without
limitation, intentionally misrepresenting the quality of certain types of
cellular telephones. Silber, et. al. v. Motorola, Inc., et al., filed on
August 1, 1995 in the Supreme Court of The State of New York, County of
Suffolk, which was transferred from the County of New York, is an action
wherein it is alleged that a traffic accident was caused by the use of a
cellular phone.
The information contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations under the caption "Environmental
Matters" and in Note 6 of the Notes to the Consolidated Financial Statements
under the caption "Environmental and Legal" contained in the attachment to
Motorola's Proxy Statement for the 1997 annual meeting of stockholders is
incorporated herein by reference.
Motorola is a defendant in various other suits, claims and investigations
which arise in the normal course of business. In the opinion of management,
the ultimate disposition of these matters, including those matters described
above in this Item 3, will not have a material adverse effect on the
consolidated financial position, liquidity or results of operations of
Motorola.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Following are the persons who were the executive officers of Motorola as of
December 31, 1996, their ages as of December 31, 1996, their current titles
and positions held during the last five years:
Gary L. Tooker; age 57; Vice Chairman of the Board and Chief Executive
Officer since December 1993; President and Acting Chief Executive Officer from
October 1993 to December 1993; and President and Chief Operating Officer from
January 1990 to October 1993. On January 1, 1997, Mr. Tooker became Chairman
of the Board.
Christopher B. Galvin; age 46; President and Chief Operating Officer since
December 1993; and Senior Executive Vice President and Assistant Chief
Operating Officer from January 1990 to December 1993. On January 1, 1997, Mr.
Galvin became Chief Executive Officer.
Robert W. Galvin; age 74; Chairman of the Executive Committee of the Board
of Directors since January 1990.
Keith J. Bane; age 57; Executive Vice President and Chief Corporate Staff
Officer since February 1995; Senior Vice President and Chief Corporate Staff
Officer from August 1994 to February 1995; Senior Vice President and Motorola
Director of Strategy, Technology and External Relations from October 1993 to
August 1994; and Senior Vice President and Motorola Director of Strategy from
November 1988 to October 1993.
14
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Arnold S. Brenner; age 59; Executive Vice President and General Manager,
Japan Group since November 1988.
Thomas D. George; age 56; Executive Vice President, and President and
General Manager, Semiconductor Products Sector since April 1993; Executive
Vice President and Assistant General Manager, Semiconductor Products Sector
from November 1992 to April 1993; and Senior Vice President and Assistant
General Manager, Semiconductor Products Sector from July 1986 to November
1992. Mr. George has announced his planned retirement from Motorola later in
1997.
Glenn A. Gienko; age 44; Executive Vice President and Director of Human
Resources since May 1996; Senior Vice President and Director of Human
Resources from June 1995 to May 1996; Corporate Vice President--Human
Resources, General Systems Sector from February 1994 to June 1995; and Vice
President--Human Resources, General Systems Sector from June 1990 to February
1994.
Merle L. Gilmore; age 48; Executive Vice President, President and General
Manager, Land Mobile Products Sector ("LMPS"), since July 1994; Senior Vice
President and President and General Manager, LMPS, from June 1994 to July
1994; Senior Vice President and Assistant General Manager, LMPS, from July
1992 to June 1994; and Senior Vice President and General Manger, Worldwide
Radio Products Group, LMPS, from May 1991 to July 1992.
Robert L. Growney; age 54; Executive Vice President, President and General
Manager, Messaging, Information and Media Sector since January 1994; Executive
Vice President and General Manager, Paging and Wireless Data Group from
September 1992 to January 1994; and Senior Vice President and General Manager,
Paging and Telepoint Systems Group from January 1991 to September 1992. On
January 1, 1997, Mr. Growney became President and Chief Operating Officer.
Carl F. Koenemann; age 58; Executive Vice President and Chief Financial
Officer since December 1991.
James A. Norling; age 54; Executive Vice President, and President, Motorola
Europe, Middle East and Africa since April 1993; and Executive Vice President,
and President and General Manager, Semiconductor Products Sector from December
1989 to April 1993. On January 1, 1997, Mr. Norling became President and
General Manager, Messaging, Information and Media Sector.
Edward F. Staiano; age 60; Executive Vice President, and President and
General Manager, General Systems Sector since December 1989. Mr. Staiano
retired as of January 1, 1997.
Frederick T. Tucker; age 56; Executive Vice President and President and
General Manager, Automotive, Energy and Controls Group since September 1992;
and Senior Vice President and General Manager, Automotive and Industrial
Electronics Group from April 1988 to September 1992. On January 7, 1997, Mr.
Tucker became President and General Manager, Automotive and Industrial
Components Sector.
Richard H. Weise; age 61; Senior Vice President since November 7, 1996;
Senior Vice President and Secretary since February 20, 1996 to November 7,
1996; Senior Vice President, General Counsel and Secretary from November 1985
to February 20, 1996. Mr. Weise retired as of January 1, 1997.
Richard W. Younts; age 57; Executive Vice President and Corporate Executive
Director International-Asia and Americas since December 1993; and Senior Vice
President and Corporate Executive Director, International-Asia and Americas
from July 1991 to December 1993.
The above executive officers, with the exception of Messrs. Staiano and
Weise, will serve as officers of Motorola until the regular meeting of the
Board of Directors in May 1997 or until their respective successors shall have
been elected except as noted above. Christopher B. Galvin is a son of Robert
W. Galvin. There is no family relationship between any of the other executive
officers listed above.
15
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PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Motorola's Common Stock is listed on the New York, Chicago, London and Tokyo
Stock Exchanges. The remainder of the response to this Item is incorporated by
reference to the information under the caption "Quarterly and Other Financial
Data" of Motorola's Consolidated Financial Statements contained in the
attachment to Motorola's Proxy Statement for the 1997 annual meeting of
stockholders.
ITEM 6: SELECTED FINANCIAL DATA
The response to this Item is incorporated by reference to the information
under the caption "Five-Year Financial Summary" of Motorola's Consolidated
Financial Statements contained in the attachment to Motorola's Proxy Statement
for the 1997 annual meeting of stockholders.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The response to this Item is incorporated by reference to the information
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the attachment to Motorola's Proxy
Statement for the 1997 annual meeting of stockholders.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is incorporated by reference to the information
under the captions "Management's Responsibility For Financial Statements,"
"Independent Auditors' Report," "Statements of Consolidated Earnings,"
"Statements of Consolidated Stockholders' Equity," "Consolidated Balance
Sheets," "Statements of Consolidated Cash Flows," "Supplemental Cash Flow
Information," "Notes to Consolidated Financial Statements," "Quarterly and
Other Financial Data" and "Five Year Financial Summary" of Motorola's
Consolidated Financial Statements contained in the attachment to Motorola's
Proxy Statement for the 1997 annual meeting of stockholders.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this Item required by Item 401 of Regulation S-K, with
respect to directors, is incorporated by reference to the information under
the caption "Nominees" on pages 1 through 5 of Motorola's Proxy Statement for
the 1997 annual meeting of stockholders and with respect to executive
officers, is contained in Part I hereof under the caption "Executive Officers
of the Registrant". The response to this Item required by Item 405 of
Regulation S-K is incorporated by reference to the information under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 16
of Motorola's Proxy Statement for the 1997 annual meeting of stockholders.
ITEM 11: EXECUTIVE COMPENSATION
The response to this Item is incorporated by reference to the information
under the caption "Director Compensation" on pages 6 and 7 of Motorola's Proxy
Statement for the 1997 annual meeting of stockholders and "Summary
Compensation Table," "Stock Option Grants in 1996," "Aggregated Option
Exercises in 1996 and 1996 Year-End Option Values," "Long-Term Incentive
Plans--Awards in 1996," "Pension and Supplementary Retirement Plans," and
"Termination of Employment and Change in Control Arrangements" on pages 9-11
of Motorola's Proxy Statement for the 1997 annual meeting of stockholders.
16
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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this Item is incorporated by reference to the information
under the caption "Security Ownership of Management of Motorola" on pages 8
and 9 of Motorola's Proxy Statement for the 1997 annual meeting of
stockholders.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item is incorporated by reference to the information
under the caption "Director Compensation" on page 7 of Motorola's Proxy
Statement for the 1997 annual meeting of stockholders.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
See Part II, Item 8 hereof.
2. Financial Statement Schedule and Auditors' Report
<TABLE>
<CAPTION>
TITLE SCHEDULE
----- --------
<S> <C>
Valuation and Qualifying Accounts.................................. II
</TABLE>
All schedules omitted are inapplicable or the information required is
shown in the Consolidated Financial Statements or notes thereto. The
auditors' report of KPMG Peat Marwick LLP with respect to the Financial
Statement Schedule is located at page 26.
3. Exhibits
Exhibits required to be attached by Item 601 of Regulation S-K are listed
in the Exhibit Index attached hereto, which is incorporated herein by
this reference. Following is a list of management contracts and
compensatory plans and arrangements required to be filed as exhibits to
this form by Item 14(c) hereof:
Motorola Executive Incentive Plan ("MEIP")
Motorola Long Range Incentive Plan of 1994
Share Option Plan of 1982
Share Option Plan of 1991
Share Option Plan of 1996
Motorola Elected Officers Supplementary Retirement Plan
Executive Health Plan
Accidental Death and Dismemberment Insurance for MEIP Participants
Arrangement for Directors' Fees
Retirement Plan for Non-Employee Directors
Deferred Fee Plan for Outside Directors
Officers' Group Life Insurance Policy
Consultant Agreement with John F. Mitchell
Form of Termination Agreement
Policy Protecting Salary and Medical Benefits
Insurance Policy for Non-employee Directors
Motorola, Inc. Non-Employee Directors' Stock Plan
(b)Reports on Form 8-K.
Motorola filed no reports on Form 8-K during the last quarter of 1996.
(c)Exhibits See Item 14(a)3 above.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Motorola, Inc.:
Under date of January 9, 1997, except for note 9, which is as of March 14,
1997, we reported on the consolidated balance sheets of Motorola, Inc. and
consolidated subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996, as
contained in the 1997 proxy statement to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1996. In connection with our
audits of the aforementioned consolidated financial statements, we also have
audited the related financial statement schedule as listed in Part IV, Item
14(a)2. The financial statement schedule is the responsibility of Motorola's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
January 9, 1997
Chicago, Illinois
18
<PAGE>
SCHEDULE II
MOTOROLA, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------------------- ---------- ----------
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS & OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful
accounts............. $123 $ 42 -- $ 28(1) $137
Product and service
warranties........... $309 $160 -- $155(2) $314
Customer reserves..... $349 $524 -- $488(3) $385
1995
Allowance for doubtful
accounts............. $118 $ 45 -- $ 40(1) $123
Product and service
warranties........... $283 $122 -- $ 96(2) $309
Customer reserves..... $121 $790 -- $562(3) $349
1994
Allowance for doubtful
accounts............. $ 91 $ 48 -- $ 21(1) $118
Product and service
warranties........... $166 $195 -- $ 78(2) $283
Customer reserves..... $ 51 $291 -- $221(3) $121
</TABLE>
- --------
(1) Uncollectible accounts written off
(2) Warranty claims paid
(3) Customer claims paid/reductions in reserves
19
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of Motorola, Inc.:
We consent to incorporation by reference in the registration statements on
Form S-8 (Nos. 333-03681, 333-03731 and 333-12817) and Form S-3 (Nos. 33-62911
and 333-11433 ) of Motorola, Inc. and consolidated subsidiaries of our reports
dated January 9, 1997, except for note 9, which is as of March 14, 1997,
relating to the consolidated balance sheets of Motorola, Inc. and consolidated
subsidiaries as of December 31, 1996 and 1995, and the related statements of
consolidated earnings, stockholders' equity, and cash flows and related
financial statement schedule for each of the years in the three-year period
ended December 31, 1996, which reports appear in or are incorporated by
reference in the annual report on Form 10-K of Motorola, Inc. for the year
ended December 31, 1996.
/s/ KPMG Peat Marwick LLP
March 19, 1997
Chicago, Illinois
20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, MOTOROLA, INC. HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
MOTOROLA, INC.
/s/ Christopher B. Galvin
By: _________________________________
Christopher B. Galvin
Chief Executive Officer
March 14, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF MOTOROLA,
INC. AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Christopher B. Galvin Director and Principal 3/14/97
____________________________________ Executive Officer
Christopher B. Galvin
/s/ Carl F. Koenemann Principal Financial Officer 3/3/97
____________________________________
Carl F. Koenemann
/s/ Kenneth J. Johnson Principal Accounting Officer 3/4/97
____________________________________
Kenneth J. Johnson
/s/ H. Laurance Fuller Director 3/4/97
____________________________________
H. Laurance Fuller
/s/ Robert W. Galvin Director 3/14/97
____________________________________
Robert W. Galvin
/s/ Robert L. Growney Director 3/3/97
____________________________________
Robert L. Growney
/s/ Anne P. Jones Director 3/4/97
____________________________________
Anne P. Jones
/s/ Donald R. Jones Director 3/14/97
____________________________________
Donald R. Jones
/s/ Judy C. Lewent Director 3/3/97
____________________________________
Judy C. Lewent
/s/ Walter E. Massey Director 3/1/97
____________________________________
Walter E. Massey
/s/ John F. Mitchell Director 3/1/97
____________________________________
John F. Mitchell
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas J. Murrin Director 3/1/97
____________________________________
Thomas J. Murrin
/s/ Nicholas Negroponte Director 3/3/97
____________________________________
Nicholas Negroponte
/s/ John E. Pepper, Jr. Director 3/2/97
____________________________________
John E. Pepper, Jr.
/s/ Samuel C. Scott III Director 3/1/97
____________________________________
Samuel C. Scott III
/s/ Gary L. Tooker Director 3/4/97
____________________________________
Gary L. Tooker
/s/ William J. Weisz Director 3/1/97
____________________________________
William J. Weisz
/s/ B. Kenneth West Director 3/3/97
____________________________________
B. Kenneth West
/s/ John A. White Director 3/14/97
____________________________________
John A. White
</TABLE>
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
3(i) Restated Certificate of Incorporation of Motorola, Inc., as
amended, including Certificate of Designation, Preferences
and Rights for Junior Participating Preferred Stock, Series
A (incorporated by reference to Exhibit 3(i)(b) to
Motorola's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 2, 1994).
3(ii) By-Laws of Motorola, Inc., revised as of November 14, 1996.
4.1 Rights Agreement dated November 9, 1988 (incorporated by
reference to Exhibit (1) to Motorola's Registration
Statement on Form 8-A dated November 15, 1988).
4.2 Amendment to Rights Agreement dated August 7, 1990
(incorporated by reference to Exhibit 2 to Motorola's Form 8
dated August 9, 1990 amending Motorola's Registration
Statement on Form 8-A dated November 15, 1988).
4.3 Amendment No. 2 on Form 8 dated December 2, 1992 amending
Motorola's Registration Statement on Form 8-A dated November
15, 1988 (incorporated by reference to Motorola's Form 8
dated December 2, 1992).
4.3(a) Amendment No. 3 on Form 8-A/A dated February 28, 1994
amending Motorola's Registration Statement on Form 8-A dated
November 15,1988 (incorporated by reference to Motorola's
Amendment No. 3 on Form 8-A/A dated February 28, 1994).
4.4 LYONs Indenture dated September 1, 1989 (incorporated by
reference to Exhibit 4(a) to Motorola's Registration
Statement on Form S-3, Registration No. 33-30662).
4.5 Indenture dated as of March 15, 1985 between Motorola, Inc.
and Harris Trust and Savings Bank, as Trustee, and specimen
of 8.40% Debentures due August 15, 2031 under the Indenture
(incorporated by reference to Exhibits 4(C) and 4(B),
respectively, to Motorola's Current Report on Form 8-K dated
August 12, 1991).
4.6 Indenture dated as of October 1, 1991 between Motorola, Inc.
and Harris Trust and Savings Bank, as Trustee (incorporated
by reference to Exhibit 4.5 to Motorola's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
4.7 Specimen of 7.60% Notes due January 1, 2007 (incorporated by
reference to Exhibit 4.6 to Motorola's Annual Report on Form
10-K for the fiscal year ended December 31, 1991).
