-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YCSy3JwfmGki+yX4vg3tYRz0TmaPPdidvDZwb3ct8F/v/kwcpdRnkpX3XHmZTirv 0eqUfc/iM4NP1qqyMT8DJQ== 0000912057-94-001081.txt : 19940331 0000912057-94-001081.hdr.sgml : 19940331 ACCESSION NUMBER: 0000912057-94-001081 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOTOROLA INC CENTRAL INDEX KEY: 0000068505 STANDARD INDUSTRIAL CLASSIFICATION: 3663 IRS NUMBER: 361115800 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07221 FILM NUMBER: 94518301 BUSINESS ADDRESS: STREET 1: 1303 E ALGONQUIN RD CITY: SCHAUMBURG STATE: IL ZIP: 60196 BUSINESS PHONE: 7085765000 FORMER COMPANY: FORMER CONFORMED NAME: MOTOROLA DELAWARE INC DATE OF NAME CHANGE: 19760414 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM _________ TO _________ COMMISSION FILE NUMBER 1-7221 MOTOROLA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-1115800 (STATE OF (I.R.S. EMPLOYER INCORPORATION) IDENTIFICATION NO.)
1303 EAST ALGONQUIN ROAD, SCHAUMBURG, ILLINOIS 60196 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER (708) 576-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - -------------------------------------------- ----------------------------- 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
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, 1994 was approximately $26.6 billion (based on closing sale price of $98.50 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, 1994 was 278,781,510. DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT LOCATION IN FORM 10-K - ------------------------------------------------------------------------------------------- --------------------- Portions of Registrant's Proxy Statement for 1994 Annual Meeting of Stockholders Part III Portions of Registrant's 1993 Annual Report to Stockholders Parts I, II and IV
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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: 708-576-5000). 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 and other forms of electronic communication systems; 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 and shared mobile radio. 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 Consolidated Financial Statements of Motorola's 1993 Annual Report to Stockholders. (c) Narrative description of business. -2- SEMICONDUCTOR PRODUCTS Semiconductors control and amplify electrical signals and are used in a broad range of electronic products, including television receivers and other consumer electronic products, solid-state ignition systems and other automotive electronic products, major home appliances, industrial controls, robotics, aircraft, missiles, space vehicles, communications equipment, computers, minicomputers, calculators and automatic controls. The semiconductor products manufactured by Motorola's Semiconductor Products Sector include integrated circuit devices (metal-oxide semiconductor and bipolar) such as dynamic and static random access memories, microcontrollers, microprocessors, microcomputers, gate arrays, standard cells, digital signal processors, mixed signal and other logic and analog components. In addition, the Sector manufactures a wide variety of discrete devices including zener and tuning diodes, RF devices, power and small signal transistors, field effect transistors, microwave devices, optoelectronics, rectifiers and thyristors. The Sector 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 Sector's own sales staff and through independent distributors. Semiconductors manufactured by the Sector are also supplied to other operating units of Motorola. The Sector is affected by the cyclical nature of the semiconductor industry. Available capacity, cyclical customer demands, new product introduction and aggressive pricing can have a significant impact on its business. The Sector's capacity is being increased to meet current strong market demand. In addition to the Sector's factory expansion program, it is actively pursuing additional capacity through the sourcing of products from outside vendors. Because of the strong market demand, the available quantity of some products have been allocated to customers from time to time. The semiconductor industry is subject to rapid changes in technology, requires a high level of capital spending and an extensive research, -3- development and design program to maintain state-of-the-art technology. Accordingly, the Sector maintains an extensive research and development program in advanced semiconductor technology. The Sector's backlog amounted to $2.12 billion at December 31, 1993 and $1.55 billion at December 31, 1992. The 1993 backlog amount is believed to be generally firm, and approximately 100% of that amount is expected to be shipped during 1994. However, in the past, the Sector has experienced abrupt and repeated rescheduling of previously firm and even expedited orders. The estimate of the firmness of such orders is subject to future events which may cause the percentage of the 1993 backlog actually shipped to change. The Semiconductor Products Sector experiences intense competition from numerous competitors, including Japanese companies and several other companies around the world, ranging from large companies offering a full range of products to small companies specializing in certain segments of the market. The competitive environment is also changing as a result of increased alliances between competitors. The Sector competes in many markets, including the telecommunications, computer, industrial, automotive, consumer, federal government and distributor markets. Due to the multitude of competitors, price, service, technology and product quality are important factors in competition. The ability to develop new products to meet customer requirements and to meet customer delivery schedules are also competitive factors. Management believes that Motorola's commitment to research and development of new products combined with utilization of state-of-the-art technology should allow the Sector to remain competitive. The Sector is not currently experiencing, nor does it anticipate, any shortages in obtaining raw materials. However, it is experiencing some extended lead times on certain raw materials due to strong industry demand, but it is not currently expected to have any material impact on the Sector's business. A significant portion of certain materials and parts used by the Sector is supplied from a single country. The Sector is actively seeking new sources of supply to decrease this dependency. With respect to other materials, the Sector is constantly seeking new sources of supply to minimize the risk of obtaining materials from only a few -4- sources. Electricity, oil and natural gas are used extensively in the Sector's operations. All of these energy sources are available in adequate quantities for current and foreseeable future needs. Electricity and oil are the primary energy sources for the Sector'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. 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 Sector's headquarters is in Phoenix, Arizona, with manufacturing facilities in Phoenix, Mesa, Tempe and Chandler, Arizona; Irvine, California; Austin, Texas; Tianjin, China; Toulouse, France; Kwai Chung and Tai Po, Hong Kong; Aizu and Sendai, Japan; Seoul, Korea; Kuala Lumpur and Seremban, Malaysia; Guadalajara, Mexico; Singapore; East Kilbride, Scotland; Manila, the Philippines; and Chung-Li, Taiwan. COMMUNICATIONS PRODUCTS Communications products are designed, manufactured and sold by Motorola's Land Mobile Products Sector and its Paging and Wireless Data Group. In 1993, both operations comprised the Company's Communications Products segment. In January 1994, Motorola's Information Systems Group (consisting of Codex Corporation and Universal Data Systems, Inc.) was combined with the Paging and Wireless Data Group to form the Messaging, Information and Media Sector. However, this new Sector does not constitute a separate reportable industry segment, and the results of operations of the Information Systems Group will continue to be reported under "Other Products." As a principal supplier of mobile and portable FM two-way radio and radio paging and wireless data systems, the Land Mobile Products Sector and the -5- Paging and Wireless Data Group provide equipment and systems to meet the communications needs of individuals and many different types of business, institutional and governmental organizations. Products of the Land Mobile Products Sector and certain products of the Paging and Wireless Data Group provide voice and data communication between vehicles, persons and base stations. The Paging and Wireless Data Group products provide signaling or signaling and one-way voice communications or wireless data communications to people away from their homes, vehicles or offices. The principal customers for two-way radio and radio paging products 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 a growing base of paging and wireless data customers using the products for personal and family communication needs. These products are also sold and leased to various federal agencies for many uses. 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'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 used. Regulatory agencies in other countries have similar types of authority. Consequently, the business of this segment may be affected by the rules and regulations adopted by the FCC or regulatory agencies in other countries from time to time. Motorola has developed products using trunking and data communications technologies to enhance spectral efficiencies. The growth of the two-way -6- radio communications industry may be affected, however, by the regulations of the FCC or other regulatory agencies relating to the allocation of frequencies for land mobile communications users, especially in urban areas where such frequencies are heavily used. The Land Mobile Products Sector 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 large-scale integrated circuits. The products manufactured and marketed by this segment are sold directly through its own distribution force, or through independent authorized distributors and dealers, radio common carriers 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. The majority of the leases and conditional sale contracts entered into by this segment are sold to several unaffiliated finance companies and banks on terms which, in most instances, provide recourse to Motorola with certain limitations. Some leases and conditional sale contracts are sold to a Motorola subsidiary. This segment's backlog amounted to $1.71 billion at December 31, 1993 and $1.12 billion at December 31, 1992. The 1993 backlog amount is believed to be generally firm, and approximately 91% of that amount is expected to be shipped during 1994. The estimate of the firmness of such orders is subject to future events which may cause the percentage of the 1993 backlog actually shipped to change. This segment experiences widespread, intense competition from numerous competitors ranging from some of the world's largest, diversified -7- companies to many small, specialized firms. The principal manufacturing operations of many competitors are located outside of the United States. Competitive factors include price, product performance, product quality, quality and availability of service, and quality and availability of systems engineering, with no one factor being dominant. Management believes 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/supply could cause temporary, selective shortages. Direct sourcing of materials and components from foreign suppliers is becoming more extensive. This segment operates certain offshore subassembly plants, the loss of one or more of which could constrain this segment's production capabilities. 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. Reference is made to the material under the heading "General" for information relating to patents and trademarks with respect to this segment. The Land Mobile Products Sector has entered into agreements in principle with Dial Page, Inc., CenCall Communications Corp. and NEXTEL Communications, Inc. to transfer substantially all of its 800 MHz specialized mobile radio businesses, systems and licenses in the United States in exchange for equity interests in these companies. This represents a move forward with the Sector's strategic plans of being primarily a technology supplier and equipment manufacturer, rather than a network systems operator in the United States. Further information on this subject is contained in Note 6 of the Notes to Consolidated Financial Statements and in the material under the caption "Results of Operations" in Motorola's 1993 Annual Report to Stockholders, which information is incorporated herein by reference. -8- This segment's headquarters are located in Schaumburg, Illinois, with manufacturing facilities in Schaumburg, Illinois; Boynton Beach and Plantation, Florida; Mount Pleasant, Iowa; Ft. Worth, Texas; Tianjin, China; Bangalore, India; Dublin, Ireland; Arad, Israel; Penang, Malaysia; Vega Baja, Puerto Rico; Taunusstein, Germany; and Singapore. GENERAL SYSTEMS PRODUCTS General systems products are designed, manufactured and sold by Motorola's General Systems Sector which includes the Cellular Subscriber Group, the Cellular Infrastructure Group, the Network Ventures Division, Personal Communications Systems ("PCS") and the Motorola Computer Group. The Cellular Subscriber and Infrastructure Groups manufacture, sell, install and service cellular infrastructure and radiotelephone equipment. In addition, the Cellular Subscriber Group resells cellular line service in the U.S., New Zealand, Germany, France, and the U.K. markets. The Network Ventures Division is a joint venture partner in cellular and telepoint operating systems in Argentina, Uruguay, Hong Kong, Israel, Chile, Mexico, Thailand, Pakistan, Nicaragua, Dominican Republic and Japan. 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. PCS products include subscriber and infrastructure equipment for the personal communications market. 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 service. The allocation of frequencies is regulated in the United States and other countries throughout the world, and limited spectrum space is allocated for cellular and personal communications services. The growth of the cellular and -9- 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. The Motorola Computer Group develops, manufactures, sells and services multi-function computer systems and board level products, together with operating systems and system enablers. Board and system level products comprise a line of VME products based on the Motorola 68000 and 88000 series microprocessors. 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. General Systems products are subject to constant changes in technology. Consequently, the Sector has an extensive research and development program. The Sector's backlog amounted to $1.2 billion at December 31, 1993 and $721 million at December 31, 1992. The 1993 backlog is believed to be generally firm, and approximately 100% of that amount is expected to be shipped during 1994. The estimate of the firmness of such orders is subject to future events which may cause the percentage of the 1993 backlog actually shipped to change. The General Systems Sector experiences intense competition from numerous competitors 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, product quality and product and system performance. An additional factor for the Motorola Computer Group products is the availability of software products to address specific user applications. Management believes 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 the General Systems Sector to remain competitive. -10- Materials used in the Sector's operations are generally second-sourced to ensure a continuity of supply. Energy necessary for the Sector's operations consists of electricity and natural gas, all of which are currently adequate in supply. The Sector's factories are highly automated and therefore, dependent upon a steady supply of electrical power. Patent protection is very important to the cellular business. Also, reference is made to the material under the heading "General" for information relating to patents and trademarks with respect to this industry segment. The General Systems Sector's headquarters is located in Arlington Heights, Illinois. It operates manufacturing facilities in Tempe, Arizona; Arlington Heights, Grayslake and Libertyville, Illinois; Swindon, England; Penang, Malaysia; Easter Inch, Scotland; Flensburg, Germany; and Tianjin, China. The Sector also has a joint venture manufacturing operation in Austria. GOVERNMENT AND SYSTEMS TECHNOLOGY PRODUCTS The Government and Systems 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 is expanding its commercial businesses and is giving increased attention to international business opportunities. The Group produces products related to electronic and communications equipment that has various applications based upon customer requirements of the Group's three business segments: Traditional Government, Commercial, and Satellite Communications. The Traditional Government business segment, previously known as the Government Electronics Group, consists of the Tactical Electronics Division and the Communications Division, and primarily does research, development and production work under contracts with governmental agencies, but also conducts independent research and development programs. The Traditional Government business segment produces products such as diversified - 11 - military and space electronic equipment, including aerospace telecommunications systems, military communications equipment, radar systems, data links, display systems, positioning and navigation systems, instrumentation products, countermeasures systems, missile guidance equipment, electronic ordnance devices and drone electronic systems. The Traditional 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. Contracts are secured from United States Government agencies and their suppliers by negotiation and competitive bidding. The government procurement environment is becoming more competitive and regulated. Competition is expected to increase substantially in all aspects of the Traditional Government business due to a slowdown in procurement resulting from a lower defense budget. Competitors include technically competent firms, including large diversified firms as well as smaller firms specializing in narrow product lines. This segment expects to continue to meet competition on the basis of price and quality of product performance. The Group is diversifying by applying its core technologies to quasi-government and commercial opportunities. During 1993, the Group organized its commercial business thrusts into the Diversified Technologies Division (DTD) which is marketing products in the secure telecommunications and commercial test equipment markets. It is developing products for positioning and navigation systems, and personal alarm and reporting systems markets. These businesses are expected to grow in the future, and substantial development and marketing efforts are being exerted in these areas. DTD is actively pursuing potential markets for its developmental product lines. Growth in the Commercial business segment may offset a decline in U.S. Government business. Distribution agreements for the domestic secure telecommunications market are in place with the sales force of the Land Mobile Products Sector (LMPS). International and government markets are handled directly by the Group's own sales force. During 1993, the world wide sales force of LMPS was also used to market test equipment. In 1994, DTD plans to expand the distribution network to penetrate new market segments. - 12 - The Group's Satellite Communications Division (SATCOM) is developing the IRIDIUM TM/SM satellite-based communication system. The IRIDIUM 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 system involves four components: (1) a constellation of low earth orbit satellites, (2) a centralized system control center, (3) gateways distributed throughout the world and (4) individual subscriber units including, for example, voice, data, facsimile, pager and geolocation units. SATCOM is the prime contractor under contracts with Iridium, Inc. to provide and launch the satellites and maintain the system. The loss of these contracts could have a material adverse effect on the Group. IRIDIUM is a trademark and service mark of Iridium, Inc. 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 1993, approximately 5% of the Group's business was conducted internationally, primarily through the Traditional Government business sector. As the competition for U.S. defense business increases, however, the Group has been focusing increased attention on the international market in the Commercial business and the Traditional Government business sectors. The Group's backlog amounted to $634 million at December 31, 1993 and $553 million at December 31, 1992. The 1993 backlog is believed to be generally firm and approximately 81% of that amount is expected to be shipped during 1994. All contracts with the United States Government are subject to cancellation at the convenience of the Government, and the contracts with Iridium, Inc. may be terminated by Iridium, Inc. pursuant to their terms. The estimate of the firmness of the 1993 backlog is subject to future events which may cause the percentage actually shipped to change. 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. - 13 - Patents are becoming more important as competition increases in a declining U.S. Government market and as the Group expands into commercial and international markets. Also, reference is made to the material under the heading "General" for information relating to patents and trademarks with respect to this industry segment. The Group has its headquarters in Scottsdale, Arizona, with manufacturing facilities in Scottsdale and Chandler, Arizona. INFORMATION SYSTEMS PRODUCTS Information systems products are designed, manufactured and sold by the Information Systems Group, which consists of Codex Corporation ("Motorola Codex") and Universal Data Systems, Inc. ("UDS"), which are wholly owned subsidiaries of Motorola. In January 1994, the Group was combined with the Paging and Wireless Data Group to form the Messaging, Information and Media Sector. However, this new Sector does not constitute a separate reportable industry segment, and the results of operations of the Information Systems Group will continue to be reported under "Other Products." Motorola Codex manufactures and sells high-speed leased-line and dial modems, digital transmission devices, data/voice, time division and statistical multiplexers, network management and control systems, X.25 networking equipment and local area network interconnection products. These products are offered alone, and increasingly in systems, which have been configured to transmit information among personal computers, terminals, other peripheral devices and host computers. Motorola Codex also markets a few communication products it does not manufacture. UDS manufactures and sells a broad line of analog and digital data communications equipment, including modems and DDS (Digital Dataphone Services) service units for dedicated and switched networks, multiplexers, ISDN (Integrated Digital Services Network) terminal adaptors, network management systems and LAN (Local Area Network) product. UDS markets a few data communication products it does not manufacture. Motorola Codex products are sold through a domestic sales organization which sells through direct and indirect channels, such as distributors and - 14 - value added resellers. Motorola Codex's international unit sells and services products in 90 nations through several subsidiaries and numerous distributors. UDS sells its products in the United States directly through its own sales force and through indirect channels, such as independent distributors and value added resellers. UDS has its own international sales organization which utilizes local distributors where it is deemed necessary. Information systems products are subject to constant changes in technology. Consequently, the Group has an extensive research and development program. The Information Systems Group experiences intense competition from numerous competitors ranging from some of the world's largest companies, including AT&T and IBM, to small, specialized firms. Competitive factors in the market for these products are product quality and performance, customer service and price. Management believes that Motorola's commitment to research and development programs for improving existing products and developing new technologies and its utilization of state-of-the-art technology should allow the Group to remain competitive. Materials used in the Group's business consist primarily of electronic components and assemblies which are generally available from multiple sources. Occasionally, shortages or extended delivery periods occur in various component parts, the effects of which have been industry-wide and short in duration. The Group requires commercially available electrical energy for manufacturing and administrative operations. Facilities are temperature controlled with oil or gas heat and electrical power. These types of energy are currently readily available. Reference is made to the material under the heading "General" for information relating to patents and trademarks with respect to this industry segment. Motorola Codex is headquartered in Mansfield, Massachusetts where it has separate product engineering and marketing facilities. Manufacturing operations are located in Mississauga, Ontario, Canada and Mansfield, - 15 - Massachusetts. Motorola Codex also has numerous sales and service offices throughout the world. UDS's headquarters and manufacturing facilities are located in Huntsville, Alabama. AUTOMOTIVE, ENERGY AND CONTROLS PRODUCTS The Automotive, Energy and Controls Group (formerly, the Automotive and Industrial Electronics 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 Group also includes operations which manufacture electronic ballasts for fluorescent lighting and radio frequency identification devices. The Group is involved in a number of joint ventures. Manufacturing facilities are located at both domestic and foreign locations. The Group 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. A large part of its business is dependent upon two customers, the loss of either of which could have a material adverse effect on the business of the Group. Demand for products is linked to automobile sales in the United States and other countries where the Group sells its products. The Group experiences competition from numerous global competitors including automobile manufacturers. The energy storage products business and the ceramic and quartz products business sell primarily to other industry segments within Motorola, principally the Communications and General Systems Products segments. All materials used by the Group have good availability at this time. The Group uses electricity and gas in its operations, which are currently adequate in supply. Competitive factors in the sale of all of the Group's products include price, product quality and performance, supply integrity, quality - 16 - reputation, experience, responsiveness and design and manufacturing technology. Reference is made to the material under the heading "General" for information relating to patents and trademarks with respect to this industry segment. The Group's headquarters is located in Northbrook, Illinois. It has manufacturing operations located in Scottsdale, Arizona; San Jose, California; Northbrook, Buffalo Grove, Schaumburg and Vernon Hills, Illinois; Albuquerque, New Mexico; Elma, New York; Carlisle, Pennsylvania; Seguin, Texas; Angers, France; Stotfold, England; Tuas, Singapore; Tianjin, China; Chung-Li, Taiwan; Penang, Malaysia; Vega Baja, Puerto Rico; Dublin, Ireland; and San Jose, Costa Rica. GENERAL CUSTOMERS. Motorola is not dependent for a material part of its business upon a single or a very few customers. Slightly less than 4.5% of Motorola's total sales and revenues in 1993 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. - 17 - 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: December 31, 1993. . . $6.006 billion December 31, 1992. . . $4.321 billion The orders supporting the 1993 backlog amounts shown in the foregoing table are believed to be generally firm, and approximately 94% of orders on hand at December 31, 1993 are expected to be shipped during 1994. However, future events may cause the percentage actually shipped to change. 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 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 $1,521 million in 1993, $1,306 million in 1992 and $1,133 million in 1991. In addition, research funded under customer-sponsored contracts amounted to approximately $324 million in 1993, $37 million in 1992 and $49 million in 1991. The 1993 increase in customer sponsored research and development was predominantly attributable to new contracts with Iridium, Inc. and regulatory agencies. Motorola presently expects to incur $1.7 billion in research and development expenditures in 1994. This is an estimate, and the actual amount which will be spent may vary. Approximately 14,100 professional employees were engaged in such research activities (including customer-sponsored) during 1993. - 18 - PATENTS AND TRADEMARKS. Motorola owns 5,888 patents in the United States and 4,234 in foreign countries. These foreign patents are counterparts of Motorola's United States patents. Many of the patents owned by Motorola are licensed to 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. During 1993, Motorola was granted 841 United States patents. Although many of Motorola's patents are used in its operations or licensed for use by others, neither Motorola's business nor that of any of its industry segments is dependent to any material degree on any one patent or group of related patents. 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. CORPORATE MISSION. Motorola's corporate mission is to grow rapidly, in each of its chosen arenas of the electronics industry, by providing its worldwide customers what they want, when they want it, with six sigma quality (virtually zero defects, i.e., no more than 3.4 parts per million defective) and best-in-class cycle time, as it strives to achieve its fundamental objective of total customer satisfaction and to achieve its stated goals of increased global market share; best-in-class people, marketing, manufacturing, technology, service and product software, hardware and systems; and superior financial results. To try to fulfill this mission, Motorola has concentrated on five key operational initiatives: first, designing products that will accept reasonable variation in component parts, developing manufacturing processes that will produce minimum variation in final output product and designing systems that will achieve six sigma performance; second, examining the total product system to reduce the time from when an order is placed or a product is conceived until it is delivered; third, emphasizing the need for product development and manufacturing disciplines to work together; fourth, implementing a long-term, customer-driven approach that shows it where to commit its resources to give customers what they want; and - 19 - fifth, empowerment for all, in a participative, cooperative and creative workplace to achieve more synergy, greater efficiency and improved quality within and between organizations. In addition, it has tried to develop the following key attributes or elements of a successful quality program: leadership; communications; training; establishing high goals and high expectations; providing for recognition; and developing a participative, cooperative, creative and receptive culture. 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 Consolidated Financial Statements under the caption "Environmental and Legal" and the information contained under the caption "Environmental Matters" in Motorola Management's Discussion and Analysis of Financial Condition and Results of Operations in Motorola's 1993 Annual Report to Stockholders. FIXED ASSET EXPENDITURES. Motorola presently expects to incur approximately $2.9 billion of fixed asset expenditures in 1994. This is an estimate, and the actual amount which will be spent may vary. MISCELLANEOUS. At December 31, 1993, there were approximately 120,000 employees of Motorola and its subsidiaries. The business of Motorola and its industry segments is not seasonal to any significant extent, although the Semiconductor Products Sector has tended to have stronger, seasonally-adjusted sales in the first half of the year. (d) Financial information about foreign and domestic operations and export sales. Local governments and their policies and the societal and economic conditions prevailing in those countries in which Motorola operates (particularly unstable governments and social conditions, rates of inflation, monetary fluctuations and balance of payments problems) may have significant effects on Motorola's business. - 20 - Domestic export sales to third parties were $1.83 billion in 1993, $1.14 billion in 1992 and $871 million in 1991. Domestic export sales to affiliates were $3.16 billion in 1993, $2.32 billion in 1992 and $2.06 billion in 1991. The remainder of the response to this section of Item 1 is incorporated by reference to Note 7 of the Notes to Consolidated Financial Statements and the "Results of Operations" section of Motorola's 1993 Annual Report to Stockholders. 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, Libertyville, Northbrook and Schaumburg, Illinois; Elma, New York; Phoenix, Chandler, Scottsdale, Mesa and Tempe, Arizona; Boynton Beach and Plantation, Florida; Austin, Dallas, Ft. Worth and Seguin, Texas; Mount Pleasant, Iowa; Mansfield, Massachusetts; Huntsville, Alabama; 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.) The United States facilities (both manufacturing and administrative) owned by Motorola contain approximately 16.6 million square feet. Motorola also leases facilities in the United States containing approximately 4.2 million square feet. Motorola's facilities outside the United States contain approximately 8.0 million square feet of which approximately 2.8 million square feet are leased. Motorola 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, except for the Semiconductor Products Sector which is engaged in a factory expansion program to meet the strong market demand for its products. - 21- 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 five cases arising out of alleged groundwater, soil and air pollution in Phoenix and Scottsdale, Arizona. MCINTIRE ET AL. V. MOTOROLA and CAMELHEAD EQUITIES ET AL. V. MOTOROLA ET AL. are pending in the U.S. District Court for the District of Arizona, and BAKER ET AL. V. MOTOROLA ET AL., LOFGREN ET AL. V. MOTOROLA ET AL. and BETANCOURT ET AL. V. MOTOROLA ET AL. are pending in the Arizona Superior Court, Maricopa County. The MCINTIRE lawsuit, filed on December 20, 1991, involves over 900 plaintiffs 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. CAMELHEAD EQUITIES, filed on June 1, 1993, is a suit for business losses by four failed real estate development limited partnerships. The BAKER lawsuit, filed on February 11, 1992, is also a proposed class action, involving seven purportedly representative individual named plaintiffs, alleging that Motorola and 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. The LOFGREN lawsuit, filed on April 6, 1993, is a proposed class action, involving approximately 130 purportedly representative individual named plaintiffs, alleging that Motorola and other defendants contaminated the soil, air and groundwater in the Phoenix/Scottsdale area, causing health problems to members of the class. The BETANCOURT lawsuit, filed on July 16, 1993, involves claims for personal injury by approximately 25 individuals, alleging that Motorola and other defendants contaminated the soil, air and groundwater in the Phoenix/ Scottsdale area, causing health problems to plaintiffs. All five 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. - 22- A class action, FELDMAN ET AL. V. MOTOROLA, INC. ET AL., against Motorola and several of its officers for alleged violations of Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is pending in the U.S. District Court for the Northern District of Illinois. The pending complaint, a consolidation of four cases, maintains that Motorola and the individual defendants committed fraud on the market by artificially inflating the price of Motorola stock through a series of alleged material misrepresentations and omissions. It also alleges that certain of the individual defendants engaged in unlawful insider trading. Plaintiffs propose a class period of May 4, 1990 through January 16, 1991, and seek an unspecified amount of monetary damages. On February 1, 1993, Motorola was named as a defendant in a purported class action that alleged economic loss to purchasers of portable cellular telephones. VERB ET AL. V. MOTOROLA, INC. ET AL., Circuit Court of Cook County, Illinois, 93 CH 00969. The plaintiffs amended their complaint several times. In its final form, the complaint named seven additional defendants (all of which were manufacturers of cellular phones) and added two new plaintiffs. The two new plaintiffs (Messrs. Crist and Pogue) also claimed personal injury, alleging that use of portable cellular phones had aggravated pre-existing brain cancers. Crist's personal injury claim was against Motorola alone while that of Pogue was against another defendant alone. In September 1993, the court dismissed all claims except those of Crist and Pogue. The plaintiffs have appealed this decision to the Illinois Court of Appeal. Subsequently, the court denied the motion of Crist and Pogue for class status and transferred the case from the equity division to the law division. After the transfer, the court severed the cases. Crist's claim for individual economic injury and for personal injury (for aggravation of a pre-existing cancer) is pending against Motorola alone, and there are no other parties associated with the case. The information contained in Motorola 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 Consolidated Financial Statements under the caption "Environmental and Legal" in Motorola's 1993 Annual Report to Stockholders is incorporated herein by reference. - 23- 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 business or financial position 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, 1993, their ages as of December 31, 1993 and their current titles and positions held during the last five years: Gary L. Tooker; age 54; Vice Chairman of the Board and Chief Executive Officer since December 1993; President and Acting Chief Executive Officer from October 1993 to December 1993; President and Chief Operating Officer from January 1990 to October 1993; and Chief Operating Officer and Senior Executive Vice President from January 1988 to January 1990. Christopher B. Galvin; age 43; President and Chief Operating Officer since December 1993; Senior Executive Vice President and Assistant Chief Operating Officer from January 1990 to December 1993; Executive Vice President and Chief Corporate Staff Officer from May 1989 to January 1990; and Senior Vice President and Chief Corporate Staff Officer from January 1988 to May 1989. Robert W. Galvin; age 71; Chairman of the Executive Committee of the Board of Directors since January 1990; and Chairman of the Board of Directors from November 1959 to January 1990. John F. Mitchell; age 65; Vice Chairman of the Board and Officer of the Board since January 1988. - 24 - Keith J. Bane; age 54; Senior Vice President and Motorola Director of Strategy, Technology and External Relations since October 1993; and Senior Vice President and Motorola Director of Strategy from November 1988 to October 1993. Arnold S. Brenner; age 56; Executive Vice President and General Manager, Japan Group since November 1988; and Senior Vice President and General Manager, Japan Operations from January 1988 to November 1988. James Donnelly; age 54; Executive Vice President and Motorola Director of Human Resources (name changed from Personnel to Human Resources in 1993) since December 1987. Thomas D. George; age 53; 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. Robert L. Growney; age 51; Executive Vice President and 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; Senior Vice President and General Manager, Paging and Telepoint Systems Group from January 1991 to September 1992; Senior Vice President and General Manager, Radio Technologies Group, Communications Sector from May 1989 to January 1991; and Corporate Vice President and General Manager, Radio Technologies Group, Communications Sector from September 1987 to May 1989. David W. Hickie; age 60; Mr. Hickie retired as an officer of the Company in December 1993; he was formerly Executive Vice President and Chief Corporate Staff Officer from November 1990 to December 1993; Senior Vice President and Chief Corporate Staff Officer from May 1990 to November 1990; and Senior Vice President and Assistant Chief Financial Officer from November 1985 to May 1990. - 25 - Carl F. Koenemann; age 55; Executive Vice President and Chief Financial Officer since December 1991; Senior Vice President and Assistant Chief Financial Officer from May 1990 to December 1991; Corporate Vice President and Assistant Chief Financial Officer from January 1990 to May 1990; and Corporate Vice President and Director of Finance, General Systems Group, from May 1987 to January 1990. James A. Norling; age 51; Executive Vice President, and President, Motorola Europe, Middle East and Africa since April 1993; Executive Vice President, and President and General Manager, Semiconductor Products Sector from December 1989 to April 1993; and Executive Vice President and General Manager, Semiconductor Products Sector from July 1986 to December 1989. Edward F. Staiano; age 57; Executive Vice President, and President and General Manager, General Systems Sector since December 1989; and Executive Vice President and General Manager, General Systems Group from December 1987 to December 1989. Morton L. Topfer; age 57; Executive Vice President, and President and General Manager, Land Mobile Products Sector since August 1991; Senior Vice President, and President and General Manager, Land Mobile Products Sector from December 1990 to August 1991; and Senior Vice President and Assistant General Manager, Communications Sector from December 1987 to December 1990. Frederick T. Tucker; age 53; Executive Vice President and General Manager, Automotive, Energy and Controls Group (name changed from Automotive and Industrial Electronics Group in 1993) since September 1992; Senior Vice President and General Manager, Automotive and Industrial Electronics Group from April 1988 to September 1992; and Corporate Vice President and Assistant General Manager, Automotive and Industrial Electronics Group from January 1987 to April 1988. Richard H. Weise; age 58; Senior Vice President, General Counsel and Secretary since November 1985. - 26 - David G. Wolfe; age 58; Executive Vice President and General Manager, Government and Systems Technology Group (name changed from Government Electronics Group in 1992) since November 1990; and Senior Vice President and General Manager, Government Electronics Group from January 1988 to November 1990. Richard W. Younts; age 54; Executive Vice President and Corporate Executive Director International-Asia and Americas since December 1993; Senior Vice President and Corporate Executive Director, International-Asia and Americas from July 1991 to December 1993; Senior Vice President and President, Nippon Motorola Ltd., Japanese Group from May 1991 to July 1991; and Corporate Vice President and President, Nippon Motorola Ltd. from August 1987 to May 1991. The above executive officers, with the exception of Mr. Hickie, will serve as officers of Motorola until the regular meeting of the Board of Directors in May 1994 or until their respective successors shall have been elected. Christopher B. Galvin is a son of Robert W. Galvin. There is no family relationship between any of the other executive officers listed above. 