Filed Pursuant to Rule 424(b)(5)
Registration No. 333-58176
Prospectus Supplement to Prospectus dated October 23, 2001.
21,000,000 Equity Security Units
[MOTOROLA LOGO]
7.00% Equity Security Units
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This is an offering of equity security units of Motorola, Inc.
Each equity security unit has a stated amount of $50 and will initially
consist of (a) a contract to purchase, for $50, shares of common stock of
Motorola on November 16, 2004 and (b) a senior note with a principal amount of
$50. The senior note will initially be held as a component of your unit and be
pledged to secure your obligation to purchase our common stock under the
related purchase contract.
We will make quarterly contract adjustment payments to you under the
purchase contract at the annual rate of 0.50% of the stated amount of $50 per
purchase contract. In addition, you will receive quarterly interest payments
on the senior note at the initial annual rate of 6.50%. We have the right to
defer the contract adjustment payments but not the interest payments on the
senior note, as described in this prospectus supplement. The interest rate on
the senior note will be reset, and the senior note remarketed, as described in
this prospectus supplement. The senior notes are unsecured and rank equally
with all of our other unsecured senior indebtedness. The units will be sold in
a minimum number of 20 units.
On October 25, 2001, the last reported sale price of our common stock on
the New York Stock Exchange was $17.28 per share.
The units have been approved for listing on the New York Stock Exchange
under the symbol "MEU."
See "Risk Factors" beginning on page S-16 to read about certain factors you
should consider before buying units.
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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
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Per Unit Total
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Initial public offering price.......................... $50.00 $1,050,000,000
Underwriting discount.................................. $ 1.50 $ 31,500,000
Proceeds, before expenses, to Motorola................. $48.50 $1,018,500,000
The initial public offering price set forth above does not include
accumulated contract adjustment payments and accrued interest, if any.
Contract adjustment payments on the purchase contracts and interest on the
senior notes will accrue from the date of original issuance of the units,
expected to be October 31, 2001, and must be paid by a purchaser if the units
are delivered after October 31, 2001.
To the extent that the underwriters sell more than 21,000,000 units, the
underwriters have the option to purchase up to an additional 3,000,000 units
from us at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the units in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York, on October 31, 2001.
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Joint Bookrunning Managers
Goldman, Sachs & Co. JP Morgan Salomon Smith Barney
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ABN AMRO Rothschild LLC Banc of America Securities LLCDeutsche Banc Alex. Brown
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BMO Nesbitt Burns BNP PARIBAS Dresdner Kleinwort Wasserstein
Mizuho International plc SG Cowen
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Prospectus Supplement dated October 26, 2001.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file with the
SEC at its public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities. Our SEC
filings are also available at the office of the New York Stock Exchange. For
further information on obtaining copies of our public filings at the New York
Stock Exchange, you should call (212) 656-5060.
We "incorporate by reference" into this prospectus supplement the
information we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus supplement
and information that we file subsequently with the SEC will automatically
update this prospectus supplement. We incorporate by reference the documents
listed below and any filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus supplement and prior to the time that we sell all the securities
offered by this prospectus supplement:
. Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001.
. Current Reports on Form 8-K, dated April 3, 2001 and October 22, 2001.
. The description of our common stock included in the Registration
Statement on Form 8-B dated July 2, 1973, including any amendments or
reports filed for the purpose of updating such description.
. The description of our preferred stock purchase rights included in the
Registration Statement on Form 8-A dated November 5, 1998, as amended.
You may request a copy of these filings (other than exhibits, unless that
exhibit is specifically incorporated by reference into that filing) at no cost,
by writing to or telephoning us at the following address:
A. Peter Lawson
Secretary, Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Telephone: (847) 576-5000
S-2
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere in this prospectus
supplement and the accompanying prospectus. As a result, it does not contain
all of the information that you should consider before investing in the equity
security units. You should read the entire prospectus supplement, including the
accompanying prospectus and the documents incorporated by reference, which are
described under "Where You Can Find More Information."
MOTOROLA, INC.
Motorola is a global leader in providing integrated communications
solutions and embedded electronic solutions. Our broad portfolio of products
and services includes:
. Software-enhanced wireless telephone, two-way radio and messaging
products and systems, as well as networking and Internet-access
products, for consumers, network operators and commercial, government
and industrial customers.
. End-to-end systems for the delivery of interactive digital video, voice
and high-speed data solutions for broadband operators.
. Embedded semiconductor solutions for customers in the networking and
computing, transportation, wireless communications and digital
consumer/home networking markets.
. Embedded electronic systems for automotive, industrial, transportation,
navigation, communications and energy systems markets.
Our solutions are focused on end markets that have, and we believe will
continue to have, attractive growth prospects. Many of the industries we
participate in are in the process of migrating to newer, more advanced
technologies. We believe that these transitions should enhance the demand for
our product offerings.
We are committed to delivering complete solutions to our customers. In
order to do that, we must be an industry leader in current and next-generation
products and technologies that our customers demand. We recognize that this
requires industry leading research and development across all of our business
segments and close collaboration with our customers. We continue to commit a
large amount of capital to these efforts.
For the year ended December 31, 2000, we generated consolidated revenues of
$37.6 billion. For the three and nine months ended September 29, 2001, we
generated consolidated revenues of $7.4 billion and $22.7 billion,
respectively.
Over the past year, we have announced significant restructuring programs in
all of our businesses. The goal of these programs is to enhance our operating
flexibility and to improve our profitability by reducing costs. These actions
have already yielded tangible results and are expected to produce significant
annual cost savings. We have also sold businesses that no longer complemented
our growth strategy.
We market our products and services in over 100 countries worldwide. In
2000, more than half of our sales occurred outside the United States. We derive
our revenue across six business units with the largest unit comprising
approximately one-third of our consolidated revenues in 2000.
Motorola is a corporation organized under the laws of the State of Delaware
as the successor to an Illinois corporation organized in 1928. Motorola's
principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 (telephone number: 847-576-5000).
S-3
RECENT DEVELOPMENTS
Financial Results
On October 9, 2001, we reported unaudited financial results for the three
and nine months ended on September 29, 2001.
Nine Months
Ended Three Months Ended
---------------- -------------------
Sept. Sept.
29, 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
------- ------- --------- ---------
(in millions, except per share
data)
Reported Results
Net sales............................... $22,680 $27,516 $ 7,406 $9,493
Net earnings (loss)..................... (2,700) 1,183 (1,408) 531
Diluted earnings (loss) per common
share.................................. (1.23) 0.52 (0.64) 0.23
Pro Forma Results
Net earnings (loss)..................... (591) 1,675 (153) 643
Diluted earnings (loss) per common
share.................................. (0.27) 0.74 (0.07) 0.28
In the third quarter of 2001, we reported pro forma adjustments resulting
in a net charge of $2.0 billion pre-tax, or $1.3 billion (equal to 57 cents per
share) after-tax. Our pro forma adjustments include unusual charges,
amortization of goodwill, investment and asset impairments, and gains (losses)
on sales of our investments and businesses. The pro forma adjustments were
primarily comprised of: (i) a non-cash charge for $1.3 billion in additional
reserves relating to a $2.0 billion financing to Telsim, a cellular operator in
Turkey, which is currently in default, (ii) a charge of approximately $220
million relating to cost-reduction activities, (iii) a non-cash charge of
approximately $850 million relating to impairments in our investment portfolio,
and (iv) an offsetting pre-tax gain of approximately $525 million realized from
the sale of our Integrated Information Systems Group to General Dynamics for
$825 million in cash. In the third quarter of 2000, we reported pro forma
adjustments resulting in a net charge of $144 million pre-tax, or $112 million
(equal to 5 cents per share) after-tax.
Cash flow from operations in the third quarter of 2001 was approximately
$300 million. Operating cash flow for the nine months ended September 29, 2001
is approximately $1.3 billion.
During the third quarter of 2001, we reduced our total debt, net of cash,
cash equivalents and short-term investments from $6.0 billion to $3.7 billion.
For the nine months ended September 29, 2001, we have reduced our net debt from
$7.0 billion to $3.7 billion.
Shortly after announcing earnings, we clarified operating results for the
third quarter of 2001 to reflect the allocation of certain corporate expenses
to the business segments. These expenses were reported in our October 9, 2001
earnings release as part of "General Corporate" expenses and the allocations do
not change Motorola's total operating results. The allocations slightly change
the operating results of our individual business segments but do not render any
profitable business segments unprofitable.
Recent Transactions
On October 15, 2001, we completed the acquisition of RiverDelta Networks,
Inc., a leading provider of carrier-class broadband routing, switching, cable
modem termination system, and service management solutions. Pursuant to the
stock-for-stock acquisition, we issued approximately 17.6 million shares of our
common stock in exchange for all of the outstanding capital stock of
RiverDelta.
On September 28, 2001, we completed the sale of our Integrated Information
Systems Group, our defense and government electronics business, to General
Dynamics for approximately $825 million in cash.
S-4
On July 2, 2001, we completed the acquisition of Blue Wave Systems Inc., a
leading supplier of channel Digital Signal Processing subsystems used in
telecommunications infrastructure equipment. Pursuant to the stock-for-stock
acquisition, we issued approximately 7.0 million shares of our common stock in
exchange for all of the outstanding capital stock of Blue Wave.
Other Recent Events
During the third quarter of 2001, we took a non-cash charge of $1.3 billion
in order to increase our reserves relating to a $2.0 billion financing to
Telsim, a cellular operator in Turkey, which is currently in default. Telsim
has been largely uncooperative in restructuring the defaulted loan or entering
into a transaction with third-party investors to either sell, or bring new
equity into, Telsim. With this additional reserve, the net amount of the
receivable from Telsim on our books is now approximately $530 million.
Regardless of the reserves already taken, we intend to continue to pursue a
collaborative solution with Telsim or, if need be, to pursue all remedies to
address Telsim's breach of contract and collect the $2.0 billion Telsim owes to
us.
In March 2001, we entered into a $2.0 billion multi-draw term loan facility
with a syndicate of lenders. As previously indicated, during the third quarter
we monetized our recently acquired shares of Telefonica and utilized the
proceeds to pay down the term loan facility. At the end of the third quarter,
the amount outstanding under the term loan facility was $720 million. Since the
end of the third quarter, the entire outstanding balance of this term loan
facility has been paid using the proceeds from the sale of our Integrated
Information Systems Group to General Dynamics.
On October 3, 2001, we announced that Edward Breen had been named
Motorola's president and chief operating officer-elect. Effective January 1,
2002, Mr. Breen, currently president of our Networks Sector, will become our
new president and chief operating officer, succeeding Robert L. Growney. To
facilitate this senior management transition, beginning on January 1, 2002 Mr.
Growney will become the vice chairman of our board of directors until he
retires on March 31, 2002.
On October 17, 2001, Standard and Poor's Rating Service lowered our senior
unsecured debt rating to "BBB+" from "A-," with a stable outlook. Moody's
Investors Service currently rates our senior unsecured debt "A3," with a
negative outlook. A rating reflects only the views of a rating agency and is
not a recommendation to buy, sell or hold the notes. Any rating can be revised
upward or downward or withdrawn at any time by a rating agency if it decides
the circumstances warrant that change. Each rating should be evaluated
independently of any other rating.
S-5
THE OFFERING
What are the equity security units?
Each equity security unit, which we refer to as the "units," will initially
consist of:
(1) a purchase contract under which:
. you will agree to purchase, for $50, shares of our common stock on
November 16, 2004 (the "stock purchase date"), the number of which we
will determine based on an average trading price of our common stock
for a period preceding that date, calculated in the manner described
below; and
. we will pay you contract adjustment payments at the rate of 0.50% of
the stated amount of $50 per year as specified below; and
(2) a senior note due November 16, 2007, with a principal amount of $50, on
which we will pay interest quarterly at the initial annual rate of
6.50% until a successful remarketing of the senior notes and at the
reset rate (as described below) thereafter.
The senior notes that are a component of the units will be owned by you,
but will initially be pledged to us to secure your obligations under the
purchase contract. We refer in this prospectus supplement to the purchase
contracts, together with the pledged senior notes or, after the remarketing or
a tax event redemption described below, together with the specified pledged
treasury securities, as "normal units."
Each holder of normal units may elect at any time to withdraw the pledged
senior notes or, after the remarketing described below, treasury securities
underlying the normal units, creating "stripped units." A holder might consider
it beneficial to either hold the senior notes directly or to realize income
from their sale. To create stripped units, the holder must substitute, as
pledged securities, specifically identified treasury securities that will pay
$50 on the stock purchase date, the amount due on such date under the purchase
contract, and the pledged senior notes or treasury securities will be released
from the pledge agreement and delivered to the holder. Holders of stripped
units may recreate normal units by re-substituting the senior notes or, after
the remarketing or a tax event redemption described below, applicable treasury
securities for the treasury securities underlying the stripped units.
We will not initially list either the stripped units or the senior notes on
any national securities exchange. In the event that either of these securities
are separately traded to a sufficient extent that applicable exchange listing
requirements are met, we will attempt to list these securities on the exchange
on which the normal units are then listed.
If the senior notes are successfully remarketed or a tax event redemption
occurs, in each case as described in this prospectus supplement, the applicable
ownership interest in the treasury securities will replace the senior note as a
component of each unit and will be pledged to us to secure your obligations
under the purchase contract.
What are the purchase contracts?
The purchase contract underlying a unit obligates you to purchase, and us
to sell, for $50, on the stock purchase date, a number of newly issued shares
of our common stock equal to the settlement rate described below. We will base
the settlement rate on an average trading price of our common stock for a
period preceding that date, calculated in the manner described below.
S-6
What payments will be made to holders of the units and the senior notes?
If you hold normal units, we will pay you quarterly contract adjustment
payments on the purchase contracts at the annual rate of 0.50% of the $50
stated amount through and including the stock purchase date and quarterly
interest payments on the senior notes at the initial annual rate of 6.50% of
the principal amount of $50 per senior note through and including August 16,
2004, and will pay a payment in the same amount on November 16, 2004. The
contract adjustment payments are subject to deferral as described below. We are
not entitled to defer interest payments on the senior notes. On the stock
purchase date, if your senior notes are successfully remarketed as described
below, we will make a quarterly payment, consisting of a cash payment on the
specified pledged treasury securities, at the same annual rate as was paid on
the senior notes.
If you hold stripped units, you will receive only the quarterly contract
adjustment payments payable by us at the annual rate of 0.50% of the $50 stated
amount. The contract adjustment payments are subject to deferral as described
below.
If you hold senior notes separately from the units, you will receive only
the cash interest payable on the senior notes. The senior notes, whether held
separately from or as part of the units, will initially pay interest at the
annual rate of 6.50% of the principal amount of $50 per senior note for the
quarterly payments payable on and before August 16, 2004. If the senior notes
are successfully remarketed, they will pay interest at the reset rate from the
date on which they are successfully remarketed until their maturity on November
16, 2007. If the remarketing agent cannot establish a reset rate meeting the
requirements described in this prospectus supplement, the remarketing agent
will not reset the interest rate on the senior notes and the interest rate will
continue to be the initial annual rate of 6.50%, until the remarketing agent
can on a later remarketing date prior to the stock purchase date establish a
reset rate meeting the requirements described in this prospectus supplement. We
are not entitled to defer payments on the senior notes.
What are the payment dates?
Subject to our deferral right in respect of the purchase contract payments
described below, distributions will be paid quarterly in arrears on each
February 16, May 16, August 16 and November 16, commencing February 16, 2002.
When can Motorola defer payments and distributions?
We can defer payment of all or part of the contract adjustment payments on
the purchase contracts until no later than the stock purchase date. We will pay
additional contract adjustment payments on any deferred installments of
contract adjustment payments at a rate of 6.50% per year until paid, compounded
quarterly, to but excluding November 16, 2004, unless your purchase contract
has been earlier settled or terminated.
We are not entitled to defer payments on the senior notes.
What is the reset rate?
In order to facilitate the remarketing of the senior notes at the
remarketing price described below, the remarketing agent will reset the rate of
interest on the senior notes for the quarterly payments payable on and after
November 16, 2004 until their maturity on November 16, 2007. The reset rate
will be the rate sufficient to cause the then current aggregate market value of
all the outstanding senior notes to be equal to at least 100.50% of the
remarketing value described below. The remarketing agent will assume for this
purpose, even if not true, that all of the senior notes continue to be
components of normal units and will be remarketed. Resetting the interest rate
on the senior notes at this rate should enable the remarketing agent to sell
the senior notes in the remarketing and purchase the necessary treasury
securities, the proceeds of which will be applied in settlement of the purchase
contracts and to payment of the quarterly payment on the normal units due on
November 16, 2004.
S-7
The reset rate will be determined by the remarketing agent on the third
business day (as defined below) prior to August 16, 2004, the last quarterly
payment date before the stock purchase date. If the remarketing agent cannot
establish a reset rate meeting these requirements on the remarketing date, and
as a result, the senior notes cannot be sold as described below, the interest
rate will not be reset and will continue to be the initial rate of the senior
notes. However, the remarketing agent may thereafter attempt to establish a
reset rate meeting these requirements, and the remarketing agent may attempt to
remarket the senior notes, on the subsequent dates described below. If a reset
rate cannot be established on a given date, the remarketing will not occur on
that date. If the remarketing agent fails to remarket the senior notes
underlying the normal units by the business day immediately preceding the stock
purchase date, we will, subject to applicable law, retain the securities
pledged as collateral or sell them in one or more public or private sales. A
nationally recognized investment banking firm will act as remarketing agent.
The reset of the interest rate on the senior notes will not change the
quarterly payment due to holders of the normal units on November 16, 2004,
which, as described above, will be paid in an amount equal to interest on the
senior notes at the initial rate of 6.50% of $50 for that quarterly payment.
"Business day" means any day that is not a Saturday, Sunday or day on which
banking institutions and trust companies in The State of New York or at a place
of payment are authorized or required by law, regulation or executive order to
close.
What is remarketing?
In order to provide holders of normal units with the necessary collateral
to be applied in the settlement of their purchase contracts, the remarketing
agent will sell the senior notes of holders of normal units, other than those
electing not to participate in the remarketing, and the remarketing agent will
use the proceeds to purchase treasury securities, which the participating
holders of normal units will pledge to secure their obligations under the
related purchase contracts. The cash paid on the pledged treasury securities
underlying the normal units of such holders will be used to satisfy such
holders' obligations to purchase our common stock on the stock purchase date.
This will be one way for holders of normal units to satisfy their obligations
to purchase shares of our common stock under the related purchase contracts.
Unless a holder elects not to participate in the remarketing as described
below, the remarketing agent will remarket the senior notes that are included
in the normal units on one or more occasions starting on the remarketing date,
which initially will be the third business day immediately preceding August 16,
2004, unless the remarketing agent delays the remarketing to a later date as
described below.
We will enter into a remarketing agreement with a nationally recognized
investment banking firm, pursuant to which it will agree to use its
commercially reasonable best efforts to sell the senior notes that are included
in normal units and that are participating in the remarketing, at a price equal
to at least 100.50% of the remarketing value.
The "remarketing value" will be equal to the sum of:
(1) the value at the remarketing date of such amount of treasury securities
that will pay, on or prior to the quarterly payment date falling on the
stock purchase date, an amount of cash equal to the aggregate interest
payments that are scheduled to be payable on that quarterly payment
date on each senior note which is included in a normal unit and which
is participating in the remarketing, assuming for this purpose, even if
not true, that the interest rate on the senior notes remains at the
initial rate; and
(2) the value at the remarketing date of such amount of treasury securities
that will pay, on or prior to the stock purchase date, an amount of
cash equal to $50 for each senior note which is included in a normal
unit and which is participating in the remarketing.
The remarketing agent will use the proceeds from the sale of the senior
notes included in normal units in a successful remarketing described in this
section to purchase, in the discretion of the remarketing agent, in open market
transactions or at treasury auction, the amount and the types of treasury
securities described in (1)
S-8
and (2) above, which it will deliver through the purchase contract agent to the
collateral agent to secure the obligations under the related purchase contracts
of the holders of the normal units whose senior notes participated in the
remarketing. The remarketing agent will deduct as a remarketing fee an amount
not exceeding 25 basis points (0.25%) of the total proceeds from such
remarketing. The remarketing agent will remit the remaining portion of the
proceeds, if any, to the holders of the normal units participating in the
remarketing.
