motorola 2006 Proxy Statement

Proxy Statement

PRINCIPAL EXECUTIVE OFFICES: PLACE OF MEETING:1303 East Algonquin Road Rosemont TheaterSchaumburg, Illinois 60196 5400 N. River Road

Rosemont, Illinois 60018March 10, 2006

NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS

To our Stockholders:

Our Annual Meeting will be held at the Rosemont Theater, 5400 N. River Road, Rosemont, Illinois60018 on Monday, May 1, 2006 at 5:00 P.M., local time.

The purpose of the meeting is to:

1. elect directors for the next year;

2. consider and vote upon the adoption of the Motorola Omnibus Incentive Plan of 2006;

3. consider and vote upon one shareholder proposal, if properly presented at the meeting; and

4. act upon such other matters as may properly come before the meeting.

Only Motorola stockholders of record at the close of business on March 3, 2006 will be entitled to voteat the meeting. Please vote in one of the following ways:

‚ use the toll-free telephone number shown on your proxy card;

‚ visit the website shown on your proxy card to vote via the Internet; or

‚ mark, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

PLEASE NOTE THAT ATTENDANCE AT THE MEETING WILL BE LIMITED TO STOCKHOLDERSOF MOTOROLA AS OF THE RECORD DATE (OR THEIR AUTHORIZED REPRESENTATIVES)HOLDING ADMISSION TICKETS OR OTHER EVIDENCE OF OWNERSHIP. THE ADMISSIONTICKET IS DETACHABLE FROM YOUR PROXY CARD. IF YOUR SHARES ARE HELD BY A BANKOR BROKER, PLEASE BRING TO THE MEETING YOUR BANK OR BROKER STATEMENT EVI-DENCING YOUR BENEFICIAL OWNERSHIP OF MOTOROLA STOCK TO GAIN ADMISSION TOTHE MEETING.

By order of the Board of Directors,

A. Peter LawsonSecretary

March 10, 2006

Fellow Stockholders:

You are cordially invited to attend Motorola's 2006 Annual Stockholders Meeting. The meeting will be

held on Monday, May 1, 2006 at 5:00 p.m., local time at the Rosemont Theater, 5400 N. River Road

Rosemont, IL 60018.

2005 was a great year for Motorola in which we achieved record results. We generated operating cash flow

of $4.6 billion, achieved record sales of $36.8 billion Ì up 18 percent as compared to 2004 Ì and solidified our

position in the wireless handset industry with an estimated 18 percent global market share. Our balance sheet, with

more than $10.5 billion in net cash, is the strongest it has been in Motorola's history. Importantly, we significantly

advanced Motorola's vision of Seamless Mobility, extended our design leadership and launched innovative new

products, led by the iconic RAZR V3, and solutions that delighted our customers. Motorola is poised for

continued growth and success with an unrivaled portfolio of products and technologies in our Mobile Devices,

Government and Enterprise Mobility Solutions, Networks and Connected Home Solutions segments.

During the year, Motorola was awarded the National Medal of Technology for its outstanding

contributions to America's technological innovation and competitiveness over its more than 75-year history.

The National Medal of Technology, established in 1980 by an act of Congress, is the highest honor awarded

by the President to America's leading innovators. The award recognizes that since its founding in 1928,

Motorola has stood on the cutting edge of innovation in areas such as two-way radios, cellular

communication, paging, space Öight communication, semiconductors and integrated, digital enhanced

networks. As a result, the company has helped establish entirely new industries and driven the phenomenal

growth of portable and mobile communications. Every Motorola employee is honored by this award.

At this year's Annual Meeting, in addition to electing the 12 members of our Board of Directors, we are

asking our shareholders to approve the Motorola Omnibus Incentive Plan of 2006. The updated plan is an

important part of our eÅort to recruit, motivate and retain world-class employees. The proposal is discussed in

greater detail in the enclosed Proxy Statement.

I encourage each of you to vote your shares through one of the three convenient methods described in

the enclosed proxy statement, and if your schedule permits, to attend the meeting. I would appreciate your

support of the nominated directors and the Motorola Omnibus Incentive Plan of 2006. As always, I thank

you for your continued support of Motorola.

Edward J. ZanderChairman and CEO,Motorola, Inc.

TABLE OF CONTENTS

PROXY STATEMENT

PAGE

‚ Voting Procedures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1

‚ Proposal 1 Ì Election of Directors for a One-Year Term ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3‚ Nominees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3

‚ Corporate Governance Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7

‚ Board of Directors Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9‚ What are the Committees of the Board? ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10‚ How are the Directors Compensated? ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11‚ Certain Related Transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13

‚ Proposal 2 Ì Adoption of the Motorola Omnibus Incentive Plan of 2006ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13

‚ Proposal 3 Ì Shareholder Proposal re: Redeem or Vote Poison Pill ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20

‚ Equity Compensation Plan Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23

‚ Ownership of Securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25‚ Security Ownership of Management and Directors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25

‚ Executive CompensationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27‚ Summary Compensation Table ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27‚ Aggregated Option Exercises in 2005 and 2005 Year-End Option Values ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29‚ Stock Option Grants in 2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30‚ Long-Term Incentive Plans Ì LRIP Cycle 2005-2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31‚ Retirement Plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32‚ Employment Contracts, Termination of Employment and Change in Control Arrangements ÏÏÏÏ 33

‚ Report of Compensation and Leadership Committee on Executive CompensationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36

‚ Audit and Legal Committee Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44‚ Report of Audit and Legal CommitteeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44‚ Independent Registered Public Accounting Firm ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46‚ Audit and Legal Committee Pre-Approval PoliciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46

‚ Performance Graphs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48

‚ Communications ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49

‚ Other Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49

‚ Appendix A: Audit and Legal Committee Charter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1

1PROXY STATEMENT

PROXY STATEMENT

VOTING PROCEDURES

The Board of Directors is soliciting proxies to ‚ Voting by Mail. If you choose to vote bybe used at the May 1, 2006 Annual Meeting of mail, mark your proxy, date and sign it, andStockholders. Your vote is very important. This return it in the postage-paid envelope pro-proxy statement, the form of proxy and the 2005 vided. To ensure your vote is counted,Annual Report will be mailed to stockholders on or receipt of your mailed proxy is needed byabout March 15, 2006. The proxy statement and Saturday, April 29, 2006.Annual Report are also available on the Company's

How Can I Change My Vote?website at www.motorola.com/investor.

You can revoke your proxy at any time beforeWho Is Entitled to Vote? it is voted at the 2006 Annual Meeting by either:

Only stockholders of record at the close of ‚ Sending written notice of revocation to thebusiness on March 3, 2006 (the ""record date'') will Secretary, Motorola, Inc., 1303 East Algon-be entitled to notice of, and to vote at, the Annual quin Road, Schaumburg, Illinois 60196;Meeting or any adjournments thereof. On that date,

‚ Submitting another timely proxy by tele-there were issued and outstanding 2,483,557,351phone, Internet or paper ballot; orshares of the Company's common stock, $3 par

value per share (""Common Stock''), the only class ‚ Attending the 2006 Annual Meeting andof voting securities of the Company. voting in person. If your shares are held in

the name of a bank, broker or other holderA list of stockholders entitled to vote at theof record, you must obtain a proxy, executedmeeting will be available for examination at Motor-in your favor, from the holder of record toola's Galvin Center, 1297 East Algonquin Road,be able to vote at the meeting.Schaumburg, Illinois 60196 for ten days before the

2006 Annual Meeting and at the Annual Meeting. How Many Votes Must be Present to ConductBusiness at the Meeting?How Can I Vote?

In order for business to be conducted, aThere are three convenient voting methods:quorum must be represented at the Annual Meeting.

‚ Voting by Telephone. You can vote your A quorum is a majority of the shares entitled toshares by telephone by calling the toll-free vote at the Annual Meeting. Shares represented by atelephone number on your proxy card. The proxy marked ""abstain'' or a proxy as to whichdeadline for telephone voting is 11:59 p.m., there is a ""broker non-vote'' will be consideredEastern time on Sunday, April 30, 2006. present at the meeting for purposes of determining aTelephone voting is available 24 hours a day. quorum.If you vote by telephone you should NOT

How Many Votes Am I Entitled to Cast?return your proxy card. If you are a beneÑ-cial owner, or you hold your shares in You are entitled to cast one vote for each share""street name,'' please check your voting of Common Stock you own on the record date.instruction card or contact your broker or Stockholders do not have the right to vote cumula-nominee to determine whether you will be tively in electing directors.able to vote by telephone.

How Many Votes Are Required to Elect Directors?‚ Voting by Internet. You can also vote via theInternet. The website address for Internet In February 2006, Motorola's Board of Direc-voting is also on your proxy card. The tors amended the Company's bylaws and Boarddeadline for Internet voting is 11:59 p.m., Governance Guidelines to adopt a majority voteEastern time on Sunday, April 30, 2006. standard for non-contested director elections. TheseInternet voting also is available 24 hours a actions reÖect Motorola's dedication to maintainingday. If you vote via the Internet you should the highest quality corporate governance practicesNOT return your proxy card. If you are a and commitment to address stockholder concerns.beneÑcial owner, or you hold your shares in Because the number of nominees properly nomi-""street name,'' please check your voting nated for the 2006 Annual Meeting is the same asinstruction card or contact your broker or the number of directors to be elected at the 2006nominee to determine whether you will be Annual Meeting, the 2006 election of directors is aable to vote by Internet. non-contested election.

2 PROXY STATEMENT

To be elected in a non-contested election, a voted for or against the proposal and will have nodirector nominee must receive more ""For'' votes eÅect on the proposal.than ""Against'' votes. Abstentions and broker non-

Will My Shares be Voted if I Do Not Providevotes will have no eÅect on the director electionInstructions to My Broker?since only votes ""For'' and ""Against'' a nominee

If you are the beneÑcial owner of shares heldwill be counted.in ""street name'' by a broker, the broker, as the

What Happens if an Incumbent Director Nominee record holder of the shares, is required to voteDoes Not Receive More ""For'' Votes than those shares in accordance with your instructions. If""Against'' Votes? you do not give instructions to the broker, the

broker will be entitled to vote the shares withMotorola is a Delaware corporation and, underrespect to ""discretionary'' items but will not beDelaware law, if an incumbent director is notpermitted to vote the shares with respect to ""non-elected, that director continues to serve as adiscretionary'' items (those shares are treated as""holdover director'' until the director's successor is""broker non-votes''). The election of directors is aduly elected and qualiÑed. To address this potential""discretionary'' item. The adoption of the Motorolaoutcome, in February 2006 the Board also adoptedOmnibus Incentive Plan of 2006 and the share-a director resignation policy in the Company'sholder proposal are ""non-discretionary'' items.bylaws and Board Governance Guidelines.What if I Return My Proxy Card But Do Not Give

Under this policy, if the votes cast ""For'' anVoting Instructions?

incumbent director nominee do not exceed theAll shares that have been properly voted Ìvotes cast ""Against'' that director, such incumbent

whether by telephone, Internet or mail Ì and notdirector shall promptly tender his or her resignationrevoked will be voted at the Annual Meeting into the Chairman of the Board. The Governance andaccordance with your instructions. If you sign yourNominating Committee will review the circum-proxy card but do not give voting instructions, thestances surrounding the ""Against'' vote andshares represented by that proxy will be voted aspromptly recommend to the Board whether torecommended by the Board of Directors. The Boardaccept or reject the tendered resignation. In makingof Directors recommends a vote ""For'' the electionthis recommendation, the Committee will considerof all director nominees, ""For'' the adoption of thevarious factors, such as listing standard compliance,Motorola Omnibus Incentive Plan of 2006 andqualiÑcations, contributions, length of service and""Against'' the shareholder proposal.underlying reasons for the vote. The Board will

publicly disclose its decision, and the rationaleWhat if Other Matters Are Voted on at the Annual

behind it, within 90 days following certiÑcation ofMeeting?

the stockholder vote.If any other matters are properly presented at

How Many Votes Are Required to Adopt the the Annual Meeting for consideration, the personsMotorola Omnibus Incentive Plan of 2006? named as proxies in the enclosed proxy card will

have the discretion to vote on those matters forIn order to adopt the Motorola Omnibus you. At the date we Ñled this proxy statement with

Incentive Plan of 2006, an aÇrmative vote of a the Securities and Exchange Commission, the Boardmajority of the shares present in person or by proxy of Directors did not know of any other matter toand entitled to vote at the Annual Meeting is be raised at the Annual Meeting.required. For this proposal, an abstention will havethe same eÅect as a vote ""Against'' the proposal. How Do I Vote if I Participate in the Company'sBroker non-votes will not be voted for or against 401(k) Plan?this proposal and will have no eÅect on this If a stockholder owns shares of Common Stockproposal. through the Motorola 401(k) Plan (the ""401(k)

Plan''), the proxy card also will serve as a votingHow Many Votes Are Required to Pass the Share-instruction for the trustees of that plan where allholder Resolution?accounts are registered in the same name. If shares

In order to recommend that the Board consider of Common Stock in the 401(k) Plan are not votedadoption of the shareholder proposal, an aÇrmative either by telephone, via the Internet, or by returningvote of a majority of the shares present in person or the proxy card representing such shares, thoseby proxy and entitled to vote at the Annual shares will be voted by the trustees in the sameMeeting is required. For the shareholder proposal, proportion as the shares properly voted by otheran abstention will have the same eÅect as a vote participants owning shares of Common Stock in theagainst the proposal. Broker non-votes will not be 401(k) Plan.

3PROXY STATEMENT

PROPOSAL 1

ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

How Many Directors Are Standing For Election and For What Term?

The number of directors of the Company to be elected at the 2006 Annual Meeting is 12. The directorselected at the 2006 Annual Meeting will serve until their respective successors are elected and qualiÑed oruntil their earlier death or resignation.

NOMINEES

Who Are the Nominees?

Each of the nominees named below is currently a director of the Company and each was elected at theAnnual Meeting of Stockholders held on May 2, 2005, except for Mr. Miles White who is standing forelection for the Ñrst time. Mr. Massey is not standing for re-election. The ages shown are as of January 1,2006.

EDWARD J. ZANDER, Principal Occupation: Chairman of the Board and ChiefExecutive OÇcer, Motorola, Inc.Director since 2004 AgeÌ58Mr. Zander joined Motorola in January 2004 as Chairman and Chief Executive OÇcer.Prior to joining Motorola, Mr. Zander was a managing director of Silver Lake Partners,a leading private equity fund focused on investments in technology industries. Prior toholding that position, Mr. Zander was President and COO of Sun Microsystems, Inc., aleading provider of hardware, software and services for networks, from January 1998until June 2002. Mr. Zander serves as Chairman of the Technology CEO Council andon the board of directors of several educational and non-proÑt organizations. He servesas a member of the Dean's Advisory Council of the School of Management at BostonUniversity and as Presidential Advisor at Rensselaer Polytechnic Institute. Mr. Zanderreceived a Bachelor of Science degree in electrical engineering from RensselaerPolytechnic Institute and a Master of Business Administration from Boston University.

H. LAURANCE FULLER, Principal Occupation: Retired; Formerly Co-Chairman of theBoard, BP Amoco, p.l.c.Director since 1994 AgeÌ67Mr. Fuller retired as Co-Chairman of BP Amoco, p.l.c., an energy company, in March2000. Prior to holding that position, he had served as Chairman and Chief ExecutiveOÇcer of Amoco Corporation since 1991. He is also a director of Abbott Laboratories,Cabot Microelectronics Corporation and Verde Group. Mr. Fuller graduated fromCornell University with a B.S. degree in chemical engineering and earned a J.D. degreefrom DePaul University Law School.

4 PROXY STATEMENT

JUDY C. LEWENT, Principal Occupation: Executive Vice President & Chief FinancialOÇcer, Merck & Co., Inc.Director since 1995 AgeÌ56Ms. Lewent has been Chief Financial OÇcer of Merck & Co., Inc., a pharmaceuticalcompany, since 1990, and in addition, Executive Vice President of Merck since February2001. She had additional responsibilities as President, Human Health Asia from January2003 until July 2005, when she assumed strategic planning responsibilities for Merck.Ms. Lewent is also a director of Dell Inc. She serves as a trustee of the RockefellerFamily Trust and is a life member of the Massachusetts Institute of TechnologyCorporation. Ms. Lewent is a member of the PENN Medicine Board (University ofPennsylvania Health System and School of Medicine) and the American Academy ofArts & Sciences. She received a B.S. degree from Goucher College and an M.S. degreefrom the MIT Sloan School of Management.

THOMAS J. MEREDITH, Principal Occupation: General Partner and Co-Founder,Meritage Capital, L.P. and Chief Executive OÇcer, MFI CapitalDirector Since 2005 AgeÌ54Mr. Meredith is currently a general partner of Meritage Capital, L.P., an investmentmanagement Ñrm specializing in multi-manager hedge funds that he co-founded. He isalso chief executive oÇcer of MFI Capital. Previously, he was the Managing Director ofDell Ventures and Senior Vice President, Business Development and Strategy of DellInc., a computer manufacturer, from 2000 until 2001, and was Chief Financial OÇcer ofDell Inc. from 1992 until 2000. Mr. Meredith is also a director of Motive and VoxPathNetworks, is an adjunct professor at the McCombs School of Business at the Universityof Texas, and serves on the advisory board of the Wharton School at the University ofPennsylvania. Mr. Meredith received a Bachelor of Science degree in Political Sciencefrom St. Francis University, a J.D. degree from Duquesne University and an LL.M.degree in Taxation from Georgetown University.

NICHOLAS NEGROPONTE, Principal Occupation: Chairman Emeritus of the MediaLaboratory at the Massachusetts Institute of TechnologyDirector since 1996 AgeÌ62Mr. Negroponte is a co-founder and chairman emeritus of the Massachusetts Institute ofTechnology Media Laboratory, an interdisciplinary, multi-million dollar research centerfocusing on the study and experimentation of future forms of human and machinecommunication. He founded MIT's pioneering Architecture Machine Group, acombination lab and think tank responsible for many radically new approaches to thehuman-computer interface. He joined the MIT faculty in 1966 and became a fullprofessor in 1980. Mr. Negroponte is also founder and chairman of One Laptop PerChild (OLPC), a non-proÑt organization created to design, manufacture and distributelaptops that are suÇciently inexpensive to provide every child in the world access toknowledge and modern forms of education. Mr. Negroponte received a B.A. and M.A.in Architecture from Massachusetts Institute of Technology.

5PROXY STATEMENT

INDRA K. NOOYI, Principal Occupation: President and Chief Financial OÇcer,PepsiCo, Inc.Director since 2002 AgeÌ50Ms. Nooyi is President & Chief Financial OÇcer of PepsiCo, Inc., a world leader inconvenient foods and beverages. She joined PepsiCo in 1994 as Senior Vice President ofStrategic Planning, and she became Chief Financial OÇcer in 2000. Ms. Nooyi alsoserves on the Board of Directors of PepsiCo, Inc. and the PepsiCo Foundation. Sheserves as Successor Fellow at Yale Corporation and is on the advisory boards of the YaleUniversity President's Council of International Activities, Yale School of Management,PlaNet Finance, and Breast Cancer Alliance, Inc. She is a member of the Board of theInternational Rescue Committee and Lincoln Center for the Performing Arts in NewYork City, serves as a trustee of the Asia Society and Eisenhower Fellowships and is amember of the Executive Committee for the Trilateral Commission. Ms. Nooyigraduated from Madras Christian College in India with a degree in Chemistry, Physicsand Math and earned a Master's Degree in Finance and Marketing from the IndianInstitute of Management in Calcutta and a Master's Degree in Public and PrivateManagement from Yale's University School of Organization and Management.

SAMUEL C. SCOTT III, Principal Occupation: Chairman, President and ChiefExecutive OÇcer, Corn Products InternationalDirector since 1993 AgeÌ61Mr. Scott is Chairman, President and Chief Executive OÇcer of Corn ProductsInternational, a corn reÑning business. He was President of the Corn ReÑning Division ofCPC International from 1995 through 1997, when CPC International spun oÅ CornProducts International as a separate corporation. Mr. Scott serves on the Board ofDirectors of Bank of New York, Inroads/Chicago, Accion USA and the Chicago Councilon Foreign Relations. He also serves as a Trustee of The Conference Board. Mr. Scottgraduated from Fairleigh Dickinson University with a bachelor's degree in engineering in1966 and an M.B.A. in 1973.

RON SOMMER, Principal Occupation: Retired; Formerly Chairman of the Board ofManagement, Deutsche Telekom AGDirector Since 2004 AgeÌ56Mr. Sommer was Chairman of the Board of Management of Deutsche Telekom AG, atelecommunication company, from May 1995 until he retired in July 2002. He is also adirector of Muenchener Rueckversicherung, Celanese and AFK Sistema. He is Chairmanof the Advisory Board of AFK Sistema and a Member of the International AdvisoryBoard of The Blackstone Group. Mr. Sommer received a Ph.D. degree in Mathematicsfrom the University of Vienna, Austria.

JAMES R. STENGEL, Principal Occupation: Global Marketing OÇcer, Procter &Gamble CompanyDirector Since 2005 AgeÌ50Mr. Stengel is currently the Global Marketing OÇcer of Procter & Gamble Company, aconsumer products company. He joined Procter & Gamble in 1983, where he recentlyserved as Vice President-Global Baby Care Strategic Planning, Marketing and NewBusiness Development from May 2000 until August 2001, when he became GlobalMarketing OÇcer. Mr. Stengel serves as chairman of the Association of NationalAdvertisers. He is also on the Seven Hills School Board of Trustees and United Way,Alexis de Toqueville Society. Mr. Stengel received a B.A. degree from Franklin &Marshall College and an M.B.A. from Pennsylvania State University.

6 PROXY STATEMENT

DOUGLAS A. WARNER III, Principal Occupation: Retired; Formerly Chairman of theBoard, J.P. Morgan Chase & Co.Director since 2002 AgeÌ59Mr. Warner was Chairman of the Board and Co-Chairman of the Executive Committeeof J.P. Morgan Chase & Co., an international commercial and investment banking Ñrm,from December 2000 until he retired in November 2001. From 1995 to 2000, he wasChairman of the Board, President and Chief Executive OÇcer of J.P. Morgan & Co. Heis also a director of Anheuser-Busch Companies, Inc. and General Electric Company. Heis on the Board of Counselors of the Bechtel Group Inc. and is a member of TheBusiness Council. He is chairman of the Board of Managers and the Board of Overseersof Memorial Sloan-Kettering Cancer Center. Mr. Warner is a trustee of the PierpontMorgan Library and a member of the Yale Investment Committee. Mr. Warner receiveda B.A. degree from Yale University.

DR. JOHN A. WHITE, Principal Occupation: Chancellor, University of ArkansasDirector since 1995 AgeÌ66Dr. White is currently Chancellor of the University of Arkansas. Dr. White served asDean of Engineering at Georgia Institute of Technology from 1991 to early 1997, havingbeen a member of the faculty since 1975. He is also a director of J.B. Hunt TransportServices, Inc., Logility, Inc. and Russell Corporation. Dr. White received a B.S.I.E. fromthe University of Arkansas, a M.S.I.E. from Virginia Polytechnic Institute and StateUniversity and a Ph.D. from The Ohio State University.

MILES D. WHITE, Principal Occupation: Chairman of the Board and Chief ExecutiveOÇcer, Abbott LaboratoriesDirector since 2005 AgeÌ50Mr. White has been Chairman of the Board and Chief Executive OÇcer of AbbottLaboratories, a pharmaceuticals and biotechnology company, since 1999. He served asan Executive Vice President of Abbott from 1998 to 1999, as Senior Vice President,Diagnostics Operations from 1994 to 1998, and as Vice President, Diagnostics SystemsOperations from 1993 to 1994. Mr. White joined Abbott in 1984. He received both hisbachelor's degree in mechanical engineering and M.B.A. degree from Stanford University.He is also a director of Tribune Company. He also serves on the board of trustees ofThe Culver Educational Foundation, The Field Museum in Chicago and NorthwesternUniversity and is chairman of the board of the Federal Reserve Bank of Chicago.

RECOMMENDATION OF THE BOARD

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THENOMINEES NAMED HEREIN AS DIRECTORS. UNLESS INDICATED OTHERWISE BY YOUR PROXYVOTE, THE SHARES WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF SUCH NOMINEES.