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 1993 Annual Report to 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 1993 Annual Report to Stockholders. - 27 - 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 captions "Financial Review", "Financial Results" and "Review of Operations" of Motorola's 1993 Annual Report to 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 1993 Annual Report to 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 2 through 11 of Motorola's Proxy Statement for the 1994 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 "Security Ownership of Management of the - 28 - Company" on page 18 of Motorola's Proxy Statement for the 1994 annual meeting of stockholders. Item 11: Executive Compensation The response to this Item is incorporated by reference to the information under the captions "Director Compensation" and "Compensation Committee Interlocks and Insider Participation" on pages 14, 15 and 16 of Motorola's Proxy Statement for the 1994 annual meeting of stockholders and "Summary Compensation Table," "Stock Option Grants in 1993," "Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values," "Long-Term Incentive Plans - Awards in Last Fiscal Year," "Pension and Supplementary Retirement Plans," and "Other Policies and Agreements" on pages 19 through 23 of Motorola's Proxy Statement for the 1994 annual meeting of stockholders. 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 the Company" on pages 17 and 18 of Motorola's Proxy Statement for the 1994 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 captions "Director Compensation" and "Compensation Committee Interlocks and Insider Participation" on pages 14, 15 and 16 of Motorola's Proxy Statement for the 1994 annual meeting of stockholders. - 29 - 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 Schedules and Auditors' Report TITLE SCHEDULE Property, Plant and Equipment. . . . . . . . .V Accumulated Depreciation of Property, Plant and Equipment. . . . . . . . . . . .VI Valuation and Qualifying Accounts. . . . . . ..VIII Short-term Borrowings. . . . . . . . . . . . . IX 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 with respect to the Financial Statement Schedules is located at page 31. 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") Share Option Plan of 1982 Share Option Plan of 1991 Motorola Long Range Incentive Plan of 1994 Motorola Elected Officers Supplementary Retirement Plan Officers Supplemental Medical Plan Accidental Death and Dismemberment Insurance for MEIP - 30 - Participants Arrangement for Directors' Fees Retirement Plan for Non-employee Directors Deferred Fee Plan for Outside Directors Officers' Group Life Insurance Policy Consultant Agreements with William J. Weisz, John T. Hickey, Gardiner L. Tucker, Donald R. Jones and Erich Bloch Form of Termination Agreement Policy Protecting Salary and Medical Benefits Insurance Policy for Non-employee Directors (b) Reports on Form 8-K. Motorola filed no reports on Form 8-K during the last quarter of 1993. (c) Exhibits See Item 14(a)3 above. - 31 - KPMG Peat Marwick Certified Public Accountants Peat Marwick Plaza 303 East Wacker Drive Chicago, IL 60601-9973 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders of Motorola, Inc.: Under date of January 13, 1994, we reported on the consolidated balance sheets of Motorola, Inc. and consolidated subsidiaries as of December 31, 1993 and 1992, 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, 1993, as contained in the 1993 annual report 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 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in Part IV, Item 14(a)2. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, 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 January 13, 1994 - 32 - Motorola, Inc. and Subsidiaries Schedule V Property, Plant and Equipment Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Balance beginning Additions Other changes at end Classification of period at cost Retirements add (deduct) of period - ----------------------------------------------------------------------------------------------------------------------------------- 1993 - ---- Land $ 115 $ 35 $ 10 $ 11 (2) $ 151 Buildings 2,185 324 24 (29) (1) 2,475 19 (2) Machinery 5,476 1,770 266 (395)(1) 6,690 105 (2) Equipment leased 403 58 51 (17)(1) 390 to others (3)(2) ------- -------- ------- -------- -------- $8,179 $2,187 $ 351 $ (309) $ 9,706 ------- -------- ------- -------- -------- ------- -------- ------- -------- -------- (1) Fully depreciated assets (2) Miscellaneous adjustments
- 33- Motorola, Inc. and Subsidiaries Schedule V Property, Plant and Equipment (continued) Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Balance beginning Additions Other changes at end Classification of period at cost Retirements add (deduct) of period - ------------------------------------------------------------------------------------------------------------------------------------ 1992 - ---- Land $ 117 $ 1 $ --- $ (3) (2) $ 115 Buildings 1,993 243 23 (20) (1) 2,185 (8) (2) Machinery 4,864 1,143 194 (345) (1) 5,476 8 (2) Equipment leased 415 55 37 (22) (1) 403 to others (8) (2) ------- ------- ------- ------- ------- $7,389 $1,442 $254 $(398) $8,179 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- (1) Fully depreciated assets (2) Miscellaneous adjustments
- 34 - Motorola, Inc. and Subsidiaries Schedule V Property, Plant and Equipment (continued) Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Balance beginning Additions Other changes at end Classification of period at cost Retirements add (deduct) of period - ----------------------------------------------------------------------------------------------------------------------------------- 1991 - ---- Land $ 116 $ 6 $ 2 $ (3)(2) $ 117 Buildings 1,771 268 23 (22)(1) 1,993 (1)(2) Machinery 4,257 1,043 202 (252)(1) 4,864 18 (2) Equipment leased 415 70 46 (16)(1) 415 to others (8)(2) ------- -------- ------- ------ ------- $6,559 $1,387 $273 $(284) $7,389 ------- ------- ------ ------- ------- ------- ------- ------ ------- ------- (1) Fully depreciated assets (2) Miscellaneous adjustments
- 35 - Motorola, Inc. and Subsidiaries Schedule VI Accumulated Depreciation of Property, Plant and Equipment Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Additions Balance beginning charged to costs Other changes at end Classification of period & expenses Retirements add (deduct) of period - ----------------------------------------------------------------------------------------------------------------------------------- 1993 - ---- Buildings $ 644 $ 126 $ 14 $ (29) (1) $ 733 6 (2) Machinery 2,752 995 189 (395) (1) 3,225 62 (2) Equipment leased 207 49 40 (17) (1) 202 to others 3 (2) ------- ------- ------ ------- ------- $3,603 $1,170 $243 $(370) $4,160 ------- ------- ------ ------- ------- ------- ------- ------ ------- ------- (1) Fully depreciated assets (2) Miscellaneous adjustments
- 36 - Motorola, Inc. and Subsidiaries Schedule VI Accumulated Depreciation of Property, Plant and Equipment (continued) Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Additions Balance beginning charged to costs Other changes at end Classification of period & expenses Retirements add (deduct) of period - ----------------------------------------------------------------------------------------------------------------------------------- 1992 - ---- Buildings $ 571 $ 113 $ 13 $ (20) (1) $ 644 (7) (2) Machinery 2,405 835 141 (345) (1) 2,752 (2) (2) Equipment leased 219 52 32 (22) (1) 207 to others (10) (2) ------- ------- ------ ------- ------- $3,195 $1,000 $186 $(406) $3,603 ------ ------ ------ ------- ------- ------ ------ ------ ------- ------- (1) Fully depreciated assets (2) Miscellaneous adjustments
- 37 - Motorola, Inc. and Subsidiaries Schedule VI Accumulated Depreciation of Property, Plant and Equipment (continued) Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Additions Balance beginning charged to costs Other changes at end Classification of period & expenses Retirements add (deduct) of period - ----------------------------------------------------------------------------------------------------------------------------------- 1991 - ---- Buildings $ 508 $ 98 $ 9 $ (22) (1) $ 571 (4) (2) Machinery 2,051 724 157 (252) (1) 2,405 39 (2) Equipment leased 222 64 41 (16) (1) 219 to others (10) (2) ------- ------- ------ ------ ------- $2,781 $886 $207 $(265) $3,195 ------- ------- ------ ------- ------- ------- ------- ------ ------- ------- (1) Fully depreciated assets (2) Miscellaneous adjustments
- 38 - Motorola, Inc. and Subsidiaries Schedule VIII Valuation and Qualifying Accounts Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - ----------------------------------------------------------------------------------------------------------------------------------- Additions Balance at -------------------------------- Balance beginning Charged to Charged to at end of period costs & expenses other accounts Deductions of period - ----------------------------------------------------------------------------------------------------------------------------------- 1993 - ---- Allowance for doubtful accounts $ 69 $ 54 -- $ 32 (1) $ 91 Product and service warranties 117 110 -- 61 (2) 166 1992 - ---- Allowance for doubtful accounts $ 79 $ 20 -- $ 30 (1) $ 69 Product and service warranties 92 64 -- 39 (2) 117 1991 - ---- Allowance for doubtful accounts $ 68 $ 43 -- $ 32 (1) $ 79 Product and service warranties 73 110 -- 91 (2) 92 (1) Uncollectible accounts written off (2) Warranty claims paid
- 39 - Motorola, Inc. and Subsidiaries Schedule IX Short-term Borrowings Three Years Ended December 31, 1993 (In millions)
- ----------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F - ----------------------------------------------------------------------------------------------------------------------------------- Weighted Maximum Average Weighted Category of average amount amount average aggregate Balance interest rate outstanding outstanding interest rate short-term at end of at end of during the during the during the borrowings period period period period (1) period (1) - ----------------------------------------------------------------------------------------------------------------------------------- 1993 - ---- Banks and other $ 97 6.5% $ 343 $ 179 7.7% Commercial paper 293 3.3% 456 308 3.2% 1992 - ---- Banks and other $103 9.7% $ 157 $ 120 8.6% Commercial paper 325 3.5% 517 511 3.7% 1991 - ---- Banks and other $ 70 10.8% $ 269 $ 198 9.1% Commercial paper 703 4.8% 937 870 5.8% (1) Computed on a daily average basis for domestic borrowings and on a month end basis for foreign borrowings.
- 40 - KPMG Peat Marwick Certified Public Accountants Peat Marwick Plaza 303 East Wacker Drive Chicago, IL 60601-9973 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. 33-40876 and 33-58714) and Form S-3 (Nos. 33-30662, 33-55080, 33-59252 and 33-50207) of Motorola, Inc. and consolidated subsidiaries of our reports dated January 13, 1994, relating to the consolidated balance sheets of Motorola, Inc. and consolidated subsidiaries as of December 31, 1993 and 1992 and the related statements of consolidated earnings, stockholders' equity, and cash flows and related financial statement schedules for each of the years in the three-year period ended December 31, 1993, 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, 1993. /s/ KPMG Peat Marwick March 22, 1994 - 41 - 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. March 10, 1994 MOTOROLA, INC. By: /s/ Gary L. Tooker ----------------------------- Gary L. Tooker Vice Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Motorola, Inc. and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Gary L. Tooker Director and Principal 3/10/94 - ------------------------- Executive Officer Gary L. Tooker /s/ Carl F. Koenemann Principal Financial 3/10/94 - -------------------------- Officer Carl F. Koenemann /s/ Kenneth J. Johnson Principal Accounting 3/11/94 - --------------------------- Officer Kenneth J. Johnson - 42 - SIGNATURE TITLE DATE --------- ----- ---- /s/ Erich Bloch Director 3/12/94 - -------------------------- Erich Bloch /s/ David R. Clare Director 3/10/94 - -------------------------- David R. Clare /s/ Wallace C. Doud Director 3/10/94 - -------------------------- Wallace C. Doud /s/ Christopher B. Galvin Director 3/10/94 - -------------------------- Christopher B. Galvin /s/ Robert W. Galvin Director 3/11/94 - -------------------------- Robert W. Galvin /s/ John T. Hickey Director 3/10/94 - -------------------------- John T. Hickey /s/ Anne P. Jones Director 3/13/94 - -------------------------- Anne P. Jones /s/ Donald R. Jones Director 3/21/94 - -------------------------- Donald R. Jones /s/ Walter E. Massey Director 3/13/94 - -------------------------- Walter E. Massey - 43 - SIGNATURE TITLE DATE --------- ----- ---- /s/ John F. Mitchell - ------------------------ Director 3/22/94 John F. Mitchell /s/ Thomas J. Murrin Director 3/12/94 - -------------------------- Thomas J. Murrin /s/ Samuel C. Scott III Director 3/10/94 - --------------------------- Samuel C. Scott III /s/ Gardiner L. Tucker Director 3/12/94 - -------------------------- Gardiner L. Tucker /s/ William J. Weisz Director 3/16/94 - -------------------------- William J. Weisz Director 3/ /94 - -------------------------- B. Kenneth West - 44 - EXHIBIT INDEX EXHIBIT NO. EXHIBIT - ----------- ------- 3(i) Restated Certificate of Incorporation of Motorola, Inc.,including Certificate of Designations 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 July 3, 1993). 3(ii) By-Laws of Motorola, Inc., revised as of February 1, 1994. 4.1 Rights Agreement dated November 9, 1988 (incorporated by reference to Exhibit 4.1 to Motorola's Annual Report on Form 10-K for the fiscal year ended December 31, 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 Form 8-A/A dated February 28, l994). 4.4 LYONs Indenture dated September 1, 1989 (incorporated by reference to Exhibit 4.1 to Motorola's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989). - 45 - EXHIBIT NO. EXHIBIT - ---------- ------- 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 5, 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 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. 10.1 Motorola Executive Incentive Plan, as amended through November 23, 1993. 10.2 Motorola Long Range Incentive Plan of 1994. 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 - 46 - EXHIBIT NO. EXHIBIT - ----------- ------- 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 December 16, 1993. 10.5 Motorola Elected Officers Supplementary Retirement Plan, as amended through June 21, 1993. 10.6 Officers supplemental medical plan (incorporated by reference to Exhibit 10.6 to Motorola's Annual Report on Form 10-K for the fiscal year ended December 31, 1990). 10.7 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). 10.8 Arrangement for directors' fees and retirement plan for non-employee directors (description incorporated by reference from page 14 of Motorola's Proxy Statement for the 1994 annual meeting of stockholders). 10.9 Deferred Fee Plan for Outside Directors (incorporated by reference to Exhibit 10.10 to Motorola's Annual Report on Form 10-K for the fiscal year ended December 31, 1986). 10.10 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). 10.11 Consultant Agreement dated February 15, 1994 between Motorola, Inc. and William J. Weisz. - 47 - EXHIBIT NO. EXHIBIT - ----------- -------- 10.12 Consultant Agreement dated January 27, 1994 between Motorola, Inc. and John T. Hickey. 10.13 Consultant Agreement dated January 27, 1994 between Motorola, Inc. and Dr. Gardiner L. Tucker. 10.14 Consultant Agreement dated January 27, 1994 between Motorola, Inc. and Donald R. Jones. 10.15 Consultant Agreement dated January 27, 1994 between Motorola, Inc. and Erich Bloch. 10.16 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). 10.17 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). 10.18 Insurance policy covering non-employee Directors (incorporated by reference to Exhibit 10.16 to Motorola's Annual Report on Form 10-K for the fiscal year ended December 31, 1989). 10.19 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. 11 Primary and Fully Diluted Earnings Per Common and Common Equivalent Share. 11.1 Pro Forma Primary and Fully Diluted Earnings Per Common and Common Equivalent Share Giving Retroactive Effect to the March 15, 1994 Two-for-One Stock Split. 13 Portions of Motorola's 1993 Annual Report to Stockholders. - 48 - EXHIBIT NO. EXHIBIT - ----------- ------- 21 Subsidiaries of Motorola. 23 Consent of KPMG Peat Marwick. See page 40 of the Annual Report on Form 10-K of which this Exhibit Index is a part. EX-3.(II) 2 EXHIBIT 3 (II) Exhibit 3 (ii) Revised as of February 1, 1994 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". - 2 - ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed by its Board of Directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the Corporation shall be sixteen (16). 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 annual 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. Directors who are not also employees of the Corporation shall not participate in incentive, profit sharing, retirement or insurance programs or other employee benefits. By resolution of the Board of - 3 - Directors 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 any committee of the Board of Directors. 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 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 the 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 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, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation, and, unless the - 4 - resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 6. INDEMNIFICATION. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving (at such time as such person is or was a director or officer of the Corporation) at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such - 5 - indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter "advances"); provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all advances if it shall ultimately be determined by final judicial decision that such indemnitee is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors or by action of any person to whom the Board of Directors has delegated such authority, provide indemnification to employees and agents of the - 6 - Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Corporation to recover advances, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such claim. In any action brought by the indemnitee to enforce a right hereunder (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) it shall be a defense that, and in any action brought by the Corporation to recover advances the Corporation shall be entitled to recover such advances if, the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the indemnitee is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable - 7 - standard of conduct, shall be a defense to an action brought by the indemnitee or create a presumption that the indemnitee has not met the applicable standard of conduct. In any action brought by the indemnitee to enforce a right hereunder or by the Corporation to recover payments by the Corporation of advances, the burden of proof shall be on the Corporation. (c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. SECTION 7. 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; - 8 - 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. 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, beginning with the year 1992, 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 - 9 - 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 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, unless the vote of a greater number or voting by classes is 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 - 10 - 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. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. 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) nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman, 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 - 11 - 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 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 - 12 - 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. 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. - 13 - 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 STOCKHOLDER 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 stockholders 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 or 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. To be timely, (i) in the case of special meetings of the shareholders, a shareholder's notice must be delivered to the secretary at the principal business office of the Corporation not earlier than the 90th day prior to such meeting and not later than the close of business on the - 14 - later of the 60th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made and (ii) in the case of all annual meetings of shareholders, a shareholder's notice must be delivered to the Secretary at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is more than 30 days prior to or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall set for (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director all information relating to 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 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); (b) as to any other business that the shareholder proposes to bring before the meeting, 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 of the - 15 - proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination of 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 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. Nothing in this Section 10 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. - 16 - 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 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. Notice of any special meeting shall be given at least 24 hours previous thereto by written notice delivered personally or by mail or telegram to each director at his business address or residence. If mailed, such notice shall be deemed to be given when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be given when the telegram is delivered to the telegraph company. 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 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. - 17 - SECTION 4. QUORUM. One-third of the number of directors fixed by 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 such consent shall have the same force and effect as a unanimous vote. - 18 - 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 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 Vice Chairman of the Board and Chief Executive Officer, one or more other Vice Chairmen of the Board, a President, a Chairman of the Executive Committee, one or more Vice Presidents, 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 Secretaries, each of whom shall be appointed by the Vice Chairman and 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 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 - 19 - 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. 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 - 20 - 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. THE VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER. The Vice Chairman of the Board of Directors and Chief Executive Officer ("Vice Chairman of the Board and 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 Vice Chairman of the Board and 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 - 21 - 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. In addition, the Board of Directors may appoint one or more other Vice Chairmen of the Board, who shall not be the Vice Chairman of the Board and CEO, who shall perform such other duties as may be prescribed by the Board of Directors, the Vice Chairman of the Board and CEO and the President from time to time. SECTION 4. THE PRESIDENT. The President, in the absence or disability of the Vice Chairman of the Board and CEO, shall exercise the functions and shall have the authority of the Vice Chairman of the Board and 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, - 22 - 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. 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. - 23 - SECTION 7. THE TREASURER. 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. - 24 - 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 or by the Board of Directors. 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 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 (except Assistant Secretaries) shall be fixed from time to time by the Board of Directors unless such authority has been delegated to a committee of the Board of Directors, in which case, salaries shall be fixed by such committee, 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 is also a director of the Corporation. SECTION 12. ASSISTANT SECRETARIES. The Vice Chairman of the Board and CEO may appoint, from time to time, as he may see fit, and may fix the - 25 - compensation of, one or more Assistant Secretaries, each of whom shall hold office during the pleasure of the Vice Chairman of the Board and CEO, and shall perform such duties as he may assign. 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 Vice Chairman of the Board and 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 - 26 - 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. 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 a bond of indemnity with one or more - 27 - 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 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 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 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 resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the - 28 - 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 - 29 - be given or mailed either by and under the statutes of the State of Delaware or by and under the Bylaws. 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 - 30 - 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 persons referred to in Section 2 below. Notice shall be given at least two days before the meeting, if feasible in the judgment of the person giving the notice, and otherwise on any shorter time he may deem necessary. SECTION 2. QUORUM. At any such meeting of the Board of Directors a quorum shall consist of three (3) members. If the directors present at any such meeting shall be fewer than three, other persons present as mentioned below to the number necessary to make up such quorum, shall be deemed directors for such meeting, if so designated by any director present or, in the absence of any director, by the senior officer present. Officers that are designated in the line of succession established pursuant to Bylaw Article XI, Section 3, that shall have been designated by the Board of Directors before the emergency, shall be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the line. - 31 - SECTION 3. LINE OF SUCCESSION. The Board of Directors may provide, and may from time to time modify, and/or add to lines of succession in the event that during such emergency some or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties. SECTION 4. 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, nor shall they be specially privy to any confidential information arising from such meeting. - 32 - 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. EX-10 3 EXHIBIT 10.1 Exhibit 10.1 As Amended November 23, 1993 MOTOROLA EXECUTIVE INCENTIVE PLAN, AS AMENDED 1. Purpose: The purpose of the Motorola Executive Incentive Plan, as Amended (the "Plan") is to provide special incentive and reward to Motorola employees who make substantial contributions to Motorola's success by their exceptional service. 2. Definitions: For the purpose of the Plan, unless the context provides otherwise: a. The term "Company" shall mean and include Motorola, Inc. and all of its subsidiaries. b. The term "Employee" shall mean any employee of the Company, including, but not limited to, the officers and directors of Motorola, Inc. c. The term "Committee" shall mean the Compensation Committee of the Board of Directors of Motorola, Inc. d. The term "Grantee" shall mean any person who is an Employee of the Company and has been or is eligible to be granted an award under the Plan. 3. Reserve for the Plan: The Company may, with respect to each fiscal year, commencing with the fiscal year ending December 31, 1977, set up a reserve for the purposes of the Plan, out of the Consolidated Net Earnings for such fiscal year, as hereinafter defined. The amount of such reserve for each fiscal year shall be determined as follows: a percentage not to exceed 7%, as may be determined by the Committee, of such Consolidated Net Earnings which remains after deducting therefrom an amount which (after allowing for United States federal, state and other nations' income taxes based on rates applicable to the income of the Company for such fiscal year) will equal five per centum (5%) of the Average Capital Employed for such fiscal year, as hereinafter defined. The term "Capital Employed" shall mean the consolidated net worth as computed by Motorola, Inc. in accordance with generally accepted accounting principles but without the deduction for the current year's reserve for the Plan, plus long term debt (including the current portion thereof) plus short term debt, less marketable securities, all as they may be classified as such under generally accepted accounting principles on the same basis as employed in preparation of the Company's audited and published financial statements. The term "Average Capital Employed" for any fiscal year shall mean the total of Capital Employed at the beginning of each fiscal month of such fiscal year plus the Capital Employed at the end of the last fiscal month of such fiscal year divided by the number of fiscal months included therein plus 1. The term "Consolidated Net Earnings" for the fiscal year shall mean the consolidated net earnings or profits of the Company, computed in accordance with generally accepted accounting principles. The Consolidated Net Earnings shall be adjusted so that there shall be no deductions for (a) the reserve for the Plan, (b) the amount of the United States federal, state and other nations' income taxes of the Company with respect to such fiscal year or (c) any extraordinary charge against the consolidated net earnings or profits of the Company, as determined by the Committee or it designee. The Company, however, in computing Consolidated Net Earnings shall make a deduction for amounts paid by the Company under Social Security and other laws having similar purposes. The Company, likewise, shall make deductions of such amounts as are required under generally accepted standard accounting practices for the purpose of setting up reserves for losses on accounts and notes receivable, depreciation and maintenance or for any other purposes provided such reserves are of the type established in accordance with generally accepted accounting principles and reflected in the Company's audited and published financial statements. In computing the Consolidated Net Earnings and the Average Capital Employed in respect of any fiscal year for the purpose of the reserve for the Plan, the Board of Directors, the Committee and officers of Motorola, Inc. shall be entitled to rely conclusively upon the computation of Consolidated Net Earnings and Average Capital Employed as prepared and certified by a firm of independent certified public accountants selected by the Board of Directors of Motorola, Inc. for that purpose, which accountants may be the firm of independent certified public accountants employed by Motorola, Inc. for any other purposes, and such determination when made by independent certified public accountants, as aforesaid, shall be binding upon all persons. Nothing in the Plan shall be construed to obligate the Company to set up any reserve for the Plan unless the Consolidated Net Earnings for the fiscal year in question shall suffice therefor. In the event that the Consolidated Net Earnings with respect to a fiscal year shall not be sufficient to permit any reserve for the Plan, the failure of the Company to set up a reserve for the Plan for such fiscal year shall not be deemed to effect the termination of the Plan. The Committee may in its sole and absolute discretion exclude the net worth and net profit or loss of any subsidiary and/or affiliate in the calculation of Average Capital Employed and Consolidated Net Earnings as provided aforesaid. 4. The Committee: The Committee shall have full power and authority to construe, interpret, and administer the Plan, and each decision of the Committee shall be final, conclusive, and binding upon all persons. Likewise, the Committee shall have full discretion with respect to the determination of each award. The Committee may grant awards which total the amount available in the reserve for the Plan as determined by the independent certified public accountants, plus the aggregate of (i) any part of the reserve for prior years which is not awarded and which the Committee has returned to the reserve, (ii) any unpaid portions of installments or deferred payments forfeited and (iii) 2 any reserves established and accumulated but not awarded under the Plan from its adoption in 1968 up to the date the Plan, as Amended, becomes effective, but the Committee shall not be obliged to award the full amount so available to be awarded. Recommendations for awards shall be made to the Committee by the Chairman of the Board of Directors, by the Vice Chairman of the Board of Directors, by the President and by the officers of Motorola, Inc. under such procedures as may be prescribed by the Committee from time to time. Any part of the reserve for the Plan that is not allocated to individual Employees of the Company may, in the discretion of the Committee, be returned to earnings or retained in the reserve for the Plan to be used for future awards to Employees of the Company. At the beginning of each fiscal year the Committee shall determine which of the Company's key Employees will make substantial contributions to the Company's success by their exceptional service and therefore participate in the Plan. The Committee may grant awards from the reserve for the Plan to such other Employees as the Committee in its sole and absolute discretion shall select. A person whose employment terminates during the year or who is granted a leave of absence during the year may, at the discretion of the Committee and under such rules as the Committee may from time to time prescribe, receive an award. 