Alternatively, a holder of normal units may elect not to participate in the
remarketing and retain the senior notes underlying those units by delivering
the treasury securities described in (1) and (2) above, in the amount and types
specified by the remarketing agent, applicable to the holder's senior notes, to
the purchase contract agent on the fourth business day prior to the remarketing
date to satisfy their obligations under the related purchase contracts.
What happens if the remarketing agent does not sell the senior notes?
If, as described above, the remarketing agent cannot establish a reset rate
on the remarketing date that will be sufficient to cause the then current
aggregate market value of all the outstanding senior notes to be equal to at
least 100.50% of the remarketing value, assuming, even if not true, that all of
the senior notes are held as components of normal units and will be remarketed,
and the remarketing agent cannot sell the senior notes offered for remarketing
on the remarketing date at a price equal to at least 100.50% of the remarketing
value, determined on the basis of the senior notes being remarketed, the
remarketing agent will attempt to establish a reset rate meeting these
requirements on each of the two immediately following business days. If the
remarketing agent cannot establish a reset rate meeting these requirements on
either of those days, it will attempt to establish such a reset rate on each of
the three business days immediately preceding October 1, 2004. If the
remarketing agent cannot establish such a reset rate during that period, it
will further attempt to establish such a reset rate on each of the three
business days immediately preceding the stock purchase date. We refer to each
of these three business day periods as "remarketing periods" in this prospectus
supplement. Any such remarketing will be at a price equal to at least 100.50%
of the remarketing value. If the remarketing agent fails to remarket the senior
notes underlying the normal units at that price by the business day immediately
preceding the stock purchase date, any holder of normal units that has not
otherwise settled its purchase contract in cash by the close of business on
that day (but without regard to the notice requirements otherwise applicable to
cash settlement) will be deemed to have directed us to retain the securities
pledged as collateral in satisfaction of its obligations under the purchase
contract and we will retain such securities in full satisfaction of those
obligations.
If I am not a party to a purchase contract, may I still participate in a
remarketing of my senior notes?
Holders of senior notes that are not included as part of normal units may
elect to have their senior notes included in the remarketing in the manner
described in "Description of the Equity Security Units--Description of the
Purchase Contracts--Optional Remarketing." The remarketing agent will use its
commercially reasonable best efforts to remarket the separately held senior
notes included in the remarketing at a price equal to at least 100.50% of the
remarketing value, determined on the basis of the separately held senior notes
being remarketed. After deducting its remarketing fee in an amount not
exceeding 25 basis points (0.25%) of the total proceeds from the remarketing,
the remaining portion of the proceeds, if any, will be remitted to the holders
whose separate senior notes were sold in the remarketing. If a holder of senior
notes elects to have its senior notes remarketed but the remarketing agent
fails to sell the senior notes during any remarketing period, the senior notes
will be promptly returned to the holder following the conclusion of that
period.
What is the settlement rate?
The settlement rate is the number of newly issued shares of our common
stock that we are obligated to sell and you are obligated to buy upon
settlement of a purchase contract on the stock purchase date.
S-9
The settlement rate for each purchase contract will be as follows, subject
to adjustment under specified circumstances:
. if the applicable market value, determined as described below, of our
common stock is equal to or greater than $21.08, the settlement rate will
be 2.3719 shares of our common stock per purchase contract;
. if the applicable market value of our common stock is less than $21.08
but greater than $17.28, the settlement rate will be equal to $50 divided
by the applicable market value of our common stock per purchase contract;
or
. if the applicable market value of our common stock is less than or equal
to $17.28, the settlement rate will be 2.8935 shares of our common stock
per purchase contract.
"Applicable market value" means the average of the closing price per share
of our common stock on each of the 20 consecutive trading days ending on the
third trading day immediately preceding the stock purchase date.
At the option of each holder, a purchase contract may be settled early by
the early delivery of cash to the purchase contract agent, as described below,
in which case 2.3719 shares of our common stock will be issued per purchase
contract.
Besides participating in a remarketing, how else can my obligations under the
purchase contract be satisfied?
Besides participating in the remarketing, your obligations under the
purchase contract may also be satisfied:
. if you have created stripped units or elected not to participate in the
remarketing, by delivering and pledging specified treasury securities in
substitution for your senior notes, and applying the cash payments
received on the pledged treasury securities;
. through the early delivery of cash to the purchase contract agent in the
manner described in "Description of the Equity Security Units--
Description of the Purchase Contracts--Early Settlement;" or
. if we are involved in a merger, acquisition or consolidation prior to the
stock purchase date in which at least 30% of the consideration for our
common stock consists of cash or cash equivalents, through an early
settlement of the purchase contract as described in "Description of the
Equity Security Units--Description of the Purchase Contracts--
Settlement--Early Settlement upon Cash Merger."
In addition, the purchase contracts, our related rights and obligations and
those of the holders of the units, including their obligations to purchase our
common stock, will automatically terminate upon the occurrence of particular
events of our bankruptcy, insolvency or reorganization. Upon such a termination
of the purchase contracts, the pledged senior notes or treasury securities will
be released and distributed to you. If we become the subject of a case under
the federal bankruptcy code, a delay may occur as a result of the automatic
stay under the bankruptcy code and continue until the automatic stay has been
lifted. The automatic stay will not be lifted until such time as the bankruptcy
judge agrees to lift it and return your collateral to you.
If the purchase contract is settled early through cash or as the result of
a bankruptcy event as described above, such holder will have no further right
to receive any accrued contract or deferred contract adjustment payments.
Under what circumstances may Motorola redeem the senior notes before they
mature?
If the tax laws change or are interpreted in a way that adversely affects
the tax treatment of the senior notes, then we, as issuer of the senior notes,
may elect to redeem the senior notes. If the senior notes are
S-10
redeemed before a successful remarketing, the money received from the
redemption will be used by the collateral agent to purchase a portfolio of
zero-coupon U.S. treasury securities that mature on or prior to each payment
date of the senior notes through the stock purchase date, in an aggregate
amount equal to the principal on the senior note included in normal units and
the interest that would have been due on such payment date on the senior notes
included in normal units. These treasury securities will replace the senior
notes as the collateral securing your obligations to purchase our common stock
under the purchase contracts. If the senior notes are redeemed, then each unit
will consist of a purchase contract for our common stock and an ownership
interest in the portfolio of treasury securities.
What is the maturity of the senior notes?
The senior notes will mature on November 16, 2007.
What are the U.S. federal income tax consequences related to the units and
senior notes?
If you purchase units in the offering, you will be treated for U.S. federal
income tax purposes as having acquired the senior notes and purchase contracts
constituting those units, and by purchasing the units you agree to treat the
senior notes in that manner for all tax purposes. In addition, you agree to
treat the senior notes as our indebtedness for all tax purposes. You must
allocate the purchase price of the units between those senior notes and
purchase contracts in proportion to their respective fair market values, which
will establish your initial tax basis. We expect to report the fair market
value of each senior note as $50.00 and the fair market value of each purchase
contract as $0.00.
For U.S. federal income tax purposes, the senior notes will be treated as
contingent payment debt instruments subject to the "noncontingent bond method"
of accruing original issue discount. As discussed more fully under "U.S.
Federal Income Tax Consequences -- Senior Notes -- Original Issue Discount,"
the effects of this method will be (1) to require you, regardless of your usual
method of tax accounting, to use the accrual method with respect to the senior
notes, (2) for all accrual periods through August 16, 2004, and possibly
thereafter, the accrual of interest income by you in excess of distributions
actually received by you and (3) generally to result in ordinary rather than
capital treatment of any gain or loss on the sale, exchange or disposition of
the units to the extent attributable to the senior notes. In addition, we
intend to report the contract adjustment payments as ordinary income to you,
but you should consult your tax advisor concerning alternative
characterizations.
Because there is no statutory, judicial or administrative authority
directly addressing the tax treatment of units or instruments similar to units,
you are urged to consult your own tax advisor concerning the tax consequences
of an investment in units. For additional information, see "U.S. Federal Income
Tax Consequences."
Will the units be listed on a stock exchange?
The normal units have been approved for listing on the New York Stock
Exchange (NYSE) under the symbol "MEU." Neither the stripped units nor the
senior notes will initially be listed; however, in the event that either of
these securities are separately traded to a sufficient extent that applicable
exchange listing requirements are met, we will endeavor to cause those
securities to be listed on the exchange on which the normal units are then
listed.
What are your expected uses of proceeds from the offering?
We estimate that we will receive net proceeds from the offering of units of
$1,017.3 million, or $1,162.8 million if the underwriters' option to purchase
additional units is exercised in full.
We anticipate using the aggregate net proceeds from this offering, together
with the net proceeds from the concurrent sale of $600 million of our 8.00%
notes due 2011 in a private placement, to reduce short-term indebtedness and
for general corporate purposes.
S-11
The Offering--Explanatory Diagrams
The following diagrams demonstrate some of the key features of the purchase
contracts, normal units, stripped units and the senior notes, and the
transformation of normal units into stripped units and senior notes.
Purchase Contracts
. Normal units and stripped units both include a purchase contract under
which you agree to purchase shares of our common stock on the stock
purchase date.
. The number of shares to be purchased under each purchase contract will
depend on the "applicable market value." The "applicable market value"
means the average of the closing price per share of our common stock on
each of the 20 consecutive trading days ending on the third trading day
immediately preceding the stock purchase date.
[CHART APPEARS HERE]
--------
(1) The "reference price" is $17.28.
(2) The "threshold appreciation price" is equal to $21.08, which is 122% of the
reference price.
(3) For each of the percentage categories shown, the percentage (expressed as a
decimal) of the shares to be delivered on the stock purchase date to a
holder of normal units or stripped units is determined by dividing
. the related number of shares to be delivered, as indicated in the
footnote for each such category, by
. an amount equal to $50, the stated amount of the unit, divided by the
reference price.
(4) If the applicable market value of our common stock is less than or equal to
the reference price, the number of shares to be delivered will be
calculated by dividing the stated amount of $50 by the reference price.
(5) If the applicable market value of our common stock is between the reference
price and the threshold appreciation price, the number of shares to be
delivered will be calculated by dividing the stated amount of $50 by the
applicable market value.
(6) If the applicable market value of our common stock is greater than or equal
to the threshold appreciation price, the number of shares to be delivered
will be calculated by dividing the stated amount of $50 by the threshold
appreciation price.
S-12
Normal Units
. A normal unit will consist of two components as illustrated below:
Purchase Senior Note
Contract
-------------------------- --------------------------
(Owed to Holder) (Owed to Holder)
Common Stock + 6.50% per annum
and contract adjustment payable quarterly
payments
0.50% per annum
payable quarterly
-------------------------- --------------------------
-------------------------- --------------------------
(Owed to Motorola) (Owed to Holder)
$50 at Stock $50 at Maturity
Purchase Date (November 16, 2007)
(November 16, 2004)
-------------------------- --------------------------
Normal Units
. After remarketing, the normal units will include specified treasury
securities in lieu of the senior notes if the remarketing is successful.
. If you hold a normal unit, you own the senior notes and, after
remarketing, the treasury securities, but will pledge them to us to
secure your obligations under the purchase contract.
. If you hold a normal unit, you may also substitute a specified amount of
treasury securities for the senior notes if you decide not to participate
in the remarketing.
Stripped Units
. A stripped unit consists of two components as described below:
Purchase Zero Coupon
Contract Treasury Securities
--------------------------
(Owed to Holder)
Common Stock +
and contract adjustment
payments
0.50% per annum
payable quarterly
--------------------------
-------------------------- --------------------------
(Owed to Motorola) (Owed to Holder)
$50 at Stock $50 at Maturity
Purchase Date (November 16, 2004)
(November 16, 2004)
-------------------------- --------------------------
Stripped Units
S-13
. If you hold a stripped unit, you own the treasury security but will
pledge it to us to secure your obligations under the purchase contract.
The treasury security is a zero-coupon U.S. treasury security (CUSIP No.
912833FV7) that matures on November 15, 2004.
Senior Notes
. Senior notes will have the terms illustrated below:
----------------------------
(Owed to Holder)
6.50% per annum
payable quarterly
(reset for quarterly
payments payable on
and after November 16, 2004)
----------------------------
----------------------------
(Owed to Holder)
$50 at Maturity
(at November 16, 2007)
----------------------------
. If you hold a senior note that is a component of a normal unit, you have
the option to either:
--allow the senior note to be included in the remarketing process, the
proceeds of which will be used to purchase treasury securities, if the
remarketing is successful, which will be applied to settle the purchase
contract; or
--elect not to participate in the remarketing by delivering treasury
securities in substitution for the senior note, the proceeds of which
will be applied to settle the purchase contract.
. If you hold a senior note that is separate and not a component of a
normal unit, you have the option to either:
--continue to hold the senior note whose rate has been reset for the
quarterly payments payable on and after November 16, 2004; or
--deliver the senior note to the remarketing agent to be included in the
remarketing.
S-14
Transforming Normal Units into Stripped Units and Senior Notes
. To create a stripped unit, you may combine the purchase contract with the
specified zero-coupon U.S. treasury security that matures on November 15,
2004.
. You will then own the zero-coupon U.S. treasury security but will pledge
it to us to secure your obligations under the purchase contract.
. The zero-coupon U.S. treasury security together with the purchase
contract would then constitute a stripped unit. The senior note (or,
after remarketing, treasury securities), which was previously a component
of the normal unit, is tradeable as a separate security.
[CHART APPEARS HERE]
. After remarketing, the normal units will include specified U.S. treasury
securities in lieu of senior notes.
. You can also transform stripped units and senior notes (or, after
remarketing, treasury securities, if the remarketing is successful) into
normal units. Following that transformation, the specified zero-coupon
U.S. treasury security, which was previously a component of the stripped
units, is tradeable as a separate security.
. The transformation of normal units into stripped units and senior notes
(or, after remarketing, treasury securities) and the transformation of
stripped units and senior notes (or, after remarketing, treasury
securities) into normal units may generally only be effected in integral
multiples of 20 units, as more fully described in this prospectus
supplement.
CONCURRENT OFFERING
In addition to the units described in this prospectus supplement, we are
concurrently offering $600 million of our 8.00% notes due 2011 in a private
placement. The notes will be unsecured senior notes and will rank equally with
all of our other unsecured senior indebtedness, including the senior notes that
are a component of the units. This offering of the units and the private
placement of the notes are not contingent upon each other.
S-15
RISK FACTORS RELATING TO THE UNITS
In considering whether to purchase the units, you should carefully consider
all the information we have included or incorporated by reference in this
prospectus supplement and the accompanying prospectus. In particular, you
should carefully consider the risk factors described below. Because a unit
consists of a purchase contract to acquire shares of our common stock and a
senior note issued by us, you are making an investment decision with regard to
our common stock and senior notes, as well as the units. You should carefully
review the information in this prospectus supplement and the accompanying
prospectus about all of these securities.
You will bear the entire risk of a decline in the price of our common stock.
The market value of the shares of our common stock you will receive on the
stock purchase date, may be materially different from the effective price per
share paid by you on the stock purchase date. If the average trading price of
our common stock on the stock purchase date is less than $17.28 per share, you
will, on the stock purchase date, be required to purchase shares of common
stock at a loss. Accordingly, a holder of units assumes the entire risk that
the market value of our common stock may decline. Any such decline could be
substantial.
You will receive only a portion of any appreciation in our common stock price.
The aggregate market value of the shares of our common stock you will
receive upon settlement of a purchase contract generally will exceed the stated
amount of $50 only if the average closing price per share of our common stock
over the 20-trading day period preceding settlement equals or exceeds $21.08,
which we refer to as the "threshold appreciation price." The threshold
appreciation price represents an appreciation of 22% over $17.28. Therefore,
during the period prior to settlement, an investment in the units affords less
opportunity for equity appreciation than a direct investment in our common
stock. If the applicable average closing price exceeds $17.28, which we refer
to as the "reference price," but falls below the threshold appreciation price,
you will realize no equity appreciation on the common stock for the period
during which you own the purchase contract. Furthermore, if the applicable
average closing price exceeds the threshold appreciation price, the value of
the shares you will receive under the purchase contract will be approximately
82% of the value of the shares you could have purchased with $50 at the time of
this offering.
The trading price for our common stock and the general level of interest rates
and our credit quality will directly affect the trading price for the units.
It is impossible to predict whether the price of our common stock or
interest rates will rise or fall. Our operating results and prospects and
economic, financial and other factors will affect trading prices of our common
stock. In addition, market conditions can affect the capital markets generally,
therefore affecting the price of our common stock. These conditions may include
the level of, and fluctuations in, the trading prices of stocks generally and
sales of substantial amounts of our common stock in the market after the
offering of the units or the perception that those sales could occur.
Fluctuations in interest rates may give rise to arbitrage opportunities based
upon changes in the relative value of our common stock underlying the purchase
contracts and of the other components of the units. The arbitrage could, in
turn, affect the trading prices of the units and our common stock.
You may suffer dilution of our common stock issuable upon settlement of your
purchase contract.
The number of shares of our common stock issuable upon settlement of your
purchase contract is subject to adjustment only for stock splits and
combinations, stock dividends and specified other transactions. The number of
shares of our common stock issuable upon settlement of each purchase contract
is not subject to adjustment for other events, such as employee stock option
grants, offerings of common stock for cash, or in connection with acquisitions
or other transactions which may adversely affect the price of our common stock.
The terms of the units do not restrict our ability to offer common stock in the
future or to engage in other
S-16
transactions that could dilute our common stock. We have no obligation to
consider the interests of the holders of the units in engaging in any such
offering or transaction.
You will have no rights as common stockholders.
Until you acquire shares of our common stock upon settlement of your
purchase contract, you will have no rights with respect to our common stock,
including voting rights, rights to respond to tender offers and rights to
receive any dividends or other distributions on our common stock. Upon
settlement of your purchase contract, you will be entitled to exercise the
rights of a holder of common stock only as to actions for which the record date
occurs after the stock purchase date.
Your pledged securities will be encumbered.
Although holders of units will be beneficial owners of the underlying
senior notes or pledged treasury securities, the holders will pledge those
securities with the collateral agent to secure their obligations under the
related purchase contracts. Therefore, for so long as the purchase contracts
remain in effect, holders will not be allowed to withdraw their pledged senior
notes or treasury securities from this pledge arrangement, except upon
substitution of other securities as described in this prospectus supplement.
The purchase contract agreement will not be qualified under the Trust Indenture
Act of 1939; the obligations of the purchase contract agent will be limited.
The purchase contract agreement relating to the units will not be qualified
under the Trust Indenture Act of 1939. The purchase contract agent under the
purchase contract agreement, who will act as the agent and the attorney-in-fact
for the holders of the units, will not be qualified as a trustee under the
Trust Indenture Act of 1939. Accordingly, holders of the units will not have
the benefits of the protections of the Trust Indenture Act of 1939 other than
to the extent applicable to a senior note included in a unit. Under the terms
of the purchase contract agreement, the purchase contract agent will have only
limited obligations to the holders of the units.
The secondary market for the units may be illiquid.
We are unable to predict how the units will trade in the secondary market
or whether that market will be liquid or illiquid. There is currently no
secondary market for the units. We will apply to list the normal units on the
NYSE. We will not initially list either the stripped units or the senior notes;
however, in the event that either of these securities are separately traded to
a sufficient extent that applicable exchange listing requirements are met, we
will attempt to list those securities on the exchange on which the normal units
are then listed. We have been advised by the underwriters that they presently
intend to make a market for the normal units; however, they are not obligated
to do so and any market making may be discontinued at any time. There can be no
assurance as to the liquidity of any market that may develop for the normal
units, the stripped units or the senior notes, your ability to sell such
securities or whether a trading market, if it develops, will continue. In
addition, in the event that sufficient numbers of normal units are converted to
stripped units, the liquidity of normal units could be adversely affected. We
cannot provide assurance that a listing application for normal units, stripped
units or senior notes will be accepted or, if accepted, that the normal units,
stripped units or senior notes will not be delisted from the NYSE or that
trading in the normal units, stripped units or senior notes will not be
suspended as a result of elections to create stripped units or recreate normal
units through the substitution of collateral that causes the number of these
securities to fall below the applicable requirements for listing securities on
the NYSE.