What if a Nominee is Unable to Serve as Director?

If any of the nominees named below is not available to serve as a director at the time of the 2006Annual Meeting (an event which the Board does not now anticipate), the proxies will be voted for theelection as director of such other person or persons as the Board may designate, unless the Board, in itsdiscretion, reduces the number of directors.

7PROXY STATEMENT

CORPORATE GOVERNANCE MATTERS

What Are the Board's Corporate GovernancePrinciples?

The Board has long adhered to governance oÇcer, director, trustee or employee, will not impairprinciples designed to assure the continued vitality independence unless the following are applicable:of the Board and excellence in the execution of its the contribution or payment (excluding Motoroladuties. The Board has responsibility for management matches of charitable contributions made by em-oversight and providing strategic guidance to the ployees or directors under Motorola's or the Mo-Company. In order to do that eÅectively, the Board torola Foundation's matching gift programs):believes it should be comprised of individuals with (i) is to an entity of which the director orappropriate skills and experiences to contribute the director's spouse currently is an oÇcer,eÅectively to this dynamic process. The Board is director or trustee, and such person heldcurrently highly diversiÑed; it is comprised of active such position at the time of theand former CEOs and CFOs of major corporations contribution,and individuals with experience in high-tech Ñelds, (ii) was made within the previous threegovernment and academia. The Board believes that years, andit must continue to renew itself to ensure that its (iii) was in an amount which, in themembers understand the industries and the markets entity's last Ñscal year prior to the year ofin which the Company operates. The Board also the contribution or payment, exceeded thebelieves that it must be informed about the positive greater of $300,000 or 5% of such entity'sand negative issues, problems and challenges facing consolidated gross revenues (or equivalentMotorola and its industries and markets so that the measure).members can exercise their Ñduciary responsibilities

‚ Indebtedness of Motorola to a bank orto stockholders.similar entity of which a director or a director'simmediate family member is a director, oÇcer,

Which Directors Are Independent? employee or 10% Owner will not impair indepen-dence unless the following are applicable:On February 23, 2006, the Board made the

(i) the director or the director's spouse isdetermination, based on the recommendation of thean executive oÇcer or an owner whoGovernance and Nominating Committee and indirectly or indirectly has a 10% or greateraccordance with the Motorola, Inc. Director Inde-equity or voting interest in an entity (apendence Guidelines, that Mr. Fuller, Ms. Lewent,""10% Owner'') of such entity and he orMr. Massey, Mr. Meredith, Mr. Negroponte,she held that position at any time duringMs. Nooyi, Mr. Scott, Mr. Sommer, Mr. Stengel,the previous twelve months, andMr. Warner, Mr. J. White and Mr. M. White are(ii) the total amount of Motorola's in-independent. Mr. Zander does not qualify as andebtedness during the previous twelveindependent director since he is an employee of themonths is more than 5% of the totalCompany.consolidated assets of such entity in its lastÑscal year.How Was Independence Determined?

‚ Other business relationships between aThe Motorola, Inc. Director Independencedirector or a director's immediate family member,Guidelines include the NYSE independence stan-such as consulting, legal or Ñnancial advisory ser-dards and categorical standards the Board uses invices provided to Motorola, will not impair inde-determining if a relationship that a Board memberpendence unless the following are applicable:has with the Company is material. The categorical

(i) the director or the director's spouse isstandards adopted by the Board are as follows:a partner, oÇcer or 10% Owner of the

‚ Contributions or payments (including company or Ñrm providing such services,the provision of goods or services) from Motorola and he or she held such position at anyto a charitable organization (including a founda- time during the previous twelve months,tion), a university, or other not-for-proÑt organiza- andtion, of which a director or an immediate family (ii) the services that were provided duringmember of a director (deÑned to include a direc- the previous twelve months were in antor's spouse, parents, children, siblings, mothers and amount which, in the company's or Ñrm'sfathers-in-law, sons and daughters-in-law, brothers last Ñscal year, exceeded the greater ofand sisters-in-law and anyone (other than domesticemployees) who shares the director's home) is an

8 PROXY STATEMENT

$1 million or 2% of such company's or ended June 30, 2005, MIT had total operatingÑrm's consolidated gross revenues. revenue (the closest equivalent to consolidated gross

revenue) of $2.03 billion, and five percent of thatThis categorical standard does not include amount is $101.5 million. Accordingly, Motorola's

business relationships with Motorola's independent and the Motorola Foundation's combined paymentsregistered public accounting Ñrm because those and contributions to MIT are significantly less thanrelationships are covered by the NYSE indepen- the $101.5 million impairment threshold. Our pay-dence standards. ments in 2004 and 2003 were also significantly less

than the 5% threshold. MIT, one of the world's‚ Motorola's ownership of voting stock ofleading research universities in science and technology,a company of which the director or the director'shas associations with many of the top corporationsimmediate family member is a director, oÇcer,around the world which, like Motorola, seek theemployee or 10% Owner will not impair indepen-expertise of MIT on a wide variety of matters.dence unless the following are applicable:Motorola's relationship with MIT advances the Com-

(i) the director or the director's spouse is pany's business goals. Mr. Negroponte does not directan executive oÇcer of that company, and the relationship nor does he vote as a member of the

Motorola Board of Directors to approve MIT(ii) Motorola is currently a 10% Ownerrelationships.of that company.

The ownership of Motorola shares by a direc- In reviewing Judy Lewent's independence, thetor or a director's immediate family member will Board considered her position as a life member ofnot be considered to be a material relationship the MIT Corporation, the board of trustees ofwhich would impair a director's independence. MIT. She is one of about 75 multi-national leaders

in higher education, business and industry, science,When applying the NYSE independence stan-

engineering and other professions who are membersdards and the categorical standards set forth above,

of the MIT Corporation. She is also a member of""Motorola'' includes Motorola, Inc. and any of its

its Executive Committee, which is responsible forsubsidiaries, and the Motorola Foundation. A com-

general administration and superintendence of theplete copy of the Motorola, Inc. Director Indepen-

MIT Corporation. Ms. Lewent is not an employeedence Guidelines is available on the Company's

of MIT, does not have direct responsibility or inputwebsite at www.motorola.com/investor.

on the Motorola/MIT relationship and does notvote as a member of the Motorola Board of

What is Motorola's Relationship with MIT? Directors to approve the Motorola/MIT relation-ship. The Board has also concluded thatMotorola and the Motorola Foundation haveMs. Lewent is independent based on the criteria sethad various commercial and charitable relationshipsforth in the Motorola, Inc. Director Independencewith the Massachusetts Institute of TechnologyGuidelines and the nature of Ms. Lewent's service(MIT) and the MIT Media Laboratory. Motorolato MIT.and the Motorola Foundation made payments to

MIT of approximately $2.5 million in 2005,$5.5 million in 2004 and $7.1 million in 2003. Two Are the Members of the Audit and Legal, Compen-of our directors are associated with MIT. Nicholas sation and Leadership and Governance and Nomi-Negroponte is the Chairman Emeritus of the MIT nating Committees Independent?Media Laboratory, an academic and research labo-ratory at MIT. Judy Lewent is a life member of the Yes. The Board has determined that all of theMIT Corporation. members of the Audit and Legal Committee, the

Compensation and Leadership Committee and theThe Board has concluded that Mr. Negroponte'sGovernance and Nominating Committee are inde-and Ms. Lewent's independence is not impaired basedpendent within the meaning of the Motorola, Inc.upon the criteria set forth in the Motorola DirectorDirector Independence Guidelines and the NYSEIndependence Guidelines and the nature of thelisting standards.Motorola/MIT relationship. The Motorola, Inc. Di-

rector Independence Guidelines state that a director'sindependence could be impaired if a payment to a Where Can I Receive More Information Aboutnon-profit organization, including universities, was in Motorola's Corporate Governance Practices?an amount which, in the recipient organization's lastfiscal year, exceeded the greater of $300,000 or 5% of Motorola maintains a corporate governancethe recipient organization's consolidated gross reve- page on its website at www.motorola.com/investornues (or equivalent measure). For the fiscal year that includes information about its corporate

9PROXY STATEMENT

governance practices. The following documents are BOARD OF DIRECTORS MATTERScurrently included on the website:

How Often Did the Board Meet in 2005?‚ The Motorola, Inc. Board Governance

Guidelines, the current version of which the The Board of Directors is responsible forBoard adopted on February 23, 2006 supervision of the overall aÅairs of the Company.

The Board of Directors held seven meetings during‚ The Motorola, Inc. Director Independence2005. Overall attendance at Board and committeeGuidelines, the current version of which themeetings was 91%. All incumbent directors attendedBoard adopted on November 15, 200575% or more of the combined total meetings of the

‚ The Principles of Conduct for Members of Board and the committees on which they servedthe Motorola, Inc. Board of Directors during 2005, except Mr. Fuller who attended 71%

of the meetings.‚ The Motorola, Inc. Code of Business Con-

duct, which applies to all employeesHow Many Directors will Comprise the Board?

‚ The charters of the Audit and Legal Commit-tee, Compensation and Leadership Commit- The Board of Directors currently is comprisedtee and Governance and Nominating of 13 directors. Following the Annual Meeting, theCommittee, the current versions of which the Board will consist of 12 directors. Mr. Massey isBoard adopted on February 13, 2006 not standing for re-election. In the interim between

Annual Meetings, the Board has the authority under‚ The Motorola, Inc. Restated CertiÑcate ofthe Company's bylaws to increase or decrease theIncorporationsize of the Board and to Ñll vacancies.

‚ The Motorola, Inc. Amended and RestatedBylaws, the current version of which the

How Many Executive Sessions of the Board AreBoard adopted on February 23, 2006Held and Who Serves as the Presiding Director?

The Company intends to disclose amendmentsto the above documents or waivers applicable to its Independent directors of the Company meetdirectors, chief executive oÇcer, chief Ñnancial regularly in executive session without managementoÇcer and corporate controller from certain provi- as required by the Motorola, Inc. Board Govern-sions of its ethical policies and standards for ance Guidelines. Generally, executive sessions aredirectors and its employees, on the Motorola held in conjunction with regularly-scheduled meet-website. The Company will also provide you a ings of the Board of Directors. The Board ap-printed copy of these documents if you contact pointed Mr. Scott its lead director on May 3, 2005.Investor Relations, in writing at Motorola, Inc., As the lead director, Mr. Scott chairs meetings of1303 E. Algonquin Road, Schaumburg, IL 60196; or the independent directors and serves as liaison withby phone at 1-800-262-8509; or by email at the chairman with respect to matters considered [email protected]. the independent directors. In 2005, the non-em-

ployee members of the Board met in executivesession four times.

Will the Directors Attend the Annual Meeting?

Board members are expected to attend theAnnual Meeting of stockholders as provided in theMotorola, Inc. Board Governance Guidelines. All ofour directors that stood for election at the 2005Annual Meeting attended that meeting.

10 PROXY STATEMENT

What Are the Committees of the Board?

To assist it in carrying out its duties, the Board has delegated certain authority to several committees. TheBoard currently has the following committees: (1) Audit and Legal, (2) Compensation and Leadership,(3) Governance and Nominating, (4) Technology and Design, (5) Executive, and (6) Finance. Committeemembership as of December 31, 2005 and the number of meetings of each committee during 2005 aredescribed below:

Audit & Compensation & Governance & Technology &Legal Leadership Nominating Design Executive Finance

Non-Employee Directors

H. Laurance Fuller Chair X

Judy C. Lewent X X Chair

Walter E. Massey(1) X Chair

Thomas J. Meredith X X

Nicholas Negroponte X X

Indra K. Nooyi X X

Samuel C. Scott III Chair X

Ron Sommer X X

James R. Stengel X X

Douglas A. Warner III Chair X X

John A. White X X

Miles D. White (2)

Employee Director

Edward J. Zander Chair

Number of Meetings in 2005 10 5 4 3 None 6

(1) Mr. Massey is retiring from the Board eÅective May 1, 2006.

(2) Mr. M. White was elected to the Board eÅective October 1, 2005. He became a member of the Audit and LegalCommittee on February 13, 2006.

What Are the Functions of the Audit and Legal‚ Prepare the report of the Committee in-Committee?

cluded in this proxy statement‚ Assist the Board in fulÑlling its oversight

responsibilities as they relate to the Com- What Are the Functions of the Compensation andpany's accounting policies, internal controls, Leadership Committee?disclosure controls and procedures, Ñnancial

‚ Assist the Board in overseeing the manage-reporting practices and legal and regulatoryment of the Company's human resourcescomplianceincluding:

‚ Hire the independent registered public ac- ‚ compensation and beneÑts programscounting Ñrm ‚ CEO performance and compensation

‚ executive development and succession‚ Monitor the qualiÑcations, independence and and diversity eÅorts

performance of the Company's independentregistered public accounting Ñrm and the ‚ Oversee the evaluation of managementperformance of the internal auditors

‚ Prepare the report of the Committee on‚ Maintain, through regularly scheduled meet- executive oÇcer compensation included in

ings, a line of communication between the this proxy statementBoard and the Company's Ñnancial manage-ment, internal auditors and independent reg- What Are the Functions of the Governance andistered public accounting Ñrm Nominating Committee?

‚ Oversee compliance with the Company's pol- ‚ Identify individuals qualiÑed to becomeicies for conducting business, including ethi- board members, consistent with the criteriacal business standards approved by the Board

11PROXY STATEMENT

What Are the Functions of the Executive‚ Recommend director nominees and individu- Committee?

als to Ñll vacant positions‚ Act for the Board between meetings on

‚ Assist the Board in interpreting the Com- matters already approved in principle by thepany's Board Governance Guidelines, the BoardBoard's Principles of Conduct and any othersimilar governance documents adopted by ‚ Exercise the authority of the Board onthe Board speciÑc matters assigned by the Board from

time to time‚ Oversee the evaluation of the Board and its

committees What Are the Functions of the Finance Committee?

‚ Generally oversee the governance of the ‚ Review the Company's overall Ñnancial pos-Board ture, asset utilization and capital structure

‚ Review the need for equity and/or debtWhat Are the Functions of the Technology andÑnancing and speciÑc outside ÑnancingDesign Committee?proposals

‚ Identify and assess signiÑcant technological‚ Monitor the performance and investments ofissues and needs aÅecting the Company

employee retirement and related funds‚ Review technical relationships and activities

‚ Review the Company's dividend paymentwith academic institutions and public sectorplans and practiceslaboratories

‚ Review the adequacy of the Company'stechnical resources and continuing technicaleducation

How are the Directors Compensated?

2005 Director Compensation

The following table further summarizes compensation paid to the non-employee directors during 2005.

Fees EarnedPaid in

Paid in Paid in Deferred Stock OptionsName Cash($) Stock($)

(1) Units($) Granted(#)(2)

H. Laurance Fuller $87,000 15,000

Judy C. Lewent $83,750 15,000

Walter E. Massey $40,000(3) 40,000 15,000

Thomas J. Meredith 80,000 15,000

Nicholas Negroponte 75,000 15,000

Indra K. Nooyi 37,500 37,500 15,000

Samuel C. Scott III 43,500 43,500 15,000

Ron Sommer 37,500 37,500 15,000

James R. Stengel 28,125 46,875 15,000

Douglas A. Warner III 39,375 39,375 15,000

John A. White 24,000(3) 56,000 15,000

Miles D. White 18,750 0(4)

(1) Certain de minimis amounts (less than $50) were paid in cash in lieu of fractional shares.

(2) On May 3, 2005, the non-employee directors received options to acquire 15,000 shares of Common Stock for $15.47per share, the fair market value of the shares on the date of grant. All stock options vest and become exercisable oneyear after the date of grant, and expire ten years after the date of grant.

(3) Includes amounts deferred pursuant to arrangements under the Motorola Management Deferred Compensation Plan.

(4) Mr. M. White did not receive an option award in May 2005 as he was elected to the Board eÅective October 1,2005.

12 PROXY STATEMENT

During 2005, the annual retainer fee paid to deferred stock units will be paid to the director ineach non-employee director was $75,000. In addi- shares of Common Stock upon termination of servicetion, (1) the chairs of the Audit and Legal and from the Motorola Board of Directors. DividendCompensation and Leadership Committees each equivalents will be reinvested in additional deferredreceived an additional annual fee of $12,000, stock units subject to the same terms. The number(2) the chairs of the other Committees each of deferred stock units to be granted will bereceived an additional annual fee of $5,000, and determined by dividing $120,000 by the fair market(3) the members of the Audit and Legal value of a share of Common Stock on the date ofCommittee, other than the chair, each received an grant (rounded up to the next whole number). Asadditional annual fee of $5,000. The Company also of January 1, 2006 non-employee directors are noreimburses its directors, and in certain circumstances longer eligible to participate in the Motorola Man-spouses who accompany directors, for travel, lodg- agement Deferred Compensation Plan.ing and related expenses they incur in attendingBoard and committee meetings. Director Retirement Plan and Insurance Coverage

In 1996, the Board terminated its retirementOn May 3, 2005, each non-employee directorplan. Non-employee directors elected to the Boardreceived options to acquire 15,000 shares of Com-after the termination date are not entitled tomon Stock for $15.47 per share, the fair marketbeneÑts under this plan, and non-employee directorsvalue of the shares on the date of grant.already participating in the plan accrued no addi-

Non-employee directors do not receive any tional beneÑts for services after May 31, 1996. Inadditional fees for attendance at meetings of the 1998, some directors converted their accrued bene-Board or it committees or for additional work done Ñts in the retirement plan into shares of restrictedon behalf of the Board or a committee. Mr. Zander, Common Stock. They may not sell or transfer thesewho is also an employee of Motorola, receives no shares and these shares are subject to repurchase byadditional compensation for serving on the Board or Motorola until they are no longer members of theits committees. Board because either: (i) they did not stand for re-

election or were not re-elected, or (ii) theirdisability or death. With the retirement of2006 Director CompensationMr. Massey, there will be no directors who did notconvert their accrued beneÑts in the retirement planEÅective January 1, 2006, the annual retainerand are entitled to receive payment of such beneÑtsfee paid to each non-employee director will bein accordance with the applicable payment terms of$100,000. The chairs of the Audit and Legal andthe retirement plan, including payments to his orCompensation and Leadership Committees will eachher spouse in the event of his or her death.receive an additional $15,000 annual fee. The chairsMr. Massey served on the Board for eight or moreof the other committees will receive an additionalyears prior to the termination of the plan and,annual fee of $10,000. In addition, the members ofaccordingly, is fully vested and will be entitled to anthe Audit and Legal Committee, other than theannual payment of $32,000 upon retirement fromchair, each will receive an additional annual fee ofthe Board.$5,000.

Non-employee directors are covered by insur-A director may elect to defer the aboveance that provides accidental death and dismember-retainers in 5% increments in the form of deferredment coverage of $500,000 per person. The spousestock units (e.g., 65% cash/35% deferred stockof each such director is also covered by suchunits). The deferred stock units will be paid to theinsurance when traveling with the director ondirector in the form of shares of Common Stockbusiness trips for the Company. The Company paysupon termination of service from the Motorolathe premiums for such insurance. The total premi-Board of Directors. Dividend equivalents will beums for coverage of all such non-employee directorsreinvested in additional deferred stock units subjectand their spouses during the year ended Decem-to the same terms.ber 31, 2005 was $2,995.

Beginning in 2006, an annual grant of deferredstock units in the second quarter of the fiscal yearwill replace the annual stock option grant. The

13PROXY STATEMENT

Certain Related Transactions that Motorola needs to keep pace with its competi-tors and eÅectively recruit, motivate and retain the

In December 2005, Motorola acquired Wireless caliber of employees essential to the Company'sValley Communications, Inc. (""WVI'') for approxi- success.mately $36 million in cash. At the time of theacquisition, Mr. Thomas J. Meredith, a director of The 2006 Plan contains the following impor-Motorola, was also a director of WVI and his tant features:family trust owned approximately 12% of WVI (the

‚ The total shares reserved under the 2006""Trust''). The Trust received approximatelyPlan includes an additional 80 million shares,$4.4 million of the purchase price. Mr. Meredithwhich is 3.2% of the Company's commondid not participate in the negotiations betweenshares outstanding. This will enable theMotorola and WVI with respect to the transactionCompany to meet its annual needs over theand the purchase price was negotiated on an arm's-next two to three years.length basis. Mr. Meredith's independence is not

impaired by this transaction pursuant to the criteria ‚ All shareholder-approved stock incentiveset forth in the Motorola, Inc. Director Indepen- plans currently in eÅect, other than thedence Guidelines. employee stock purchase plan (as described

on page 14, collectively, the ""Prior Plans'')What is the Process for Identifying and Evaluating will be merged into the 2006 Plan.Director Candidates?

‚ The total number of shares reserved forAs stated in the Motorola, Inc. Board Govern- issuance under the 2006 Plan after the

ance Guidelines, when selecting directors, the Board merger of the Prior Plans is approximatelyand the Governance and Nominating Committee 139.4 million shares (based upon 80 millionreview and consider many factors, including experi- shares requested and 59.4 million sharesence, in the context of the Board's needs; diversity; available under the Prior Plans as of Decem-age; skills and independence. It also considers ber 31, 2005), representing 5.6% of theethical standards and integrity. currently outstanding shares of Common

Stock.The Committee considers recommendationsfrom many sources, including members of the ‚ Stock options and stock appreciation rightsBoard, management and search Ñrms. From time-to- must be granted with an exercise price that istime, Motorola hires global search Ñrms to help not less than 100% of the fair market valueidentify and facilitate the screening and interview on the date of grant.process of director nominees. The search Ñrm

‚ Repricing of stock options and stock appreci-screens candidates based on the Board's criteria,ation rights is prohibited.performs reference checks, prepares a biography for

each candidate for the Committee's review and‚ The 2006 Plan has a ten-year term with ahelps set up interviews. The Committee and the

Ñxed number of shares authorized for issu-Chairman of the Board conduct interviews withance. It is not an ""evergreen'' plan.candidates who meet the Board's criteria. During

2005, the Governance and Nominating Committee In addition, contingent upon approval of theconducted a search and identiÑed Mr. Miles White 2006 Plan by stockholders, no further grants will beas a director candidate. The Committee has full made under the Motorola Compensation/Acquisi-discretion in considering its nominations to the tion Plan of 2000.Board.

Background InformationPROPOSAL 2

To reward and retain employees in a mannerADOPTION OF THE MOTOROLA OMNIBUSthat best aligns employees' interests with stockhold-INCENTIVE PLAN OF 2006ers' interests, Motorola uses stock options as its

The Board has adopted the Motorola Omnibus primary long-term incentive vehicle. The Board andIncentive Plan of 2006 (the ""2006 Plan'') and is the Compensation and Leadership Committee of therecommending that stockholders approve the 2006 Board that administers the Company's existing em-Plan at the Annual Meeting. The 2006 Plan is ployee equity incentive plans believe that stockintegral to the Company's compensation strategies options align employees' interests precisely withand programs. The use of stock options and other those of other stockholders, because when the pricestock awards among technology companies is widely of the stock declines from the price at the grantprevalent. The 2006 Plan will maintain the Öexibility date, the employees' stock options have no value. A

14 PROXY STATEMENT

wide range of employees, managerial and individual under the 2006 Plan are referred to as ""Partici-contributors, participate in the Company's stock pants.'' Participants include all employees and non-incentive plans. There is a general grant of stock employee directors of the Company and employeesoptions annually and stock options are also selec- of any subsidiary in which the Company owns atively used to attract new employees, for retention 50% or greater interest which the Company consoli-of critical talent and for recognition of superior dates for Ñnancial reporting purposes.performance.