5. Payment of Awards: Until the awards are paid to the Grantees as herein provided, the unpaid awards shall be retained by the Company (without liability for interest, unless interest is provided for by the Committee in accordance with the provisions of this Section 5). The Committee may, in order to more fully implement the purpose of the Plan, provide that any or all awards shall be paid (a) in full at the time of the award, (b) in installments, (c) on a deferred basis, in whole or in part, until some future date or dates specified by the Committee or (d) upon the written request of a Grantee, on a deferred basis, in whole or in part, until some future date or dates specified in the request and agreed to by the Committee; provided however, that with respect to awards deferred at the request of a Grantee as to any year, such request for deferral shall be irrevocable as to such year, and provided further, that such irrevocable written request must be received by the Committee on or before December 31 of the year for which the award is payable. With respect to awards not payable in full at the time of the award, the Committee shall have full power and authority in its sole discretion to set all terms and conditions relating thereto, including, but not limited to (i) the payment date or dates if payment of the award is deferred by the Committee under (c) above or if the award is payable in installments and (ii) the forfeiture provisions, if any, which shall apply to awards deferred by the Committee under (c) above - it being the intent that the forfeiture provisions contained in this Section 5 shall not apply to awards deferred by the Committee under (c) above unless the Committee expressly provides for their applicability as a term or condition of the deferral and then they shall apply only to the extent so provided. The Committee shall also have the power and authority to provide forfeiture provisions with respect to awards it defers under (c) above which are different from those contained in this Section 5 and forfeiture provisions with respect to awards payable in installments or deferred at the request of a participant which are additional to those 3 contained in this Section 5. As to awards not payable in full at the time of the award, the Committee may impose such terms, conditions, restrictions and forfeitures with respect thereto as it shall determine to be in the best interests of the Company and to effect the purposes of the Plan. The Committee may provide that interest shall be paid out of the reserve on the amount of any award payable in installments under (b) above, or deferred in whole or in part by the Committee under (c) above, or deferred in whole or in part at the request of any Grantee with the agreement of the Committee under (d) above. If the Committee provides for the payment of interest with respect to any such award, such interest shall be accrued as of the last day of each fiscal quarter of the Company, shall be credited to an account which shall be established by the Company in the name of the Grantee and shall be compounded as of the end of each such fiscal quarter. Accumulated interest shall be distributed to the Grantee at the time or times the award is paid out. In the case of awards payable in installments and deferred awards which are not paid out in a single sum, the interest to be distributed shall be proportionate to the amount of the award being paid at the time. The rate of interest to be paid shall be set by the Committee at the time of the grant of the award to which it relates. The Committee is authorized to change the rate of interest at any time and to set different rates for different Grantees and for differing circumstances. If the Committee shall determine that the actions or conduct of a Grantee have been in a manner adverse, or in any way contrary, to the best interests of the Company, such Grantee shall lose any right to receive any portion of any installment, or deferred payment, or amount that would otherwise have been paid subsequent to the first of the month in which such act or conduct first occurred, provided, however, that in no case shall the Grantee lose the right to be paid the Grantee's unpaid awards or award, as the case may be, as of a date prior to January 1 of the year in which the determination resulting in such loss of right is made, and provided further, that no installment, deferred payment or amount delivered or paid prior to the date of such determination shall be required to be returned. The determination as to whether any act or conduct of a Grantee is adverse or in any way contrary to the best interests of the Company shall be made by the Committee under such procedure as may from time to time be prescribed by the Committee and shall be made in the absolute discretion of the Committee. Any determination so made, including any determination of the time at which such act or conduct first occurred, shall be conclusive. The provisions relating to forfeiture contained in this subparagraph shall not apply to awards deferred by the Committee under clause (c) in the first subparagraph of this Section 5 unless and to the extent specifically made applicable by the Committee. A Grantee whose employment terminates by dismissal for cause, as determined by the Committee in its sole discretion, or who voluntarily terminates employment with the Company or any of its subsidiaries shall, unless otherwise determined by the Committee in connection with such termination of employment, lose any right to receive any unpaid installments or deferred payments. A Grantee whose employment terminates for any reason other than by death or as set forth in the preceding sentence shall, unless 4 otherwise determined in connection with the termination of the Grantee's employment, continue to be paid any unpaid installments or deferred payments in the same manner as though the Grantee's employment had continued without interruption until such awards are fully paid. The provisions relating to forfeiture contained in this subparagraph shall not apply to awards deferred by the Committee under clause (c) in the first subparagraph of this Section 5 unless and to the extent specifically made applicable by the Committee. If it shall be determined by the Committee that a Grantee who was permitted to retain the right to receive any unpaid installments or deferred payments upon termination of employment has, after such termination of employment, engaged, directly or indirectly, in any activity which is in competition with any activity of the Company or whose actions or conduct, either prior to or after such termination of employment, has been in a manner adverse or in any way contrary to the best interests of the Company, such Grantee shall, unless otherwise determined, lose any right to receive any unpaid installments or deferred payments as of the first of the month in which such competitive activity or such act or conduct first occurred, provided, however, that in no case shall the Grantee lose the right to receive any unpaid installments or deferred payments as of a date prior to January 1 of the year in which the determination resulting in such loss of right is made, and provided further, that no installment or amount delivered or paid prior to the date of any such determination shall be required to be returned. Each determination provided for in this subparagraph shall be made by the Committee under such procedure as may from time to time be prescribed by the Committee and shall be made in the absolute discretion of the Committee. Any determination so made, including any determination of the time at which such competitive activity or such act or conduct first occurred, shall be conclusive. The provisions relating to forfeiture contained in this subparagraph shall not apply to awards deferred by the Committee under clause (c) in the first subparagraph of this Section 5 unless and to the extent specifically made applicable by the Committee. A Grantee who loses the right to be paid any unpaid installments or deferred payments shall receive forthwith all portions of such Grantee's awards, unpaid but earned installments or deferred payments not otherwise forfeited in accordance with this Section 5. The unpaid portions of installments or deferred payments which are forfeited shall be credited to the reserve for the Plan. If a Grantee dies, the Grantee's unpaid and undelivered awards shall be paid and delivered to the beneficiary previously designated by such Grantee in writing, or, if such Grantee did not designate any beneficiary in writing or if all of the Grantee's designated beneficiaries predeceased the Grantee, to the Grantee's legal representative at such time and in such manner as if such Grantee were living and in service with the Company unless the Committee in its sole and absolute discretion accelerates such payment and delivery. Notwithstanding the foregoing provisions of this Section 5 or any of the eligibility requirements of the Plan, in the event of a Change in Control, all Grantees on the date of the Change in Control shall have a fully vested and 5 nonforfeitable right to receive all amounts of awards which remain payable under (b) above or which were previously deferred under (c) or (d) above, and no amendment, suspension, curtailment or termination of the Plan shall adversely affect or terminate such vested and nonforfeitable right to receive any award granted under the Plan. For purposes of the Plan, 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 Securities Exchange Act of 1934, as amended ("Exchange Act") whether or not the Company 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 the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (other than the Company, any employee benefit plan of the Company, any "person" who is a natural person and was shown as the "beneficial owner", directly or indirectly, of securities of the Company representing more than 5% of the combined voting power of the Company's securities in the Company's Proxy Statement dated earlier than, but closest to, the date of this amendment of the Plan; 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 the Company's securities by any of the foregoing), (B) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's 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 the Company, (C) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (D) as a 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 of Directors of the Company), 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. Furthermore, in the event a Grantee's employment with the Company terminates within a year of a Change in Control, that Grantee shall receive an award from the reserve for the year in which the Grantee's employment is terminated. Such award shall be prorated from the first day of the fiscal year in which the Grantee's employment is terminated up to the date of termination of employment. This pro rata share of the award shall be paid within thirty days after the date on which the Grantee's employment is terminated. 6 A Grantee shall be entitled to a pro rata award if his or her employment with the Company is terminated for any reason (including disability or retirement) except: (a) when the relevant Change in Control occurs as a result of a transaction or transactions initiated by the Company, other than a transaction or transactions initiated by the Company in response to or otherwise in connection with an unsolicited proposal to the Company which would result in a Change in Control, or (b) the Company involuntarily terminates the Grantee's employment with the Company or a subsidiary of the Company for good cause. For purposes of the Plan, "good cause" means (a) the conviction of a Grantee of any criminal violation involving dishonesty, fraud or breach of trust, or (b) the Grantee's willful engagement in gross misconduct in the performance of his or her duties that materially injures the Company. 6. Amount of Individual Awards: The Committee shall make the sole determination of the amount of the awards to be made under the Plan, provided, however, that the aggregate amount of all awards made under the Plan does not exceed the aggregate amount in the reserve. 7. Nature of Grantee's Rights Under The Plan: Neither the adoption of the Plan, nor any modification hereof, nor any payment hereunder, shall be construed as giving to the Grantee or any person whomsoever any legal or equitable rights against the Company or its officers or directors or as giving any Grantee the right to be retained in the service of the Company or any of its subsidiaries. No loan shall be made to any Grantee by the Company because one or more payments might be made to the Grantee under the Plan. No Grantee shall have any right to assign, transfer, appropriate, encumber, commute or anticipate any payment that might be made to the Grantee under the Plan, and no benefits, rights or interest of a Grantee under the Plan shall in any way be subject to any legal process to levy upon, garnishee or attach the same for payment of any claim against the Grantee, nor shall any Grantee have any right of any kind whatsoever under the Plan other than the right to receive any payment as and when it is due and payable under the terms of the Plan. 8. Administration of the Plan: The Committee shall keep and maintain records and accounts which will accurately disclose at all times the reserve for the Plan, if any, for each year during which the Plan is in effect, the awards made by the Committee under the Plan, the payment or other disposition of these awards, and any other pertinent information with respect to the activities of the Committee. The fiscal year of the Plan shall at all times be the same as the fiscal year of the Company. The Committee may consult with counsel, who may be of counsel to the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of such counsel. The expenses of administering the Plan shall be borne by the Company and shall not be charged against the reserve for the Plan, if any. 7 9. Indemnification and Exculpation: Each person who is or shall have been a member of the Board of Directors of the Company or of the Committee shall be indemnified and held harmless by the Company 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 the Company'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 the Company 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 or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless. Each member of the Board of Directors of the Company or of the Committee, and each officer and employee of the Company shall be fully justified in relying or acting upon any information furnished on behalf of the Company 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 of Directors of the Company or of the Committee, or any officer or employee of the Company, 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 (including the furnishing of information) taken or any failure to act, if in good faith. 10. Amendment of the Plan: The Plan may be amended from time to time by the Board of Directors of the Company or the Committee and may be terminated at any time by the Board of Directors of the Company. 8 EX-10 4 EXHIBIT 10.2 Exhibit 10.2 Adopted: January 31,1994 Amended: March 9, 1994 MOTOROLA LONG RANGE INCENTIVE PLAN OF 1994 1. NAME OF THE PLAN AND PLAN OBJECTIVES The name of the Plan is the Motorola Long Range Incentive Plan of 1994 (the "Plan"). The objectives of the Plan are: a. To increase the value of the stockholders' investment in Motorola, Inc. common stock through the achievement of outstanding corporate performance; b. To reward participating executives for the Company's achieving outstanding performance, based on preestablished objective performance standards, over extended periods; c. To provide long term incentives in addition to the short term incentives of the Motorola Executive Incentive Plan, as amended; and d. To enhance the Company's ability to retain participating executives. 2. DEFINITIONS For the purpose of the Plan, unless the context provides otherwise: a. The term "Committee" shall mean the Compensation Committee of the Board of Directors of Motorola, Inc. or any successor committee. b. The term "Company" shall mean Motorola, Inc. c. The term "Cycle" shall mean a period equal to four consecutive fiscal years of the Company. d. The term "Eligible Employee" shall mean any elected officer of the Company. e. The term "Grantee" shall mean any elected officer of the Company who is or has been eligible to receive an award under the Plan. 3. STOCKHOLDER APPROVAL Awards, if any, granted under the Plan are contingent on receiving approval of the Plan by the stockholders of the Company, by a majority of the shares voting at a meeting of the stockholders, prior to payment of awards, if any. 4. RESERVE FOR THE PLAN The Company may, with respect to each Cycle, commencing with the Cycle beginning January 1, 1994, set up a reserve for the purpose of the Plan in such amount as may be determined by the Company in its sole discretion. Nothing in the Plan shall be construed to obligate the Company to set up a reserve for the Plan. The failure of the Company to set up a reserve for the Plan in any given year shall not be deemed to effect termination of the Plan. 5. COMMITTEE The Committee shall have full power and authority to construe, interpret and administer the Plan, and each decision of the Committee shall be final, conclusive and binding upon all persons. At the beginning of each Cycle, the Committee shall determine (1) which of the Company's Eligible Employees are in positions in which they are likely to make substantial long term contributions to the Company's success and therefore participate in the Plan for the Cycle, and (2) which award level category each participant is assigned to. After the close of each Cycle, the Committee shall determine and certify the extent to which the performance measures/metrics and other terms and conditions, if any, relating to the achievement of the performance measures/metrics were satisfied. 6. COMPARATOR COMPANIES AND PERFORMANCE MEASURES/METRICS At the beginning of each Cycle, the Committee shall determine the comparator companies (Exhibit A) to be used in comparing performance and the objective measures/metrics for the Cycle. The measures/metrics to be used for this purpose shall be Return on Net Assets, Shareholder Return, Sales Growth and Fundable Growth (Exhibits B and C), each of which shall be weighted 25%. In the event that the financial reports of one or more of the comparator companies is not published for one or more years of a Cycle, such company or companies shall be excluded from the calculations of comparator company performance for such Cycle. 7. AWARD LEVEL CATEGORIES, MAXIMUM AWARDS AND CALCULATION OF AWARDS Each participant shall be assigned by the Committee to one of the following categories, with the associated maximum award, at the beginning of each Cycle: 2
Award Level Maximum Award As Percent Category Of Annualized Base Salary ----------- ------------------------- A 200% B 150 C 100
The Company's actual performance for the Cycle in relation to the objective performance measures/metrics shall determine the percent of the maximum award to be paid to each Grantee. This percent shall be multiplied by the maximum award for each Grantee (i.e., 200%, 150% and 100% for award level categories A, B and C, respectively) to calculate the award, as a percent of annualized base salary, to be paid to each Grantee. For the purpose of computing the maximum dollar amount of the award for each Grantee, the lesser of (1) 125% of annualized base salary on January 1 of the first year of the Cycle, or (2) 100% of annualized base salary on December 31 of the last year of the Cycle, shall be used. The maximum dollar amount of the award for any Grantee for any Cycle shall not exceed $5 million. 8. PAYMENT OF AWARDS After performance has been determined by the Committee, awards, if any, shall be paid in cash. Until the awards are paid to the Grantee as herein provided, the unpaid awards shall be retained by the Company (without liability for interest, unless interest is provided for by the Committee in accordance with the provisions of this Section 8). All awards shall be payable in full at the time the performance has been determined by the Committee, provided that the Committee may specify that awards shall be paid (a) in installments, (b) on a deferred basis, in whole or in part, until some future date or dates specified by the Committee or (c) upon the written request of a Grantee, on a deferred basis, in whole or in part, until some future date or dates specified in the request and agreed to by the Committee; provided however, that with respect to awards deferred at the request of a Grantee as to any Cycle, such request for deferral shall be irrevocable as to such Cycle, and provided further, that such irrevocable written request must be received by the Committee on or before December 31 of the last year of the Cycle for which the award is payable. With respect to awards not payable in full at the time of the award, the Committee shall have full power and authority in its sole discretion to set all terms and conditions relating thereto, including, but not limited to (i) the payment date or dates if payment of the award is deferred by the Committee under (b) above or if the award is payable in installments and (ii) the forfeiture provisions, if any, which shall apply to awards deferred by the Committee under (b) above - it being the intent that the forfeiture provisions contained in this Section 8 shall not apply to awards deferred by the Committee under (b) above unless the Committee expressly provides for their applicability as a term or condition of the deferral and then they shall apply only to the extent so provided. The Committee shall also have the power and authority to provide forfeiture provisions 3 with respect to awards it defers under (b) above which are different from those contained in this Section 8 and forfeiture provisions with respect to awards payable in installments or deferred at the request of a participant which are additional to those contained in this Section 8. As to awards not payable in full at the time of the award, the Committee may impose such terms, conditions, restrictions and forfeitures with respect thereto as it shall determine to be in the best interests of the Company and to effect the purposes of the Plan. The Committee may provide that interest shall be paid out of the reserve, if any, or by the Company, on the amount of any award payable in installments under (a) above, or deferred in whole or in part by the Committee under (b) above, or deferred in whole or in part at the request of any Grantee with the agreement of the Committee under (c) above. If the Committee provides for the payment of interest with respect to any such award, such interest shall be accrued as of the last day of each fiscal quarter of the Company, shall be credited to an account which shall be established by the Company in the name of the Grantee and shall be compounded as of the end of each such fiscal quarter. Accumulated interest shall be distributed to the Grantee at the time or times the award is paid out. In the case of awards payable in installments and deferred awards which are not paid out in a single sum, the interest to be distributed shall be proportionate to the amount of the award being paid at the time. The rate of interest to be paid shall be set by the Committee at the time of the grant of the award to which it relates. The Committee is authorized to change the rate of interest at any time and to set different rates for different Grantees and for differing circumstances. If the Committee shall determine that the actions or conduct of a Grantee have been in a manner adverse, or in any way contrary, to the best interests of the Company, such Grantee shall lose any right to receive any portion of any installment, or deferred payment, or amount that would otherwise have been paid subsequent to the first of the month in which such act or conduct first occurred, provided, however, that in no case shall the Grantee lose the right to be paid the Grantee's unpaid awards or award, as the case may be, as of a date prior to January 1 of the year in which the determination resulting in such loss of right is made, and provided further, that no installment, deferred payment or amount delivered or paid prior to the date of such determination shall be required to be returned. The determination as to whether any act or conduct of a Grantee is adverse, or in any way contrary, to the best interests of the Company shall be made by the Committee under such procedure as may from time to time be prescribed by the Committee and shall be made in the absolute discretion of the Committee. Any determination so made, including any determination of the time at which such act or conduct first occurred, shall be conclusive. The provisions relating to forfeiture contained in this subparagraph shall not apply to awards deferred by the Committee under clause (b) in the first subparagraph of this Section 8 unless and to the extent specifically made applicable by the Committee. 4 A Grantee whose employment terminates by dismissal for cause, as determined by the Committee in its sole discretion, or who voluntarily terminates employment with the Company or any of its subsidiaries shall, unless otherwise determined by the Committee in connection with such termination of employment, lose any right to receive any unpaid installments or deferred payments. A Grantee whose employment terminates for any reason other than by death or as set forth in the preceding sentence shall, unless otherwise determined in connection with the termination of the Grantee's employment, continue to be paid any unpaid installments or deferred payments in the same manner as though the Grantee's employment had continued without interruption until such awards are fully paid. The provisions relating to forfeiture contained in this subparagraph shall not apply to awards deferred by the Committee under clause (b) in the first subparagraph of this Section 8 unless and to the extent specifically made applicable by the Committee. If it shall be determined by the Committee that a Grantee who was permitted to retain the right to receive any unpaid installments or deferred payments upon termination of employment has, after such termination of employment, engaged, directly or indirectly, in any activity which is in competition with any activity of the Company or whose actions or conduct, either prior to or after such termination of employment, has been in a manner adverse or in any way contrary to the best interests of the Company, such Grantee shall, unless otherwise determined, lose any right to receive any unpaid installments or deferred payments as of the first of the month in which such competitive activity or such act or conduct first occurred, provided, however, that in no case shall the Grantee lose the right to receive any unpaid installments or deferred payments as of a date prior to January 1 of the year in which the determination resulting in such loss of right is made, and provided further, that no installment or amount delivered or paid prior to the date of any such determination shall be required to be returned. Each determination provided for in this subparagraph shall be made by the Committee under such procedure as may from time to time be prescribed by the Committee and shall be made in the absolute discretion of the Committee. Any determination so made, including any determination of the time at which such competitive activity or such act or conduct first occurred, shall be conclusive. The provisions relating to forfeiture contained in this subparagraph shall not apply to awards deferred by the Committee under clause (b) in the first subparagraph of this Section 8 unless and to the extent specifically made applicable by the Committee. A Grantee who loses the right to be paid any unpaid installments or deferred payments shall receive forthwith all portions of such Grantee's awards, unpaid but earned installments or deferred payments not otherwise forfeited in accordance with this Section 8. The unpaid portions of installments or deferred payments which are forfeited shall be credited to the reserve, if any, for the Plan, or if there is no reserve, shall be retained by the Company. 5 If a Grantee dies, the Grantee's unpaid and undelivered awards shall be paid and delivered to the beneficiary previously designated by such Grantee in writing, or, if such Grantee did not designate any beneficiary in writing or if all of the Grantee's designated beneficiaries predeceased the Grantee, to the Grantee's legal representative at such time and in such manner as if such Grantee were living and in service with the Company unless the Committee in its sole and absolute discretion accelerates such payment and delivery. Notwithstanding the foregoing provisions of this Section 8 or any of the eligibility requirements of the Plan, in the event of a Change in Control, all Grantees on the date of the Change in Control shall have a fully vested and nonforfeitable right to receive all amounts of awards which remain payable under (a) above or which were previously deferred under (b) or (c) above, and no amendment, suspension, curtailment or termination of the Plan shall adversely affect or terminate such vested and nonforfeitable right to receive any award granted under the Plan. For purposes of the Plan, 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 Securities Exchange Act of 1934, as amended ("Exchange Act") whether or not the Company 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 the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (other than the Company, any employee benefit plan of the Company, any "person" who is a natural person and was shown as the "beneficial owner", directly or indirectly, of securities of the Company representing more than 5% of the combined voting power of the Company's securities in the Company's Proxy Statement dated earlier than, but closest to, the date the Plan is approved by the Company's stockholders, 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 the Company's securities by any of the foregoing), (B) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's 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 the Company, (C) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (D) as a result of, or in connection with, any cash tender offer, 6 exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board of Directors ("Board") of the Company ), 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. Furthermore, in the event a Grantee's employment with the Company terminates within a year of a Change in Control, that Grantee shall receive an award(s) for the Cycle(s) in which the Grantee's employment is terminated. Such award(s) shall be prorated from the first day of the Cycle(s) in which the Grantee's employment is terminated up to the date of termination of employment. This pro rata share of the award(s) shall be paid within thirty days after the date on which the Grantee's employment is terminated. A Grantee shall be entitled to a pro rata award(s) if his or her employment with the Company is terminated for any reason (including disability or retirement) except: (a) when the relevant Change in Control occurs as a result of a transaction or transactions initiated by the Company, other than a transaction or transactions initiated by the Company in response to or otherwise in connection with an unsolicited proposal to the Company which would result in a Change in Control, or (b) the Company terminates the Grantee's employment with the Company or a subsidiary of the Company for good cause. For purposes of the Plan, "good cause" means (a) the conviction of a Grantee of any criminal violation involving dishonesty, fraud or breach of trust, or (b) the Grantee's willful engagement in gross misconduct in the performance of his or her duties that materially injures the Company. 9. NATURE OF GRANTEE'S RIGHTS UNDER THE PLAN Neither the adoption of the Plan, nor any modification thereof, nor any payment thereunder, shall be construed as giving to the Grantee or any person whomsoever any legal or equitable rights against the Company or its officers or directors or as giving any Grantee the right to be retained in the service of the Company or any of its subsidiaries. No loan shall be made to any Grantee by the Company because one or more payments might be made to the Grantee under the Plan. No Grantee shall have any right to assign, transfer, appropriate, encumber, commute or anticipate any payment that might be made to the Grantee under the Plan, and no benefits, rights or interest of a Grantee under the Plan shall in any way be subject to any legal process to levy upon, garnishee or attach the same for payment of any claim against the Grantee, nor shall any Grantee have any right of any kind whatsoever under the Plan other than the right to receive any payment as and when it is due and payable under the terms of the Plan. 7 10. ADMINISTRATION OF THE PLAN The Committee shall keep and maintain records and accounts which will accurately disclose at all times the reserve for the Plan, if any, for each year during which the Plan is in effect, the awards made under the Plan, the payment or other disposition of these awards, and any other pertinent information with respect to the activities of the Committee. The fiscal year of the Plan shall at all times be the same as the fiscal year of the Company. The Company may consult with counsel, who may be of counsel to the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of such counsel. The expenses of administering the Plan shall be borne by the Company and shall not be charged against the reserve for the Plan, if any. 11. 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 the Company 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 the Company'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 the Company 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 or otherwise, or any power that the Company 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 the Company shall be fully justified in relying or acting upon any information furnished on behalf of the Company 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 any officer or employee of the Company, be liable for any determination made or other action taken or any omission to act in reliance upon any such 8 information, or for any action (including the furnishing of information) taken or any failure to act, if in good faith. 12. AMENDMENT OF THE PLAN The Plan may be amended from time to time by the Board or the Committee and may be terminated at any time by the Board. 9 EX-10 5 EXHIBIT 10.4 Exhibit 10.4 Adopted May 13, 1991, As Amended Through December 16, 1993 MOTOROLA, INC. SHARE OPTION PLAN OF 1991 1. Purpose: This Plan shall be known as the "Share Option Plan of 1991" (hereinafter referred to as the "Plan"). The purpose of the Plan is to provide certain key employees of Motorola, Inc. (the "Company") and its subsidiaries with additional incentive to increase their efforts on the Company's behalf and to remain in the employ of the Company or any of its subsidiaries by granting key employees from time to time options to purchase shares of Common Stock of the Company. The options granted under this Plan may, but need not, constitute "incentive stock options" (referred to herein as "Incentive" options) within the meaning of Section 422, or any successor section, of the Internal Revenue Code of 1986, as amended (the "Code"). An option granted which does not constitute an Incentive option shall for purposes of the Plan constitute a "Non-Qualified" option. The terms "subsidiary" and "subsidiaries" mean and include any corporation, partnership, joint venture or other business entity or organization in which a fifty percent (50%) or greater interest is, at the time, directly or indirectly, owned by the Company or by one or more subsidiaries or by the Company and one or more subsidiaries, except that with respect to any key employee who is subject to Section 16 of the Securities Exchange Act of 1934, as amended, (the "1934 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 the Company or by one or more subsidiaries. Notwithstanding the foregoing definitions, with respect to Incentive options, "subsidiary" shall mean "subsidiary corporation" as defined in Section 424(f) of the Code. 2. Administration: The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board of Directors"), or such other committee as may be designated by the Board of Directors. The Committee shall have full authority to act in all matters pertaining to the Plan. Without limiting the generality of the foregoing provision, the Committee is authorized and shall have full power and authority, subject to the provisions of the Plan, from time to time, to establish such rules and regulations as it may deem appropriate for the proper administration and operation of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with the Plan and the options granted thereunder as it may deem necessary or advisable. All determinations of the Committee shall be final, conclusive and binding upon all persons. 3. Shares: The shares to be optioned under the Plan shall be shares of the Company's Common Stock, $3 par value (the "Shares"), which Shares may either be authorized but unissued or treasury Shares. The aggregate number of Shares for which options may be granted under the Plan shall (subject to the provisions of paragraph 11 hereof) be (i) 8,000,000 Shares, plus (ii) the total number of Shares with respect to which no options have been granted under the Company's Share Option Plan of 1982 on the date the Plan is implemented as hereinafter provided in paragraph 17, plus (iii) the total number of Shares as to which options granted under the Share Option Plan of 1982 terminate or expire without being wholly exercised. New options may be granted under this Plan covering the number of Shares to which such termination or expiration relates. 4. Granting of Options: Subject to the approval of this Plan by the affirmative votes of the holders of a majority of the Shares of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Delaware, and subject to the provisions of this paragraph and paragraph 3 hereof, the Committee may at any time and from time to time after May 13, 1991, and prior to the expiration of five (5) years from the date on which this Plan is approved by the stockholders of the Company, grant options to such key employees of the Company or any subsidiary, and for such numbers of Shares, as the Committee shall designate. An individual optionee may be granted (i) an Incentive option, (ii) a Non- Qualified option, or (iii) an Incentive option and a Non-Qualified option at the same time. Incentive options shall be evidenced by Incentive option certificates and Non-Qualified options shall be evidenced by Non-Qualified option certificates. Each option certificate shall be in such form as the Committee shall, from time to time, designate, and shall include, by reference, the terms of the Plan as a condition under which the option is issued and received. The following terms and conditions shall apply to Incentive options: (a) No Incentive option shall be granted to any participant who, at the time the 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 the Company. (b) The aggregate Fair Market Value, as defined in paragraph 9 hereof, (determined as of the time the option is granted) of the Shares of Common Stock with respect to which one or more Incentive options are exercisable for the first time by any individual optionee during any calendar year (under all plans of the Company and its subsidiaries) shall not exceed $100,000.00. 2 (c) Each Incentive option, by its terms, shall (i) not be exercisable after the expiration of ten (10) years after the date it is granted and (ii) not be transferable 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. 5. Price: The option price per Share ("Option Price") for options granted hereunder shall be determined by the Committee. No option granted under the Plan shall have an Option Price less than the Fair Market Value of a Share on the date of grant of such option as determined by the Committee. 6. Term and Exercise of Options: Except as provided herein for optionees who die while in the employ of the Company or any subsidiary or for a Change in Control, as hereinafter defined, no option granted under this Plan may be exercised prior to the expiration of twelve (12) months from the date it is granted (hereinafter referred to as the "non-exercise period"). In the event of a Change in Control, on the date of the Change in Control, the following shall apply to every option then outstanding which has a non-exercise period in effect: (a) the non-exercise period shall automatically terminate and have no further force or effect and (b) each such option shall be immediately exercisable for the entire amount of Shares subject to each such option. For purposes hereof, 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 1934 Act whether or not the Company 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 1934 Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (other than the Company, any employee benefit plan of the Company, any "person" who is a natural person and who was shown as the "beneficial owner," directly or indirectly, of securities of the Company representing more than 5% of the combined voting power of the Company's securities in the Company's Proxy Statement dated earlier than, but closest to, the date the Plan is approved by the Company's stockholders, 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 the Company's securities by any of the foregoing), (B) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior 3 to the merger have (directly or indirectly) at least 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, the assets of the Company, (C) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, 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 of Directors), contested election or substantial stock accumulation (a "Control Transaction"), the members of the Board of Directors immediately prior to the first public announcement relating to such Control Transaction shall thereafter cease to constitute a majority of the Board of Directors. No option shall be exercisable for less than a minimum of fifty (50) Shares except in cases where the number of Shares represented by the option being exercised is less than fifty (50), in which case, the option shall not be exercisable for less than all Shares represented by the option. Anything in the Plan to the contrary notwithstanding, no option granted under the Plan shall be exercisable in any amount after a date ten (10) years from the date the option was granted. Subject to the specific provisions of this paragraph 6 and of paragraph 8 of the Plan with respect to the exercise and termination of options granted under the Plan, each such option shall be exercisable in such manner (including any installments), at such time or times and subject to such terms, conditions or limitations as shall be fixed by the Committee, in its sole discretion, at the time such option is granted. 