Delivery of the securities under the pledge agreement is subject to potential
delay if we become subject to a bankruptcy proceeding.
Notwithstanding the automatic termination of the purchase contracts, if we
become the subject of a case under the U.S. bankruptcy code, imposition of an
automatic stay under Section 362 of the U.S. bankruptcy code may delay the
delivery to you of your securities being held as collateral under the pledge
arrangement and
S-17
such delay may continue until the automatic stay has been lifted. The automatic
stay will not be lifted until such time as the bankruptcy judge agrees to lift
it and return your collateral to you.
We may redeem the senior notes upon the occurrence of a tax event.
We have the option to redeem the senior notes, on not less than 30 days nor
more than 60 days prior written notice, in whole but not in part, at any time
if a tax event occurs and continues under the circumstances described in this
prospectus supplement. If we exercise this option, we will redeem the senior
notes at the redemption price (described later in this prospectus supplement)
plus accrued and unpaid interest, if any. If we redeem the senior notes, we
will pay the redemption price in cash to the holders of the notes. If the tax
event redemption occurs prior to the successful remarketing of the notes, the
redemption price payable to you as a holder of the normal units will be
distributed to the collateral agent, who in turn will apply an amount equal to
the redemption price to purchase a portfolio of zero-coupon U.S. treasury
securities on your behalf, and will remit the remainder of the redemption
price, if any, to you, and the treasury securities will be substituted for the
senior notes as collateral to secure your obligations under the purchase
contracts related to the normal units. If your senior notes are not components
of normal units, you, rather than the collateral agent, will receive redemption
payments. There can be no assurance as to the effect on the market prices for
the normal units if we substitute the treasury securities as collateral in
place of any senior notes so redeemed. A tax event redemption will be a taxable
event to the holders of the senior notes.
The U.S. federal income tax consequences of the purchase, ownership and
disposition of the units are unclear.
No statutory, judicial or administrative authority directly addresses the
treatment of the units or instruments similar to the units for U.S. federal
income tax purposes. As a result, the U.S. federal income tax consequences of
the purchase, ownership and disposition of the units are not entirely clear. In
addition, because the senior notes will be treated as contingent payment debt
instruments any gain on the disposition of a senior note prior to the date on
which the interest rate on the senior note is reset generally will be treated
as ordinary interest income; thus, the ability to offset such interest income
with a loss, if any, on a purchase contract may be limited.
Because the senior notes will be issued with original issue discount, you will
have to include interest in your taxable income before you receive cash.
Because the senior notes will be treated as contingent payment debt
instruments, original issue discount will accrue from the issue date of the
senior notes and will be included in your gross income for U.S. federal income
tax purposes before you receive a cash payment to which the income is
attributable and in an amount greater than the interest payable on the senior
notes prior to the date on which the interest rate on the notes is reset.
The trading price of the senior notes may not fully reflect the value of their
accrued but unpaid interest.
The senior notes may trade at a price that does not fully reflect the value
of their accrued but unpaid interest. If you dispose of your notes between
record dates for interest payments, you will be required to include in gross
income the daily portions of original issue discount through the date of
disposition in income as ordinary income, and to add this amount to your
adjusted tax basis in the notes disposed of. To the extent the selling price is
less than your adjusted tax basis, you will recognize a loss.
S-18
ACCOUNTING TREATMENT
The net proceeds from the sale of the units will be allocated between the
purchase contracts and the senior notes in our financial statements based on
the underlying fair value of each instrument. The present value of the purchase
contract adjustment payments will be initially charged to equity, with an
offsetting credit to liabilities. Subsequent contract adjustment payments will
be allocated between this liability account and interest expense based on a
constant rate calculation over the life of the transaction.
The purchase contracts are forward transactions in our common stock. Upon
settlement of a purchase contract, we will receive $50 on that purchase
contract and will issue the requisite number of shares of our common stock. The
$50 we receive will be credited to stockholders' equity and allocated between
our common stock and additional paid-in-capital accounts.
Before the issuance of shares of our common stock upon settlement of the
purchase contracts, the purchase contracts will be reflected in our diluted
earnings per share calculations using the treasury stock method. Under this
method, the number of shares of our common stock used in calculating diluted
earnings per share is deemed to be increased by the excess, if any, of the
number of shares that would be issued upon settlement of the purchase contracts
less the number of shares that could be purchased by us in the market, at the
average market price during the period, using the proceeds receivable upon
settlement. Consequently, we anticipate that there will be no dilutive effect
on our earnings per share except during periods when the average market price
of our common stock is above $21.08.
S-19
USE OF PROCEEDS
The net proceeds to be received by us from this offering, after deducting
the underwriters' discount and estimated expenses, are estimated to be
approximately $1,017.3 million. The aggregate net proceeds from this offering
of the units, together with $592.6 million of estimated net proceeds from the
concurrent sale of our 8.00% notes due 2011 in a private placement, will be
used to reduce short-term indebtedness and for general corporate purposes. On
October 19, 2001, we had outstanding approximately $1.9 billion of commercial
paper, with a weighted average maturity of approximately 41 days and bearing a
weighted average interest rate of approximately 3.33% per annum.
CAPITALIZATION
The following table sets forth our actual consolidated cash, cash
equivalents and short-term investments, debt and total capitalization as of
September 29, 2001, and pro forma as adjusted to give effect to (i) our recent
reduction in short-term indebtedness using proceeds from the sale of a business
unit and (ii) this offering of our units and the concurrent private placement
of our notes and the anticipated application of the estimated net proceeds
therefrom to reduce short-term indebtedness. From time to time, we may issue
additional debt or equity securities. The following information should be read
in conjunction with our consolidated financial statements, including the notes
thereto, which are incorporated herein by reference. See "Where You Can Find
More Information."
September 29, 2001
--------------------
Pro Forma
Actual As Adjusted
------- -----------
(in millions of
dollars)
Cash, cash equivalents and short-term investments(a)...... $ 5,643 $ 4,923
======= =======
Short-Term Debt
Commercial paper(b)..................................... $ 1,641 $ 31
Notes payable and other short-term debt(a).............. 913 193
Current portion of long-term debt....................... 163 163
------- -------
Total short-term debt................................. $ 2,717 $ 387
======= =======
Long-Term Debt(c)
Senior notes and debentures............................. $ 6,201 $ 6,201
Other senior debt....................................... 570 570
Equity security units offered hereby.................... -- 1,050
Notes offered concurrently.............................. -- 600
Less current portion of long-term debt.................. (163) (163)
------- -------
Total long-term debt.................................. 6,608 8,258
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely company-
guaranteed debentures.................................... 485 485
Stockholders' Equity(d)
Preferred stock (none issued)........................... -- --
Common stock............................................ 6,679 6,679
Additional paid-in capital(e)........................... 1,421 1,383
Retained earnings....................................... 6,762 6,762
Non-owner changes to equity............................. (578) (578)
------- -------
Total stockholders' equity............................ 14,284 14,246
------- -------
Total capitalization................................ $21,377 $22,989
======= =======
--------
(a) During the third quarter, our $2.0 billion term loan facility was reduced
to $720 million. The remainder of this loan was repaid in early October
2001 using the proceeds from the sale of our Integrated Information Systems
Group to General Dynamics.
(b) On October 19, 2001, we had outstanding approximately $1.9 billion of
commercial paper. Assuming all of the aggregate net proceeds from this
offering of the units and the concurrent private placement of the notes are
used to reduce short-term indebtedness, approximately $281 million of
commercial paper would be outstanding following the consummation of the
concurrent private placement and offering.
(c) For additional information on long-term debt, see Note 4 of the Notes to
Consolidated Financial Statements for December 31, 2000, included in our
Annual Report on Form 10-K filed with the SEC and incorporated by reference
herein.
(d) Given the recent volatility experienced in the equity markets, and
particularly in the technology sector in which we have significant
strategic investments, our period-to-period stockholders' equity is subject
to fluctuations caused by changes in the market values of our investments.
For additional information on stockholders' equity, see Note 3 of the Notes
to the Consolidated Financial Statements for December 31, 2000, included in
our Annual Report on Form 10-K filed with the SEC and incorporated by
reference herein.
(e) Adjusted to reflect the portion of estimated offering expenses attributable
to equity securities.
S-20
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed and traded on the New York Stock Exchange under
the symbol "MOT." The following table provides, for the calendar quarters
indicated, the high and low prices per share on the New York Stock Exchange for
the periods shown below as reported on the New York Stock Exchange Composite
Tape and the amount of per-share dividends for the periods indicated.
Dividends
Period High Low Paid
------ ------ ------ ---------
1999:
First Quarter..................................... $25.79 $20.85 $0.04
Second Quarter.................................... 33.04 24.58 0.04
Third Quarter..................................... 33.83 27.33 0.04
Fourth Quarter.................................... 49.83 28.33 0.04
2000:
First Quarter..................................... 61.42 39.26 0.04
Second Quarter.................................... 52.55 28.61 0.04
Third Quarter..................................... 39.67 27.20 0.04
Fourth Quarter.................................... 29.76 15.78 0.04
2001:
First Quarter..................................... 24.99 13.97 0.04
Second Quarter.................................... 16.95 10.47 0.04
Third Quarter..................................... 19.49 13.48 0.04
Fourth Quarter (through October 25, 2001)......... 18.00 14.25 0.04
On October 25, 2001, the last reported sale price of our common stock on
the NYSE was $17.28. As of October 23, 2001, there were approximately 109,920
holders of record of our common stock.
S-21
SUMMARY SELECTED FINANCIAL DATA
(in millions, except per share data)
The selected historical consolidated financial data of Motorola as of
December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and
1998 has been derived from consolidated financial statements of Motorola which
have been audited by KPMG LLP, independent auditors, and incorporated by
reference herein from Motorola's Annual Report on Form 10-K filed with the SEC.
The selected historical consolidated financial data of Motorola as of December
31, 1998 and for the year ended December 31, 1997 has been derived from audited
consolidated financial statements of Motorola previously filed with the
Securities and Exchange Commission, but not incorporated by reference in this
prospectus supplement. The selected historical consolidated financial data of
Motorola as of December 31, 1997 and 1996 and for the year ended December 31,
1996 has been derived from audited consolidated financial statements of
Motorola audited by KPMG LLP, independent auditors, and of General Instrument
Corporation audited by Deloitte & Touche LLP, independent auditors, (merged on
January 5, 2000 and accounted for as a pooling-of-interests) previously filed
with the SEC, but not incorporated by reference herein. The selected historical
consolidated financial data as of and for the nine months ended September 29,
2001 and September 30, 2000, has been derived from unaudited condensed
consolidated financial statements and, in the opinion of management, contains
all adjustments, consisting only of normal recurring adjustments, necessary for
the fair presentation of Motorola's financial position and results of
operations as of and for such periods. Operating results for the nine months
ended September 29, 2001, are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 2001. See "Recent
Developments." This information is qualified in its entirety by, and should be
read in conjunction with, the consolidated financial statements, the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for Motorola incorporated by reference herein.
Nine Months Ended Year Ended December 31,
------------------- -------------------------------------------
Sept 29, Sept 30,
2001 2000 2000 1999 1998 1997 1996
---------- -------- ------- ------- ------- ------- -------
(unaudited)
Operating Results (1)
Net sales............. $ 22,680 $ 27,516 $37,580 $33,075 $31,340 $31,498 $29,657
Manufacturing and
other costs of
sales................ 16,410 16,838 23,628 20,631 19,396 18,532 17,854
Selling, general and
administrative
expenses............. 2,833 3,795 5,141 5,220 5,807 5,443 4,891
Research and
development
expenditures......... 3,295 3,293 4,437 3,560 3,118 2,930 2,572
Depreciation expense.. 1,749 1,718 2,352 2,243 2,255 2,394 2,367
Reorganization of
businesses........... 993 220 596 (226) 1,980 327 --
Other charges......... 2,632 506 517 1,406 109 -- 249
Interest expense,
net.................. 324 175 248 138 215 136 211
Gains on sales of
investments and
businesses........... (1,898) (847) (1,570) (1,180) (260) (70) (113)
-------- -------- ------- ------- ------- ------- -------
Total costs and
expenses............. $ 26,338 $ 25,698 $35,349 $31,792 $32,620 $29,692 $28,031
Earnings (loss) before
income taxes......... (3,658) 1,818 2,231 1,283 (1,280) 1,806 1,626
Income tax provision
(benefit)............ (958) 635 913 392 (373) 642 568
-------- -------- ------- ------- ------- ------- -------
Net earnings (loss)... $ (2,700) $ 1,183 $ 1,318 $ 891 $ (907) $ 1,164 $ 1,058
Diluted earnings
(loss) per common
share................ $ (1.23) $ 0.52 $ 0.58 $ 0.41 $ (0.44) $ 0.56 $ 0.51
As of As of December 31,
------------------- -------------------------------------------
Sept 29, Sept 30,
2001 2000 2000 1999 1998 1997 1996
---------- -------- ------- ------- ------- ------- -------
(unaudited)
Balance Sheet (1)
Total assets.......... $ 34,259 $ 44,177 $42,343 $40,489 $30,951 $28,954 $25,665
Working capital....... 7,636 3,953 3,628 4,679 2,532 4,597 3,696
Long-term debt and
redeemable preferred
securities........... 7,093 3,590 4,778 3,573 2,633 2,144 1,931
Total debt and
redeemable preferred
securities........... 9,810 8,852 11,169 6,077 5,542 3,426 3,328
Total stockholders'
equity............... $14,284 $20,658 $18,612 $18,693 $13,913 $14,487 $12,843
-------
(1) These figures have been restated to reflect the merger with General
Instrument Corporation, which has been accounted for as a pooling-of-
interests.
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DESCRIPTION OF THE EQUITY SECURITY UNITS
We summarize below the principal terms of the equity security units, which
we refer to as the "units," and the purchase contracts and senior notes which
comprise the units. The following description is not complete, and we refer you
to the agreements which will govern your rights as a holder of units. See
"Where You Can Find More Information." In addition, to the extent that the
following description is not consistent with those contained in the
accompanying prospectus under "Description of Debt Securities" and "Description
of Capital Stock" you should rely on this description.
Overview
Each unit will have a stated amount of $50. Each unit will initially
consist of and represent:
(1) a purchase contract under which:
. you will agree to purchase, and we will agree to sell, for $50,
shares of our common stock on the stock purchase date, the number of
which will be determined by the settlement rate described below,
based on an average trading price of our common stock for a period
preceding that date; and
. we will pay you contract adjustment payments at the annual rate of
0.50% payable on a quarterly basis as specified below; and
(2) a senior note with a principal amount of $50, on which we will pay
interest quarterly at the initial annual rate of 6.50%.
The senior notes will initially be pledged to secure your obligations under
the purchase contract. The purchase contracts, together with the pledged senior
notes or, after a successful remarketing, the specified pledged treasury
securities, are referred to in this prospectus supplement as "normal units."
Each holder of normal units may elect to withdraw the pledged senior notes or
treasury securities underlying the normal units by substituting, as pledged
securities, specifically identified treasury securities that will pay $50 on
the stock purchase date, the amount due on such date under each purchase
contract. If a holder of normal units elects to substitute treasury securities
as pledged securities, the pledged senior notes or treasury securities will be
released from the pledge agreement and delivered to the holder. The normal
units would then become "stripped units." Holders of stripped units may
recreate normal units by resubstituting the senior notes (or, after a
successful remarketing, the applicable specified treasury securities) for the
treasury securities underlying the stripped units.
As a beneficial owner of the units, you will be deemed to have:
. irrevocably agreed to be bound by the terms of the purchase contract
agreement, pledge agreement and purchase contract for so long as you
remain a beneficial owner of such units; and
. appointed the purchase contract agent under the purchase contract
agreement as your agent and attorney-in-fact to enter into and perform
the purchase contract on your behalf.
In addition, as a beneficial owner of the units, you will be deemed by your
acceptance of the units to have agreed, for all tax purposes, to treat yourself
as the owner of the related senior notes, or the treasury securities, as the
case may be, and to treat the senior notes as our indebtedness.
At the closing of the offering of the units, the underwriters will purchase
the units. The purchase price of each unit will be allocated by us between the
related purchase contract and the related senior note. The senior notes will
then be pledged to the collateral agent to secure the obligations owed to us
under the purchase contracts.
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We will enter into:
. a purchase contract agreement with First Union Trust Company, National
Association, as purchase contract agent, governing the appointment of
the purchase contract agent as the agent and attorney-in-fact for the
holders of the units, the purchase contracts, the transfer, exchange or
replacement of certificates representing the units and certain other
matters relating to the units; and
. a pledge agreement with The Chase Manhattan Bank, as collateral agent,
custodial agent and securities intermediary creating a pledge and
security interest for our benefit to secure the obligations of holders
of units under the purchase contracts.
Creating Stripped Units and Recreating Normal Units
Holders of normal units will have the ability to "strip" those units and
take delivery of the pledged senior notes (or after a successful remarketing,
the pledged treasury securities), creating "stripped units," and holders of
stripped units will have the ability to recreate normal units from their
stripped units by depositing senior notes (or after a successful remarketing,
the applicable treasury securities) as described in more detail below. Holders
who elect to create stripped units or recreate normal units shall be
responsible for any related fees or expenses.
Creating Stripped Units
Each holder of normal units may create stripped units and withdraw the
pledged senior notes or treasury securities underlying the normal units by
substituting, as pledged securities, the treasury securities described below
that will pay $50 on the stock purchase date, the amount due on that date under
the purchase contract. Holders of normal units may create stripped units at any
time on or before the second business day prior to the stock purchase date,
except that they may not create stripped units during the period from four
business days prior to any remarketing period until the expiration of three
business days after the end of that period.
In order to create stripped units, a normal unitholder must substitute, as
pledged securities, zero-coupon U.S. Treasury securities (CUSIP No. 912833FV7)
which mature on the stock purchase date. Upon creation of the stripped units,
the treasury securities will be pledged with the collateral agent to secure the
unitholder's obligation to purchase our common stock under the purchase
contract, and the pledged senior notes or treasury securities underlying the
normal units will be released. Because treasury securities are issued in
integral multiples of $1,000, holders of normal units may make the substitution
only in integral multiples of 20 normal units. However, after a successful
remarketing of the senior notes or the occurrence of a tax event redemption,
the holders may make the substitution only in integral multiples of normal
units such that both the treasury securities to be deposited and the treasury
securities to be released are in integral multiples of $1,000.
To create stripped units, you must:
. deposit with the collateral agent the treasury securities described
above, which will be substituted for the pledged senior notes or
treasury securities underlying your normal units and pledged with the
collateral agent to secure your obligation to purchase our common stock
under the purchase contract;
. transfer the normal units to the purchase contract agent; and
. deliver a notice to the purchase contract agent stating that you have
deposited the specified treasury securities with the collateral agent
and are requesting that the purchase contract agent instruct the
collateral agent to release to you the pledged senior notes or treasury
securities underlying the normal units.
Upon that deposit and the receipt of an instruction from the purchase
contract agent, the collateral agent will effect the release to the purchase
contract agent of the underlying pledged senior notes or treasury securities
from the pledge under the pledge agreement free and clear of our security
interest. The purchase contract agent will:
. cancel the normal units;
. transfer to you the underlying pledged senior notes or treasury
securities; and
. deliver to you the stripped units.
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Any senior notes released to you will be tradeable separately from the
resulting stripped units. Interest on the senior notes will continue to be
payable in accordance with their terms.
Recreating Normal Units
Each holder of stripped units may recreate normal units by substituting, as
pledged securities, senior notes or the applicable treasury securities then
constituting a part of the normal units for the treasury securities underlying
the stripped units. Holders may recreate normal units at any time on or before
the second business day prior to the stock purchase date, except that they may
not recreate normal units during the period from four business days prior to
any remarketing period until the expiration of three business days after that
period.
Upon recreation of the normal units, the senior notes or treasury
securities will be pledged with the collateral agent to secure the holder's
obligation to purchase our common stock under the purchase contract, and the
treasury securities underlying the stripped units will be released. Because
treasury securities are issued in integral multiples of $1,000, holders of
stripped units may make the substitution only in integral multiples of 20
stripped units. However, after a successful remarketing of the senior notes or
the occurrence of a tax event redemption, the holder may make the substitution
only in integral multiples of stripped units such that both the treasury
securities to be deposited and the treasury securities to be released are in
integral multiples of $1,000.