In 2005, the Company granted a total of Shares Available for Issuance40.7 million options to its employees, includingexecutive oÇcers and non-employee directors. The

As of December 31, 2005, approximately2005 burn rate, deÑned as the total options granted61.6 million shares were available for new grantsin a year divided by the number of shares ofunder the Company's existing stock incentive plansCommon Stock outstanding at the beginning of theand there were approximately 272.2 million sharesyear, was 1.7%, which is lower than the 2004 andsubject to outstanding beneÑts under these and2003 burn rates of 2.4% and 3.1%, respectively. Thepredecessor plans.Company's 2005 burn rate is lower than the median

of its technology peer group.Contingent upon receipt of stockholder ap-

On May 3, 2005, the Committee granted proval of this 2006 Plan, the Board of Directors has37.7 million stock options to approximately approved a merger of the Motorola Omnibus24,000 employees as part of the Company's annual Incentive Plan of 2003, the Motorola Omnibusaward of stock options. These options vest and Incentive Plan of 2002, the Motorola Omnibusbecome exercisable in four equal annual install- Incentive Plan of 2000 and the Motorola Amendedments, with the Ñrst installment vesting on May 3, and Restated Incentive Plan of 1998 (collectively,2006. Approximately 94% of the stock options the ""Prior Plans'') into the 2006 Plan. Accordinglycovered by the May 3, 2005 grant went to on or after the date the 2006 Plan is approved byemployees other than the executives named in the stockholders, the maximum number of shares re-Summary Compensation Table. served for issuance under this 2006 Plan shall not

exceed: (a) the 80 million shares reserved forMotorola also grants restricted stock or re-

issuance under this 2006 Plan, plus (b) the numberstricted stock units to encourage retention and

of shares approved and available for grant under thereward performance. The granting of restricted

Prior Plans as of the date of such stockholderstock or restricted stock units is done on a limited

approval, plus (c) any shares that become availableand selective basis.

for issuance pursuant to the reusage provisionsdiscussed below. As of December 31, 2005, thereA summary of the principal features of thewere approximately 59.4 million shares available to2006 Plan is provided below, but is qualiÑed in itsbe granted under the Prior Plans.entirety by reference to the full text of the 2006 Plan

that was Ñled electronically with this proxy state-ment with the Securities and Exchange Commis- In addition, contingent upon approval of thesion. Such text is not included in the printed 2006 Plan by stockholders, Management is recom-version of this proxy statement. A copy of the 2006 mending that no further grants be made under thePlan is available from the Company's Secretary at Motorola Compensation/Acquisition Plan of 2000.the address on the cover of this document. As of December 31, 2005, 2.2 million shares were

available to be granted under this plan.The 2006 Plan will permit awards of Stock

Options, Stock Appreciation Rights (""SARs''), Re-stricted Stock and Restricted Stock Units, Deferred Administration and EligibilityStock Units, Performance Shares, Performance CashAwards, Annual Management Incentive Awards, and

The 2006 Plan will be administered by aother Stock Awards and Cash Awards as describedCommittee of the Board (the ""Committee'') con-below. Stockholder approval of the 2006 Plan willsisting of two or more directors, each of whom willpermit the performance-based awards discussed belowsatisfy the requirements: (1) established for admin-to qualify for deductibility under Section 162(m) ofistrators acting under plans intended to qualify forthe Internal Revenue Code (""Code'').exemption under Rule 16b-3 under the Securities

Awards and grants under the 2006 Plan are Exchange Act of 1934 (""Exchange Act''), (2) forreferred to as ""BeneÑts.'' Those eligible for BeneÑts outside directors acting under plans intended to

15PROXY STATEMENT

qualify for exemption under Section 162(m) of the promptly deliver to the Company the amount ofCode, and (3) established by the New York Stock sale proceeds from the option shares or loanExchange. The Committee will approve the aggre- proceeds to pay the exercise price and any with-gate BeneÑts and the individual BeneÑts for the holding taxes due to the Company, or (d) in suchmost senior elected oÇcers and non-employee direc- other manner as may be authorized by thetors. The Committee may delegate some of its Committee.authority under the 2006 Plan in accordance withthe terms of the 2006 Plan. SARs

The Committee has the authority to grant SARsNo Participant may receive in any calendarto Participants and to determine the number ofyear: (i) Stock Options relating to more thanshares subject to each SAR, the term of the SAR,3 million shares, (ii) Restricted Stock or Restrictedthe time or times at which the SAR may beStock Units relating to more than 1.5 million shares,exercised, and all other terms and conditions of the(iii) SARs relating to more than 3 million shares,SAR. A SAR is a right, denominated in shares, to(iv) Performance Shares relating to more thanreceive, upon exercise of the right, in whole or in1.5 million shares, or (v) Deferred Stock Unitspart, without payment to the Company, an amount,relating to more than 50,000 shares. No non-payable in shares, in cash or a combination thereof,employee director may receive in any calendar yearthat is equal to: (i) the fair market value of(i) Stock Options relating to more thanCommon Stock on the date of exercise of the right,50,000 shares, or (ii) Deferred Stock Units relatingminus (ii) the fair market value of Common Stockto more than 50,000 shares. (Each of the aboveon the date of grant of the right, multiplied by thelimits is subject to the adjustment provisions dis-number of shares for which the right is exercised.cussed below).Except with respect to SARs issued in substitutionfor Stock Options (see the following paragraph),BeneÑtsthe exercise price of any SAR must be at least equal

Stock Options to the fair market value of the shares on the date ofthe grant. The 2006 Plan prohibits repricing ofGrants of OptionsSARs.

The Committee is authorized to grant StockThe Committee also may, in its discretion,Options to Participants (""Optionees''), which may

substitute SARs which can be settled only inbe either Incentive Stock Options (""ISOs'') orCommon Stock for outstanding Stock Options. TheNonqualiÑed Stock Options (""NSOs''). NSOs andterms and conditions of any substitute SAR shall beISOs are collectively referred to as ""Stock Options''.substantially the same as those applicable to theThe exercise price of any Stock Option must be atStock Option that it replaces and the term of theleast equal to the fair market value of the shares onsubstitute SAR shall not exceed the term of thethe date of the grant. At the time of grant, theStock Option that it replaces.Committee in its sole discretion will determine

when Options are exercisable and when they expire,Restricted Stock and Restricted Stock Unitsprovided the term cannot exceed 10 years.

Restricted Stock consists of shares which areFor purposes of the 2006 Plan, fair markettransferred or sold by the Company to a Participant,value shall be determined in such manner as thebut are subject to substantial risk of forfeiture andCommittee may deem equitable, or as required byto restrictions on their sale or other transfer by theapplicable law or regulation. The 2006 Plan prohib-Participant. Restricted Stock Units are the right toits repricing of Stock Options.receive shares at a future date after vesting upon theattainment of certain conditions and restrictions.Payment of Option PriceThe Committee determines the eligible Participants

Payment for shares purchased upon exercise of to whom, and the time or times at which, grants ofa Stock Option must be made in full at the time of Restricted Stock or Restricted Stock Units will bepurchase. Payment may be made: (a) in cash, made, the number of shares or units to be granted,(b) by the transfer to the Company of shares the price to be paid, if any, the time or times withinowned by the Participant having a fair market value which the shares covered by such grants will beon the date of exercise equal to the option exercise subject to forfeiture, the time or times at which theprice (or certiÑcation of ownership of such shares), restrictions will terminate, and all other terms and(c) to the extent permitted by applicable law, by conditions of the grants. Restrictions or conditionsdelivery of a properly executed exercise notice, could include, but are not limited to, the attainmenttogether with irrevocable instructions to a broker to of performance goals (as described below), contin-

16 PROXY STATEMENT

uous service with the Company, the passage of time market share; or total return to stockholders (""Per-or other restrictions or conditions. Awards of formance Criteria'').Restricted Stock and Restricted Stock Units may

Any Performance Criteria may be used toinclude the right to be credited with dividends ormeasure the performance of the Company as adividend equivalents.whole or any business unit of the Company andmay be measured relative to a peer group or index.

Deferred Stock UnitsPerformance Criteria shall be calculated in accor-dance with (a) the Company's Ñnancial statementsDeferred Stock Units provide a Participant a(including without limitation the Company's ""con-vested right to receive shares in lieu of othersolidated earnings before income taxes'' as deÑnedcompensation at termination of employment orin the following section), (b) Generally Acceptedservice or at a speciÑc future designated date.Accounting Principles, or (c) under an objectiveDeferred Stock Units may include the right to bemethodology established by the Committee prior tocredited with dividend equivalents in accordancethe issuance of an award which is consistentlywith the terms and conditions of the units.applied.

Performance SharesAnnual Management Incentive Awards

A Participant who is granted PerformanceShares has the right to receive shares or cash or a The Committee has the authority to grantcombination of shares and cash equal to the fair Management Incentive Awards to designated execu-market value of such shares at a future date in tive oÇcers of the Company or any subsidiary.accordance with the terms of such grant and upon

Management Incentive Awards will be paid outthe attainment of performance goals speciÑed by theof an incentive pool equal to Ñve percent of theCommittee for a performance period of at leastCompany's ""consolidated earnings before income12 months. The Committee may, in its discretion,taxes'' for each calendar year. The Committee willmake a cash payment equal to the fair market valueallocate an incentive pool percentage to each desig-of shares of Common Stock otherwise required tonated executive oÇcer for each calendar year. In nobe issued to a Participant pursuant to a Performanceevent, may the incentive pool percentage for anyShare award.one executive oÇcer exceed 30% of the total pool.For purposes of the 2006 Plan, ""consolidated

Performance Cash Awardsearnings before income taxes'' will mean the consol-idated earnings before income taxes of the Com-A Participant who is granted a Performancepany, computed in accordance with GenerallyCash Award has the right to receive a payment inAccepted Accounting Principles, but shall excludecash upon the attainment of performance goalsthe eÅects of the following items, if and only if,speciÑed by the Committee for a performancesuch items are separately identiÑed in the Com-period of at least 12 months. The Committee maypany's quarterly earnings releases: (i) extraordinary,substitute actual shares of Common Stock for theunusual, and/or nonrecurring items of gain or loss,cash payment otherwise required to be made pursu-(ii) gains or losses on the disposition of a businessant to a Performance Cash Award.or investment, (iii) changes in tax or accountingregulations or laws, or (iv) the eÅect of a merger orPerformance Goalsacquisition. The executive oÇcer's incentive award

Awards of Restricted Stock, Restricted Stock then will be determined by the Committee based onUnits, Performance Shares, Performance Cash the executive oÇcer's allocated portion of theAwards and other incentives under the 2006 Plan incentive pool subject to adjustment in the solemay be made subject to the attainment of perform- discretion of the Committee. In no event may theance goals relating to one or more business criteria portion of the incentive pool allocated to anwithin the meaning of Section 162(m) of the Code, executive oÇcer who is subject to Section 162(m)including, but not limited to: cash Öow; cost; ratio of the Code be increased in any way, including as aof debt to debt plus equity; proÑt before tax; result of the reduction of any other executiveeconomic proÑt; earnings before interest and taxes; oÇcer's allocated portion.earnings before interest, taxes, depreciation andamortization; earnings per share; operating earnings; Stock Awardseconomic value added; ratio of operating earningsto capital spending; free cash Öow; net proÑt; net The Committee may award shares of Commonsales; sales growth; price of the Common Stock; Stock to Participants without payment therefore asreturn on net assets, equity or stockholders' equity; additional compensation for service to the Company

17PROXY STATEMENT

or a subsidiary. Stock awards may be subject to and SARs shall become vested and exercisable, allother terms and conditions, which may vary from restrictions on Restricted Stock and Restricted Stocktime to time and among employees, as the Commit- Units shall lapse, all performance goals shall betee determines to be appropriate. deemed achieved at target levels and all other terms

and conditions met, all Performance Shares shall bedelivered, all Performance Cash Awards, DeferredCash AwardsStock Units and Restricted Stock Units shall be paid

A cash award consists of a monetary payment out as promptly as practicable, all Annual Manage-made by the Company to an employee as additional ment Incentive Awards shall be paid out at targetcompensation for his or her services to the Com- levels (or earned levels, if greater) and all otherpany or a subsidiary. Cash awards may be subject to terms and conditions deemed met, and all Otherother terms and conditions, which may vary from Stock or Cash Awards shall be delivered or paid.time to time and among employees, as the Commit- The treatment of outstanding BeneÑts set forthtee determines to be appropriate. above is referred to herein as ""Accelerated Treat-

ment''. Accelerated Treatment shall not apply if andAmendment of the 2006 Plan to the extent that such BeneÑts are assumed by the

successor corporation (or parent thereof) or areThe Board or the Committee has the right andreplaced with an award that preserves the value ofpower to amend the 2006 Plan, provided, however,the award existing at the time of the Change inthat neither the Board nor the Committee mayControl and provides for subsequent payout inamend the 2006 Plan in a manner which wouldaccordance with the same vesting schedule applica-impair or adversely aÅect the rights of the holder ofble to the original BeneÑt; provided, however, thata BeneÑt without the holder's consent, except thatwith respect to any awards that are assumed orthe Committee may, in its discretion, substitutereplaced, such assumed or replaced awards mustSARs which can be settled only in stock forprovide for the Accelerated Treatment with respectoutstanding Stock Options without a Participant'sto any Participant that is involuntarily terminatedconsent. The Company shall obtain stockholder(for a reason other than ""Cause'') or quits forapproval of any amendment of the 2006 Plan to the""Good Reason'' within 24 months of the Change inextent necessary to comply with applicable laws,Control.regulations or stock exchange rules.

Any payment required by the preceding para-Termination of the 2006 Plan graph to a ""speciÑed employee'' as deÑned in

Section 409A(a)(2)(B)(i) of the Code will beThe Board may terminate the 2006 Plan at anysuspended for six months from the Change intime. The Plan is scheduled to terminate onControl to the extent necessary to comply withFebruary 23, 2016. Termination will not in anySection 409A of the Code.manner impair or adversely aÅect any BeneÑt out-

standing at the time of termination. For purposes of the 2006 Plan, the term""Change in Control'' is deÑned as: (i) any change in

Committee's Right to Modify BeneÑts the person or group that possesses, directly orindirectly, the power to direct or cause the direction

The Committee may grant BeneÑts on termsof the management and the policies of the Com-

and conditions diÅerent than those speciÑed in thepany, whether through the ownership of voting

2006 Plan to comply with the laws and regulationssecurities, by contract or otherwise; (ii) the acquisi-

of any foreign jurisdiction, or to make the BeneÑtstion, directly or indirectly, of securities of the

more eÅective under such laws and regulations.Company representing at least 20% of the combinedvoting power of the outstanding securities of theThe Committee may permit or require a Partici-Company (other than by the Company, or anypant to have amounts or shares of Common Stockemployee beneÑt plan of the Company); (iii) thethat otherwise would be paid or delivered to theconsummation of certain mergers and consolidationsParticipant as a result of the exercise or settlementinvolving the Company; (iv) the consummation ofof an award under the 2006 Plan credited to athe sale or other disposition of all or substantiallydeferred compensation or stock unit account estab-all of the Company's assets; (v) the approval oflished for the Participant by the Committee on theliquidation or dissolution of the Company by itsCompany's books of account.stockholders; and (vi) a change in the majority ofthe Board of the Company in existence prior to theChange in Control

Upon the occurrence of a Change in Control(as deÑned below), all outstanding Stock Options

18 PROXY STATEMENT

Ñrst public announcement relating to any cash holders of shares of Common Stock other than atender oÅer, exchange oÅer, merger or other busi- regular cash dividend, the Committee shall makeness combination, sale of assets, proxy or consent such substitution or adjustment in the number of orsolicitation (other than by the Board of the class of shares which may be issued under the 2006Company), contested election or substantial stock Plan in the aggregate or to any one Participant inaccumulation. any calendar year and in the number, class, price or

terms of shares subject to outstanding awardsFor purposes of the 2006 Plan, the term granted under the 2006 Plan as it deems

""Cause'' shall mean, with respect to any Participant, appropriate.(i) the Participant's conviction of any criminalviolation involving dishonesty, fraud or breach of In direct connection with the sale, lease, distri-trust, or (ii) the Participant's willful engagement in bution to stockholders, outsourcing arrangement orgross misconduct in the performance of the Partici- any other type of asset transfer or transfer of anypant's duties that materially injures the Company or portion of a facility or any portion of a discretea subsidiary. organizational unit of the Company or a subsidiary,

the Committee may authorize the assumption orFor purposes of the 2006 Plan, the term ""Good

replacement of aÅected Participants' awards by theReason'' shall mean, with respect to any Participant,

spun-oÅ facility or organization or by the entity thatwithout such Participant's written consent, (i) the

controls the spun-oÅ facility or organizational unitParticipant is assigned duties materially inconsistent

following disaÇliation.with his position, duties, responsibilities and statuswith the Company or a subsidiary during the 90-day In the event of any merger, consolidation, orperiod immediately preceding a Change in Control, reorganization of the Company with or into anotheror the Participant's position, authority, duties or corporation which results in the Company's out-responsibilities are materially diminished from those standing Common Stock being converted into orin eÅect during the 90-day period immediately exchanged for diÅerent securities, cash, or otherpreceding a Change in Control (whether or not property, there shall be substituted on an equitableoccurring solely as a result of the Company ceasing basis as determined by the Committee, for eachto be a publicly traded entity), (ii) the Company share of Common Stock subject to a BeneÑt, thereduces the Participant's annual base salary or target number and kind of shares of stock, other securi-incentive opportunity under the Company's annual ties, cash, or other property to which holders ofincentive plan, such target incentive opportunity as Common Stock of the Company are entitled pursu-in eÅect during the 90-day period immediately prior ant to the transaction.to the Change in Control, or as the same may beincreased from time to time, unless such target Substitution and Assumption of BeneÑtsincentive opportunity is replaced by a substantially

Either the Board or the Committee may au-equivalent substitute opportunity, (iii) the Companythorize the issuance of BeneÑts in connection withor a subsidiary requires the Participant regularly tothe assumption of, or substitution for, outstandingperform his duties of employment beyond a 50 milebeneÑts previously granted to individuals who be-radius from the location of the Participant's em-come employees of the Company or any subsidiaryployment immediately prior to the Change inas the result of any merger, consolidation, acquisi-Control, or (iv) the Company purports to terminatetion of property or stock, or reorganization otherthe Participant's employment other than pursuant tothan a Change in Control, upon such terms anda notice of termination which indicates the Partici-conditions as it deems appropriate. To the extentpant's employment has been terminated for ""Cause''permitted by Section 303A.08 of the Corporate(as deÑned above) and sets forth in reasonableGovernance Standards of the New York Stockdetail the facts and circumstances claimed to pro-Exchange, any substitute awards granted under thevide a basis for termination of the Participant's2006 Plan shall not count against the share limita-employment.tions set forth herein.

AdjustmentsReusage

If there is any change in the number, class,market price or terms of the Common Stock by If a Stock Option granted under the 2006 Plan,reason of any stock dividend, stock split, recapitali- the Prior Plans or the Motorola Share Option Planzation, reorganization, merger, consolidation, spin- of 1996 (the ""1996 Plan'') expires or is terminated,oÅ, disaÇliation of a subsidiary, combination of surrendered or canceled without having been fullyshares, exchange of shares, stock rights oÅering or exercised or if Restricted Stock, Restricted Stockother similar event or any distribution to the Units, Deferred Stock Units, Performance Shares or

19PROXY STATEMENT

SARs granted under the 2006 Plan, the Prior Plans Optionee has held the ISO shares prior to disposi-or the 1996 Plan are forfeited or terminated tion. In the year of a disqualifying disposition, thewithout the issuance of all of the shares subject Company receives a federal income tax deduction inthereto, the shares covered by such BeneÑts will an amount equal to the ordinary income that theagain be available for use under the 2006 Plan (to Optionee recognizes as a result of the disposition.the extent permitted under the terms of the PriorPlans or the 1996 Plan if the original award NSOsoccurred under a such Plan). Shares covered by a

An Optionee does not recognize taxable in-BeneÑt granted under the 2006 Plan or the Priorcome upon the grant of an NSO. Upon the exercisePlans will not be counted as used unless and untilof such a Stock Option, the Optionee recognizesthey are actually issued and delivered to a Partici-ordinary income to the extent the fair market valuepant. Any shares of Common Stock covered by aof the shares received upon exercise of the NSO onSAR shall be counted as used only to the extentthe date of exercise exceeds the exercise price. Theshares are actually issued to the Participant uponCompany receives an income tax deduction in anexercise of the SAR. Shares exchanged by anamount equal to the ordinary income that theoptionee as full or partial payment of the exerciseOptionee recognizes upon the exercise of the Stockprice under any stock option exercised under theOption.2006 Plan, shares withheld to pay withholding taxes

in connection with the exercise or payment of aBeneÑt will not be counted as used. Shares covered Restricted Stockby a BeneÑt that is settled in cash will not be

A Participant who receives an award of Re-counted as used.stricted Stock does not generally recognize taxableincome at the time of the award. Instead, the

U.S. Federal Income Tax ConsequencesParticipant recognizes ordinary income in the Ñrsttaxable year in which his or her interest in theThe Company has been advised by counsel thatshares becomes either: (i) freely transferable; orthe federal income tax consequences as they relate(ii) no longer subject to substantial risk of forfei-to BeneÑts are as follows:ture. The amount of taxable income is equal to thefair market value of the shares less the cash, if any,ISOspaid for the shares.

An Optionee does not generally recognizeA Participant may elect to recognize income attaxable income upon the grant or upon the exercise

the time he or she receives Restricted Stock in anof an ISO. Upon the sale of ISO shares, theamount equal to the fair market value of theOptionee recognizes income in an amount equal toRestricted Stock (less any cash paid for the shares)the diÅerence, if any, between the exercise price ofon the date of the award.the ISO shares and the fair market value of those

shares on the date of sale. The income is taxed at The Company receives a compensation expenselong-term capital gains rates if the Optionee has not deduction in an amount equal to the ordinarydisposed of the stock within two years after the income recognized by the Participant in the taxabledate of the grant of the ISO and has held the shares year in which restrictions lapse (or in the taxablefor at least one year after the date of exercise and year of the award if, at that time, the Participantthe Company is not entitled to a federal income tax had Ñled a timely election to accelerate recognitiondeduction. The holding period requirements are of income).waived when an Optionee dies.

Other BeneÑtsThe exercise of an ISO may in some casestrigger liability for the alternative minimum tax.

In the case of an exercise of an SAR or anIf an Optionee sells ISO shares before having award of Restricted Stock Units or Deferred Stock

held them for at least one year after the date of Units, Performance Shares, or Common Stock orexercise and two years after the date of grant (a cash, the Participant will generally recognize ordi-""disqualifying disposition''), the Optionee recog- nary income in an amount equal to any cashnizes ordinary income to the extent of the lesser of: received and the fair market value of any shares(i) the gain realized upon the sale; or (ii) the received on the date of payment or delivery. In thatdiÅerence between the exercise price and the fair taxable year, the Company will receive a federalmarket value of the shares on the date of exercise. income tax deduction in an amount equal to theAny additional gain is treated as long-term or short- ordinary income which the Participant hasterm capital gain depending upon how long the recognized.

20 PROXY STATEMENT

Million Dollar Deduction Limit current or future poison pill unless such poison pillis submitted to a shareholder vote, as a separate

The Company may not deduct compensation of ballot item, as soon as may be practicable.more than $1,000,000 that is paid to an individualwho, on the last day of the taxable year, is either

Supporting Statement:the Company's chief executive oÇcer or is amongone of the four other most highly-compensated

Pills Entrench Current ManagementoÇcers for that taxable year as reported in theCompany's proxy statement. The limitation on ""Poison pills . . . prevent shareholders, and thedeductions does not apply to certain types of overall market, from exercising their right to disci-compensation, including qualiÑed performance- pline management by turning it out. They entrenchbased compensation. The Company believes that the current management, even when it's doing aBeneÑts in the form of Stock Options, Performance poor job. They water down shareholders' votes andShares, Performance Cash Awards, SARs, perform- deprive them of a meaningful voice in corporateance-based Restricted Stock and Restricted Stock aÅairs.'' ""Take on the Street'' by Arthur Levitt, SECUnits and cash payments under Management Incen- Chairman, 1993-2001.tive Awards constitute qualiÑed performance-basedcompensation and, as such, will be exempt from the Progress Begins with One Step$1,000,000 limitation on deductible compensation.

