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Exhibit 10.2 to Motorola's Form 10-K
for the Period Ending September 30, 2000
Motorola Long Range Incentive Plan (LRIP) of 2000
ELIGIBILITY
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Senior and Executive Vice Presidents of Motorola or a subsidiary, as recommended
by the CEO and approved by the Compensation Committee of the Board of Directors,
are eligible to participate in the Motorola Long Range Incentive Plan (LRIP) of
2000. The Chief Operating Officer and the Chief Executive Officer are also
eligible to participate as approved by the Compensation Committee.
PARTICIPATION
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Officers who become eligible to participate during the first quarter of a
performance cycle will participate in that full three-year performance cycle.
Officers who become eligible after the first quarter of a performance cycle will
participate in the next full three-year performance cycle.
OVERVIEW
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Here is an overview of the 2000 LRIP:
. Performance Cycle
The 2000 LRIP is based upon rolling three-year performance cycles as
illustrated below:
<TABLE>
<CAPTION>
Cycles Start Date 2000 2001 2002 2003 2004 2005
<C> <S> <C> <C> <C> <C> <C>
1/1/2000 Year 1 Year 2 Year 3
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1/1/2001 Year 1 Year 2 Year 3
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1/1/2002 Year 1 Year 2 Year 3
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1/1/2003 Year 1 Year 2 Year 3
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</TABLE>
. Performance Measure
Performance will be measured and based on relative total shareholder return
(TSR). Relative TSR will be determined as follows:
STEP #1: TOTAL SHAREHOLDER RETURN (TSR)
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. Total shareholder return (TSR) is the annualized measure of the change in
shareholder value over the performance cycle.
. TSR will be calculated as follows:
TSR = Dividends + Change in Stock Price
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Beginning Stock Price
. The annualized TSR will be based on the quarterly reinvestment of
dividends.
. The actual beginning and/or closing stock price on any day that either
starts or ends a measurement period will be the stock price used in all
2000 LRIP calculations.
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STEP #2: PERCENTILE RANKING
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. Our annualized TSR will than be compared to the TSR of each member of a peer
group to determine our ranking within that group. The Compensation Committee
of the Board has the authority to modify this peer group for future cycles.
(Click here for the peer group used in the 2000 LRIP.)
(NOTE: PUT A LINK TO THAT PAGE OF THIS DOCUMENT HERE.)
. Our percentile ranking will be determined as follows:
Percentile Rank = 1 - Company Rank
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No. of Companies in Peer Group (Including Motorola)
STEP #3: RELATIVE TSR
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. The percentile ranking of Motorola's annualized TSR within that group is the
relative TSR.
. The relative TSR will determine the extent to which any performance award is
earned.
. Why Relative TSR as the Performance Measure TSR is the final measure of
shareholder value-creation and is the only means by which shareholders gain
a return on their investment. Relative TSR is used because, beyond an
absolute improvement in shareholder wealth, investors require an investment
to deliver returns consistent with the competition.
The only way Motorola can be the company-of-choice to investors, to current
and prospective employees, and to our customers, is to create and sustain
superior TSR relative to our competition.
Over time, if we are not above the median TSR (above the 50th percentile
ranking of our competition), our ability to create shareholder and customer
value may be significantly diminished.
As senior executives of Motorola, you have considerable influence over value
creation. Thus, the 2000 LRIP is an important component of our overall long-
term incentive structure and pay-for-performance philosophy.
. Earned Award Determination
. If the annualized TSR is less than six percent (6.0%), no award will be
paid.
. If the annualized TSR is greater than or equal to six percent (6.0%) and
our relative position is at least the 50th percentile of our peer group,
each participant will have an opportunity to earn a performance award.
. Calculation of Earned Award
. A participant's earned award will be determined utilizing the following
factors:
. A participant's base salary as of the end of the performance cycle. For
purposes of the 2000 LRIP "base salary" means the contractual definition
of base salary in each country.
. The target award opportunity, which is a percentage of base salary.
There are three levels of target award opportunity: 100%, 75%, and 50%
of base salary. The Compensation Committee upon the recommendation of
the CEO will make
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determination of participation levels at the beginning of each
performance cycle. The Compensation Committee will determine the
participant level for the CEO.