7. Non-Transferability of Option Rights: No option shall 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, nor shall any optionee pledge, hypothecate, or otherwise create any lien thereon. 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. 8. Effect of Termination of Employment: Notwithstanding any time period specified in this paragraph 8 or elsewhere in the Plan for exercise of an option, no option may be exercised after expiration of its stated term. (a) Termination of Employment During the Non-Exercise Period. (i) If, during the non-exercise period, the optionee's employment with the Company and its subsidiaries shall terminate for any reason (including 4 retirement) other than death, transfer to an Affiliate, as herein defined, or Total or Permanent Disability (as that term is defined in the Motorola Employees' Savings and Profit Sharing Plan) of the optionee, as determined by the Committee or its designee, the optionee's right to exercise the 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 a corporation, partnership, joint venture or other business entity in which the Company or a subsidiary of the Company has an ownership interest (an "Affiliate"), the Committee shall have the power and authority, in its discretion, to determine whether or not any or all of the options held by the optionee shall terminate or shall continue in effect. Any option which the Committee permits to continue in effect shall be subject to all of the terms and conditions of the Plan, including this paragraph 8 (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). (ii) If, during the non-exercise period, an optionee dies while in the employ of the Company or any subsidiary, the deceased optionee's Successor-in-Interest, as hereinafter defined, shall have the right to exercise, in whole or in part, at any time during the remainder of the term of the option, the entire amount of the Shares subject to such option (without regard to any installment limitation on the exercise of the 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 option by bequest or inheritance or by reason of the laws of descent and distribution. (iii) If an optionee's employment with the Company 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 Total and Permanent Disability of the optionee, each 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, and the optionee shall then have the right to exercise, in whole or in part, each such option for the entire amount of Shares subject to each such option (without regard to any installment limitation on exercise of the option) at any time during the remainder of the term of the option. The unexercised portion of each option shall terminate upon expiration of the term of each such option, and any unexercised portion shall terminate immediately if and when the optionee is employed by a competitor of the Company 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 and the optionee's employment with the Company and its subsidiaries shall have been terminated 5 thereafter by the Company or any subsidiary without cause, the optionee shall have the right to exercise the then presently exercisable unexercised portion of the option at any time during a period of twelve (12) months after the date of termination of employment. The unexercised portion of the option may be exercised, in whole or in part, for the number of Shares which were or would have become exercisable under and pursuant to paragraph 6 of the Plan to the extent the optionee could have exercised such option had the optionee remained in the employ of the Company or any subsidiary during the twelve (12) month period immediately following the date of termination of employment. The unexercised and/or unexercisable portion of each option shall terminate twelve (12) months after an optionee's employment with the Company 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 the Company or any subsidiary without the written consent of the Committee. (ii) By Termination of Employment for Cause. If an optionee's employment is terminated by the Company or any subsidiary for cause, any unexercised portion of any 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 an optionee voluntarily terminates employment with the Company or any subsidiary for reasons other than the retirement of the optionee, any unexercised portion of the optionee's 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 the Company or any subsidiary shall have been terminated because of the retirement of the optionee from the Company 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 Incentive or Non-Qualified option held by such optionee for the entire amount of Shares subject to such option (without regard to any installment limitation on exercise of the option) at any time during the remainder of the term of the option. The unexercised portion of each option shall terminate upon expiration of the term applicable to each such option, and any unexercised portion shall terminate immediately if and when the optionee is employed by a competitor of the Company or any subsidiary without written consent of the Committee. For purposes of the Plan, if the optionee is a participant in the Company's pension plan or the pension plan of any subsidiary, the term "retirement" shall mean the optionee's retirement as provided for in the 6 applicable pension plan. If the optionee is not a participant in the Company'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 and the optionee's employment with the Company 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 Incentive or Non- Qualified option held by such optionee for the entire amount of Shares subject to such option (without regard to any installment limitation on exercise of the option) at any time during the remainder of the term of the option. The unexercised portion of each option shall terminate upon expiration of the term of each such option, and any unexercised portion shall terminate immediately if and when the optionee is employed by a competitor of the Company or any subsidiary without written consent of the Committee. (vi) By Death. If an optionee dies while in the employ of the Company or any subsidiary, the unexercised portion of the option may be exercised, in whole or in part, at any time during the remainder of the term of the option by the optionee's Successor-in-Interest for the entire number of Shares subject to the option (without regard to any installment limitation on exercise of the option). (vii) Effect of Death After Termination of Employment Without Cause or Retirement. If an optionee dies during the twelve (12) month period immediately following the optionee's termination of employment without cause and at the time of death such optionee is not employed by a competitor of the Company or any subsidiary (or while employed by a competitor of the Company or any subsidiary with the written consent of the Committee), the unexercised portion of the option may be exercised by the optionee's Successor-in-Interest at any time during the remainder of the term of the option, in whole or in part, for the number of Shares which were or would have become exercisable under and pursuant to paragraph 6 of the Plan had the optionee survived for the remainder of the terms of the option, without regard to the requirement of exercise within twelve (12) months after termination of employment without cause. If an optionee dies after retirement prior to the expiration of the term of the option, and if at the time of death such optionee is not employed by a competitor of the Company or any subsidiary (or while employed by a competitor of the Company or any subsidiary with the written consent of the Committee), 7 the unexercised portion of the option may be exercised for the entire number of Shares subject to such option (without regard to any installment limitation on exercise of the option), by the optionee's Successor-in-Interest at any time during the remainder of the term of the option. (viii) By Transfer of Optionee to an Affiliate. If the non-exercise period shall have elapsed and the optionee's employment with the Company and its subsidiaries shall terminate by reason of the transfer of such optionee to an Affiliate, as defined in this paragraph 8, the Committee shall have the power and authority, in its discretion, to determine whether or not any or all of the options held by the optionee shall continue in effect for the remainder of the term of the option or for the period otherwise applicable under the provisions of the Plan. Any 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 paragraph 8 (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 option to a Successor-in-Interest pursuant to sub- paragraphs (a)(ii), (b)(vi) and (b)(vii) above, by will or by the laws of descent and distribution, shall be effective unless the Company shall have been furnished with written notice of the optionee's death and a copy of the will (if the optionee had a will) 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 option, and under no circumstances shall the right of any such Successor-in- Interest to exercise any such option extend beyond the expiration of the term of such option. (d) Leaves of Absence and Lay-offs. If an optionee is placed on leave of absence status by the Company or any subsidiary, any then exercisable option shall be suspended at such time. If an optionee is placed on lay-off status by the Company or any subsidiary, any then exercisable option may be exercised during the following period of twelve (12) months and shall be suspended thereafter. In either case, the unexercised portion of the option shall either (i) terminate upon the optionee's termination of employment with the Company and its subsidiaries or (ii) be reinstated upon such optionee being re-employed from leave of absence or lay-off status by the Company or any subsidiary. (e) Meaning of Termination of Employment. Wherever in this paragraph 8 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 8 intent are used, they shall mean the last day worked by the optionee rather than the last day the optionee is on the payroll of the Company or any of its subsidiaries. 9. Payment for Shares; Withholding Tax: (a) Payment for Shares purchased upon exercise of an option granted hereunder shall be made in full for all Shares purchased at the time of purchase. An optionee may pay the option price (a) in cash, (b) by transferring to the Company Shares owned by the optionee equal in Fair Market Value, as herein defined, to all or part of the aggregate option price of the Shares being purchased, or (c) by a combination of the means specified in (a) or (b). No fractional Shares may be purchased. For purposes of this paragraph and paragraph 4 hereof, the Fair Market Value of Shares shall be determined as follows: (i) if the New York Stock Exchange is open for trading on the date of the purchase or grant and Shares trade on the New York Stock Exchange on that day, the Fair Market Value shall be the average of the high and low prices for Shares as reported on the Composite Tape, or (ii) if the New York Stock Exchange is not open for trading on the date of the purchase or grant or if Shares do not trade on the New York Stock Exchange on that day, the Fair Market Value shall be the closing price for Shares as reported on the Composite Tape for the last previous day on which Shares did so trade. (b) If the Company is required to withhold any tax for Federal Insurance Contribution Act ("FICA") purposes and/or any federal, state or local income tax or taxes in connection with the exercise of a Non-Qualified option by an optionee, the Committee may permit the optionee, subject to the restrictions herein contained, to satisfy, in whole or in part, the optionee's obligation to pay to the Company the amount of such tax or taxes by electing (a) to have the Company withhold a portion of the Shares which would otherwise be issuable to such optionee upon exercise of the option, or (b) to deliver and transfer to the Company Shares previously owned by the optionee, or (c) by a combination of the means specified in (a) and (b); provided, however, that the amount of federal, state and local income taxes that may be paid by delivery or withholding of Shares shall not exceed the applicable statutory minimum withholding requirements. The amount of any withholding tax not paid by delivery or withholding of Shares shall be paid by the optionee to the Company in cash. Any fractional Share shall also be paid in cash. Shares delivered or withheld shall have a Fair Market Value equal (as near as possible) to the amount of tax required to be withheld, or such part of such tax that the optionee elects to pay with Shares. The Fair Market Value of the Shares delivered to or withheld by the Company shall be determined as provided in this Section 9 as of the date the amount of tax to be withheld is determined (the "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. An election by an optionee to deliver Shares or to have Shares withheld to satisfy tax withholding requirements shall be subject to the following restrictions: (1) if the election is made by an optionee other than an optionee who is a director or officer of the Company subject to Section 16 of the 1934 Act: (i) the election shall be made on or prior to the option exercise date, (ii) the election shall be irrevocable unless revocation is approved by the Committee, 9 and (iii) the election shall be subject to the approval or disapproval of the Committee; (2) if the election is made by an optionee who is a director or officer of the Company subject to Section 16 of the 1934 Act (a "Section 16 Optionee"), and the election is to deliver and transfer to the Company Shares previously owned by the optionee, the restrictions stated in (1) above shall apply; (3) if the election is made by a Section 16 Optionee, and the election is to have the Company withhold a portion of the Shares which would otherwise be issuable to such Section 16 Optionee upon exercise of the option, the election shall be made in accordance with either (A), (B) or (C) hereinafter: (A)(i) the election shall be made at least six (6) months prior to the date the option is exercised and the Shares are withheld, (ii) the election shall be irrevocable unless revocation is permitted by a rule or ruling of the SEC, and then only in accordance with such rule or ruling, provided that the Committee also approves the revocation, and (iii) the election shall be subject to the approval or disapproval of the Committee, or (B)(i) the election shall be made during the period beginning on the third business day following the date of the release by the Company for publication of the Company's quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such date (the "Window Period"), and the option exercise and the withholding of the Shares shall occur during the same Window Period, and (ii) the election shall be subject to the approval or disapproval of the Committee, or (C)(i) the election shall be made in advance of a Window Period to take effect in the Window Period next succeeding the date the election is made, with the option being exercised and the shares withheld in such Window Period, (ii) the election shall be subject to the approval or disapproval of the Committee, and (iii) the election may be revoked only if permitted by a rule or ruling of the SEC, and then only in accordance with such rule or ruling, provided that the Committee also approves the revocation. 10. Rights as a Stockholder: An optionee or a Successor-in-Interest of an optionee shall have no rights as a stockholder with respect to any Shares covered by the optionee's option until the optionee or Successor-in-Interest shall have become the holder of record of such Shares, and no adjustment, except as may be effected pursuant to the provisions of paragraph 11 below, shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Shares for which the record date is prior to the date on which the optionee or Successor-in-Interest shall become the holder of record thereof. 11. Merger, Consolidation, Reclassification, Stock Dividend, Etc.: In the event of any merger, consolidation, reorganization, reclassification, recapitalization, subdivision, stock dividend, stock split-up, reverse stock split-up, or other change in the corporate structure, which affects the Shares, such adjustment, if any, as the Committee in its sole discretion deems appropriate to reflect such change, shall be made in the aggregate number of Shares subject to the Plan, the maximum number of Shares which may be granted to a participant in a calendar year and the number of 10 Shares and the price per Share subject to outstanding options. 12. Company's Right to Terminate Employment: Nothing contained herein or in any share option agreement shall restrict the right of the Company or any subsidiary to terminate the employment of any optionee at any time, with or without cause, or to increase or decrease the compensation of any optionee. 13. Indemnification and Exculpation: Each person, who is or shall have been a member of the Board of Directors or of the Committee, shall be indemnified and held harmless by the Company 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 the Company'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 the Company 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 Bylaws of the Company or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless. Each member of the Board of Directors or of the Committee, and each officer and employee of the Company shall be fully justified in relying or acting upon any information furnished on behalf of the Company 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 of Directors or of the Committee, or an officer or employee of the Company, 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. Use of Proceeds: The proceeds received from the sale of Shares pursuant to the Plan will be used for general corporate purposes. 15. Amendment and Termination of Plan: The Board of Directors may at any time terminate the Plan. The Board of Directors or any committee thereof to whom authority is delegated by the Board of Directors may make such amendments and modifications as it deems advisable, 11 in its sole discretion, except that the Board of Directors or such committee may not, without approval of the stockholders, (a) materially increase the total number of Shares on which options may be granted under the Plan, except as may be effected pursuant to the provisions of paragraph 11 hereof, (b) materially increase the benefits accruing to participants under the Plan, (c) materially change the requirement as to eligibility for participation in the Plan, or (d) extend the termination date of the Plan or the term of any option granted thereunder so that its term exceeds 10 years from the date of its original grant. Unless sooner terminated, the Plan shall terminate at midnight, Central Time, on May 12, 1996; provided, however, that all options granted under the Plan shall continue in full force and effect until terminated in accordance with the terms and conditions of the options and the Plan. No amendment, modification or termination of the Plan shall in any manner affect any option theretofore granted under the Plan without the consent of the optionee or the Successor-in-Interest of the optionee, as applicable. 16. 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. 17. Implementation of the Plan and Grant of Options Under 1982 Plan: If the Plan is implemented, except as hereinafter provided, no further options will be granted under the Share Option Plan of 1982. If the Board of Directors terminates the Plan after it has been implemented, options may be granted under the Share Option Plan of 1982, but not as to any Shares issued or under option pursuant to the Plan. 12 EX-10 6 EXHIBIT 10.5 Exhibit 10.5 MOTOROLA ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN AS AMENDED June 21, 1993 Motorola, Inc. (the "Company") heretofore established the Elected Officers Supplementary Retirement Plan (the "Plan"). Effective November 9, 1988, the Board of Directors of the Company approved extensive amendments to the Plan. This document sets forth the Plan as amended on November 9, 1988 and includes all additional amendments through June 21, 1993. The Plan and the Trust created to fund the Company's obligations under the Plan are not intended to be qualified under Sections 401(a) and 501(a) of the Internal Revenue Code. Section 1. DEFINITIONS. Where the following words and phrases appear in this Plan, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary: 1.1 Actuarial (or Actuarially) Equivalent: Equality in value of the aggregate amounts expected to be received under different forms of payment, and except as provided below, based on the actuarial assumptions, tables and interest rates which are adopted by the Committee from time to time for this purpose and are set forth in Appendix A hereto. 1.2 Affiliated Employer: Any corporation which is a member of a controlled group of corporations (as defined in Section 414 (b) of the Internal Revenue Code) which includes the Company. 1.3 Annuity Starting Date: As defined in Section 8.1 hereof. 1.4 Average MEIP Award: As defined in Section 6 hereof. 1.5 Board of Directors: The Board of Directors of the Company, and shall also mean any committee of the Board of Directors which has been delegated authority to exercise the powers and authority of the Board of Directors with respect to the Plan. 1.6 Change in Control: A change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act") whether or not the Company 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 13-d3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (other than the Company, any employee benefit plan of the Company, any "person" who is a natural person and who was shown as the "beneficial owner", directly or indirectly, of securities of the Company representing more than 5% of the combined voting power of the Company's securities in the Company's Proxy Statement dated earlier than, but closest to, the Effective Date; 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 the Company's securities by any of the foregoing), (B) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company, in which the holders of the Company's 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 the Company, (C) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, 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. 1.7 Committee: The persons appointed pursuant to Section 12 to assist the Company in the administration of the Plan in accordance with said Section. 1.8 Company: Motorola, Inc., a corporation organized and existing under the laws of the State of Delaware or its successor or successors. 1.9 Disability; Disabled: A Participant has a Disability and is Disabled if he is entitled to disability benefits under Title II of the Social Security Act or if he is determined by the Committee to be totally and permanently disabled. 1.10 Early Retirement Date: The first day of the calendar month coincident with or immediately following the Participant's 60th birthday. 1.11 Early Retirement Age: The Participant's 60th birthday. 1.12 Effective Date: November 9, 1988, the date on which the provisions of this Plan as amended on November 9, 1988 become effective. 1.13 ERISA: The Employee Retirement Income Security Act of 1974, as amended from time to time. 1.14 ERISA Excess Formula: As defined in Section 6 hereof. 1.15 Hour of Service: (a) each hour for which an employee is paid, or entitled to payment, for the performance of duties for the Company. These hours will be credited to the employee for the computation period in which the duties are performed; 2 (b) each hour for which an employee is paid, or entitled to payment, by the Company on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service will be credited under this paragraph for a single computation period (whether or not the period of time during which no duties are performed occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; and (c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company. The same Hours of Service will not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. Solely for purposes of determining whether a One Year Break in Service for vesting purposes has occurred in a computation period, an employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such employee but for such absence, or in any case in which such hours cannot be determined, 8 hours of service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the employee, (2) by reason of a birth of a child of the employee, (3) by reason of the placement of a child with the employee in connection with the adoption of such child by such employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a One Year Break in Service in that period, or (2) in all other cases, in the following computation period. The total Hours of Service Required to be credited for maternity or paternity reasons shall not exceed 501 hours. As used in this definition, the term Company includes all Affiliated Employers. 1.16 Normal Formula: As defined in Section 6 hereof. 1.17 Normal Retirement Age: The Participant's 65th birthday. 1.18 Normal Retirement Date: A Participant's Normal Retirement Date is the first day of the calendar month coincident with or immediately following the Participant's 65th birthday. 1.19 Officer: An officer of the Company elected by the Board of Directors. 1.20 One Year Break in Service: An employee shall incur a One Year Break in Service if in any computation period, as described in the definition of a Year of Service, he does not complete more than five hundred (500) Hours of Service. In the case of an employee who is absent from work for maternity 3 or paternity reasons, as described in Section 1.15, Hours of Service shall be credited to such employee in accordance with Section 1.15. 1.21 PBGC: Pension Benefit Guaranty Corporation, a body corporate within the Department of Labor established under the provisions of Title IV of ERISA. 1.22 Participant: An Officer participating in the Plan in accordance with the provisions of Section 3. 1.23 Pension Plan: The Motorola, Inc. Pension Plan. 1.24 Plan: Motorola Elected Officers Supplementary Retirement Plan, the plan set forth herein, as amended from time to time. 1.25 Plan Year: The 12-month period commencing on January 1 and ending on December 31. 1.26 Qualified Joint and Survivor Annuity: As defined in Section 8.1 hereof. 1.27 Qualified Pre-Retirement Annuity: As defined in Section 8.2 hereof. 1.28 Retirement Benefit: As defined in Section 6 hereof. 1.29 Salary: The amount paid to an Officer by the Company as annual basic compensation, excluding awards under the Motorola Executive Incentive Plan and Long Range Incentive Program, moving expense reimbursements, the imputed fair market value of a Company provided automobile or excess group-term life insurance coverage and similar imputed income items. 1.30 SCRP: The Motorola Supplementary Contributory Retirement Plan. 1.31 Service Credit: As defined in Section 6 hereof. 1.32 Subsidiary: Any corporation more than fifty percent (50%) of the outstanding voting stock of which (other than directors' qualifying shares) is at the time directly or indirectly owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. 1.33 Survivor Annuity Starting Date: As defined in Section 8.2 hereof. 1.34 Trust: Any trust established for receiving, holding, investing and disposing of the Trust Fund and for implementing and carrying out the provisions of the Plan. 1.35 Trustee: The person or entity named as trustee herein or in any separate Trust forming part of this Plan, and any successors. 1.36 Trust Agreement: As defined in Section 14.1 hereof. 4 1.37 Trust Fund: The Plan assets held by the Trustee under the Trust. 1.38 Year of Service: A twelve (12) consecutive month period (computation period) during which period the employee has completed at least one thousand (1,000) Hours of Service. the computation period of an employee shall begin with the date he commences employment with the Company and additional computation periods shall begin on each succeeding anniversary of the date the employee commences employment with the Company. In the event an employee's employment with the Company is terminated and such employee has a One Year Break in Service following the termination of his employment, and if such employee is later reemployed by the Company, the computation period shall begin with the date such employee is reemployed by the Company, and additional computation periods shall begin on each succeeding anniversary of the date the employee was reemployed by the Company. All Years of Service (both pre-break and post-break) will be counted for vesting purposes and for calculating the Retirement Benefit under the Normal Formula. Years of Service with any Affiliated Employer shall be counted as Years of Service with the Company. Section 2. CONSTRUCTION. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. The words "hereof," "herein," "hereunder," and other similar compounds of the word "here" shall mean and refer to the entire Plan, not to any particular provision or Section. Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Plan. Section 3. PARTICIPATION. Each Officer who is age 55 or older on the Effective Date shall become a Participant in the Plan, as amended, on the Effective Date. After the Effective Date, an Officer shall become a Participant in the Plan upon the earlier of (i) his designation as a Participant by the Committee at any age under age 55, (ii) attaining age 55, (iii) his election as an Officer if age 55 or older at that time, (iv) a Change in Control or (v) his Disability. Section 4. VESTING. A Participant's right to a Retirement Benefit shall be vested and nonforfeitable as follows: (a) For a Participant who has not attained age 60, when he has completed at least five Years of Service; (b) For a Participant who is age 60 or older but who has not attained age 65, when he has completed at least two Years of Service; (c) Upon attainment of age 65 (Normal Retirement Age) regardless of his Years of Service; (d) Upon a Change in Control of the Company regardless of the Participant's age or number of Years of Service; 5 (e) At the time he becomes Disabled regardless of the Participant's age or number of Years of Service. Section 5. ELIGIBILITY FOR RETIREMENT BENEFITS. To be eligible for a Retirement Benefit under the Plan, a Participant must also be a participant in the Pension Plan if eligible for participation, or the pension plan of a Subsidiary if the Subsidiary has a pension plan and the Participant is eligible to participate in it, and he must meet the other eligibility requirements stated herein. A Participant who is vested and who retires on or after age 60 shall be eligible to receive an unreduced Retirement Benefit upon retirement. A Participant who retires at any age because of Disability shall be eligible to receive an unreduced Retirement Benefit upon retirement. A Participant whose employment with the Company terminates at any age because of a Change in Control shall be eligible to receive an unreduced Retirement Benefit upon retirement at or after age 55. A Participant who is vested and ceases to be an Officer or ceases to be employed by the Company for any reason (other than Disability or a Change in Control) before he has attained age 57 shall be eligible to receive a deferred unreduced Retirement Benefit upon retirement at or after age 60 or, subject to the condition stated hereinbelow, a deferred Actuarially reduced Retirement Benefit determined as provided in this Section 5 upon retirement at or after age 57. A Participant who is vested and who retires at or after age 57 but prior to age 60 shall, subject to the condition stated hereinbelow, be eligible to receive an Actuarially reduced Retirement Benefit upon retirement determined as follows: (a) With respect to the lump sum payment option, the lump sum amount to be paid to the Participant will be equal to the cost to purchase (from an insurance company selected by the Company) a deferred annuity for the Participant at retirement which would provide the full Retirement Benefit with payments commencing at age 60. (b) With respect to the lifetime income payments option, such payments will be determined by the amount of lifetime income which could be provided by purchasing an annuity with the lump sum amount determined in (a) above. The other optional forms of payment under the Plan will also be available to the Participant on an actuarially reduced basis. Notwithstanding the foregoing, as a condition to the availability of a Retirement Benefit at or after age 57 but prior to age 60, the Participant shall enter into an agreement not to compete with the Company. Section 6. DETERMINATION OF AMOUNT OF RETIREMENT BENEFIT. A benefit for each Participant shall be calculated under the Normal Formula. A benefit for each Participant who participates in the Pension Plan shall also be calculated under the ERISA Excess Formula. The formula which produces the greater benefit will be the applicable formula for Participants who participate in the Pension Plan. The benefit so calculated for each Participant, whether determined under the Normal Formula or the ERISA Excess Formula, shall be reduced by the amount (computed on a life annuity basis) payable to such Participant under the Pension Plan (but not including SCRP payments), the pension plan of any Subsidiary, the Company's Long Term 6 Disability Plan, and the disability plan of any Subsidiary, whichever plan or plans is or are at the time applicable to such Participant. The result so obtained shall be the Participant's "Retirement Benefit", provided, however, that the Retirement Benefit payable annually to any Participant shall not exceed seventy percent (70%) of his Salary as of the date immediately prior to retirement. NORMAL FORMULA. The monthly benefit under the Normal Formula expressed as lifetime income shall be calculated as follows: One-Twelfth (1/12) times the sum of (i) Salary as of the date immediately prior to retirement (or as of such earlier date as may be mutually agreed upon by the Company and the Officer affected) or in the case of a deferred vested Retirement Benefit, as of the date of the Participant's termination of employment plus (ii) the five year Average MEIP Award paid to the Officer under the Motorola Executive Incentive Plan times forty percent (40%) plus an additional percentage ("Service Credit") equal to one-fourth (1/4) of one percent (1%) for each Year of Service of the Officer in excess of ten (10) Years of Service, subject to the following maximums:
AGE AT AGE AT RETIREMENT MAXIMUM RETIREMENT MAXIMUM ---------- ------- ---------- ------- 55 42.50% 61 44.00% 56 42.75% 62 44.25% 57 43.00% 63 44.50% 58 43.25% 64 44.75% 59 43.50% 65 & over 45.00% 60 43.75%
If the Service Credit determined as above is less than the Early Service Credit calculated under the Plan as it existed prior to the Effective Date for any Participant, the Early Service Credit shall be used for such Participant in lieu of the Service Credit determined as above. "Average MEIP Award" shall mean and shall be calculated as follows: (i)For each of the eight full calendar years prior to retirement, each year's MEIP award is calculated as a percentage of that year's actual earnings from Salary. (ii)The five calendar years which produce the highest percentages are then determined. (iii)The average of the percentages for those five years is then determined. (iv)The average of the percentages so determined is then applied to the Officer's Salary at retirement (or at such earlier date as may be mutually agreed upon by the Company and the Officer affected) to determine the Average MEIP Award amount for purposes of this Plan. 7 Following is an example of the calculation:
ACTUAL MEIP AWARD AS % EARNINGS FROM MEIP OF ACTUAL EARNINGS YEAR SALARY AWARD FROM SALARY - ---- --------- -------- --------- 1 $ 190,000 $57,000 30.0%* 2 180,000 36,000 20.0%* 3 170,000 30,600 18.0%* 4 160,000 20,800 13.0% 5 150,000 48,000 32.0%* 6 140,000 -0- 0 7 130,000 28,600 22.0%* 8 110,000 17,600 16.0%