It is important to take one step forward in ourcorporate governance and adopt the above RE-MiscellaneousSOLVED statement since our 2005 governance

A new beneÑts table is not provided because standards were not impeccable. For instance in 2005no grants have been made under the 2006 Plan and it was reported (and certain concerns are noted):all BeneÑts are discretionary. On March 3, 2006, the

‚ The Corporate Library (TCL), an indepen-closing price of the Common Stock was $21.98.dent investment research Ñrm in Portland,Maine rated our company:Approval by Stockholders

""D'' in CEO Compensation.In order to be adopted, the 2006 Plan must be ""D'' in Accounting.

approved by the aÇrmative vote of a majority of‚ We had no Independent ChairmanÌIndepen-the outstanding shares represented at the meeting

dent oversight concern.and entitled to vote.

‚ Cumulative voting was not allowed.RECOMMENDATION OF THE BOARD

‚ Our directors and management were stillTHE BOARD OF DIRECTORS RECOM-protected by a poison pill with a low 10%MENDS A VOTE FOR ADOPTION OF THEthreshold.MOTOROLA OMNIBUS INCENTIVE PLAN OF

2006. UNLESS OTHERWISE INDICATED ON‚ Two directors had non-director business withTHE PROXY, THE SHARES WILL BE VOTED

our companyÌIndependence concern. I be-FOR ADOPTION OF THE MOTOROLA OMNI-lieve these sub-optimal governance examplesBUS INCENTIVE PLAN OF 2006.at our company reinforce the reason toadopt the above RESOLVED statement to

PROPOSAL 3improve our corporate governance.

SHAREHOLDER PROPOSAL RE: REDEEM ORLike a DictatorVOTE POISON PILL

""®Poison pill© That's akin to the argument of aFor reasons stated below, the Board of Direc-benevolent dictator, who says, "Give up more oftors of the Company recommends a voteyour freedom and I'll take care of you.' ''""AGAINST'' this shareholder proposal.T.J. Dermot Dunphy, CEO of Sealed Air

The Company has been advised that William (NYSE) for 25 yearsSteiner, 112 Abbottsford Gate, Piermont, NY10968, the beneÑcial owner of 3,000 shares, intends Poison Pill Negativeto submit the following proposal for consideration

""That's the key negative of poison pills Ìat the 2006 Annual Meeting.instead of protecting investors, they can also pre-

RESOLVED: Shareholders request that our serve the interests of management deadwood asBoard adopt a rule that our Board will redeem any well.'' Morningstar.com, Aug. 15, 2003

21PROXY STATEMENT

The Potential of a Tender OÅer Can Motivate terms than would be proposed if no Rights PlanOur Directors were in place.

Hectoring directors to act more independently The Board is in the best position to negotiateis a poor substitute for the bracing possibility that on behalf of all shareholders, evaluate the adequacyshareholders could sell the company out from under of any potential oÅer and seek a higher price ifits present management. there is to be a sale of the Company. In summary,Wall Street Journal, Feb. 24, 2003 the Rights Plan allows your Board to evaluate

oÅers, investigate alternatives and take the necessaryStock Value steps to maximize shareholder value. Without the

protection of the Rights Plan, your Board wouldIf a poison pill makes our stock diÇcult to selllose important bargaining power in negotiating theat a proÑt Ì the value of our stock could suÅer.transaction with a potential acquirer or pursuing apotentially superior alternative.

RECOMMENDATION OF THE BOARD

Evidence Shows that Rights Plans are EÅective andTHE BOARD OF DIRECTORS RECOM-Protect InvestorsMENDS A VOTE AGAINST ADOPTION OF

THIS SHAREHOLDER PROPOSAL FOR THE Merger and acquisition activity over the last tenREASONS SET FORTH BELOW, UNLESS OTH- years shows that Rights Plans neither preventERWISE INDICATED ON THE PROXY, THE unsolicited oÅers from occurring nor prevent com-SHARES WILL BE VOTED AGAINST THE panies from being acquired at prices that are fairADOPTION OF THIS PROPOSAL. and adequate to shareholders. In fact, a study by

J.P. Morgan published in 2001, analyzing 397The Board recommends a vote against the

acquisitions of U.S. public companies from 1997 tocurrent proposal because the Board continues to

2000 where the purchase price exceeded $1 billion,believe that the Company's Rights Plan is an

found that companies with Rights Plans in placeimportant tool that enables the Board to maximize

received a median premium of 35.9% compared toshareholder value in the event of a proposed

31.9% for companies without a Rights Plan. A 1997acquisition of control of the Company. The Rights

study published by Georgeson & Company ofPlan also allows the Board to protect the Company

takeover premiums during the period from 1992 toand its shareholders from unfair and coercive

1996 also concluded that premiums paid to acquiretakeover tactics, such as a partial or two-tier tender

target companies with Rights Plans were higher thanoÅer, a ""creeping acquisition'' or other tactics that

premiums paid for target companies that did notthe Board believes are unfair to the Company's

have such Plans. In addition, the Georgeson studyshareholders. Similar plans have been adopted by

concluded that the presence of a Rights Plan didover 2,000 companies, including approximately 60%

not increase the likelihood of the defeat of a hostileof the Standard & Poor's 500.

takeover bid or the withdrawal of a friendly bid andthat Rights Plans did not reduce the likelihood that

The Rights Plan is Designed to Help the Board a company would become a takeover target. Thus,Enhance Shareholder Value empirical evidence suggests that Rights Plans serve

their principal objectives: protection against inade-The Rights Plan is not intended to prevent a quate oÅers and abusive tactics and increased

takeover of the Company. Nor does the Rights Plan bargaining power resulting in higher value forchange or diminish the Ñduciary obligations of the shareholders. Indeed, many companies with RightsCompany's Board. The Rights Plan strengthens the Plans have received unsolicited takeover proposalsability of the Board, 12 of whose 13 current and have redeemed their rights after their board ofmembers are considered independent under current directors concluded that the oÅer, as negotiated byNew York Stock Exchange rules for board indepen- such board of directors, adequately reÖected thedence, to fulÑll its Ñduciary duties under Delaware intrinsic value of the company and was fair andlaw. Because the Board, prior to the acquisition of equitable to all shareholders.10% of the Company's common shares by anacquirer, has the power to redeem the rights issued The Board Will Use the Rights Plan in the Bestunder the Rights Plan and thereby remove the Interests of Shareholdersimpediment to the completion of an acquisition ofthe Company, a prospective acquirer seeking to The Board believes that the adoption andpersuade the Board to redeem the rights may maintenance of a Rights Plan is appropriately withinpropose a higher takeover price, an oÅer for all the scope of responsibilities of the Board, acting onshares rather than a partial oÅer or better takeover behalf of all shareholders. The adoption of such a

22 PROXY STATEMENT

Plan accords with the Board's responsibilities for Board should have for the protection of sharehold-the management of the Company's aÅairs and the ers and would leave shareholders vulnerable to anissuance of securities and does not require share- unsolicited and potentially coercive and unfair take-holder approval under Delaware law or the rules of over oÅer. The Board believes that any decision tothe New York Stock Exchange. To redeem the redeem the Rights Plan should be made by theRights Plan now, in the absence of an acquisition Board in the context of a speciÑc acquisitionproposal, would remove an important tool that the proposal.

23PROXY STATEMENT

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes the Company's equity compensation plan information as of Decem-ber 31, 2005. The table does not include information with respect to shares subject to outstanding optionsgranted under equity compensation plans assumed by the Company in connection with mergers or acquisitionswhere the plans governing the options will not be used for future awards, as described below.

Number of securitiesremaining available for

Number of future issuance undersecurities to be Weighted-average equity compensation

issued upon exercise exercise price plans (excludingof outstanding of outstanding securities reÖected in

options and rights options and rights column (a))Plan Category (a) (b) (c)

Equity compensation plansapproved by Motorola stockholders 259,261,333(1)(2)(3) $16.68(4) 77,390,567(5)

Equity compensation plans notapproved by Motorolastockholders(6)(7) 9,010,057 $14.55 2,186,010(8)

Total 268,271,390 $16.61 79,576,577

(1) This includes shares subject to outstanding options granted under the Motorola Omnibus Incentive Plan of 2003(""2003 Plan''), the Motorola Omnibus Incentive Plan of 2002 (""2002 Plan''), the Motorola Omnibus IncentivePlan of 2000 (""2000 Plan''), the Motorola Amended and Restated Incentive Plan of 1998 (""1998 Plan'') and priorstock incentive plans no longer in eÅect.

(2) This also includes an aggregate of 3,584,583 restricted or deferred stock units that have been granted or accruedpursuant to dividend equivalent rights under the 2003 Plan, the 2002 Plan, the 2000 Plan, the Motorola Non-Employee Directors Stock Plan and prior incentive plans which are no longer in eÅect. Each restricted or deferredstock unit is intended to be the economic equivalent of a share of Common Stock.

(3) This does not include 530,249 stock appreciation rights (""SARs'') which are outstanding and exercisable under the2000 Plan, the 1998 Plan and prior stock incentive plans that are no longer in eÅect. These SARs enable therecipient to receive, for each SAR granted, cash in an amount equal to the excess of the fair market value of oneshare of Common Stock on the date the SAR is exercised over the fair market value of one share of Common Stockon the date the SAR was granted. No security is issued upon the exercise of these SARs.

(4) This weighted exercise price does not include outstanding restricted or deferred stock units.

(5) Of these shares: (i) 17,950,199 shares remain available for future issuance under the Company's employee stockpurchase plan, the Motorola Employee Stock Purchase Plan of 1999, as amended; and (ii) an aggregate of59,440,368 shares remain available for grants of awards under the 2003 Plan, the 2002 Plan, the 2000 Plan and the1998 Plan, of which 24,307,910 shares are available for grants of awards other than options under the 2003 Plan,3,092,662 shares are available for grants of awards other than options under the 2002 Plan and 4,970,763 shares areavailable for grants of awards other than options under the 2000 Plan. Other beneÑts which may be granted underthe 2003 Plan, the 2002 Plan and the 2000 Plan are SARs, restricted stock, restricted stock units, performance stock,performance units, annual management incentive awards and other stock awards. Only options and SARs cancurrently be granted under the 1998 Plan.

(6) The Company's only non-stockholder approved plan is the Motorola Compensation/Acquisition Plan of 2000(""C/A Plan'') that was adopted in November 2000. Since its inception, the major purposes of the C/A Plan havebeen to grant awards: (i) to persons newly hired by the Company, and (ii) in connection with the acquisition ofbusinesses. Otherwise, grants are generally made by the Company under the 1998, 2000, 2002 and 2003 Plans.Awards may not be made under the C/A Plan to directors or executive oÇcers of the Company. The Companyintends to no longer make grants under the C/A Plan if the proposed Motorola Omnibus Incentive Plan of 2006, asdescribed on pages 13 through 20, is approved by stockholders. The C/A Plan is more fully described below.

(7) As of December 31, 2005, there were 2,548,710 shares subject to outstanding stock options which had beenassumed by the Company in connection with acquisition transactions, at a weighted average exercise price of $10.32.These options were issued under equity compensation plans of companies acquired by the Company. No additionaloptions may be granted under these equity compensation plans. The table does not include information with respectto these assumed options.

24 PROXY STATEMENT

(8) Of these shares, 78,200 are available for grants of awards other than options under the C/A Plan. Other beneÑtswhich may be granted under the C/A Plan are SARs, restricted stock, restricted stock units, performance stock,performance units, annual management incentive awards and other stock awards. As noted in footnote 6 above, theCompany intends to no longer make grants under the C/A Plan if the proposed Motorola Omnibus Incentive Planof 2006, as described on pages 13 through 20, is approved by stockholders.

The Motorola Compensation/Acquisition Plan of 2001 under the C/A Plan expired without being2000 exercised. As a result, approximately 6 million

shares became available for the use under the C/AThe Motorola Compensation/Acquisition Plan Plan's reusage provisions. As of December 31, 2005,

of 2000 (the ""C/A Plan''), initially adopted on the maximum number of shares available under theNovember 7, 2000 by the Board of Directors, C/A Plan was 2,186,010.provides that awards may be granted to employeesof the Company and its subsidiaries who are not Awards have included options to acquire sharesexecutive oÇcers or directors of the Company, in of Common Stock, shares of restricted Commonconnection with its recruiting and retention eÅorts. Stock and restricted stock units. Each optionSince its inception, the major purposes of the C/A granted has an exercise price of 100% of the marketPlan have been to grant awards: (i) to persons value of the Common Stock on the date of grant.newly hired by the Company, and (ii) in connec- Generally, all options expire 10 years from the datetion with the acquisition of businesses. of grant and vest and become exercisable at 25%

increments over four years. Awards of restrictedThe C/A Plan permits the granting of stockstock or restricted stock units consist of shares oroptions, stock appreciation rights, restricted stockrights to shares of Common Stock. The restrictionsand restricted stock units, performance stock, per-on individual grants vary, but are designed so thatformance units and other stock awards. Whenthe awards are subject to substantial risk of forfei-initially adopted, the C/A Plan provided for ature by the employee.maximum of 40 million shares of Common Stock to

be issued under the C/A Plan, subject to certain Upon the occurrence of a change in control,adjustments and the reusage of shares in certain each stock option outstanding on the date on whichcircumstances such as forfeitures and cancellations. the change in control occurs, will immediatelyHowever, the C/A Plan was amended in November become exercisable in full. In addition, the restric-2001 to provide that, in lieu of such share authori- tions on all shares of restricted stock or restrictedzation, the Compensation and Leadership Commit- stock units outstanding on the date on which thetee has the authority to determine from time to change in control occurs will be automaticallytime the maximum number of shares of Common terminated.Stock reserved for issuance under the C/A Plan. InNovember 2001, the Compensation and Leadership As noted above, the Company intends to noCommittee authorized 2 million shares to be issued longer make grants under the C/A Plan if theunder the C/A Plan, subject to adjustments and the proposed Motorola Omnibus Incentive Plan ofC/A Plan's reusage provisions. On May 3, 2003, a 2006, as described on pages 13 through 20, isgrant of stock options made prior to November approved by stockholders.

25PROXY STATEMENT

OWNERSHIP OF SECURITIES

Security Ownership of Management and Directors

The following table sets forth information as of February 28, 2006, regarding the beneÑcial ownership ofshares of Common Stock by each director and nominee for director of the Company, by the persons namedin the Summary Compensation Table, and by all current directors, nominees and executive oÇcers of theCompany as a group. Each director, nominee and named executive oÇcer owns less than 1% of the CommonStock. All current directors, nominees and current executive oÇcers as a group own less than 1%.

Shares Under Total SharesExercisable BeneÑcially

Name Shares Owned(1) Options(2) Stock Units(3) Owned(4)(5)

Edward J. Zander 135,599 1,094,810 214,351 1,899,816(6)

David W. Devonshire 47,306 111,760 5,235 169,536(7)

Ronald G. Garriques 25,000 43,586 0 169,156(8)

Gregory Q. Brown 17,937 167,640 0 337,861(9)

Adrian R. Nemcek 47,394 550,695 0 601,780

H. Laurance Fuller 936 112,318 13,002 126,256(10)

Judy C. Lewent 47,604 112,318 0 159,922(11)

Walter E. Massey 20,684 87,172 5,979 113,835(12)

Thomas J. Meredith 4,223 0 0 4,223

Nicholas Negroponte 44,511 112,318 0 156,829

Indra K. Nooyi 4,579 33,528 5,545 43,652(13)

Samuel C. Scott III 33,629 112,318 6,501 152,448(14)

Ron Sommer 3,043 0 0 3,043

James R. Stengel 7,305 0 0 7,305

Douglas A. Warner III 24,372 50,292 5,695 80,360(15)

John A. White 44,266 41,910 0 86,176(16)

Miles D. White 2,000 0 830 2,830(17)

All current directors, nominees andcurrent executive oÇcers as a group(23 persons) 595,073 4,080,507 257,138 5,992,066(18)

(1) Includes shares over which the person currently holds or shares voting and/or investment power but excludesinterests, if any, in shares held in the Motorola Stock Fund of the Company's 401(k) Plan and the shares listedunder ""Shares Under Exercisable Options'' and ""Stock Units''.

(2) Includes shares under options exercisable on February 28, 2006 and options which become exercisable within60 days thereafter.

(3) Includes stock units which are deemed to be beneÑcially owned on February 28, 2006 or 60 days thereafter. Stockunits are not deemed beneÑcially owned until the restrictions on the units have lapsed. Each stock unit is intendedto be the economic equivalent of a share of Common Stock.

(4) Unless otherwise indicated, each person has sole voting and investment power over the shares reported.

(5) Includes interests, if any, in shares held in the Motorola Stock Fund of the Company's 401(k) Plan, which is subjectto some investment restrictions, the shares listed under ""Shares Under Exercisable Options'' and units listed under""Stock Units.''

(6) Mr. Zander has shared voting and investment power over 75,000 of these shares. His holdings under ""Total SharesBeneÑcially Owned'' include 214,351 restricted stock units that have vested but are subject to a deferred distributionupon the occurrence of certain events, as provided in his employment agreement as described on page 33. Hisholdings under ""Total Shares BeneÑcially Owned'' also include 455,056 stock units that are subject to restrictions.The 455,056 units are excluded from the computations of percentages of shares owned because the restrictions lapsemore than 60 days after February 28, 2006.

(7) Mr. Devonshire's holdings under ""Total Shares BeneÑcially Owned'' include 10,470 stock units that are subject torestrictions. The restrictions on 5,235 of these units lapse on March 18, 2006 and are reÖected under ""Stock Units''

26 PROXY STATEMENT

and the remaining 5,235 units are excluded from the computations of percentages of shares owned because therestrictions on these units lapse more than 60 days after February 28, 2006.

(8) Mr. Garriques' does not have investment power over 25,000 of these shares. His holdings under ""Total SharesBeneÑcially Owned'' include 100,570 stock units that are subject to restrictions. These units are excluded from thecomputations of percentages of shares owned because the restrictions lapse more than 60 days after February 28,2006.

(9) Mr. Brown's holdings under ""Total Shares BeneÑcially Owned'' include 152,284 stock units that are subject torestrictions. These units are excluded from the computations of percentages of shares owned because the restrictionslapse more than 60 days after February 28, 2006.

(10) Mr. Fuller does not have investment power over 936 of these shares.

(11) Ms. Lewent does not have investment power over 264 of these shares.

(12) Mr. Massey has shared voting and investment power over 2,397 of these shares, and does not have investmentpower over 10,294 of these shares.

(13) Ms. Nooyi does not have investment power over 2,995 of these shares.

(14) Mr. Scott does not have investment power over 12,177 of these shares.

(15) Mr. Warner does not have investment power over 4,245 of these shares.

(16) Mr. John White has shared voting and investment power over 31,091 of these shares and does not have investmentpower over 540 of these shares.

(17) Mr. Miles White has shared voting and investment power over 2,000 of these shares.

(18) All directors, nominees and current executive oÇcers as a group have: sole voting and investment power over397,382 of these shares, shared voting and investment power over 141,240 of these shares, and have sole voting andno investment power over 56,451 of these shares. Included under ""Total Shares BeneÑcially Owned'' are 1,031,859stock units that are subject to restrictions. Each stock unit is intended to be the economic equivalent of a share ofCommon Stock. These units are excluded from the computations of percentages of shares owned because therestrictions lapse more than 60 days after February 28, 2006.

27PROXY STATEMENT

EXECUTIVE COMPENSATION

Summary Compensation Table

Annual Compensation Long-Term Compensation

Other AllAnnual Restricted Securities Other

Compen- Stock Underlying LTIP Compen-Salary Bonus sation Awards Options Payouts sation

Name and Principal Position Year ($)(1) ($)(2) ($)(3) ($)(4) (#)(5)(6) ($) ($)(7)

Edward J. Zander 2005 $1,500,000 $3,000,000 $364,520(8) $2,320,500(9) 1,050,000(10) $7,500,000 $ 6,300Chairman of the Board and 2004 1,500,000 4,600,000(11) 420,831(8) 9,148,857(9) 2,570,480(10) 0 17,390Chief Executive OÇcer

David W. Devonshire 2005 625,000 800,000 2,605 0 400,000 1,800,000 6,300Executive Vice President, 2004 642,308 1,164,858 71,030(12) 0 502,920 1,725,000 17,824Chief Financial OÇcer 2003 593,269 822,925(13) 3,452 0 549,864 0 8,054

Ronald G. Garriques 2005 586,538 1,514,646(14) 656,437(15) 1,547,000(16) 400,000 1,421,333 6,300Executive Vice President 2004 495,336 979,429 1,365,902(15) 0 111,760 738,000 13,768

2003 431,923 137,837 1,169,316(15) 0 162,052 0 6,586

Gregory Q. Brown 2005 593,981 825,000 1,108 1,547,000(17) 400,000 1,575,000 3,150Executive Vice President 2004 583,654 1,096,735(18) 1,475 0 474,980 1,575,000 8,609

2003 510,866 692,196(19) 477 865,000(19) 949,960(19) 0 832

Adrian R. Nemcek 2005 593,269 750,000 3,319 0 350,000 1,620,000 6,300Executive Vice President 2004 587,692 1,015,797 72,325(20) 0 474,980 1,500,000 20,862

2003 529,231 662,782 18,875 0 447,040 0 8,340

(1) Includes amounts deferred pursuant to salary reduction arrangements under the 401(k) Plan and the MotorolaManagement Deferred Compensation Plan.

(2) Unless otherwise indicated, bonuses were earned under the Motorola Incentive Plan (""MIP'').

(3) Unless otherwise indicated, these amounts consist of the Company's reimbursements for the income tax liability(""tax gross-ups'') resulting from income imputed to the executive oÇcer as a result of: (a) premiums paid by theCompany under the term life portion of an endorsement split-dollar life insurance policy for elected oÇcers (for allnamed executive oÇcers except Mr. Zander), and (b) certain use of Company aircraft. Unless otherwise indicated,the aggregate amount of perquisites and other personal beneÑts, securities or property given to each named executiveoÇcer valued on the basis of aggregate incremental cost to the Company (""Company perquisite costs''), was lessthan either $50,000 or 10% of the total of annual salary and bonus for that executive oÇcer during each of theseyears.

(4) Restricted stock and restricted stock units are valued at the time of grant. Dividends are paid on restricted stock atthe same rate and time as dividends are paid on Common Stock. Restricted stock units automatically accrueadditional units at the current market price pursuant to dividend equivalent rights at the same rate and time asdividends are paid on the Common Stock. Restrictions on the units received pursuant to dividend equivalent rightslapse at the same time as restrictions on the underlying units. Restrictions on restricted stock or restricted stockunits lapse upon the holder's death or permanent disability. On December 2, 2004, all holders of restricted stockand restricted stock units received a distribution equal to .110415 shares of Class B common stock of FreescaleSemiconductor, Inc. (""Freescale Semiconductor'') per restricted share or restricted stock unit. As of December 31,2005, the aggregate number of shares of restricted Common Stock and restricted stock units held by the oÇcers andthe dollar value of such shares were: Mr. Zander, 750,187 shares, including 657,163 restricted stock units($16,946,742); Mr. Devonshire, 10,453 restricted stock units ($236,126); Mr. Garriques, 125,402 shares, including100,402 restricted stock units ($2,832,835); and Mr. Brown, 177,779 restricted stock units ($4,016,033). The dollarvalues are based on the closing price of the Common Stock ($22.59) on December 30, 2005.

(5) All options were granted at fair market value at the date of grant. On December 2, 2004, the Company completedthe spin-oÅ of Freescale Semiconductor, its former semiconductor business, by distributing its remaining ownershipinterest in Freescale Semiconductor to Motorola stockholders. At that time, the number of shares and exercise priceof vested and unvested stock options were adjusted by a ratio of 1.1176 to reÖect the decrease in the Company'sstock price immediately following the distribution. The adjustment was designed to preserve the intrinsic value of allvested and unvested options. Accordingly, the number of shares and exercise price of all option grants, includingthose reported in this table, have been adjusted by multiplying the number of shares underlying the option by1.1176 and dividing the exercise price by the same number.

(6) Unless otherwise indicated, all stock options vest and become exercisable in equal annual installments over fouryears, with the Ñrst installment vesting one year after the date of grant, and expire ten years after the date of grantand all options were granted as part of the Company's broad-based annual stock option grants, which occurred onMay 6, 2003, May 4, 2004 and May 3, 2005.