To recreate normal units from stripped units, you must:
. deposit with the collateral agent:
-- if the substitution occurs prior to the remarketing of the senior
notes, senior notes having an aggregate principal amount equal to the
aggregate stated amount of your stripped units; and
-- if the substitution occurs after the remarketing of the senior notes
or the occurrence of a tax event redemption, the applicable treasury
securities then constituting a part of the normal units;
.transfer the stripped units to the purchase contract agent; and
. deliver a notice to the purchase contract agent stating that you have
deposited the senior notes or treasury securities with the collateral
agent and are requesting that the purchase contract agent instruct the
collateral agent to release to you the pledged treasury securities
underlying those stripped units.
The senior notes or treasury securities will be substituted for the
treasury securities underlying your stripped units and will be pledged with the
collateral agent to secure your obligation to purchase our common stock under
your purchase contract.
Upon the deposit and receipt of an instruction from the purchase contract
agent, the collateral agent will effect the release to the purchase contract
agent of the underlying pledged treasury securities from the pledge under the
pledge agreement free and clear of our security interest. The purchase contract
agent will:
. cancel the stripped units;
. transfer to you the underlying treasury securities; and
. deliver to you the normal units.
Current Payments
If you hold normal units, you will receive payments consisting of quarterly
contract adjustment payments on the purchase contracts payable by us at the
annual rate of 0.50% of the $50 stated amount through and including the stock
purchase date, quarterly interest payments on the senior notes at the annual
rate of 6.50% of the principal amount of $50 per senior note until a successful
remarketing of the senior notes, and a quarterly payment on the stock purchase
date from specified pledged treasury securities, at the same annual rate as was
initially paid on the senior notes.
S-25
If you hold stripped units, you will only be entitled to receive quarterly
contract adjustment payments payable by us at the annual rate of 0.50% of the
$50 stated amount. However, you will be required for U.S. federal income tax
purposes to recognize original issue discount on the treasury securities on a
constant yield basis or acquisition discount on the treasury securities when it
is paid or accrues generally in accordance with your regular method of tax
accounting.
The contract adjustment payments are subject to deferral by us until the
stock purchase date as described below. If we defer any of these payments, we
will pay or accrue additional payments on the deferred amounts at the annual
rate of 6.50% until paid.
If you hold senior notes separately from the units, you will only receive
the interest payment on the senior notes. The senior notes, whether held
separately or as part of the units, will initially pay interest at the annual
rate of 6.50% of the principal amount of $50 per senior note. The rate of
interest on the senior notes will be reset for the quarterly payments payable
on and after the stock purchase date and interest payments on the senior notes
will be made at the reset rate from the date the senior notes are successfully
remarketed to maturity of the notes. However, if a reset rate meeting the
requirements described in this prospectus supplement cannot be established, the
interest rate will not be reset and will continue to be the initial annual rate
of 6.50%, until a reset rate meeting the requirements described in this
prospectus supplement can be established on a later remarketing date prior to
the stock purchase date. If no remarketing occurs prior to that date, the
initial rate will be the interest rate through maturity of the notes.
Contract adjustment payments and interest payments on the senior notes
payable for any period will be computed (1) for any full quarterly period on
the basis of a 360-day year of twelve 30-day months and (2) for any period
shorter than a full quarterly period, on the basis of a 30-day month and, for
periods of less than a month, on the basis of the actual number of days elapsed
per 30-day month. Contract adjustment payments and interest on the senior notes
will accrue from October 31, 2001 and will be payable quarterly in arrears on
February 16, May 16, August 16 and November 16 of each year, commencing
February 16, 2002. If the purchase contracts are settled early, at your option,
or terminated, you will have no right to receive any accrued and deferred
contract adjustment payments.
Our obligations with respect to the senior notes will be unsecured and will
rank equally with all our other unsecured and unsubordinated indebtedness. See
"Description of the Senior Notes" below and "Description of Debt Securities" in
the accompanying prospectus.
Contract adjustment payments and interest payments on the senior notes will
be payable to the holders of normal units as they are registered on the books
and records of the purchase contract agent on the relevant record dates. So
long as the normal units remain in book-entry only form, the record date will
be the business day prior to the relevant payment dates. Contract adjustment
payments will be paid through the purchase contract agent, which will hold
amounts received in respect of the contract adjustment payments for the benefit
of the holders of the purchase contracts that are a part of such normal units.
Subject to any applicable laws and regulations, each payment will be made as
described under "--Description of the Senior Notes--Book-Entry and Settlement"
below. If the normal units do not remain in book-entry only form, the relevant
record dates will be the 15th day prior to the relevant payment dates. If any
date on which these payments and distributions are to be made is not a business
day, then amounts payable on that date will be made on the next day that is a
business day, however, if such business day is in the next calendar year,
payment will be made on the prior business day, in each case with the same
force and effect as if made on the payment date.
Option to Defer Contract Adjustment Payments
We may, at our option and upon prior written notice to the holders of the
units and the forward purchase contract agent, defer the payment of contract
adjustment payments on the related forward purchase contracts forming a part of
normal units and stripped units until no later than the stock purchase date.
However, deferred contract adjustment payments will bear additional contract
adjustment payments at the rate of 6.50% per year (compounding on each
succeeding payment date) until paid. If the purchase contracts are terminated
(upon
S-26
the occurrence of certain events of bankruptcy, insolvency or reorganization
with respect to us), the right to receive contract adjustment payments and
deferred contract adjustment payments will also terminate.
In the event that we elect to defer the payment of contract adjustment
payments on the purchase contracts until the stock purchase date, each holder
of normal units and stripped units will receive on the stock purchase date in
respect of the deferred contract adjustment payments, in lieu of a cash
payment, a number of shares of our common stock equal to (a) the aggregate
amount of deferred contract adjustment payments payable to the holder divided
by (b) the applicable market value.
We will not issue any fractional shares of our common stock with respect to
the payment of deferred contract adjustment payments on the stock purchase
date. In lieu of fractional shares otherwise issuable with respect to such
payment of deferred contract adjustment payments, the holder will be entitled
to receive an amount in cash equal to the fraction of a share times the
applicable market value.
In the event we exercise our option to defer the payment of contract
adjustment payments, then until the deferred contract adjustment payments have
been paid, we will not, and we will not permit any subsidiary of ours to,
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of our
capital stock other than:
. purchases, redemptions or acquisitions of shares of our capital stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers or directors
or a stock purchase or dividend reinvestment plan, or the satisfaction
by us of our obligations pursuant to any contract or security
outstanding on the date of such event,
. as a result of a reclassification of our capital stock or the exchange
or conversion of one class or series of our capital stock for another
class or series of the capital stock,
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged,
. dividends or distributions in our capital stock (or rights to acquire
capital stock), or repurchases, redemptions or acquisitions of capital
stock in connection with the issuance or exchange of capital stock (or
securities convertible into or exchangeable for shares of our capital
stock), or
. redemptions, exchanges or repurchases of any rights outstanding under a
shareholder rights plan or the declaration or payment thereunder of a
dividend or distribution of or with respect to rights in the future.
Description of the Purchase Contracts
Each purchase contract underlying a unit, unless earlier terminated, or
earlier settled at your option or upon specified mergers and other transactions
described below, will obligate you to purchase, and us to sell, for $50, on the
stock purchase date a number of newly issued shares of our common stock equal
to the settlement rate.
The settlement rate, which is the number of newly issued shares of our
common stock issuable upon settlement of a purchase contract on the stock
purchase date, will, subject to adjustment under certain circumstances as
described under "--Anti-dilution Adjustments" below, be as follows:
. If the "applicable market value" of our common stock, which is the
average of the closing prices per share of our common stock on each of
the 20 consecutive trading days ending on the third trading day
immediately preceding the stock purchase date, is equal to or greater
than the threshold appreciation price of $21.08, which is 22% above
$17.28, the settlement rate, which is equal to $50 divided by $21.08,
will be 2.3719 shares of our common stock per purchase contract.
Accordingly, if the market price for our common stock increases to an
amount that is greater than $21.08 on the settlement date, the aggregate
market value of the shares of common stock issued upon settlement of
each purchase
S-27
contract, assuming that this market value is the same as the applicable
market value of our common stock, will be greater than $50, and if the
market price equals $21.08, the aggregate market value of those shares,
assuming that this market value is the same as the applicable market
value of our common stock, will equal $50.
. If the applicable market value of our common stock is less than $21.08
but greater than $17.28, the settlement rate will be equal to $50
divided by the applicable market value of our common stock per purchase
contract. Accordingly, if the market price for our common stock
increases but that market price is less than $21.08 on the settlement
date, the aggregate market value of the shares of common stock issued
upon settlement of each purchase contract, assuming that this market
value is the same as the applicable market value of our common stock,
will equal $50.
. If the applicable market value of our common stock is less than or equal
to $17.28, the settlement rate, which is equal to $50 divided by $17.28,
will be 2.8935 shares of our common stock per purchase contract.
Accordingly, if the market price for our common stock decreases to an
amount that is less than $17.28 on the settlement date, the aggregate
market value of the shares of common stock issued upon settlement of
each purchase contract, assuming that the market value is the same as
the applicable market value of our common stock, will be less than $50,
and if the market price equals $17.28, the aggregate market value of
those shares, assuming that this market value is the same as the
applicable market value of our common stock, will equal $50.
For purposes of determining the applicable market value for our common
stock, the closing price of our common stock on any date of determination means
the closing sale price or, if no closing price is reported, the last reported
sale price of our common stock on the NYSE on that date. If our common stock is
not listed for trading on the NYSE on any date, the closing price of our common
stock on any date of determination means the closing sales price as reported in
the composite transactions for the principal U.S. securities exchange on which
our common stock is so listed, or if our common stock is not so listed on a
U.S. national or regional securities exchange, as reported by the Nasdaq stock
market, or, if our common stock is not so reported, the last quoted bid price
for our common stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization or, if that bid price is not
available, the market value of our common stock on that date as determined by a
nationally recognized independent investment banking firm retained by us for
this purpose.
A trading day is a day on which our common stock (1) is not suspended from
trading on any national or regional securities exchange or association or over-
the-counter market at the close of business and (2) has traded at least once on
the national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of our common stock.
Settlement
Settlement of the purchase contracts will occur on the stock purchase date,
unless:
. you have settled the related purchase contract prior to the stock
purchase date through the early delivery of cash to the purchase
contract agent, in the manner described in "--Early Settlement;"
. we are involved in a merger prior to the stock purchase date in which at
least 30% of the consideration for our common stock consists of cash or
cash equivalents, and you have settled the related purchase contract
through an early settlement as described in "--Early Settlement" and "--
Early Settlement upon Cash Merger;" or
. an event described under "--Termination of Purchase Contracts" below has
occurred.
The settlement of the purchase contracts on the stock purchase date will
occur as follows:
. for the stripped units or normal units that include pledged treasury
securities, the cash payments on the treasury securities will
automatically be applied to satisfy in full your obligation to purchase
our common stock under the purchase contracts; and
S-28
. for the normal units in which the related senior notes remain a part of
the normal units because of a failed remarketing, we will exercise our
rights as a secured party to dispose of the senior notes in accordance
with applicable law in order to satisfy in full your obligation to
purchase our common stock under the purchase contracts.
In either event, our common stock will then be issued and delivered to you or
your designee, upon payment of the applicable consideration, presentation and
surrender of the certificate evidencing the units, if the units are held in
certificated form, and payment by you of any transfer or similar taxes payable
in connection with the issuance of our common stock to any person other than
you.
Prior to the date on which shares of common stock are issued in settlement
of purchase contracts, our common stock underlying the related purchase
contracts will not be deemed to be outstanding for any purpose and you will
have no rights with respect to the common stock, including voting rights,
rights to respond to tender offers and rights to receive any dividends or other
distributions on the common stock, by virtue of holding the purchase contracts.
No fractional shares of common stock will be issued by us pursuant to the
purchase contracts. In place of fractional shares otherwise issuable, you will
be entitled to receive an amount of cash equal to the fractional share,
calculated on an aggregate basis in respect of the purchase contracts you are
settling, times the applicable market value.
Remarketing
The senior notes held by each holder of a normal unit will be sold in a
remarketing, unless the holder elects not to participate in the remarketing.
The proceeds of such remarketing will be used to purchase treasury securities,
which will be pledged to secure the obligations of such participating holder of
normal units under the related purchase contract. Cash payments received on the
pledged treasury securities underlying the normal unit of such holder will be
used to satisfy such participating holder's obligation to purchase our common
stock on the stock purchase date.
Unless a holder of normal units delivers treasury securities in a kind and
amount designated by the remarketing agent, as described below, the senior
notes that are included in the normal units will be remarketed on the
remarketing date, unless the remarketing agent delays the remarketing to a
later date as described below. The remarketing date will be the third business
day preceding August 16, 2004, the last quarterly payment date before the stock
purchase date.
We will enter into a remarketing agreement with a nationally recognized
investment banking firm, pursuant to which that firm will agree, as remarketing
agent, to use its commercially reasonable best efforts to sell the senior notes
which are included in normal units and which are participating in the
remarketing at a price equal to at least 100.50% of the remarketing value.
The "remarketing value" will be equal to the sum of:
(1) the value at the remarketing date of such amount of treasury
securities that will pay, on or prior to the quarterly payment date
falling on the stock purchase date, an amount of cash equal to the
aggregate interest payments that are scheduled to be payable on that
quarterly payment date, on each senior note which is included in a
normal unit and which is participating in the remarketing, assuming
for this purpose, even if not true, that the interest rate on the
senior notes remains at the initial rate; and
(2) the value at the remarketing date of such amount of treasury
securities that will pay, on or prior to the stock purchase date, an
amount of cash equal to $50 for each senior note which is included in
a normal unit and which is participating in the remarketing.
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For purposes of (1) and (2) above, the value on the remarketing date of the
treasury securities will assume that (a) the treasury securities are highly
liquid treasury securities maturing on or within 35 days prior to the stock
purchase date (as determined in good faith by the remarketing agent in a manner
intended to minimize the cash value of the treasury securities) and (b) those
treasury securities are valued based on the ask-side price of the treasury
securities at a time between 9:00 a.m. and 11:00 a.m., New York City time,
selected by the remarketing agent, on the remarketing date (as determined on a
third-day settlement basis by a reasonable and customary means selected in good
faith by the remarketing agent) plus accrued interest to that date.
The remarketing agent will use the proceeds from the sale of these senior
notes in a successful remarketing described in this section to purchase, in the
discretion of the remarketing agent, in open market transactions or at treasury
auction, the amount and the types of treasury securities described in (a) and
(b) above, which it will deliver through the purchase contract agent to the
collateral agent to secure the obligations under the related purchase contracts
of holders of the normal units whose senior notes participated in the
remarketing. The remarketing agent will deduct as a remarketing fee an amount
not exceeding 25 basis points (0.25%) of the total proceeds from such
remarketing. The remarketing agent will remit the remaining portion of the
proceeds, if any, to the holders of the normal units participating in the
remarketing.
Alternatively, a holder of normal units may elect not to participate in the
remarketing and retain the senior notes underlying those units by delivering
the treasury securities described in (1) and (2) above, in the amount and types
specified by the remarketing agent to the purchase contract agent on the fourth
business day prior to the remarketing date.
The purchase contract agent will give holders notice of remarketing,
including the specific treasury securities (including the CUSIP numbers and/or
the principal terms thereof) that must be delivered by holders that elect not
to participate in the remarketing, on the seventh business day prior to the
remarketing date. A holder electing not to participate in the remarketing must
notify the purchase contract agent of such election and deliver such specified
treasury securities to the purchase contract agent not later than 10:00 a.m. on
the fourth business day prior to the remarketing date. A holder that notifies
the purchase contract agent of such election but does not so deliver the
treasury securities and a holder that does not notify the purchase contract
agent will be deemed to have elected to participate in the remarketing. On the
stock purchase date, the purchase contract agent will apply the cash payments
received on the pledged treasury securities to pay the purchase price under the
purchase contracts.
If the remarketing agent cannot establish a reset rate on the remarketing
date that will be sufficient to cause the then current aggregate market value
of the senior notes to be equal to at least 100.50% of the remarketing value,
assuming, even if not true, that all of the senior notes are held as components
of normal units and will be remarketed, and the remarketing agent cannot
remarket the senior notes offered for remarketing on the remarketing date at a
price equal to at least 100.50% of the remarketing value, determined on the
basis of the senior notes being remarketed, the remarketing agent will attempt
to establish a reset rate meeting these requirements on each of the two
immediately following business days. If the remarketing agent cannot establish
a reset rate meeting these requirements on either of those days, it will
attempt to establish such a reset rate on each of the three business days
immediately preceding October 1, 2004. If the remarketing agent cannot
establish such a reset rate during that period, it will further attempt to
establish such a reset rate on each of the three business days immediately
preceding the stock purchase date. We refer each of these three business day
periods as "remarketing periods" in this prospectus supplement. Any such
remarketing will be at a price equal to at least 100.50% of the remarketing
value (determined on the basis of the senior notes being remarketed) on the
subsequent remarketing date. If the remarketing agent fails to remarket the
senior notes underlying normal units at that price prior to the stock purchase
date, any holder of normal units that has not otherwise settled its purchase
contract in cash by the close of business on that day (but without regard to
the notice requirements described below under "--Notice to Settle With Cash")
will be deemed to have directed
S-30
us to retain the securities pledged as collateral in satisfaction of such
holder's obligations under the related purchase contracts, and our retention of
such securities will satisfy such holder's obligation to purchase our common
stock under the applicable portion of the related purchase contracts.
We will cause a notice of any failed remarketing period to be published on
the fourth business day immediately following such period, by publication in a
daily newspaper in the English language of general circulation in New York
City, which is expected to be The Wall Street Journal. We will also release
this information by means of Bloomberg and Reuters newswire. In addition, we
will request, not later than seven nor more than 15 calendar days prior to
remarketing period that the depositary notify its participants holding senior
notes, normal units and stripped units of the remarketing. The remarketing
agent will be a nationally recognized investment bank.
Optional Remarketing
Under the remarketing agreement, on or prior to the fourth business day
immediately preceding the beginning of a remarketing period, holders of senior
notes that are not included in normal units may elect to have their senior
notes included in the remarketing by delivering their senior notes along with a
notice of such election to the custodial agent prior to the beginning of a
remarketing period, but no earlier than the payment date immediately preceding
August 16, 2004. The custodial agent will hold these senior notes in an account
separate from the collateral account in which the securities pledged to secure
the holders' obligations under the purchase contracts will be held. Holders of
senior notes electing to have their senior notes remarketed will also have the
right to withdraw that election on or prior to the fifth business day
immediately preceding the first day of the relevant remarketing period.
On the third business day immediately prior to August 16, 2004, the
custodial agent will deliver these separate senior notes to the remarketing
agent for remarketing. The remarketing agent will use its commercially
reasonable best efforts to remarket the separately held senior notes included
in the remarketing on the remarketing date at a price equal to at least 100.50%
of the remarketing value, determined on the basis of the separately held senior
notes being remarketed. After deducting as the remarketing fee an amount not
exceeding 25 basis points (0.25%) of the total proceeds from such remarketing,
the remarketing agent will remit to the collateral agent the remaining portion
of the proceeds for payment to such participating holders.
If, as described above, the remarketing agent cannot remarket the senior
notes during the remarketing period, the remarketing agent will promptly return
the senior notes to the custodial agent to release to the holders. Holders of
senior notes that are not components of normal units may elect to have their
senior notes remarketed during any subsequent remarketing period pursuant to
the procedures described above.
Early Settlement
At any time not later than 10:00 a.m. on the seventh business day prior to
November 16, 2004, a holder of units may settle the related purchase contracts
by delivering to the purchase contract agent immediately available funds in an
amount equal to $50 multiplied by the number of purchase contracts being
settled. Holders may settle early only in units of 20 and integral multiples of
20.
No later than the third business day after an early settlement, we will
issue, and the holder will be entitled to receive, 2.3719 shares of our common
stock for each unit, regardless of the market price of our common stock on the
date of early settlement, subject to adjustment under the circumstances
described under "--Anti-dilution Adjustments" below. At that time, the holder's
right to receive future contract adjustment payments will terminate. The holder
will also receive the senior notes or other securities underlying those units.