4.8 Specimen of 6 1/2% Notes due March 1, 2008 (incorporated by
reference to Exhibit 4(B) to Motorola's Current Report on
Form 8-K dated March 1, 1993).
4.9 LYONs Indenture dated as of September 1, 1993 (incorporated
by reference to Exhibit 4(v) to Motorola's Quarterly Report
on Form 10-Q for the quarter ended October 2, 1993).
4.10 Indenture dated as of May 1, 1995 between Motorola, Inc. and
Harris Trust and Savings Bank, as Trustee (incorporated by
reference to Exhibit 4(d) to Motorola's Registration
Statement on Form S-3, Registration No. 33-56055).
4.11 Specimen of 7 1/2% Debentures due May 15, 2025 (incorporated
by reference to Exhibit 4(B) to Motorola's Current Report on
Form 8-K dated May 15, 1995).
4.12 Specimen of 6$% Debentures due September 1, 2025
(incorporated by reference to Exhibit 4.12 to Motorola's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
10.1 Motorola Executive Incentive Plan, as amended through
November 23, 1993, including the Long Range Incentive
Program (incorporated by reference to Exhibit 10.1 to
Motorola's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
10.2 Motorola Long Range Incentive Plan of 1994 (incorporated by
reference to Exhibit 10.2 to Motorola's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.3 Share Option Plan of 1982, as amended through March 24, 1992
(incorporated by reference to Exhibit 10.3 to Motorola's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Exhibit 10.2(a) to Motorola's Annual
Report on Form 10-K for the fiscal year ended December 31,
1991 and Exhibit 10.3 to Motorola's Annual Report on Form
10-K for the fiscal year ended December 31, 1992).
10.4 Share Option Plan of 1991, as amended through August 7, 1995
(incorporated by reference to Exhibit 10.4 to Motorola's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 and Exhibit 10.4 to Motorola's Report on
Form 10-K for the fiscal year ended December 31, 1995).
10.5 Resolutions Amending Sections 8 and 10(2) of the Share
Option Plan of 1982, and Resolutions Amending Sections 7 and
9(b) of the Share Option Plan of 1991, effective August 15,
1996.
10.6 Share Option Plan of 1996, as amended through August 15,
1996.
10.7 Motorola Elected Officers Supplementary Retirement Plan, as
amended through February 6, 1995 (incorporated by reference
to Exhibit 10.5 to Motorola's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994).
10.8 Executive Health Plan.
10.9 Accidental death and dismemberment insurance for MEIP
participants (incorporated by reference to Exhibit 10.7 to
Motorola's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990).
10.10 Arrangement for directors' fees and retirement plan for non-
employee directors (description incorporated by reference
from pages 6 and 7 of Motorola's Proxy Statement for the
1997 annual meeting of stockholders).
10.11 Deferred Fee Plan for Outside Directors, as amended February
6, 1996 (incorporated by reference to Exhibit 10.9 to
Motorola's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
10.12 Motorola, Inc. Non-Employee Directors' Stock Plan, as
amended August 15, 1996.
10.13 Officers' Group Life Insurance Policy (incorporated by
reference to Exhibit 10.10 to Motorola's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990).
10.14 Consultant Agreement dated May 1, 1996 between Motorola,
Inc. and John F. Mitchell (incorporated by reference to
Exhibit 99 to Motorola's Quarterly Report on Form 10-Q for
the quarter ended March 30, 1996).
10.15 Form of Termination Agreement in respect of a change in
control (incorporated by reference to Exhibit 10.15 to
Motorola's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989).
10.16 Policy protecting salary and medical benefits of employees
in the event of an unsolicited change in control
(incorporated by reference to Exhibit 10.16 to Motorola's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1990).
10.17 Insurance policy covering non-employee Directors
(incorporated by reference to the description on page 6 of
Motorola's Proxy Statement for the 1997 annual meeting of
stockholders and to Exhibit 10.16 to Motorola's Annual
Report on Form 10-K for the fiscal year ended December 31,
1989).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.18 Iridium Space System Contract between Motorola, Inc. and
Iridium, Inc., as amended to date, and Iridium
Communications Systems Operations and Maintenance Contract
between Motorola, Inc. and Iridium, Inc., as amended to date
(incorporated by reference to Exhibits 99.2 and 99.3,
respectively, to Motorola's Current Report on Form 8-K dated
August 2, 1993 and Exhibits 99(a) and 99(b), respectively,
to Motorola's Quarterly Report on Form 10-Q for the quarter
ended October 1, 1994).
11 Motorola, Inc. and Consolidated Subsidiaries Primary and
Fully Diluted Earnings Per Common and Common Equivalent
Share.
21 Subsidiaries of Motorola.
23 Consent of KPMG Peat Marwick LLP. See page 28 of the Annual
Report on Form 10-K of which this Exhibit Index is a part.
27 Financial Data Schedule (filed only electronically with
SEC).
</TABLE>
25
<PAGE>
EXHIBIT 3(ii)
Revised as of November 14, 1996
MOTOROLA, INC.
-------------
BYLAWS
------
ARTICLE I
---------
Offices and Corporate Seal
--------------------------
The registered office of the Corporation required by the Delaware General
Corporation Law shall be 1209 Orange Street, Wilmington, Delaware, 19801, and
the address of the registered office may be changed from time to time by the
Board of Directors.
The principal business office of the Corporation shall be located in the
Village of Schaumburg, County of Cook, State of Illinois. The Corporation may
have such other offices, either within or without the State of Illinois, as the
Board of Directors may designate or as the business of the Corporation may
require from time to time.
The registered office of the Corporation required by the Illinois Business
Corporation Act may be, but need not be, the same as its place of business in
the State of Illinois, and the address of the registered office may be changed
from time to time by the Board of Directors.
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal".
ARTICLE II
----------
Board of Directors
------------------
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by, or under the direction of, its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of directors of
the Corporation shall be sixteen (16), or such other number fixed from time to
time by the
<PAGE>
-2-
Board of Directors. Each director shall hold office until his successor shall
have been elected and qualified, or until his earlier death or resignation.
Section 3. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled for the remainder of the unexpired term by the affirmative vote of a
majority of the directors then in office although less than a quorum.
Section 4. Compensation. Directors who also are employees of the
Corporation shall not receive any additional compensation for services on the
Board of Directors. By resolution of the Board of Directors, a fixed sum may be
allowed directors who are not employees of the Corporation for attendance at
each regular or special meeting of the Board of Directors or any committee of
the Board of Directors, and by resolution of the Board of Directors an
additional fixed fee may be allowed directors who are not employees of the
Corporation in consideration of other services and continuous interest and study
of the affairs of the Corporation. Travel and other expenses actually incurred
may be allowed all directors for attendance at each regular or special meeting
of the Board of Directors or at any meeting of a committee of the Board of
Directors or in connection with their other services to the Corporation. Nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 5. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees. Each committee shall consist of one or more of the directors of the
Corporation, as selected by the Board of Directors, and the Board of Directors
shall also designate a chairman of each committee and the members of each
committee shall designate a person to act as secretary of the committee to keep
the minutes of, and serve the notices for, all meetings of the committee and
perform such other duties as the committee may direct. Such person may, but need
not be a member of the committee. Any such committee, to the extent provided in
a resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee
<PAGE>
-3-
shall have the power and authority of the Board of Directors in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under Section 251 or 252 of the Delaware General Corporation Law,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
shareholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation, and, unless the resolution expressly
so provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law. Each committee of the Board of Directors may establish its own rules of
procedure. Except as otherwise specified in a resolution designating a
committee, one-third of the members of a committee shall be necessary to
constitute a quorum of that committee for the transaction of business and the
act of a majority of committee members present at a meeting at which a quorum is
present shall be the act of the committee.
Section 6. Validity of Contracts. No contract or other transaction
entered into by the Corporation shall be affected by the fact that a director or
officer of the Corporation is in any way interested in or connected with any
party to such contract or transaction, or himself is a party to such contract or
transaction, even though in the case of a director the vote of the director
having such interest or connection shall have been necessary to obligate the
Corporation upon such contract or transaction; provided, however, that in any
such case (i) the material facts of such interest are known or disclosed to the
directors or shareholders and the contract or transaction is authorized or
approved in good faith by the shareholders or by the Board of Directors or a
committee thereof through the affirmative vote of a majority of the
disinterested directors (even though not a quorum), or (ii) the contract or
transaction is fair to the Corporation as of the time it is authorized, approved
or ratified by the shareholders, or by the Board of Directors, or by a committee
thereof.
<PAGE>
-4-
ARTICLE III
-----------
Shareholders' Meetings
----------------------
Section 1. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal business office of the
Corporation in the State of Illinois.
Section 2. Annual Meetings. The annual meeting of the shareholders shall
be held on the first Tuesday in the month of May in each year, at the hour of
5:00 o'clock P.M., or at such other day and hour as may be fixed by or under the
authority of the Board of Directors, for the purpose of electing directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the state where
the meeting is to be held, such meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated herein for the annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as is convenient.
Section 3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairman of the Board or by the Board of Directors.
Section 4. Voting - Quorum. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of any class or
classes are enlarged, limited or denied by the Certificate of Incorporation or
in the manner therein provided. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, except that directors shall be elected by
a plurality of the votes of the shares represented at the meeting
<PAGE>
-5-
and entitled to vote on the election of directors, except as otherwise required
by Delaware law, the Certificate of Incorporation, or these Bylaws. No matter
shall be considered at a meeting of shareholders except upon a motion duly made
and seconded. If less than a majority of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 5. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after three years from the date of its
execution, unless otherwise provided in the proxy.
Section 6. Notice of Meetings. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
days (twenty days if the shareholders are to approve a merger or consolidation
or a sale, lease or exchange of all or substantially all the Corporation's
assets) nor more than sixty days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board, or
the Secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail, addressed
to the shareholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 7. Voting Lists. The officer or agent having charge of the stock
ledger of the Corporation shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each; which list, for a period of
ten days prior to such meeting, shall be kept at the place where the meeting is
to be held, or at another place within the city where the meeting is to be held,
which other place shall be specified in the notice of meeting and the list shall
be subject to inspection by any shareholder for
<PAGE>
-6-
any purpose germane to the meeting, at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original stock ledger shall be prima facie
evidence as to who are the shareholders entitled to examine such list or ledger
or to vote at any meeting of shareholders.
Section 8. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose, the
Board of Directors of the Corporation may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than sixty days and, in case of a meeting of shareholders, not less than
ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
close of business on the date next preceding the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this Section, such determination shall apply to any adjournment thereof;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 9. Voting of Shares by Certain Holders. Neither treasury shares
nor shares of the Corporation held by another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall be entitled to vote
or to be counted for quorum purposes. Nothing in this paragraph shall be
construed as limiting the right of the Corporation to vote its own stock held by
it in a fiduciary capacity.
<PAGE>
-7-
Shares standing in the name of another corporation, domestic or foreign,
may be voted in the name of such corporation by any officer thereof or pursuant
to any proxy executed in the name of such corporation by any officer of such
corporation in the absence of express written notice filed with the Secretary
that such officer has no authority to vote such shares.
Shares held by an administrator, executor, guardian, conservator, trustee
in bankruptcy, receiver or assignee for creditors may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a fiduciary may be voted by him, either in person or by
proxy.
A shareholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer by the pledgor on the books of the Corporation the
pledgor has expressly empowered the pledgee to vote thereon, in which case only
the pledgee, or his proxy, may represent such stock and vote thereon.
Section 10. Advance Notice of Shareholder Nominations and Proposals for
other Business. Nominations of persons for election to the Board of Directors
and the proposal of business to be transacted by the shareholders may be made at
an annual or special meeting of the shareholders only (a) pursuant to the
Corporation's notice with respect to such meeting, (b) by or at the direction of
the Board of Directors or (c) by any shareholder of the Corporation who was a
shareholder of record on the record date set with respect to such meeting as
provided for in Section 8 of Article III, who is entitled to vote at the meeting
and who has complied with the notice procedures set forth in this Section 10.
For nominations or proposals for other business to be properly brought before an
annual or special meeting by a shareholder pursuant to clause (c) above, the
shareholder must give timely notice thereof in writing to the Secretary of the
Corporation and such business must be a proper matter for shareholder action
under the Delaware General Corporation Law and a proper matter for consideration
at such meeting under the Certificate of Incorporation and these Bylaws. For
such notice to be timely, it must be delivered to the Secretary at the principal
business office of the Corporation not earlier than the 90th day prior to the
date of such meeting and not later than the close of business on the later of
(i) the 60th day prior to the date of such meeting or (ii) the 10th day
following the day on which public announcement of the
<PAGE>
-8-
date of such meeting is first made. If such shareholder's notice relates to a
proposal by such shareholder to nominate one or more persons for election or re-
election as a director, it shall set forth all information relating to each such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including, if and to the extent so required, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected). If such shareholder's notice relates to any other business that the
shareholder proposes to bring before the meeting, it shall set forth a brief
description of such business, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made. Each such notice
shall also set forth as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (i) the name
and address of such shareholder, as they appear on the Corporation's books, and
of such beneficial owner and (ii) the class and number of shares of capital
stock of the Corporation which are owned beneficially and of record by such
shareholder and such beneficial owner. Persons nominated by shareholders to
serve as directors of the Corporation who have not been nominated in accordance
with this Section 10 shall not be eligible to serve as directors. Only such
business shall be conducted at an annual or special meeting of shareholders as
shall have been brought before the meeting in accordance with this Section 10.
The chairman of the meeting shall determine whether a nomination or any business
proposed to be transacted by the shareholders has been properly brought before
the meeting and, if any proposed nomination or business has not been properly
brought before the meeting, the chairman shall declare that such proposed
business or nomination shall not be presented for shareholder action at the
meeting. For purposes of this Section 10, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service. Notwithstanding any provision in
this Section 10 to the contrary, requests for inclusion of proposals in the
Corporation's proxy statement made pursuant to Rule 14a-8 under the Exchange Act
shall be deemed to have been
<PAGE>
-9-
delivered in a timely manner if delivered in accordance with such Rule.
Notwithstanding compliance with the requirements of this Section 10, the
chairman presiding at any meeting of the shareholders may, in his sole
discretion, refuse to allow a shareholder or shareholder representative to
present any proposal which the Corporation would not be required to include in a
proxy statement under any rule promulgated by the Securities and Exchange
Commission.
ARTICLE IV
----------
Board of Directors' Meetings
----------------------------
Section 1. Annual Meetings. An annual meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders.
Section 2. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board or any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
Section 3. Notice. Except as set forth in the next sentence, notice of
any special meeting shall be given at least 24 hours prior to the meeting by
written notice delivered or given personally (including by phone) or by mail or
telegram or other written communication to each director at his business address
or residence. If, however, the meeting is called by or at the request of the
Chairman of the Board and if the Chairman of the Board decides that unusual and
urgent business is to be transacted at the meeting (which decision shall be
conclusively demonstrated by his giving notice of the meeting less than 24 hours
prior to the meeting), then at least 2 hours' prior notice shall be given. If
notice is given by telegram or courier, such notice shall be deemed to be given
when the telegram is delivered to the telegraph company or courier company and
any personal notice shall be deemed given when given. Any director may waive
notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting and objects thereat to the transaction of any business because the
meeting is
<PAGE>
-10-
not lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 4. Quorum. One-third of the number of directors fixed by, or
pursuant to, Section 2 of Article II shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such one-third is present at a meeting, a majority of the directors present
may adjourn the meeting from time to time without further notice.
Section 5. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 6. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent is entered in the minutes of the meeting or unless he files his
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or forwards such dissent by registered
mail to the Secretary of the Corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 7. Action by Directors Without a Meeting. Any action required to
be taken at a meeting of directors, or at a meeting of a committee of directors,
or any other action which may be taken at a meeting, may be taken without a
meeting if a consent in writing setting forth the action so taken shall be
signed by all of the directors or members of the committee thereof entitled to
vote with respect to the subject matter thereof and filed with the minutes of
proceedings of the Board of Directors or committee and such consent shall have
the same force and effect as a unanimous vote.