28 PROXY STATEMENT

(7) In 2005, these Ñgures reÖect the following contributions made by the Company to the 401(k) Plan for each of theoÇcers: Mr. Zander, $6,300; Mr. Devonshire, $6,300; Mr. Garriques, $6,300; Mr. Brown, $3,150; and Mr. Nemcek$6,300.

(8) In 2005, this amount consists of: (i) Company perquisite costs for Mr. Zander of $362,253, including $307,764 forpersonal use of Company aircraft, and (ii) tax gross-ups of $2,267 for income imputed to Mr. Zander. In 2004, thisamount consists of: (i) Company perquisite costs for Mr. Zander of $390,370, including $133,925 for personal useof Company aircraft and $125,000 for relocation beneÑts, and (ii) tax gross-ups of $30,461 for income imputed toMr. Zander. As Chairman and CEO, Mr. Zander is required to use the plane for business and personal travelpursuant to the Company's security program established by the Board of Directors.

(9) On May 3, 2005, Mr. Zander was awarded 150,000 restricted stock units. The restrictions on 50% of the units willlapse on November 3, 2007 and the restrictions on the remaining 50% of the units will lapse on May 3, 2010. Aspart of the Zander Compensation Arrangements (as deÑned in footnote 11 below), on January 5, 2004, Mr. Zanderwas awarded 93,024 shares of restricted Common Stock, all of the restrictions on which lapsed on January 5, 2006.On January 5, 2004, Mr. Zander was awarded 400,000 restricted stock units. The restrictions on 50% of the unitslapsed on January 5, 2006 and restrictions on the remaining 50% of the units will lapse on January 5, 2008. OnMay 4, 2004, Mr. Zander was awarded 109,770 restricted stock units. Restrictions on 10% of the units lapsed onMay 4, 2005, restrictions on an additional 20% of the units will lapse on May 4, 2006, restrictions on an additional30% of the units will lapse on May 4, 2007, and restrictions on the remaining 40% of the units will lapse on May 4,2008.

(10) Mr. Zander was granted 300,000 stock options on February 14, 2005 in recognition of his performance throughout2004. In connection with the Company's broad-based annual stock option grant, Mr. Zander was granted 750,000stock options on May 3, 2005. As part of the Zander Compensation Arrangements, Mr. Zander was granted1,508,760 stock options on January 5, 2004 and, in connection with the Company's broad-based annual stockoption grant, Mr. Zander was granted 1,061,720 stock options on May 4, 2004.

(11) On January 5, 2004, Mr. Zander joined the Company as Chairman of the Board and Chief Executive OÇcer. At thattime, as an incentive for him to join the Company, the Company entered into certain compensation arrangementswith Mr. Zander (the ""Zander Compensation Arrangements''). The compensation arrangements included aguaranteed signing bonus of $600,000 that was paid to Mr. Zander in January 2004. The remaining $4,000,000 waspaid under MIP and receipt was deferred through the Company's Management Deferred Compensation Planpursuant to the terms of the Zander Compensation Arrangements.

(12) In 2004, this amount consists of: (i) Company perquisite costs for Mr. Devonshire of $64,270, including $38,097for the fair market value of an automobile gifted upon elimination of the Company's U.S. executive vehicle program,and (ii) a tax gross-up of $6,760 for income imputed to Mr. Devonshire.

(13) In March 2002, Mr. Devonshire joined the Company as Executive Vice President and Chief Financial OÇcer. At thattime, as an incentive for him to join the Company, the Company entered into certain compensation arrangementswith Mr. Devonshire (the ""Devonshire Compensation Arrangements''). The Devonshire Compensation Arrange-ments included a guaranteed signing bonus, $287,500 of which was paid to Mr. Devonshire in 2003, aftercompletion of Mr. Devonshire's Ñrst year of employment. Mr. Devonshire's remaining 2003 bonus of $535,425 wasearned under MIP.

(14) In 2005, Mr. Garriques earned a bonus of $900,000 under MIP and was awarded a bonus of $114,646 pursuant tothe Company's expatriate policies for the successful completion of an overseas assignment that began inOctober 2002 and ended in April 2005. Also, in April 2005, Mr. Garriques received a payment of $500,000 inexchange for an agreement to forgo the reimbursement of certain relocation-related expenses and other expensesthat the Company had previously agreed to reimburse.

(15) In 2005, this amount consists of: (i) Company perquisite costs for Mr. Garriques of $300,824, including $266,600of Expatriate BeneÑts (as deÑned below), and (ii) tax gross-ups of $355,613 for income imputed to Mr. Garriques,primarily for Expatriate BeneÑts. In 2004, this amount consists of: (i) Company perquisite costs for Mr. Garriquesof $1,352,821, including $1,257,731 of Expatriate BeneÑts, and (ii) tax gross-ups of $13,081 for income imputed toMr. Garriques. In 2003, this amount consists of: (i) Company perquisite costs for Mr. Garriques of $1,155,545,including $1,097,105 of Expatriate BeneÑts, and (ii) tax gross-ups of $13,771 for income imputed to Mr. Garriques.At the Company's request, Mr. Garriques relocated for an overseas assignment that began in October 2002 andended in April 2005. In connection with this expatriate assignment, the Company made certain payments to, andcovered certain costs of, Mr. Garriques, including housing expenses (both overseas and domestic), automobileexpenses, travel expenses and other expenses, as well as payments to Mr. Garriques for cost-of-living-adjustmentsand tax equalization (collectively, ""Expatriate BeneÑts'').

(16) On May 3, 2005, Mr. Garriques was awarded 100,000 restricted stock units. The restrictions on 50% of the unitswill lapse on November 3, 2007 and the restrictions on the remaining 50% of the units will lapse on May 3, 2010.

29PROXY STATEMENT

(17) On May 3, 2005, Mr. Brown was awarded 100,000 restricted stock units. The restrictions on 50% of the units willlapse on November 3, 2007 and the restrictions on the remaining 50% of the units will lapse on May 3, 2010.

(18) As part of the Brown Compensation Arrangements (as deÑned in footnote 19 below), Mr. Brown received aguaranteed bonus of $100,000 that was paid on January 2, 2004. Mr. Brown's remaining 2004 bonus of $996,735was earned under MIP.

(19) On January 1, 2003, Mr. Brown joined the Company as Executive Vice President, President and Chief ExecutiveOÇcer, Commercial, Government and Industrial Solutions Sector. At that time, as an incentive for him to join theCompany, the Company entered into certain compensation arrangements with Mr. Brown (the ""BrownCompensation Arrangements''). The Brown Compensation Arrangements included a signing bonus of $100,000 thatwas paid to Mr. Brown shortly after he joined the Company in 2003 and a guaranteed bonus of $100,000 that waspaid in January 2004, after completion of Mr. Brown's Ñrst year of employment. Mr. Brown also earned a bonus of$592,196 in 2003 under MIP. On January 1, 2003, Mr. Brown was awarded 100,000 restricted stock units.Restrictions on 25% of the units lapsed on January 1, 2005; restrictions on an additional 25% of the units lapsed onJanuary 1, 2006; restrictions on an additional 25% of the units will lapse on January 1, 2007; and restrictions on theremaining 25% of the units will lapse on January 1, 2008. On January 1, 2003, Mr. Brown was also granted 558,800stock options. 10% of the options vested on January 1, 2004; 20% of the options vested on January 1, 2005; 30% ofthe options vested on January 1, 2006; and the remaining 40% of the options will vest on January 1, 2007. Theoptions expire on January 1, 2013. Mr. Brown also received 391,160 options on May 6, 2003 as part of theCompany's broad-based annual stock option grant.

(20) In 2004, this amount consists of: (i) Company perquisite costs for Mr. Nemcek of $65,359, including $29,092 forthe fair market value of an automobile gifted upon elimination of the Company's U.S. executive vehicle program and$18,784 for personal use of Company aircraft, and (ii) tax gross-ups of $6,966 for income imputed to Mr. Nemcek.

Aggregated Option Exercises in 2005and 2005 Year-End Option Values

Number of Securities Value of UnexercisedUnderlying Unexercised In-The-Money(2)

SharesOptions at end Options at endAcquired on Value

of 2005(#) of 2005($)(3)Exercise Realized

Name (# of Shares) ($)(1) Exercisable Unexercisable Exercisable Unexercisable

Edward J. Zander 0 $ 0 642,620 2,977,860 $5,295,795 $23,231,385

David W. Devonshire 374,955 3,250,285 0 1,163,883 0 10,554,869

Ronald G. Garriques 517,740 3,645,129 93,586 881,965 293,480 7,128,676

Gregory Q. Brown 342,823 3,585,395 0 1,342,975 0 13,891,930

Adrian R. Nemcek 454,862 4,083,716 550,695 999,605 3,443,641 8,830,456

(1) The ""Value Realized'' represents the diÅerence between the base (or exercise) price of the option shares and themarket price of the option shares on the date the option was exercised. The value realized was determined withoutconsidering any taxes that may have been owed.

(2) ""In-the-Money'' options are options whose base (or exercise) price was less than $22.59 per share, the closingmarket price of a share of Common Stock at December 31, 2005.

(3) Assuming a stock price of $22.59 per share, which was the closing market price of a share of Common Stockreported by the New York Stock Exchange on December 31, 2005.

30 PROXY STATEMENT

Stock Option Grants in 2005

Individual Grants

% of TotalNumber of Options Grant DateSecurities Granted Exercise Present

Underlying to or Base ValueOptions Granted Employees Price Expiration of Option

Name (# of shares)(1) in 2005 ($/Sh) Date Grants($)(2)

Edward J. Zander 300,000(3) .74% $15.91 2/14/2015(3) $1,865,101750,000(4) 1.84 15.47 5/3/2015(5) 4,114,026

David W. Devonshire 400,000(4) .98 15.47 5/3/2015(5) 2,194,147Ronald G. Garriques 400,000(4) .98 15.47 5/3/2015(5) 2,194,147Gregory Q. Brown 400,000(4) .98 15.47 5/3/2015(5) 2,194,147Adrian R. Nemcek 350,000(4) .86 15.47 5/3/2015(5) 1,919,879

(1) These options were granted under the Motorola, Inc. Omnibus Incentive Plan of 2003 to acquire shares of CommonStock and were granted at fair market value at the time of the grant. The options carry with them the right to electto have shares withheld upon exercise and/or to deliver previously-acquired shares of Common Stock to satisfy tax-withholding requirements. Options may be transferred to family members or certain entities in which family membershave an interest. In the aggregate, the options described in this table are exercisable for approximately .10% of thetotal shares of Common Stock outstanding on December 31, 2005. These options generally vest upon retirement.

(2) The grant date present value of option grants reÖected here was calculated using the Black-Scholes option pricingmodel pursuant to the rules of the SEC. The following assumptions were used in the calculation: options will be heldfull term; a dividend yield of 1%; a risk-free interest rate of 3.9%; expected price volatility of 35.2%; and an assumedforfeiture rate of 3%. We have made no adjustments to reÖect that these options are non-transferable.

(3) These options were granted to Mr. Zander on February 14, 2005 in recognition of his performance throughout 2004.The options vest and become exercisable in four equal annual installments with the Ñrst installment vesting onFebruary 14, 2006. The options expire 10 years from the date of grant.

(4) These options were granted on May 3, 2005 as part of the Company's broad-based annual stock option grant. Theoptions vest and become exercisable in four equal annual installments with the Ñrst installment vesting on May 3,2006.

(5) The options expire 10 years from the date of grant. The option term is the same for substantially all of the optionsgranted to employees on May 3, 2005. These options could expire earlier in certain situations.

31PROXY STATEMENT

Long-Term Incentive Plans Ì LRIP Cycle 2005-2007

The Company introduced the Long-Range Incentive Plan (""LRIP'') in 2005. The initial three-year cyclestarted on January 1, 2005 and will end on December 31, 2007. A second three-year cycle will begin onJanuary 1, 2006 and will end on December 31, 2008, if such cycle is approved by the Board.

Performanceor OtherPeriod

Estimated Future Payouts UnderUntilNon-Stock Price-Based Plans(1)(2)(3)Maturation

Name or Payout Threshold($) Target($)(4) Maximum($)

Edward J. Zander 3 Years $937,500 $3,750,000 $7,500,000

David W. Devonshire 3 Years 234,375 937,500 1,875,000

Ronald G. Garriques 3 Years 225,000 900,000 1,800,000

Gregory Q. Brown 3 Years 215,625 862,500 1,725,000

Adrian R. Nemcek 3 Years 215,625 862,500 1,725,000

(1) LRIP is a three-year plan that has Ñnancial targets set annually. The measures/metrics used are (a) annualimprovement in economic proÑt and (b) annual growth in sales. SpeciÑc economic proÑt and sales growth targets areestablished at the beginning of each year within a performance cycle and a ""Business Performance Matrix'' isdeveloped. The LRIP ""Business Performance Matrix'' is a table that outlines speciÑc award payout factors to be usedfor speciÑc achievements against the established performance goals. The LRIP Business Performance Factors can rangefrom 0% (for performance below threshold) to 200% (for maximum performance). At the conclusion of each year,the performance against the LRIP business performance targets is measured and recorded. At the conclusion of thecycle, the three recorded annual performance results are averaged together to determine the LRIP cycle's baselineaward. Motorola's total shareholder return is then measured among its peer comparator group to determine if the fullLRIP cycle award will be paid. Additionally, each participant's individual performance will be taken into account indetermining the Ñnal LRIP award on a negative discretion basis onlyÌno participant's individual award can be greaterthan their formula-driven award. The Ñnal LRIP award, if any, is paid in Common Stock.

Award targets are between 50% and 250% of cycle-start base salary. The Compensation and Leadership Committeedetermines targets for the Chairman and CEO and other executive oÇcers. The CEO determines targets for otherparticipants.

(2) All the payments shown are potential assumed amounts. There is no assurance that the Company will achieve resultsthat would lead to payments under LRIP or that any payments will be made under this plan.

(3) These Ñgures were calculated using the January 1, 2005 annualized base salary for each participating executive oÇcer.

(4) If the speciÑed performance targets are met, an award payment would be made under LRIP. For each individual, this""target'' payment is 50% of the maximum award under LRIP.

32 PROXY STATEMENT

RETIREMENT PLANS A participant's beneÑts derived solely under thePortable Plan and Supplemental Plan are calculatedThe Motorola, Inc. Pension Plan (the ""Pensionbased on an employee's length of service and thePlan'') and either the Motorola Supplemental Pen-average plan compensation (base pay) for the Ñvesion Plan (the ""Supplemental Plan'') or the Motor-years of highest pay during the last ten years ofola Elected OÇcers Supplementary Retirement Planemployment with the Company. The estimated(the ""SRP Plan'') are intended to provide pensionannual pension beneÑts payable at age 65 arebeneÑts to the named executive oÇcers in thecomputed as a single life annuity and are not oÅsetfuture. Prior to January 1, 2005, most regular U.S.by Social Security beneÑts.employees who had completed one year of employ-

ment with the Company or certain of its subsidiarieswere eligible to participate in one or more of the Mr. Garriques' BeneÑtCompany's pension plans. They become vested after

Mr. Garriques' Pension Plan beneÑt is calcu-Ñve years of service. Normal retirement is at age 65.lated exclusively under the Traditional Plan. ThatEÅective January 1, 2005, newly-hired employees areformula essentially consists of (i) for service fromnot eligible to participate in the Pension Plan or the1978 through 1987, the sum of 40% of the ÑrstSupplemental Plan.$20,000 of average plan compensation, plus 35% of

The Pension Plan contains two beneÑt formu- average plan compensation in excess of $20,000,las, referred to as the Traditional Plan and the multiplied by a fraction whose numerator is thePortable Plan. Because they started their eligible number of his months of service during that periodemployment with the Company after July 1, 1999, and whose denominator is 420, plus (ii) for serviceMessrs. Zander, Devonshire and Brown are auto- in 1988 and after, 75% of average plan compensa-matically covered exclusively under the Portable tion, multiplied by a fraction whose numerator isPlan. Mr. Garriques made a one-time election to the number of months of his service on and afterhave his Pension Plan beneÑt calculated under the January 1, 1988 (not exceeding 420) and whoseTraditional Plan. Mr. Nemcek elected to have his denominator is 420, minus (iii) 50% of his SocialPension Plan beneÑt calculated under the Tradi- Security BeneÑt (as deÑned) multiplied by a fractiontional Plan with respect to service and compensa- whose numerator is the number of months of histion prior to July 1, 2000, and under the Portable service on and after January 1, 1978 (not exceedingPlan with respect to service and compensation on 420) and whose denominator is 420.and after July 1, 2000.

Based on his average plan compensation atPortable Plan Table December 31, 2005, the estimated annual beneÑt

payable upon retirement at normal retirement ageThe following table provides the estimatedfrom the Pension Plan, as supplemented pursuant toannual pension beneÑt payable at age 65, normalthe Supplemental Plan, for Mr. Garriquesretirement date, as of December 31, 2005 under theis $921,688.Portable Plan and the Supplemental Plan for

Messrs. Zander, Devonshire and Brown. The esti-mated annual Portable Plan pension beneÑts are Mr. Nemcek's BeneÑtshown for various rates of Ñnal average base salaryand years of service. The Traditional Plan portion of Mr. Nemcek's

Pension Plan beneÑt is calculated in the sameYEARS OF SERVICEmanner as Mr. Garriques' Pension Plan beneÑtREMUNERATION 5 10 15 20described above, but without taking into account

$400,000 $ 6,600 $14,851 $24,751 $ 36,301 his service or compensation earned on or after$500,000 $ 8,250 $18,563 $30,939 $ 45,377 July 1, 2000. The Portable Plan portion of$600,000 $ 9,900 $22,276 $37,126 $ 54,452 Mr. Nemcek's Pension Plan beneÑt is based on the

""Portable Plan Table'' above with respect to his$700,000 $11,550 $25,988 $43,314 $ 63,527years of service and compensation after July 1, 2000$800,000 $13,200 $29,701 $49,502 $ 72,603that are counted for beneÑt calculation purposes.

$900,000 $14,851 $33,414 $55,689 $ 81,678

$1,000,000 $16,501 $37,126 $61,877 $ 90,753 Based on his salary level at December 31, 2005,$1,100,000 $18,151 $40,839 $68,065 $ 99,829 and the average of the highest annual incentive

awards paid for Ñve years out of the last eight years,$1,200,000 $19,801 $44,552 $74,253 $108,904the estimated annual beneÑt payable upon retire-$1,300,000 $21,451 $48,264 $80,440 $117,979ment at normal retirement age from the Pension

$1,400,000 $23,101 $51,977 $86,628 $127,055 Plan, as supplemented pursuant to the SRP Plan, for$1,500,000 $24,751 $55,689 $92,816 $136,130 Mr. Nemcek is $420,000.

33PROXY STATEMENT

Credited Compensation and Years of Service maximum of 70% of that oÇcer's base salary priorto retirement. If the oÇcer is vested and retires at

The following table provides the compensation or after age 55 but prior to age 60, he or she maycovered and credited years of service under the elect to receive a deferred unreduced beneÑt whenPension Plan and the Supplemental Plan (or the he or she attains age 60, or an actuarially reducedPension Plan and the SRP Plan, below, in the case beneÑt at or after age 57, contingent upon enteringof Mr. Nemcek). into an agreement not to compete with the Com-

Compensation pany. If a change in control (as deÑned) of theCovered by Credited Company occurs, the right of each non-vestedName Plans Service

elected oÇcer to receive supplementary paymentsEdward J. Zander $1,500,000 2 years will become vested on the date of such change in

0 monthscontrol and unreduced payments may begin or be

David W. Devonshire $ 625,000 3 years made upon retirement at or after age 55.10 months

Ronald G. Garriques $ 586,538 19 years Mr. Nemcek is vested in his SRP Plan beneÑt.7 months At the time of vesting, the Company makes a

Gregory Q. Brown $ 586,538 3 years contribution to the trust for that plan. The purpose0 months of that contribution is to enable the trust to make

Adrian R. Nemcek $ 593,269 28 years payments of the beneÑts under the SRP Plan due to0 months

the participant after retirement. Federal and statetax laws require that the participant include in

Elected OÇcers Supplementary Retirement Plan income the amount of any contribution in the yearit was made even though the participant receives no

The Company also maintains the SRP Plan forcash in connection with such contribution or any

certain elected oÇcers. Since January 1, 2000, nopayments from the retirement plan. Because the

additional oÇcers are eligible for participation in theparticipant receives no cash yet incurs a signiÑcant

SRP Plan. Mr. Nemcek participates in the SRP Plan.income tax liability, the Company believes that it is

Messrs. Zander, Devonshire, Brown and Garriquesappropriate to reimburse the participant so that he

do not participate in the SRP Plan. The SRP Planor she is not paying additional taxes as a result of a

provides that if the beneÑt payable annually (com-contribution. Mr. Nemcek was reimbursed for such

puted on a single life annuity basis) to anya tax liability in 2002. This is the Company's policy

participating oÇcer under one of the Company'swith respect to all participants in the SRP Plan.

pension plans (which is based on a percentage ofÑnal average earnings for each year of service) is

EMPLOYMENT CONTRACTS, TERMINATIONless than the beneÑt calculated under the SRP Plan,OF EMPLOYMENT AND CHANGE INthat oÇcer will receive supplementary paymentsCONTROL ARRANGEMENTSupon retirement.

Employment Agreement with Edward J. ZanderGenerally, the total annual payments to anoÇcer participating in the SRP Plan will equal a On December 15, 2003, the Company enteredpercentage of the sum of such oÇcer's rate of salary into an employment agreement with Mr. Zander,at retirement plus an amount equal to the highest eÅective as of January 5, 2004. The agreement hasaverage of the annual bonus awards paid to such an initial term of Ñve years but, commencing onoÇcer for any Ñve years within the last eight years January 5, 2008, the term will be extended for onepreceding retirement. Such percentage ranges from year on each anniversary of the eÅective date of the40% to 45%, depending upon the oÇcer's years of agreement unless either party delivers notice to theservice and other factors. Under an alternate other party of its intention not to extend the term.formula, the total annual payments to such oÇcer During the term, Mr. Zander will serve as Chieffrom both plans will equal the amount of the Executive OÇcer of the Company, with such dutiesoÇcer's retirement beneÑt calculated under the and responsibilities as are commensurate with theterms of the pension plan in which he participates, position, and reports directly to our Board ofwithout regard to the limitation on considered Directors. Mr. Zander will also serve as Chairmancompensation under qualiÑed retirement plans in of our Board of Directors.Section 417 of the Internal Revenue Code, asamended (the ""Code''), or the technical beneÑts During the term, Mr. Zander will be paid anlimitation in Section 415 of the Code. However, the annual base salary of not less than $1.5 million. Thetotal annual pension payable on the basis of a single base salary will be reviewed for increase commencinglife annuity to any named executive oÇcer from the at such times as the Compensation and Leadershipapplicable pension plan and SRP Plan is subject to a Committee reviews the salaries of senior executives

34 PROXY STATEMENT

generally. For each fiscal year completed during the 2005, the Board reduced this requirement to 75,000term, Mr. Zander will also be eligible to receive shares, all which have been purchased byannual cash bonuses based upon performance targets Mr. Zander.established by the Compensation and LeadershipCommittee, but in no event will his annual target On January 5, 2004, pursuant to his employ-bonus be less than 135% of his annual base salary. ment agreement, we granted Mr. Zander an option

to purchase 1,508,760* shares of Common StockAs provided in his employment agreement,with a per share exercise price of $12.97*. TheMr. Zander deferred receipt of his 2004 annualstock option has a term of 10 years and vests inbonus of $4 million until after his date of termina-four equal annual installments commencing ontion of employment (but no later than January 1 ofJanuary 5, 2005, subject to Mr. Zander's continuedthe year following termination) or, if earlier, theemployment with us through each such date. InÑrst day on which the deductibility of this compen-addition, on January 5, 2004, we grantedsation by us is no longer precluded by the provi-Mr. Zander 400,000 restricted stock units based onsions of Section 162(m) of the Code.shares of our Common Stock, 50% of which vestedon January 5, 2006 and the remainder of which willFor each multi-year period completed duringvest on January 5, 2008, subject to Mr. Zander'sthe term of his employment, Mr. Zander will alsocontinued employment with us through such date.be eligible to receive an award under our Mid-Mr. Zander has agreed to defer settlement of theRange Incentive Plan based upon performancerestricted stock units until after his date of termina-targets established by the Compensation and Lead-tion of employment (but no later than January 1 ofership Committee, but in no event will his targetthe year following termination) or, if earlier, theaward be less than 250% of his annual base salary.Ñrst day on which the deductibility of this compen-During the term, he is also eligible to participate insation by us is no longer precluded by the provi-all long-term incentive plans, qualiÑed pension planssions of Section 162(m) of the Code.and health and welfare, perquisite, fringe beneÑt and

other arrangements generally available to othersenior executives, including reasonable use of Com- Pursuant to his employment agreement and inpany aircraft for personal (not less than 100 hours connection with the Company's broad-based annualannually for personal use) and business purposes, stock option grant, on May 4, 2004, we grantedtransition housing and a home security system. Mr. Zander an option to purchase 1,061,720*

shares of Common Stock with a per share exerciseMr. Zander receives change in control beneÑts price of $16.30*. The stock option has a term of

under our Senior OÇcer Change in Control Sever- 10 years and vests in four equal annual installmentsance Plan or any successor change in control plan commencing on May 4, 2005, subject toor program. If we no longer maintain the Senior Mr. Zander's continued employment with usOÇcer Change in Control Severance Plan, we will through each such date. In addition, on May 4,provide Mr. Zander with no less favorable beneÑts 2004, we granted Mr. Zander 109,770 restrictedand protection under an alternative program or stock units based on shares of our Common Stock,arrangement. In addition, upon a change in control of which 10% vested on May 4, 2005, 20% will vestof the Company, all equity-based awards granted to on May 4, 2006, 30% will vest on May 4, 2007 andMr. Zander will become fully vested and exercisa- the remaining 40% will vest on May 4, 2008,ble, all performance goals will be deemed achieved subject to Mr. Zander's continued employment withat target levels, all performance stock will be us through each such date. Mr. Zander has agreeddelivered as promptly as practicable and all per- to defer settlement of the restricted stock units untilformance units, restricted stock units and other after his date of termination of employment (butincentive awards will be paid out as promptly as no later than the January 1 of the year followingpracticable. If we adopt an equity incentive plan or termination) or, if earlier, the Ñrst day on which thea severance plan for senior executives with change deductibility of this compensation by us is noin control beneÑts more generous than the beneÑts longer precluded by the provisions of Sec-provided to Mr. Zander under his employment tion 162(m) of the Code.agreement, Mr. Zander will be entitled to thosebeneÑts.

