Motorola 2008 Annual Report Download - page 121

changes to equity in the amounts of $4 million and $37 million, respectively, in the Company’s consolidated
statement of stockholders’ equity as of December 31, 2008.
Defined Contribution Plan
The Company and certain subsidiaries have various defined contribution plans, in which all eligible employees
participate. In the U.S., the 401(k) plan is a contributory plan. Matching contributions are based upon the amount
of the employees’ contributions. Effective January 1, 2005, newly hired employees have a higher maximum
matching contribution at 4% on the first 5% of employee contributions, compared to 3% on the first 6% of
employee contributions for employees hired prior to January 2005. Effective January 1, 2009, the Company
temporarily suspended all matching contributions to the Motorola 401(k) plan. The Company’s expenses,
primarily relating to the employer match, for all defined contribution plans, for the years ended December 31,
2008, 2007 and 2006 were $95 million, $116 million and $105 million, respectively.
8. Share-Based Compensation Plans and Other Incentive Plans
Stock Options, Stock Appreciation Rights and Employee Stock Purchase Plan
The Company grants options to acquire shares of common stock to certain employees, and existing option
holders in connection with the merging of option plans following an acquisition. Each option granted has an
exercise price of no less than 100% of the fair market value of the common stock on the date of the grant. Option
awards have a contractual life of five to ten years and vest over two to four years. For stock options and stock
appreciation rights issued under plans prior to the 2006 Omnibus Plan, upon the occurrence of a change in
control, each stock option and stock appreciation right outstanding on the date on which the change in control
occurs will immediately become exercisable in full. Under the 2006 Omnibus Plan, the stock option or stock
appreciation right only becomes exercisable if the holder is also involuntarily terminated within 24 months of the
change in control.
The Company grants stock appreciation rights to acquire shares of common stock to certain employees. Each
stock appreciation right granted has an exercise price of 100% of the fair market value of the common stock on
the date of the grant. Upon the occurrence of a change in control, each stock appreciation right outstanding on the
date on which the change in control occurs will immediately become exercisable in full.
The employee stock purchase plan allows eligible participants to purchase shares of the Company’s common
stock through payroll deductions of up to 10% of eligible compensation on an after-tax basis. Plan participants
cannot purchase more than $25,000 of stock in any calendar year. The price an employee pays per share is 85% of
the lower of the fair market value of the Company’s stock on the close of the first trading day or last trading day
of the purchase period. The plan has two purchase periods, the first one from October 1 through March 31 and
the second one from April 1 through September 30. For the years ended December 31, 2008, 2007 and 2006,
employees purchased 18.9 million, 10.2 million and 8.3 million shares, respectively, at purchase prices of $7.91
and $6.07, $14.93 and $15.02, and $19.07 and $19.82, respectively.
The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-
Scholes option pricing model. The weighted-average estimated fair value of employee stock options granted during
2008, 2007 and 2006 was $3.47, $5.95 and $9.23, respectively, using the following weighted-average assumptions:
2008 2007 2006
Expected volatility 56.4% 28.3% 36.2%
Risk-free interest rate 2.4% 4.5% 5.0%
Dividend yield 2.7% 1.1% 0.8%
Expected life (years) 5.5 6.5 6.5
In 2006, the Company began using the implied volatility for traded options on the Company’s stock as the
expected volatility assumption required in the Black-Scholes model. The selection of the implied volatility approach
was based upon the availability of actively traded options on the Company’s stock and the Company’s assessment
that implied volatility is more representative of future stock price trends than historical volatility.
The risk-free interest rate assumption is based upon the average daily closing rates during the year for
U.S. treasury notes that have a life which approximates the expected life of the option. The dividend yield
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