* Average MEIP rate for five years which 24.4% produces the highest percentage Final Salary = $200,000 Average MEIP Award (24.4% of $200,000 final Salary) = $48,800 Payments made under the Long Range Incentive Program shall not be taken into account in determining the Average MEIP Award. ERISA EXCESS FORMULA. The monthly benefit under the ERISA Excess Formula expressed as lifetime income shall be calculated in the same manner as the Normal Retirement Benefit is calculated under Section 6.1(b) of the Pension Plan. The benefit calculated under this formula shall not be subject to the limitations of Sections 401(a)(17) and 415 of the Internal Revenue Code. Notwithstanding the method prescribed above for calculating Average MEIP Award, if, under extraordinary circumstances which are in the interest of the Company, as determined by the Company (acting through the Board of Directors or any committee thereof to whom authority has been delegated) in its sole discretion, an Officer extends his or her employment beyond his or her planned retirement date at the request of the Company, the Company may, with the consent of the Officer affected, calculate the Officer's Average MEIP Award by using the MEIP awards for the calendar years that would have been used if the Officer had retired on the date originally planned. Section 7. PAYMENT OF RETIREMENT BENEFITS. A Participant's Retirement Benefit shall be paid in monthly installments commencing as follows: (i) in the case of a vested Participant who retires prior to or on or after his Early Retirement Age, on the first day of the month coinciding with or immediately following the date of his retirement, (ii) in the case of a Participant who retires before his Early Retirement Age because of Disability, on the first day of the month coinciding with or immediately following the date of Disability, and (iii) in the case of a Participant who has a deferred vested Retirement Benefit, on the first day of the month selected by the Participant 8 after he has attained his Early Retirement Age, or if a Change in Control has occurred, after he has attained age 55 rather than his Early Retirement Age. Such payments shall continue on the first day of each succeeding month until the benefit terminates as provided in the Plan for the type of benefit being paid to the Participant. Unless the Participant elects otherwise, in writing, payment of benefits under the Plan will begin not later than the 60th day after the latest of the close of the Plan Year in which: (1) the Participant attains Normal Retirement Age; (2) occurs the 10th anniversary of the year in which the Participant commenced participation in the Plan; or (3)the Participant terminates his service with the Company. 7.1 Facility of Payment: If, in the Committee's judgment, any person to whom benefits are payable hereunder is under a legal disability or unable to care for his affairs because of illness, accident, or other incapacity, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian, committee, or other legal representative) may be paid to his spouse, parent, brother or sister, or any other person as the Committee may determine. Any such payment shall be a payment for the account of such person and shall, to the extent thereof, be a complete discharge of any liability under the Plan to such person. Section 8. QUALIFIED JOINT AND SURVIVOR ANNUITY AND QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY. 8.1 Qualified Joint and Survivor Annuity. (a) Unless otherwise elected as provided below, a Participant who is married on the Annuity Starting Date and who does not die before the Annuity Starting Date shall receive the value of his benefit in the form of a Qualified Joint and Survivor Annuity. An unmarried Participant shall receive the value of his benefit in the form of a life annuity. Such unmarried Participant, however, may elect in writing to waive the life annuity. The election must comply with the provisions of this Section as if it were an election to waive the joint and survivor annuity by a married Participant, but without the spousal consent requirement. The joint and survivor annuity and the life annuity form of distribution shall be the Actuarial Equivalent of the benefits due the Participant. (b) Any election to waive the Qualified Joint and Survivor Annuity must be made by the Participant in writing during the election period, must be consented to in writing by the Participant's spouse and must indicate that the Participant alone is to receive the benefit or designate a specific beneficiary or beneficiaries, including any class of beneficiaries or a contingent beneficiary and a form of benefit payment which may not be changed (except back to a Qualified Joint and Survivor Annuity) without spousal consent, unless the consent of the spouse expressly permits designations by the Participant without any requirement of further consent by the spouse. 9 Such spouse's consent shall be irrevocable and must acknowledge the effect of such election and be witnessed by a Plan representative or a notary public. A consent that permits designations by the Participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific beneficiary and a specific form of benefit, where applicable and that the spouse voluntarily elects to relinquish either or both of such rights. Such consent shall not be required if it is established to the satisfaction of the Committee that the required consent cannot be obtained because there is no spouse, the spouse cannot be located, or other circumstances that may be prescribed by Treasury regulations. The election made by the Participant and consented to by his spouse may be revoked by the Participant in writing without the consent of the spouse at any time during the election period. The number of revocations shall not be limited. Any new election must comply with the requirements of this paragraph. A former spouse's waiver shall not be binding on a new spouse. (c) The election period to waive the joint and survivor annuity and to revoke an election shall be the ninety (90) day period ending on the Annuity Starting Date. (d) "Annuity Starting Date" means the first day of the first period for which an amount is paid as an annuity, or, in the case of a Retirement Benefit not payable in the form of an annuity, the first day on which all events have occurred which entitles the Participant to such Retirement Benefit. (e) "Qualified Joint and Survivor Annuity" means a reduced annuity for the life of the Participant with a survivor annuity for the life of the spouse which is either 50 percent (50%), 75 percent (75%) or 100 percent (100%) (as selected by the Participant, and if no selection is made, it will be 50%) of the amount of the annuity which is payable during the joint lives of the Participant and the spouse and which is the Actuarial Equivalent of the normal form of benefit. (f) With regard to the election, the Committee shall provide the Participant no less than thirty (30) days and no more than ninety (90) days prior to the Annuity Starting Date (and consistent with Treasury regulations), a written explanation of: (i) the terms and conditions of the Qualified Joint and Survivor Annuity, (ii) the Participant's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity, (iii) the right of the Participant's spouse to consent to any election to waive the Qualified Joint and Survivor Annuity, (iv) the right of the Participant to revoke such election, and the effect of such revocation, and (v) the relative values of the various optional forms of benefit 10 under the Plan. (g) The distribution of a benefit in the form of a Qualified Joint and Survivor Annuity shall not require the consent of the Participant's spouse if such distribution commences prior to the later of his Normal Retirement Age or age 62. 8.2 Qualified Pre-Retirement Survivor Annuity. In the case of a vested Participant who dies before the Annuity Starting Date, whether or not separated from service with the Company at the time of death, and who has a surviving spouse, a Qualified Pre-Retirement Survivor Annuity shall be paid to the surviving spouse of such Participant. This form of benefit may not be waived nor may another beneficiary be selected. Under this form of benefit, the Participant's surviving spouse will receive a lifetime annuity payable in monthly installments equal to fifty percent (50%) of the Retirement Benefit calculated for the deceased Participant as of the date immediately prior to his death. For purposes of this Section 8.2, a surviving spouse will begin to receive payments on the fist day of the month immediately following the date of the Participant's death unless such surviving spouse elects a later date. A surviving spouse's benefit will be paid in a lump sum upon such spouse's written request made prior to the date benefit payments begin. The date on which a surviving spouse begins to receive payments as an annuity or receive a lump sum payment under this Section 8.2 shall be referred to as the "Survivor Annuity Starting Date". Section 9. OPTIONAL METHODS OF PAYMENT. If a married Participant has duly waived the Qualified Joint and Survivor Annuity form of benefit or if an unmarried Participant has duly waived the life annuity form of benefit in accordance with the requirements of Section 8.1, upon the written request of such a Participant filed with the Committee before the Annuity Starting Date in accordance with the rules governing such requests, the Committee shall provide for him an optional form of Retirement Benefit, in one of the forms set forth below, which shall be the Actuarial Equivalent of the Retirement Benefit to which he would be otherwise entitled hereunder except that no optional form shall be granted which would reduce the value of the Participant's Retirement Benefit payable to him personally by more than fifty percent (50%): (i) a lump sum payment; (ii) in the case of a married Participant, in the form of a life annuity; or (iii) a life-ten years certain form as set forth in Section 6.7 (b) of the Pension Plan. Section 10. LIMITATIONS ON BENEFITS. All rights and benefits, including elections, provided to a Participant in the Plan shall be subject to the rights afforded to any alternate payee under a qualified domestic relations order as those terms are defined in Section 206 (d) of ERISA. 11 Section 11. NONALIENATION OF BENEFITS. No benefit which shall be payable out of the Trust Fund to any person (including a Participant or his beneficiary), or any other amount or asset set aside or purchased under Section 13 to fund a Participant's Retirement Benefit, shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void; and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any such person, nor shall it be subject to attachment or legal process for or against such person, and the same shall not be recognized by the Trustee, except to such extent as may be required by law. This provision shall also apply to the creation, assignment or recognition of a right to a benefit payable with respect to a Participant pursuant to a domestic relations order as defined in Section 206(d) of ERISA unless such order is determined to be a qualified domestic relations order as defined in Section 206(d) of ERISA; provided, however, a domestic relations order entered prior to January 1, 1985 may, in the discretion of the Officers Plan Committee or its delegate, be treated as a Qualified Domestic Relations Order, even though the order does not satisfy the requirement of Section 206(d) of ERISA. The Committee shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. Section 12. ADMINISTRATION. 12.1 Officers Plan Committee: The Board of Directors shall appoint a committee to be known as the Officers Plan Committee to administer the Plan. The Committee shall be the Named Fiduciary for purposes of Section 402(a) of the Act. The Committee shall consist of one or more persons appointed by the Board of Directors, and each member shall serve until his resignation or removal or until his successor is appointed. Each member may, but need not, be a director, officer or employee of the Company. A member of the Committee may resign by delivering his written resignation to the Board of Directors. Any member of the Committee may be removed, with or without cause, by the Board of Directors. 12.2 Powers and Duties of the Committee: The Committee shall carry out the duties assigned to it under the Plan and shall administer the Plan in accordance with its terms. The Committee shall have all powers as may be necessary to carry out its duties under the Plan, including, but not by way of limitation, the following: to construe and interpret the provisions of the Plan; to decide any disputes which may arise under the Plan; to decide all questions that shall arise under the Plan, including questions as to the eligibility to become Participants, and the amount, manner and time of payment of any benefits under the Plan; to decide questions submitted by the Trustee on all matters necessary for it to properly discharge its duties, powers and obligations; to employ or appoint legal counsel, accountants, actuaries, consultants or any person to assist in the administration of the Plan and any other agents it deems advisable. The Committee shall also have the power to allocate and delegate fiduciary responsibilities. The Committee shall have the power and authority to direct the investment of the Trust Fund, and in 12 connection with such power, may delegate in writing authority to manage assets of the Trust Fund to one or more investment managers. The Committee may adopt from time to time written investment policies and guidelines which shall govern the manner in which the assets of the Trust Fund are to be invested, which policies and guidelines shall be followed by the investment managers. With respect to Retirement Benefits funded under Section 13.1(b) or (c) hereof, the Committee shall have the discretion to appoint such agents as are necessary to act on its behalf and shall have the authority to direct the investment of amount held to fund such Retirement Benefits. 12.3 Meetings of the Committee: The Committee shall act by a majority of its members at the time in office, and such action may be taken either by a vote at a meeting or in writing without a meeting. The Committee may authorize any person or persons, who may but need not be a member or members of the Committee, to execute any document or documents on behalf of the Committee, in which event the Committee shall notify the Trustee in writing of such action and the name or names of such person or persons so designated. The Trustee thereafter may accept and rely upon any document executed by such person or persons as representing action by the Committee until the Committee shall file with the Trustee a written revocation of such designation. 12.4 Adoption of Rules by the Committee: The Committee may adopt such rules as it deems necessary, desirable or appropriate. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Committee shall be entitled to rely upon information furnished by a Participant or beneficiary, the Company, the legal counsel of the Company, or the Trustee. 12.5 Instructions to Trustee: The Committee shall advise the Trustee in writing with respect to all benefits which become payable under the terms of the Plan and shall direct the Trustee to pay such benefits from the Trust Fund. 12.6 Reports and Records: The Committee shall keep a record of all its proceedings and acts and shall keep all such books of account, records, and other data as may be necessary for the proper administration of the Plan. The Committee shall file or cause to be filed all such annual reports, financial and other statements as may be required by any federal or state statute, agency or authority within the time prescribed by the law or regulations for filing said documents. The Committee shall furnish such reports, statements and other documents to Participants and Beneficiaries of the Plan as may be required by any federal or state statute or regulation within the time prescribed for furnishing such documents. 12.7 Inspection of Records of the Committee: The Committee's records and books of account shall be open to inspection at all reasonable times by the Company or the Board of Directors, or both, or any person designated from time to time by the Company or Board of Directors. 12.8 Indemnification: The Company shall indemnify each member of the 13 Committee, and the directors, officers and employees of the Company involved in the operation and administration of the Plan against any and all claims, losses, damages, expenses and liabilities arising from any action or failure to act, except when the same is determined by the Board of Directors to be due to gross negligence or willful misconduct of such member. 12.9 Claims Procedure: The Committee shall make all determinations as to the right of any person to a benefit. Any denial by the Committee of the claim for benefits under the Plan by a Participant or beneficiary shall be stated in writing by the Committee and delivered or mailed to the Participant or beneficiary. Such notice shall set forth the specific reasons for the denial, written in a manner that may be understood without legal or actuarial counsel. In addition, the Committee shall afford a reasonable opportunity to any Participant or beneficiary whose claim for benefits has been denied for a review of the decision denying the claim. Section 13. FUNDING OF RETIREMENT BENEFITS. 13.1 Discretion of Committee on Form of Funding: The Plan is intended to be a funded plan for purposes of ERISA, and is intended to be a permanent as distinguished from a temporary program. Provided that the minimum funding standards of ERISA are met, the Committee shall have the discretion to fund the payment of each Participant's vested Retirement Benefit through one or more of the following: (a) making contributions on such Participant's behalf to the Trust; (b) purchasing a commercial annuity contract or contracts and, to the extent the Committee deems advisable, transferring the annuity contract or contracts to such Participant; or (c) implementing any other funding method which the Committee, in its sole discretion, shall consider appropriate. The Committee's decision to use one method for funding one Participant's Retirement Benefit shall not in any way limit the Committee's discretion to use any other method for funding another Participant's Retirement Benefit. Similarly, the Committee's decision to use one method for funding a portion of a particular Participant's Retirement Benefit shall not limit the Committee's discretion with respect to the funding of the remainder of such Participant's Retirement Benefit. Moreover, the Committee shall have the discretion to change, to the extent practicable, the method for funding any Participant's Retirement Benefit. If at any time a Participant's Retirement Benefit is funded through one or more methods which do not require the use of the Trust, all references herein to the Trust, the Trust Fund and the Trustee shall, with respect to such Participant, be disregarded. 13.2 Early Distribution: Under Section 13.1, the Committee may select a method of funding that provides for distributions to be made to a Participant or beneficiary before the Annuity Starting Date or the Survivor Annuity Starting Date, as the case may be; provided, however, that to the 14 extent ERISA requires the consent of the Participant, his spouse, a beneficiary, or any combination thereof, to any such distribution, no distribution shall be made unless such consent or consents have been given. 13.3 Employee Contributions: Under Section 13.1, the Committee may select a method of funding that permits Participants to make contributions to fund Retirement Benefits. 13.4 Payments for Taxes: To the extent that the Committee's funding of a Participant's Retirement Benefit pursuant to Section 13.1 results in adverse foreign (non-United States), federal, state or local tax consequences to such Participant which would not have resulted if such Participant's Retirement Benefit had not been funded, the Committee may, in its discretion, authorize the payment to such Participant, either by the Company or out of the Trust Fund, of an amount sufficient to indemnify such Participant against some or all of such adverse tax consequences. 13.5 Overfunding of Benefits: The funding of Retirement Benefits under Section 13.1 is intended solely to allow the Committee to establish a fund from which the Company's liability to pay Retirement Benefits to Participants may be satisfied, and not to increase in any way the Retirement Benefit to which a Participant is entitled. Accordingly, to the extent the Committee funds a Participant's Retirement Benefit pursuant to Section 13.1 based on certain assumptions, but the actual payments resulting from such funding would exceed such Participant's Retirement Benefit as determined under Section 6, the Committee may, in its discretion, reallocate the excess among other Participants who are presently covered by the Plan or who may be so covered in the future. The Company shall have no right, title or interest in or to amounts or assets used to fund Retirement Benefits, and no part of any such amounts or assets shall revert to the Company except that any amounts or assets remaining, because of overpayments, after satisfaction of all liabilities of the Plan with regard to Participants may revert to the Company. Any amounts or assets contributed to fund Retirement Benefits under a mistake of fact shall be returned to the Company, to the extent practicable, upon request within one (1) year after such funding. 13.6 Underfunded Benefits: The Committee's funding of some or all of a Participant's Retirement Benefit under Section 13.1 shall not reduce the Company's liability to provide to a Participant the Retirement Benefit to which he is entitled under Section 6; provided, however, that if as a result of the funding method adopted by the Committee any Participant or his beneficiary (i) receives any distribution of cash from the Trust or any other entity prior to the Annuity Starting Date or the Survivor Annuity Starting Date, as the case may be, and (ii) fails to recontribute the after-tax amount of such distribution (as defined in the following sentence) in order to fund a portion of such Participant's Retirement Benefit, then the Committee may reduce such Participant's Retirement Benefit by the sum of such after-tax amounts not recontributed and the investment income the Trust would have earned thereon. For purposes of this Section 13.6, the after-tax amount of a distribution shall be the amount of such distribution reduced by the amount of any federal, state and local taxes incurred by the Participant because of such 15 distribution; provided, however, that no such reduction will be made to the extent that the Participant receives a payment from the Company indemnifying him for such taxes. Section 14. TRUST FUND. 14.1 Trust Agreement: As a part of the Plan, the Company may enter into a Trust Agreement under which the Trustee would receive contributions of the Company to the Trust Fund. The provisions of and benefits under the Plan are subject to the terms and provisions of such Trust Agreement. 14.2 Contributions to the Trust Fund: Subject to Section 13.4 hereof, no contribution shall be required from any Participant. An individual account will be established in the Trust Fund for each Participant whose Retirement Benefit is funded, in whole or in part, through the Trust. Section 15. BENEFITS OF RETIRED OFFICERS AND SPOUSES OF DECEASED OFFICERS. 15.1 Funding of Benefits: The benefits payable to Officers who retired prior to the Effective Date shall continue to be paid by the Company under the Plan provisions as they existed prior to the Effective Date; provided, however, that on or before December 31, 1988, the Retirement Benefit of each retired Officer shall be funded through the Trust; and, provided further, that effective January 1, 1989, the Retirement Benefit of each retired Officer will be recalculated under the formulas set forth in Section 6 of the Plan. Each retired Officer will be given the right to elect, within a time period to be set by the Committee, payment of the recalculated Retirement Benefit in a lump sum or in the form of a Qualified Joint and Survivor Annuity or one of the optional methods of payment specified in Section 9 of the Plan. If a retired Officer elects to receive payment other than in a lump sum, the Committee will direct the Trustee to purchase an annuity contract from the Trust Fund to fund the benefit. The benefit currently being paid to a spouse of a deceased Officer shall remain the same except that (i) on or before December 31, 1988 the benefit payable to each such spouse shall be funded through the Trust and (ii) each such spouse shall, within a reasonable time period to be set by the Committee, be allowed to elect to receive a lump sum payment from the Trust or to continue to receive installment payments. If a surviving spouse elects to continue to receive installment payments, the Committee will direct the Trustee to purchase an annuity contract from the Trust Fund to fund the benefit. 15.2 Underfunding of Benefits: The Committee's funding of some or all of a retired Officer's or surviving spouse's benefit under Section 15.1 shall not reduce the Company's liability to provide such retired Officer or surviving spouse with the benefit to which he otherwise is entitled. 15.3 Payment for Taxes: To the extent the funding of a retired Officer's or surviving spouse's benefit (either through the funding of the Trust or the purchase of an annuity) results in adverse federal, state, or 16 local tax consequences to such retired Officer or surviving spouse which would not have resulted if such retired Officer's or surviving spouse's benefit had not been funded, the Committee may, in its discretion, authorize the payment to such retired Officer or surviving spouse, either by the Company or out of the Trust Fund, of an amount sufficient to indemnify such retired Officer or surviving spouse against some or all of such adverse tax consequences. Section 16.MERGER OR CONSOLIDATION OF PLAN; TRANSFER OF ASSETS. In the event of any merger or consolidation of the Plan with another retirement or pension plan, or in the event of any transfer of assets or liabilities from the Plan to another retirement or pension plan, provision shall be made so that each Participant in the Plan on the date thereof (if the Plan then terminated), would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan had then terminated). Section 17.AMENDMENTS. The Board of Directors shall have the right at any time to amend the Plan, the Trust Agreement and any other document entered into as a result of a funding method adopted by the Committee under Section 13.1 hereof. However, no such amendment shall authorize or permit any part of the Trust Fund or any other asset purchased or amount set aside to fund Participants' Retirement Benefits (other than such part as is required to pay administration expenses) to be used for or diverted to purposes other than for the exclusive benefit of the Participants, either current or future, or their beneficiaries or estates. No such amendment shall cause any reduction in the vested accrued benefit of any Participant. The Company further reserves the right to discontinue or suspend the payment of contributions to any fund held under the Trust Agreement or under any other funding method adopted under Section 13.1 hereof. Section 18.TERMINATION. The Board of Directors shall have the right to terminate the Plan at any time. Upon termination the amount credited to the account of each Participant shall become fully vested and shall not thereafter be subject to forfeiture. Upon termination of the Plan, the Company, by written notice to the Trustee, may direct either: (i) continuation of the Trust and the distribution of benefits at such time and in such manner as though the Plan had not been terminated; or (ii) complete distribution of the assets in the Trust Fund to the Participants in a manner consistent with the Plan. In such case, the Trustee shall distribute to each Participant in the Plan and to each retired Participant, the amount then credited to his account in the Trust Fund, subject to provision for expenses of administration or liquidation. The balance, if any, of the assets due to erroneous actuarial computation held by the Trust Fund after such distribution shall be returned to the Company, but only after satisfaction of all liabilities with respect to Participants and Retirement Benefits under the Plan. 17 Section 19.MISCELLANEOUS. 19.1 No Enlargement of Rights: The Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any Officer, or to be consideration for, or an inducement to, or condition of, the employment of any Officer. Nothing contained in the Plan shall be deemed to give any Officer the right to be retained in the employment of the Company or to interfere with the right of the Company to discharge any Officer at any time regardless of the effect which such discharge shall have upon him as a Participant of the Plan. No Officer, prior to his retirement under conditions of eligibility for retirement benefits or prior to his acquiring vested rights, shall have any right or interest in or to any portion of any funds arising from Company contributions under the Plan, and no person shall have any right to Retirement Benefits, except to the extent provided in the Plan. 19.2 Notice of Address: Each person entitled to benefits under the Plan must file with the Committee, in writing, his post Office address and each change of post office address. Any communication, statement, or notice addressed to such a person at his latest post office address as filed with the Committee will be binding upon such person for all purposes of the Plan, and neither the Trustee nor the Company shall be obliged to search for or ascertain the whereabouts of any such person. 19.3 Data: All persons entitled to benefits under the Plan must furnish to the Committee or Trustee such documents, evidence, or information as the Committee or Trustee considers necessary or desirable for the purpose of administering the Plan, or to protect the Committee or Trustee, and it shall be a condition of the Plan that each such person must furnish promptly true and complete data, evidence, or information and sign such documents as the Committee or Trustee may require before any benefits become payable under the Plan. In the event that any data so furnished is found by the Company to be incorrect, any payments thereafter due shall be adjusted on an actuarial basis to correct for any previous overpayments or underpayments, as the case may be. After such adjustment is made, all future payments shall be based on the corrected data. 19.4 Governing Law: The Plan shall be governed by and construed in accordance with ERISA and the laws of the State of Illinois to the extent not preempted by ERISA. 18 EX-10 7 EXHIBIT 10.11 EXHIBIT 10.11 AMENDED CONSULTANT AGREEMENT This Agreement is entered into this 15th day of February, 1994, between Motorola, Inc., a Delaware corporation, with an office at 1303 E. Algonquin Road, Schaumburg, Illinois 60196 ("Motorola") and William J. Weisz ("Consultant"). In consideration of the mutual promises contained herein and other valuable consideration, the parties mutually agree as follows: 1. TERM. This Agreement, which supersedes any existing consulting agreement between Consultant and Motorola, is deemed to have begun on February 1, 1994, and continue through December 31, 1994, and may thereafter be renewed on an annual basis upon written agreement of the parties, provided, however, that either Motorola or Consultant may terminate this Agreement or any renewal thereof upon thirty (30) days notice to the other party. 2. STATEMENT OF SERVICES. Consultant agrees to be available to Motorola for consulting services in the areas described in Appendix A and other areas as shall from time to time be agreed upon by Consultant and Motorola. 3. PAYMENT. For services performed pursuant to this Agreement, Consultant will be compensated at an amount and under such terms as are contained in a separate memo between Consultant and Richard Weise, said memo being incorporated herein as Appendix B; paid monthly. Consultant shall be reimbursed for all expenses which are necessary for and incident to the performance of service hereunder upon approval of Motorola. 4. RECORDS, REPORTS AND INFORMATION. Consultant agrees to furnish Motorola with information with respect to the services covered by this Agreement upon request. Consultant specifically agrees to maintain expense sheets and other evidence in compliance with federal contracting requirements, if any, to accurately show the services performed under this Agreement and to submit such information to Motorola as required. 5. INDEPENDENT CONTRACTOR. Consultant shall perform services hereunder only as an independent contractor. 6. CODE OF CONDUCT. Notwithstanding Consultant's status as an independent contractor, Motorola expects that and Consultant hereby agrees to conduct himself on behalf of Motorola in accordance with the relevant sections of the Motorola Code of Conduct, which is attached hereto as Appendix C. Should Consultant require interpretation of any section of said Code of Conduct, such can be obtained by contacting Motorola's Senior Vice President and General Counsel, who is currently Richard H. Weise, 1303 E. Algonquin Road, Schaumburg, Illinois 60196; (708) 576-5009. The Code of Conduct does not bar Consultant from business relationships with competitors as long as such does not constitute a conflict of interest. 7. PROCUREMENT INTEGRITY ACT CERTIFICATIONS. (a) Consultant agrees to become familiar with the requirements of Section 27(a) of the Procurement Integrity Act and will participate in any training programs recommended by Motorola in its effort to comply with this statute and related procurement policies contained in the Federal Acquisition Regulation ("FAR"). (b) Consultant agrees to report immediately to the Motorola employee in charge of Motorola's participation in any federal procurement process any violations or possible violations of Section 27(a)(b)(d) or (f) relating to offers of employment and business opportunities; gratuities; and solicitation or unauthorized receipt of any proprietary or source selection information. Should that employee be suspected of wrongdoing, Consultant agrees to report the matter to that employee's supervisor or, if necessary, to the Motorola General Counsel. (c) Consultant will provide any additional certifications requested by any U.S. government official pursuant to FAR 3.104-9(d). (d) Consultant will certify his compliance with this paragraph 7 in writing upon Motorola's request. 8. GENERAL REPRESENTATION OF COMPLIANCE. Consultant agrees to comply with all other standards, laws and procedures pertaining to this Agreement which are currently in effect or which are subsequently implemented by any government agency or industry consortium to which Motorola belongs. 9. ENTIRE AGREEMENT. This Agreement constitutes the final expression of the agreement of the parties; it is intended as a complete and exclusive statement of the terms of their agreement; and it supersedes all prior and concurrent promises, representations, negotiations, discussions, and agreements that may have been made in connection with the subject matter hereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement on the day and year first above written. MOTOROLA, INC. BY: /s/William J. Weisz BY: /s/ Richard H. Weise ------------------------ ----------------------------------- William J. Weisz Richard H. Weise Senior Vice President, General Counsel & Secretary 2 APPENDIX A Consultant agrees to make available to Motorola the following services pursuant to the Consultant Agreement to which this Appendix is attached. 1. Serving as Chairman of Motorola's Board of Directors, performing the duties of the Chairman of the Board and such other duties which are from time to time assigned. 2. Federal government contracting activities. 3. Representation of Motorola at various civic, cultural, political, and educational activities. 4. Serving as the Company's representative in various government, industry or customer matters. 5. Field testing new products as they become available. 6. Acting as a Senior Consultant to the Company on various issues as they become relevant or pertinent to the continued health and welfare of the Company, such as Japan or European relations, total customer satisfaction, quality and etc. 7. Making facility visits both in the U.S. and internationally. 8. Providing training services, such as MTEC seminars. 9. Other topics as may from time to time be decided upon by Consultant or the CEO. 3 APPENDIX B Law Department Inter-Office Correspondence Date: February 15, 1994 From: Rich Weise To: Bill Weisz Phone: (708) 576-5009 Re: Consultant Agreement -------------------- As you know, I am very pleased that you have agreed to continue your consulting agreement with Motorola. As we agreed, you will provide consulting services to Motorola as specified in attached agreement, as well as handle other projects which, from time to time, may arise. The compensation terms of your consulting arrangement are as follows: 1) Compensation at the rate of Three Hundred Thousand Dollars ($300,000) per year, paid monthly; 2) Motorola shall be responsible for all expenses which you incur in performing the services pursuant to our arrangement; 3) we shall provide you office facilities and secretarial services in Phoenix, as well as in Chicago consistent with government regulations to maintain your security clearance; and 4) you shall have the corporate aircraft made available to you, dependent upon scheduling, to further your consulting activities for Motorola. It is understood that these payments are in addition to your regular Board Retainer and Board and Committee Fee payments. Once again, I am delighted that Motorola will continue to benefit from your expertise which has proved so invaluable to the Company. 4 EX-10 8 EXHIBIT 10.12 EXHIBIT 10.12 CONSULTANT AGREEMENT This Agreement is entered into this 27th day of January, 1994, between Motorola, Inc., a Delaware corporation ("Motorola") and John T. Hickey ("Consultant"). In consideration of the mutual promises contained herein and other valuable consideration, the parties mutually agree as follows: 1. TERM. This Agreement is deemed to have begun on January 1, 1994 and continue through December 31, 1994 and may thereafter be renewed on an annual basis upon written agreement of the parties, provided, however, that either Motorola or Consultant may terminate this Agreement or any renewal thereof upon thirty (30) days' notice to the other party. 2. STATEMENT OF SERVICES. Consultant agrees to be available to Motorola for consulting services in the areas described in the attached letter dated December 18, 1992 between Consultant and Carl F. Koenemann, said letter being incorporated herein as Appendix A, and other areas as shall from time to time be agreed upon by Consultant and Motorola. 3. PAYMENT. For services performed pursuant to this Agreement, Consultant will be compensated at an amount and under such terms as are contained in Appendix A. Consultant shall be reimbursed for all expenses which are necessary for and incident to the performance of service hereunder upon approval of Motorola. 4. RECORDS, REPORTS AND INFORMATION. Consultant agrees to furnish Motorola with information with respect to the services covered by this Agreement upon request. Consultant specifically agrees to maintain expense sheets and other evidence in compliance with federal contracting requirements, if any, to accurately show the services performed under this Agreement and to submit such information to Motorola as required. 5. INDEPENDENT CONTRACTOR. Consultant shall perform agreed upon services pursuant to this Agreement as an independent contractor, and shall not be entitled to participate in Motorola's profit sharing, pension, or other plans for the benefit of Motorola employees. 6. WRITINGS AND OTHER DATA TO BECOME PROPERTY OF MOTOROLA. Consultant agrees that all notes, writings and memoranda prepared and/or produced by Consultant in the performance of this Agreement shall, upon request, become the sole property of Motorola, including all rights therein of whatever kind, and shall not be disclosed to any other person or firm by Consultant. 7. INFORMATION FURNISHED TO CONSULTANT BY MOTOROLA. Any Motorola proprietary information received by Consultant used in the performance of this Agreement may not be used for any other purpose and shall be held in confidence by Consultant. 8. PROTECTION OF MOTOROLA'S BUSINESS. Consultant agrees that during the term of this Agreement he will not in any manner use any Motorola proprietary information for the benefit of any other person or company or divulge such information or data to others. Consultant further agrees that he will not serve as a consultant to any independent company or business segment of a corporation that is competitive with Motorola during the term of this Agreement. 9. CODE OF CONDUCT. Notwithstanding Consultant's status as an independent contractor, Motorola expects that and Consultant hereby agrees to conduct himself on behalf of Motorola in accordance with the relevant sections of the Motorola Code of Conduct, which is attached hereto as Appendix B. Should Consultant require interpretation of any section of said Code of Conduct, such can be obtained by contacting Motorola's Senior Vice President and General Counsel, who is currently Richard H. Weise, 1303 E. Algonquin Road, Schaumburg, Illinois 60196; (708) 576-5009. 10. GENERAL REPRESENTATION OF COMPLIANCE. Consultant agrees to comply with all other standards, laws and procedures pertaining to this Agreement which are currently in effect or which are subsequently implemented by any government agency or industry consortium to which Motorola belongs. 11. ENTIRE AGREEMENT. This Agreement constitutes the final expression of the agreement of the parties; it is intended as a complete and exclusive statement of the terms of their agreement; and it supersedes all prior and concurrent promises, representations, negotiations, discussions, and agreements that may have been made in connection with the subject matter hereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement on the day and year first above written. MOTOROLA, INC. BY: /s/ John T. Hickey BY: /s/ Richard H. Weise ------------------------- --- --------------------------------- John T. Hickey Richard H. Weise Senior Vice President, General Counsel & Secretary 2 UPDATED APPENDIX A December 18, 1992 Mr. John T. Hickey 614 South Avenue Glencoe, IL 60022 Dear Jack: This letter is to confirm our previous discussions with regard to your consulting relationship with the Profit Sharing and Retirement Plans for 1993. We agreed that you will continue to be a member of the Profit Sharing and Pension Committees and be available to consult with the investment professionals within the company on an as required basis. We have agreed that this arrangement would continue for the calendar year 1993 after which we would re- evaluate your ongoing participation. For the consulting services indicated above, it was agreed that you would be compensated at the rate of $8,000 per quarter. We assume that you will continue your prior practice of sending us a statement of consulting fees due at the conclusion of each quarter. Let me take this opportunity to say that we continue to value your expertise and find it of great help to have you raise issues of significance and to challenge issues espoused by the other investment professionals with the company. We look forward to a successful year in 1993. Sincerely, /s/ Carl F. Koenemann Executive Vice President and Chief Financial Officer 3 EX-10 9 EXHIBIT 10.13 EXHIBIT 10.13 CONSULTANT AGREEMENT This Agreement is entered into this 27th day of January, 1994, between Motorola, Inc., a Delaware corporation ("Motorola") and Dr. Gardiner L. Tucker ("Consultant"). In consideration of the mutual promises contained herein and other valuable consideration, the parties mutually agree as follows: 1. TERM. This Agreement is deemed to have begun on January 1, 1994 and continue through December 31, 1994 and may thereafter be renewed on an annual basis upon written agreement of the parties, provided, however, that either Motorola or Consultant may terminate this Agreement or any renewal thereof upon thirty (30) days' notice to the other party. 