In connection with the replacement of out-Mr. Zander agreed to purchase 100,000 shares standing amounts at his former employer that were

of Common Stock on or prior to July 31, 2005. In forfeited by Mr. Zander, on January 5, 2004, we

*All references to the number of shares and exercise price of stock option grants in this section reÖect the adjustments made onDecember 2, 2004 in connection with the spin-oÅ of Freescale Semiconductor.

35PROXY STATEMENT

paid Mr. Zander a lump sum cash payment of compensation advisors regularly used by the Com-$600,000 and granted Mr. Zander 93,024 restricted pensation and Leadership Committee and the Com-shares of our Common Stock. The restrictions with pany to develop the compensation package.respect to these share of restricted stock lapsed on Comparator data from similarly-sized companies andJanuary 5, 2006. companies in our industries was gathered and

analyzed in determining the compensation package.If Mr. Zander's employment is terminated by

us, except for cause, death or disability, or if heSeverance Agreement with David W. Devonshireresigns for good reason (as deÑned in his agree-

ment), he would be eligible to receive: (1) a cash In March 2002, the Company entered intopayment equal to the sum of his unpaid annual base compensation arrangements with David Devonshiresalary and any accrued vacation pay through the as an incentive for him to join the Company asdate of termination, outstanding reimbursable busi- Chief Financial OÇcer. Pursuant to the compensa-ness expenses and his annual cash bonus for the tion arrangements, if Mr. Devonshire is terminatedyear preceding the date of termination of employ- without cause, Motorola has agreed to pay himment (if not previously paid); (2) a cash payment severance equal to one year's base salary plus hisequal to two times the sum of his annual base targeted incentive payout.salary and his target bonus (currently, this paymentwould be $7,050,000); (3) continued medical and

Change in Control Arrangementslife insurance beneÑts for two years following thedate of termination, and (4) continued vesting in The Company has Change in Control Severanceany stock options, restricted stock, performance Plans (the ""Plans'') for its elected oÇcers. The Planshares and any other stock-based long term incen- applicable to the named executive oÇcers is thetive compensation awards held by Mr. Zander Motorola, Inc. Senior OÇcer Change in Controlpursuant to their original vesting schedule and Severance Plan (the ""Senior OÇcer Plan''). Thecontinued exercisability of any stock options until Senior OÇcer Plan provides for the payment of18 months after the earlier of: (a) the later of beneÑts in the event that: (i) an executive oÇcer(i) the vesting date, or (ii) date of termination of terminates his or her employment for ""good rea-employment or (b) the expiration of the scheduled son'' (as deÑned) within two years of a change inoption term, subject to Mr. Zander's continued control, or (ii) the executive oÇcer's employment iscompliance with the restrictive covenants described terminated for any reason other than terminationbelow. Mr. Zander was entitled to reimbursement for ""good cause'' (as deÑned), disability, death orfor all reasonable legal fees and expenses reasonably normal retirement within two years of a change inincurred by him in connection with the negotiation control of the Company. In addition to unpaidand preparation of the agreement, subject to a salary for accrued vacation days and accrued salarymaximum of $50,000 and we will reimburse him for and annual bonus through the termination date, theall legal costs and expenses reasonably incurred by amount of the beneÑts payable to an executivehim in connection with any dispute under the oÇcer entitled thereto would be equal to the sumagreement so long as he prevails in such dispute on of: (i) three times the greater of the executiveat least one material claim. oÇcer's highest annual base salary in eÅect during

the three years immediately preceding the change inMr. Zander has agreed not to use or disclosecontrol and the annual base salary in eÅect on theany conÑdential information during or following histermination date; (ii) three times the highest annualtermination of employment with us. In addition,bonus received by the executive oÇcer during theduring his employment and for a period of twoimmediately preceding Ñve Ñscal years ending on oryears thereafter, Mr. Zander has agreed not tobefore the termination date; and (iii) a pro ratasolicit our employees, compete with our business ortarget bonus for the year of termination. Thesolicit our customers and has further agreed that,executive oÇcer would also receive continued medi-during and after his employment with us, he willcal and insurance beneÑts for 3 years, and 3 years ofassist us in the defense of any claims or potentialage and service credit for retiree medical eligibility.claims against us.In the event the executive oÇcer is subject to the

The agreement was approved by the Board of excise of tax under Section 4999 of the Code, theDirectors, based in part on the recommendation of Company will make a tax reimbursement paymentthe Compensation and Leadership Committee and to the executive oÇcer to oÅset the impact of suchthe Search Committee (a committee formed in 2003 excise tax. The Senior OÇcer Plan's term is forto facilitate the search for a Company Chairman 3 years, subject to automatic one-year extensionsand CEO). The Search Committee hired its own unless the Company gives 90 days prior notice thatCEO compensation advisors who worked with the it does not wish to extend. In addition, if a change

36 PROXY STATEMENT

in control occurs during the term, the Plans copy of the Committee's charter is available atcontinue for an additional two years. These Plans www.motorola.com/investor.replaced individual agreements that the Company

The Committee meets at scheduled times dur-began providing in 1988. In addition to plansing the year and met Ñve times during 2005, and itcovering all of the Company's oÇcers, the generalalso considers and takes action by written consent.employee population is covered by a change inThe Committee Chair reports on Committee actionscontrol severance plan.and recommendations at Board meetings.

The following ""Report of Compensation andThe Global Rewards department in Motorola'sLeadership Committee on Executive Compensa-

Human Resources organization supports the Com-tion'', ""Report of Audit and Legal Committee'' andmittee in its work and, in some cases, acts pursuant""Performance Graphs'' and related disclosure shallto delegated authority from the Committee to fulÑllnot be deemed incorporated by reference by anyvarious functions in administering Motorola's com-general statement incorporating this proxy state-pensation programs.ment into any Ñling under the Securities Act of

1933 (the ""Securities Act'') or under the SecuritiesIn carrying out its duties, the Committee hasExchange Act of 1934 (the ""Exchange Act''),

direct access to outside advisers, independent com-except to the extent that the Company speciÑcallypensation consultants and others to assist theincorporates this information by reference, and shallCommittee. During 2005, the Committee directlynot otherwise be deemed Ñled under such Acts.engaged an outside compensation consulting Ñrm toassist the Committee in its review of the compensa-tion for Motorola's executive oÇcers. The results of

REPORT OF COMPENSATION AND LEADER- this independent review are highlighted later in thisSHIP COMMITTEE ON EXECUTIVE report.COMPENSATION

Membership of the Compensation and General Compensation PhilosophyLeadership Committee

Motorola's general compensation philosophy isThroughout 2005, Director Samuel C. Scott IIIto provide world-class reward strategies and pro-was the Committee's Chair and Directors Indra K.grams that attract, retain and motivate the bestNooyi and Ron Sommer served on the Committee.people, producing outstanding business performanceDirector James R. Stengel was elected to theand shareholder value.Committee by the Board on July 27, 2005.

As a result, the Company strives to provide aDuring 2005, the Committee was comprisedtotal compensation package that is competitive withsolely of non-employee directors who were each:the prevailing practices for the industry and coun-(i) independent as deÑned under the NYSE listingtries in which it operates, allowing for abovestandards and the Motorola, Inc. Director Indepen-average total compensation when justiÑed by indi-dence Guidelines, (ii) a non-employee director forvidual performance and business results.purposes of Rule 16b-3 of the Exchange Act, and

(iii) an outside director for purposes of Sec-Executive Compensation Guiding Principlestion 162(m) of the Code. During 2006, the Com-

mittee will be comprised of directors who meetThe Company's general compensation philoso-these same standards.

phy is further guided by the following principlesspeciÑc to its executives:Purposes of the Compensation and

‚ A strong link between pay and perform-Leadership CommitteeanceÌboth at the Company and the individ-

The Compensation and Leadership Committee ual level.is appointed by the Board for the primary purposes ‚ When Motorola has outstanding perform-of overseeing the programs under which compensa- ance, total target compensation can betion is paid or awarded to Motorola's executives above the prevailing market medianÌcor-and evaluating the performance of Motorola's se- relating with the level of success achieved.nior management. The speciÑc functions of the ‚ Strongly diÅerentiated pay for high per-Committee are described in this proxy statement formers proportional to their contributionsunder ""What are the Functions of the Compensa- to Motorola's success.tion and Leadership Committee?'' and in the Com- ‚ Executives aligning with stockholders andmittee's charter, which the Committee and the managing from the perspective of ownersBoard periodically review and revise as necessary. A with a meaningful equity stake in Motorola.

37PROXY STATEMENT

‚ A competitive total rewards package that will plan that was initiated in January 2002 and appliesenable the Company to attract and motivate to every employee in the Company (excluding thosehigh-performing talent and that is strongly employees participating in a sales incentive plan).competitive with other large-cap, high-tech

The MIP incentive formula has the followingcompanies.components:‚ Retain high performers through meaningful

Performance Factorswealth creation opportunities.‚ A simple and cost-eÇcient program design. Eligible Individual Business Individual • MIP Award

Earnings £ Incentive £ Performance £ Performance‚ Tools to achieve success provided by Motor-Target Factor Factorola, but signiÑcant individual responsibility

and accountability. The MIP ""Individual Incentive Targets'' arebased on market-competitive data and are estab-

Comparator Group lished as a percentage of eligible earnings (generallybase salary). Each year, the Committee designates

The Company's rewards program structure is target levels for Motorola executives. Overall, andcompared to a benchmark competitive peer group. for the last several years, MIP Incentive Targets forIn the United States, the Company's peer group each position are targeted, on average, between theconsists of 17 large-cap, high-tech companies* that, 50th percentile and 65th percentile of similar posi-in the aggregate, the Committee believes fairly tions in the peer group. For 2005, the Individualrepresent the Motorola portfolio of businesses and Incentive Targets for Motorola executives generallywith which the Company competes for executive ranged from 45% (for appointed vice presidents) totalent. Outside of the United States, the same peer 135% (for the CEO) of base salary. The Committeegroup companies are compared unless other, more also reviews target levels for all other non-executivecompelling, competitors for executive talent are participants.present.

The MIP ""Business Performance Factor'' fo-cuses on operating earnings, operating cash Öow,Components of Motorola's Compensationrevenue growth and three quality-speciÑc measures:Programcustomer satisfaction, reliability and cost of poor

Motorola's compensation program consists of quality. Each year, Business Performance Factor(1) base salary, (2) short-term incentivesÌnamely targets are established for the Company and forthe annual Motorola Incentive Plan, (3) long-term each of its major businesses. While most employeesincentivesÌnamely, the Mid-Range Incentive Plan receive rewards based on business performance of(discontinued as of December 31, 2005), the their particular business (and its correspondingLong-Range Incentive Plan, and equity, and Business Performance Factor), the award for all(4) beneÑts and perquisites. Motorola executives (including the executives

named in the Summary Compensation Table) have(1) Base Salary a signiÑcant portion of their award (100% for

Motorola's senior business leaders and 50% for allOverall, and for the last several years, base

other Motorola executives and senior managers)salary levels for each position are targeted, on

based on the overall Motorola Business Perform-average, at the 50th percentile of similar positions in

ance Factor.the peer group. Some variation above and below thecompetitive median is allowed when, in the judg- Motorola's 2005 business performance sur-ment of management and/or the Committee, as passed the performance objectives set forth in theappropriate, the value of the individual's experience, targeted 2005 MIP Business Performance Factor. Asperformance and speciÑc skill set justiÑes variation. a result, the formula-driven 2005 MIP awardsIn this way, competitively superior pay goes to those (based on 2005 business results) were appropriatelywho earn it. As a result, the greatest retention value above the established target award level.has been invested in the strongest performers.

The MIP ""Individual Performance Factor''modiÑes the formula-driven award (business results)(2) Short-Term Incentivesaccording to an individual's contribution to the

The Motorola Incentive Plan (""MIP'') is a Company's success. Individual Performance Factorcash-based, pay-for-performance annual incentive multipliers range from 0% to 130%, demonstrating

*In 2005, the peer group consisted of the following companies: Cisco Systems, Dell, EDS, EMC, Ericsson, Hewlett-Packard, IBM,Intel, Lucent Technologies, Microsoft, Nokia, Nortel Networks, Oracle, Qualcomm, ScientiÑc-Atlanta, Sun Microsystems and TexasInstruments. In 2006, Apple Computer will be added to the comparator group.

38 PROXY STATEMENT

the Company's commitment to diÅerentiating re- MRIP awards are based on: (1) cumulativewards based on business and individual improvement in Economic ProÑt over a two-yearperformance. performance period, and (2) Cumulative Growth in

Sales over a two-year performance period. Bycombining these measures, MRIP emphasizes the(3) Long-term Incentivesimportance of balancing growth and proÑtability.While MRIP is not directly tied to stock prices, theMotorola's long-term incentive programs in-progress made against these two measures shouldclude the Mid-Range Incentive Plan (discontinuedequate to value created for shareholders.on December 31, 2005), the Long-Range Incentive

Plan (replaced the Mid-Range Incentive Plan) andEconomic ProÑt is deÑned as: Net Operatingequity (stock options and limited and selective use

ProÑt (after taxes) minus Capital ChargeÌwhereof restricted stock or restricted stock units). Over-Capital Charge is equal to the average of investedall, and for the last several years, long-term incen-capital at the beginning and the end of each year,tive levels for each position are targeted on average,multiplied by the cost of capital.at the 65th percentile of similar positions in the peer

group. Cumulative Growth in Sales is equal to thepercent change in sales from the beginning of theperformance period to the end of the performanceMid-Range Incentive Planperiod.

The Motorola Mid-Range Incentive PlanSpeciÑc Economic ProÑt and sales growth(""MRIP'') is a cash-based, pay-for-performance

targets are established at the beginning of a per-multi-year incentive plan that was implemented informance cycle. MRIP awards are based on per-January 2003. The initial two-year cycle started onformance against the established targets.January 1, 2003 and concluded on December 31,

2004. A Ñnal two-year cycle started on January 1,The MRIP ""Business Performance Matrix'' is a2004 and concluded on December 31, 2005. There

table that outlines speciÑc Business Performancewill not be any additional performance cycles underFactors to be used for speciÑc achievements againstthe Motorola Mid-Range Incentive Plan. The Mo-the established Economic ProÑt improvement andtorola Long-Range Incentive Plan (""LRIP''Ìde-sales growth targets. The MRIP Business Perform-scribed below) replaced MRIP with the inauguralance Factors can range from 0% (for performancecycle starting on January 1, 2005.below threshold) to 200% (for maximumperformance).Participation in MRIP is limited to Motorola's

senior and executive vice presidents (approximately Motorola's 2004 and 2005 business perform-50 participants, including the executives named in ance signiÑcantly surpassed the targeted two-yearthe Summary Compensation Table). Motorola's cumulative improvement in Economic ProÑt and theChief Executive OÇcer, Mr. Edward J. Zander, did targeted two-year Cumulative Growth in Sales per-not participate in the January 1, 2003-December 31, formance objectives set forth in the 2004-20052004 MRIP cycle. Mr. Zander did participate in the MRIP cycle. As a result, the formula-driven 2004-January 1, 2004-December 31, 2005 MRIP cycle. 2005 MRIP awards (based on business results)

were appropriately above the target award level.The MRIP incentive formula has the followingvariables:

Long-Range Incentive PlanMRIP Business

Performance MatrixThe Motorola Long-Range Incentive Plan

Base Salary Individual Cumulative Cumulative • MRIP Award (""LRIP'') is a Motorola stock-based, pay-for-per-at Cycle £ Incentive £ Improvement AND Growth in

formance, multi-year incentive plan that was imple-Start Target in Economic SalesProÑt mented in January 2005. The initial three-year cycle

started on January 1, 2005 and will conclude onThe MRIP ""Individual Incentive Targets'' are December 31, 2007. A second three-year cycle will

based on market-competitive data and are estab- start on January 1, 2006 and will conclude onlished as a percentage of base salary at the start of December 31, 2008, if such cycle is approved by thethe performance cycle. The Committee designates Board.target levels for all MRIP participants. The Individ-ual Incentive Targets ranged from 75% to 250% of Participation in LRIP is limited to Motorola'scycle-start base salary. The MRIP Individual Incen- elected oÇcersÌincluding all corporate, senior andtive Targets are diÅerent than the individual incen- executive vice presidents (approximately 135 partici-tive targets set under MIP. pants, including the executives named in the Sum-

39PROXY STATEMENT

mary Compensation Table). Motorola's Chief Exec- ual year within the LRIP cycle to the end of thatutive OÇcer, Mr. Edward J. Zander, is participating individual year.in the 2005-2007 LRIP cycle and is expected to

SpeciÑc Economic ProÑt and Annual Growth inparticipate in the 2006-2008 LRIP cycle if such aSales targets are established at the beginning of eachcycle is approved by the Board.year within a performance cycle and a ""BusinessPerformance Matrix'' is developed. The LRIP ""Busi-LRIP is a three-year plan that has Ñnancialness Performance Matrix'' is a table that outlinestargets set annually. Annual performance against thespeciÑc Business Performance Factors to be used forestablished Ñnancial targets is averaged to determinespeciÑc achievements against the established Eco-the overall cycle's award. Motorola's total share-nomic ProÑt improvement and sales growth targets.holder return is then measured among its peerThe LRIP Business Performance Factors can rangecomparator group to determine if the full LRIPfrom 0% (for performance below threshold) tocycle award will be paid. Additionally, each partici-200% (for maximum performance).pant's individual performance will be taken into

account in determining the Ñnal LRIP award on aAt the conclusion of each year, the perform-negative discretion basis onlyÌno participant's indi-

ance against the LRIP business performance targetsvidual award can be greater than their formulais measured and recorded.driven award. The Ñnal LRIP award, if any, is paid

in Motorola common stock. Step 2: Average the recorded annual perform-ance results to determine the foundation of the

The LRIP incentive formula has the followingLRIP award.

variables:

The three recorded annual performance resultsBase Salary Individual £ LRIP Business • LRIP Awardare averaged together to determine the LRIP cycle'sat Cycle £ Incentive Performance Factor

Start Target baseline award.

The LRIP ""Individual Incentive Targets'' are Step 3: Measure Motorola's three-year totalbased on market-competitive data and are estab- shareholder return compared with the establishedlished as a percentage of base salary at the start of comparator company group to determine the Ñnalthe performance cycle. The Committee designates Business Performance Factor to be used for thetarget levels for all LRIP participants. The Individual LRIP cycle.Incentive Targets ranged from 50% to 250% of

In order for a full LRIP award to be paid,cycle-start base salary. The LRIP Individual Incen-Motorola's three-year total shareholder return musttive Targets are diÅerent than the individual incen-exceed the average total shareholder return of thetive targets set under MIP.established peer-group competitors (see Compara-

The LRIP Business Performance Factor is cal- tor Group above). For LRIP purposes, total share-culated as a result of the following three-step holder return is calculated as follows:process:

Ending share price(200-day average through last day of cycle)Step 1: Establish performance targets and re-

° Value of reinvested dividendscord performance results annually.• Total ending value

Ì Beginning share priceLRIP awards are based on: (1) Annual Im-(200-day average through Ñrst day of cycle)provement in Economic ProÑt, and (2) Annual

• Total value createdGrowth in Sales. By combining these measures,§ Beginning share priceLRIP emphasizes the importance of balancing

(200-day average through Ñrst day of cycle)growth and proÑtability. While LRIP is not directly• Total shareholder returntied to stock prices, the progress made against these

two measures should equate to value created forIf Motorola's three-year total shareholder re-shareholders.

turn is equal to or above the 50th percentile of theEconomic ProÑt is deÑned as: Net Operating comparator group, then the full LRIP business

ProÑt (after taxes) minus Capital ChargeÌwhere, performance factor is applied.Capital Charge is equal to the average of invested

If Motorola's three-year total shareholder re-capital at the beginning and the end of each year,turn is below the 50th percentile but above the 35thmultiplied by the cost of capital.percentile of the comparator group, then a 25%

Annual Growth in Sales is equal to the percent reduction in the LRIP business performance factorchange in sales from the beginning of each individ- is applied.

40 PROXY STATEMENT

If Motorola's three-year total shareholder re- ‚ Supplemental Executive AD&D/Travel Ac-turn is below the 35th percentile of the comparator cident Insurance coverage ended on De-group, then a 50% reduction in the LRIP business cember 31, 2004.performance factor is applied.

‚ Supplemental Executive Life Insurancecoverage ended on December 31, 2004The 2005-2007 LRIP cycle began on January 1,(with the exception of retired participants2005 and will conclude on December 31, 2007.and active participants who were age 55 orolder on January 1, 2005; these retired andEquityactive participants will continue to receivepost-retirement life insurance coverageTo reward and retain employees in a mannerequal to one times their salary atthat best aligns employees' interests with stockhold-retirement).ers' interests, Motorola uses stock options as its

primary long-term incentive vehicle. Management ‚ Executive Retirement BeneÑtsand the Committee believe that stock options alignemployees' interests precisely with those of other ‚ The Elected OÇcer Supplemental Retire-stockholders, because when the price of the stock ment Plan was closed to new participantsdeclines from the price at the grant date, the as of January 1, 2000. This supplementalemployee obtains no value. retirement plan provides an annual income

of up to 70% of salary at retirement orA wide range of managerial and individual disability based on certain eligibility and

contributors participate in the Company's stock vesting requirements. As of January 1,option plans. On May 3, 2005, the Committee 2006, there are 6 unvested ""grandfathered''granted stock options to approximately 24,000 participants in the plan. Of the oÇcersemployees as part of the Company's annual award named in the Summary Compensation Ta-of stock options. These options vest and become ble, only Mr. Nemcek participates in thisexercisable in four equal annual installments, with program.the Ñrst installment vesting May 3, 2006. The per

‚ Executive Perquisitesshare exercise price for the stock options is $15.47,the fair market value of Motorola common stock

‚ The U.S. Executive Vehicle Program endedon the date of the grant. The stock options expireon November 1, 2004.on May 3, 2015. Approximately 94% of the stock

options covered by the May 3, 2005 grant went to ‚ The U.S. Executive Home Security Pro-employees other than the executives named in the gram ended on December 31, 2004.Summary Compensation Table.

