AGREEMENT by and
between Motorola, Inc. (the “Company”), and Edward J.
Zander (the “Executive”) dated as of the 15th day of
December 2003, as amended as of the 27th day of July,
2005.
WHEREAS, the Board
of Directors of the Company (the “Board”) has
determined that it is in the best interests of the Company and its
shareholders to employ the Executive as the Company’s Chief
Executive Officer and to have the Executive serve as Chairman of
the Board;
WHEREAS, the
Company desires to employ the Executive and to enter into an
agreement embodying the terms of such employment; and
WHEREAS, the
Executive desires to enter into this Agreement and to accept such
employment, subject to the terms and provisions of this
Agreement;
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein
and for other good and valuable consideration, the receipt of which
is mutually acknowledged, the Company and the Executive
(individually a “Party” and together the
“Parties”) agree as follows:
1.
Effective Date . The “Effective Date” shall mean
January 5, 2004.
2.
Employment Period . The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to be employed by the
Company, subject to the terms and conditions of this Agreement, for
the period commencing on the Effective Date and ending on the fifth
anniversary thereof (the “Initial Term”),
provided that, on the fourth anniversary and each
anniversary of the Effective Date thereafter, the employment period
shall be extended by one year unless at least 30 days prior to
such anniversary, the Company or the Executive delivers a written
notice (a “Notice of Non-Renewal”) to the other Party
that the employment period shall not be extended (the Initial Term
as so extended, the “Employment Period”).
3. Terms
of Employment . (a) Position and Duties .
(i) During the Employment Period, (A) the Executive shall
serve as the Chief Executive Officer, with such duties and
responsibilities as are commensurate with such positions, reporting
directly to the Board, and (B) the Executive’s principal
location of employment shall be at the principal headquarters of
the Company; provided , that the Executive may be required
under reasonable business circumstances to travel outside of such
location in connection with performing his duties under this
Agreement. In addition, the Company shall cause the Executive to be
elected as Chairman of the Board as of the Effective Date, and
during the Employment Period, the Executive shall remain on the
Board and as Chairman of the Board, subject to Section 4(g),
and shall perform his duties as a director of the Company
conscientiously and faithfully.
(ii) The
Executive agrees that during the Employment Period, he shall devote
substantially all of his business time, energies and talents to
serving as the Company’s Chief Executive Officer and Chairman
of the Board, perform his duties conscientiously and
faithfully
subject to the lawful directions of the Board, and in accordance
with each of the Company’s corporate governance and ethics
guidelines, conflict of interests policies and code of conduct
(collectively, the “Company Policies”). During the
Employment Period, it shall not be a violation of this Agreement
for the Executive, subject to the requirements of Section 7,
to (A) serve on corporate, civic or charitable boards or
committees, provided , that, without the written approval of
the Board, the Executive shall be permitted to serve on no more
than one such corporate board, (B) deliver lectures or fulfill
speaking engagements and (C) manage personal investments, so
long as such activities do not interfere with the performance of
the Executive’s responsibilities as the Chief Executive
Officer or as Chairman of the Board of the Company or violate any
Company Policies.
(iii) The
Executive acknowledges and agrees that he shall at all times during
his service with the Company be subject to the Motorola Stock
Ownership Requirements, as may be in effect from time to time,
which currently require that the Executive maintain holdings of the
Company’s common stock (“Common Stock”) in an
amount at least equal to four times the Executive’s Annual
Base Salary (as defined below). In connection with such
requirements, the Executive shall purchase 75,000 shares of Common
Stock on or prior to July 31, 2005, provided, that, 25,000 of
such shares shall be purchased on or prior to July 31, 2004
and another 25,000 of such shares shall be purchased on or prior to
January 31, 2005.
(i)
Base Salary . During the Employment Period, the Executive
shall receive an annualized base salary (“Annual Base
Salary”) of not less than $1,500,000, payable pursuant to the
Company’s normal payroll practices. During the Employment
Period, the current Annual Base Salary shall be reviewed for
increase only at such time as the salaries of senior officers of
the Company are reviewed generally, provided that, the
Executive’s first such review shall occur no earlier than
calendar year 2005.