Notice to Settle With Cash
Unless the treasury securities have replaced the senior notes as a
component of normal units as a result of a successful remarketing of the notes
or a tax event redemption, a holder of normal units may settle the related
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purchase contract with separate cash prior to 11:00 a.m., New York City time,
on the business day
immediately preceding the stock purchase date. A holder of a normal unit
wishing to settle the related purchase contract with separate cash must notify
the purchase contract agent by presenting and surrendering the normal unit
certificate evidencing the normal unit at the offices of the purchase contract
agent with the form of "Notice to Settle by Separate Cash" on the reverse side
of the certificate completed and executed as indicated on or prior to 5:00
p.m., New York City time, on the seventh business day immediately preceding the
stock purchase date. If a holder who has given notice of its intention to
settle the related purchase contract with separate cash fails to deliver the
cash to the collateral agent on the business day immediately preceding the
stock purchase date, such holder will be deemed to have directed us to retain
the related senior note in full satisfaction of the holder's obligation to
purchase shares of our common stock under the related purchase contracts.
Early Settlement Upon Cash Merger
Prior to the stock purchase date, if we are involved in a merger in which
at least 30% of the consideration for our common stock consists of cash or cash
equivalents ("cash merger"), then on or after the date of the cash merger each
holder of the units will have the right to accelerate and settle the related
purchase contract at the settlement rate in effect immediately before the cash
merger. We refer to this right as the "merger early settlement right." We will
provide each of the holders with a notice of the completion of a cash merger
within five business days thereof. The notice will specify a date, which shall
be not less than 20 nor more than 30 days after the date of the notice, on
which the optional early settlement will occur and a date by which each
holder's merger early settlement right must be exercised. The notice will set
forth, among other things, the applicable settlement rate and the amount of the
cash, securities and other consideration receivable by the holder upon
settlement. To exercise the merger early settlement right, you must deliver to
the purchase contract agent, on or one business day before the early settlement
date, the certificate evidencing your units, if the units are held in
certificated form, and payment of the applicable purchase price in the form of
a certified or cashier's check. If you exercise the merger early settlement
right, we will deliver to you on the early settlement date the kind and amount
of securities, cash or other property that you would have been entitled to
receive if you had settled the purchase contract immediately before the cash
merger at the settlement rate in effect at such time. You will also receive the
senior notes or treasury securities underlying those units. If you do not elect
to exercise your merger early settlement right, your units will remain
outstanding and subject to normal settlement on the stock purchase date.
Anti-dilution Adjustments
The formula for determining the settlement rate and the number of shares of
our common stock to be delivered upon an early settlement may be adjusted if
certain events occur, including:
(1) the payment of a stock dividend or other distributions on our common
stock;
(2) the issuance to all holders of our common stock of rights or warrants,
other than any dividend reinvestment or share purchase or similar
plans, entitling them to subscribe for or purchase our common stock at
less than the current market price (as defined below);
(3) subdivisions, splits and combinations of our common stock;
(4) distributions to all holders of our common stock of evidences of our
indebtedness, shares of capital stock, securities, cash or other
assets (excluding any dividend or distribution covered by clause (1)
or (2) above and any dividend or distribution paid exclusively in
cash);
(5) distributions consisting exclusively of cash to all holders of our
common stock in an aggregate amount that, when combined with (a) other
all-cash distributions made within the preceding 12 months and (b) the
cash and the fair market value, as of the date of expiration of the
tender or exchange offer referred to below, of the consideration paid
in respect of any tender or exchange
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offer by us or a subsidiary of ours for our common stock concluded
within the preceding 12 months, exceeds 15% of our aggregate market
capitalization (such aggregate market capitalization being the product
of the current market price of our common stock multiplied by the
number of shares of common stock then outstanding) on the date fixed
for the determination of stockholders entitled to receive such
distribution; and
(6) the successful completion of a tender or exchange offer made by us or
any subsidiary of ours for our common stock that involves an aggregate
consideration that, when combined with (a) any cash and the fair
market value of other consideration payable in respect of any other
tender or exchange offer by us or a subsidiary of ours for our common
stock concluded within the preceding 12 months and (b) the aggregate
amount of any all-cash distributions to all holders of our common
stock made within the preceding 12 months, exceeds 15% of our
aggregate market capitalization on the date of expiration of such
tender or exchange offer.
The "current market price" per share of our common stock on any day means
the average of the daily closing prices for the five consecutive trading days
preceding the earlier of the day preceding the day in question and the day
before the "ex date" with respect to the issuance or distribution requiring
such computation. For purposes of this paragraph, the term "ex date," when used
with respect to any issuance or distribution, means the first date on which our
common stock trades without the right to receive the issuance or distribution.
In the case of reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions that cause our common stock to be
converted into the right to receive other securities, cash or property, each
purchase contract then outstanding would, without the consent of the holders of
units, become a contract to purchase such other securities, cash or property
instead of our common stock. In such event, on the stock purchase date the
settlement rate then in effect will be applied to the value on the stock
purchase date of the securities, cash or property a holder would have received
if it had held the shares covered by the purchase contract when the applicable
transaction occurred. Holders have the right to settle their obligations under
the purchase contracts early in the event of certain cash mergers as described
under "--Early Settlement" and "--Early Settlement Upon Cash Merger."
If at any time we make a distribution of property to our common
stockholders that would be taxable to the stockholders as a dividend for U.S.
federal income tax purposes (that is, distributions, evidences of indebtedness
or assets, but generally not stock dividends or rights to subscribe for capital
stock), and, pursuant to the settlement rate adjustment provisions of the
purchase contract agreement, the settlement rate is increased, that increase
may be deemed to be the receipt of taxable income to holders of units. See
"U.S. Federal Income Tax Consequences--Purchase Contracts--Adjustment to
Settlement Rate."
In the case of the payment of a dividend or other distribution on our
common stock of shares of capital stock of any class or series, or similar
equity interests, of or relating to a subsidiary or other business unit, which
we refer to as a "spin-off," the settlement rate in effect immediately before
the close of business on the record date fixed for determination of
stockholders entitled to receive that distribution will be increased by
multiplying:
. the settlement rate by
. a fraction, the numerator of which is the current market price of our
common stock plus the fair market value, determined as described below,
of those shares of capital stock or similar equity interests so
distributed applicable to one share of common stock and the denominator
of which is the current market price of our common stock.
The adjustment to the settlement rate under the preceding paragraph will
occur on the date that is the earlier of :
. the tenth trading day following the effective date of the spin-off and
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. the date of the securities being offered in the initial public offering
of the spin-off, if that initial public offering is effected
simultaneously with the spin-off.
For purposes of this section, "initial public offering" means the first
time securities of the same class or type as the securities being distributed
in the spin-off are offered to the public for cash.
In the event of a spin-off that is not effected simultaneously with an
initial public offering of the securities being distributed in the spin-off,
the fair market value of the securities to be distributed to holders of our
common stock means the average of the closing sale prices of those securities
over the first 10 trading days following the effective date of the spin-off.
Also, for purposes of such a spin-off, the current market price of our common
stock means the average of the closing sale prices of our common stock over the
first 10 trading days following the effective date of the spin-off.
If, however, an initial public offering of the securities being distributed
in the spin-off is to be effected simultaneously with the spin-off, the fair
market value of the securities being distributed in the spin-off means the
initial public offering price, while the current market price of our common
stock means the closing sale price of our common stock on the trading day on
which the initial public offering price of the securities being distributed in
the spin-off is determined.
In addition, we may increase the settlement rate if our board of directors
deems it advisable to avoid or diminish any income tax to holders of our common
stock resulting from any dividend or distribution of shares (or rights to
acquire shares) or from any event treated as a dividend or distribution for
income tax purposes or for any other reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate will be required
unless the adjustment would require an increase or decrease of at least one
percent in the settlement rate. If any adjustment is not required to be made
because it would not change the settlement rate by at least one percent, then
the adjustment will be carried forward and taken into account in any subsequent
adjustment.
We will be required, as soon as practicable following the occurrence of an
event that requires or permits an adjustment in the settlement rate, to provide
written notice to the holders of units of the occurrence of that event. We will
also be required to deliver a statement setting forth in reasonable detail the
method by which the adjustment to the settlement rate was determined and
setting forth the revised settlement rate.
Each adjustment to the settlement rate will result in a corresponding
adjustment to the number of shares of our common stock issuable upon early
settlement of a purchase contract.
Pledged Securities and Pledge Agreement
The senior notes or treasury securities underlying the units will be
pledged to the collateral agent for our benefit. Under the pledge agreement,
the pledged securities will secure the obligations of holders of units to
purchase our common stock under the purchase contract. A holder of a unit
cannot separate or separately transfer the purchase contract from the pledged
securities underlying the unit. Your rights to the pledged securities will be
subject to our security interest created by the pledge agreement. You will not
be permitted to withdraw the pledged securities related to the units from the
pledge arrangement except:
. to substitute specified treasury securities for the related pledged
senior notes or other pledged treasury securities upon creation of a
stripped unit;
. to substitute senior notes or specified treasury securities for the
related pledged treasury securities upon the recreation of a normal
unit;
. upon delivering specified treasury securities when electing not to
participate in a remarketing; or
.upon the termination or early settlement of the purchase contracts.
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Subject to our security interest and the terms of the purchase contract
agreement and the pledge agreement:
. each holder of units that include senior notes will retain ownership of
the senior notes and will be entitled through the purchase contract
agent and the collateral agent to all of the rights of a holder of the
senior notes, including interest payments, voting, redemption and
repayment rights; and
. each holder of units that include treasury securities will retain
ownership of the treasury securities.
We will have no interest in the pledged securities other than our security
interest.
Quarterly Payments on Pledged Securities
Except as described in "--Description of the Purchase Contracts," the
collateral agent, upon receipt of quarterly interest payments on the pledged
securities underlying the normal units, will distribute those payments to the
purchase contract agent, which will, in turn, distribute that amount to persons
who were the holders of normal units on the record date for the payment. As
long as the units remain in book-entry only form, the record date for any
payment will be one business day before the payment date.
Termination of Purchase Contracts
The purchase contracts, our related rights and obligations and those of the
holders of the units, including their rights to receive contract adjustment
payments and obligations to purchase our common stock, will automatically
terminate upon the occurrence of particular events of our bankruptcy,
insolvency or reorganization.
Upon such a termination of the purchase contracts, the collateral agent
will release the securities held by it to the purchase contract agent for
distribution to the holders. If a holder would otherwise have been entitled to
receive less than $1,000 principal amount at maturity of any treasury security
upon termination of the purchase contract, the purchase contract agent will
dispose of the security for cash and pay the cash to the holder. Upon
termination, however, the release and distribution may be subject to a delay.
If we become the subject of a case under the federal bankruptcy code, a delay
in the release of the pledged senior notes or treasury securities may occur as
a result of the automatic stay under the bankruptcy code and continue until the
automatic stay has been lifted. The automatic stay will not be lifted until
such time as the bankruptcy judge agrees to lift it and return your collateral
to you.
The Purchase Contract Agreement
Distributions on the units will be payable, purchase contracts will be
settled and transfers of the units will be registrable at the office of the
purchase contract agent in the Borough of Manhattan, The City of New York. In
addition, if the units do not remain in book-entry form, payment of
distributions on the units may be made, at our option, by check mailed to the
address of the persons shown on the unit register.
If any quarterly payment date or the stock purchase date is not a business
day, then any payment required to be made on that date must be made on the next
business day (and so long as the payment is made on the next business day,
without any interest or other payment on account of any such delay), except
that if the next business day is in the next calendar year, the payment or
settlement will be made on the prior business day with the same force and
effect as if made on the payment date. A "business day" means any day other
than Saturday, Sunday or any other day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to be
closed.
If your units are held in certificated form and you fail to surrender the
certificate evidencing your units to the purchase contract agent on the stock
purchase date, the shares of our common stock issuable in settlement of the
related purchase contracts will be registered in the name of the purchase
contract agent. These shares,
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together with any distributions on them, will be held by the purchase contract
agent as agent for your benefit, until the certificate is presented and
surrendered or you provide satisfactory evidence that the certificate has been
destroyed, lost or stolen, together with any indemnity that may be required by
the purchase contract agent and us.
If your units are held in certificated form and (1) the purchase contracts
have terminated prior to the stock purchase date, (2) the related pledged
securities have been transferred to the purchase contract agent for
distribution to the holders and (3) you fail to surrender the certificate
evidencing your units to the purchase contract agent, the pledged securities
that would otherwise be delivered to you and any related payments will be held
by the purchase contract agent as agent for your benefit, until you present and
surrender the certificate or provide the evidence and indemnity described
above.
The purchase contract agent will not be required to invest or to pay
interest on any amounts held by it before distribution.
No service charge will be made for any registration of transfer or exchange
of the units, except for any applicable tax or other governmental charge.
Modification
The purchase contract agreement, the pledge agreement and the purchase
contracts may be amended with the consent of the holders of a majority of the
units at the time outstanding. However, no modification may, without the
consent of the holder of each outstanding unit affected by the modification:
. change any payment date;
. change the amount or type of pledged securities required to be pledged
to secure obligations under the units, impair the right of the holder of
any units to receive distributions on the pledged securities underlying
the units or otherwise adversely affect the holder's rights in or to the
pledged securities;
. change the place or currency of payment for any amounts payable in
respect of the units, increase any amounts payable by holders in respect
of the units or decrease any other amounts receivable by holders in
respect of the units;
. reduce any contract adjustment payment or change the place or currency
of that payment;
. impair the right to institute suit for the enforcement of any purchase
contract;
. reduce the number of shares of common stock purchasable under any
purchase contract, increase the price to purchase shares of common stock
on settlement of any purchase contract, change the stock purchase date
or otherwise adversely affect the holder's rights under any purchase
contract; or
. reduce the above stated percentage of outstanding units the consent of
whose holders is required for the modification or amendment of the
provisions of the purchase contract agreement, the pledge agreement or
the purchase contracts.
Consolidation, Merger, Sale or Conveyance
We will agree in the purchase contract agreement that we will not (1) merge
with or into or consolidate with any other entity or (2) sell, assign,
transfer, lease or convey all or substantially all of our properties and assets
to any person, firm or corporation other than, with respect to clause (2), a
direct or indirect wholly-owned subsidiary of Motorola, Inc., unless:
. we are the continuing corporation or the successor corporation is a
corporation organized under the laws of the United States of America or
any state or the District of Columbia;
. the successor entity expressly assumes its obligations under the
purchase contract agreement, the pledge agreement, the purchase
contracts and the remarketing agreement; and
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. we or such corporation is not, immediately after such merger,
consolidation, sale, assignment, transfer, lease or conveyance, in
default in the performance of any of our or its obligations under the
purchase contract agreement, the pledge agreement, the purchase
contracts or the remarketing agreement.
Title
We, the purchase contract agent and the collateral agent may treat the
registered holder of any units as the absolute owner of those units for the
purpose of making payment and settling the related purchase contracts and for
all other purposes.
Governing Law
The purchase contract agreement, the pledge agreement and the purchase
contracts will be governed by, and construed in accordance with, the laws of
the State of New York.
Book-Entry System
The Depository Trust Company ("DTC") will act as securities depositary for
the units. The units will be issued only as fully-registered securities
registered in the name of Cede & Co., the depositary's nominee. One or more
fully-registered global security certificates, representing the total aggregate
number of units, will be issued and deposited with the depositary and will bear
a legend regarding the restrictions on exchanges and registration of transfer
referred to below.
The laws of some jurisdictions require that some purchasers of securities
take physical delivery of securities in definitive form. Those laws may impair
the ability to transfer beneficial interests in the units so long as the units
are represented by global security certificates.
The depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934.
The depositary holds securities that its participants deposit with the
depositary. The depositary also facilitates the settlement among participants
of securities transactions, including transfers and pledges, in deposited
securities through electronic computerized book-entry changes in participants'
accounts, thus eliminating the need for physical movement of securities
certificates. Direct participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
The depositary is owned by a number of its direct participants and by the NYSE,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc., collectively referred to as participants. Access to the
depositary system is also available to others, including securities brokers and
dealers, bank and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a direct participant either
directly or indirectly, collectively referred to as indirect participants. The
rules applicable to the depositary and its participants are on file with the
SEC.
No units represented by global security certificates may be exchanged in
whole or in part for units registered, and no transfer of global security
certificates will be made in whole or in part for units registered, and no
transfer of global security certificates in whole or in part may be registered,
in the name of any person other than the depositary or any nominee of the
depositary, unless, however, the depositary has notified us that it is
unwilling or unable to continue as depositary for the global security
certificates, has ceased to be qualified to act as required by the purchase
contract agreement or there is a continuing default by us in respect of our
obligations under one or more purchase contracts, the indenture, the purchase
contract agreement, the senior notes, the units, the pledge agreement or any
other principal agreements or instruments executed in connection with this
offering. All units represented by one or more global security certificates or
any portion of them will be registered in those names as the depositary may
direct.
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As long as the depositary or its nominee is the registered owner of the
global security certificates, the depositary or that nominee will be considered
the sole owner and holder of the global security certificates and all units
represented by those certificates for all purposes under the units and the
purchase contract agreement. Except in the limited circumstances referred to
above, owners of beneficial interests in global security certificates will not
be entitled to have the global security certificates or the units represented
by those certificates registered in their names, will not receive or be
entitled to receive physical delivery of units certificates in exchange and
will not be considered to be owners or holders of the global security
certificates or any units represented by those certificates for any purpose
under the units or the purchase contract agreement. All payments on the units
represented by the global security certificates and all related transfers and
deliveries of senior notes, treasury securities and common stock will be made
to the depositary or its nominee as their holder.
Ownership of beneficial interests in the global security certificates will
be limited to participants or persons that may hold beneficial interests
through institutions that have accounts with the depositary or its nominee.
Ownership of beneficial interests in global security certificates will be shown
only on, and the transfer of those ownership interests will be effected only
through, records maintained by the depositary or its nominee with respect to
participants' interests or by the participant with respect to interests of
persons held by the participants on their behalf.
Procedures for settlement of purchase contracts on the stock purchase date
or upon early settlement will be governed by arrangements among the depositary,
participants and persons that may hold beneficial interests through
participants designed to permit the settlement without the physical movement of
certificates. Payments, transfers, deliveries, exchanges and other matters
relating to beneficial interests in global security certificates may be subject
to various policies and procedures adopted by the depositary from time to time.
Neither we or any of our agents, nor the purchase contract agent or any of
its agents, will have any responsibility or liability for any aspect of the
depositary's or any participant's records relating to, or for payments made on
account of, beneficial interests in global security certificates, or for
maintaining, supervising or reviewing any of the depositary's records or any
participant's records relating to those beneficial ownership interests.
The information in this section concerning the depositary and its book-
entry system has been obtained from sources that we believe to be reliable, but
we do not take responsibility for its accuracy.
Replacement of Units Certificates
If physical certificates are issued, we will replace any mutilated
certificate at your expense upon surrender of that certificate to the unit
agent. We will replace certificates that become destroyed, lost or stolen at
your expense upon delivery to us and the purchase contract agent of
satisfactory evidence that the certificate has been destroyed, lost or stolen,
together with any indemnity that may be required by the purchase contract agent
and us.
We, however, are not required to issue any certificates representing units
on or after the stock purchase date or after the purchase contracts have
terminated. In place of the delivery of a replacement certificate following the
stock purchase date, the purchase contract agent, upon delivery of the evidence
and indemnity described above, will deliver the shares of our common stock
issuable pursuant to the purchase contracts included in the units evidenced by
the certificate, or, if the purchase contracts have terminated prior to the
stock purchase date, transfer the pledged securities related to the units
evidenced by the certificate.
Information Concerning the Purchase Contract Agent
First Union Trust Company, National Association will initially act as
purchase contract agent. The purchase contract agent will act as the agent and
attorney-in-fact for the holders of units from time to time. The
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purchase contract agreement will not obligate the purchase contract agent to
exercise any discretionary authority in connection with a default under the
terms of the purchase contract agreement, the pledge agreement and the purchase
contracts, or the pledged securities.