‚ First class air travel on Öights less than 6From time to time, Motorola also grants hours in duration ended on September 1,

restricted stock or restricted stock units to en- 2004.courage retention and reward performance. The

‚ An Executive Health Coaching beneÑt wasgranting of restricted stock or restricted stock unitsintroduced in 2005. This program providesis done on a limited and selective basis.Motorola executives with personal healthcoaching recommendations and encourage-

(4) Executive BeneÑts and Perquisites ment to reach exercise, weight manage-ment, nutrition, smoking cessation andSince 2000, the Committee and managementstress management goals.have sought to more closely align the Company's

total executive rewards programs with that of itsExecutive BeneÑts and Perquisites That Havelarge-cap high-tech peers. Overall, Motorola's phi-Not Changedlosophy is to pay between the 50th and 65th

percentile for total rewards for executive positions‚ The Motorola Management Deferred Com-

in this peer group given average business perform-pensation Plan has not been changed. This

ance but with substantially leveraged compensationprogram allows eligible executive participants

which is performance based. As a result, several(Motorola's elected oÇcers) the opportunity

signiÑcant changes in the Motorola executive bene-to defer taxes on their base salary and cash

Ñts and perquisites programs have taken place:incentive compensation. Motorola does notcontribute to this plan. The Motorola Man-Changes in BeneÑt and Perquisite Programsagement Deferred Compensation Plan is not

‚ Executive Welfare BeneÑts intended to provide for the payment of

41PROXY STATEMENT

above-market or preferential earnings (as Mr. Zander's compensation consists of basethese terms are deÑned under the regulations salary, awards from the Motorola Incentive Planof the Securities and Exchange Commission) (MIP), the Mid-Range Incentive Plan (MRIP) andon compensation deferred under the plan. the Long-Range Incentive Plan (LRIP), stock op-

tions, restricted stock or restricted stock units and‚ The Motorola Executive Financial Planning certain other beneÑts.

Program has not been changed. This programThe Committee studied the data gathered fromprovides Motorola executives with compre-

the 17-company peer group mentioned above tohensive Ñnancial planning assistance.assess the appropriate competitive compensation

‚ The Motorola Change-in-Control Program levels for Mr. Zander. Mr. Zander's compensationhas not been changed. This program provides levels are also governed by the employment agree-Motorola's elected oÇcers with severance ment entered into by the Company on Decem-beneÑt protection triggered in the event of a ber 15, 2003, eÅective January 5, 2004. Thechange in control of Motorola. employment agreement was approved by the Board,

based in part on the recommendation of theAll other beneÑts, including health care and otherCompensation and Leadership Committee and theinsurance programs, are the same for all eligibleSearch Committee (a committee formed in 2003 toemployees, including Motorola executives.facilitate the search for a Company Chairman andCEO). The Search Committee hired its own CEO

Stock Ownership Requirements compensation advisors who worked with the com-pensation advisors regularly used by the Compensa-Because the Committee believes in linking thetion and Leadership Committee and the Companyinterests of management and stockholders, theto develop the compensation package. ComparatorBoard requires Motorola's senior leadership teamdata from similarly-sized companies and companiesand all other senior and executive vice presidentsin our industries was gathered and analyzed in(approximately 45 executives) to maintain pre-determining the compensation package.scribed levels of Motorola stock ownership.

The Committee most recently determinedThe stock ownership guidelines set a minimumMr. Zander's compensation in February 2006, whenlevel of ownership of: Common Stock with a valueit determined MIP and MRIP plan awards for 2005equal to 4 times base salary for the CEO; the lesserand set compensation amounts for 2006. In deter-of Common Stock with a value equal to 3 timesmining Mr. Zander's 2006 compensation, the Com-base salary or 50,000 shares or units for executivemittee reviewed Mr. Zander's total remuneration,vice presidents; and the lesser of Common Stockincluding all aspects of Mr. Zander's total cashwith a value equal to 2 times base salary or 25,000compensation (base salary plus short-term incen-shares or units for senior vice presidents.tives) and long-term incentives from continuingemployment, Mr. Zander's outstanding equity grantsIndependent Consultant Review of Motorola(both stock options and restricted stock/restrictedSenior Leadership Team Compensationstock units), the value of Mr. Zander's deferredcompensation and retirement beneÑts and the valueIn 2005, the Committee engaged Mercerof Mr. Zander's health and wellness employeeHuman Resources Consulting to independently re-beneÑts and executive perquisites.view Motorola's Senior Leadership Team compensa-

tion. This study found that Motorola's currentexecutive compensation programs are fundamentally Mr. Zander's Base Salarycompetitive and sound.

Pursuant to the terms of his employmentThe Committee agreed with the Mercer study's agreement, Mr. Zander's annual salary for 2005 was

conclusions that no substantive revisions to the $1,500,000. In February 2006, the Committee de-compensation programs are required. cided, and the independent board members con-

curred, that Mr. Zander's base salary will not beincreased in 2006.CEO Compensation

Motorola's compensation program is designed Mr. Zander's 2005 MIP Awardto motivate outstanding corporate and businessperformance. This pay-for-performance program ex- Mr. Zander's target award under 2005 MIP wastends to all Motorola employees, including our $2,025,000 and is unchanged under 2006 MIP. ForChairman and Chief Executive OÇcer, Mr. Edward Mr. Zander's 2005 MIP award, the CommitteeJ. Zander. assessed performance based on the MIP ""Business

42 PROXY STATEMENT

Performance Factors'' (operating earnings, operating Mr. Zander's continued employment with Motorolacash Öow, revenue growth and three quality-speciÑc through each such date.measures: customer satisfaction, reliability and cost

On May 3, 2005, as part of the Company'sof poor quality) that comprise the formula forannual award of stock options, Mr. Zander wasawards under the plan. The Committee and thegranted options to purchase 750,000 shares ofBoard considered these results in addition to strate-Motorola common stock under the Motorola Om-gic and leadership accomplishments to decide onnibus Incentive Plan of 2003, with a per shareMr. Zander's 2005 MIP award.exercise price equal to $15.47, the fair market valueof Motorola common stock on the date of theBased on the assessment of performance againstgrant. The stock options have a term of 10 years2005 MIP Business Performance Factor targets andand will vest in four equal annual installmentson the assessment of Mr. Zander's performance incommencing May 3, 2006, subject to Mr. Zander's2005, the Committee decided upon, and the inde-continued employment with Motorola through eachpendent board members concurred in approving, asuch date.2005 MIP award of $3,000,000 (119% of the

formula-driven award).Mr. Zander's 2005 Restricted Stock and Re-stricted Stock UnitsMr. Zander's 2004-2005 MRIP Award

On May 3, 2005, in recognition of his perform-Mr. Zander's target award under MRIP for theance throughout 2004 and the Ñrst four months ofJanuary 1, 2004 - December 31, 2005 cycle was2005, Mr. Zander was granted 150,000 restricted$3,750,000. For this MRIP award, the Committeestock units based on shares of Motorola commonassessed performance based on the MRIP ""Businessstock under the Motorola Omnibus Incentive PlanPerformance Factors'' (two-year cumulative im-of 2003. Restrictions on 50% of these shares willprovement in economic proÑt and two-year cumula-lapse on November 3, 2007 and restrictions on thetive growth in sales performance) that comprise theremainder will lapse on May 3, 2010, subject toformula for awards under the plan.Mr. Zander's continued employment with Motorola

Motorola's 2004 and 2005 business perform- through each such date.ance signiÑcantly surpassed the targeted two-yearcumulative improvement in Economic ProÑt and the Mr. Zander's BeneÑts and Perquisitestargeted two-year Cumulative Growth in Sales per-

During the term of Mr. Zander's employmentformance objectives set forth in the January 1,agreement, Mr. Zander is eligible to participate in2004-December 31, 2005 MRIP cycle. Based onall long-term incentive plans, pension plans andthese results, the Committee decided upon, and thehealth and welfare, perquisite and other arrange-independent board members concurred in approv-ments generally available to other senior executives.ing, a 2004-2005 MRIP award of $7,500,000 (100%He is also entitled to reasonable use of Companyof the formula-driven award).aircraft for personal and business purposes.

As described earlier in this report, the MRIPprogram was discontinued with the conclusion of Mr. Zander's Severance BeneÑts Associatedthe 2004-2005 cycle. The Motorola Long-Range with a Change in ControlIncentive Plan (LRIP) replaced MRIP with the

Mr. Zander will receive change in controlinaugural cycle starting on January 1, 2005.beneÑts under our Senior OÇcer Change in ControlMr. Zander's January 1, 2005-December 31, 2007Severance Plan, or any successor change in controlLRIP target award is $3,750,000.plan or program. If we no longer maintain theSenior OÇcer Change in Control Severance Plan, weMr. Zander's 2005 Stock Optionswill provide Mr. Zander with no less favorable

On February 14, 2005, in recognition of his beneÑts and protection under an alternative programperformance throughout 2004, Mr. Zander was or arrangement. In addition, upon a change ingranted an option to purchase 300,000 shares of control of the Company, all equity-based awardsMotorola common stock under the Motorola Om- granted to Mr. Zander will become fully vested andnibus Incentive Plan of 2003, with a per share exercisable, all performance goals will be deemedexercise price equal to $15.91, the fair market value achieved at target levels, all performance stock willof Motorola common stock on the date of the be delivered as promptly as practicable and allgrant. The stock options have a term of 10 years performance units, restricted stock units and otherand will vest in four equal annual installments incentive awards will be paid out as promptly ascommencing on February 14, 2006, subject to practicable. If we adopt an equity incentive plan or

43PROXY STATEMENT

a severance plan for senior executives with change agreement so long as he prevails in such dispute onin control beneÑts more generous than the beneÑts at least one material claim.provided to Mr. Zander under the agreement,Mr. Zander will be entitled to those beneÑts.

Mr. Zander's Stock Ownership Requirements

Mr. Zander's Severance BeneÑts Associated On July 27, 2005, the independent directors ofwith ""Not for Cause'' Termination the Board of Directors of the Company, in execu-

tive session, approved, eÅective July 27, 2005, anPer Mr. Zander's employment agreement, ifamendment to Mr. Zander's employment agreementMr. Zander's employment is terminated by us,reducing Mr. Zander's requirement to purchaseexcept for cause, death or disability, or if he resigns100,000 shares of Motorola common stock byfor good reason (as deÑned in his agreement), heJuly 31, 2005 to 75,000 shares for the followingwould be eligible to receive:reasons:

(1) a cash payment equal to the sum of his‚ Mr. Zander had already purchased 75,000unpaid annual base salary and any accrued

shares and at that time held an additionalvacation pay through the date of termina-758,637 shares and share equivalents oftion, outstanding reimbursable business ex-Motorola restricted stock and Motorola re-penses and his annual cash bonus for thestricted stock units.year preceding his date of termination of

employment (if not previously paid);‚ The Board believed that Mr. Zander's hold-

(2) a cash payment equal to two times the ings at that time of 833,637 shares and sharesum of his annual base salary and his equivalents fully aligned his interest with thattarget bonus (currently, this payment of the Company's shareholders and that thewould be $7,050,000); purchase of the remaining 25,000 shares by

July 31, 2005 was not necessary.(3) continued medical and life insurance bene-Ñts for two years following the date oftermination; and Section 162(m) of the Internal Revenue Code

(4) continued vesting in any stock options, Section 162(m) of the Internal Revenue Coderestricted stock, performance shares and limits the deductibility of certain items of compen-any other stock-based long term incentive sation paid to the Chief Executive OÇcer and tocompensation awards held by Mr. Zander each of the named executive oÇcers (the ""Coveredpursuant to their original vesting schedule Employees'') to $1,000,000 annually. The Commit-and continued exercisability of any stock tee has adopted or approved appropriate changes tooptions until 18 months after the earlier of the Company's short-term and long-term incentive

programs to provide for the deductibility of com-a. the later of (i) the vesting date orpensation paid to the Covered Employees under the(ii) date of termination of employmentplans. However, the Committee reserves the right toorprovide for compensation to the Covered Employ-

b. the expiration of the scheduled option ees that may not be deductible.term, subject to Mr. Zander's continuedcompliance with the restrictive cove- Overall, the Committee believes that the Mo-nants described in his employment torola's pay-for-performance based executive com-agreement. pensation is in the long-term interests of the

stockholders.Mr. Zander is entitled to reimbursement for all

reasonable legal fees and expenses reasonably in- Respectfully submitted,curred by him in connection with the negotiationand preparation of the agreement, subject to a Samuel C. Scott III, Chairmanmaximum of $50,000 and we will reimburse him for Indra K. Nooyiall legal costs and expenses reasonably incurred by Ron Sommerhim in connection with any dispute under the James R. Stengel

44 PROXY STATEMENT

AUDIT AND LEGAL COMMITTEE MATTERS ment. Outside of formal meetings Committee mem-bers had telephone calls to discuss importantReport of Audit and Legal Committeematters with management and the independent

The Audit and Legal Committee is comprised registered public accounting Ñrm. The Committeeof Ñve non-employee directors. Mr. Fuller, the also obtains a review, of the nature described inChair, and Mr. J. White served on the Committee Statement on Auditing Standards (SAS) No. 100,throughout 2005. Mr. Meredith joined the Commit- from the independent registered public accountingtee upon his election to the Board on January 31, Ñrm containing the results of their review of the2005. Ms. Lewent joined the Committee on May 3, interim Ñnancial statements.2005 and Mr. M. White joined the Committee on

Throughout the year, the Committee monitorsFebruary 13, 2006. The Committee operates pursu-matters related to the independence of KPMG LLPant to a written charter that was amended and(""KPMG''), the Company's independent registeredrestated by the Board as of February 13, 2006. Apublic accounting Ñrm. As part of its monitoringcopy of the Committee's current charter is availableactivities, the Committee reviews the relationshipsat www.motorola.com/investor and is also includedbetween the independent registered public account-herein as Appendix A.ing Ñrm and the Company. During 2005, theCommittee considered two independence mattersOn February 23, 2006, the Board determinedand concluded in both instances that KPMG'sthat each member of the Committee was indepen-independence was not compromised. During 2003, adent within the meaning of the NYSE listingKPMG oÇce outside the U.S. was retained tostandards, SEC rules and the Motorola, Inc. Direc-provide tax consultation services related to taxtor Independence Guidelines. The Board also deter-liabilities of a Motorola subsidiary in a foreignmined that each member of the Committee isjurisdiction. In connection with the matter, the""Ñnancially literate'' and has accounting or relatedpartners in the KPMG oÇce recommended a thirdÑnancial management expertise. The Board alsoparty consultant to assist Motorola with the matter.determined that H. Laurance Fuller, Judy Lewent,Motorola hired the consultant on a contingent feeTom Meredith and Miles White are ""audit commit-basis. During 2004, the tax services were completedtee Ñnancial experts'' as deÑned by SEC rules. Theand the consultant was paid a fee of approximatelyBoard also determined that John White's service on$625,000. In 2005, KPMG discovered that thea total of four audit committees of public compa-consultant gave approximately 96% of the fee to thenies (including Motorola) did not impair his servicetwo KPMG partners in the local KPMG oÇce.on the Motorola Audit and Legal CommitteeAfter investigating the matter, KPMG told thebecause of his excellent service on the CommitteeCommittee that it believed that the actions by thesince 1995. During all of 2005, the Committee wasKPMG oÇce violated the SEC's auditor indepen-comprised of non-employee directors who weredence rules but did not compromise the auditoreach independent as deÑned by the NYSE listingindependence. The Committee agreed with thestandards applicable during 2005 and SEC rules.conclusion that KPMG's independence was not

The responsibilities of the Committee include compromised for several reasons including the fol-assisting the Board of Directors in fulÑlling its lowing: Motorola employees had no knowledge ofoversight responsibilities as they relate to the Com- the improper arrangement; the operations of thepany's accounting policies, internal controls, Ñnan- Motorola subsidiary in the country were immaterialcial reporting practices and legal and regulatory to the Company; the KPMG oÇce and partners didcompliance. The Committee also appoints and not participate in the Motorola audit; the KPMGretains the independent registered public accounting (U.S.) audit team had no knowledge of theÑrm. improper arrangements; and KPMG (U.S.) refunded

the contingent fees paid by Motorola. The secondThe Committee fulÑlls its responsibilitiesmatter reviewed by the Committee involved athrough periodic meetings with the Company'sKPMG oÇce outside the U.S. providing corporateindependent registered public accounting Ñrm, inter-secretarial services in 2005. The KPMG oÇcenal auditors and management. During 2005, theassisted Motorola in making a Ñnal tax payment inCommittee met ten times. The Committee schedulesthe foreign jurisdiction of less than $3,000. Theits meetings with a view toward ensuring that itCommittee reviewed the matter and concluded thatdevotes appropriate attention to all of its tasks.independence was not compromised because of theDuring certain of these meetings, the Committeenature of the services and the de minimis amountmeets privately with the independent registeredinvolved.public accounting Ñrm, the chief Ñnancial oÇcer, the

director of internal audit, the chief legal counseland from time-to-time other members of manage-

45PROXY STATEMENT

KPMG also has conÑrmed in writing as re- internal control over Ñnancial reporting as of De-quired by Independence Standards Ì Board Stan- cember 31, 2005 and the report of the Company'sdard No. 1, that, in its professional judgment, it is independent registered public accounting Ñrm onindependent of the Company under all relevant management's assessment and on the eÅectiveness ofprofessional and regulatory standards. Based on its internal control over Ñnancial reporting as of De-continued monitoring activities and year-end review, cember 31, 2005. Management is responsible forthe Committee satisÑed itself as to the independent maintaining adequate internal control over Ñnancialregistered public accounting Ñrm's independence. reporting and for its assessment of the eÅectiveness

of internal control over Ñnancial reporting. TheThe Committee also discussed with manage- Company's independent registered public accounting

ment, the internal auditors and the independent Ñrm has the responsibility for auditing management'sregistered public accounting Ñrm, the quality and assessment and the eÅectiveness of internal controladequacy of the Company's internal controls and over Ñnancial reporting and expressing an opinionthe internal audit function's management, organiza- thereon based on their audit. Based on the above-tion, responsibilities, budget and staÇng. The Com- mentioned review and discussions with managementmittee reviewed with both the independent and the Company's independent registered publicregistered public accounting Ñrm and the internal accounting Ñrm, the Committee recommended toauditors their audit plans, audit scope, and identiÑ- the Board that management's report on its assess-cation of audit risks. ment of the eÅectiveness of internal control over

Ñnancial reporting as of December 31, 2005 and theThe Committee discussed and reviewed withreport of our independent registered public account-the independent registered public accounting Ñrm alling Ñrm be included in the Company's Annualmatters required by the standards of the PublicReport on Form 10-K for the year ended Decem-Company Accounting Oversight Board (Unitedber 31, 2005 for Ñling with the Securities andStates), including those described in SAS No. 61,Exchange Commission.""Communications with Audit Committees.'' With

and without management present, the CommitteeAs speciÑed in the Audit and Legal Committeediscussed and reviewed the results of the indepen-

Charter, it is not the duty of the Committee to plandent registered public accounting Ñrm's examinationor conduct audits or to determine that the Com-of the consolidated Ñnancial statements. The Com-pany's consolidated Ñnancial statements are com-mittee also discussed the results of the internal auditplete and accurate and in accordance with U.S.examinations.generally accepted accounting principles. That is the

The Committee reviewed the audited consoli- responsibility of management and the Company'sdated Ñnancial statements of the Company as of and independent registered public accounting Ñrm.for the year ended December 31, 2005, with

In giving its recommendation to the Board ofmanagement and the independent registered publicDirectors, the Committee has relied on:accounting Ñrm. Management has the responsibility(i) management's representation that such consoli-for the preparation and integrity of the Company'sdated Ñnancial statements have been prepared withconsolidated Ñnancial statements and the indepen-integrity and objectivity and in conformity with U.S.dent registered public accounting Ñrm has thegenerally accepted accounting principles, andresponsibility for the examination of those state-(ii) the reports of the Company's independentments. Based on the above-mentioned review andregistered public accounting Ñrm with respect todiscussions with management and the independentsuch consolidated Ñnancial statements.registered public accounting Ñrm, the Committee

recommended to the Board that the Company'saudited consolidated Ñnancial statements be in- Respectfully submitted,cluded in its Annual Report on Form 10-K for the

H. Laurance Fuller, Chairyear ended December 31, 2005, for Ñling with theJudy C. LewentSecurities and Exchange Commission.Thomas J. Meredith

The Committee also reviewed management's John A. Whitereport on its assessment of the eÅectiveness of Miles D. White

46 PROXY STATEMENT

Independent Registered Public Accounting Firm Tax Fees

KPMG LLP (""KPMG'') served as the Com- The aggregate fees billed by KPMG for taxpany's independent registered public accounting Ñrm services were $1.0 million in 2005 and $4.6 millionfor the Ñscal years ended December 31, 2004 and in 2004. These fees primarily related to assistanceDecember 31, 2005 and is serving in such capacity with U.S. tax returns, U.S. and international subsidi-for the current Ñscal year. Beginning in 2003, the ary tax audit services, and for 2004, tax planningAudit and Legal Committee appoints and engages services associated with the spin-oÅ of Freescale andthe independent registered public accounting Ñrm assistance with international subsidiaries tax returns.annually. The decision of the Committee is basedon a review of both the audit scope and the All Other Feesestimated audit fees.

The aggregate fees for all other services ren-Representatives of KPMG are expected to be dered by KPMG were $0 in 2005 and $0 in 2004.

present at the Annual Meeting and will have theThe following table further summarizes feesopportunity to make a statement if they desire to

billed to the Company by KPMG during 2005 anddo so and to respond to appropriate questions of2004.stockholders.

Worldwide Fees($ in millions)Total Fees Billed by KPMG

Without WithOn December 2, 2004, the Company completed Freescale Freescale

the spin-oÅ of Freescale Semiconductor, Inc., Service 2005 2004 2004(Freescale), an entity comprised of the Company's

Audit Fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $12.0 $12.2 $13.9former semiconductor operations. As of that date,Freescale became an entirely independent company.

Audit-Related FeesAccordingly, the column labeled ""2004 Without

Acquisition & Disposition Audits, DueFreescale'' in the table below excludes $1.7 million Diligence, and Assurance Services ÏÏÏ $ 1.2 $ 2.0 $ 2.0of Audit Fees billed by KPMG in 2004 that related BeneÑt Plan AuditsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.2 $ 0.2 $ 0.2to Freescale. Sarbanes-Oxley Section 404 Assistance $ 0.0 $ 0.2 $ 0.2

The aggregate fees billed by KPMG for profes- $ 1.4 $ 2.4 $ 2.4

sional services to the Company were $14.4 millionTax Feesin 2005 and $19.2 million in 2004 excludingInternational Tax ServicesÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.3 $ 3.0 $ 3.0Freescale.U.S. Tax Services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.7 $ 1.6 $ 1.6

Audit Fees $ 1.0 $ 4.6 $ 4.6

The aggregate fees billed by KPMG for profes-All Other Fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.0 $ 0.0 $ 0.0

sional services rendered in connection with the auditTotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $14.4 $19.2 $20.9of the Company's annual Ñnancial statements, the

audit of internal control over Ñnancial reporting, thereview of the Company's quarterly Ñnancial state- Audit and Legal Committee Pre-Approval Policiesments, and services that are normally provided in

In addition to retaining KPMG to audit theconnection with statutory and regulatory Ñlings orCompany's consolidated Ñnancial statements andengagements were $12.0 million in 2005 andinternal controls over Ñnancial reporting for 2005,$12.2 million in 2004 excluding Freescale.KPMG and other accounting Ñrms were retained toprovide auditing and advisory services in 2005. TheAudit-Related FeesAudit and Legal Committee (the Committee) has

The aggregate fees billed by KPMG for assur- restricted the non-audit services that KPMG mayance and related services reasonably related to the provide to the Company primarily to divestiture andperformance of the audit of the Company's Ñnancial acquisition related due diligence and audit services,statements, but not included under Audit Fees, were Ñnancial statement audits of employee beneÑt plans,$1.4 million in 2005 and $2.4 million in 2004. audit related assurance services, and certain taxThese fees primarily related to audits and due services. The Committee has further determined thatdiligence in connection with acquisitions and dispo- the Company will obtain non-audit services fromsitions by the Company, miscellaneous assurance KPMG only when the services oÅered by KPMGservices, beneÑt plan audits and for 2004, Sarbanes- are more eÅective than other service providers andOxley Section 404 assistance. do not impair the independence of KPMG.