(ii)
Annual Bonus . For each fiscal year completed during the
Employment Period, the Executive shall be eligible to receive an
annual cash bonus (“Annual Bonus”) based upon
performance targets that are established by the Compensation and
Leadership Committee of the Board (the “Committee”),
provided that, the Executive’s target Annual Bonus
shall be not less than 135% of his Annual Base Salary (the
“Target Bonus”). Payment of the Target Bonus shall be
guaranteed for fiscal year 2004 (the “Guaranteed
Bonus”). The Executive has agreed to defer receipt of the
Guaranteed Bonus pursuant to the terms of the Company’s
Management Deferred Compensation Plan until after the
Executive’s Date of Termination (as defined below). However,
notwithstanding the immediately preceding sentence, the Executive
shall not be required to defer receipt of the Guaranteed Bonus
beyond the first day on which the deductibility of the Guaranteed
Bonus by the Company is no longer precluded by the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), and in no event shall the Executive be
required to defer receipt beyond January 1 of the year following
the year in which his Date of Termination (as defined below)
occurs.
(iii)
Mid-Range Incentive Plan . For each multi-year period (as
recommended by management and determined by the Committee)
completed during the Employment Period, the Executive shall be
eligible to receive an award (“Mid-Range Incentive Plan
Award”)
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based upon
performance targets that are established by the Committee,
provided that, the Executive’s target Mid-Range
Incentive Plan Award shall be not less than 250% of his Annual Base
Salary.
(iv)
Long-Term Incentive Awards . As determined by the Committee,
the Executive shall be eligible for grants of equity compensation
awards under the Company’s long term incentive compensation
arrangements in accordance with the Company’s policies, as in
effect from time to time. Except for grants with respect to fiscal
year 2004 as set forth below, all grants of equity compensation
awards shall be made in the discretion of the Committee based upon
performance of the Executive and the Company and the
Company’s compensation philosophy.
A. 2004 Stock
Option . In May 2004, the Executive shall be granted an
option (the “2004 Stock Option”) to purchase a number
of shares of common stock of the Company (the “Common
Stock”) for fiscal year 2004 pursuant to the Company’s
Omnibus Incentive Plan of 2003 (the “Incentive Plan”)
having an aggregate Black-Scholes value of $6,250,000. The
Black-Scholes value to be calculated under this
Section 3(b)(iv)(A) shall be determined on the 2004 Stock
Option grant date in a manner consistent with the methodology used
by Hewitt Associates for valuing stock options granted to employees
of its publicly traded clients during the year 2003. The 2004 Stock
Option shall have a per share exercise price equal to the closing
price of a share of Common Stock on the last trading day prior to
the date of grant as reported in the Wall Street Journal (the
“Fair Market Value”), a ten-year term and a vesting
schedule such that the 2004 Stock Option will become exercisable in
four equal annual installments commencing on the first anniversary
of the date of grant, provided that, the Executive remains in the
employ of the Company through each such date. Except as
specifically provided herein, the terms and conditions of the 2004
Stock Option shall be subject to the terms of the Incentive Plan
and the award agreement evidencing the grant of the 2004 Stock
Option, as provided to senior executives of the Company
generally.
B. 2004
Restricted Stock Units . In May 2004, the Executive shall
be granted an award of a number of restricted stock units (the
“Restricted Stock Units”) based on shares of Common
Stock for fiscal year 2004 pursuant to the Incentive Plan equal to
the quotient obtained by dividing (i) $2,000,000 by (ii) the
Fair Market Value on the date of grant. The Restricted Stock Units
shall vest 10% on the first anniversary of the date of grant, 20%
on the second anniversary of the date of grant, 30% on the third
anniversary of the date of grant and 40% on the fourth anniversary
of the date of grant, provided that, the Executive remains
in the employ of the Company through each such date. The Executive
has agreed to defer receipt of the settlement of any Restricted
Stock Units until after the Executive’s Date of Termination
(as defined below). However, notwithstanding the immediately
preceding sentence, the Executive shall not be required to defer
receipt of the settlement of any Restricted Stock Units beyond the
first day on which the deductibility of such settlement by the
Company is no longer precluded by the provisions of Section 162(m)
of the Code. Except as specifically provided herein, the terms and
conditions of the Restricted Stock Units shall be subject to the
terms of the Incentive Plan and the award agreement evidencing the
grant of the Restricted Stock Units, as provided to senior
executives of the Company generally, and in no event shall
the
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Executive be
required to defer receipt beyond January 1 of the year following
the year in which his Date of Termination occurs. Notwithstanding
anything in this Section 3(b)(iv)(B) to the contrary, the
Executive shall be entitled to immediate settlement of any
outstanding Restricted Stock Units to the extent the Restricted
Stock Units otherwise become taxable to the Executive.