Section 8. Participation in a Meeting by Telephone. Members of the Board of
Directors or any committee of directors may participate in a meeting of such
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participating in a meeting pursuant to this Section 8 shall
constitute presence in
<PAGE>
-11-
person at such meeting.
ARTICLE V
---------
Officers and Chairman of the Board
----------------------------------
Section 1. Number, Election, Appointment, Removal, Vacancy. The elected
officers of the Corporation shall be one Chairman, one Chief Executive Officer,
a President, one or more Vice Presidents, a Chief Financial Officer, a
Treasurer, a Secretary and a Controller, each of whom shall be elected by the
Board of Directors. The appointed officers of the Corporation shall be one or
more Assistant Treasurers and Assistant Secretaries, each of whom shall be
appointed by the Chief Executive Officer and shall serve at his pleasure. The
Board of Directors may designate one or more Vice Presidents as Senior Executive
Vice President, one or more Vice Presidents as Executive Vice President and one
or more Vice Presidents as Senior Vice President. Such other officers as may be
necessary, including one or more Vice Chairmen of the Board, one or more
Officers of the Board and a Chairman of the Executive Committee may be elected
by the Board of Directors. Any two or more offices may be held by the same
person, except the offices of President and Secretary, and the offices of
President and Vice President. The elected officers of the Corporation shall be
elected annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as convenient. Each elected officer shall hold office until his
successor shall have been duly elected or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Any
officer elected by the Board of Directors may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election shall not of itself create
contract rights. A vacancy in any elected office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term.
<PAGE>
-12-
Section 2. Chairman of the Board of Directors. At its first meeting after
the annual meeting of shareholders, the Board of Directors shall elect one of
its own members to be the Chairman of the Board of Directors ("Chairman of the
Board"). The Chairman of the Board shall work with the Board of Directors to
define its structure, agenda and activities in order to fulfill its
responsibilities and shall work with senior management to help ensure that
matters for which management is responsible are appropriately reported to the
Board of Directors. He shall preside at all meetings of the shareholders and of
the Board of Directors and shall call and prescribe the content of such
meetings. The Chairman of the Board shall lead the Board of Directors in its
role of assessing the performance of the management of the Corporation. The
Chairman of the Board shall also counsel the members of the Chief Executive
Office, where appropriate, and shall perform such other duties as may be
prescribed by the Board of Directors from time to time. The Chairman of the
Board may designate one or more other directors to exercise the functions and to
have the authority of the Chairman of the Board during the absence or disability
of the Chairman of the Board and prior to any action by the Board of Directors
to fill any vacancy. The Board of Directors may remove or replace the Chairman
of the Board at any time and any vacancy in such position because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 3. Chief Executive Officer. The Chief Executive Officer ("CEO")
shall be the senior executive officer of the Corporation and shall in general
supervise and control all the business and affairs of the Corporation. He shall
direct the policy of the Corporation; and he may delegate powers to any other
officer of the Corporation. Except where by law the signature of such other
officer is required, the CEO shall possess the same power as such other officer
to sign all certificates, contracts and other instruments and documents of the
Corporation which may be authorized by the Board of Directors or otherwise, and
shall possess the same power as such other officer to take any action authorized
by these Bylaws or by the Board of Directors or otherwise. He shall also perform
such duties as may be prescribed by the Board of Directors or by the Chairman of
the Board of Directors acting for the Board of Directors from time to time.
<PAGE>
-13-
Section 4. The President. The President, in the absence or disability of
the CEO, shall exercise the functions and shall have the authority of the CEO.
The President may sign, with the Secretary or other proper officer of the
Corporation thereunto authorized by the Board of Directors (if the signature of
the Secretary or such other officer is required), certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, and other instruments and
documents which may be authorized by the Board of Directors or otherwise, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general, shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Board of Directors from time to
time.
Section 5. The Chairman of the Executive Committee, Senior Executive Vice
Presidents, Executive Vice Presidents, Officers of the Board, Senior Vice
Presidents and the Corporate Vice Presidents. The Chairman of the Executive
Committee, Senior Executive Vice Presidents, Executive Vice Presidents, Officers
of the Board, Senior Vice Presidents and the Corporate Vice Presidents, in the
order designated by the Board of Directors or the Chairman of the Board, shall
exercise the functions and shall have the authority of the President during the
absence or disability of the President. The Chairman of the Executive Committee,
each Senior Executive Vice President, Executive Vice President, Officer of the
Board, Senior Vice President and Corporate Vice President shall have such powers
as may be designated and shall discharge such duties as may be assigned to him
from time to time by the Board of Directors or the Chief Executive Office. In
addition to the duties described in the prior sentence, all these elected
officers (except the Chairman of the Executive Committee) are authorized to sign
and execute all agreements, contracts, leases, bids, proposals, deeds,
assignments, powers of attorney, guarantee undertakings, instruments, documents,
claims, including claims against the United States of America, and
certifications of such claims, in the ordinary course of business of the
Corporation, and to redelegate that authority in writing to others; provided,
however, that only the CEO, the President, the Chief Financial Officer and the
Treasurer are authorized to perform
<PAGE>
-14-
those activities set forth in the third sentence of the first paragraph of
Article V, Section 7, of these Bylaws.
Section 6. The Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
shareholders, in books provided by the Corporation for such purpose. He shall
attend to giving and serving of all notices of the Corporation whereby meetings
of the Board of Directors and shareholders are assembled. He shall provide lists
of shareholders and their addresses required to be prepared by the provisions of
any present or future statute of the State of Delaware. He may sign, with any
other officer, in the name of the Corporation, all contracts and other
instruments requiring the seal of the Corporation and may affix the seal
thereto. He shall have charge of such books and papers as the Board of Directors
may direct. He shall in general perform all of the duties which are incident to
the office of secretary of a corporation, subject at all times to the direction
and control of the Board of Directors.
Section 7. The Chief Financial Officer and the Treasurer. The Chief
Financial Officer shall be the senior financial officer of the Corporation. The
Chief Financial Officer, the CEO, the President and the Treasurer shall each
individually have the power, which may be redelegated in writing, on behalf of
the Corporation, to borrow funds and to otherwise incur liabilities, to sell or
discount bills, receivables and other instruments and rights, to enter into and
deliver repurchase, credit, guarantee, surety, loan, interest rate, currency and
other agreements, which may contain covenants restricting the Corporation's
ability to take certain actions or require it to take certain actions, to sign
and deliver acceptances, notes and other obligations, to buy and sell foreign
exchange, whether for current or future delivery, or options on foreign
exchange, to purchase, sell, exchange or otherwise deal in stock or other
securities, to procure letters of credit, travelers' checks or similar
instruments, to open and close accounts with any banking institution or other
depository of funds, to sign, manually, by facsimile signature or otherwise,
checks, drafts or other orders for the payment of funds (which each such
institution is hereby authorized and directed to honor), to issue written,
telephonic, electronic or oral instructions for the transfer of funds by wire or
other electronic means or otherwise, to enter into agreements or documents with
any
<PAGE>
-15-
banking or financial institution with respect to any services, including,
without limitation, electronic services, and to do all things in connection with
any of these as any of them sees fit. The Chief Financial Officer, the CEO, the
President and the Treasurer shall each individually also have the power, which
may be redelegated in writing, on behalf of the Corporation, to guarantee, or to
act as surety with respect to, any of the obligations of any entity of which any
of the outstanding stock or securities is owned, directly or indirectly by the
Corporation. In addition, the Chief Financial Officer, as well as each of the
CEO, the President and the Treasurer, shall individually have the authority to
vote all shares or securities in any entity directly or indirectly owned by the
Corporation and to redelegate that authority in writing to others.
The Treasurer shall have the custody of all of the funds and securities of
the Corporation. He shall be empowered to endorse on behalf of the Corporation
all checks, notes or other obligations and evidences of the payment of money,
payable to the Corporation or coming into his possession, and shall deposit the
funds arising therefrom, together with all other funds of the Corporation,
coming into his possession, in such banks as may be selected as the depositories
of the Corporation, or properly care for them in such other manner as the Board
of Directors may direct. All checks and other instruments drawn on or payable
out of the funds of the Corporation and all bills, notes or other evidence of
indebtedness shall be signed by such officers and employees as the Board of
Directors may designate. Whenever required by the Board of Directors so to do,
he shall exhibit a complete and true statement of property in his possession,
custody or control. He shall provide for the entry regularly, in records
belonging to the Corporation, a full and accurate account of all money received
and paid on account of the Corporation, together with all other business
transactions. He shall, at all reasonable times within the hours of business,
exhibit his records and accounts to any director. He shall perform all duties
which are incident to the office of treasurer of a corporation, subject,
however, at all times to the direction and control of the Board of Directors. If
the Board of Directors shall so require, he shall give bond, in such sum and
with such securities as the Board of Directors may direct, for the faithful
performance of his duties and for the safe custody of the funds and property of
the Corporation coming into his possession.
<PAGE>
-16-
Section 8. The Controller. The Controller shall be the Chief Accounting
Officer of the Corporation and shall: (a) keep, or cause to be kept, correct and
complete books and records of account, including full and accurate accounts of
receipt and disbursements in books belonging to the Corporation; and (b) in
general, perform all duties incident to the office of Controller and such other
duties as from time to time may be assigned to him by the Chairman of the Board
or by the Board of Directors. In addition, the Controller, the Chief Financial
Officer and the Treasurer shall each individually be authorized to sign powers
of attorney on behalf of the Corporation and to appoint agents and attorneys to
represent the Corporation in dealings before or with the Bureau of Customs.
Section 9. Statutory Duties. Each respective officer shall discharge any
and every duty, appertaining to his respective office, which is imposed on such
officer by the provisions of any present or future statute of the State of
Delaware.
Section 10. Delegation of Duties. In case of the absence of any officer of
the Corporation, the Chairman of the Board or the Board of Directors may
delegate, for the time being, the duties of such officer to any other officer or
to any director.
Section 11. Salaries. The salaries of the officers and the Chairman of the
Board shall be fixed from time to time by the Board of Directors unless such
authority has been delegated by the Board of Directors, in which case, salaries
shall be fixed by the person, persons or committee to whom authority has been
delegated, subject to any limitations which may be contained in the resolution
delegating such authority. No officer shall be prevented from receiving such
salary by reason of the fact that he or she is also a director of the
Corporation.
Section 12. Assistant Treasurers and Assistant Secretaries. The CEO may
appoint, from time to time, as he may see fit, and may (but shall not be
required to) fix the compensation of, one or more Assistant Treasurers and
Assistant Secretaries, each of whom shall hold office during the pleasure of the
CEO, and shall perform such duties as he may assign.
<PAGE>
-17-
ARTICLE VI
----------
Certificates for Shares and Their Transfer
------------------------------------------
Section 1. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the CEO or President, and by the
Treasurer or the Secretary. Any or all of the signatures on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock ledger of the Corporation.
Section 2. Transfer of Certificate. Transfer of shares of the Corporation
shall be made only upon the records of the Transfer Agent appointed for this
purpose, by the owner in person or by the legal representative of such owner
and, upon such transfer being made, the old certificates shall be surrendered to
the Transfer Agent who shall cancel the same and thereupon issue a new
certificate or certificates therefor. Whenever a transfer is made for collateral
security, and not absolutely, the fact shall be so expressed in the recording of
the transfer.
Section 3. Transfer Agent and Registrar. The Board of Directors may appoint
a transfer agent and registrar of transfers and thereafter may require all stock
certificates to bear the signature of such transfer agent and such registrar of
transfers. The signature of either the transfer agent or the registrar, but not
both, may be a facsimile.
Section 4. Registered Holder. The Corporation shall be entitled to treat
the registered holder of any shares as the absolute owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim
thereto, or interest therein, on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
statutes of the State of Delaware.
<PAGE>
-18-
Section 5. Rules of Transfer. The Board of Directors also shall have the
power and authority to make all such rules and regulations as they may deem
expedient concerning the issue, transfer and registration of the certificates
for the shares of the Corporation.
Section 6. Lost Certificates. Any person claiming a certificate for shares
of this Corporation to be lost or destroyed, shall make affidavit of the fact
and lodge the same with the Secretary of the Corporation, accompanied by a
signed application for a new certificate. Such person shall give to the
Corporation, to the extent deemed necessary by the Secretary or Treasurer, a
bond of indemnity with one or more sureties satisfactory to the Secretary, and
in an amount which, in his judgment, shall be sufficient to save the Corporation
from loss, and thereupon the proper officer or officers may cause to be issued a
new certificate of like tenor with the one alleged to be lost or destroyed. But
the Secretary may recommend to the Board of Directors that it refuse the
issuance of such new certificate in the event that the applicable provisions of
the Uniform Commercial Code are not met.
ARTICLE VII
-----------
Contracts, Loans, Checks and Deposits
-------------------------------------
Section 1. Contracts. The Board of Directors may authorize, by these Bylaws
or any resolution, any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the Corporation, and such authority may be general or confined to specific
instances.
Section 2. Loans. No loans shall be contracted on behalf of the Corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by these Bylaws or a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents,
of the Corporation and in such manner as shall from time to time be determined
by these Bylaws or a resolution of the Board of Directors.
<PAGE>
-19-
Section 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VIII
------------
Books and Records
-----------------
Section 1. Location. Complete books and records of account together with
minutes of the proceedings of the meetings of the shareholders and Board of
Directors shall be kept. A record of shareholders, giving the names and
addresses of all shareholders, and the number and class of the shares held by
each, shall be kept by the Corporation at its registered office or principal
place of business in the State of Illinois or at the office of a Transfer Agent
or Registrar.
ARTICLE IX
----------
Notices
-------
Section 1. Manner of Notice. Whenever, under the provisions of the
Certificate of Incorporation or of the Bylaws of the Corporation or of the
statutes of the State of Delaware, notice is required to be given to a
shareholder, to a director or to an officer, it shall not be construed to mean
personal notice, unless expressly stated so to be. And any notice so required
(other than notice by publication) may be given in writing by depositing the
same in the United States mail, postage prepaid, directed to the shareholder,
director or officer, at his, or her, address as the same appears on the records
of the Corporation, and the time when the same is mailed shall be deemed the
time of the giving of such notice.
Section 2. Waiver of Notice. Any shareholder, director or officer may, in
writing, waive the giving and the mailing of any notice required to be given or
mailed either by and under the statutes of the State of Delaware or by and under
the Bylaws.
<PAGE>
-20-
ARTICLE X
---------
Fiscal Year
-----------
Section 1. Fiscal Year. The fiscal year of the Corporation shall begin on
the 1st day of January and terminate on the 31st day of December.
ARTICLE XI
----------
Emergency Bylaws
----------------
The Emergency Bylaws provided in this Article XI shall be operative upon
(a) the declaration of a civil defense emergency by the President of the United
States or by concurrent resolution of the Congress of the United States pursuant
to Title 50, Appendix, Section 2291 of the United States Code, or any amendment
thereof, or (b) upon a proclamation of a civil defense emergency by the Governor
of the State of Illinois which relates to an attack or imminent attack on the
United States or any of its possessions. Such Emergency Bylaws, or any
amendments to these Bylaws adopted during such emergency, shall cease to be
effective and shall be suspended upon any proclamation by the President of the
United States, or the passage by the Congress of a concurrent resolution, or any
declaration by the Governor of Illinois that such civil defense emergency no
longer exists.
Section 1. Board of Directors' Meetings. During any such emergency, any
meeting of the Board of Directors may be called by any officer of the
Corporation or by any director. Notice shall be given by such person or by any
officer of the Corporation. The notice shall specify the place of the meeting,
which shall be at the head office of the Corporation at the time if feasible,
and otherwise, any other place specified in the notice. The notice shall also
specify the time of the meeting. Notice may be given only to such of the
directors as it may be feasible to reach at the time and by such means as may be
feasible at the time, including publication or radio. If given by mail,
messenger, telephone, or telegram, the notice shall be addressed to the director
at his residence or business address, or such other place as the person giving
the notice shall deem most suitable. Notice shall be similarly given, to the
extent feasible in the judgment of the person giving the notice, to the other
directors. Notice shall be given at least two days before the meeting, if
feasible in the judgment of the person giving
<PAGE>
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the notice, and otherwise on any shorter time he may deem necessary.