The purchase contract agreement will contain provisions limiting the
liability of the purchase contract agent. The purchase contract agreement will
contain provisions under which the purchase contract agent may resign or be
replaced. Resignation or replacement of the purchase contract agent would be
effective upon the appointment of a successor.
The purchase contract agent is one of a number of banks with which we and
our subsidiaries maintain ordinary banking and trust relationships.
Information Concerning the Collateral Agent
The Chase Manhattan Bank will initially act as collateral agent. The
collateral agent will act solely as our agent and will not assume any
obligation or relationship of agency or trust for or with any of the holders of
the units except for the obligations owed by a pledgee of property to the owner
thereof under the pledge agreement and applicable law.
The pledge agreement will contain provisions limiting the liability of the
collateral agent. The pledge agreement will contain provisions under which the
collateral agent may resign or be replaced. Resignation or replacement of the
collateral agent would be effective upon the appointment of a successor.
The collateral agent is one of a number of banks with which we and our
subsidiaries maintain ordinary banking and trust relationships.
Miscellaneous
The purchase contract agreement will provide that we will pay all fees and
expenses related to:
. the offering of the units;
. the retention of the collateral agent;
. the enforcement by the purchase contract agent of the rights of the
holders of the units; and
. with certain exceptions, stock transfer and similar taxes attributable
to the initial issuance and delivery of our common stock upon settlement
of the purchase contracts.
Should you elect to create stripped units or recreate normal units, you
will be responsible for any fees or expenses payable in connection with the
substitution of the applicable pledged securities, as well as any commissions,
fees or other expenses incurred in acquiring the pledged securities to be
substituted, and we will not be responsible for any of those fees or expenses.
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DESCRIPTION OF THE SENIOR NOTES
The senior notes are to be issued under our indenture dated May 1, 1995
between Motorola and Bank One Trust Company, N.A., as trustee. A copy of the
indenture is on file with the SEC and may be obtained by accessing the Internet
address provided or contacting us as described under "Where You Can Find More
Information." The following description is qualified in its entirety by
reference to the provisions of the indenture. You should read the indenture
carefully to fully understand the terms of the senior notes.
Unless otherwise indicated, capitalized terms used in the following summary
that are defined in the indenture have the meanings used in the indenture.
General
The senior notes will mature on November 16, 2007. The senior notes will
initially pay interest at the annual rate of 6.50% on each February 16, May 16,
August 16 and November 16, commencing on February 16, 2002, for quarterly
payments due on or before August 16, 2004. If the senior notes are successfully
remarketed, they will pay interest at the reset rate from the date on which
they are successfully remarketed until they mature on November 16, 2007. If the
remarketing agent cannot establish a reset rate meeting the requirements
described under "Description of the Equity Security Units--Remarketing," the
remarketing agent will not reset the interest rate on the senior notes and the
reset rate will continue to be the initial annual rate of 6.50%, until the
remarketing agent can establish such a reset rate on a later remarketing date
prior to the stock purchase date. The senior notes are not redeemable prior to
their stated maturity except as described below.
The amount of interest payable for any period will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed will be computed on the basis of the actual number of days elapsed
in the 90-day period. In the event that any date on which interest is payable
on the senior notes is not a business day, the payment of the interest payable
on that date will be made on the next succeeding day that is a business day,
without any interest or other payment in respect of the delay, except that, if
the business day is in the next succeeding calendar year, then the payment will
be made on the immediately preceding business day, in each case with the same
force and effect as if made on the scheduled payment date.
The senior notes will be issued in denominations of $50 and integral
multiples of $50.
The senior notes will not have the benefit of a sinking fund.
Payment of the principal and interest on the senior notes will rank equally
with all of our other unsecured and unsubordinated debt. As of September 29,
2001, we had approximately $9.23 billion of indebtedness, and approximately
$364 million of guarantees by Motorola, that would have ranked equally with the
senior notes and approximately $581 million of indebtedness and redeemable
preferred securities that would have ranked junior to the senior notes.
The indenture does not limit the amount of additional indebtedness that we
or any of our subsidiaries may incur. The senior notes will be our exclusive
obligations. Since our operations are partially conducted through subsidiaries,
primarily overseas, the cash flow and the consequent ability to service debt,
including our senior notes, are partially dependent upon the earnings of our
subsidiaries and the distribution of those earnings to, or upon other payments
of funds by those subsidiaries to, us. The subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due on the senior notes or to make funds available for such
payments, whether by dividends, loans or other payments. In addition, the
payment of dividends and the making of loans and advances to us by our
subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries, and are subject to various
business considerations.
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Any right of Motorola to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the resulting right of the holders of
the senior notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that Motorola is itself recognized as a
creditor of such subsidiary, in which case our claims would be subordinated to
any security interests in the assets of such subsidiary and any indebtedness of
such subsidiary senior to that held by us. As of September 29, 2001, our
subsidiaries had outstanding approximately $4.3 billion of liabilities.
We may, without the consent of the holders of the senior notes, create and
issue additional notes ranking equally with the senior notes and otherwise
similar in all respects so that such further notes would be consolidated and
form a single series of notes.
Remarketing
The senior notes will be remarketed as described under "Description of the
Equity Security Units--Remarketing."
Optional Remarketing
On or prior to the fourth business day immediately preceding the first day
of a remarketing period, holders of senior notes that are not components of
normal units may elect to have their senior notes remarketed in the same manner
as senior notes that are components of normal units by delivering their senior
notes along with a notice of this election to the collateral agent. The
collateral agent will hold the senior notes in an account separate from the
collateral account in which the pledged securities will be held. Holders of
senior notes electing to have their notes remarketed will also have the right
to withdraw the election on or prior to the fourth business day immediately
preceding the first day of the relevant remarketing period.
Tax Event Redemption
If a tax event occurs and is continuing, we may, at our option, redeem the
senior notes in whole, but not in part, at any time at a price, which we refer
to as the redemption price, equal to, for each senior note, the redemption
amount referred to below plus accrued and unpaid interest, if any, to the date
of redemption. Installments of interest on senior notes which are due and
payable on or prior to a redemption date will be payable to holders of the
senior notes registered as such at the close of business on the relevant record
dates. If, following the occurrence of a tax event, we exercise our option to
redeem the senior notes, the proceeds of the redemption will be payable in cash
to the holders of the senior notes. If the tax event redemption occurs prior to
a successful remarketing of the senior notes, the redemption price for the
senior notes forming part of normal units at the time of the tax event
redemption will be distributed to the collateral agent, who in turn will
purchase the applicable Treasury portfolio described below on behalf of the
holders of normal units and remit the remainder of the redemption price, if
any, to the purchase contract agent for payment to the holders. The Treasury
portfolio will be substituted for corresponding senior notes and will be
pledged to the collateral agent to secure the obligations of the holders of the
normal units to purchase shares of our common stock under the purchase
contracts.
"Tax event" means the receipt by Motorola of an opinion of nationally
recognized tax counsel experienced in such matters (which may be McDermott,
Will & Emery) to the effect that there is more than an insubstantial risk that
interest payable by us on the senior notes on the next interest payment date
would not be deductible, in whole or in part, by us for United States federal
income tax purposes as a result of any amendment to, change in, or announced
proposed change in, the laws, or any regulations thereunder, of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, any amendment to or change in an official interpretation or
application of any such law or regulations by any legislative body, court,
governmental agency or regulatory authority or any official interpretation or
pronouncement that provides for a position with respect to any such laws or
regulations that differs from the generally accepted position on the date of
this prospectus supplement, which amendment, change, or proposed
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change is effective or which interpretation or pronouncement is announced on or
after the date of this prospectus supplement.
If a tax event redemption occurs prior to a successful remarketing of the
notes, the Treasury portfolio to be purchased on behalf of the holders of the
normal units will consist of interest or principal strips of U.S. Treasury
securities which mature on or prior to the stock purchase date in an aggregate
amount equal to the aggregate principal amount of the senior notes included in
the normal units and with respect to each scheduled interest payment date on
the senior notes that occurs after the tax event redemption date and on or
before November 16, 2004, interest or principal strips of U.S. Treasury
securities that mature on or prior to that interest payment date in an
aggregate amount equal to the aggregate interest payment that would be due on
the aggregate principal amount of the senior notes on that date if the interest
rate of the senior notes were not reset on the applicable reset date. These
Treasury securities are non-callable by us.
Solely for purposes of determining the Treasury portfolio purchase price in
the case of a tax event redemption date occurring prior to a successful
remarketing of the senior notes, "Treasury portfolio" shall mean a portfolio of
zero-coupon U.S. Treasury securities consisting of principal or interest strips
of U.S. Treasury securities that mature on or prior to the stock purchase date
in an aggregate amount equal to the aggregate principal amount of the senior
notes outstanding on the tax event redemption date and with respect to each
scheduled interest payment date on the senior notes that occurs after the tax
event redemption date and no later than the stock purchase date, interest or
principal strips of U.S. Treasury securities that mature on or prior to that
interest payment date in an aggregate amount equal to the aggregate interest
payment that would be due on the aggregate principal amount of the senior notes
outstanding on the tax event redemption date.
"Redemption amount" means in the case of a tax event redemption occurring
prior to a successful remarketing of the senior notes, for each senior note the
product of the principal amount of the note and a fraction whose numerator is
the Treasury portfolio purchase price and whose denominator is the aggregate
principal amount of senior notes included in normal units, and in the case of a
tax event redemption date occurring after a successful remarketing of the
senior notes, the par value of the senior notes.
"Treasury portfolio purchase price" means the lowest aggregate price quoted
by a primary U.S. government securities dealer in New York City to the
quotation agent on the third business day immediately preceding the tax event
redemption date for the purchase of the Treasury portfolio for settlement on
the tax event redemption date.
"Quotation agent" means Goldman, Sachs & Co., J.P. Morgan Securities Inc.
or Salomon Smith Barney Inc., or any of their successors or any other primary
U.S. government securities dealer in New York City selected by us.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each registered holder of senior notes to
be redeemed at its registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest shall cease to
accrue on the senior notes. In the event any notes are called for redemption,
neither we nor the trustee will be required to register the transfer of or
exchange the notes to be redeemed.
Book-Entry and Settlement
Senior notes that are released from the pledge following substitution or
early settlement will be issued in the form of one or more global certificates,
which we refer to as global securities, registered in the name of the
depositary or its nominee. Except as provided below and except upon recreation
of normal units, owners of beneficial interests in such a global security will
not be entitled to receive physical delivery of notes in certificated form and
will not be considered the holders (as defined in the indenture) thereof for
any purpose under the indenture, and no global security representing notes
shall be exchangeable, except for another global security of like denomination
and tenor to be registered in the name of the depositary or its nominee or a
successor depositary or its nominee. Accordingly, each beneficial owner must
rely on the procedures of the
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depositary or if such person is not a participant, on the procedures of the
participant through which such person owns its interest to exercise any rights
of a holder under the indenture.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of the securities in certificated form. These
laws may impair the ability to transfer beneficial interests in such a global
security.
In the event that
. the depositary notifies us that it is unwilling or unable to continue
as a depositary for the global security certificates and no successor
depositary has been appointed within 90 days after this notice, or
. the depositary at any time ceases to be a clearing agency registered
under the Securities Exchange Act at which time the depositary is
required to be so registered to act as the depositary and no successor
depositary has been appointed within 90 days after we learn that the
depositary has ceased to be so registered, or
. we determine in our sole discretion that we will no longer have debt
securities represented by global securities or permit any the global
security certificates to be exchangeable or an event of default under
the indenture has occurred and is continuing,
certificates for the notes will be printed and delivered in exchange for
beneficial interests in the global security certificates. Any global note that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
note certificates registered in the names directed by the depositary. We expect
that these instructions will be based upon directions received by the
depositary from its participants with respect to ownership of beneficial
interests in the global security certificates.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material U.S. federal income tax
consequences of the purchase, ownership and disposition of the units, the
senior notes, treasury securities and purchase contracts that are or may be the
components of a unit, and shares of our common stock acquired under a purchase
contract to U.S. holders who purchase units in the initial offering at their
original offering price and hold the units, senior notes, treasury securities,
purchase contracts and shares of our common stock as capital assets. For
purposes of this discussion, the term "U.S. holder" means an individual who is
a citizen or resident of the United States, a U.S. domestic corporation or any
other entity or person generally subject to U.S. federal income tax on a net
income basis. This discussion is based upon the Internal Revenue Code of 1986
as amended (the "Code"), treasury regulations (including proposed treasury
regulations) issued thereunder, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject
to change, possibly with retroactive effect.
This discussion does not address all aspects of U.S. federal income
taxation that may be relevant to U.S. holders in light of their particular
circumstances, such as U.S. holders who are subject to special tax treatment
(for example, (1) banks, regulated investment companies, insurance companies,
dealers in securities or currencies or tax-exempt organizations, (2) persons
holding units, senior notes or shares of common stock as part of a straddle,
hedge, conversion transaction or other integrated investment, or (3) persons
whose functional currency is not the U.S. dollar), some of which may be subject
to special rules, nor does it address alternative minimum taxes or state, local
or foreign taxes. Prospective investors that are not U.S. holders are urged to
consult their own tax advisors with respect to the U.S. federal income tax
consequences of an investment in units, including the potential application of
the U.S. withholding taxes.
No statutory, administrative or judicial authority directly addresses the
treatment of units or instruments similar to units for U. S. federal income tax
purposes. As a result, no assurance can be given that the IRS or a court will
agree with the tax consequences described herein. Prospective investors are
urged to consult their own tax advisors with respect to the U.S. federal income
tax consequences of the purchase, ownership and disposition of units, senior
notes and shares of common stock acquired under a purchase contract in light of
their own particular circumstances, as well as the effect of any state, local
or foreign tax laws.
Normal Units
Allocation of Purchase Price. A U.S. holder's acquisition of a normal unit
will be treated as an acquisition of the senior note and the purchase contract
constituting the unit for U.S. federal income tax purposes. The purchase price
of each unit will be allocated among the senior note and the purchase contract
constituting the unit, in proportion to their respective fair market values at
the time of purchase. Such allocation will establish the U.S. holder's initial
tax basis in the senior note and the purchase contract. We expect to report the
fair market value of each senior note as $50.00 and the fair market value of
each purchase contract as $0.00. This position will be binding on each U.S.
holder (but not on the IRS) unless such U.S. holder explicitly discloses a
contrary position on a statement attached to such U.S. holder's timely filed
U.S. federal income tax returns for the taxable year in which a unit is
acquired. Thus, absent such disclosure, a U.S. holder should allocate the
purchase price for a unit in accordance with the values reported by us. The
remainder of this discussion assumes that this allocation of the purchase price
of a unit will be respected for U.S. federal income tax purposes.
Ownership of Senior Notes or Treasury Securities. For U.S. federal income
tax purposes, a U.S. holder will be treated as owning the senior notes or
treasury securities constituting a part of the units owned. We (under the terms
of the units) and each U.S. holder (by acquiring units) agree to treat the
senior notes or treasury securities constituting a part of the units as owned
by such U.S. holder for all tax purposes, and the remainder of this summary
assumes such treatment. The U.S. federal income tax consequences of owning the
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senior notes or treasury securities are discussed below (see --"Senior Notes,"
--"Stripped Units," -- and "Treasury Securities Purchased on Remarketing").
Sales, Exchanges or Other Taxable Dispositions of Units. If a U.S. holder
sells, exchanges or otherwise disposes of units in a taxable disposition, such
U.S. holder will be treated as having sold, exchanged or disposed of each of
the purchase contract and the senior note (or treasury securities) that
constitute such unit. The proceeds realized on such disposition will be
allocated among the purchase contract and the senior note (or treasury
securities) in proportion to their respective fair market values. As a result,
as to each of the purchase contract and the senior note (or treasury
securities), a U.S. holder generally will recognize gain or loss equal to the
difference between the portion of the proceeds received by such U.S. holder
that is allocable to the purchase contract and the senior note (or treasury
securities) and such U.S. holder's adjusted tax basis in the purchase contract
and the senior note (or treasury securities), except that amounts received by a
taxpayer who uses a cash method of tax accounting with respect to accrued but
unpaid interest on treasury securities will be treated as ordinary interest
income to the extent not previously taken into income. For treatment of amounts
received with respect to contract adjustment payments or deferred contract
adjustment payments, see --"Purchase Contracts--Contract Adjustment Payments
and Deferred Contract Adjustment Payments" below.
In the case of the purchase contract and the treasury securities, such gain
or loss generally will be capital gain or loss. Such gain or loss generally
will be long-term capital gain or loss if the U.S. holder held the units for
more than one year immediately prior to such disposition. Long-term capital
gains of individuals are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations. The rules governing
the determination of the character of gain or loss on the disposition of a
senior note are summarized under --"Senior Notes--Sales, Exchanges, Remarketing
or Other Taxable Dispositions of Senior Notes." Because gain or loss on
disposition of a senior note may be treated as ordinary income or loss,
disposition of a unit constituting of a purchase contract and a senior note may
give rise to capital gain or loss on the purchase contract and ordinary income
or loss on the senior note, which must be reported separately for U.S. federal
income tax purposes.
If the sale, exchange or other disposition of a unit occurs when the
purchase contract has a negative value, a U.S. holder should be considered to
have received additional consideration for the senior note (or treasury
securities) in an amount equal to such negative value and to have paid such
amount to be released from such U.S. holder's obligations under the related
purchase contract. Because, as discussed below, any gain on the disposition of
a senior note prior to the purchase contract settlement date generally will be
treated as ordinary interest income for U.S. federal income tax purposes, the
ability to offset such interest income with a loss on the purchase contract may
be limited. U.S. holders should consult their tax advisors regarding a
disposition of a unit at a time when the purchase contract has a negative
value.
Senior Notes
Classification of the Senior Notes. In connection with the issuance of the
senior notes, our special tax counsel, McDermott, Will & Emery, is of the
opinion that, under current law, and based on certain representations, facts
and assumptions set forth in the opinion, the senior notes will be classified
as indebtedness for U.S. federal income tax purposes. We (under the terms of
the senior notes) and each U.S. holder (by acquiring senior notes) agree to
treat the senior notes as our indebtedness for all tax purposes.
Original Issue Discount. Because of the manner in which the interest rates
on the senior notes are reset, the senior notes will be classified as
contingent payment debt instruments subject to the "noncontingent bond
method" for accruing original issue discount, as set forth in the applicable
Treasury Regulations.
As discussed more fully below, the effects of applying such method will be
(1) to require each U.S. holder, regardless of such holder's usual method of
tax accounting, to use an accrual method with respect to the interest income on
senior notes, (2) to require each U.S. holder to accrue interest income in
excess of interest payments actually received for all accrual periods through
August 16, 2004, and possibly for accrual
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periods thereafter, and (3) generally to result in ordinary, rather than
capital, treatment of any gain or loss on the sale, exchange or other
disposition of senior notes. (See --"Sales, Exchanges, Remarketing or Other
Taxable Dispositions of Senior notes" below.)
A U.S. holder will be required to accrue original issue discount on a
constant yield to maturity basis based on the "comparable yield" of the senior
notes. The comparable yield of the senior notes generally will be the rate at
which we would issue a fixed rate noncontingent debt instrument with terms and
conditions similar to the senior notes. We have determined that the comparable
yield is 7.45% and the projected payments are $0.96 on February 16, 2002, $0.81
for each subsequent quarter ending on or prior to August 16, 2004 and $1.06 for
each quarter ending after August 16, 2004. We have also determined that the
projected payment for the senior notes, per $50 of principal amount, at the
maturity date is $51.06 (which includes the stated principal amount of the
senior notes as well as the final projected interest payment).
The amount of original issue discount on a senior note for each accrual
period is determined by multiplying the comparable yield of the senior note
(adjusted for the length of the accrual period) by the senior note's adjusted
issue price at the beginning of the accrual period. Based on the allocation of
the purchase price of each unit described above (see --"Normal Units" --
"Allocation of Purchase Price"), the adjusted issue price of each senior note,
per $50 of principal amount, at the beginning of the first accrual period will
be $50, and the adjusted issue price of each senior note at the beginning of
each subsequent accrual period will be equal to $50, increased by any original
issue discount previously accrued by such U.S. holder on such senior note and
decreased by the amount of projected payments on such senior note through such
date. The amount of original issue discount so determined will then be
allocated on a ratable basis to each day in the accrual period that such U.S.
holder holds the senior note.