C. Effective
Date Stock Option . On the Effective Date, the Company shall
grant to the Executive a stock option pursuant to the Incentive
Plan to purchase 1,350,000 shares of Common Stock (the
“Effective Date Stock Option”). The Effective Date
Stock Option shall have a per share exercise price equal to the
Fair Market Value on the Effective Date, a ten-year term and will
vest in four equal annual installments commencing on the first
anniversary of the date of grant, provided that, the
Executive remains in the employ of the Company through each such
date. Except as specifically provided herein, the terms and
conditions of the Effective Date Stock Option shall be subject to
the terms of the Incentive Plan and the award agreement evidencing
the grant of the Effective Date Stock Option, as provided to senior
executives of the Company generally.
D. Effective
Date Restricted Stock Units . On the Effective Date, the
Company shall grant to the Executive 400,000 Restricted Stock Units
under the Incentive Plan (the “Effective Date Restricted
Stock Units”). The restrictions with respect to the Effective
Date Restricted Stock Units shall lapse 50% on the second
anniversary of the Effective Date and the remainder shall lapse on
the fourth anniversary of the Effective Date, provided that,
the Executive remains in the employ of the Company through each
such date. The Executive has agreed to defer receipt of the
settlement of any Effective Date Restricted Stock Units until after
the Executive’s Date of Termination (as defined below).
However, the Executive shall not be required to defer receipt of
the settlement of any Effective Date Restricted Stock Units beyond
the first day on which the deductibility of such settlement by the
Company is no longer precluded by the provisions of Section 162(m)
of the Code, and in no event shall the Executive be required to
defer receipt beyond January 1 of the year following the year in
which his Date of Termination occurs. Notwithstanding anything in
this Section 3(b)(iv)(D) to the contrary, the Executive shall
be entitled to immediate settlement of any outstanding Effective
Date Restricted Stock Units to the extent the Effective Date
Restricted Stock Units become taxable to the Executive. Except as
specifically provided herein, the terms and conditions of the
Effective Date Restricted Stock Units shall be subject to the terms
of the Incentive Plan and the award agreement evidencing the grant
of the Effective Date Restricted Stock Units, as provided to senior
executives of the Company generally.
(v)
Pension Plans . During the Employment Period, the Executive
shall be eligible for participation in the qualified pension plans,
practices, policies and programs of the Company, as may be in
effect from time to time, for senior executives of the Company
generally.
(vi)
Other Benefits . During the Employment Period, the Executive
shall be eligible for participation in the welfare, perquisites,
fringe benefit, and other benefit plans, practices, policies and
programs, as may be in effect from time to time, for senior
executives of the Company generally; provided, that, any severance
payments or benefits to be
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received under
any severance benefit plans, practices, policies and programs shall
be offset and reduced by any severance benefits or payments
received under this Agreement. The fringe benefits and perquisites
described in the preceding sentence shall include: reasonable use
of Company aircraft for personal and business purposes (not less
than 100 flight hours annually for personal use); participation in
the Company’s Elected Officer Life Insurance Program;
relocation benefits on a tax-neutral basis (including, but not
limited to, providing a suitable, furnished apartment to the
Executive for transition housing for up to 12 months); and, at
the level generally provided for the chief executive officer of the
Company, financial planning; an automobile allowance; personal
security; and a home security system.
(vii)
Change in Control Benefits . The Executive shall be eligible
for participation in the Motorola, Inc. Senior Officer Change in
Control Severance Plan or any successor change in control plan or
program (the “Change in Control Plan”), as may be in
effect from time to time, for senior executives of the Company
generally. At all times during the Employment Period, the Company
will maintain the Change in Control Plan as in effect on the
Effective Date, or provide the Executive with no less favorable
benefits and protection under an alternative program or
arrangement. Additionally, upon a Change in Control (as defined in
Section 9(f)), all equity-based awards granted to the
Executive on or after the Effective Date (including, without
limitation, the 2004 Stock Option, the Restricted Stock Units, the
Effective Date Stock Option and the Effective Date Restricted Stock
Units) shall become fully vested and exercisable (or, if
applicable, all restrictions shall lapse), all performance goals
shall be deemed achieved at target levels, all Performance Stock
(as defined in the Incentive Plan) shall be delivered as promptly
as practicable and all performance units, restricted stock units
and other incentive awards shall be paid out as promptly as
practicable. Notwithstanding the foregoing, if the Company adopts
an equity incentive plan with Change in Control benefits more
generous than the benefits provided in this Section 3(b)(vii) or a
Change in Control severance plan for senior executives generally
with more generous benefits than the Change in Control Plan, the
Executive will be entitled to those more generous benefits to the
extent Executive’s awards are granted under such plan or such
Change in Control severance plan is adopted, as
applicable.