Section 2. Change of Head Office. The Board of Directors, during any such
emergency may, effective in the emergency, change the head office or designate
several alternative head offices, or regional offices or authorize the officers
to do so.
ARTICLE XII
-----------
Director Emeritus
-----------------
Section 1. Director Emeritus. The Board of Directors may at any time and
from time to time award to former members of the Board of Directors in
recognition of their past distinguished service and contribution rendered to the
Corporation the honorary title "Director Emeritus." The award of this title
shall not constitute an election or appointment to the Board of Directors, nor
to any office of the Corporation, nor the bestowal of any duties,
responsibilities or privileges associated therewith; and accordingly no
"Director Emeritus" shall be deemed a "Director" as that term is used in these
Bylaws. The title "Director Emeritus" shall carry no compensation, and holders
thereof shall not attend any meetings of the Board of Directors or committees of
the Board of Directors, except by written invitation, nor shall they be
specially privy to any confidential information arising from such meeting.
ARTICLE XIII
------------
Amendment of Bylaws
-------------------
Section 1. Amendment of Bylaws. These Bylaws may be altered, amended or
repealed and new Bylaws may be adopted at any meeting of the Board of Directors
by a majority vote of the directors present at the meeting.
<PAGE>
Exhibit 10.5
Resolutions Amending
the Motorola, Inc. Share Option Plan of 1991
and
the Motorola, Inc. Share Option Plan of 1982
RESOLVED, that, effective August 15, 1996, Section 7 of the Motorola, Inc. Share
Option Plan of 1991 and Section 8 of the Motorola, Inc. Share Option Plan of
1982 are each amended to read as follows:
"Except as set forth in the last sentence of this section, an option shall
not be transferable by an optionee otherwise than by operation of a death
beneficiary designation made by the optionee in accordance with rules
established by the Committee, by will or by the applicable laws of descent
and distribution, and during the lifetime of any optionee, an option shall
be exercisable only by the optionee or by the optionee's guardian or legal
representative if the optionee is legally incompetent.
Notwithstanding the foregoing, except to the extent that it would cause the
Plan to fail to meet the conditions required to be met under Rule 16b-3
under the 1934 Act, the Committee shall have the power and authority to
provide, as a term of any Non-Qualified option, including any outstanding
Non-Qualified option held by an optionee, that such Non-Qualified option
may be transferred without consideration by the optionee to a member or
members of his or her immediate family (i.e., a child, children,
grandchild, grandchildren or spouse) and/or to a trust or trusts for the
benefit of an immediate family member or family members."
RESOLVED, that, effective August 15, 1996, Section 9(b) of the Motorola,
Inc. Share Option Plan of 1991 and Section 10(2) of the Motorola, Inc.
Share Option Plan of 1982 are each hereby amended by deleting the last
sentence and substituting the following two sentences:
"An election by an optionee to deliver Shares or to have Shares
withheld to satisfy tax withholding requirements must be made on or
prior to the Tax Date. The Committee may disapprove any election or
may suspend, condition, restrict or terminate the right to make
elections. An election is irrevocable, unless revocation is approved
by the Committee."
<PAGE>
Exhibit 10.6
MOTOROLA SHARE OPTION PLAN OF 1996, as amended 8/15/96
-----------------------------------
1. NAME AND PURPOSE
----------------
1.1 Name. The name of this plan is the Motorola Share Option Plan of 1996
(the "Plan").
1.2 Purpose. Motorola has established the Plan to promote the interests
of Motorola and its stockholders by providing full and part-time employees of
Motorola or its Subsidiaries and members of Motorola's Board who are not
employees of Motorola or any of its Subsidiaries (each a "Non-Employee
Director") with additional incentive to increase their efforts on Motorola's
behalf and to remain in the employ or service of Motorola or its Subsidiaries
and with the opportunity, through stock ownership, to increase their proprietary
interest in Motorola and their personal interest in its continued success and
progress.
2. DEFINITIONS
-----------
2.1 General Definitions. The following words and phrases, when used
herein, unless otherwise specifically defined or unless the context clearly
indicates otherwise, shall have the following meanings:
(a) Affiliate. Any corporation, partnership, joint venture or other
business entity in which Motorola or a Subsidiary holds an ownership interest.
(b) Board. The Board of Directors of Motorola.
(c) Change in Control. The events described in Section 11.2.
(d) Code. The Internal Revenue Code of 1986, as amended, and the
regulations promulgated pursuant thereto.
(e) Committee. The Compensation Committee of the Board.
(f) Common Stock. Motorola's common stock, $3 par value per Share.
(g) Directors. Members of the Board of Motorola.
(h) Disinterested Person. A person described in Rule 16b-3(c)(2) or
any successor definition adopted by the SEC.
(i) Effective Date. The date that the Plan is approved by both the
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directors of Motorola and the stockholders of Motorola, and if not approved by
both on the same day, the date of the last approval.
(j) Employee. Any person employed by Motorola or a Subsidiary on a
full or part-time basis.
(k) Employee Stock Options. Stock Options granted to an Employee
under Article 4 of the Plan, including both NSOs and ISOs.
(l) Exchange Act. The Securities Exchange Act of 1934, as amended.
(m) Fair Market Value. The average of the high and low sale prices of
Shares as reported for the New York Stock Exchange - Composite Transactions on a
given date, or, in the absence of sales on a given date, the average of the high
and low sale prices (as so reported) for the New York Stock Exchange - Composite
Transactions on the last previous day on which a sale occurred prior to such
date. With respect to an ISO, as defined below, if such method of determining
Fair Market Value shall not be consistent with the then current regulations of
the U.S. Secretary of the Treasury, Fair Market Value shall be determined in
accordance with those regulations.
(n) ISO. An incentive stock option that meets the requirements of
Section 422 (or any successor section) of the Code.
(o) Motorola. Motorola, Inc. or any successor.
(p) NSO. A Stock Option that does not qualify as an ISO.
(q) Non-Employee Director. Is defined in Section 1.2.
(r) Non-Employee Stock Option Period. Is defined in Section 5.3.
(s) Non-Employee Stock Option. Is defined in Section 5.1.
(t) Non-Exercise Period. The period, for each Employee Stock Option,
ending twelve (12) months from the date of its grant, or any longer period or
periods determined by the Committee and set forth in, or incorporated by
reference into, the Employee Stock Option.
(u) Optionee. An Employee who has been granted an Employee Stock
Option under the Plan.
(v) Participant. An individual who is granted a Stock Option under in
the Plan.
(w) Plan. The Motorola Share Option Plan of 1996 and all
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amendments and supplements thereto.
(x) Plan Year. The calendar year.
(y) Rule 16b-3. Rule 16b-3 promulgated by the SEC, as amended, or any
successor rule in effect from time to time.
(z) SEC. The Securities and Exchange Commission.
(aa) Share. A share of Common Stock.
(bb) Stock Options. Employee Stock Options and Non-Employee Stock
Options.
(cc) Subsidiary; Subsidiaries. Any corporation or other entity in
which a fifty percent (50%) or greater interest is, at the time, directly or
indirectly owned by Motorola or by one or more Subsidiaries or by Motorola and
one or more Subsidiaries, except that: (i) with respect to ISOs, "Subsidiary"
shall mean "subsidiary corporation" as defined in Section 424(f) of the Code,
and (ii) with respect to Directors and any elected officer of Motorola or a
Subsidiary subject to Section 16 of the Exchange Act, the terms "Subsidiary" or
"Subsidiaries" mean and include any corporation or other entity at least a
majority of the outstanding voting shares of which (other than directors'
qualifying shares) is, at the time, directly or indirectly owned by Motorola or
by one or more Subsidiaries or by Motorola and one or more Subsidiaries.
(dd) Successor-in-Interest. Is defined in Section 4.5(a)(ii).
(ee) Total and Permanent Disability. Is defined in Section 4.5(a)(i).
2.2 Other Definitions. In addition to the above definitions, certain
words and phrases used in the Plan and any Stock Option certificate may be
defined elsewhere in the Plan or in such Stock Option certificate.
3. SHARES SUBJECT TO PLAN
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3.1 Number of Shares. The number of Shares for which Stock Options may be
granted under the Plan shall be (i) 29,000,000 Shares, plus (ii) the total
number of Shares with respect to which no options have been granted under
Motorola's Share Option Plan of 1991 on the Effective Date, plus (iii) the
number of Shares as to which options granted under Motorola's Share Option Plan
of 1991 terminate or expire without being fully exercised, subject, in each
case, to Sections 3.2 and 3.3. Shares issued under the Plan may be either
authorized and unissued Shares or issued Shares reacquired by Motorola. No
Employee may receive Stock Options relating to more than 300,000 Shares in any
Plan Year (as adjusted pursuant to Section 3.3).
3.2 Reusage. If a Stock Option expires or is terminated, surrendered or
canceled without having been fully exercised, the Shares covered by such Option
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shall again be available for use under the Plan.
3.3 Adjustments. If there is any change in the Common Stock by reason of
any stock split, stock dividend, spin-off, split-up, spin-out, recapitalization,
merger, consolidation, reorganization, combination or exchange of shares, the
number and class of Shares available for Stock Options the number of Shares to
be automatically granted under Section 5.1 hereof and the number of Shares
subject to outstanding Stock Options and the price of each of the foregoing, as
applicable, shall be appropriately adjusted by the Committee to provide
Participants with the same relative rights before and after such adjustment.
4. EMPLOYEE STOCK OPTIONS
----------------------
4.1 Grant of Employee Stock Options. The Committee shall have authority
to grant Stock Options (ISOs or NSOs) to Employees. The Committee shall
determine the number of Shares subject to each Employee Stock Option, the
purchase price per Share, the term of the Employee Stock Option, the time or
times at which the Employee Stock Option may be exercised, and all other terms
and conditions of the Employee Stock Option. The Option exercise price per
Share of an Employee Stock Option may not be less than the Fair Market Value of
a Share on the date of grant. The Committee may accelerate the exercisability of
any Employee Stock Option, including the waiver or modification of any
installment exercise provisions. The Committee may in its discretion, delegate
to members of the Committee and/or one or more elected officers of Motorola the
authority to grant Stock Options to Employees who are not subject to Section 16
of the Exchange Act.
4.2 NSOs and ISOs.
(a) The Stock Option exercise price of any Stock Option may not be
less than the Fair Market Value on the date of grant of the Shares of the Common
Stock subject to the Stock Option.
(b) ISOs. The following additional terms and conditions shall apply
to ISOs:
(i) No ISO shall be granted to any Participant who, at the time
the Employee Stock Option is granted, would own (within the meaning of Section
422(b) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of Motorola.
(ii) The aggregate Fair Market Value (determined as of the time
the Employee Stock Option is granted) of the Shares of Common Stock with respect
to which one or more ISO's are exercisable for the first time by any individual
Optionee during any calendar year (under all plans of Motorola and its
Subsidiaries) shall not exceed $100,000.00.
(iii) Each ISO, by its terms, shall (1) not be exercisable after
the
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expiration often (10) years after the date it is granted and (2) not be
transferrable by the Optionee otherwise than by will or the applicable laws of
descent and distribution or by operation of a death beneficiary designation made
by the Optionee in accordance with rules established by the Committee and shall
be exercisable during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative if the Optionee is legally
incompetent.
4.3 Exercise of Employee Stock Options; Payment.
(a) An Employee Stock Option may be exercised by the Optionee
submitting to Motorola such form(s) as are prescribed for such purpose.
Motorola may require the surrender of the Employee Stock Option certificate if
one has been issued. No Employee Stock Option shall be exercisable for less
than a minimum of fifty (50) Shares except in cases where the number of Shares
represented by the Employee Stock Option being exercised is less than fifty
(50), in which case, the Employee Stock Option shall not be exercisable for less
than all shares represented by such Option.
(b) Payment for Shares purchased upon exercise of an Employee Stock
Option shall be paid in full as permitted by Section 13 for all Shares purchased
at the time of purchase. No fractional Shares may be purchased.
4.4 Non-Exercise Period. Except as provided herein for Optionees who die
while in the employ of Motorola or any Subsidiary or for a Change in Control, no
Employee Stock Option granted under the Plan may be exercised prior to the
expiration of the Non-Exercise Period. No Employee Stock Option may be
exercised after expiration of its stated term.
4.5 Effect of Termination of Employment on Employee Stock Options:
(a) Termination of Employment During the Non-Exercise Period.
(i) Except for a Change in Control and except for a disability
leave of absence as provided in Section 4.5(a)(iii) hereof, if, during the
NonExercise Period, the Optionee's employment with Motorola and its Subsidiaries
shall terminate for any reason (including retirement) other than death, transfer
to an Affiliate and other than Total and Permanent Disability (as that term is
defined in the Motorola Profit Sharing and Investment Plan) of the Optionee, as
determined by the Committee or its designee, the Optionee's right to exercise
the Employee Stock Option shall terminate and all rights thereunder shall cease;
provided, however, if the Optionee's employment terminates by reason of the
transfer of such Optionee to an Affiliate, the Committee shall have the power
and authority, in its discretion, to determine whether or not any or all of the
Employee Stock Options held by the Optionee shall terminate or shall continue in
effect (in which case such Options shall be subject to all of the conditions of
the Plan, including this Section 4.5, and such other conditions as the Committee
may impose, with "termination of employment," "employment is terminated" or
"employment shall have been terminated" or words of like import or intent
meaning termination of employment with the Affiliate.)
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(ii) If, during the Non-Exercise Period, an Optionee dies while
in the employ of Motorola or any Subsidiary, the deceased Optionee's Successor-
in-Interest shall have the right to exercise, in whole or in part, at any time
during the remainder of the term of such Employee Stock Option, the entire
amount of the Shares subject to such Employee Stock Option (without regard to
any installment limitation on the exercise of the Employee Stock Option). For
purposes of the Plan, the term "Successor-in-Interest" shall mean the deceased
Optionee's death beneficiary, personal representative, or any person who
acquired the right to exercise such Employee Stock Option by bequest or
inheritance or by reason of the laws of descent and distribution.
(iii) If, during the Non-Exercise Period, an Optionee's
employment with Motorola and its Subsidiaries shall terminate because of the
Total and Permanent Disability of the Optionee or if the Optionee shall be put
on disability leave of absence status because of the Total and Permanent
Disability of the Optionee, each Employee Stock Option held by such an Optionee
which has a Non-Exercise Period in effect at the time of termination of
employment or commencement of the disability leave of absence shall become
exercisable at the time the applicable Non-Exercise Period elapses or
terminates, and the Optionee shall then have the right to exercise, in whole or
in part, each such Employee Stock Option for the entire amount of Shares subject
to each such Employee Stock Option (without regard to any installment limitation
on exercise of the Employee Stock Option) at any time during the remainder of
the term of the Employee Stock Option. The unexercised portion of each Employee
Stock Option shall terminate upon expiration of the term of such Stock Option,
and any unexercised portion shall terminate immediately if and when the Optionee
is employed by a competitor of Motorola or any Subsidiary without written
consent of the Committee.
(b) Termination of Employment After the Non-Exercise Period.
(i) By Termination of Employment Without Cause. If the Non-
Exercise Period shall have elapsed or terminated and the Optionee's employment
with Motorola and its Subsidiaries shall have been terminated thereafter by
Motorola or any Subsidiary without cause, the Optionee shall have the right to
exercise the then presently exercisable unexercised portion of the Employee
Stock Option at any time during a period of twelve (12) months after the date of
termination of employment. The unexercised portion of the Employee Stock Option
may be exercised, in whole or in part, for the number of Shares which were or
would have become exercisable to the extent the Optionee could have exercised
such Employee Stock Option had the Optionee remained in the employ of Motorola
or any Subsidiary during the twelve (12) month period immediately following the
date of termination of employment. Except as otherwise provided in Section
4.5(b)(vii) hereof, the unexercised and/or unexercisable portion of each
Employee Stock Option shall terminate twelve (12) months after an Optionee's
employment with Motorola and its Subsidiaries shall have been so terminated, and
any unexercised and/or unexercisable portion shall terminate immediately if and
when the Optionee is employed by a competitor of Motorola or any
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7
Subsidiary without the written consent of the Committee.