2. STATEMENT OF SERVICES. Consultant agrees to be available to Motorola for consulting in the development of Motorola's Corporate Intelligence Program, enhancing the relevance and timeliness of intelligence provided to members of the CEO's office and Sector/Group General Managers, and on various other issues as they become relevant or pertinent to the continued health and welfare of Motorola. 3. PAYMENT. For services performed pursuant to this Agreement, Consultant will be compensated at an amount and under such terms as are contained in a separate letter between Consultant and Timothy L. Stone, said letter being incorporated herein as Appendix A. 4. RECORDS, REPORTS AND INFORMATION. Consultant agrees to furnish Motorola with information with respect to the services covered by this Agreement upon request. Consultant specifically agrees to maintain expense sheets and other evidence in compliance with federal contracting requirements, if any, to accurately show the services performed under this Agreement and to submit such information to Motorola as required. 5. INDEPENDENT CONTRACTOR. Consultant shall perform agreed upon services pursuant to this Agreement as an independent contractor, and shall not be entitled to participate in Motorola's profit sharing, pension, or other plans for the benefit of Motorola employees. 6. WRITINGS AND OTHER DATA TO BECOME PROPERTY OF MOTOROLA. Consultant agrees that all notes, writings and memoranda prepared and/or produced by Consultant in the performance of this Agreement shall, upon request, become the sole property of Motorola, including all rights therein of whatever kind, and shall not be disclosed to any other person or firm by Consultant. 7. INFORMATION FURNISHED TO CONSULTANT BY MOTOROLA. Any Motorola proprietary information received by Consultant used in the performance of this Agreement may not be used for any other purpose and shall be held in confidence by Consultant. 8. PROTECTION OF MOTOROLA'S BUSINESS. Consultant agrees that during the term of this Agreement he will not in any manner use any Motorola proprietary information for the benefit of any other person or company or divulge such information or data to others. Consultant further agrees that he will not serve as a consultant to any independent company or business segment of a corporation that is competitive with Motorola during the term of this Agreement. 9. CODE OF CONDUCT. Notwithstanding Consultant's status as an independent contractor, Motorola expects that and Consultant hereby agrees to conduct himself on behalf of Motorola in accordance with the relevant sections of the Motorola Code of Conduct, which is attached hereto as Appendix B. Should Consultant require interpretation of any section of said Code of Conduct, such can be obtained by contacting Motorola's Senior Vice President and General Counsel, who is currently Richard H. Weise, 1303 E. Algonquin Road, Schaumburg, Illinois 60196; (708) 576-5009. 10. GENERAL REPRESENTATION OF COMPLIANCE. Consultant agrees to comply with all other standards, laws and procedures pertaining to this Agreement which are currently in effect or which are subsequently implemented by any government agency or industry consortium to which Motorola belongs. 11. ENTIRE AGREEMENT. This Agreement constitutes the final expression of the agreement of the parties; it is intended as a complete and exclusive statement of the terms of their agreement; and it supersedes all prior and concurrent promises, representations, negotiations, discussions, and agreements that may have been made in connection with the subject matter hereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement on the day and year first above written. MOTOROLA, INC. BY: /s/ Gardiner Tucker BY: /s/ Richard H. Weise ----------------------------- -------------------------------- Gardiner Tucker Richard H. Weise Senior Vice President, General Counsel & Secretary 2 APPENDIX A March 11, 1993 Dr. Gardiner L. Tucker 13 Quarter Mile Road Westport, CT 06880 Dear Gardiner: We are very pleased that you are continuing your consulting relationship with Motorola. Enclosed please find two copies of a Consultant Agreement for 1993 for your signature. We have agreed that you will be compensated in an amount not to exceed $10,000 per year plus travel and expenses. Motorola shall be responsible for all such expenses which you incur in performing the services pursuant to our arrangement. We will appreciate your submitting statements of services and expenses which you incur for payment on a twice a year basis. Once again, I am delighted that Motorola will continue to benefit from your expertise which has proved so invaluable to the Company. If you have any questions with respect to the Agreement or the fee arrangement, please do not hesitate to contact me. Once you have signed both copies of the Agreements, please return them both to me for my signature and I will return one completely executed copy to you. Regards, /s/ Tim Stone Vice President and Director of Analytical Research 3 EX-10 10 EXHIBIT 10.14 EXHIBIT 10.14 CONSULTANT AGREEMENT This Agreement is entered into this 27th day of January, 1994, between Motorola, Inc., a Delaware corporation ("Motorola") and Donald R. Jones ("Consultant"). In consideration of the mutual promises contained herein and other valuable consideration, the parties mutually agree as follows: 1. TERM. This Agreement is deemed to have begun on January 1, 1994 and continue through December 31, 1994 and may thereafter be renewed on an annual basis upon written agreement of the parties, provided, however, that either Motorola or Consultant may terminate this Agreement or any renewal thereof upon thirty (30) days' notice to the other party. 2. STATEMENT OF SERVICES. Consultant agrees to be available to Motorola for consulting on various issues as they become relevant or pertinent to the continued health and welfare of Motorola. 3. PAYMENT. For services performed pursuant to this Agreement, Consultant will be compensated at an amount and under such terms as are contained in a separate letter between Consultant and Carl Koenemann, said letter being incorporated herein as Appendix A. 4. RECORDS, REPORTS AND INFORMATION. Consultant agrees to furnish Motorola with information with respect to the services covered by this Agreement upon request. Consultant specifically agrees to maintain expense sheets and other evidence in compliance with federal contracting requirements, if any, to accurately show the services performed under this Agreement and to submit such information to Motorola as required. 5. INDEPENDENT CONTRACTOR. Consultant shall perform agreed upon services pursuant to this Agreement as an independent contractor, and shall not be entitled to participate in Motorola's profit sharing, pension, or other plans for the benefit of Motorola employees. 6. WRITINGS AND OTHER DATA TO BECOME PROPERTY OF MOTOROLA. Consultant agrees that all notes, writings and memoranda prepared and/or produced by Consultant in the performance of this Agreement shall, upon request, become the sole property of Motorola, including all rights therein of whatever kind, and shall not be disclosed to any other person or firm by Consultant. 7. INFORMATION FURNISHED TO CONSULTANT BY MOTOROLA. Any Motorola proprietary information received by Consultant used in the performance of this Agreement may not be used for any other purpose and shall be held in confidence by Consultant. 8. PROTECTION OF MOTOROLA'S BUSINESS. Consultant agrees that during the term of this Agreement he will not in any manner use any Motorola proprietary information for the benefit of any other person or company or divulge such information or data to others. Consultant further agrees that he will not serve as a consultant to any independent company or business segment of a corporation that is competitive with Motorola during the term of this Agreement. 9. CODE OF CONDUCT. Notwithstanding Consultant's status as an independent contractor, Motorola expects that and Consultant hereby agrees to conduct himself on behalf of Motorola in accordance with the relevant sections of the Motorola Code of Conduct, which is attached hereto as Appendix B. Should Consultant require interpretation of any section of said Code of Conduct, such can be obtained by contacting Motorola's Senior Vice President and General Counsel, who is currently Richard H. Weise, 1303 E. Algonquin Road, Schaumburg, Illinois 60196; (708) 576-5009. 10. GENERAL REPRESENTATION OF COMPLIANCE. Consultant agrees to comply with all other standards, laws and procedures pertaining to this Agreement which are currently in effect or which are subsequently implemented by any government agency or industry consortium to which Motorola belongs. 11. ENTIRE AGREEMENT. This Agreement constitutes the final expression of the agreement of the parties; it is intended as a complete and exclusive statement of the terms of their agreement; and it supersedes all prior and concurrent promises, representations, negotiations, discussions, and agreements that may have been made in connection with the subject matter hereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement on the day and year first above written. MOTOROLA, INC. BY: /s/ Donald R. Jones BY: /s/ Richard H. Weise ----------------------------- ---------------------------------- Donald R. Jones Richard H. Weise Senior Vice President, General Counsel & Secretary 2 APPENDIX A Inter-Office Correspondence Date: February 15, 1994 From: Carl Koenemann To: Don Jones Phone:(708) 576-6100 CC: Rich Weise Re: Consultant Agreement -------------------- Dear Don: As you know, I am very pleased that you have agreed to continue your relationship with Motorola after your retirement through a consulting arrangement. As was previously agreed, you will provide consulting services to Motorola as Chairman of the Profit/Pension Plan Advisory Committee. We have agreed that you will be compensated at the rate of $8,000.00 per quarter for your services. We assume that you will continue your prior practice of sending us a statement of consulting fees due at the conclusion of each quarter. Motorola shall be responsible for all expenses which you incur in performing the services pursuant to our arrangement. While on a consulting assignment, we will reimburse you for First Class airfare, if utilized. Once again, I am delighted that Motorola will continue to benefit from your expertise which has proved so invaluable to the Company. Approved: /s/ Donald R. Jones - ---------------------------- Donald R. Jones 3 EX-10 11 EXHIBIT 10.15 EXHIBIT 10.15 CONSULTANT AGREEMENT This Agreement is entered into this 27th day of January, 1994, between Motorola, Inc., a Delaware corporation ("Motorola") and Erich Bloch ("Consultant"). In consideration of the mutual promises contained herein and other valuable consideration, the parties mutually agree as follows: 1. TERM. This Agreement is deemed to have begun on January 1, 1994 and continue through December 31, 1994 and may thereafter be renewed on an annual basis upon written agreement of the parties, provided, however, that either Motorola or Consultant may terminate this Agreement or any renewal thereof upon thirty (30) days' notice to the other party. 2. STATEMENT OF SERVICES. Consultant agrees to be available to Motorola for consulting on various issues as they become relevant or pertinent to the continued health and welfare of Motorola. 3. PAYMENT. For services performed pursuant to this Agreement, Consultant will be compensated at an amount and under such terms as are contained in a separate letter between Consultant and Veronica A. Haggart, said letter being incorporated herein as Appendix A. 4. RECORDS, REPORTS AND INFORMATION. Consultant agrees to furnish Motorola with information with respect to the services covered by this Agreement upon request. Consultant specifically agrees to maintain expense sheets and other evidence in compliance with federal contracting requirements, if any, to accurately show the services performed under this Agreement and to submit such information to Motorola as required. 5. INDEPENDENT CONTRACTOR. Consultant shall perform agreed upon services pursuant to this Agreement as an independent contractor, and shall not be entitled to participate in Motorola's profit sharing, pension, or other plans for the benefit of Motorola employees. 6. WRITINGS AND OTHER DATA TO BECOME PROPERTY OF MOTOROLA. Consultant agrees that all notes, writings and memoranda prepared and/or produced by Consultant in the performance of this Agreement shall, upon request, become the sole property of Motorola, including all rights therein of whatever kind, and shall not be disclosed to any other person or firm by Consultant. 7. INFORMATION FURNISHED TO CONSULTANT BY MOTOROLA. Any Motorola proprietary information received by Consultant used in the performance of this Agreement may not be used for any other purpose and shall be held in confidence by Consultant. 8. PROTECTION OF MOTOROLA'S BUSINESS. Consultant agrees that during the term of this Agreement he will not in any manner use any Motorola proprietary information for the benefit of any other person or company or divulge such information or data to others. Consultant further agrees that he will not serve as a consultant to any independent company or business segment of a corporation that is competitive with Motorola during the term of this Agreement. 9. CODE OF CONDUCT. Notwithstanding Consultant's status as an independent contractor, Motorola expects that and Consultant hereby agrees to conduct himself on behalf of Motorola in accordance with the relevant sections of the Motorola Code of Conduct, which is attached hereto as Appendix B. Should Consultant require interpretation of any section of said Code of Conduct, such can be obtained by contacting Motorola's Senior Vice President and General Counsel, who is currently Richard H. Weise, 1303 E. Algonquin Road, Schaumburg, Illinois 60196; (708) 576-5009. 10. GENERAL REPRESENTATION OF COMPLIANCE. Consultant agrees to comply with all other standards, laws and procedures pertaining to this Agreement which are currently in effect or which are subsequently implemented by any government agency or industry consortium to which Motorola belongs. 11. ENTIRE AGREEMENT. This Agreement constitutes the final expression of the agreement of the parties; it is intended as a complete and exclusive statement of the terms of their agreement; and it supersedes all prior and concurrent promises, representations, negotiations, discussions, and agreements that may have been made in connection with the subject matter hereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement on the day and year first above written. MOTOROLA, INC. BY: /s/ Erich Bloch BY: /s/ Richard H. Weise -------------------------------- ------------------------------ Erich Bloch Richard H. Weise Senior Vice President, General Counsel & Secretary 2 APPENDIX A February 19, 1993 Mr. Erich Bloch, Distinguished Fellow Council on Competitiveness 900 17th St. NW, Suite 1050 Washington, D.C. 20006 Dear Erich: As you know, I am very pleased that you have agreed to expand your relationship with Motorola through a consulting arrangement. Enclosed please find two copies of a Consultant Agreement for 1993 for your signature. We have agreed that you will be compensated at the rate of $30,000 on an annual basis. A fee of $2,500 will be paid monthly. It is our mutual understanding that you will devote approximately one third of your time to consulting for Motorola under this Agreement. Motorola shall be responsible for all expenses which you incur in performing the services pursuant to our arrangement. We will appreciate your submitting statements of services and expenses which you incur for payment on a monthly basis. Once again, I am delighted that Motorola will continue to benefit from your expertise which has proved so invaluable to the Company. If you have any questions with respect to the Agreement or the fee arrangement, please do not hesitate to contact me. Sincerely, /s/ Veronica A. Haggart 3 EX-11 12 EXHIBIT 11 Exhibit 11 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share (In millions, except per share amounts)
For the Years Ended ------------------- Dec. 31, Dec. 31, 1993 1992 ------------------- Net Income $ 1,022 $ 576 Add: Interest on Zero coupon notes due 2009 and 2013, net of tax and effect of executive incentive and employee profit sharing plans 15 18 -------- -------- Adjusted net income before cumulative effect of change in accounting principle 1,037 594 -------- -------- Cumulative effect of a change in accounting principle, net of tax --- (123) -------- -------- Adjusted net income $ 1,037 $ 471 -------- -------- -------- -------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - PRIMARY: - ---------------------------------------------- Weighted average common shares outstanding 274.4 267.0 Common equivalent shares: Stock options 6.4 3.8 Zero coupon notes due 2009 and 2013 10.5 12.0 -------- -------- Common and common equivalent shares-primary (in millions) 291.3 282.8 -------- -------- -------- -------- Net earnings per share before cumulative effect of change in accounting principle $ 3.56 $ 2.10 Cumulative effect of change in accounting principle per share --- (.43) -------- -------- Net earnings per share - primary $ 3.56 $ 1.67 -------- -------- -------- -------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - FULLY DILUTED: - ---------------------------------------------- Weighted average common shares outstanding 274.4 267.0 Common equivalent shares: Stock options 7.0 4.6 Zero coupon notes due 2009 and 2013 10.5 12.0 -------- -------- Common and common equivalent shares-fully diluted (in millions) 291.9 283.6 -------- -------- -------- -------- Net earnings per share before cumulative effect of change in accounting principle $ 3.55 $ 2.09 Cumulative effect of change in accounting principle per share --- (.43) -------- -------- Net earnings per share - fully diluted $ 3.55 $ 1.66 -------- -------- -------- --------
EX-11.1 13 EXHIBIT 11.1 Exhibit 11.1 Motorola, Inc. and Consolidated Subsidiaries Pro Forma Primary and Fully Diluted Earnings Per Common and Common Equivalent Share Giving Retroactive Effect to the March 15, 1994 Two-For-One Stock Split (In millions, except per share amounts)
For the Years Ended -------------------- Dec. 31, Dec. 31, 1993 1992 -------------------- Net Income $ 1,022 $ 576 Add: Interest on Zero coupon notes due 2009 and 2013, net of tax and effect of executive incentive and employee profit sharing plans 15 18 ------- ------- Adjusted net income before cumulative effect of change in accounting principle 1,037 594 ------- ------- Cumulative effect of a change in accounting principle, net of tax --- (123) ------- ------- Adjusted net income $ 1,037 $ 471 ------- ------- ------- ------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - PRIMARY: - ---------------------------------------------- Weighted average common shares outstanding 548.8 534.1 Common equivalent shares: Stock options 12.9 7.5 Zero coupon notes due 2009 and 2013 20.9 24.0 ------- ------- Common and common equivalent shares-primary (in millions) 582.6 565.6 ------- ------- ------- ------- Net earnings per share before cumulative effect of change in accounting principle $ 1.78 $ 1.05 Cumulative effect of change in accounting principle per share --- (.22) ------- ------- Net earnings per share - primary $ 1.78 $ .83 ------- ------- ------- ------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - FULLY DILUTED: - ---------------------------------------------- Weighted average common shares outstanding 548.8 534.1 Common equivalent shares: Stock options 14.0 9.0 Zero coupon notes due 2009 and 2013 20.9 24.0 ------- ------- Common and common equivalent shares-fully diluted (in millions) 583.7 567.1 -------- ------- -------- ------- Net earnings per share before cumulative effect of change in accounting principle $ 1.78 $ 1.05 Cumulative effect of change in accounting principle per share --- (.22) ------- ------- Net earnings per share - fully diluted $ 1.78 $ .83 ------- ------- ------- -------
EX-13 14 EXHIBIT 13 EXHIBIT 13 FINANCIAL RESULTS Sales and earnings set records as strong growth continued throughout our major businesses. Sales increased 28% to approximately $17.0 billion from $13.3 billion in 1992. Earnings were $1.02 billion, or $3.55 per share on a fully diluted basis, compared with $576 million, or $2.09 per share on the same basis a year earlier, before the 1992 cumulative effect of a change in accounting principle involving postretirement benefits other than pensions. Net margin on sales was 6.0%, compared with 4.3% a year ago. Detailed operating and financial results of our various businesses in 1993 appear on pages 18-37. REVIEW OF OPERATIONS SEMICONDUCTOR PRODUCTS SECTOR Segment sales advanced 28% to $5.7 billion, the 20th consecutive quarter of sales growth. Orders climbed 26%, and segment operating profits were higher. Amid the convergence of computing, communications and consumer/entertainment technologies, we developed an array of advanced products to help lead this evolution and provide innovative, on-chip solutions for customers worldwide. All major market regions posted double-digit growth, led by Asia-Pacific. Among market segments, communications set the pace for new orders, followed by automotive, personal computer/workstation, industrial and consumer. Distributor channels also posted strong increases. We also achieved double-digit growth in each of our major product groups. Microcontrollers, microprocessors, digital signal processors, mixed signal (analog-digital), logic integrated circuits, MOS gate arrays, memories, analog and communication devices led the way, with most product categories contributing. Support for the PowerPC -TM- family of reduced instruction set (RISC) microprocessors expanded during the year. It is being developed as part of our technology alliance with IBM and Apple Computer. Volume production of the PowerPC 601 was begun by IBM in third quarter. Designed for use in desktop systems, the 601 also supports high-end symmetric multiprocessing features. Initial production of the PowerPC 603, targeted for notebook computers and other battery-powered devices, was announced in October. Motorola and IBM will manufacture the 603 chip. Development of the other two members of the PowerPC family continued on schedule, with rollout of these powerful microprocessors slated to occur in 1994. The 604 microprocessor addresses high-performance PCs, workstations, servers and graphics applications. The 620 is designed for super high performance uniprocessor and multiprocessor workstations, servers and supercomputers. Microsoft Corp. and Motorola announced that a port of the Microsoft -R- Windows NT -TM- operating system is under way. Windows NT joins IBM's AIX -R- and OS/2 -R-, Apple's Macintosh System 7 -R-, PowerOpen -TM- Environment, Taligent's Object-oriented Environment and Sun Microsystems' Solaris -R- as PowerPC -TM- operating systems. Along with Apple and IBM, a wide variety of customers announced the use of PowerPC microprocessors. They include Bull, Ford Motor Co., Harris, Kaleida Labs/Scientific Atlanta, Tadpole Technology and Thomson-CSF. The Taiwan New PC (personal computer) Consortium, which encompasses more than 70% of the world's PC motherboard manufacturing, was launched to develop and promote PowerPC systems. In addition, six key industry leaders formed the PowerOpen Association to provide software developers with services to support development of products based on the PowerPC architecture. The year was highlighted by new or expanded technology relationships with key computer customers. Apple Computer chose the 33MHz version of our 68030 microprocessor for its PowerBook -TM- Duos and the 68040 for its new high performance desktop computers. Low power devices, such as our 3.3-volt 68040V microprocessor, for portable and other battery powered computing were a big focus during the year. For example, our patented read-channel device for hard disk drives operates as low as 2.7 volts. We became the second largest worldwide supplier of static random access memories (SRAMs), which are used in many computer systems. In addition, we introduced low voltage logic products for the computer and communications markets. We capitalized on rapid growth in the communications arena by introducing GaAS (gallium arsenide) RF field effect transistors for cellular phones, with more than one million units shipped during the year. We also introduced a new family of integrated processors for the personal communications wireless market, including the Dragon I -TM- for personal intelligent communicators. For the emerging digital information superhighway, we introduced the first 32-bit Quad Integrated Communications Controller. In automotive markets, we continued to win key designs at Ford, General Motors and Chrysler for engine, powertrain, safety and electrical systems. Ford will use our insulated gate bipolar transistors in next-generation ignition systems. A licensing agreement with Bosch of Germany will provide that customer with microcomputers, digital signal processor architectures and wafer manufacturing techniques. In consumer markets, in partnership with Thomson Consumer Electronics we released an industry standard closed-captioning device. Our new 1GHz amplifier family will enable cable TV providers to add hundreds of new channels. In the multimedia arena, we partnered with Scientific Atlanta and Kaleida Labs to produce the Malibu -TM- graphic chip set, and introduced the 68341 processor for CD-I (compact disk-interactive) Systems. In the industrial arena, in partnership with Allen Bradley we developed a new motor control drive family using hybrid power module technology. We shipped more than 600 LonBuilder development systems to customers worldwide, with IBM, AT&T, Honeywell and Raytheon among companies that have adopted this technology and our Neuron Chip -R- for intelligent, distributed sense and control networks. Our leadership in Smart Card technology was underscored by production of the 100 millionth chip in our East Kilbride, Scotland facility. Many of the products we make are used in a wide spectrum of applications, and we expanded many popular device lines. For example, as the world's largest producer of microcontrollers, we added to the 68H05 family of customer-specified controllers and announced key additions to our HC11 and HC16 families. We continued expanding our sensor lines, with a new thrust in chemical sensors. Expansions in our worldwide production network were announced to address the increasing demand for semiconductors. We purchased a wafer fabrication facility in Irvine, Calif., and announced new or expanded facilities in Austin, Texas; Chandler, Mesa and Phoenix, Ariz.; Carmona, the Philippines; Tai Po, Hong Kong; East Kilbride, Scotland; Aizu and Sendai, Japan; and Tianjin, China. Thomas D. "Tommy" George was elevated to President of the Semiconductor Products Sector, replacing James A. Norling, who was appointed President of Motorola Europe, Middle East and Africa. Murray A. Goldman was promoted to Senior Vice President and Assistant General Manager. GENERAL SYSTEMS SECTOR Segment sales advanced 43% to $5.2 billion and orders rose 42%. Segment operating profits were higher. Sales of Motorola cellular telephones continued to show strong growth worldwide. We introduced the world's lightest GSM digital phone. GSM is a digital protocol that allows international roaming throughout western Europe. A line of personal and portable Time Division Multiple Access (TDMA) digital cellular telephone products was introduced for the North American market. Motorola acquired an 18% interest in Telular Corp. and formed a strategic relationship to advance the development of fixed wireless products. Motorola also acquired a 40% interest in CedeTel, S.A. de C.V., which serves customers in Monterey, Mexico's second largest market. The world's first integrated cellular phone and pager underwent field trials. Called the MicroTAC -R- RSVP -TM-, it incorporates a numeric digital pager with silent vibrating alert in a single phone. Our cellular infrastructure business made significant gains. Analog systems were expanded in Austria, China, Latin America, Spain and the United Kingdom. Our narrowband technology, which increases capacity and improves voice quality of existing systems, has been adopted by more than 12 major operators worldwide. Motorola was awarded new digital cellular GSM contracts in Austria, Belgium, Pakistan, Qatar and the United Arab Emirates. We also won expansion awards and second source supplier contracts in Germany, Portugal, and the U.K. To meet the increased demand, we expanded our Swindon, U.K., manufacturing facility. Several cellular operators in the U.S. and the Philippines awarded us contracts to supply Code Division Multiple Access (CDMA) cellular infrastructure systems. In Japan, we were awarded our third digital cellular contract to provide SC -TM- 9600 base station equipment for Personal Digital Cellular systems. The SC 9600 offers customers multiple analog and digital air interfaces in a compact cabinet. Several U.S. cellular operators began offering our Cellular Digital Messaging Services (CDMS). It provides customers with paging, voice mail notification and digital alphanumeric messaging capabilities. We also won three additional contracts for our PPS -R- 800 Personal Phone Service, which gives customers a single phone number to use at home, at work and while traveling. We asked the Telecommunications Industry Association that our proposed Interface Specification be used as the basis for developing a standard open and common cellular industry interface between base stations and switches throughout North and South America. We have achieved full radio frequency and switch compatibility for all switches in commercial use for the GSM digital standard. Motorola and Northern Telecom announced that the cellular infrastructure systems, sales and service activities within the joint venture, Motorola Nortel Communications Co., would return to the parent companies. We supplied equipment for eight new CT-2 (telepoint) systems, four of which went into service during 1993. Motorola systems are now in the Netherlands, Finland, Singapore, Hong Kong, Malaysia, Thailand and China. CT-2 (second-generation cordless phone) subscriber equipment began shipping into the digital home cordless telephone market in Germany, the Netherlands, Singapore and Hong Kong. We are also engaged in tests of various microcell personal communications systems worldwide. The Computer Group announced its Series 900 family of UNIX-based systems and servers. Based on the Motorola 88110 RISC microprocessor, they feature "snap-together" modularity and expandability. The group also introduced its highest performance single board computer based on the 88110. The Series FT -TM- family of fault-tolerant open network system platforms was announced. They are particularly suited for telecommunications applications. COMMUNICATIONS SEGMENT In this segment, composed of the Land Mobile Products Sector (LMPS) and the former Paging and Wireless Data Group (PWDG), sales rose 24% to $4.8 billion and orders rose 27%. Segment operating profits were higher. In LMPS, higher orders reflected strong worldwide demand for trunking systems and new portable two-way radios. New orders for digital Motorola Integrated Radio Systems (MIRS) totaled more than $400 million in 1993, including an order for more than $100 million from China that represents the largest international order in the sector's history, and orders from Nextel Communications, Inc., for MIRS equipment for its Chicago and New York systems. We received conditional acceptance of the MIRS system installed in Los Angeles for Nextel. Motorola signed agreements in principle to sell its 800MHz Specialized Mobile Radio (SMR) systems, businesses and licenses in the U.S. to Nextel, Dial Page, Inc., and CenCall Communications, Inc., in exchange for minority ownership positions in the three SMR operators. Completion is subject to definitive agreements and regulatory approvals and approvals by stockholders of the three companies, among other items. Motorola acquired Airwave Communications Corp. of Los Angeles, an SMR operator, and acquired, or agreed to acquire, other SMR operators. Some of these agreements are conditional. Major orders for systems using our Astro -TM- digital technology were received in Canada, Australia, Austria and Switzerland. Our first Astro wide-area trunking system began operating in South Florida. Orders for other large trunking systems came from Taiwan, China, Hungary, Portugal and Mexico and several states in the U.S. We introduced the Visar -TM- , the industry's smallest high-powered portable two-way radio at eight cubic inches. Two new Radius -R- portables were introduced for first-time users, and will be sold through distributors and retailers for both business and leisure time use. A new portable developed specifically for China offers telephone interconnect capabilities. A new generation of mobile and portable two-way radios for Europe supports a variety of signaling formats. Motorola sold certain assets of its CoveragePLUS -R- U.S. network to Qualcomm Inc.'s OmniTRACS -R- business. We are working with Qualcomm for a smooth transition of CoveragePLUS customers to the OmiTRACS satellite communications network. By forming joint ventures, we expanded our trunked radio network services in international markets. Our joint venture with Organizacion Cisneros of Venezuela began operations in Caracas and five other cities. Other joint ventures began new shared trunked two-way radio service in Sao Paulo and Port Allegre, Brazil, and in Prague in the Czech Republic. In the former Paging and Wireless Data Group, paging orders again set records. The Asia-Pacific region led the international growth, especially in China. Strong Latin American growth was fueled by the expansion of the Brazilian, Colombian and Mexican markets. In the United States, sales through retail stores were strong. The paging infrastructure business received major awards in the United States, Latin America, Europe and Asia. New subscriber products include the Freespirit -TM- and Bravo -R- Encore pagers, as well as the Memo Express -TM-, the world's first endless line feature alphanumeric pager. The Kanaco pager was developed for the new common carriers in Japan. A new manufacturing facility was opened in Fort Worth, Texas. The new FLEX -TM- paging protocol underwent successful market trials. The protocol provides enhanced speed and increased subscriber capacity for pager carriers. We introduced the first in a line of NewsCard -TM- credit-card sized messaging receivers for use with handheld computers. NewsCard began shipping for both Apple Computer's Newton -TM- , Casio's Z7000 -TM- and Tandy Corp.'s ZPDA -TM- Zoomer personal digital assistants. The service to Newton is provided by MobileComm and the service to Zoomer is provided by Motorola's EMBARC -TM- (Electronic Mail Broadcast to A Roaming Computer) messaging service. Wireless data technology moved forward in several areas. United Parcel Service (UPS) will use Motorola packet radio modems on a new wireless packet data network in Germany. UPS is a major user of our wireless data products in the U.S. Pilot systems also were installed in Australia and Malaysia, and a Hong Kong system was upgraded. We are developing a family of wireless personal communicators that will use operating systems from General Magic, Apple Computer and Microsoft. We also have demonstrated Mobile Networks Integration products, designed for end-to-end connectivity between the increasing varieties of both mobile computing devices and wired and wireless networks. Motorola acquired Lexicus Corp., a developer of handwriting recognition software for pen-based computers, and invested in RadioMail Corp., a provider of wireless electronic mail services. In January 1994, the Paging and Wireless Data Group's businesses were incorporated into the new Messaging, Information and Media Sector, as discussed on page 9. GOVERNMENT AND SYSTEMS TECHNOLOGY GROUP (GSTG) Segment sales increased 32% to $858 million and orders rose 54%. The group recorded a larger loss than a year ago. GSTG continued to move into commercial and international markets while maintaining its traditional Department of Defense market share. The group continued development on several Joint Stars Light Ground Station Modules for the U.S. Army, and produced a modified commercial cellular network to help communications and tracking of troops and equipment during battlefield exercises at the National Training Center in Fort Irwin, Calif. GSTG received orders totaling $335 million as prime contractor for the Iridium -TM/SM- global personal communications system. The program is discussed on page 12. The Diversified Technologies Division was formed to pursue new commercial businesses, including space, positioning systems, personal alarm and reporting systems, secure telecommunications and test equipment. Amtech Corp. and GSTG formed an Intellitag Products joint venture to produce electronic toll and traffic management systems for autos and other vehicles. Along with Motorola's Automotive, Energy and Controls Group, GSTG formed the Position and Navigation Systems business to develop equipment using Global Positioning System technology. AUTOMOTIVE, ENERGY AND CONTROLS GROUP (AECG) Sales were up 39% and orders rose 37%. Operating profits were higher. AECG's results, which are part of the Other Products segment, include the Automotive and Industrial Electronics Group and Motorola Lighting, Inc., as well as two former Communications Segment businesses, the Component Products Division and Energy Products Division. Results include a significant level of internal sales of crystals, filters and battery products to other business segments. AECG's performance was led by strong demand for component and energy products and continued growth in the U.S. automotive market. Major orders included programs for body electronics modules, ignitions, load control receivers, quartz and ceramic components, electronic ballasts, batteries and chargers. The group announced it will manufacture PC multimedia communications hardware for BT (formerly British Telecom). AECG is adding new or expanding facilities in Singapore; Tianjin, China; Albuquerque, N.M., and Vernon Hills, Ill. Motorola acquired Indala Corp., a manufacturer of radio frequency identification cards, tags and readers used in access control, vehicle identification and industrial automation systems. Motorola and Schlumberger Ltd. formed a joint venture to develop wireless electronics technology for remote and automated reading of utility meters. The first vehicles equipped with Motorola's in-vehicle route guidance system were delivered for a field test of Intelligent Vehicle Highway Systems in the Chicago area. A new manufacturing facility was unveiled by Motif Inc., a joint venture of Motorola and In Focus Systems, Inc. to develop and manufacture Active Addressing -TM- liquid-crystal display technology. Motorola Lighting, Inc., expanded its distribution network and received additional orders from major fluorescent light fixture manufacturers. INFORMATION SYSTEMS GROUP Group sales declined 2% and orders were 1% lower. Operating profits were lower. The group's results are part of the Other Products segment. Codex introduced the 6950 SoftCell -TM- ATM Networking Node, a software-defined communications platform that integrates data, voice, image and video over existing and emerging worldwide carrier services. Other new products included the Multimedia Periphery Router -TM- and a digital service unit with synchronous data compression. Universal Data Systems (UDS) introduced two portable modems that connect directly to Motorola cellular telephones. A multiprotocol dial-up networking router also was introduced. A combination bridge and router, the product provides dial-up networking so that organizations can link large numbers of remote users together. UDS expanded its Canadian operation and opened new offices in the Czech Republic and Dubai. In early 1994, a reorganization of ISG was announced as part of the creation of the Messaging, Information and Media Sector. ISG established a transmission line of business, responsible for all transmission product engineering, and development, marketing and support worldwide, and a networking unit, responsible for network management systems. NEW ENTERPRISES The New Enterprises organization manages our entry into strategically relevant, emerging, high-growth