If after the date on which the interest rate on the senior notes is reset,
the remaining amounts of principal and interest payable differ from the
payments set forth on the applicable projected payment schedule, negative or
positive adjustments reflecting such difference should generally be taken into
account by such U.S. holder as adjustments to interest income in a reasonable
manner over the period to which they relate. We expect to account for any such
difference with respect to a period as an adjustment for that period.
A U.S. holder is generally bound by the comparable yield and projected
payment schedule provided by us under the terms of the units. The comparable
yield and projected payment schedules are supplied us solely for computing
income under the noncontingent bond method for U.S. federal income tax purposes
and do not constitute projections or representations as to the amounts that
such U.S. holder will actually receive as a result of owning senior notes or
units.
Tax Basis in Senior Notes. A U.S. holder's tax basis in a senior note will
be equal to the portion of the purchase price for the units allocated to the
senior notes as described above (see --"Normal Units" --"Allocation of Purchase
Price"), increased by the amount of original issue discount included in income
with respect to the senior note and decreased by the amount of projected
payments with respect to the senior note through the computation date.
Sales, Exchanges, Remarketing or Other Taxable Dispositions of Senior
Notes. A U.S. holder will recognize gain or loss on a disposition of senior
notes (including a redemption for cash or upon the remarketing thereof) in an
amount equal to the difference between the amount realized by such U.S. holder
on the disposition of the senior notes and such U.S. holder's adjusted tax
basis in such senior notes. Selling expenses incurred by such U.S. holder,
including the remarketing fee, will reduce the amount of gain or increase the
amount of loss recognized by such U.S. holder upon a disposition of senior
notes. Gain recognized on the disposition of a senior note prior to the date on
which the interest rate on the senior notes is reset will be treated as
ordinary interest income. Loss recognized on the disposition of a senior note
prior to the interest rate reset date will be treated as ordinary loss to the
extent of such U.S. holder's prior inclusions of original issue discount on the
senior note. Any loss in excess of such amount will be treated as a capital
loss. In general, gain recognized on the disposition of a senior note on or
after the interest rate reset date will be ordinary interest
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income to the extent attributable to the excess, if any, of the total remaining
principal and interest payments due on the senior note over the total remaining
payments set forth on the projected payment schedule for the senior note. Any
gain recognized in excess of such amount and any loss recognized on such a
disposition will generally be treated as a capital gain or loss. Long-term
capital gains of individuals are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations.
Purchase Contracts
Acquisition of our Common Stock Under a Purchase Contract. A U.S. holder
generally will not recognize gain or loss on the purchase of our common stock
under a purchase contract, except with respect to any cash paid to a U.S.
holder in lieu of a fractional share of our common stock, which should be
treated as paid in exchange for such fractional share. A U.S. holder's
aggregate initial tax basis in the common stock received under a purchase
contract should generally equal the purchase price paid for such common stock,
plus the properly allocable portion of such U.S. holder's adjusted tax basis
(if any) in the purchase contract (see --"Normal Units"--"Allocations of
Purchase Price"), less the portion of such purchase price and adjusted tax
basis allocable to the fractional share. The holding period for our common
stock received under a purchase contract will commence on the day following the
acquisition of such common stock.
Early Settlement of Purchase Contract. The purchase of our common stock on
early settlement of a purchase contract will be taxed as described above. U.S.
holder of units will not recognize gain or loss on the return of such U.S.
holder's proportionate share of senior notes or treasury securities upon early
settlement of a purchase contract and will have the same adjusted tax basis and
holding period in such senior notes or treasury securities as before such early
settlement.
Termination of Purchase Contract. If a purchase contract terminates, a U.S.
holder of units will recognize a loss equal to such U.S. holder's adjusted tax
basis (if any) in the purchase contract at the time of such termination. Any
such loss will be capital. The deductibility of capital losses is subject to
limitations. A U.S. holder will not recognize gain or loss on the return of
such U.S. holder's proportionate share of senior notes or treasury securities
upon termination of the purchase contract and such U.S. holder will have the
same adjusted tax basis and holding period in such senior notes or treasury
securities as before such termination.
Adjustment to Settlement Rate. A U.S. holder of units might be treated as
receiving a constructive dividend distribution from us if (1) the settlement
rate is adjusted and as a result of such adjustment such U.S. holder's
proportionate interest in our assets or earnings and profits is increased and
(2) the adjustment is not made pursuant to a bona fide, reasonable anti-
dilution formula. An adjustment in the settlement rate would not be considered
made pursuant to such a formula if the adjustment were made to compensate a
U.S. holder for certain taxable distributions with respect to the common stock.
Thus, under certain circumstances, an increase in the settlement rate might
give rise to a taxable dividend to a U.S. holder of units even though such U.S.
holder would not receive any cash related thereto.
Contract Adjustment Payments and Deferred Contract Adjustment
Payments. There is no direct authority addressing the treatment, under current
law, of the contract adjustment payments or deferred contract adjustment
payments, and such treatment is, therefore, unclear. Contract adjustment
payments and deferred contract adjustment payments may constitute taxable
ordinary income to a U.S. holder when received or accrued, in accordance with
such U.S. holder's regular method of tax accounting. We intend to file
information returns that report contract adjustment payments and deferred
contract adjustment payments as taxable ordinary income to U.S. holders. U.S.
holders should consult their tax advisors concerning the treatment of contract
adjustment payments and deferred contract adjustment payments, including the
possibility that any contract adjustment payment or deferred contract
adjustment payment may be treated as a loan, purchase price adjustment, rebate
or payment analogous to an option premium, rather than being includible in
income on a current basis.
The treatment of contract adjustment payments and deferred contract
adjustment payments could affect a U.S. holder's adjusted tax basis in a
purchase contract or shares of our common stock received under a
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purchase contract or the amount realized by a U.S. holder upon the sale or
disposition of a unit or the termination of a purchase contract. In particular,
. amounts received on sale or disposition of a unit or on termination of a
purchase contract with respect to any accrued but unpaid contract
adjustment payments or deferred contract adjustment payments that have
not been included in a U.S. holder's income may be treated as ordinary
income
. any contract adjustment payments or deferred contract adjustment
payments that have been included in a U.S. holder's income, but that
have not been paid to such U.S. holder, should increase such
U.S. holder's adjusted tax basis in the purchase contract
. any contract adjustment payments or deferred contract adjustment
payments that have been paid to a U.S. holder, but that have not been
included in such U.S. holder's income, should either reduce such U.S.
holder's adjusted tax basis in the purchase contract or result in an
increase in the amount realized on termination or disposition of the
purchase contract.
Common Stock
Any distribution on our common stock paid by us out of our current or
accumulated earnings and profits (as determined for U.S. federal income tax
purposes) will constitute a dividend and will be includible in income by a U.S.
holder when received. Any such dividend will be eligible for the dividends
received deduction if the U.S. holder is an otherwise qualifying corporate
holder that meets the holding period and other requirements for the dividends
received deduction.
Upon a disposition of our common stock, a U.S. holder will recognize
capital gain or loss in an amount equal to the difference between the amount
realized and such U.S. holder's adjusted tax basis in our common stock (see --
"Purchase Contracts"--"Acquisition of our Common Stock Under a Purchase
Contract"). Capital gains of individuals derived in respect of capital assets
held for more than one year are eligible for reduced rates of taxation.
Stripped Units
Substitution of Treasury Securities to Create Stripped Units. A U.S. holder
of normal units who delivers treasury securities to the collateral agent in
substitution for senior notes or other pledged securities generally will not
recognize gain or loss upon the delivery of such treasury securities or the
release of the senior notes or other pledged securities to such U.S. holder.
Such U.S. holder will continue to take into account items of income or
deduction otherwise includible or deductible, respectively, by such U.S. holder
with respect to such treasury securities and senior notes or other pledged
securities, and the purchase contract will not be affected by such delivery and
release. In general, a U.S. holder will be required for U.S. federal income tax
purposes to recognize original issue discount on the treasury securities on a
constant yield basis, or acquisition discount on the treasury securities when
it is paid or accrues generally in accordance with such U.S. holder's normal
method of accounting. U.S. holders should consult their own tax advisors
concerning the tax consequences of purchasing, owning and disposing of the
treasury securities so delivered to the collateral agent.
Substitution of Senior Notes to Recreate Normal Units. A U.S. holder of
stripped units who delivers senior notes to the collateral agent in
substitution for pledged treasury securities generally will not recognize gain
or loss upon the delivery of such senior notes or the release of the pledged
treasury securities to such U.S. holder. Such U.S. holder will continue to take
into account items of income or deduction otherwise includible or deductible,
respectively, by such holder with respect to such pledged treasury securities
and such senior notes. Such U.S. holder's tax basis in the senior notes, the
pledged treasury securities and the purchase contract will not be affected by
such delivery and release. U.S. holders should consult their own advisors
concerning the tax consequences of purchasing, owning and disposing of the
treasury securities so released to them.
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Treasury Securities Purchased on Remarketing
A U.S. holder's initial basis in the treasury securities purchased by the
collateral agent in connection with a remarketing will be equal to the amount
paid for the treasury securities.
If a U.S. holder is on the cash method of accounting, it will generally not
include income on these treasury securities until payment is received on them.
If a U.S. holder is on the accrual method of accounting, it will be required to
include acquisition discount in income over the remaining term of the treasury
securities and will increase its basis in the treasury securities by the amount
of acquisition discount included in income.
Backup Withholding Tax and Information Reporting
Unless a U.S. holder is an exempt recipient, such as a corporation,
payments under units, senior notes, purchase contracts, treasury securities or
common stock, the proceeds received with respect to a fractional share of
common stock upon the settlement of a purchase contract, and the proceeds
received from the sale of units, senior notes, purchase contracts, treasury
securities or common stock, may be subject to information reporting and may
also be subject to U.S. federal backup withholding tax if such U.S. holder
fails to supply accurate taxpayer identification numbers or otherwise fail to
comply with applicable U.S. information reporting or certification
requirements. The U.S. federal backup withholding tax rate for 2001 is 30.5%
and is scheduled to be reduced gradually to 28% by the year 2006 for payments
made prior to taxable years beginning after December 31, 2010. Any amounts so
withheld will be allowed as a credit against the U.S. holder's U.S. federal
income tax liability.
ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
acquisition, holding and disposition of units (and the securities underlying
such units) by employee benefit plans that are subject to Title I of the U.S.
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), plans,
individual retirement accounts and other arrangements that are subject to
Section 4975 of the Code or provisions under any federal, state, local, non-
U.S. or other laws or regulations that are similar to such provisions of the
Code or ERISA (collectively, "similar laws"), and entities whose underlying
assets are considered to include "plan assets" of such plans, accounts and
arrangements (each, a "plan").
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of
a plan subject to Title I of ERISA or Section 4975 of the Code and prohibit
certain transactions involving the assets of a plan and its fiduciaries or
other interested parties. Under ERISA and the Code, any person who exercises
any discretionary authority or control over the administration of such a plan
or the management or disposition of the assets of such a plan, or who renders
investment advice for a fee or other compensation to such a plan, is generally
considered to be a fiduciary of the plan.
In considering an investment in the securities of a portion of the assets
of any plan, a fiduciary should determine whether the investment is in
accordance with the documents and instruments governing the plan and the
applicable provisions of ERISA, the Code or any similar law relating to a
fiduciary's duties to the plan including, without limitation, the prudence,
diversification, delegation of control and prohibited transaction provisions of
ERISA, the Code and any other applicable similar laws.
Any insurance company proposing to invest assets of its general account in
the securities should consider the extent that such investment would be subject
to the requirements of ERISA in light of the U.S. Supreme Court's decision in
John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank and
under any subsequent legislation or other guidance that has or may become
available relating to that decision, including the enactment of Section 401(c)
of ERISA by the Small Business Job Protection Act of 1996 and the regulations
promulgated thereunder.
S-49
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit plans subject to
Title I of ERISA or Section 4975 of the Code from engaging in specified
transactions involving plan assets with persons or entities who are "parties in
interest," within the meaning of ERISA, or "disqualified persons," within the
meaning of Section 4975 of the Code, unless an exemption is available. A party
in interest or disqualified person who engaged in a non-exempt prohibited
transaction may be subject to excise taxes and other penalties and liabilities
under ERISA and the Code. In addition, the fiduciary of the plan that engaged
in such a non-exempt prohibited transaction may be subject to penalties and
liabilities under ERISA and the Code.
The units (and the securities underlying such units) will be deemed to
constitute "plan assets" and the acquisition, holding and disposition of the
units (and the securities underlying such units) may constitute or result in a
direct or indirect prohibited transaction under Section 406 of ERISA and/or
Section 4975 of the Code, if Motorola, the seller or the purchaser is a party
in interest or disqualified person with respect to such plan, unless an
exemption is available. In this regard, the U.S. Department of Labor (the
"DOL") has issued prohibited transaction class exemptions, or "PTCEs," that may
apply to these transactions. These class exemptions include, without
limitation, PTCE 84-14 respecting transactions determined by independent
qualified professional asset managers, PTCE 90-1 respecting insurance company
pooled separate accounts, PTCE 91-38 respecting bank collective investment
trust partnerships, PTCE 95-60 respecting life insurance company general
accounts, PTCE 96-23 respecting transactions determined by in-house asset
managers, and PTCE 75-1 respecting principal transactions by a broker-dealer,
although there can be no assurance that all of the conditions of any such
exemptions will be satisfied.
Accordingly, by its purchase of the units (and the securities underlying
such units), each holder, and the fiduciary of any plan that is a holder, will
be deemed to have represented and warranted on each day from and including the
date of its purchase of the units (and the securities underlying such units)
through and including the date of disposition of the satisfaction of its
obligation under the purchase contract and the disposition of any such unit
(and any security underlying such unit) either (i) that it is not a plan or
(ii) that the acquisition, holding and the disposition of any unit (and any
security underlying such unit) by such holder does not and will not constitute
a prohibited transaction under ERISA or Section 4975 of the Code or other
similar laws unless an exemption is available with respect to such transactions
and the conditions of such exemption have been satisfied.
In addition, no plan will be permitted to participate in the remarketing
program unless and until such plan provides the remarketing agent with
assurances, reasonably satisfactory to the remarketing agent, that such
participation in the remarketing program will not constitute a prohibited
transaction under ERISA or Section 4975 of the Code or other similar laws for
which an exemption is not available.
Any plan or other entity whose assets include plan assets subject to ERISA,
Section 4975 of the Code or substantially similar federal, state or local law
should consult their advisors and/or counsel.
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UNDERWRITING
Motorola and the underwriters named below have entered into an underwriting
agreement with respect to the units. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of units set forth in
the following table.
Number of
Underwriters Units
------------ ----------
Goldman, Sachs & Co........................................... 5,716,664
J.P. Morgan Securities Inc.................................... 5,716,664
Salomon Smith Barney Inc...................................... 5,716,664
ABN AMRO Rothschild LLC....................................... 700,001
Banc of America Securities LLC................................ 700,001
Deutsche Banc Alex. Brown Inc. ............................... 700,001
BMO Nesbitt Burns Corp. ...................................... 350,001
BNP Paribas Securities Corp. ................................. 350,001
Dresdner Kleinwort Wasserstein................................ 350,001
Mizuho International plc...................................... 350,001
SG Cowen Securities Corporation............................... 350,001
----------
Total..................................................... 21,000,000
==========
If the underwriters sell more units than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
3,000,000 units from us to cover such sales. They may exercise that option for
30 days. If any units are purchased pursuant to this option, the underwriters
will severally purchase units in approximately the same proportion as set forth
above.
The following table summarizes the underwriting discounts and commissions
we will pay.
Full
Paid by Motorola, Inc. No Exercise Exercise
---------------------- ----------- -----------
Per Unit............................................. $1.50 $1.50
Total................................................ $31,500,000 $36,000,000
Units sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. Any units sold by the underwriters to securities dealers may be
sold at a discount from the initial public offering price of up to 0.35% of the
stated amount per unit. Any such securities dealers may resell any units
purchased from the underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to 0.25% of the stated
amount per unit. If all the units are not sold at the initial offering price,
the underwriters may change the offering price and the other selling terms.
The units are a new issue of securities with no established trading market.
We have been advised by the underwriters that the underwriters intend to make a
market in the units but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the units.
In connection with this offering, the underwriters may purchase and sell
the units in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
units than they are required to purchase in this offering. "Covered" short
sales are sales made in an amount not greater than the underwriters' option to
purchase additional units from us in the offering. The underwriters may close
out any covered short position by either exercising their option to purchase
additional units or purchasing units in the open market. In determining the
source of units to close out the covered short position, the underwriters will
consider, among other things, the price of units available for purchase in the
open market as compared to the price at which they may purchase units through
the overallotment option. "Naked" short sales are any sales in excess of such
option. The underwriters must close out any naked short position by purchasing
units in the
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open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the units in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the units while this offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased the units
sold by or for the account of such underwriter in stabilizing or short-covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the units. As a result, the price of the units may
be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected in the over-the-counter market or
otherwise.
Each underwriter has represented and agreed that (1) it has not offered or
sold and prior to the date six months after the date of issue of the units will
not offer or sell any units to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances that have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (2) it has complied, and will
comply, with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the units in,
from or otherwise involving the United Kingdom; and (3) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issuance of the units to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 of Great Britain or is a
person to whom the document may lawfully be issued or passed on.
The units may not be offered, sold, transferred or delivered in or from The
Netherlands, as part of their initial distribution or as part of any re-
offering, and neither this prospectus nor any other document in respect of the
offering may be distributed or circulated in The Netherlands, other than to
individuals or legal entities which include, but are not limited to, banks,
brokers, dealers, institutional investors and undertakings with a treasury
department, who or which trade or invest in securities in the conduct of a
business or profession.
We estimate that our share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately $1.2
million.
We have agreed for a period of 90 days, subject to certain exceptions, and
our executive officers and directors have agreed for a period of 30 days, not
to offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file with the SEC a registration statement under the Securities
Act of 1933 relating to, shares of our common stock, securities convertible
into or exchangeable or exercisable for any shares of our common stock, enter
into a transaction that would have the same effect, or enter into any swap,
hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether any such
aforementioned transaction is to be settled by delivery of offer, sale,
disposition or filing, without the prior written consent of Goldman, Sachs &
Co., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. We may take such
actions with respect to currently contemplated issuances of our common stock,
issuances of our common stock as consideration in future acquisitions and
transfers of our common stock to affiliates.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Salomon Smith Barney
Inc. are also joint bookrunning managers for our concurrent private placement
of our 8.00% notes due 2011.
S-52
From time to time, the underwriters and certain of their affiliates have
engaged, and may in the future engage, in transactions with, and perform
services for, us and our affiliates in the ordinary course of business. H.
Laurance Fuller, a director of Motorola, is also a director of J.P. Morgan
Chase & Co., which is an affiliate of J.P. Morgan Securities Inc. Dr. Walter E.
Massey, a director of Motorola, is also a director of Bank of America
Corporation, which is an affiliate of Banc of America Securities LLC.
LEGAL MATTERS
The validity of the units will be passed upon for Motorola by Jeffrey A.
Brown of our Law Department and Winston & Strawn, Chicago, Illinois. As of
September 30, 2001, Mr. Brown owned approximately 1,625 shares of our common
stock and held options to purchase 27,000 shares of our common stock, of which
options to purchase 5,375 shares were currently exercisable. Certain legal
matters relating to the units will be passed upon for the underwriters by
Cleary, Gottlieb, Steen & Hamilton, New York, New York.
EXPERTS
The consolidated financial statements and schedule of Motorola and
subsidiaries as of December 31, 2000 and 1999 and for each of the years in the
three-year period ended December 31, 2000 have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent certified public accountants, incorporated by reference herein
and in the registration statement, and upon the authority of said firm as
experts in auditing and accounting.
S-53
PROSPECTUS
$2,000,000,000
[MOTOROLA LOGO]
Debt Securities and Debt Securities Warrants
Common Stock and Common Stock Warrants
Stock Purchase Contracts and Stock Purchase Units
----------------
We may use this prospectus to offer and sell securities from time to time.