47PROXY STATEMENT

The Audit and Legal Committee Auditor Fee provides the Company's Controller with the author-Policy requires the pre-approval of all professional ity to pre-approve fees less than $25,000 that wereservices provided to the Company by KPMG. Below not in the budget but that are in the list of servicesis a summary of the policy and procedures. approved by the Committee. The Controller is

responsible to report any approval decisions to theThe Committee reviews the annual audit plan Committee at its next scheduled meeting. The

and pre-approves the estimated annual audit budget. Committee reviews, and if necessary, approves anupdated estimate of the annual audit and non-auditThe Committee policy includes an approved listservices and fees budget in comparison to theof non-audit services that KPMG can provideprevious approved budget at each regular Commit-including audit related services, tax services, andtee meeting.other services. The Committee pre-approves an

annual budget for all KPMG non-audit services and In 2005, management did not approve anyreviews the description of services in the budget. services that were not on the list of services pre-The Committee allows the Company's Controller to approved by the Committee.authorize payment for any audit and non-auditservice in the approved budget. The Committee also

48 PROXY STATEMENT

PERFORMANCE GRAPHS

The following graphs compare the Ñve-year and one-year cumulative total returns of Motorola, Inc., theS&P 500 Index and the S&P Communications Equipment Index.

These graphs assume $100 was invested in the stock or the Index on December 31, 2000 orDecember 31, 2004, respectively, and also assume the reinvestment of dividends. The Ñve-year performancegraph assumes reinvestment of the Company's distribution to its shareholders of .110415 shares of Class Bcommon stock of Freescale Semiconductor, Inc. (""Freescale Class B Shares'') on December 2, 2004 for eachshare of Motorola Common Stock. For purposes of this graph, the Freescale Semiconductor, Inc. distributionis treated as a non-taxable cash dividend of $2.06 (the value of .110415 Freescale Class B Shares, based onFreescale Semiconductor's December 2, 2004 closing price of $18.69) that would have been reinvested inMotorola Common Stock at the close of business on December 2, 2004.

Five-Year Performance Graph

S&P 500 IndexMotorola S&P Communications Index

75.0

36.5

87.0

66.6

44.0

18.9

84.2

72.0

33.7

99.6

91.8

36.6

131.7

94.5

38.5

0

20

40

60

80

100

120

140

200520042003200220012000

One-Year Performance Graph200

150

100

502004 2005

105.1

132.3

S&P 500 IndexMotorola S&P Communications Index

103.0

49PROXY STATEMENT

COMMUNICATIONS What is the Deadline and How Do I SubmitProposals?

How Can I Recommend a Director Candidate toAny stockholder who intends to present athe Governance and Nominating Committee?

proposal at the Company's 2007 Annual Meeting ofStockholders must send the proposal to: Secretary,

The Governance and Nominating Committee Motorola, Inc., 1303 East Algonquin Road,will consider a candidate for director proposed by a Schaumburg, Illinois 60196.stockholder. A candidate must be highly qualiÑedand be both willing and expressly interested in If the stockholder intends to present theserving on the Board. A stockholder wishing to proposal at the Company's 2007 Annual Meeting ofpropose a candidate for the Committee's considera- Stockholders and have it included in the Company'stion should forward the candidate's name and proxy materials for that meeting, the proposal mustinformation about the candidate's qualiÑcations in be received by the Company no later than Novem-writing to the Governance and Nominating ber 15, 2006, and must comply with the require-Committee, c/o Secretary, Motorola, Inc., ments of Rule 14a-8 under the Securities Exchange1303 E. Algonquin Road, Schaumburg, Act of 1934, as amended. The Company is notIllinois 60196. obligated to include any shareholder proposal in its

proxy materials for the 2007 Annual Meeting ofStockholders if the proposal is received after theThe Governance and Nominating CommitteeNovember 15, 2006 deadline.will consider nominees recommended by Motorola

stockholders provided that the recommendationIf a stockholder submits a proposal after thecontains suÇcient information for the Governance

November 15, 2006 deadline but still wishes toand Nominating Committee to assess the suitabilitypresent the proposal at the 2007 Annual Meeting ofof the candidate, including the candidate's qualiÑca-Stockholders, the proposal: (1) must be received bytions. Candidates recommended by stockholdersthe Company no later than January 29, 2007,that comply with these procedures will receive the(2) must present a proper matter for shareholdersame consideration that candidates recommended byaction under Delaware General Corporation Law,the Committee and management receive.(3) must present a proper matter for considerationat such meeting under the Company's amended andrestated certiÑcate of incorporation and bylaws,What is the Deadline and How Do I Submit(4) must be submitted in a manner that is consis-Nominations to the Board?tent with the submission requirements provided inthe Company's bylaws, and (5) must relate to

A stockholder wishing to nominate a candidatesubject matter which could not be excluded from a

for election to the Board at the 2007 Annualproxy statement under any rule promulgated by the

Meeting of Stockholders is required to give writtenSecurities and Exchange Commission.

notice addressed to the Secretary, Motorola, Inc.,1303 E. Algonquin Road, Schaumburg, Illinois60196 of his or her intention to make such a How Can I Communicate with the Board?nomination. The notice of nomination must be

All communications to the Board of Directors,received by the Company's Secretary at the addresspresiding director, the non-management directors orabove no later than January 29, 2007.any individual director, must be in writing andaddressed to them c/o Secretary, Motorola, Inc.,The notice of nomination is required to contain1303 East Algonquin Road, Schaumburg, IL 60196certain information about both the nominee and theor by email to [email protected] making the nomination as set forth in

the Company's bylaws. In addition, it must includeinformation regarding the recommended candidate OTHER MATTERSrelevant to a determination of whether the recom-mended candidate would be barred from being The Board knows of no other business to beconsidered independent under New York Stock transacted at the 2006 Annual Meeting of Stock-Exchange Rule 303A.02(b), or, alternatively, a holders, but if any other matters do come beforestatement that the recommended candidate would the meeting, it is the intention of the persons namednot be so barred. A nomination which does not in the accompanying proxy to vote or act withcomply with the above requirements will not be respect to them in accordance with their bestconsidered. judgment.

50 PROXY STATEMENT

Section 16(a) BeneÑcial Ownership Reporting sharing the same address by delivering a singleCompliance proxy statement addressed to those security holders.

This process, which is commonly referred to asEach director and certain oÇcers of the Com- ""householding,'' potentially means extra conve-

pany are required to report to the Securities and nience for security holders and cost savings forExchange Commission, by a speciÑed date, his or companies.her transactions related to Motorola CommonStock. Based solely on a review of the copies of As in the past few years, a number of brokersreports furnished to the Company or written repre- with accountholders who are Motorola stockhold-sentations that no other reports were required, the ers will be ""householding'' our proxy materials. AsCompany believes that, during the 2005 Ñscal year, indicated in the notice previously provided by theseall Ñling requirements applicable to its oÇcers, brokers to Motorola stockholders, a single proxydirectors and greater than 10% beneÑcial owners statement will be delivered to multiple stockholderswere complied with, however, Mr. Negroponte, a sharing an address unless contrary instructions havedirector, was late in Ñling a Form 4 to report one been received from an aÅected stockholder. Oncetransaction that took place prior to Ñscal year 2005. you have received notice from your broker that they

will be ""householding'' communications to yourManner and Cost of Proxy Solicitation address, ""householding'' will continue until you are

notiÑed otherwise or until you revoke your consent.The Company pays the cost of soliciting prox-If, at any time, you no longer wish to participate inies. In addition to mailing proxies, oÇcers, directors""householding'' and would prefer to receive aand regular employees of the Company, acting onseparate proxy statement, please notify your brokerits behalf, may solicit proxies by telephone oror call us at 1-800-262-8509 or write us atpersonal interview. Also, the Company has retainedSecretary, Motorola, Inc., 1303 E. Algonquin Road,D.F. King & Co. to aid in soliciting proxies. TheSchaumburg, IL 60196.Company will pay an estimated fee of $20,000, plus

expenses, to D.F. King. The Company will, at its Stockholders who currently receive multipleexpense, request brokers and other custodians, copies of the proxy statement at their address andnominees and Ñduciaries to forward proxy soliciting would like to request ""householding'' of theirmaterial to the beneÑcial owners of shares held of communications should contact their broker.record by such persons.

By order of the Board of Directors,""Householding'' of Proxy Materials

In December of 2000, the Securities and Ex-change Commission adopted new rules that permitcompanies and intermediaries (e.g., brokers) tosatisfy the delivery requirements for proxy state- A. Peter Lawsonments with respect to two or more security holders Secretary

A-1PROXY STATEMENT

Appendix AAudit and Legal Committee Charter

(as approved by Board of Directors on February 13, 2006)

PURPOSES to the time he or she is appointed to theCommittee.

The Audit and Legal Committee is appointedby the Board of Directors (the ""Board'') for the 2. Each member of the Committee will have andprimary purposes of: maintain independence from management of the

Company in accordance with the standards of1. Assisting the Board in fulÑlling its oversight independence required by the SEC and the

responsibilities as they relate to: NYSE.

‚ the integrity of the Company's Ñnancial3. No member of the Committee may receive,

statements and the Company's accountingdirectly or indirectly, any consulting, advisory or

policies, internal controls, disclosure con-other compensatory fee from the Company

trols and procedures and Ñnancial reportingother than: (i) director's fees, which may be

practices;received in cash, stock options or other in-kindconsideration ordinarily available to Directors;‚ the Company's compliance with legal and(ii) a pension or other deferred compensationregulatory requirements;for prior service that is not contingent on future

‚ monitoring the qualiÑcations, independence service; and (iii) any other regular beneÑts thatand performance of the Company's external Directors receive in their capacity as membersauditors; and of the Board or its committees.

‚ monitoring the performance of the Com- 4. Each member of the Committee shall be Ñnan-pany's internal audit function. cially literate (as such qualiÑcation is interpreted

by the Board in its business judgment).2. Preparing the report of the Committee requiredby the proxy rules of the Securities and Ex- 5. At least one member of the Committee shallchange Commission (the ""SEC'') to be in- have accounting or related Ñnancial managementcluded in the Company's proxy statement for expertise (as such qualiÑcation is interpreted byeach annual meeting. the Board in its business judgment).

3. Maintaining, through regularly scheduled meet- 6. No member of the Committee shall serve onings, a line of communication between the the audit committee of more than three publicBoard and the Company's Ñnancial management, companies (including Motorola) unless theinternal auditors and external auditors. Board shall have made a prior determination

that such simultaneous service will not impair4. Overseeing compliance with the Company's pol-the ability of the member to eÅectively serve onicies for conducting business, including ethicalthe Committee and discloses this determinationbusiness standards as speciÑed in Motorola'sin the Company's proxy statement.Code of Business Conduct.

ORGANIZATION, PROCEDURES ANDCOMPOSITION AND QUALIFICATIONSPOWERS

The Committee shall be appointed by the1. The Board of Directors shall appoint oneBoard and shall serve at the pleasure of the Board

member of the Committee as the Chair. Theand for such term or terms as the Board mayChair (or in his or her absence, a memberdetermine. The Committee shall be comprised ofdesignated by the Chair) shall preside at allthree or more Directors (as determined from timemeetings of the Committee. The Chair shall beto time by the Board), each of whom shall meetresponsible for leadership of the Committee,the independence and experience requirements ofincluding scheduling meetings, preparing agen-the SEC and the New York Stock Exchangedas and making regular reports to the Board.(""NYSE'') for audit committee membership.

1. Each member of the Committee will be a 2. The Committee shall have the authority toDirector who: (i) is not otherwise employed by establish its own rules and procedures, consis-the Company, and (ii) has not been so em- tent with the bylaws of the Company, forployed at any time during the three years prior notice and conduct of its meetings should the

A-2 PROXY STATEMENT

Committee, in its discretion, deem it desirable Company's SEC Ñlings and discuss them with seniorto do so. management and the external auditors. In connec-

tion with such review, the Committee will:3. The Committee may, in its discretion, request

that management, the external auditors, the ‚ Discuss with the external auditors: (i) ininternal auditors or counsel undertake special the case of the annual audited Ñnancialprojects or investigations which it deems neces- statements, the matters required to be dis-sary to fulÑll its responsibilities. cussed by Statement on Auditing Standards

(SAS) No. 61 relating to the conduct of4. The Committee shall have the authority to the audit; and (ii) in the case of unaudited

engage independent counsel, independent ac- quarterly Ñnancial statements, importantcountants or other advisors as the Committee matters relating to the SAS No. 100 review.deems necessary to carry out its duties.

‚ Review with senior management and the5. The Committee shall receive appropriate fund- external auditors signiÑcant Ñnancial report-

ing, as determined by the Committee, in its ing judgments made in connection with thecapacity as a committee of the Board, for preparation of the Company's Ñnancialpayment of any: (i) compensation to outside statements, including analyses of the eÅectsaccounting, legal or other advisors employed by of alternative GAAP methods on the Ñnan-the Committee, or (ii) ordinary administrative cial statements.expenses of the Committee that are necessaryand appropriate in carrying out its duties. ‚ Review with senior management and the

external auditors any major issues regarding6. The Committee may, in its discretion, delegate

accounting principles or policies and Ñnan-all or a portion of its duties and responsibilities

cial statements presentations, including anyto a subcommittee of the Committee.

signiÑcant changes in the Company's selec-tion or application of accounting principles

MEETINGS or policies.

The Committee will meet at least four times ‚ Review with the external auditors: (i) anyeach year and at such other times as it deems problems or diÇculties encountered in thenecessary to fulÑll its responsibilities. course of their audit, including any change

in the scope of the planned audit work;1. The Committee may include in its meetings:(ii) any restrictions placed on the scope of(i) members of the Company's management,such work; or (iii) any restrictions on(ii) representatives of the external auditors,access to requested information, including a(iii) members of the internal audit team, orreview of Company management's reactions(iv) any other personnel employed or retainedto such problems or diÇculties.by the Company or the Committee.

‚ Review with management the Company's2. The Committee will periodically meet withannual assessment of the eÅectiveness of itsmembers of the Company's management ininternal controls and review with the exter-separate executive sessions to discuss any mat-nal auditors its report about the Company'sters that the Committee believes should beassessment.addressed privately, without the presence of

other Company management.‚ Review with management the Company's

quarterly assessments of the eÅectiveness ofDUTIES AND RESPONSIBILITIES its internal controls.Financial Statements and Published Information

‚ Review with senior management and theexternal auditors the eÅect of regulatory1. The Committee will meet with the externaland accounting initiatives as well as oÅ-auditors and senior management prior to the annualbalance sheet structures on the Company'saudit to discuss planning and staÇng of the audit.Ñnancial statements.

2. The Committee will review the Company'sannual audited Ñnancial statements and quarterly 3. Based on its review of the annual auditedunaudited Ñnancial statements, including the Com- Ñnancial statements, the Committee will make itspany's disclosures under ""Management's Discussion recommendation to the Board as to the inclusion ofand Analysis of Financial Condition and Results of the Company's audited Ñnancial statements in theOperations'' (""MD&A''), that are included in the Company's Annual Report on Form 10-K.

A-3PROXY STATEMENT

4. The Committee (or, at the discretion of ‚ Periodically meet separately with the exter-the Committee, the Chair acting on behalf of the nal auditors without senior managementCommittee) shall discuss with senior management present.and the external auditors the quarterly earnings

‚ Be directly responsible for resolution ofannouncement and earnings guidance provided todisagreements between management and theanalysts and rating agencies. These discussions needexternal auditors regarding Ñnancialnot occur in advance of each release or eachreporting.provision of guidance.

‚ At least annually, present the Committee's5. The Committee will periodically review theconclusions with respect to its evaluation oftype and presentation of information to be providedthe external auditors to the Board.in: (i) quarterly earnings releases (paying particular

attention to any use of ""pro forma'', or ""adjusted''non-GAAP, information); and (ii) Ñnancial infor- Independence of External Auditorsmation and earnings guidance provided to analysts

7. The Committee shall obtain conÑrmationand rating agencies.and assurance as to the external auditors' indepen-dence, including ensuring that they submit on aAppointment, Retention and Evaluation of Externalperiodic basis (not less than annually) to theAuditorsCommittee a formal written statement delineatingall relationships between the external auditors and6. The Company's external auditors shall re-the Company.port directly to the Committee. The Committee has

the ultimate authority and direct responsibility to8. The Committee shall actively engage in aappoint, compensate, retain, oversee, evaluate and,

dialogue with the external auditors with respect towhere appropriate, replace the external auditors. Inany disclosed relationships or services that mayconnection with its oversight of the external auditimpact the objectivity and independence of theactivities, the Committee will:external auditors and take appropriate action inresponse to the external auditors' report to satisfy‚ Appoint and retain the external auditorsitself of their independence.each year.

9. The Committee will periodically review‚ At least annually, obtain and review aand, if necessary, update its policy with regard toreport by the external auditors describing:the pre-approval of the retention of the external

(a) the external audit Ñrm's internal qual- auditors for any permitted non-audit services, in-ity-control procedures; and cluding a requirement that the Committee approve

all not-audit engagements of the external auditors(b) any material issues raised by: (i) the and shall, consistent with that policy, approve the

most recent internal quality-control re- retention of the external auditors to perform suchview, or peer review, of the Ñrm, or services and the fees for such services, if required by(ii) any inquiry or investigation by that policy. The Committee may, in its discretion,governmental or professional authori- delegate to one or more of its members theties, within the preceding Ñve years, authority to pre-approve any audit or non-auditrespecting one or more independent services to be performed by the external auditors,audits carried out by the Ñrm, and any provided that any such approvals are presented tosteps taken to deal with any issues the Committee at its next scheduled meeting.raised in the reviews described above.

10. Periodically review and, if necessary, up-‚ Annually review and evaluate: date its guidelines for the Company's hiring of

employees and former employees of the external(a) The experience and qualiÑcations ofauditors who were previously engaged on thethe senior members of the externalCompany's account.auditor team; and

11. Discuss with management the timing and(b) The performance and independence ofprocess for implementing the rotation of the leadthe external auditors, including the leadaudit partner, the concurring partner and any otherpartner of the external audit Ñrm.active audit engagement team partner within the

‚ Approve the fees to be paid to the external time limits and in such a manner as is necessary toauditors for audit services. prevent the external auditor from being deemed

A-4 PROXY STATEMENT

""not independent of the Company'' pursuant to internal auditors together with senior man-governing rules and regulations. agement's responses thereto.

14. The Committee will meet periodicallyOversee Internal Audit Activities with senior management to discuss the Company's

policies with respect to risk assessment and risk12. In connection with its oversight responsi-management. In doing so, the Committee willbilities, the Committee will:review the Company's major Ñnancial risk exposure

‚ Review the appointment or replacement and and the steps management has taken to monitor andperformance of the senior internal auditing control such exposure.executive.

15. The Committee will periodically review‚ Review, in consultation with senior manage- and, if necessary, update its procedures for:

ment, the external auditors and the senior‚ the receipt, retention and treatment ofinternal auditing executive, the plan and

complaints received by the Company regard-scope of internal audit activities, includinging accounting, internal accounting controlsthe enterprise risk assessment process.or auditing matters, and

‚ Review internal audit activities, budget,‚ the conÑdential, anonymous submission bystaÇng and qualiÑcations of the internal

the Company's employees and others ofaudit staÅ, and discuss such matters withconcerns regarding questionable accountingthe senior internal auditing executive andor auditing matters.the external auditors.

‚ Review signiÑcant reports to management Legal Mattersprepared by the internal auditing depart-

16. The Committee will periodically reviewment and management's responses to suchlegal matters concerning the Company. In connec-reports.tion with such review, the Committee will:

‚ Review with senior management and the‚ Review periodically with senior managementexternal auditor any correspondence with

and/or the Company's General Counsel anyregulatory or governmental agencies thatlegal matters (including the status of pend-raise material issues regarding the Com-ing litigation) that could have a materialpany's Ñnancial statements or accountingimpact on the Company's Ñnancialpolicies.statements.

‚ Periodically meet separately with members‚ Review the Company's compliance withof the internal audit staÅ, including the

applicable laws and regulations and anysenior internal executive, without other se-material reports or inquiries from regulatorynior management present.or government agencies.

Internal Controls ‚ Review the Company's signiÑcant legal risksand management of such risks.

13. The Committee will review with the ex-ternal auditors, the senior internal auditing executive ‚ Review the Company's policy, practice,and senior management: staÇng and posture regarding legal matters.

‚ The adequacy and eÅectiveness of the Com- ‚ Review the Company's relationship withpany's internal accounting and Ñnancial con- external attorneys.trols, including computerized information

‚ Periodically meet separately with the Gen-system controls and security, and considereral Counsel without other senior manage-any recommendations for improvement ofment present.such controls.

‚ Consider any reports concerning material‚ Major issues as to the adequacy of theviolations submitted to it by CompanyCompany's internal controls and any specialattorneys or outside counsel pursuant to theaudit steps adopted in light of materialSEC attorney professional responsibilitycontrol deÑciencies.rules or otherwise and determine what

‚ Any related signiÑcant Ñndings and recom- action or response is appropriate ormendations of the external auditors and necessary.

A-5PROXY STATEMENT

Business Ethics and Compliance (c) the performance and independence of theCompany's external auditors;

17. The Committee will review the Com-pany's business ethics and compliance policies and (d) the performance of the internal auditprograms. In connection with such review, the function; orCommittee will:

(e) any other matters that arise in the Com-‚ Receive periodic reports from the seniormittee's performance of its duties andethics and compliance oÇcer regarding eth-that the Committee deems important toics and compliance.present to the full Board.

‚ Discuss with the senior ethics and compli-ance oÇcer matters that he or she believes 21. Participate in the Board's annual perform-should be presented to the Committee ance evaluation, which includes an evaluation of thedirectly and not through management. performance of the Committee as a whole.

‚ Periodically meet separately with the senior While the Committee has the responsibilitiesethics and compliance oÇcer without other and powers set forth in this Charter, it is not thesenior management present. duty of the Committee to plan or conduct audits or

to determine that the Company's Ñnancial state-Miscellaneous ments are complete and accurate and are in accor-

dance with generally accepted accounting principles.The Committee will:This is the responsibility of the Company's manage-

18. Review and reassess at least annually the ment and the external auditors. Nor is it the dutyadequacy of this Audit and Legal Committee Char- of the Committee to conduct investigations or toter and recommend any proposed changes to the assure compliance with laws and regulations and theBoard of Directors. Company's corporate policies.

19. Prepare the report of the CommitteeNothing contained in this Charter is intendedrequired by the proxy rules of the SEC to be

to alter or impair the operation of the ""businessincluded in the Company's proxy statement for eachjudgment rule'' as interpreted by the courts underannual meeting.the Delaware General Corporation Law. Further,

20. Report regularly to the full Board any nothing contained in this Charter is intended toissues that arise with respect to: alter or impair the right of the members of the

Committee to rely, in discharging their oversight(a) the quality or integrity of the Company'srole, on the records of the Company and on otherÑnancial statements;information presented to the Committee, the Board

(b) the Company's compliance with legal or or the Company by its oÇcers or employees or byregulatory requirements; outside experts such as the external auditors.

Location for the Annual Meeting of Stockholders:Rosemont Theater

5400 N. River Road, Rosemont, Illinois 60018, (847) 671-5100May 1, 2006 at 5:00 P.M., local time

Map to the Rosemont Theater

Oakton St.

E. Touhy Ave.

Devon Ave.

Kennedy Expressway

W. Irving Park Rd.

NWTollway

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O’HAREAIRPORT

CHICAGO

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294

294

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