and high-technology worldwide business arenas. One of these companies, INFO Enterprises, Inc., provides services such as the EnGenius(SM) on-line source of engineering component information, and litigation support delivered to a desktop computer. Emtek Health Care Systems is a leader in the provision of clinical information systems for critical-care intensive care units, while moving to acute care and enterprise-wide electronic medical systems. Motorola New Enterprises continually seeks to identify paradigm shifting technologies, discontinuous business opportunities and individual entrepreneurs with vision and a passion for their enterprise. FINANCIAL REVIEW Motorola Management's Discussion and Analysis of Financial Condition and Results of Operations includes the Financial Results section of the Letter to Stockholders on pages 2-3 and the Review of Operations on pages 18-21, in addition to the following commentary. This commentary should be read in conjunction with the consolidated financial statements and notes, presented on pages 26-37, for a full understanding of Motorola's financial position and results of operations. RESULTS OF OPERATIONS Sales increased 28% to $17.0 billion from $13.3 billion in 1992. Sales in 1991 were $11.3 billion. The Semiconductor Products segment continues to be the largest business segment, reporting 31% of total sales in 1993, compared to 32% in 1992. The General Systems Products segment also continued its growth, representing 28% of total sales in 1993 compared with 26% a year ago. International market sales, as measured by the locale of the end customer, represent 54% of total sales in 1993, compared with 52% a year ago. The growth was primarily due to stronger markets in the People's Republic of China/Hong Kong, and the rest of the Asia-Pacific region. Operating profits were $1.94 billion. The Semiconductor Products Segment again showed the most profit improvement in 1993, and the General Systems Products segment maintained its position as one of the Company's most profitable segments in 1993. The Company's profitability was primarily affected by significant volume increases driven by demand for its products. The Company continued investing in new technologies across business segments. Net earnings in 1993 were $1.0 billion, or $3.56 and $3.55 per primary and fully diluted common and common equivalent share, respectively, compared with $576 million before the cumulative effect of change in accounting principle, or $2.10 and $2.09 per primary and fully diluted common and common equivalent share, respectively, a year earlier. In 1991, earnings were $454 million, or $1.70 and $1.69 per primary and fully diluted common and common equivalent share, respectively. Net margin on sales was 6.0%, compared with 4.3% a year ago, before the cumulative effect of change in accounting principle. Sales in the fourth quarter were $4.99 billion, up 35% from $3.71 billion in the fourth quarter of 1992. Earnings in the fourth quarter were $340 million, or $1.15 per primary and fully diluted common and common equivalent share, compared with $181 million, or 65 cents and 64 cents per primary and fully diluted common and common equivalent share, respectively, a year ago. Motorola routinely reviews its business strategies, organizational structure, and asset valuations, and implements changes deemed appropriate by management. Charges associated with these decisions are included in selling, general, and administrative expenses; amounts provided in the fourth quarter of 1993, principally relating to the Communications Products, General Systems Products, and Other Products segments, were larger than amounts recorded in prior periods. The effective tax rate for 1993 of 33% is up from the 1992 rate of 28% and the 1991 rate of 26%, principally due to continued growth in countries with high tax rates. The Company will adopt SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities," effective January 1, 1994. The statement establishes a new accounting and reporting standard to be applied to investments in equity and debt securities. The statement requires the Company, based on its intent to hold or dispose of the securities, to categorize them into one of three separate groups, each receiving different accounting treatment. The impact of this change on the Company's financial position and results of operations is not expected to be material. In recent years, a large and increasing portion of the Company's net sales, operating profits and growth have come from its international operations. As a result, the Company's business activities and its results could be significantly affected by the policies of local governments and prevailing social and economic conditions, such as unstable governments, inflation rates, monetary fluctuations, balance of payments, foreign exchange rates and trade restrictions or prohibitions. During 1993, a significant portion of the Company's growth was in the People's Republic of China/Hong Kong. Total sales in these two countries, as measured by the locale of the end customer, were $1.56 billion in 1993. Any possible restrictions on U. S. trade imposed by the People's Republic of China or by the United States on the People's Republic of China, for example, through its loss of Most Favored Nation trade status, could have a significant effect on the Company's growth in this region of the world. While the Company operates using many currencies, the U. S. dollar is the primary functional currency for financial reporting purposes. On January 1, 1993, the Company's operations in Japan began to use the Japanese yen as its functional currency. Beginning on January 1, 1994, the Company's European operations will begin to use an appropriate local functional currency for financial reporting purposes. The Company monitors all foreign currency exposures and generally implements strategies to reduce the impact of currency fluctuations on its financial position and results, including hedging activities. STRATEGIC INVESTMENT: The Company further advanced its strategic investment in the IRIDIUM-TM-(SM) global communications system. The system is being developed by Iridium, Inc., a private, international consortium of telecommunications and industrial companies. The Company has reduced its ownership in Iridium, Inc. from 100% to approximately 29% and intends to further reduce its ownership to not less than 15% over time. At December 31, 1993, the Company's equity investment in and commitments to make equity investments in Iridium, Inc. totaled $231.3 million; additionally, it has committed, subject to action by the Iridium, Inc. Board, to additional equity investments totaling approximately $60 million. Iridium, Inc. will require additional funding from various sources in order to complete the global communications system, which is expected to take place over the next five years. The Company has executed two contracts with Iridum, Inc., for the construction and operation of portions of the global communications system, providing for approximately $6.3 billion in payments by the consortium over a ten year period. The Company has in turn entered into significant subcontracts for portions of the system, for which it will generally remain obligated even if Iridium, Inc. is unable to satsify the terms of the contracts with the Company, including funding. Separately, the Company is making significant investments to produce ancillary products for the system, such as subscriber units. TRANSFER OF SPECIALIZED MOBILE RADIO BUSINESSES, SYSTEMS, AND LICENSES: The Company has signed agreements in principle with Dial Page, Inc., CenCall Communications Corp., and NEXTEL Communications Inc., under which the Company agreed to transfer substantially all of its 800 MHz specialized mobile radio businesses, systems and licenses in the United States, along with cash, in exchange for stock and warrants in these companies. Binding agreements to complete these transactions are subject to various conditions, including agreement on definitive documents, and approvals by the Federal Communications Commission and other governmental agencies, and the shareholders of each of the three companies. The Company may receive approximately 11.74 million shares of Dial Page, Inc. stock and a warrant to purchase an additional 1 million shares at specified, increasing prices; 11.5 million shares of CenCall Communications Corp. common stock and a warrant to purchase an additional 4 million shares at specified, increasind prices; and 35.5 million shares of NEXTEL Communications Inc. common stock, subject to certain adjustments. In connection with these agreements, those companies have agreed to enter into purchase agreements to use Motorola Integrated Radio System technology on those systems. These agreements in principle provide that the Company will lend or guarantee approximately $440 million in connection with these transactions, which may result in some concentrations of credit risk. The agreements in principle further provide that the Company will acquire certain managed licenses (or substitutes) within specified periods. ENVIRONMENTAL MATTERS: Regulating agencies are proposing regulations and interpreting legislation in a manner that allows retroactive imposition of remedial requirements. The Company is engaged in a number of remedial efforts, some of which have been identified as Superfund sites under the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980, or similar state laws. The Company accrues costs associated with environmental matters when they become probable and reasonably estimable. At the end of 1993, the Company has accrued liabilities for the remedial efforts of approximately $42 million. However, due to their uncertain nature, the amounts accrued could differ, perhaps significantly, from the actual costs incurred. These amounts assume no substantial recovery of costs from any insurer. The remedial efforts include environmental cleanup costs, and communication programs. These liabilities represent only the Company's share of any possible costs incurred in environmental cleanup sites, since in most cases, potentially responsible parties other than the Company may exist. STOCK SPLIT: On February 1, 1994, the Board of Directors declared a two-for-one stock split, effected in the form of a 100% stock dividend, to stockholders of record on March 15, 1994, payable on April 18, 1994. On the same day, the Board of Directors approved an increase of 27% in the quarterly dividend. RESEARCH AND DEVELOPMENT: Expenditures increased to $1.52 billion in 1993, up from $1.31 billion in 1992 and $1.13 billion in 1991. The Company continues to invest approximately 9% of every sales dollar in product development and technological advances, and continues to believe that a strong commitment to research and development will drive long-term growth. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations reached a record $2.31 billion in 1993 compared with $1.96 billion in 1992 and $1.36 billion in 1991. Accounts receivable levels grew at a significantly slower pace than sales. The number of weeks that accounts receivable were outstanding was reduced to 6.1 for 1993 from 7.1 for 1992. While the Company's inventory levels also grew, the inventory turns improved to 5.8 in 1993 from 5.2 in 1992. The Company's ratio of net debt to net debt plus equity was 11.9% for 1993 compared with 15.2% in 1992. As of December 31, 1993, the zero coupon notes referred to as Liquid Yield Option-TM- Notes ("LYONs"-TM-), due 2009, have a face value of $744 million. During 1993, various holders of the 2009 LYONs exercised conversion rights for approximately 568,000 notes ($216 million carrying value). On September 27, 1993, the Company issued $480 million principal amount at maturity of LYONs due 2013, for net cash proceeds of $301 million. The 2013 LYONS are subordinated to all existing and future senior indebtedness of the Company, rank on a parity with the 2009 LYONs, and may be redeemed by the holders prior to the stated maturity. The 2013 LYONs are convertible into the Company's common stock at a conversion rate of 5.589 shares per LYON. In March 1993, the Company issued $200 million in aggregate principal amount of 6.5% 15-year notes, which fully depleted its shelf registration statement. In 1993, the Company redeemed all of its 8% sinking fund debentures due 2007 which were then outstanding. In 1994, the Company intends to call the 11.5% Eurodollar notes due 1997. As of December 31, 1993, the Company had domestic and international credit facilities totaling $1.88 billion, of which $1.48 billion remain unused. Cash generated from operations and available credit facilities provides support for short-term funding requirements. Capital expenditures required to support current and long-term growth increased to $2.13 billion from $1.39 billion in 1992. The expenditures for 1994 are expected to be higher than the 1993 level. The 1991 expenditures totaled $1.32 billion. The Semiconductor Products segment continues to comprise the largest portion of fixed asset expenditures, with 53% of all such investments. LYON-TM- is a trademark of Merrill Lynch & Co., Inc. MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS Management is responsible for the preparation, integrity, and objectivity of the consolidated financial statements and other financial information presented in this report. The accompanying consolidated financial statements were prepared in accordance with generally accepted accounting principles, applying certain estimates and judgments as required. Motorola's internal controls are designed to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard, verify, and maintain accountability of assets. Such controls are based on established written policies and procedures, are implemented by trained, skilled personnel with an appropriate segregation of duties, and are monitored through a comprehensive internal audit program. These policies and procedures prescribe that the Company and all its employees are to maintain the highest ethical standards and that its business practices throughout the world are to be conducted in a manner which is above reproach. KPMG Peat Marwick, independent auditors, are retained to audit Motorola's financial statements. Their accompanying report is based on audits conducted in accordance with generally accepted auditing standards, which includes the consideration of the Company's internal controls to establish a basis for reliance thereon in determining the nature, timing, and extent of audit tests to be applied. The Board of Directors exercises its responsibility for these financial statements through its Audit Committee, which consists entirely of independent non-management Board members. The Audit Committee meets periodically with the independent auditors and with the Company's internal auditors, both privately and with management present, to review accounting, auditing, internal controls, and financial reporting matters. /s/ GARY L. TOOKER /s/ CARL F. KOENEMANN Gary L. Tooker Carl F. Koenemann Vice Chairman and Executive Vice President Chief Executive Officer and Chief Financial Officer INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders of Motorola, Inc.: We have audited the accompanying consolidated balance sheets of Motorola, Inc. and consolidated subsidiaries as of December 31, 1993 and 1992, and the related statements of consolidated earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Motorola, Inc. and consolidated subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in notes 1, 2, and 5 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes," in 1992. /s/ KPMG PEAT MARWICK KPMG Peat Marwick Chicago, Illinois January 13, 1994 STATEMENTS OF CONSOLIDATED EARNINGS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 - -------------------------------------------------------------------------------------------- Net Sales $16,963 $13,303 $11,341 ---------------------------------------------------------------------------------------- COSTS AND EXPENSES Manufacturing and other costs of sales 10,351 8,395 7,134 Selling, general and administrative expenses 3,776 2,951 2,579 Depreciation expense 1,170 1,000 886 Interest expense, net 141 157 129 ---------------------------------------------------------------------------------------- Total costs and expenses 15,438 12,503 10,728 ---------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,525 800 613 ---------------------------------------------------------------------------------------- INCOME TAXES PROVIDED ON EARNINGS 503 224 159 ---------------------------------------------------------------------------------------- NET EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $1,022 $576 $454 ---------------------------------------------------------------------------------------- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX -- (123) -- ---------------------------------------------------------------------------------------- NET EARNINGS $1,022 $453 $454 ---------------------------------------------------------------------------------------- FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (1),(2) ---------------------------------------------------------------------------------------- Net earnings before cumulative effect of change in accounting principle $3.55 $2.09 $1.69 ---------------------------------------------------------------------------------------- Cumulative effect of change in accounting principle -- (0.43) -- ---------------------------------------------------------------------------------------- NET EARNINGS $3.55 $1.66 $1.69 ---------------------------------------------------------------------------------------- FULLY DILUTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 291.9 283.6 279.3 - --------------------------------------------------------------------------------------------- (1) PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE ONE CENT HIGHER THAN FULLY DILUTED FOR ALL YEARS SHOWN. AVERAGE PRIMARY COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING FOR 1993, 1992, AND 1991 WERE 291.3, 282.8 AND 277.8, RESPECTIVELY. (2) INCLUDES ADJUSTMENT FOR THE 1992 TWO-FOR-ONE STOCK SPLIT (SEE ALSO NOTE 9).
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Common Stock and (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Additional Paid-In Capital (2) Retained Earnings - ---------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------- Balances at January 1 $1,510 $1,343 $1,324 $3,634 $3,287 $2,933 Net earnings -- -- -- 1,022 453 454 Stock options and other (1) 365 167 19 -- -- -- Dividends declared ($.440 per share in 1993, $.395 in 1992, and $.380 in 1991) -- -- -- (122) (106) (100) ------------------------------------------------------------------------------------------------------ Balances at December 31 $1,875 $1,510 $1,343 $4,534 $3,634 $3,287 - ---------------------------------------------------------------------------------------------------------- (1) CONVERSIONS OF THE ZERO COUPON NOTES DUE 2009, WITH CARRYING VALUES OF APPROXIMATELY $216 MILLION AND $11 MILLION, ARE REFLECTED WITHIN 1993 AND 1992 COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL AMOUNTS, RESPECTIVELY. (2) 1992 STOCK SPLIT: AN AMOUNT EQUAL TO THE PAR VALUE OF THE ADDITIONAL SHARES ISSUED WAS TRANSFERRED FROM ADDITIONAL PAID-IN CAPITAL TO COMMON STOCK DUE TO THE TWO-FOR-ONE STOCK SPLIT EFFECTED IN THE FORM OF A 100 PERCENT STOCK DIVIDEND. ALL REFERENCES TO SHARES OUTSTANDING AND PER SHARE AMOUNTS HAVE BEEN ADJUSTED ON A RETROACTIVE BASIS (SEE ALSO NOTE 9).
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. TWENTY-SIX CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - ---------------------------------------------------------------------------------------------------- December 31 1993 1992 - ---------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $886 $677 Short-term investments (at lower of cost or market) 358 253 Accounts receivable, less allowance for doubtful accounts (1993, $91; 1992, $86) 2,476 2,036 Inventories 1,864 1,321 Future income tax benefits 675 522 Other current assets 454 409 --------------------------------------------------------------------------------- Total current assets 6,713 5,218 --------------------------------------------------------------------------------- Property, plant and equipment, net 5,547 4,576 Other assets 1,238 835 --------------------------------------------------------------------------------- Total assets $13,498 $10,629 - ---------------------------------------------------------------------------------------------------- LIABILITIES AND CURRENT LIABILITIES STOCKHOLDERS' Notes payable and current portion of long-term debt $555 $437 EQUITY Accounts payable 1,338 1,127 Accrued liabilities 2,496 1,771 --------------------------------------------------------------------------------- Total current liabilities 4,389 3,335 --------------------------------------------------------------------------------- Long-term debt 1,360 1,258 Deferred income taxes 433 230 Other liabilities 907 662 --------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Common stock, $3 par value Authorized shares: 1993, 700.0; 1992, 300.0 Issued and outstanding shares: 1993, 278.6; 1992, 269.7 836 809 Preferred stock, $100 par value issuable in series Authorized shares: 0.5 (none issued) -- -- Additional paid-in capital 1,039 701 Retained earnings 4,534 3,634 --------------------------------------------------------------------------------- Total stockholders' equity 6,409 5,144 --------------------------------------------------------------------------------- Total liabilities and stockholders' equity $13,498 $10,629 - ----------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. TWENTY-SEVEN STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - --------------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------- OPERATING Net earnings $1,022 $453 $454 Add (deduct) non-cash items Cumulative effect of change in accounting principle -- 123 -- Depreciation 1,170 1,000 886 Net change in deferred income taxes 50 (23) (5) Amortization of debt discount and issue costs 26 29 27 Change in assets and liabilities, net of effects of acquisition and dispositions Gain on disposition of investments in affiliated companies (9) (12) (22) Accounts receivable, net (439) (82) (96) Inventories (539) (77) 3 Other current assets (44) (67) 12 Accounts payable and accrued liabilities 927 675 154 Other assets (95) (16) (145) Other liabilities 245 (42) 90 ------------------------------------------------------------------------------------------ Net cash provided by operations 2,314 1,961 1,358 - --------------------------------------------------------------------------------------------------------------- INVESTING Acquisitions and advances to affiliated companies (408) (117) (52) Dispositions of investments in affiliated companies 67 28 40 Payments for property, plant and equipment (2,187) (1,442) (1,387) Other changes to property, plant, and equipment, net 126 59 86 (Increase) decrease in short-term investments (105) (22) 81 ------------------------------------------------------------------------------------------ Net cash used for investing activities (2,507) (1,494) (1,232) - --------------------------------------------------------------------------------------------------------------- FINANCING Increase (decrease) in notes payable and current portion of long-term debt 117 (415) (143) Increase in long-term debt 292 286 135 Issuance of common stock 113 137 19 Payment of dividends to stockholders (120) (100) (100) ------------------------------------------------------------------------------------------ Net cash provided by (used for) financing activities 402 (92) (89) - --------------------------------------------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS $209 $375 $37 - ---------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. SUPPLEMENTAL CASH FLOW INFORMATION
(IN MILLIONS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - --------------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------- NON-CASH Conversion of zero coupon notes due 2009 $216 $11 -- ACTIVITIES Issuance of common stock for investment acquisition $ 36 $19 -- - ----------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. TWENTY-EIGHT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION: The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. CASH EQUIVALENTS: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. CONTRACT ACCOUNTING: The Company uses the percentage-of-completion method to recognize revenues and costs associated with most long-term contracts. For contracts involving certain technologies, profits and revenues are deferred until technological feasibility is established or customer acceptance is obtained. INVENTORIES: Inventories are valued at the lower of average cost (which approximates computation on a first-in, first-out basis) or market (i.e., net realizable value or replacement cost), less progress payments on long-term contracts. PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation is recorded principally using the declining-balance method, based on the estmated useful lives of the assets (buildings and building equipment, 5-50 years; machinery and equipment, 2-12 years). FOREIGN CURRENCY TRANSLATION: The Company principally uses the U.S. dollar as the functional currency for financial reporting. Gains and losses from remeasurement to U.S. dollars are included in net earnings. The Company enters into foreign exchange contracts to hedge its investments in foreign subsidiaries. Gains and losses on these hedges are also included in net earnings. The Company periodically enters into foreign exchange contracts to hedge identifiable transactions. Gains and losses from these contracts are classified in earnings in the same category and accounting period as the underlying transactions. EARNINGS PER SHARE: The Company has considered the dilutive effects of the convertible zero coupon notes due 2009 and 2013 and the outstanding stock options in determining primary and fully diluted earnings per share. INCOME TAXES: Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires a change from the deferred method of accounting for income taxes of Accounting Principles Board (APB) Opinion 11 to the asset and liability method of accounting for income taxes. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106 requires that the cost of postretirement benefits be accrued during the years that employees render service. The Company implemented SFAS No. 106 by recognizing the transition obligation in the year of adoption. RECLASSIFICATIONS: Certain amounts in prior years' financial statements and related notes have been reclassified to conform to the 1993 presentation. - -------------------------------------------------------------------------------- 2. INCOME TAXES The company adopted, in 1992, SFAS No. 109, "Accounting for Income Taxes." The impact of this accounting change was not material. Prior years' financial statements have not been restated to apply the provisions of SFAS No. 109. COMPONENTS OF EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
1993 1992 1991 - ------------------------------------------------------ United States $ 360 $146 $166 Other nations 1,165 654 447 ---------------------- Total $1,525 $800 $613 - ------------------------------------------------------
Income tax payments were $286 million in 1993, $132 million in 1992, and $150 million in 1991. Income taxes are generally not provided on cumulative undistributed earnings of certain non-U.S. subsidiaries. Such undistributed earnings aggregated $2.2 billion and $1.7 billion at December 31, 1993 and 1992, respectively. It is intended that these earnings will be permanently reinvested in operations outside the U.S. Should these earnings be distributed, foreign tax credits would reduce the additional U.S. income tax which would be payable. In cases where taxes are provided on such undistributed earnings, those taxes are included in U.S. income taxes. COMPONENTS OF INCOME TAXES PROVIDED ON EARNINGS
1993 1992 1991 - -------------------------------------------------------- Current United States $133 $ 75 $ 54 Other nations 298 147 104 State income taxes (U.S.) 22 7 6 ------------------------ 453 229 164 Deferred 50 (5) (5) ----------------------- Income taxes before cumulative effect of change in accounting principle $503 $224 $159 - --------------------------------------------------------
TWENTY-NINE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- At December 31, 1993, certain non-U.S. subsidiaries had loss carryforwards for income tax reporting purposes of $59.1 million, with expiration dates starting in 1994. DIFFERENCES BETWEEN INCOME TAX EXPENSE COMPUTED AT THE U.S. FEDERAL STATUTORY TAX RATE OF 35% FOR 1993 AND 34% FOR 1992 AND 1991 AND INCOME TAXES PROVIDED ON EARNINGS
1993 1992 1991 - ----------------------------------------------------------------- Income tax expense at statutory rate $534 $272 $208 Taxes on non-U.S. earnings (21) (31) (24) State income taxes 14 7 5 Foreign Sales Corporation (29) (18) (22) Tax Credits (4) (2) (7) Other 9 (4) (1) ------------------------ Income taxes before cumulative effect of change in accounting principle $503 $224 $159 - ------------------------------------------------------------------
SIGNIFICANT DEFERRED TAX ASSETS (LIABILITIES)
December 31 1993 1992 - ----------------------------------------------------------------- Depreciation $(166) $(139) Inventory reserves 196 164 Employee benefits 114 102 Capitalized items 97 72 Other deterred income (3) 93 ----- ----- Net deferred tax asset $ 242 $ 292 - -----------------------------------------------------------------
The deferred tax assets are considered realizable considering past income and evidence of future income. These include, but are not limited to, carrybacks, earnings trends, and tax planning strategies. The Internal Revenue Service (IRS) has examined the federal income tax returns for Motorola, Inc. through 1985 and the returns have been settled through 1983. In connection with the audits for the years 1984 through 1987, the IRS has proposed adjustments to the Company's income and tax credits for those years which would result in substantial additional tax. The Company disagrees with most of the proposed adjustments and is contesting them. In the opinion of the Company's management, the final disposition of these matters, and proposed adjustments from other tax authorities, will not have a material adverse effect on the consolidated business or financial position of the Company. - -------------------------------------------------------------------------------- 3. DEBT AND CREDIT FACILITIES LONG-TERM DEBT
December 31 1993 1992 - ------------------------------------------------------- 12% Eurodollar notes due 1994 $ 68 $ 68 11.5% Eurodollar notes due 1997 93 93 7.6% notes due 2007 300 300 8% sinking fund debentures 0 58 6.5% debentures due 2008 199 0 Zero coupon notes due 2009 294 489 Zero coupon notes due 2013 309 0 6.75% industrial revenue bonds due 2014 20 20 8.4% debentures due 2031 (redeemable at the holders' option in 2001) 200 200 Other long-term debt 42 39 --------------- 1,525 1,267 Less current maturities 165 9 --------------- Long-term debt $1,360 $ 1,258 - -------------------------------------------------------
SHORT-TERM DEBT
December 31 1993 1992 - ------------------------------------------------------- Notes to banks $ 83 $ 89 Commercial paper 293 325 Other short-term debt 14 14 -------------- 390 428 Add current maturities 165 9 -------------- Notes payable and current portion of long-term debt $555 $437
The Company intends to call, in 1994, at a rate of 101%, the 11.5% Eurodollar notes due 1997. The $93 million carrying value of the notes is included in current maturities of long-term debt. As of December 31, 1993, the zero coupon notes due 2009, referred to as Liquid Yield Option -TM- Notes ("LYONs"-TM-), have a face value at maturity of $744 million. The 2009 LYONs were priced at a 6% yield to maturity and are convertible into 9.134 shares of Motorola common stock for each $1,000 note. During 1993, various holders of the 2009 LYONs exercised conversion rights for approximately 568,000 notes ($568 million face value; $216 million carrying value). On September 27, 1993, the Company issued additional LYONs due 2013, having a face value of $480 million at maturity, for net cash proceeds of $301 million. The 2013 LYONs were priced to yield 2.25% to maturity and are convertible into 5.589 shares of Motorola THIRTY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- common stock for each $1,000 note. Both LYONs issues are subordinated to all existing and future senior indebtedness of the Company, rank on a parity with each other, and may be redeemed by the holders prior to the stated maturity. During March 1993, the Company issued $200 million in aggregate principal amount of 6.5% fifteen year debentures. The Company also retired the 8% sinking fund debentures during 1993. Aggregate maturities and sinking fund requirements for long-term debt, in millions, during the next five years are as follows: 1994, $165; 1995, $9; 1996, $7; 1997, $6; 1998, $5. The Company has domestic and international credit facilities for short-term borrowings with banks and other external sources. It pays commitment fees of approximately 1/10% on its domestic credit facilities and generally no fees on its foreign credit facilities. Short-term credit facilities totaled $1.88 billion at December 31, 1993, of which $1.48 billion remain unused. Domestic credit facilities primarily support the issuance of commercial paper, while foreign credit facilities generally support working capital requirements. The Company's finance subsidiary has outstanding floating to fixed interest rate commercial paper swaps totaling $75 million as of December 31, 1993. These instruments mature at a rate of $25 million per year from 1994 to 1996. Outstanding letters of credit aggregated approximately $189 million and $172 million at December 31, 1993 and 1992, respectively. - -------------------------------------------------------------------------------- 4. OTHER FINANCIAL DATA INCOME STATEMENT INFORMATION
1993 1992 1991 - ---------------------------------------------------------------------- Research and development $1,521 $1,306 $1,133 -------------------------- Maintenance and repairs 267 236 204 -------------------------- Foreign currency gains (losses) (18) (34) 16 -------------------------- Interest expense, net Interest expense 182 196 176 Interest income (41) (39) (47) -------------------------- Interest expense, net $ 141 $ 157 $ 129 - ----------------------------------------------------------------------
The Company's cash payments for interest expense were $126 million in 1993, $121 million in 1992 and $122 million in 1991. BALANCE SHEET INFORMATION
December 31 1993 1992 - ---------------------------------------------------------------------- Inventories: Finished goods $ 584 $ 413 W.I.P. and production materials 1,280 908 ---------------- Total $1,864 $1,321 ---------------- Property, plant, and equipment: Land $ 151 $ 115 Buildings 2,475 2,185 Machinery 6,690 5,476 Equipment leased to others 391 403 ---------------- 9,707 8,179 Less accumulated depreciation 4,160 3,603 ---------------- Total $5,547 $4,576 ---------------- Accrued liabilities: Compensation $ 491 $ 326 Deferred revenue 223 128 Taxes other than income 137 149 Income taxes payable 158 62 Contribution to employees' profit sharing funds 107 59 Dividends payable 31 30 Other 1,349 1,017 ---------------- Total $2,496 $1,771 - ----------------------------------------------------------------------
FINANCIAL DATA OF CONSOLIDATED FINANCE SUBSIDIARY
1993 1992 1991 - ---------------------------------------------------------------------- Total revenue $ 37 $ 29 $ 20 ------------------------- Net earnings 16 12 8 ------------------------- Total assets 361 295 238 Total liabilities (298) (248) (203) ------------------------- Stockholder's investments and advances $ 63 $ 47 $ 35 - ----------------------------------------------------------------------
The Company's finance subsidiary purchases customer obligations under long- term contracts from the Company at net carrying value. The finance subsidiary interest revenue is included in the Company's consolidated net sales. Interest expense of $12 million in 1993, $11 million in 1992, and $8 million in 1991 is included in manufacturing and other costs of sales. In addition, long-term finance receivables of $282 million in 1993 and $228 million in 1992 are included in other assets. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments include short-term investments, long-term receivables, notes payable, long-term debt, foreign currency contracts, and other financing commitments. The fair values of such financial instruments have been determined based on quoted market prices and market interest rates, as of December 31, 1993. At December 31, 1993, the fair value of the convertible zero coupon notes due 2009 was $624 million compared to the carrying value of $294 million. Such notes, however, are callable by the Company at the carrying value at any time. The fair values of all other financial instruments were not materially different than their carrying (or contract) values. THIRTY-ONE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- LEASES The Company owns most of its major facilities, but does lease certain office, factory and warehouse space, land, and data processing and other equipment under principally noncancellable operating leases. Rental expense, net of sublease income, was $152 million in 1993, $149 million in 1992, and $142 million in 1991. At December 31, 1993, future minimum lease obligations, net of minimum sublease rentals, for the next five years and beyond are as follows: 1994, $113; 1995, $85; 1996, $65; 1997, $48; 1998, $31; beyond, $120. - -------------------------------------------------------------------------------- 5. EMPLOYEE BENEFIT AND INCENTIVE PLANS PENSION BENEFITS The Company's noncontributory pension plan covers most U.S. employees after one year of service. The benefit formula is dependent upon employee earnings and years of service. The Company's policy is to fund the accrued pension cost or the amount allowable based on the full funding limitations of the Internal Revenue Code, if less. The Company has a noncontributory supplemental retirement benefit plan for its elected officers. The plan contains provisions for funding the participants' expected retirement benefits when the participants meet the minimum age and years of service requirements. Certain non-U.S. subsidiaries have varying types of retirement plans providing benefits for substantially all of their employees. Amounts charged to earnings for all non-U.S. plans were $41 million in 1993, $33 million in 1992, and $32 million in 1991. The Company uses a three-year, market-related asset value method of amortizing asset-related gains and losses. Net transition amounts and prior service costs are being amortized over periods ranging from 10 to 15 years. Benefits under all U.S. pension plans are valued based upon the projected unit credit cost method. The assumptions used to develop the projected benefit obligations for the plans for 1993 and 1992 were as follows:
1993 1992 - ---------------------------------------------------------------------- Discount rate for obligations 7.25% 8.5% Future compensation increase rate 5.0% 5.5% Investment return assumption (regular) 9.25% 9.25% Investment return assumption (elected officers) 8.0% 8.0% - ----------------------------------------------------------------------
Accounting literature requires discount rates to be established based on prevailing market rates for high-quality fixed-income instruments that, if the pension benefit obligation was settled at the measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. The Company has reduced the discount rate in determining the pension obligation from 8.5% to 7.25% to comply with these guidelines. As of December 31, 1993, the investment portfolio was predominantly long-term bonds and equity investments, which have historically realized annual returns at or significantly above the assumed investment return rate. The Company believes that discount rate fluctuations are short term in nature and should not adversely affect the Company's long-term obligation. If the pension assumptions were not changed from the previous year, the market value of the plan asset would have exceeded the projected benefit obligation by $55 million at December 31, 1993. COMPONENTS OF NET U.S. PENSION EXPENSE FOR THE REGULAR PENSION PLAN.