(ii) By Termination of Employment for Cause. If the Non-Exercise
Period shall have elapsed or terminated and the Optionee's employment is
terminated by Motorola or any Subsidiary for cause, any unexercised portion of
any Employee Stock Option granted to the Optionee shall terminate with the
Optionee's termination of employment. As used herein, the term "cause" means (a)
the failure of the Optionee to carry out the duties assigned to the Optionee as
a result of incompetence or willful neglect, as determined by the Committee, or
(b) such other reasons, including the existence of a conflict of interest, as
the Committee may determine.
(iii) By Voluntary Termination of Employment. If the Non-Exercise
Period shall have elapsed or terminated and the Optionee voluntarily terminates
employment with Motorola or any Subsidiary for reasons other than the retirement
of the Optionee, any unexercised portion of the Optionee's Employee Stock Option
shall terminate with the Optionee's termination of employment.
(iv) By Retirement. If the Non-Exercise Period shall have elapsed
or terminated and the Optionee's employment with Motorola or any Subsidiary
shall have been terminated because of the retirement of the Optionee from
Motorola or any Subsidiary at age 55 or older, the Optionee shall have the right
to exercise, in whole or in part, the unexercised portion of any Employee Stock
Option held by such Optionee for the entire amount of Shares subject to such
Stock Option (without regard to any installment limitation on exercise of the
Employee Stock Option) at any time during the remainder of the term of such
Stock Option. The unexercised portion of each Employee Stock Option shall
terminate upon expiration of the term applicable to each such Employee Stock
Option, and any unexercised portion shall terminate immediately if and when the
Optionee is employed by a competitor of Motorola or any Subsidiary without the
written consent of the Committee.
For purposes of this Section 4.5, if the Optionee is a
participant in Motorola's pension plan or the pension plan of any Subsidiary,
the term "retirement" shall mean the Optionee's retirement as provided for in
the applicable pension plan. If the Optionee is not a participant in Motorola's
pension plan or the pension plan of any Subsidiary, "retirement" of an Optionee
shall be determined by the Committee. In no event can retirement take place
prior to age 55 even if permitted under the applicable pension plan.
(v) By Total and Permanent Disability. If the Non-Exercise Period
shall have elapsed or terminated, and the Optionee's employment with Motorola
and its Subsidiaries shall have been terminated because of the Total and
Permanent Disability of the Optionee or if the Optionee shall be put on
disability leave of absence status because of the Total and Permanent Disability
of the Optionee, the Optionee shall have the right to exercise, in whole or in
part, the unexercised portion of any Employee Stock Option held by such Optionee
for the entire amount of Shares subject to such Employee Stock Option (without
regard to any installment limitation on
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exercise of the Employee Stock Option) at any time during the remainder of the
term of the Employee Stock Option. The unexercised portion of each Employee
Stock Option shall terminate upon expiration of the term of each such Employee
Stock Option, and any unexercised portion shall terminate immediately if and
when the Optionee is employed by a competitor of Motorola or any Subsidiary
without the written consent of the Committee.
(vi) By Death. If the Non-Exercise Period shall have elapsed or
terminated and the Optionee dies while in the employ of Motorola or any
Subsidiary, the unexercised portion of the Employee Stock Option may be
exercised, in whole or in part, at any time during the remainder of the term of
the Employee Stock Option by the Optionee's Successor-in-Interest, for the
entire number of Shares subject to the Employee Stock Option (without regard to
any installment limitation on exercise of the Employee Stock Option).
(vii) Effect of Death After Termination of Employment Without
Cause or Retirement. If the Non-Exercise Period shall have elapsed or terminated
and the Optionee dies during the twelve (12) month period immediately following
the Optionee's termination of employment by Motorola or any Subsidiary without
cause and at the time of death such Optionee is not employed by a competitor of
Motorola or any Subsidiary (or while employed by a competitor of Motorola or any
Subsidiary with the written consent of the Committee), the unexercised portion
of the Employee Stock Option may be exercised by the Optionee's Successor-in-
Interest at any time during the remainder of the term of the Employee Stock
Option, in whole or in part, for the number of Shares which were or would have
become exercisable had the Optionee survived for the remainder of the term of
the Employee Stock Option, without regard to the requirement of exercise within
twelve (12) months after termination of employment without cause.
If the Non-Exercise Period shall have elapsed or terminated
and the Optionee dies after retirement prior to the expiration of the term of
the Employee Stock Option, and, if at the time of death such Optionee is not
employed by a competitor of Motorola or any Subsidiary (or while employed by a
competitor of Motorola or any Subsidiary with the written consent of the
Committee), the unexercised portion of the Employee Stock Option may be
exercised for the entire number of Shares subject to such Employee Stock Option
(without regard to any installment limitation on exercise of the Employee Stock
Option), by the Optionee's Successor-in-Interest at any time during the
remainder of the term of the Employee Stock Option.
(viii) By Transfer of Optionee to an Affiliate. If the Non-
Exercise Period shall have elapsed or terminated and the Optionee's employment
with Motorola and its Subsidiaries shall terminate by reason of the transfer of
such Optionee to an Affiliate, the Committee shall have the power and authority,
in its discretion, to determine whether or not any or all of the Employee Stock
Options held by the Optionee shall continue in effect for the remainder of the
term of such Employee Stock Option or for the period otherwise applicable under
the provisions of the Plan.
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Any Employee Stock Option which the Committee permits to continue in effect
beyond the period otherwise applicable under the Plan shall be subject to all of
the terms and conditions of the Plan, including this Section 4.5 and such other
conditions as the Committee may impose (with "termination of employment",
"employment shall terminate", "terminates employment", "employment is
terminated" or "employment shall have been terminated" or words of like import
or intent meaning termination of employment with the Affiliate).
(c) Procedure on Death.
No transfer of an Employee Stock Option pursuant to Section 4.5 (a)(ii),
(b)(vi) and (b)(vii) above, by will or by the laws of descent and distribution,
shall be effective unless Motorola shall have been furnished with written notice
thereof and a copy of the will, if any, and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the Successor-in-interest or Successors-in-interest of the terms
and conditions of the Employee Stock Option, and under no circumstances shall
the right of any such Successor-in-Interest to exercise any such Employee Stock
Option extend beyond the applicable period specified in sub-paragraph (a)(ii),
(b)(vi) or (b)(vii) above, or beyond the expiration of the term of such Employee
Stock Option.
(d) Leaves of Absence and Lay-offs.
If an Optionee is placed on leave of absence status (except as provided in
Section 4.5 (a)(iii) or (b)(v) above) by Motorola or any Subsidiary, each
Employee Stock Option then held by the optionee, whether exercisable or
nonexercisable, shall be suspended at such time, but the period of time during
which the Optionee is on leave of absence shall be counted in determining when
the Non-Exercise Period elapses. If an Optionee is placed on lay-off status by
Motorola or any Subsidiary, any then non-exercisable Employee Stock Option shall
terminate and any then exercisable Employee Stock Option may be exercised during
the period of twelve (12) months from the date the Optionee is placed on lay-off
status and shall be suspended thereafter to the extent not exercised. In any
case, the unexercised portion of each suspended Employe Stock Option shall
either (i) terminate upon the Optionee's termination of employment with Motorola
and its Subsidiaries or (ii) be reinstated upon such Optionee returning from
leave of absence or lay-off status to active employment status with Motorola or
any Subsidiary.
(e) Meaning of Termination of Employment.
Wherever in this Article or elsewhere in the Plan the words "termination of
employment, employment is terminated, employment shall terminate or employment
shall have been terminated" or words of like import or intent are used, they
shall mean the last day worked by the Participant rather than the last day the
Participant is on the payroll of Motorola or any Subsidiary.
5. NON-EMPLOYEE STOCK OPTIONS
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5.1 Automatic Grant of Non-Employee Stock Options. On June 1, 1996 and on
June 1 of each Plan Year after 1996 in which the Plan is in effect, each
individual elected, re-elected or continuing as a Non-Employee Director shall
automatically receive a NSO covering 1,000 Shares (a "Non-Employee Stock
Option"). Notwithstanding the foregoing, if, on that day, the General Counsel of
Motorola determines, in his or her sole discretion, that Motorola is in
possession of material, undisclosed information about Motorola, then the annual
grant of NSO's to Non-Employee Directors shall be suspended until the second day
after public dissemination of such information and the price, exercisability
date and Non-Employee Stock Option Period shall then be determined by reference
to such later date. If Common Stock is not reported as traded on the New York
Stock Exchange - Composite Transactions on any date a grant would otherwise be
awarded, then the grant shall be made the next day thereafter on which Common
Stock is so traded.
5.2 Price. The Stock Option exercise price of a Non-Employee Stock Option
shall be the Fair Market Value of the Shares subject to such Stock Option on the
date of grant.
5.3 Exercisability. A Non-Employee Stock Option granted under the Plan
shall become exercisable twelve months after the date of grant (except as
otherwise provided in Section 5.6 for retirement and Section 5.7 for death which
occurs during such period and in Article 11 if a Change in Control occurs during
such period) and shall expire, except as otherwise provided herein, 10 years
after the date of grant ("Non-Employee Stock Option Period").
5.4 Payment. The Non-Employee Stock Option exercise price shall be paid in
full as permitted by Section 13 for all Shares purchased at the time the Non-
Employee Stock Option is exercised. No fractional Shares may be purchased.
Motorola may require the surrender of the Non-Employee Stock Option certificate
if one has been issued, and no Non-Employee Stock Option may be exercised for
less than fifty (50) Shares, except in cases where the number of shares
represented by the Non-Employee Stock Option being exercised is less than fifty
(50), in which case the Non-Employee Stock Option shall not be exercisable for
less than all Shares represented by such Stock Option.
5.5 Termination. Upon cessation of services as a Non-Employee Director (for
reasons other than retirement as defined in Section 5.6 hereof or death) only
those Non-Employee Stock Options immediately exercisable at the date of
cessation of service shall be exercisable by the Non-Employee Director. Such
Non-Employee Stock Options must be exercised within 30 days after cessation of
service (but in no event after the expiration of the Non-Employee Stock Option
Period) or they shall be forfeited. If, however, the Non-Employee Director
during or after his or her service on the Board, engages, directly or
indirectly, in any activity which is in competition with any activity of
Motorola or any Subsidiary or in any action or conduct which is in any manner
adverse or in any way contrary to the interests of Motorola, or any Subsidiary,
any unexercised portion of such Non-Employee Stock Options shall immediately
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terminate, unless otherwise determined by the Chief Executive Officer of
Motorola. The determination of whether a Director is or has engaged in any
competitive activity or in any action or conduct which is adverse or contrary to
the interests of Motorola or any of its Subsidiaries shall be made by the Chief
Executive Officer of Motorola, and such determination shall be conclusive and
binding upon all parties.
5.6 Retirement. As used in this Article 5, the term "retirement" shall
mean, for Non-Employee Directors, resignation at or after age 65, failure to
stand for re-election at or after age 65 or failure to be re-elected at or after
age 65. Upon retirement, all Non-Employee Stock Options previously granted to a
Non-Employee Director shall become or continue to be exercisable, except as
otherwise provided herein. Such Non-Employee Stock Options must be exercised
prior to the expiration of the Non-Employee Stock Option Period or they shall be
forfeited.
5.7 Death. Upon the death of a Non-Employee Director, all Non-Employee
Stock Options previously granted to the Non-Employee Director shall become
exercisable by his or her Successor-in-Interest, except as otherwise provided
herein. Such Non-Employee Stock Options can be exercised during the remainder of
the Non-Employee Stock Option Period.
5.8 Amendments. An amendment of this Article 5 amending provisions of the
kind described in Rule 16b-3(c)(2)(ii)(A) under the Exchange Act shall not be
made more frequently than once every six months unless necessary to comply with
the Code. No amendment may revoke or alter in a manner unfavorable to a Non-
Employee Director holding Non-Employee Stock Options any Non-Employee Stock
Options then outstanding, without such Non-Employee Director's approval.
5.9 Interpretation. The Chief Executive Officer of Motorola shall
administer, construe and interpret this Article 5, whose decisions shall be
conclusive and binding on all parties. The Chief Executive Officer of Motorola
is authorized, subject to the provisions of this Article 5, from time to time to
establish such rules and regulations as he or she may deem appropriate for the
proper administration or operation of this Article 5. Non-Employee Stock Options
may be evidenced by certificates at the option of the Chief Executive Officer of
Motorola.
6. ELIGIBILITY
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The Participants shall be determined by the Committee, except for Non-
Employee Stock Options which shall be automatically granted to Non-Employee
Directors under Article 5 and except to the extent authority has been delegated
under Section 7.1 hereof. In making its determinations, the Committee shall
consider past, present and expected future contributions of Employees to
Motorola and its Subsidiaries.
7. ADMINISTRATION
--------------
7.1 Committee. The Plan (except for Article 5 and the Non-Employee Stock
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Options automatically granted thereunder) shall be administered by the
Committee; provided, however, if at any time Rule 16b-3 and Section 162(m) of
the Code, and any implementing regulations (and any successor provisions
thereof), so permit without adversely affecting the ability of the Plan to
comply with the conditions for exemption from Section 16 of the Exchange Act (or
any successor provision) provided by Rule 16b-3 and the exemption from the
limitations on the deductibility of certain executive compensation provided by
Section 162(m), the Committee may delegate the administration of the Plan in
whole or in part, on such terms and conditions, to such other person or persons
as it may determine in its discretion. References to the Committee hereunder
shall include the Board where appropriate. The membership of the Committee or
such successor committee shall be constituted so as to comply at all times with
the applicable requirements of Rule 16b-3 and Section 162(m). No member of the
Committee shall have within one year prior to his appointment received awards
under the Plan or under any other plan, program or arrangement of Motorola or
any of its affiliates if such receipt would cause such member to cease to be a
"disinterested person" under Rule 16b-3; provided that if at any time Rule 16b-3
so permits without adversely affecting the ability of the Plan to comply with
the conditions for exemption from Section 16 of the Exchange Act (or any
successor provision) provided by Rule 16b-3, one or more members of the
Committee may cease to be a "disinterested person."
7.2 Authority. Subject to the terms of the Plan, and except for the Non-
Employee Stock Options granted under Article 5 (over which the Committee shall
have no discretion), the Committee shall have complete power and authority to:
(a) determine the individuals to whom Employee Stock Options are
granted, the type and amounts to be granted and the time of all such grants;
(b) determine the terms, conditions and provisions of, and
restrictions relating to, each Employee Stock Option granted;
(c) administer, interpret and construe the Plan and the Employee Stock
Options;
(d) prescribe, amend and revoke rules and regulations relating to the
Plan;
(e) maintain accounts, records and ledgers relating to the Plan;
(f) maintain records concerning its decisions and proceedings;
(g) employ agents, attorneys, accountants or other persons for such
purposes as the Committee considers necessary or desirable;
(h) take, at any time, any action permitted by Section 11.1
irrespective of whether any Change in Control has occurred or is imminent; and
(i) do and perform all acts which it may deem necessary or appropriate
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for the administration of the Plan and carry out the purposes of the Plan.
7.3 Determinations. All determinations of the Committee shall be final,
binding and conclusive upon all persons, including Motorola and its Subsidiaries
and Participants and their respective legal representatives, Successors-in
Interest and permitted assigns and upon all other persons claiming by, through,
under or against any of them.
8. AMENDMENT
---------
Except as hereinafter provided, and except as may be required for
compliance with Rule 16b-3 and Section 162(m) of the Code, the Board or the
Committee shall have the right and power to amend the Plan at any time and from
time to time. Only the Board may amend Article 5 of the Plan, subject to such
Article and subject to compliance with Rule 16b-3. Neither the Board nor the
Committee may amend the Plan in a manner which would impair or adversely affect
the rights of the holder of a Stock Option without the holder's consent. If the
Code or any other applicable statute, rule or regulation, including, but not
limited to, those of any securities exchange, requires stockholder approval with
respect to the Plan or any type of Plan amendment, then to the extent so
required, stockholder approval shall be obtained.