. The earned award expressed as a percentage of the target award.
This factor is a function of Motorola's percentile ranking, the
relationship of which is illustrated below:
<TABLE>
<CAPTION>
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Earned Award as
Percentile Ranking* Percentage of Target Award*
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<S> <C>
(greater or less than) 80th 200%
75th 175%
65th 150%
55th 125%
50th 100%
(greater than) 50th 0%
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</TABLE>
*The results will be interpolated if the percentile rank falls between
the ranks above.
. A participant's earned award will be calculated as follows:
(Ending Base Salary) x (Target Award) x (Earned Award as % of Target) =
Earned Award
. Maximum Earned Award
A participant's maximum earned award will be two times his/her target award.
. Example of Earned Award Calculation
As an example, assume the following:
. A participant's base salary at the ending of a cycle is $300,000.
. The participant's target award opportunity is 50% of base salary.
. Motorola's percentile rank at the completion of the cycle is the 75th
percentile, which means the earned award expressed as a percentage of the
target award is 175%.
<TABLE>
<CAPTION>
Calculation of Earned Award
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Target Earned Award as
Ending Base Salary Award Percent of Target Earned Award
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<S> <C> <C> <C>
$300,000 x 50% x 175% = $262,500
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</TABLE>
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. The Payout Process
. All earned awards will be paid in cash. Payments will be made as soon as
administratively practicable following the close of the performance cycle.
. A participant has no right to any award until that award is paid.
. If the Compensation Committee determines, in its sole discretion, that a
participant has willfully engaged in any activity at any time, prior to
the payment of an award, that the Committee determines was, is, or will be
harmful to the Company, the participant will forfeit any unpaid award.
SITUATIONS AFFECTING 2000 LRIP
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. Change in Employment
. Generally, a participant will be eligible for payment of an earned award
only if employment continues until the award payout date.
. Pro rata awards may be possible, however, depending upon the type of the
employment termination. The table below summarizes how earned awards will
generally be prorated in accordance with the type of employment
termination:
<TABLE>
<CAPTION>
If your employment terminates due to... Your earned award will be...
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<S> <C>
Death Pro rata award based on the number of completed
months of employment within a performance cycle.
Total and Permanent Disability Pro rata award based on the number of completed
months of employment within a performance cycle.
Retirement Pro rata award based on the number of completed
months of employment within a performance cycle.
Termination of Employment or Service Because Forfeited
of Serious Misconduct
Change in Employment in Connection with a Pro rata award based on the number of completed
Divestiture months of employment within a performance cycle.
Termination of Employment or Service by Pro rata award based on the number of completed
Motorola or a Subsidiary Other Than for Serious months of employment within a performance cycle.
Misconduct or a Divestiture on its imitative
Termination of Employment or Service for any Forfeited.
Other Reason than Described Above
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</TABLE>
The prorated payout will be paid as soon as administratively practicable after
the end of the performance cycle.
For purposes of the 2000 LRIP, "Disability" and "Retirement" will be defined as
set forth below:
. Total and Permanent Disability means for (x) U.S. employees, entitlement to
long-term disability benefits under the Motorola Disability Income Plan, as
amended and any successor plan and (y) non-U.S. employees, as established by
applicable Motorola policy or as required by local regulations.
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. Retirement means your retirement from Motorola or a Subsidiary as follows:
(i) Retiring at or after age 55 with 20 years of service;
(ii) Retiring at or after age 60 with 10 years of service;
(iii) Retiring at or after age 65, without regard to years of service.
Years of service will be based on your Service Club Date.
. Change of Control
If Motorola undergoes a Change of Control as defined in the Omnibus Plan of
2000:
. The percentile ranking for each performance cycle will be determined as of
the effective date of the Change of Control.
. Pro rata award payments will be made based on the number of completed
months of each cycle as of the effective date of the Change of Control.
. Awards will be paid in cash as soon as administratively practicable
following the effective date of the Change of Control.