(viii)
Expenses . During the Employment Period, the Executive shall
be eligible for prompt reimbursement for business expenses
reasonably incurred by the Executive in accordance with the
Company’s policies, as may be in effect from time to time,
for its senior executives generally.
(ix)
Vacation . During the Employment Period, the Executive shall
be eligible for paid vacation in accordance with the
Company’s policies, as may be in effect from time to time,
for its senior executives generally.
(x)
Signing Bonus . In connection with the replacement of
outstanding amounts at his current employer that will be forfeited,
on the Effective Date, the Company shall pay to the Executive a
lump sum cash payment of $600,000. In addition, on the Effective
Date, the Company shall grant to the Executive the number of
restricted shares of Company Common Stock under the Incentive Plan
(the “Effective Date Restricted Stock”) determined by
dividing (a) $1,400,000 by (b) the per-share fair market value of
Company Common Stock as of the close of market on the Effective
Date, rounded up to the nearest whole share. The restrictions with
respect to the Effective Date Restricted Stock shall lapse 100% on
the second anniversary of the
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Effective Date,
provided that, the Executive remains in the employ of the
Company through such date. Except as specifically provided herein,
the terms and conditions of the Effective Date Restricted Stock
shall be subject to the terms of the Incentive Plan and the award
agreement evidencing the grant of the Effective Date Restricted
Stock, as provided to senior executives of the Company
generally.
(c) Other
Entities . The Executive agrees to serve, without additional
compensation, as an officer and director for each of the
Company’s subsidiaries, partnerships, joint ventures, limited
liability companies and other affiliates, including entities in
which the Company has a significant investment (collectively, the
Company and such entities, the “Affiliated Group”), as
determined by the Company. As used in this Agreement, the term
“affiliates” shall include any entity controlled by,
controlling, or under common control with the Company.
4.
Termination of Employment . (a) Death or Disability .
The Executive’s employment shall terminate automatically upon
the Executive’s death during the Employment Period. If the
Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to
the definition of Disability set forth below), it may provide the
Executive with written notice in accordance with Section 9(b) of
this Agreement of its intention to terminate the Executive’s
employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the “Disability Effective
Date”), provided that, within the 30-day period after
such receipt, the Executive shall not have returned to full time
performance of the Executive’s duties. For purposes of this
Agreement, “Disability” shall mean the inability of the
Executive to perform his duties with the Company on a full-time
basis for 120 consecutive days or for 180 intermittent days in any
one-year period as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a licensed
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive’s legal
representative. If the Parties cannot agree on a licensed
physician, each Party shall select a licensed physician and the two
physicians shall select a third who shall be the approved licensed
physician for this purpose.
(b)
Cause . The Company may terminate the Executive’s
employment during the Employment Period with or without Cause. For
purposes of this Agreement, “Cause” shall
mean:
(i) the
Executive’s willful and continued failure to substantially
perform his duties under this Agreement, other than any such
failure resulting from incapacity due to physical or mental
illness, which failure has continued for a period of at least
30 days following delivery to the Executive of a written
demand for substantial performance specifying the manner in which
the Executive has failed to substantially perform; or
(ii) the
Executive’s willful engagement in (A) in any
malfeasance, dishonesty or fraud that is intended to or does result
in the Executive’s substantial personal enrichment or a
material detrimental effect on the Company’s reputation or
business; or (B) gross misconduct;
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(iii) the
Executive’s indictment for, or plea of guilty or nolo
contendere to (A) a felony in the United States or (B) to
a felony outside the United States, which, regardless of where such
felony occurs, the Board reasonably believes has had or will have a
detrimental effect on the Company’s reputation or business or
the Executive’s reputation; or
(iv) the
Executive’s material breach of Section 7 or
Section 12 of this Agreement.
A termination
of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board (not
including the Executive) at a meeting of the Board called and held
for such purpose (after at least ten days’ written notice is
provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in one or more of the clauses of
Section 4(b) above, and specifying the particulars thereof in
detail.
(c) Good
Reason . The Executive’s employment may be terminated by
the Executive for Good Reason if (x) an event or circumstance
set forth in the clauses of this Section 4(c) below shall have
occurred and the Executive provides the Company with written notice
thereof within 15 days after the Executive has knowledge of the
occurrence or existence of such event or circumstance, which notice
shall specifically identify the event or circumstance that the
Executive believes constitutes Good Reason, (y) the Company
fails to correct the circumstance or event so identified within
30 days after the receipt of such notice
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