9. TERM AND TERMINATION
--------------------
9.1 Term. The Plan shall commence as of the Effective Date and, subject to
the terms of the Plan, including those in Section 14.7 requiring stockholder
approval for implementation or limiting the period over which ISOs may be
granted, shall continue in full force and effect until five (5) years from the
Effective Date, unless sooner terminated by the Board.
9.2 Termination. The Plan may be terminated at any time by the Board.
Termination shall not in any manner impair or adversely affect any Stock Option
outstanding at the time of termination.
10. MODIFICATION OR TERMINATION
---------------------------
10.1 General. Subject to the provisions of Section 10.2, the amendment or
termination of the Plan shall not impair or adversely affect a Participant's
right to any Stock Option granted prior to such amendment or termination.
10.2 Committee's Right. Any Stock Option granted may be converted,
modified, forfeited or canceled, in whole or in part, by the Committee if and to
the extent permitted in the Plan or applicable Stock Option certificate or with
the consent of the Participant to whom such Stock Option was granted. Subject to
the limitations in the Plan, the Committee may grant Stock Options on such terms
and conditions, which may be different than those specified in the Plan, as it
may deem desirable in order to comply with, or make available the benefits of,
the laws of any foreign jurisdiction.
<PAGE>
14
11. CHANGE IN CONTROL
-----------------
11.1 Stock Option Vesting and Payment. Upon the occurrence of a Change in
Control, each Stock Option outstanding on the date on which the Change in
Control occurs shall immediately become exercisable in full for the remainder of
its term and each Participant holding Stock Options shall have the right, at his
or her election made during a period of sixty (60) days following the date on
which the Change in Control occurs, to have Motorola purchase any or all such
Stock Options for an immediate lump-sum cash payment equal to the product of (1)
the excess, if any, of the higher of (i) the average of the high and low sale
prices of the Common Stock as reported on the New York Stock Exchange -Composite
Transactions on the date immediately prior to the date of payment, or if Shares
did not trade on such date, on the last previous day on which Shares traded
prior to such date, or (ii) the highest per Share price for Common Stock
actually paid in connection with the Change in Control, over the per Share
exercise price of each such Stock Option held, and (2) the number of Shares
covered by each such Stock Option.
11.2 Change in Control. A Change in Control shall mean:
A Change in Control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act whether or not Motorola is then subject to such reporting
requirement; provided that, without limitation, such a Change in Control shall
be deemed to have occurred if (A) any "person" or "group" (as such terms are
used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Motorola representing 20% or more of the
combined voting power of Motorola's then outstanding securities (other than
Motorola or any employee benefit plan of Motorola; and, for purposes of the
Plan, no Change in Control shall be deemed to have occurred as a result of the
"beneficial ownership," or changes therein, of Motorola's securities by either
of the foregoing), (B) there shall be consummated (i) any consolidation or
merger of Motorola in which Motorola is not the surviving or continuing
corporation or pursuant to which Shares of Common Stock would be converted into
cash, securities or other property, other than a merger of Motorola in which the
holders of Common Stock immediately prior to the merger have (directly or
indirectly) at least an 80% ownership interest in the outstanding common stock
of the surviving corporation immediately after the merger, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of Motorola, (C) the
stockholders of Motorola approve any plan or proposal for the liquidation or
dissolution of Motorola, or (D) as the result of, or in connection with, any
cash tender offer, exchange offer, merger or other business combination, sale of
assets, proxy or consent solicitation (other than by the Board), contested
election or substantial stock accumulation (a "Control Transaction"), the
members of the Board immediately prior to the first public announcement relating
to such Control Transaction shall thereafter cease to constitute a majority of
the Board.
12. CERTIFICATES AND TRANSFER OF STOCK OPTIONS
------------------------------------------
<PAGE>
15
12.1 Provisions of Stock Option Certificates. ISOs may be evidenced by
Incentive Stock Option certificates and NSOs may be evidenced by Non-Qualified
Stock Option certificates. Each certificate may include, but shall not be
limited to, the following: description of the type of Stock Option; the Stock
Option's duration; its transferability; the exercise price; the exercise period;
the Non-Exercise Period; the person or persons who may exercise the Stock
Option; the effect upon such Stock Option of the Participant's death or other
termination of employment; and the Stock Option's conditions.
12.2 Transfer of Stock Options. Except as set forth in the next sentence of
this Section 12.2, a Stock Option shall not be transferable by a Participant
other than by operation of a death beneficiary designation made by the
Participant in accordance with rules established by the Committee, or the Chief
Executive Officer of Motorola, as appropriate, by will or the applicable laws of
descent and distribution and shall be exercisable during the Participant's
lifetime only by him or her or his or her guardian or legal representative if
the Participant is legally incompetent. Notwithstanding the foregoing, except to
the extent that it would cause the Plan to fail to meet the conditions required
to be met under Rule 16b-3, the Committee shall have the power and authority to
provide, as a term of any NSO, including any outstanding NSO held by a Non-
Employee Director or an Optionee, that such NSO may be transferred without
consideration by the Non-Employee Director or the Optionee to a member or
members of his or her immediate family (i.e., a child, children, grandchild,
grandchildren, or spouse) and/or to a trust or trusts for the benefit of an
immediate family member or family members.
13. PAYMENT
-------
Upon the exercise of a Stock Option, the amount due Motorola is to be paid:
(a) in cash;
(b) by the transfer to Motorola of Shares owned by the Participant
valued at Fair Market Value on the date of transfer;
(c) by any combination of the payment methods specified in (a) and (b)
above; or
(d) such other manner as may be authorized from time to time by the
Committee.
Notwithstanding the foregoing, any method of payment other than (a) and (b) may
be used only with the approval of the Committee or if and to the extent so
provided in the applicable Stock Option certificate.
14. GENERAL
-------
<PAGE>
16
14.1 Tax Withholding. At the time Motorola is required to withhold any
Federal Insurance Contribution Act ("FICA") tax and/or any federal, state or
local tax of any kind with respect to the exercise of any Stock Option, the
Participant shall pay to Motorola the amount of any such FICA, federal, state or
local tax or taxes required to be withheld. The obligations of Motorola under
the Plan shall be conditional on payment of all withholding taxes, and Motorola
shall have the right to deduct any such taxes from any payment of any kind under
the Plan or otherwise due to the Participant. Withholding tax obligations may be
settled, in whole or in part, with Common Stock. At any time when a Participant
is required to pay to Motorola an amount required to be withheld under
applicable tax laws upon exercise of a Stock Option, the Participant may satisfy
this obligation in whole or in part by transfer to Motorola of Shares previously
owned by the Participant, by electing (the "Election") to have Motorola withhold
from the distribution Shares of Common Stock having a value equal (as near as
possible) to the amount required to be withheld or by a combination of such
means, provided, however, that the amount of federal, state and local income
taxes that may be paid by transfer or withholding of Shares shall not exceed the
statutory minimum withholding requirements. The amount of any withholding tax
not paid by transfer or withholding of Shares shall be paid to Motorola in cash.
The value of the Shares transferred or to be withheld shall be based on the Fair
Market Value of the Common Stock on the date that the amount of tax to be
withheld shall be determined ("Tax Date") or if Shares did not trade on the New
York Stock Exchange on the Tax Date, as of the last previous date Shares did so
trade. Each Election must be made on or prior to the Tax Date. The Committee may
disapprove of any Election or may suspend, condition, restrict or terminate the
right to make Elections. An Election is irrevocable, unless revocation is
approved by the Committee.
14.2 Compliance With Legal Requirements. Anything in the Plan to the
contrary notwithstanding: (a) Motorola may, if it shall determine it necessary
or desirable for any reason, at the time of award of any Stock Option or the
issuance of any Shares of Common Stock, require the recipient of the Stock
Option, as a condition to the receipt thereof or to the receipt of Shares of
Common Stock issued pursuant thereto, to deliver to Motorola a written
representation of present intention to acquire the Stock Option or the Shares of
Common Stock issued pursuant thereto for his or her own account for investment
and not for distribution; and (b) if at any time Motorola further determines
that the listing, registration or qualification (or any updating of any such
document) of any Stock Option or the Shares of Common Stock issuable pursuant
thereto is necessary on any securities exchange or under any federal or state
securities or blue sky law, or that the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with the grant of any Stock Option or the issuance of Shares of Common Stock
pursuant thereto, such Stock Option shall not be granted or such Shares of
Common Stock shall not be issued, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to Motorola. In
addition, Motorola may terminate any Stock Option or terminate, condition,
restrict or limit the issuance or delivery of any Shares of Common Stock if it
determines that such Stock Option or delivery violates any applicable laws,
regulations or rules, including but not limited to, those of any
<PAGE>
17
stock exchange or Rule 16b-3.
14.3 Indemnification and Exculpation. Each person, who is or shall have
been a member of the Board or of the Committee, shall be indemnified and held
harmless by Motorola against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by such person in
connection with or resulting from any claim, action, suit or proceeding to which
such person may be a party or in which such person may be involved by reason of
any action taken or failure to act under the Plan and against and from any and
all amounts paid by such person in settlement thereof (with Motorola's written
approval) or paid by such person in satisfaction of a judgment in any such
action, suit, or proceeding, except a judgment based upon a finding of such
person's bad faith, subject, however, to the condition that upon the institution
of any claim, action, suit or proceeding against such person, such person shall
in writing give Motorola an opportunity, at its own expense, to participate in,
and to the extent it may wish, to assume the defense thereof before such person
undertakes to handle it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law, under the Delaware General Corporation Law,
the Restated Certificate of Incorporation or By-Laws of Motorola or otherwise,
or any power that Motorola may have to indemnify such person or hold such person
harmless. Each member of the Board or of the Committee, and each officer and
employee of Motorola shall be fully justified in relying or acting upon any
information furnished on behalf of Motorola by any person or persons other than
himself or herself in connection with the administration of the Plan. In no
event shall any person who is or shall have been a member of the Board or of the
Committee, or an officer or employee of Motorola, be liable for any
determination made or other action taken or any omission to act in reliance upon
any such information, or for any action taken (including the furnishing of
information) or any failure to act, if in good faith.
14.4 Headings. The headings of the sections and subsections of the Plan are
for convenience of reference only and shall not be used to construe any
provision of the Plan.
14.5 Governing Law. The Plan shall be governed by, and construed and
administered in accordance with, the laws of the State of Illinois except to the
extent that any federal law otherwise controls.
14.6 Employment Rights. Nothing in the Plan or in any grant of any Employee
Stock Option shall restrict the right of Motorola or any Subsidiary to terminate
the employment of any Participant at any time, with or without cause, or to
increase or decrease the compensation of any Participant.
14.7 Approval by Stockholders. The Plan has been approved by the Board of
Directors and is subject to approval by the affirmative votes of the holders of
a majority of the Shares present, or represented, and entitled to vote at the
meeting of stockholders at which the Plan is submitted.
<PAGE>
18
14.8 Implementation of the Plan and Grant of Employee Stock Options Under
1991 Plan. If the Plan is implemented pursuant to Section 14.7, except as herein
provided, no further options will be granted under the Share Option Plan of
1991. If the Board of Directors terminates this Plan after it has been
implemented, stock options may be granted under the Share Option Plan of 1991,
but not as to any Shares issued or subject to Stock Options under this Plan.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. NAME AND PURPOSE........................................................1
1.1 Name..............................................................1
1.2 Purpose...........................................................1
2. DEFINITIONS.............................................................1
2.1 General Definitions...............................................1
2.2 Other Definitions.................................................3
3. SHARES SUBJECT TO PLAN..................................................3
3.1 Number of Shares..................................................3
3.2 Reusage...........................................................3
3.3 Adjustments.......................................................4
4. EMPLOYEE STOCK OPTIONS..................................................4
4.1 Grant of Employee Stock Options...................................4
4.2 NSOs and ISOs.....................................................4
4.3 Exercise of Employee Stock Options; Payment.......................5
4.4 Non-Exercise Period...............................................5
4.5 Effect of Termination of Employment on Employee Stock Options.....5
5. NON-EMPLOYEE STOCK OPTIONS..............................................9
5.1 Automatic Grant of Non-Employee Stock Options....................10
5.2 Price............................................................10
5.3 Exercisability...................................................10
5.4 Payment..........................................................10
5.5 Termination......................................................10
5.6 Retirement.......................................................11
5.7 Death............................................................11
5.8 Amendments.......................................................11
5.9 Interpretation...................................................11
6. ELIGIBILITY............................................................11
7. ADMINISTRATION.........................................................11
7.1 Committee........................................................11
7.2 Authority........................................................12
7.3 Determinations...................................................13
8. AMENDMENT..............................................................13
9. TERM AND TERMINATION...................................................13
9.1 Term.............................................................13
9.2 Termination......................................................13
10. MODIFICATION OR TERMINATION............................................13
10.1 General..........................................................13
10.2 Committee's Right................................................13
11. CHANGE IN CONTROL......................................................14
11.1 Stock Option Vesting and Payment.................................14
11.2 Change in Control................................................14
12. CERTIFICATES AND TRANSFER OF STOCK OPTIONS.............................14
12.1 Provisions of Stock Option Certificates..........................15
12.2 Transfer of Stock Options........................................15
13. PAYMENT................................................................15
14. GENERAL................................................................15
14.1 Tax Withholding..................................................16
14.2 Compliance with Legal Requirements...............................16
14.3 Indemnification and Exculpation..................................17
14.4 Headings.........................................................17
14.5 Governing Law....................................................17
14.6 Employment Rights................................................17
14.7 Approval by Stockholders.........................................17
14.8 Implementation of the Plan and Grant of Employee Stock Options
Under 1991 Plan..................................................18
</TABLE>
<PAGE>
Exhibit 10.8
The Executive Health Plan
I. General Information
A. Eligibility
B. Pre-Existing Conditions
C. Deductibles
D. General Rules
II. The Executive Health Plan In Conjunction with the Health Advantage Plan and
the Global Health Advantage Plan
A. Co-Payments
B. Inpatient and Outpatient Services
C. Coverage for Out-of-Network Providers
D. Coverage for Non-Network Providers
E. Coverage Chart for Medical Benefits
F. Coverage for Vision Care
G. Coverage Chart for Vision Care Benefits
H. Coverage for Hearing Care
I. Coverage Chart for Hearing Care Benefits
J. Coverage for Non-Covered Expenses
III. The Executive Health Plan In Conjunction with the Basic Medical Plan
A. Coverage for Expenses Covered by the Basic Medical Plan
B. Coverage Chart for Medical Benefits
C. Coverage for Vision Care
D. Coverage for Hearing Care
E. Coverage for Non-Covered Expenses
F. Coverage Chart for Medical Benefits
IV. The Executive Health Plan in Conjunction with the Mental Health and
Chemical Dependency Program
A. Explanation of Plan
B. Coverage of In-Network Expenses
C. Coverage of Out-of-Network Expenses
D. Coverage Chart for Mental Health and Chemical Dependency
V. The Executive Health Plan in Conjunction with the Prescription Drug Program
(PCS)
A. Prescriptions Covered by the PCS Plan
B. Prescriptions Not Covered by the PCS Plan
VI. The Executive Health Plan in Conjunction with the Motorola Dental Plan
A. Coverage for Expenses Covered by the Motorola Dental Plan
B. Coverage for Orthodontia
C. Coverage for Expenses Not Covered by the Motorola Dental Plan
VII. The Executive Health Plan in Conjunction with Offshore Medical Plans
Effective: 1/1/96
<PAGE>
1
I. General Information
-------------------
Eligibility
- -----------
Executives and qualified dependents are eligible for the Executive Health Plan
if enrolled in the Health Advantage Plan, the Global Health Advantage Plan (for
expatriates), the Motorola Basic Medical (Indemnity) Plan or in one of our
offshore medical plans. Executives are not eligible for medical coverage under
the Executive Health Plan if enrolled in a United States-based Health
Maintenance Organization (HMO). Limited coverage for dental and vision care
services is available for HMO enrolled participants. All enrollment rules
applicable to the primary plan in which you are a member apply to the Executive
Health Plan. Coverage for dependent children ceases at age 19 or age 23 if the
dependent is enrolled full-time (12 or more hours) in an accredited college or
university.