1993 1992 1991 - ---------------------------------------------------------------------- Service costs $ 92 $ 84 $ 69 Interest cost on projected obligation 67 55 43 Actual return on plan assets (80) (53) (154) Net amortization and deferral (11) (25) 89 ------------------------- Net pension expense $ 68 $ 61 $ 47 - ----------------------------------------------------------------------
The net U.S. pension expense for the elected officers' supplemental retirement benefit plan was $19 million in 1993 and $17 million in 1992 and 1991. U.S. FUNDED PENSION PLANS
December 31 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- Elected Elected Regular Officers Regular Officers - ---------------------------------------------------------------------------------------------------------------------------------- Actuarial present value of: Vested benefit obligation $(754) $ (42) $(511) $ (34) ---------------------------------------------------- Accumulated benefit obligation (821) (73) (558) (57) ---------------------------------------------------- Projected benefit obligation for service rendered to date (1,117) (82) (774) (67) Plan assets at fair value, primarily bonds, stocks, and cash equivalents 991 45 849 44 ---------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation (126) (37) 75 (23) Unrecognized net (gain) loss 106 36 (97) 17 Unrecognized prior service cost 1 21 1 25 Unrecognized net transition (asset) liability (57) 8 (68) 9 Adjustment required to recognize minimum liability -- (56) -- (41) ---------------------------------------------------- Pension liability recognized in balance sheet $ (76) $ (28) $ (89) $ (13) - ----------------------------------------------------------------------------------------------------------------------------------
THIRTY-TWO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- POSTRETIREMENT HEALTH CARE BENEFITS In addition to providing pension benefits, the Company provides certain health care benefits to its retired employees. The majority of its domestic employees may become eligible for these benefits if they reach normal retirement age while working for the Company. During 1992, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106 requires that the cost of postretirement benefits be accrued during the years that the employees render service. Prior to 1992, costs of retiree health care were recognized as expenses when claims were paid. The Company chose to implement SFAS No. 106 by recognizing as expense in 1992 the entire accumulated postretirement benefit obligation as of January 1, 1992. The Company's policy is to fund the maximum amount allowable based on funding limitations of the Internal Revenue Code. The assumptions used to develop the accumulated postretirement benefit obligation for the retiree health care plan for 1993 and 1992 were as follows:
1993 1992 - --------------------------------------------------------------------------- Discount rate for obligations 7.25% 8.5% Investment return assumption 9.25% 9.25% - ---------------------------------------------------------------------------
Components of the expense recognized in 1993 and 1992 for the retiree health care plan were as follows:
1993 1992 - --------------------------------------------------------------------------- Service costs $ 7 $ 7 Interest cost on projected obligation 16 14 --------------- Net retiree health care expense $23 $21 - ---------------------------------------------------------------------------
U.S. FUNDED RETIREE HEALTH CARE PLAN
December 31 1993 1992 - --------------------------------------------------------------------------- Actuarial present value of accumulated postretirement benefit obligation $(263) $(183) Plan assets at fair value, primarily listed stocks, bonds, and cash equivalents 33 4 Unrecognized net loss 55 -- ---------------- Retiree health care liability recognized in balance sheet $(175) $(179) - ---------------------------------------------------------------------------
The health care trend rate used to determine the pre-age 65 accumulated postretirement benefit obligation was 9.89% for 1993, decreasing to 6% by the year 2000 and beyond. A flat 5% rate per year is used for the post-age 65 obligation. Increasing the health care trend rate by one percentage point would increase the accumulated postretirement benefit obligation by $30 million and would increase the 1993 net retiree health care expense by $5 million. There are no significant postretirement health care benefit plans outside of the United States. OTHER BENEFITS PROFIT SHARING PLANS: The Company and certain subsidiaries have profit sharing plans, principally contributory, in which all eligible employees participate. The Company makes contributions to profit sharing funds in the United States and other nations, which are generally based upon percentages of pretax earnings, as defined, from those operations. Company contributions to all profit sharing plans totaled $107 million, $59 million, and $45 million in 1993, 1992, and 1991, respectively. MANAGEMENT INCENTIVE: The Company may provide up to 7% of its annual consolidated pretax earnings, as defined in the Motorola Executive Incentive Plan, for the payment of cash incentive awards to key employees. During 1993, $78 million was provided for incentive awards, as compared to $29 million and $16 million in 1992 and 1991, respectively. STOCK OPTIONS: Under the Company's employee stock option plans, shares of common stock have been made available for grant to key employees. The exercise price of each option granted is 100% of market value on the date of the grant. Options exercised during 1993 were at per share prices ranging from $15.91 to $52.07. Options outstanding at December 31, 1993 were at per share prices ranging from $15.57 to $106.44. SHARES SUBJECT TO OPTIONS
(In thousands of shares) 1993 1992 - --------------------------------------------------------------------------- Options outstanding at January 1 13,009 14,990 Additional options granted 1,765 3,348 Options exercised (3,163) (5,250) Options terminated, cancelled, or expired (158) (79) ----------------- Options outstanding at December 31 11,453 13,009 Shares reserved for future option grants 8,727 10,334 ----------------- Total shares reserved 20,180 23,343 ----------------- Total options exercisable 9,688 9,672 - ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 6. COMMITMENTS AND CONTINGENCIES FINANCIAL: The Company had $1.78 billion of forward foreign exchange contracts outstanding as of December 31, 1993. Management believes that these forward contracts should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should offset losses and gains on the assets, liabilities, and transactions being hedged. As of December 31, 1993, off balance sheet commitments aggregated $586 million, which includes commitments to extend or guarantee financing for non- consolidated affiliates and for customer financing as well as capital funding commitments. Customer financing commitments require the customer to meet certain conditions established in the financing arrangements. Capital funding commitments are primarily related to the Company's strategic investment in the IRIDIUM(TM/SM) space system. Commitments represent the THIRTY-THREE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- maximum amounts available under these arrangements and may not be completely utilized. The Company has entered into agreements in principle with NEXTEL Communications, Inc., CenCall Communications Corp., and Dial Page, Inc., to effect tax-deferred exchanges of substantially all of the 800 MHz Specialized Mobile Radio businesses, systems, and licenses owned or managed by the Company in the United States in exchange for equity interests in these companies. Binding commitments to complete these transactions are subject to a number of significant conditions including, among other items, agreement on definitive documents, all regulatory approvals, and shareholder approval of the acquiring companies. The transactions further commit the Company to acquire certain managed licenses (or substitutes) within a specified period before or after the closing. The agreements in principle provide that the Company will lend or guarantee approximately $440 million. During 1994, the outcome of the agreements in principle noted above may result in concentrations of credit risk; however, as of December 31, 1993, the Company had no significant concentrations of credit risk. ENVIRONMENTAL AND LEGAL: Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (CERCLA, or Superfund), the Company has been designated as a potentially responsible party by the United States Environmental Protection Agency with respect to certain waste sites with which the Company may have had direct or indirect involvement. Such designations are made regardless of the extent of the Company's involvement. These claims are in various stages of administrative or judicial proceedings. They include demands for recovery of past governmental costs and for future investigations or remedial actions. In many cases, the dollar amounts of the claims have not been specified, and have been asserted against a number of other entities for the same cost recovery or other relief as was asserted against the Company. The Company accrues costs associated with environmental matters when they become probable and reasonably estimable. The amount of such charges to earnings, which did not include potential reimbursements from insurance coverage, was $36 million, $17 million, and $18 million in 1993, 1992, and 1991, respectively. The Company is a defendant in various suits and is subject to various claims which arise in the normal course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the consolidated business or financial position of the Company. - -------------------------------------------------------------------------------- 7. INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC REGION INDUSTRY SEGMENT INFORMATION
Net Sales Operating Profit - ---------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductor Products $ 5,707 $ 4,475 $ 3,679 $ 801 14.0% $ 464 10.4% $ 356 9.7% General Systems Products 5,236 3,662 2,882 718 13.7% 420 11.5% 344 11.9% Communications Products 4,834 3,906 3,491 354 7.3% 192 4.9% 111 3.2% Government and Systems Technology Products 858 650 704 (17) (2.0)% (7) (1.1)% 33 4.7% Other Products 1,762 1,452 1,212 95 5.4% 77 5.3% 42 3.5% Adjustments and eliminations (1,434) (842) (627) (11) -- (4) -- 4 -- ---------------------------- ------ ------ ----- Industry segment totals $16,963 $13,303 $11,341 1,940 11.4% 1,142 8.6% 890 7.8% ---------------------------- General corporate expenses (274) (185) (148) Interest expense, net (141) (157) (129) ------ ------ ----- Earnings before income taxes and cumulative effect of change in accounting principle $1,525 9.0% $ 800 6.0% $ 613 5.4% - ----------------------------------------------------------------------------------------------------------------------------------
Assets Fixed Asset Expenditures Depreciation Expense - ---------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductor Products $ 4,507 $ 3,618 $3,196 $1,120 $ 666 $ 653 $ 529 $ 429 $362 General Systems Products 3,223 2,108 1,790 453 334 250 227 171 151 Communications Products 3,202 2,925 2,597 363 263 274 238 207 195 Government and Systems Technology Products 304 312 375 31 24 27 33 33 36 Other Products 957 826 755 120 101 101 89 106 88 Adjustments and eliminations (24) (32) (51) -- -- -- -- -- -- --------------------------- -------------------------- ------------------------- Industry segment totals 12,169 9,757 8,662 2,087 1,388 1,305 1,116 946 832 General corporate 1,329 872 713 100 54 82 54 54 54 --------------------------- -------------------------- ------------------------- Consolidated totals $13,498 $10,629 $9,375 $2,187 $1,442 $1,387 $1,170 $1,000 $886 - ---------------------------------------------------------------------------------------------------------------------------------- 1992 and 1991 have been reclassified to reflect the realignment of various business units.
THIRTY-FOUR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- GEOGRAPHIC AREA INFORMATION(1)
Net Sales Operating Profit - ---------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- United States $12,924 $10,232 $ 8,802 $ 970 7.5% $ 624 6.1% $ 452 5.1% Other nations 10,066 8,017 6,340 1,164 11.6% 706 8.8% 501 7.9% Adjustments and eliminations (6,027) (4,946) (3,801) (193) -- (188) -- (63) -- --------------------------- ------ ------ ----- Geographic totals $16,963 $13,303 $11,341 1,940 11.4% 1,142 8.6% 890 7.8% --------------------------- General corporate expenses (274) (185) (148) Interest expense, net (141) (157) (129) ------ ------ ----- Earnings before income taxes and cumulative effect of change in accounting principle $1,525 9.0% $ 800 6.0% $ 613 5.4% - ----------------------------------------------------------------------------------------------------------------------------------
Assets - ---------------------------------------------------------------------------------------------------------------------------------- December 31 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- United States $ 7,731 $ 6,297 $5,660 Other nations 4,674 3,668 3,164 Adjustments and eliminations (236) (208) (162) --------------------------------- Geographic totals 12,169 9,757 8,662 General corporate assets 1,329 872 713 --------------------------------- Consolidated totals $13,498 $10,629 $9,375 - ---------------------------------------------------------------------------------------------------------------------------------- (1) AS MEASURED BY THE LOCALE OF THE REVENUE-PRODUCING OPERATIONS. 1992 AND 1991 HAVE BEEN RECLASSIFIED TO REFLECT THE REALIGNMENT OF VARIOUS BUSINESS UNITS.
The Company operates predominantly in the wireless communication, semiconductor technology, and advanced electronic industries. Operations involve the design, manufacture, and sale of a diversified line of products, which include, but are not limited to, two-way radios and pagers; cellular telephones and systems; semiconductors, including integrated circuits and microprocessor units; data communication and distributive data processing equipment and systems; and electronic equipment and industrial electronic products. Previously, Information Systems Products was reported as an industry segment. It no longer represents a significant industry segment of the Company's operations and has been combined with Other Products in the presentation. Manufacturing and distribution operations in any one foreign country do not account for more than 10% of consolidated net sales or total assets. Operating profit (revenues less operating expenses) excludes general corporate expenses, net interest, and income taxes. Intersegment and intergeographic transfers are accounted for on an arm's length pricing basis. Identifiable assets (excluding intersegment receivables) are the Company's assets that are identified with classes of similar products or operations in each geographic area. General corporate assets primarily include cash and cash equivalents, marketable securities, equity investments, and the administrative headquarters of the Company. In 1993, no single customer or group under common control represented 10% or more of the Company's sales. The equity in net assets of non-U.S. subsidiaries amounted to $3.28 billion at December 31, 1993 and $2.51 billion at December 31, 1992. - -------------------------------------------------------------------------------- 8. STOCKHOLDER RIGHTS PLAN Each outstanding share of the Company's common stock carries with it one-half of a preferred share purchase right. Each right becomes exercisable for one- thousandth of a share of the Company's junior participating preferred stock, series A, at an exercise price of $150 per one-thousandth of a share (subject to adjustment) if a person or group acquires 20% or more of the Company's common stock or announces a tender or exchange offer for 30% or more of the Company's common stock. If a person or group acquires 20% or more of the Company's common stock and in certain other circumstances, each right (except, in some instances, those held by an acquiror) becomes exercisable for an amount of the Company's common stock (or that of an acquiror) having a market value of twice the exercise price. In some cases, the Board of Directors may exchange one exercisable right for two shares (subject to adjustment) of the Company's common stock (or the equivalent) and may suspend the exercisability of the rights. The rights have no voting power, expire on November 20, 1998, and may be redeemed for $.05 per right prior to a public announcement that 20% or more of the Company's shares have been accumulated by a person or group. THIRTY-FIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------------------------------------- 9. SUBSEQUENT EVENTS On February 1, 1994, the Board of Directors declared a two-for-one stock split (effected in the form of a 100 percent stock dividend) and an increase in the quarterly dividend to 14 cents per pre-split share, payable April 18, 1994, to stockholders of record on March 15, 1994. Pro forma net earnings per fully diluted common and common equivalent share before cumulative effect of change in accounting principle, giving retroactive effect to the two-for-one stock split, are as follows: 1993, $1.78; 1992, $1.05; 1991, $0.85. Conversion rights outstanding on the zero coupon notes due 2009 and 2013 will increase to 18.268 common shares and 11.178 common shares, respectively, and each outstanding share of the Company's common stock will carry with it one- quarter of a preferred share purchase right. Financial information contained elsewhere in this report has not been adjusted to reflect the impact of the 1994 common stock split. QUARTERLY AND OTHER FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS; UNAUDITED) 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- Quarterly 1ST 2ND 3RD 4TH 1st(1) 2nd(1) 3rd(1) 4th - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING Net sales $3,626 $3,936 $4,408 $4,993 $3,055 $3,141 $3,396 $3,711 RESULTS Gross profit 1,391 1,556 1,696 1,969 1,130 1,159 1,240 1,379 Net earnings before cumulative effect of change in accounting principle 204 224 254 340 125 143 127 181 Cumulative effect of change in accounting principle -- -- -- -- (123) -- -- -- Net earnings 204 224 254 340 2 143 127 181 Net earnings before cumulative effect of change in accounting principle as a percent of sales 5.6% 5.7% 5.8% 6.8% 4.1% 4.6% 3.7% 4.9% Net earnings as a percent of sales 5.6% 5.7% 5.8% 6.8% 0.1% 4.6% 3.7% 4.9% - ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE Fully diluted net earnings DATA(2),(3) per common and common equivalent share Net earnings before cumulative effect of change in accounting principle $ 0.72 $ 0.81 $ 0.87 $ 1.15 $ 0.46 $ 0.53 $ 0.46 $ 0.64 Cumulative effect of change in accounting principle -- -- -- -- (0.44) -- -- -- Net earnings $ 0.72 $ 0.81 $ 0.87 $ 1.15 $ 0.02 $ 0.53 $ 0.46 $ 0.64 -------------------------------------------------------------------------------------------------------------------- Dividends declared $0.110 $0.110 $ 0.110 $ 0.110 $0.095 $0.095 $0.095 $0.110 Dividends paid $0.110 $0.110 $ 0.110 $ 0.110 $0.095 $0.095 $0.095 $0.095 STOCK PRICES High $67.13 $88.63 $105.13 $107.50 $40.82 $41.32 $45.22 $52.72 Low $48.63 $63.25 $ 82.50 $ 84.75 $32.44 $37.10 $37.91 $42.57 - ---------------------------------------------------------------------------------------------------------------------------------- 1 THE FIRST, SECOND, AND THIRD QUARTER 1992 NET EARNINGS, NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE, AND NET EARNINGS AS A PERCENT OF SALES HAVE BEEN RESTATED TO REFLECT THE ADOPTION OF SFAS NO. 106 AS OF JANUARY 1, 1992. THE ADOPTION OF SFAS NO. 109 DID NOT HAVE A MATERIAL AFFECT ON ANY QUARTER. 2 ALL EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE, DIVIDEND AND STOCK PRICE DATA HAS BEEN RESTATED TO REFLECT THE 1992 TWO-FOR-ONE STOCK SPLIT. 3 PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE THE SAME AS FULLY DILUTED FOR ALL PERIODS SHOWN, EXCEPT FOR THE FIRST AND THIRD QUARTERS OF 1993, AND THE FOURTH QUARTER OF 1992, WHEN THEY WERE ONE CENT HIGHER. THE NUMBER OF STOCKHOLDERS OF RECORD OF MOTOROLA COMMON STOCK ON JANUARY 31, 1994 WAS 21,453.
THIRTY-SIX FIVE YEAR FINANCIAL SUMMARY
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES - ---------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 1993 1992 1991 1990 1989 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING Net sales $16,963 $13,303 $11,341 $10,885 $ 9,620 RESULTS Manufacturing and other costs of sales 10,351 8,395 7,134 6,787 5,877 Selling, general, and administrative expenses 3,776 2,951 2,579 2,509 2,317 Depreciation expense 1,170 1,000 886 790 650 Interest expense, net 141 157 129 133 130 Total costs and expenses 15,438 12,503 10,728 10,219 8,974 Earnings before income taxes and cumulative effect of change in accounting principle 1,525 800 613 666 646 Income taxes provided on earnings 503 224 159 167 148 Net earnings before cumulative effect of change in accounting principle $ 1,022 $ 576 $ 454 $ 499 $ 498 Net earnings $ 1,022 $ 453 $ 454 $ 499 $ 498 Net earnings before cumulative effect of change in accounting principle as a percent of sales 6.0% 4.3% 4.0% 4.6% 5.2% Net earnings as a percent of sales 6.0% 3.4% 4.0% 4.6% 5.2% - ---------------------------------------------------------------------------------------------------------------------------------- SHARE DATA(1,2)Fully diluted net earnings per common and common equivalent share Net earnings before cumulative effect of change in accounting principle $ 3.55 $ 2.09 $ 1.69 $ 1.86 $ 1.88 Cumulative effect of change in accounting principle -- (0.43) -- -- -- Net earnings $ 3.55 $ 1.66 $ 1.69 $ 1.86 $ 1.88 Fully diluted average common and common equivalent shares outstanding 291.9 283.6 279.3 277.9 267.4 Dividends declared per share $ 0.440 $ 0.395 $ 0.380 $ 0.380 $ 0.380 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE Total assets $13,498 $10,629 $ 9,375 $ 8,742 $ 7,686 SHEET Working capital 2,324 1,883 1,424 1,404 1,261 Long-term debt 1,360 1,258 954 792 755 Total debt 1,915 1,695 1,806 1,787 1,542 Total stockholders' equity $ 6,409 $ 5,144 $ 4,630 $ 4,257 $ 3,803 - ---------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Current ratio 1.53 1.56 1.46 1.46 1.48 Return on average invested capital before cumulative effect of change in accounting principle 15.3% 9.4% 7.8% 9.4% 10.3% Return on average invested capital 15.3% 7.5% 7.8% 9.4% 10.3% Return on average stockholders' equity before cumulative effect of change in accounting principle 17.8% 11.7% 10.2% 12.3% 13.9% Return on average stockholders' equity 17.8% 9.4% 10.2% 12.3% 13.9% Year-end employment (in thousands) 120 107 102 105 104 - ---------------------------------------------------------------------------------------------------------------------------------- (1) ALL EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE, DIVIDENDS, AND OUTSTANDING SHARES HAVE BEEN RESTATED TO REFLECT THE 1992 TWO-FOR-ONE STOCK SPLIT. (2) PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE ONE CENT HIGHER THAN FULLY DILUTED FOR ALL YEARS SHOWN, EXCEPT IN 1990, WHEN THEY WERE THE SAME. AVERAGE PRIMARY COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING FOR 1993, 1992, 1991, 1990 AND 1989 WERE 291.3, 282.8, 277.8, 277.9, AND 266.6, RESPECTIVELY.
THIRTY-SEVEN EX-22 15 EXHIBIT 22 Exhibit 21 SUBSIDIARIES OF MOTOROLA The following subsidiaries are wholly-owned, directly or indirectly through wholly-owned subsidiaries of Motorola.
JURISDICTION NAME OF SUBSIDIARY OF INCORPORATION - ------------------ ---------------- Motorola Australia Proprietary Limited Australia Motorola Canada Limited/Motorola Canada Limitee Canada Motorola (China) Electronics Ltd. China Codex Corporation Delaware Motorola Componentes de Puerto Rico, Inc. Delaware Motorola Credit Corporation Delaware Motorola International Capital Corporation Delaware Motorola International Development Corporation Delaware Motorola International Sales, Inc. Delaware Motorola Lighting, Inc. Delaware Motorola Satellite Communications, Inc. Delaware Motorola Telcarro de Puerto Rico, Inc. Delaware Universal Data Systems, Inc. Delaware Motorola A/S Denmark Motorola Limited England Motorola Electronique Automobile France Motorola S.A. France Motorola Semiconducteurs S.A. France Motorola Electronic G.m.b.H. Germany Motorola G.m.b.H. Germany Motorola B.V. Holland Motorola Asia Limited Hong Kong Motorola Semiconductors Hong Kong, Limited Hong Kong Motorola Communications Israel Limited Israel Motorola Israel Limited Israel Motorola Pelephone Cellular Communications Ltd. Israel Motorola S.p.A. Italy Nippon Motorola, Limited Japan Motorola Korea Limited Korea Motorola Electronics Sdn. Bhd. Malaysia Motorola Malaysia Sdn. Bhd. Malaysia Motorola Semiconductor Sdn. Bhd. Malaysia Motorola de Mexico, S.A. Mexico Embarc Communication Services, Inc. Nevada Motorola Philippines, Inc. Philippines Motorola Electronics Pte. Ltd. Singapore Motorola Espana S.A. Spain Telcel S.A. Spain Motorola A. B. Sweden Motorola Electronics Taiwan, Ltd. Taiwan Motorola Foreign Sales Corporation Virgin Islands
The names of other subsidiaries have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary -----END PRIVACY-ENHANCED MESSAGE-----