. Integration with the Motorola Long Range Incentive Plan of 1994
If a participant earns an award for any remaining performance cycle under the
Motorola Long Range Incentive Plan of 1994, as amended on February 4, 1998
("Cycle 6"--1999-2002), and an award for a performance cycle under the
Motorola Long Range Incentive Plan of 2000 ("Cycle 7"--2000-2002), the
participant will receive the greater of the two awards. In no event will a
participant receive an award from both plans for overlapping performance
cycles.
DEFINITION OF TERMS
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"Subsidiary" means an entity of which Motorola owns directly or indirectly at
least 50% and that Motorola consolidates for financial reporting purposes.
If a term is used buy not defined, it has the meaning given such term in the
Plan.
RESERVATION AND RETAINMENT OF COMPANY RIGHTS
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. The selection of any employee for participation in the 2000 LRIP will not
give that participant any right to be retained in the employ of the
Company.
. The right and power of the Company to terminate the employment of any
participant is specifically reserved.
. The participant acknowledges his or her understanding that participation in
this Plan is completely at the discretion of Motorola, and that the
Motorola's decision to make this Award in no way implies that similar
awards may be granted in the future. In addition, the Grantee hereby
acknowledges that he or she has entered into employment with Motorola or a
Motorola Subsidiary upon terms that did not include this Award or similar
awards, that his or her decision to continue employment is not dependent on
an expectation of this Award or similar awards, and that any amount
received under from this Award is considered an amount in addition to that
which the Grantee expects to be paid for the performance of his services.
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. Anyone claiming a benefit under the 2000 LRIP will not have any right to or
interest in any awards unless and until all terms, conditions, and provisions
of 2000 LRIP that affect that person have been fulfilled as specified herein.
. No employee will at any time have a right to be selected for participation in
the Plan for any fiscal year, despite having been selected for participation
in a previous fiscal year.
GOVERNANCE
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It is expressly understood that the Compensation Committee is authorized to
administer, construe, and make all determinations necessary or appropriate to
the administration of the 2000 LRIP, all of which will be binding upon the
participant.
AMENDMENT, MODIFICATION, and TERMINATION
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The Compensation Committee may amend, modify, or terminate the 2000 LRIP
provided, however, that no such amendment, modification, or termination in any
way adversely affects a participant's rights to an outstanding award without the
participant's written consent.
MISCELLANEOUS PROVISIONS
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. The parties agree that any dispute or controversy arising under or in
connection with the 2000 LRIP will be settled by arbitration, conducted
before a single arbitrator sitting in a location selected by the participant
within fifty (50) miles from the location of his or her job with Motorola, in
accordance with the rules of the American Arbitration Association then in
effect.
Judgement may be entered on the award of the arbitrator in any court having
proper jurisdiction. The Company and the participant will share the expenses
of such arbitration, including the fees and expenses of the arbitrator
equally. Each party will be responsible for payment of its own expenses and
legal fees. The arbitrator may not award legal fees, costs, or any punitive
or exemplary damages to either party.
. Award opportunities may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
. The Company will have the right to require participants to remit the Company
an amount sufficient to satisfy federal, state, and local withholding tax
requirements, or to deduct from any or all payments under the LRIP 2000
amounts sufficient to satisfy all withholding tax requirements.
. To the extent permitted by law, amounts paid under the 2000 LRIP will not be
considered to be compensation for purposes of any benefit plan or program
maintained by the Company.
. All obligations of the Company under the 2000 LRIP with respect to payout of
awards, and the corresponding rights granted thereunder, will be binding on
any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or other
acquisition of all or substantially all of the business and/or assets of the
Company.
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. In the event that any provision of the 2000 LRIP will be held illegal or
invalid for any reason, the illegality or invalidity will not affect the
remaining parts of the plan, and the 2000 LRIP will be construed and enforced
as if the illegal or invalid provision had not been included.
. No participant or beneficiary will have any interest whatsoever in any
specific asset of the Company. To the extent that any person acquires a right
to receive payments under the 2000 LRIP, such right will be no greater than
the right of any unsecured general creditor of the Company.
. To the extent not preempted by federal law, the 2000 LRIP, and all agreements
hereunder, will be construed in accordance with and governed by the laws of
the state of Illinois without giving effect to the principles of conflicts of
laws.
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