Pre-Existing Conditions
- -----------------------
Pre-existing conditions are covered from the first day of enrollment in the
Executive Health Plan for executives and qualified dependents. The pre-existing
conditions for primary plans are not waived, however, and benefits for pre-
existing conditions will be paid only under the Executive Health Plan.
Deductibles
- -----------
There are no deductibles to satisfy under the Executive Health Plan. Any
deductibles under the primary plans must be satisfied. The Executive Health Plan
will reimburse you for half of those deductibles.
General Rules
- -------------
Executives must comply with all primary plan rules to receive full coverage from
their primary plans and the Executive Health Plan. This includes contacting
CallCare for in-patient admissions, using network providers as described in the
primary plans and satisfying all other requirements under the primary plans.
Neither the Motorola Benefits Administration Office in Phoenix nor Executive
Compensation will confirm benefits under the Executive Health Plan for
providers. The Executive Health Plan is a non-qualified plan and only
confirmation of benefits on the primary plans will be made.
The Executive Health Plan will pay for charges governed by Section 213 of the
United States Internal Revenue Service tax code. Motorola's attorneys will act
as the final authorities on interpretation of Section 213 for any charges
submitted for reimbursement under the Executive Health Plan.
<PAGE>
2
The Executive Health Plan will not pay for charges considered over and above
reasonable and customary under any of its primary plans. The Executive Health
Plan will not cover charges for missed appointments, contact lens replacement
insurance, plastic or cosmetic surgery or any other charges that are excluded
from IRS Section 213.
The Executive Health Plan will not process any claims that are older than one
year from date of service. There will be no exceptions made to this policy.
<PAGE>
3
II. The Executive Health Plan In Conjunction with the Health Advantage Plan and
the Global Health Advantage Plan
Co-Payments
- -----------
Under the Health Advantage Plan, network providers will charge a $10 co-payment
for office visits and lab work. This is the out-of-pocket cost under the plan
and no additional payment will be made for co-payments under the Executive
Health Plan.
An exception to this rule is the Health Screening required for an executive
health plan participant under the Health Advantage Plan. If the health
screenings required under HAP are performed in conjunction with the Executive
Physical, Motorola will reimburse the $10 co-payment under the Executive Health
Plan.
In-Network Inpatient and Outpatient Services
- --------------------------------------------
The Executive Health Plan will reimburse the 10% not covered by the Health
Advantage Plan for inpatient and outpatient hospital admissions, procedures
performed in a specialty clinic or doctor's office, or for physical therapy. To
obtain this full coverage, all HAP rules regarding CallCare must be followed and
network providers must be used. Please refer to the chart at the end of this
section for a list of procedures covered under inpatient and outpatient
services.
Out-of-Network Coverage
- -----------------------
For executives enrolled in the Global Health Advantage Plan, all service is
considered "out-of-network." Coverage for offshore medical claims will be paid
at 90% under the primary plan and the additional 10% will be covered by the
Executive Health Plan. Coverage for U.S. medical claims will be paid at 90% of
reasonable and customary charges under Global HAP. The additional 10% of
reasonable and customary charges will be covered by the Executive Health Plan.
For executives enrolled in the Health Advantage Plan, if there is not a network
provider available in the area, coverage will be 90% of reasonable and customary
charges under the Health Advantage Plan. The additional 10% of reasonable and
customary charges will be covered by the Executive Health Plan. This also
applies to students who may be attending college in an area not served by one of
Motorola's provider networks.
Non-Network Coverage
- --------------------
If executives or their qualified dependents receive care from a non-network
provider in an area where a Motorola network has been established, the Health
Advantage Plan will pay nothing. The Executive Plan will pay 50% of the
reasonable and customary charges. There will be no exceptions to this policy.
<PAGE>
4
COVERAGE EXAMPLES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Health Advantage Plan
- --------------------------------------------------------------------------------
Medical Service Health Advantage Plan Executive Health Plan
- --------------------------------------------------------------------------------
<S> <C> <C>
Required Screenings 100% at on-site health Not applicable
fair
$10.00 covered if
$10.00 co-pay at network included in executive
provider's office physical
- --------------------------------------------------------------------------------
Early Detection Screenings $10.00 co-pay at network No coverage
provider's office
- --------------------------------------------------------------------------------
Office/Clinic Visits $10.00 No coverage
(network provider)
- --------------------------------------------------------------------------------
Office/Clinic Visits No coverage 50% up to R&C
(non-network provider)
- --------------------------------------------------------------------------------
Laboratory & X-Ray work $10.00 No coverage
done at network
provider's office
- --------------------------------------------------------------------------------
Allergy Testing and 90% of negotiated rate 100% of negotiated
Injections balance
- --------------------------------------------------------------------------------
Durable Medical Equipment 90% 100% of balance
and Supplies
- --------------------------------------------------------------------------------
Specialty Lab & X-Ray 90% of negotiated rate 100% of negotiated
(i.e., MRI, Ultrasounds) balance
- --------------------------------------------------------------------------------
Surgery - Inpatient or 90% of negotiated rate 100% of negotiated
Outpatient (with CallCare balance
and using a Select
Hospital)
- --------------------------------------------------------------------------------
Surgery - Non-Emergency 50% of negotiated rate 50% of negotiated rate
Inpatient (without balance
CallCare and using a
Select Hospital)
- --------------------------------------------------------------------------------
Surgery - Non-Emergency 0% 50% of R&C
Inpatient (with CallCare
and without using a
Select Hospital)
- --------------------------------------------------------------------------------
Surgery - Non-Emergency 0% 50% of R&C
Inpatient (without
CallCare and without
using a Select Hospital)
- --------------------------------------------------------------------------------
Maternity 90% of hospital charges 100% of remaining
at Select Hospitals hospital charges
$10.00 co-pay for No coverage
pre-natal and
post-partum checks
- --------------------------------------------------------------------------------
Therapies: Occupational, 90% of negotiated rates 100% of remaining
Physical, Respiratory or negotiated rates or
Speech (limited to 52 50% of visits after 52
visits per year for all in a calendar year
except Respiratory)
- --------------------------------------------------------------------------------
Training: Biofeedback & 90% of negotiated rates 100% of remaining
Orthoptics negotiated rates
- --------------------------------------------------------------------------------
Out of Area Treatment (All 90% of reasonable and 100% up to reasonable
offshore treatment for customary and customary
Global HAP participants)
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
5
Vision Care Coverage
- --------------------
If the executive or a qualified dependent chooses to use the Vision Service Plan
to obtain vision services, the co-payments will not be covered by the Executive
Health Plan. Any expenses for glasses or contacts over and above the co-
payments will be covered at 100% up to $500 for each family member each year.
In addition, if the executive or qualified dependent wishes to purchase
additional pairs of glasses they will be covered at 100% up to the $500 limit.
If the executive or a qualified dependent chooses to go outside the Vision
Service Plan, the exam will be paid at 50% (the non-network provider rate) and
any glasses or contacts would be covered at 100% up to $500 per family member
per year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Vision Service Plan
- --------------------------------------------------------------------------------
Expense Vision Service Plan Executive Health Plan
- --------------------------------------------------------------------------------
<S> <C> <C>
Vision examination (must $10.00 co-pay at No coverage for network
be at least 12 months network provider's provider, non-network
between exams) office provider covered at 50%
- --------------------------------------------------------------------------------
Eyeglass lenses (must be $15.00 A $500 per person per
at least 12 months year maximum has been
between lens purchases) set for any additional
lenses, frames
- --------------------------------------------------------------------------------
Eyeglass frames (must be $30.00 or contacts purchased
at least 24 months under the Vision Service
between frame purchases) Plan.
If the Vision Service
Plan is
- --------------------------------------------------------------------------------
Contact lenses (instead of Up to $100.00 not used, $500 per
eyeglass lenses and person per year maximum
frames must be at least is set for purchase of
12 months between lenses, frames or
purchases) contacts
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
6
Hearing Care Coverage
- ---------------------
If the executive or a qualified dependent chooses to use National Ear Care Plan
(NECP), the examination co-payments will not be covered by the Executive Health
Plan. For hearing aids, the Executive Health Plan will pay 50% of costs over the
maximum covered by the NECP.
If the executive or a qualified dependent chooses not to use the National Ear
Care Plan, the exam and/or hearing aid expenses will be covered at 50%.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
National Ear Care Plan
- --------------------------------------------------------------------------------
Expense National Ear Care Plan Executive Health Plan
- --------------------------------------------------------------------------------
<S> <C> <C>
Hearing Screenings (ages 5 100% coverage using No coverage if using
and over, must be at network provider NECP, 50% if non-network
least 12 months between provider
screenings)
- --------------------------------------------------------------------------------
Hearing exam:
Adults and children 12 and $10.00 No coverage if using
over (36 month intervals) NECP, 50% if non-network
Children under age 12 (24 $10.00 provider
month intervals)
Children under age 5 (24 $20.00
month intervals)
- --------------------------------------------------------------------------------
Hearing aid, hearing aid Up to $500.00 50% of costs over $500.00
repair, and when if using NECP, 50% of
necessary, ear mold (36 total if using
month intervals) non-network provider
- --------------------------------------------------------------------------------
Hearing aid evaluation, 100% coverage using No coverage using NECP,
fitting and dispensing network provider 50% if using non-network
(36 month intervals) provider
- --------------------------------------------------------------------------------
Cleaning/checking of 100% coverage using No coverage if using
hearing aids (12 month network provider NECP, 50% of total if
intervals) using non-network provider
- --------------------------------------------------------------------------------
</TABLE>
Non-Covered Expenses
- --------------------
Expenses for chiropractic care or other medically necessary expenses allowed for
deduction by IRS Section 213, but not covered by the Health Advantage Plan, will
be covered at 50% under the Executive Health Plan.
<PAGE>
7
III. The Executive Health Plan in Conjunction with the Basic Medical Plan
--------------------------------------------------------------------
Charges Covered by the Basic Medical Plan
- -----------------------------------------
The Basic Medical Plan will pay 80% of reasonable and customary charges for non-
routine doctor's visits, inpatient and outpatient hospitalization, physical
therapies and other medical charges. The Executive Health Plan will reimburse
50% of the balance up to reasonable and customary for these services. To obtain
full coverage, all rules for contacting CallCare and using Select Hospitals must
be followed. Please see the chart below for a detailed look at the coverage.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Basic Medical Plan
- --------------------------------------------------------------------------------
<S> <C> <C>
Medical Service Basic Medical Plan Executive Health Plan
- --------------------------------------------------------------------------------
Office/Clinic Visits 80% of reasonable & 50% of remaining
(non-routine) customary expenses balance up to R&C
- --------------------------------------------------------------------------------
Laboratory & X-Ray work 80% of R&C 50% of remaining
balance up to R&C
- --------------------------------------------------------------------------------
Allergy Testing and 80% of R&C 50% of remaining
Injections balance up to R&C
- --------------------------------------------------------------------------------
Durable Medical Equipment 80% of R&C 50% of remaining
and Supplies balance up to R&C
- --------------------------------------------------------------------------------
Specialty Lab & X-Ray 80% of R&C 50% of remaining
(i.e., MRI, Ultrasounds) balance up to R&C
- --------------------------------------------------------------------------------
Surgery - Inpatient or 80% of negotiated rate 50% of remaining
Outpatient (with CallCare balance
and using a Select
Hospital)
- --------------------------------------------------------------------------------
Surgery - Non-Emergency 50% of negotiated rate 50% of negotiated rate
Inpatient (without balance
CallCare and using a
Select Hospital)
- --------------------------------------------------------------------------------
Surgery - Non-Emergency 50% of R&C 50% of R&C balance
Inpatient (with CallCare
and without using a
Select Hospital)
- --------------------------------------------------------------------------------
Surgery - Non-Emergency 50% of R&C 50% of R&C balance
Inpatient (without
CallCare and without
using a Select Hospital)
- --------------------------------------------------------------------------------
Maternity 80% of hospital charges 50% of remaining
at Select Hospitals balance
80% of doctor's fees up 50% of R&C balance
to R&C
- --------------------------------------------------------------------------------
Therapies: Occupational, 90% of negotiated rates 50% of remaining
Physical, Respiratory or balance up to R&C
Speech (limited to 52
visits per year for all
except Respiratory)
- --------------------------------------------------------------------------------
Training: Biofeedback & 90% of negotiated rates 50% of remaining
Orthoptics balance up to R&C
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
8
Vision Care
- -----------
The Executive Health Plan will reimburse 50% of the charges for an eye exam.
The Executive Health Plan will reimburse up to $500 per family member per year
for prescription glasses, contact lenses or prescription sun glasses.
Hearing Care
- ------------
The Executive Health Plan will reimburse 50% of the charges for hearing
screening, hearing exams and for hearing aids.
Non-Covered Expenses
- --------------------
Expenses for chiropractic care or other medically necessary expenses allowed for
deduction by IRS Section 213, but not covered by the Basic Health Plan, will be
covered at 50% under the Executive Health Plan.
<PAGE>
9
IV. The Executive Health Plan in Conjunction with the Mental Health and
-------------------------------------------------------------------
Chemical Dependency Program
- ---------------------------
Explanation of Plan
- -------------------
The Mental Health and Chemical Dependency Program applies to participants in
both the Health Advantage Plan and the Basic Medical Plan. The program uses
network providers that have been screened for the proper credentials and must
meet specific standards of care. If services are performed by non-network
providers, benefits under the plan as well as number of visits or days of
hospitalization will be reduced.
In-Network Providers
- --------------------
The Executive Health Plan will reimburse the additional 10% not covered by the
Mental Health and Chemical Dependency Program for in-network inpatient
facility/provider and day or evening treatment (partial hospitalization). The
Executive Health Plan will not reimburse the $10 co-payment for in-network
outpatient therapy.
Out-of-Network Providers
- ------------------------
If out-of-network providers are chosen, the Mental Health and Chemical
Dependency Program will pay 50% of the Negotiated Network Schedule (NNS) rates
for properly certified providers. The Executive Health Plan will reimburse 50%
of the NNS balance. Since there are limits placed on the number of visits made
to an outpatient provider or days of hospitalization, the Executive Health Plan
will pay 50% of the NNS rates after the visit or hospitalization limits have
been reached.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In-Network Provider Out-of-Network Provider
- --------------------------------------------------------------------------------
Executive Executive
Medical Service Primary Plan Plan Primary Plan Plan
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inpatient Facility 90% of 100% of 50% of 50% of NNS
scheduled scheduled Negotiated balance,
fees fee balance Network 50% of NNS
Schedule charges
(NNS), after 10
annual days
maximum 10
day stay
- --------------------------------------------------------------------------------
Inpatient Provider 90% of 100% of 50% of 50% of NNS
scheduled scheduled NNS, balance,
fees fee balance annual 50% of NNS
maximum 10 charges
days after 10
days
- --------------------------------------------------------------------------------
Day/Evening Treatment 90% of 100% of 50% of 50% of NNS
(partial hospitalization) scheduled scheduled NNS, balance,
fees fee balance annual 50% of NNS
maximum 10 charges
days after 10
days
- --------------------------------------------------------------------------------
Outpatient $10 No coverage 50% of 50% of NNS
co-payment NNS, balance,
annual 50% of NNS
maximum 20 charges
visits after 20
visits
- --------------------------------------------------------------------------------
Annual Out-of-Pocket Included in Not Not Not
Maximum HAP or applicable included applicable
Basic in HAP or
Medical Basic
Plan Medical
maximums Plan
maximums
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
10
Continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In-Network Provider Out-of-Network Provider
- --------------------------------------------------------------------------------
Executive Executive
Medical Service Primary Plan Plan Primary Plan Plan
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Lifetime Maximum $1,000,000 $2,000,000 $50,000 $2,000,000
(including (including
non-mental non-mental
health health
treatment) treatment)
- --------------------------------------------------------------------------------
Chemical Dependency 3 per No maximum 3 per No maximum
Courses of Treatment covered covered
person person
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
11
V. The Executive Health Plan in Conjunction with the Prescription Drug
Program (PCS)
Covered Prescriptions
- ---------------------
The Executive Health Plan does not reimburse the $5.00 or $10.00 co-payment for
covered PCS prescriptions. The Executive Health Plan will also not reimburse
for the difference between generic and brand name prescription drugs if the
doctor okays the generic but the patient requests the brand name. If the
executive chooses not to use the PCS plan for covered prescriptions, no coverage
will be made under the Executive Health Plan.
Non-Covered Prescriptions
- -------------------------
The Executive Health Plan will reimburse 50% of the cost of prescription drugs
not covered by the PCS plan (i.e., birth control pills, Retin-A if over age 26).
The Executive Health Plan will also reimburse 50% of the cost of some over-the-
counter medications if the medication is prescribed by a physician. For
example, if a physician orders a patient to take one aspirin per day for a heart
condition, the cost of the aspirin would be considered for reimbursement. A
copy of the physician's prescription with diagnosis is needed and must be
renewed annually for this coverage to be effective.
<PAGE>
12
VI The Executive Health Plan in Conjunction with the Motorola Dental Plan
Covered Expenses
- ----------------
The Executive Health Plan will reimburse 50% of the reasonable and customary
balance for dental charges covered by the Motorola Dental Plan. If the Motorola
Dental Plan cuts back the benefit for service, the Executive Health Plan will
pick up the full 50% of the reasonable and customary charges, and will not
consider the reduced benefit.
For example: If a dentist places a crown and, after review, the Motorola Dental
Plan judges that the tooth needed a two-surface filling, the Motorola Dental
Plan will pay only 80% of the reasonable and customary charge for a two-sided
filling. The Executive Health Plan will reimburse 50% of the difference between
the two-sided filling and the R&C price of a crown.
Motorola urges all employees to obtain a pre-treatment estimate for any dental
work performed so that the dentist and the employee are aware of any cut backs
to the benefits before the work is performed. The pre-treatment estimate will
only provide the benefit under the Motorola Dental Plan. The Executive Plan, as
a non-qualified plan, will not be listed.
Orthodontia
- -----------
There are two ways in which orthodontia bills can be covered under the Executive
Health Plan:
1) If an executive chooses to pay the complete orthodontia bill up front and
submits the entire bill and proof of payment, the Motorola Dental Plan will
reimburse the maximum amount allowed immediately. The Executive Health Plan
will reimburse 50% of the balance immediately to the executive. This is the
only situation in which a Motorola plan and the Executive Plan will reimburse
for services that have not been completed.
2) If the executive chooses to pay the initial payment and then make monthly
payments to the orthodontist, the Motorola Dental Plan will reimburse each
payment at 80% up to the maximum amount allowed. The Executive Health Plan will
pay 50% of the balance of each bill. After the Motorola Dental Plan has paid the
maximum allowed, the Executive Health Plan will continue to cover the monthly
fees at 50%.
Non-Covered Expenses
- --------------------
For expenses not covered by the Motorola Dental Plan, or for expenses incurred
after the yearly annual maximum has been reached, the Executive Health Plan will
reimburse 50% of the reasonable and customary charges.
<PAGE>
13
VII The Executive Health Plan in Conjunction with Offshore Medical Plans
For executives and their qualified dependents not covered by a U.S. plan, the
Executive Health Plan will pay 50% of the balances not paid by local employee
plans or by government plans. If certain coverage is not offered at all, dental
for example, the Executive Health Plan will pay 50% of the total charges. The
Benefits office requires that for charges not covered under local plans, an
executive needs to submit a written statement with signature that the local plan
does not provide coverage for the type of service being submitted. A new
statement must be on file each year to continue to pay benefits.
Bills for services must have written on them, in English, the following
information:
1) Date of service
2) Type of service (office visit, lab work, eye glasses)
3) Diagnosis
4) Provider's name
5) Exchange rate for local currency to U.S. dollars
If the exchange rate is not provided on the bill, the Benefits office will use
the exchange rate for the date the bill is processed. All other information must
be on the bill or the executive will receive an E-Mail asking for additional
information.
Payments under the Executive Health Plan are made in U.S. currency and checks
are sent to the executive's home.
<PAGE>
Exhibit 10.12
MOTOROLA, INC.
NON-EMPLOYEE DIRECTORS' STOCK PLAN
as amended August 15, 1996
1. Purpose
The purpose of the Motorola, Inc. Non-Employee Directors' Stock Plan (the
"Plan") is to advance the interests of Motorola, Inc. (the "Company") and its
stockholders by enabling members of the Board of Directors of the Company (the
"Board") who are not employees of the Company or any of its Subsidiaries to
receive shares of the Company's common stock, par value $3 per share, ("Common
Stock"), which Common Stock may be either authorized but unissued or treasury
shares, in lieu of all or a portion of the compensation they receive for
membership on the Board and committees thereof.
2. Administration
The plan shall be administered by the Compensation Committee of the Board (the
"Committee"). The Committee shall, subject to the provisions of the Plan, have
the power to construe thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decisions of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may authorize any one or
more of its members or the secretary of the Committee or any officer, appointed
vice president or employee of the Company to execute and deliver documents on
behalf of the Committee. No member of the Committee shall be liable for anything
done or omitted to be done by him or her or by any other member of the Committee
in connection with the Plan, except for his or her own willful misconduct or as
expressly provided by statute.
3. Participation
Each member of the Board who is not a regular employee of the Company or any of
its Subsidiaries (a "Non-Employee Director") shall be eligible to participate in
the Plan. As used herein, the term "Subsidiary" means any partnership,
corporation, association, limited liability company, joint stock company, trust,
joint venture, unincorporated organization or other business entity of which (i)
if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or of
the other Subsidiaries of the Company or a combination thereof, or (ii) if a
partnership, association, limited liability company, joint stock company,
trust, joint venture, unincorporated organization or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by the Company or one or
more Subsidiaries of the Company or a combination thereof. For purposes hereof,
the Company or a Subsidiary shall be deemed to have a majority ownership
interest in a
<PAGE>
2
partnership, association, limited liability company, joint stock company, trust,
joint venture, unincorporated organization or other business entity if the
Company or such Subsidiary shall be allocated a majority of partnership,
association, limited liability company, joint stock company, trust, joint
venture, unincorporated organization or other business entity gains or losses or
shall be or control the managing director, the trustee, a manager or a general
partner of such partnership, association, limited lability company, joint stock
company, trust, joint venture, unincorporated organization or other business
entity.
4. Election to Receive Common Stock in Lieu of Cash Compensation
A Non-Employee Director may elect to reduce all or part of the cash compensation
otherwise payable for services to be rendered by him or her as a director
(including the annual retainer fee and any fees payable for services on the
Board or any committee thereof) and to receive in lieu thereof shares of Common
Stock. Any such election (a) shall be in writing, (b) shall specify an amount of
such compensation to be received in the form of Common Stock, expressed as a
percentage of the compensation otherwise payable in cash, as an amount in
dollars of compensation otherwise payable in cash or as a type of fee (e.g.,
retainer fee) otherwise payable in cash, and (c) shall become effective on the
date of receipt by the Company. Any such election shall continue in effect until
a written election to revoke or change such election is received by the Company.
5. Issuance of Common Stock
If a Non-Employee Director elects pursuant to Paragraph 4 above to receive
Common Stock, there shall be issued to such director promptly after the end of
each calendar quarter with respect to which such election applies a number of
shares of Common Stock equal to the amount of such compensation divided by the
average of the high and low prices per share of Common Stock reported for the
New York Stock Exchange - Composite Transactions on the last business day of the
calendar quarter for which the compensation would have been paid in cash in the
absence of such election; provided, however, if the New York Stock Exchange is
not open for trading on such business day or if Common Stock does not trade on
such business day, the average of the high and low prices for the last day of
such calendar quarter on which Common Stock did so trade shall be used. To the
extent that the application of the foregoing formula would result in fractional
shares of Common Stock being issuable, cash will be paid to the Non-Employee
Director in lieu of such fractional shares based upon the value established
pursuant to such formula.
6. Number of Shares of Common Stock Issuable Under the Plan
The maximum number of shares of Common Stock that may be purchased under the
Plan shall be 100,000; provided, however, that if the Company shall at any time
increase or decrease the number of its outstanding shares of Common Stock or
change in any way the rights and privileges of such shares by means of a payment
of a stock dividend or any other distribution upon such shares payable in Common
Stock, or through a stock split, reverse stock split, subdivision,
consolidation,
<PAGE>
3
combination, reclassification or recapitalization involving Common Stock, then
the numbers, rights and privileges of the shares issuable under the Plan shall
be increased, decreased or changed in like manner.
7. Miscellaneous Provisions
(a) Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Company.
(b) A participant's rights and interest under the Plan may not be assigned or
transferred, hypothecated or encumbered in whole or in part either directly or
by operation of law or otherwise (except in the event of a participant's death,
by will or the laws of descent and distribution), including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in
any other manner, and no such right or interest of any participant in the Plan
shall be subject to any obligation or liability of such participant.
(c) No shares of Common Stock shall be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities exchange and
other applicable laws and requirements.
(d) It shall be a condition to the obligation of the Company to issue shares of
Common Stock hereunder, that the participant pay to the Company, upon its
demand, such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold federal, state, local or foreign income or
other taxes. If the amount requested is not paid, the Company shall have no
obligation to issue, and the participant shall have no right to receive, shares
of Common Stock.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the issuance of shares hereunder.
(g) By accepting any Common Stock hereunder or other benefit under the Plan,
each participant and each person claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company or the Committee.
(h) The appropriate officers of the Company shall cause to be filed any
registration statement required by the Securities Act of 1933, as amended, and
any reports, returns or other information regarding any shares of Common Stock
issued pursuant hereto as may be required by Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any other
applicable statute, rule or regulation.
(i) The provisions of this Plan shall be governed by and construed in
accordance with
<PAGE>
4
the laws of the State of Delaware.
(j) Pending issuance of shares of Common Stock hereunder, all compensation
earned by a Non-Employee Director with respect to which an election to receive
Common Stock pursuant to Paragraph 4 above has been made shall be the property
of such director and shall be paid to him or her in cash in the event that
shares of Common Stock are not used.
(k) Headings are given to the sections of this Plan solely as a convenience to
facilitate reference. Such headings, numbering and paragraphing shall not in
any case be deemed in any way material or relevant to the construction of this
Plan or any provisions thereof. The use of the singular shall also include
within its meaning the plural, where appropriate, and vice versa.
8. Amendment
The Plan may be amended at any time and from time to time by resolution of the
Board as the Board shall deem advisable; provided, however, that no amendment
shall become effective without stockholder approval if such stockholder approval
is required by law, rule or regulation, and provided further, to the extent
required by Rule 16b-3 under Section 16 of the Exchange Act, in effect from time
to time, Plan provisions shall not be amended more than once every six months,
except that the foregoing shall not preclude any amendment to comport with
changes in the Internal Revenue Code of 1986, the Employee Retirement Income
Security Act of 1974 or the rules thereunder in effect from time to time. No
amendment of the Plan shall materially and adversely affect any right of any
participant with respect to any shares of Common Stock theretofore issued
without such participant's written consent.
9. Termination
This Plan shall terminate upon the earlier of the following dates or events to
occur: (a) upon the adoption of a resolution of the Board terminating the Plan;
or (b) ten years from the date the Plan is initially approved and adopted by the
stockholders of the Company in accordance with Paragraph 10 below. No
termination of the Plan shall materially and adversely affect any of the rights
or obligations of any person without his or her consent with respect to any
shares of Common Stock theretofore earned and issuable under the Plan.
10. Stockholder Approval and Adoption
The Plan shall be submitted to the stockholders of the Company for their
approval and adoption at the meeting of stockholders of the Company to be held
on May 2, 1995. The Plan shall not be effective unless and until the Plan has
been so approved and adopted. The stockholders shall be deemed to have approved
and adopted the Plan only if it is approved and adopted at a meeting of the
stockholders duly held on that date (or any adjournment of said meeting
occurring subsequent to such date) by vote taken in the manner required by the
laws of the State of Delaware.
<PAGE>
Exhibit 11
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common and Common Equivalent Share
(In millions, except per share amounts)
<TABLE>
<CAPTION>
For the Years Ended
-----------------------------------
Dec. 31, Dec. 31,
1996 1995
------------- ------------
<S> <C> <C>
Net Income $ 1,154 $ 1,781
Add:
Interest on Zero coupon notes due
2009 and 2013, net of tax and
effect of executive incentive and
employee profit sharing plans 4 7
------------- ------------
Adjusted net income $ 1,158 $ 1,788
============= ============
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE - PRIMARY:
- ---------------------------------------
Weighted average common shares
outstanding 592.5 589.7
Common equivalent shares:
Stock options 9.9 12.8
Zero coupon notes due 2009 and 2013 6.6 7.2
------------- ------------
Common and common equivalent
shares-primary (in millions) 609.0 609.7
------------- ------------
Net earnings per share - primary $ 1.90 $ 2.93
============= ============
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE - FULLY DILUTED:
- ---------------------------------------
Weighted average common shares
outstanding 592.5 589.7
Common equivalent shares:
Stock options 10.5 12.9
Zero coupon notes due 2009 and 2013 6.6 7.2
------------- ------------
Common and common equivalent
shares-fully diluted (in millions) 609.6 609.8
------------- ------------
Net earnings per share-fully diluted $ 1.90 $ 2.93
============= ============
</TABLE>
<PAGE>
Exhibit 21
MOTOROLA, INC.
LISTING OF COMBINED AND MAJOR SUBSIDIARIES
12/31/96
Motorola International Capital Corporation Delaware
Motorola International Development Corporation Delaware
Embarc Communications Services, Inc. Nevada
Motorola Foreign Sales Corporation Virgin Islands
Motorola Credit Corporation Delaware
Motorola Ardis, Inc. Delaware
Nippon Motorola Limited Japan
Motorola G.m.b.H. Germany
Motorola Limited England
Motorola Asia Limited Hong Kong
Motorola Korea Limited Korea
Motorola Canada Limited Canada
Motorola Israel Limited Israel
Motorola Semiconducteurs S.A. France
Motorola Malaysia Sdn. Bhd. Malaysia
Motorola de Mexico, S.A. Mexico
Motorola Electronics Taiwan, Limited Taiwan
Motorola Electronics Pte. Limited Singapore
Motorola Semiconductor Hong Kong Limited Hong Kong
Motorola Semiconductor Sdn. Bhd. Malaysia
Motorola Electronics Sdn. Bhd. Malaysia
Motorola Lighting, Inc. Delaware
Motorola S.A. France
Motorola S.p.A. Italy
Motorola A.B. Sweden
Motorola Australia Proprietary Limited Australia
Motorola Espana S.A. Spain
Motorola Philippines, Inc. Philippines
Motorola Communications Israel Limited Israel
Telcel S.A. Spain
Motorola Electronic G.m.b.H. Germany
Motorola A/S Denmark
Motorola (China) Electronics Ltd. China
Motorola Electronique Automobile S.A. France
Motorola B.V. Holland
Motorola China Holdings Limited Hong Kong
Motorola de Puerto Rico, Inc. Delaware
Motorola de Brasil LTDA. Brazil
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
consolidated Balance Sheet as of 12/31/96 and the Statement of Consolidated
Earnings for the quarter ended 12/31/96 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,513
<SECURITIES> 298
<RECEIVABLES> 4,172
<ALLOWANCES> (137)
<INVENTORY> 3,220
<CURRENT-ASSETS> 11,319
<PP&E> 19,598
<DEPRECIATION> (9,830)
<TOTAL-ASSETS> 24,076
<CURRENT-LIABILITIES> 7,995
<BONDS> 1,931
<COMMON> 1,780
0
0
<OTHER-SE> 10,015
<TOTAL-LIABILITY-AND-EQUITY> 24,076
<SALES> 27,973
<TOTAL-REVENUES> 0
<CGS> 18,990
<TOTAL-COSTS> 23,705<F1>
<OTHER-EXPENSES> 2,308<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185
<INCOME-PRETAX> 1,775
<INCOME-TAX> 621
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,154
<EPS-PRIMARY> 1.902
<EPS-DILUTED> 1.900
<FN>
<F1> TOTAL COST INCLUDES: COST OF GOODS SOLD, SELLING & ADMIN EXPENSE, TOTAL
EXCH (GAIN)/LOSS.
<F2> OTHER EXPENSE INCLUDES: DEPRECIATION EXPENSES.
</FN>
</TABLE>