The types of securities we may sell include:
. unsecured senior debt securities . warrants to purchase common stock
. unsecured subordinated debt . stock purchase contracts
securities
. stock purchase units
. warrants to purchase debt securities
. units consisting of any
. common stock combination of these securities
We will provide the specific terms of these securities in supplements to
this prospectus prepared in connection with each offering. The securities
offered will contain other significant terms and conditions. Please read this
prospectus and the applicable prospectus supplement carefully before you
invest.
----------------
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have they determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
----------------
The date of this prospectus is October 23, 2001.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. You
should read this prospectus and the applicable prospectus supplement together
with the additional information described below under the heading "Where You
Can Find More Information."
The registration statement that contains this prospectus (including the
exhibits) contains additional important information about Motorola, Inc. and
the securities offered under this prospectus. Specifically, we have filed
certain legal documents that control the terms of the securities offered by
this prospectus as exhibits to the registration statement. We will file certain
other legal documents that control the terms of the securities offered by this
prospectus as exhibits to reports we file with the SEC. That registration
statement and the other reports can be read at the SEC web site or at the SEC
offices mentioned under the heading "Where You Can Find More Information."
2
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file with the
SEC at its public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities. Our SEC
filings are also available at the office of the New York Stock Exchange. For
further information on obtaining copies of our public filings at the New York
Stock Exchange, you should call (212) 656-5060.
We "incorporate by reference" into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus and information that we file subsequently
with the SEC will automatically update this prospectus. We incorporate by
reference the documents listed below and any filings we make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus and prior to the time that we sell all
the securities offered by this prospectus:
. Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001.
. Current Reports on Form 8-K, dated April 3, 2001 and October 22, 2001.
. The description of our common stock included in the Registration
Statement on Form 8-B dated
July 2, 1973, including any amendments or reports filed for the purpose
of updating such description.
. The description of our preferred stock purchase rights included in the
Registration Statement on Form 8-A dated November 5, 1998, as amended.
You may request a copy of these filings (other than exhibits, unless that
exhibit is specifically incorporated by reference into that filing) at no
cost, by writing to or telephoning us at the following address:
A. Peter Lawson
Secretary, Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Telephone: (847) 576-5000
You should rely only on the information contained or incorporated by
reference in this prospectus or the applicable prospectus supplement. We have
not authorized anyone else to provide you with different information. We may
only use this prospectus to sell securities if it is accompanied by a
prospectus supplement. We are only offering these securities in states where
the offer is permitted. You should not assume that the information in this
prospectus or the applicable prospectus supplement is accurate as of any date
other than the dates on the front of those documents.
3
THE COMPANY
Motorola is a global leader in providing integrated communications
solutions and embedded electronic solutions. Our broad portfolio of products
and services includes:
. Software-enhanced wireless telephone, two-way radio and messaging
products and systems, as well as networking and Internet-access
products, for consumers, network operators and commercial, government
and industrial customers.
. End-to-end systems for the delivery of interactive digital video, voice
and high-speed data solutions for broadband operators.
. Embedded semiconductor solutions for customers in the networking and
computing, transportation, wireless communications and digital
consumer/home networking markets.
. Embedded electronic systems for automotive, industrial, transportation,
navigation, communications and energy systems markets.
Our solutions are focused on end markets that have, and we believe will
continue to have, attractive growth prospects. Many of the industries we
participate in are in the process of migrating to newer, more advanced
technologies. We believe that these transitions should enhance the demand for
our product offerings.
We are committed to delivering complete solutions to our customers. In
order to do that, we must be an industry leader in current and next-generation
products and technologies that our customers demand. We recognize that this
requires industry leading research and development across all of our business
segments and close collaboration with our customers. We continue to commit a
large amount of capital to these efforts.
For the year ended December 31, 2000, we generated consolidated revenues of
$37.6 billion. For the three and nine months ended September 29, 2001, we
generated consolidated revenues of $7.4 billion and $22.7 billion,
respectively.
Over the past year, we have announced significant restructuring programs in
all of our businesses. The goal of these programs is to enhance our operating
flexibility and to improve our profitability by reducing costs. These actions
have already yielded tangible results and are expected to produce significant
annual cost savings. We have also sold businesses that no longer complemented
our growth strategy.
We market our products and services in over 100 countries worldwide. In
2000, more than half of our sales occurred outside the United States. We derive
our revenue across six business units with the largest unit comprising
approximately one-third of our consolidated revenues in 2000.
Motorola is a corporation organized under the laws of the State of Delaware
as the successor to an Illinois corporation organized in 1928. Motorola's
principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 (telephone number: 847-576-5000).
USE OF PROCEEDS
Unless the applicable prospectus supplement provides otherwise, we will use
the net proceeds from the sale of the offered securities for general corporate
purposes.
4
RATIOS OF EARNINGS TO FIXED CHARGES
The following are the unaudited consolidated ratios of earnings to fixed
charges for the nine months ended September 29, 2001 and each of the years in
the five-year period ended December 31, 2000:
Nine Months
Ended Year Ended December 31,
September 29, -------------------------
2001 2000 1999 1998 1997 1996
------------- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges..... --(a) 3.9 3.5 --(b) 6.3 5.2
--------
(a)Earnings were inadequate to cover fixed charges by $3.6 billion.
(b)Earnings were inadequate to cover fixed charges by $1.2 billion.
For purposes of computing the ratios of earnings to fixed charges, we have
divided earnings before income tax expense plus fixed charges by fixed charges.
Fixed charges consist of interest costs and estimated interest included in
rentals (one-third of net rental expense).
5
DESCRIPTION OF DEBT SECURITIES
The following is a general description of the debt securities that we may
offer from time to time. The particular terms of the debt securities offered by
any prospectus supplement and the extent, if any, to which the general
provisions described below may apply will be described in the applicable
prospectus supplement. We may also sell hybrid or novel securities now existing
or developed in the future that combine certain features of debt securities and
other securities described in this prospectus.
The debt securities will be either senior debt securities or subordinated
debt securities. We will issue the "senior securities" under the "senior
indenture" dated May 1, 1995 between us and Bank One Trust Company, N.A., or
any successor trustee. We will issue the "subordinated securities" under a
"subordinated indenture" between us and the trustee named therein, or any
successor trustee. The senior indenture and the subordinated indenture are
collectively referred to in this prospectus as the "indentures," and each of
the trustee under the senior indenture and the trustee under the subordinated
indenture are referred to in this prospectus as a "trustee." The indentures are
included as exhibits to our registration statement and the following
description is qualified in its entirety by reference to the provisions of the
indentures and the applicable prospectus supplement. You should read these
documents carefully to fully understand the terms of the debt securities.
The numerical references in parentheses below are to sections of the
indentures. Unless otherwise indicated, capitalized terms used in the following
summary that are defined in the indentures have the meanings used in the
indentures. As used in this "Description of Debt Securities," the "company"
refers to Motorola, Inc. and does not, unless the context otherwise indicates,
include our subsidiaries.
General
The senior securities are unsubordinated obligations of the company. They
will be unsecured and will rank equally with each other and all of our other
unsubordinated debt, unless otherwise indicated in the applicable prospectus
supplement. (section 301 of the senior indenture.) Each applicable prospectus
supplement will set forth, as of the most recent practicable date, the
aggregate amount of outstanding debt that would rank junior to the senior
securities. The subordinated securities are subordinated in right of payment to
the prior payment in full of our senior indebtedness. See "--Subordinated
Indenture Provisions" below. The subordinated securities will be unsecured and
will rank equally with each other, unless otherwise indicated in the applicable
prospectus supplement. (section 301 of the subordinated indenture.) We will set
forth in each applicable prospectus supplement, as of the most recent
practicable date, the aggregate amount of our outstanding debt that would rank
senior to the subordinated securities. The indentures do not limit the
aggregate principal amount of debt securities that we may issue thereunder and
provide that we may issue debt securities thereunder from time to time in one
or more series.
Terms
We will prepare a prospectus supplement for each series of debt securities
that we issue. Each prospectus supplement will set forth the applicable terms
of the debt securities to which it relates, which may include the following:
. the title of the securities;
. any limit on the aggregate principal amount of the securities;
. the maturity;
. the interest rate or method of calculation of the interest rate and the
date from which interest will accrue;
. the interest payment dates and the record dates for payment of interest,
or the discount to face value and accretion rate in the case of debt
securities issued at a substantial discount to the principal amount;
. the price and date of any optional redemption by us;
6
. our obligation, if any, to redeem the offered securities and any
requirement to maintain a "sinking fund" to support such obligation;
. the terms of any repurchase or remarketing rights of third parties;
. the currency or currencies in which we will pay principal or interest;
. any conversion features; and
. whether the defeasance or covenant defeasance provisions of the
applicable indenture apply.
We can also establish any other terms and conditions of the debt securities
to the extent they do not conflict with the terms of the indentures. (section
301 of each indenture.) Therefore, you must read the applicable indenture and
prospectus supplement carefully to understand the terms of any series of debt
securities.
Effective Subordination
The debt securities will be our obligations exclusively. Since our
operations are partially conducted through subsidiaries, primarily overseas,
our cash flow and therefore our ability to service debt, including the debt
securities offered by the applicable prospectus supplement, are partially
dependent upon the earnings of our subsidiaries and the distribution of those
earnings to, or upon loans or other payments of funds by those subsidiaries to,
us. Our subsidiaries are separate and distinct legal entities and have no
obligation to pay any amounts due pursuant to the debt securities or to make
any funds available to us to repay our obligations, whether by dividends, loans
or other payments. In addition, the payment of dividends and the making of
loans and advances to us by our subsidiaries may be subject to statutory or
contractual restrictions, are contingent upon the earnings of those
subsidiaries and are subject to various business considerations.
Any right of ours to receive assets of any of our subsidiaries upon their
liquidation or reorganization and therefore the right of the holders of the
debt securities to participate in those assets will be effectively subordinated
to the claims of that subsidiary's creditors, including trade creditors.
No Limitations on Other Debt
The general provisions of the indentures do not contain any provisions that
would limit our ability to incur indebtedness or that would afford holders of
debt securities protection in the event of a highly leveraged or similar
transaction involving us. However, the indentures do restrict us and our
domestic subsidiaries from granting certain security interests on certain of
their property or assets unless the debt securities are equally secured. See
"--Restrictive Covenants" below.
Open-Ended Indenture
The indentures are "open-ended," meaning we may issue a number of different
series of debt securities, with different terms and conditions, under each of
the indentures. (section 301 of each indenture.) There is no limit on the
amount of debt securities we can issue under either indenture, and we already
have issued a significant amount of debt securities under the senior indenture.
Defeasance and Covenant Defeasance
Under the indentures, we have the ability to take certain steps to effect a
"defeasance" or a "covenant defeasance." A defeasance allows us to be
discharged from any and all obligations in respect of a series of debt
securities except for certain obligations to register the transfer or exchange
of such debt securities, to replace temporary, destroyed, stolen, lost or
mutilated debt securities, to maintain paying agencies and to hold monies for
payment in trust. A covenant defeasance allows us to stop complying with
certain restrictive covenants relating to:
. consolidation, merger, conveyance, transfer or lease;
7
. maintenance of our existence and properties;
. payment of taxes and other claims; and
. restrictions on secured debt and sale and leaseback transactions.
A covenant defeasance also causes certain events specified in the
indentures to no longer be deemed an event of default under the indentures.
To effect a defeasance or a covenant defeasance, we must deposit with the
applicable trustee an amount of money or U.S. government securities that,
through the payment of interest and principal in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of, and premium, if any, and each installment of interest, if any, on
the debt securities of such series at the time such payments are due. We will
remain liable for any shortfall between the amount deposited with the trustee
and the amount due holders of debt securities upon any acceleration of payment.
We may only effect a defeasance or a covenant defeasance if we have
provided a legal opinion that such action will not cause holders of our debt
securities to recognize income, gain or loss for federal income tax purposes as
a result and that holders will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred. The opinion, in the case of a
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable Federal income tax law occurring after the
date of the applicable indenture.
We may further describe in the applicable prospectus supplement the
provisions, if any, regarding defeasance or covenant defeasance with respect to
the debt securities of a particular series. (article fifteen of each
indenture.)
Restrictive Covenants
Restrictions on Secured Debt
If we or any Domestic Subsidiary incurs or guarantees any Debt secured by a
Mortgage on any Principal Property or on any shares of stock or Debt of any
Domestic Subsidiary, we must secure the debt securities of each series equally
and ratably with (or prior to) such secured Debt, unless, after giving effect
to such transaction, the aggregate amount of all such Debt so secured, together
with all Attributable Debt in respect of sale and leaseback transactions
involving Principal Properties, would not exceed 5% of the Consolidated Net
Tangible Assets of us and our consolidated subsidiaries. See "--Restrictive
Covenants--Restrictions on Sales and Leasebacks" below.
This restriction does not apply to, and there will be excluded from secured
Debt in any computation under such restriction, Debt secured by:
. Mortgages on property of, or on any shares of stock of or Debt of, any
corporation existing at the time such corporation becomes a Domestic
Subsidiary or at the time it is merged into or consolidated with us or a
Domestic Subsidiary;
. Mortgages in favor of us or a Domestic Subsidiary;
. Mortgages in favor of governmental bodies to secure progress or advance
payments;
. Mortgages on property, shares of stock or Debt existing at the time of
acquisition thereof, including acquisition through merger or
consolidation;
. purchase money Mortgages and Mortgages to secure the construction cost
of property; and
. any extension, renewal or refunding of any Mortgage referred to above.
8
Restrictions on Sales and Leasebacks
Neither we nor any Domestic Subsidiary may enter into any sale and
leaseback transaction involving any Principal Property, completion of
construction and commencement of full operation of which has occurred more than
180 days prior thereto, unless:
. we or such Domestic Subsidiary could mortgage such property as provided
for above under "--Restrictive Covenants--Restrictions on Secured Debt"
in an amount equal to the Attributable Debt with respect to the sale and
leaseback transaction without equally and ratably securing the debt
securities of each series; or
. within 120 days, we apply to the retirement of our Funded Debt an amount
not less than the greater of:
. the net proceeds of the sale of the Principal Property leased
pursuant to such arrangement; or
. the fair market value of the Principal Property so leased, subject
to credits for certain voluntary retirements of Funded Debt.
This restriction will not apply to any sale and leaseback transaction:
. between us and a Domestic Subsidiary or between Domestic Subsidiaries;
or
. involving the taking back of a lease for a period, including renewals,
of three years or less. (section 1011 of each indenture.)
Certain Definitions
The following are certain key definitions used in the descriptions above of
restrictions on secured debt and sales and leasebacks contained in the
indentures. These and other definitions are contained in the indentures. You
should read the applicable indenture to understand these restrictions fully.
"Attributable Debt" means the total net amount of rent required to be paid
during the remaining term of any lease, discounted at the rate per annum borne
by the senior securities of each series, compounded annually.
"Consolidated Net Tangible Assets" means the aggregate amount of assets,
less applicable reserves and other properly deductible items, after deducting
from that net amount:
. all current liabilities, excluding any constituting Funded Debt by
reason of their being renewable or extendable; and
. goodwill and other intangibles. (section 1010 of each indenture.)
"Domestic Subsidiary" means a Subsidiary of ours except a Subsidiary of
ours which neither transacts any substantial portion of its business nor
regularly maintains any substantial portion of its fixed assets within the
United States, or which is engaged primarily in financing our operations or our
Subsidiaries, or both, outside the United States.
"Principal Property" includes any single parcel of real estate, any
manufacturing plant or warehouse we own or lease or any Domestic Subsidiary
owns or leases which is located within the United States and the gross book
value, without deduction of any depreciation reserves, of which on the date as
of which the determination is being made exceeds 1% of Consolidated Net
Tangible Assets, other than any manufacturing plant or warehouse or a portion
of any manufacturing plant or warehouse:
. which is a pollution control or other facility financed by obligations
issued by a state or local government unit; or
. which, in the opinion of our board of directors, is not of material
importance to the total business conducted by us and our subsidiaries as
an entirety.
9
"Subsidiary" means a corporation, a majority of the outstanding voting
stock of which is owned, directly or indirectly, by us or by one or more of our
other Subsidiaries.
Events of Default
The following are events of default under the indentures with respect to
any debt securities:
. failure to pay principal of, or premium, if any, on any debt security of
that series when due;
. failure to pay any installment of interest on any debt security of that
series when due, continued for 30 days;
. failure to deposit any sinking fund payment, when due, in respect of any
debt security of that series;
. failure to perform any other covenant of ours in the applicable
indenture, other than a covenant included in the applicable indenture
solely for the benefit of any series of debt securities other than that
series, continued for 60 days after written notice as provided in the
applicable indenture;
. certain events in bankruptcy, insolvency or reorganization; and
. any other event of default provided with respect to debt securities of
that series. (section 501 of each indenture.)
If an event of default with respect to the outstanding debt securities of
any series occurs and continues either the trustee or the holders of at least
25% in principal amount of the outstanding debt securities of that series may
declare the principal amount of all debt securities of that series to be due
and payable immediately; provided that in the case of certain events of
bankruptcy, insolvency or reorganization, such principal amount, or portion
thereof, will automatically become due and payable. However, at any time after
an acceleration with respect to debt securities of any series has occurred, but
before a judgment or decree based on such acceleration has been obtained, the
holders of a majority in principal amount of the outstanding debt securities of
that series may, under certain circumstances, rescind and annul such
acceleration. (section 502 of each indenture.) For information as to waiver of
defaults, see "--Modification and Waiver." You must read the applicable
prospectus supplement for a description of the acceleration provisions of any
debt securities issued as original issue discount or indexed securities.
Subject to the duty of the trustee during default to act with the required
standard of care, the trustee will be under no obligation to exercise any of
its rights or powers under the applicable indenture at the request or direction
of any of the holders, unless such holders have offered the trustee reasonable
security or indemnity. (section 603 of each indenture.) Subject to such
indemnification and certain other limitations, the holders of a majority in
principal amount of the outstanding debt securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or power conferred on
the trustee, with respect to the debt securities of that series. (section 512
of the senior indenture and section 505 of the subordinated indenture.)
We will be required to furnish to the trustee an annual statement as to our
performance of certain of our obligations under the applicable indenture and as
to any default in such performance. (section 1006 of each indenture.)
Modification and Waiver
Modifications and amendments of each indenture may be made by us and the
trustee with the consent of the holders of 66 2/3% in principal amount of the
outstanding debt securities of each series affected thereby, except that no
such modification or amendment may, without the consent of the holder of each
outstanding debt security affected thereby:
. change the stated maturity date of the principal of, or any installment
of principal of or interest on, any debt security;
10
. reduce the principal amount of, or premium, if any, or interest, if any,
on, any debt security;
. reduce the amount of principal of any original issue discount debt
security payable upon acceleration of the maturity thereof;
. change the place or currency of payment of principal of, or premium, if
any, or interest, if any, on, any debt security;
. impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security; or
. reduce the percentage in principal amount of outstanding debt securities
of any series, the consent of the holders of which is required for
modification or amendment of the indenture or for waiver of compliance
with certain provisions of the applicable indenture or for waiver of
certain defaults. (section 902 of each indenture.)
The holders of a majority of the outstanding debt securities of any series
may on behalf of the holders of all debt securities of that series waive,
insofar as that series is concerned, our compliance with certain restrictive
provisions of the applicable indenture. (section 1012 of each indenture.) The
holders of a majority of the outstanding debt securities of any series may on
behalf of the holders of all debt securities of that series waive any past
default under the applicable indenture with respect to debt securities of that
series, except a default in the payment of the principal of, or premium, if
any, or interest, if any, on any debt security of that series or in respect of
any provision which under the applicable indenture cannot be modified or
amended without the consent of the holder of each outstanding debt security of
that series affected. (section 513 of the senior indenture and section 504 of
the subordinated indenture.)
In addition, we may not modify or amend the subordination provisions of the
subordinated indenture without the consent of the holders of each outstanding
subordinated debt security affected thereby. Further, no modification or
amendment of that type may adversely affect the rights under article sixteen of
the subordinated indenture of the holders of senior indebtedness then
outstanding without the consent of the requisite holders of senior indebtedness
required under the terms of such senior indebtedness. (section 902 of the
subordinated indenture.)
Each indenture contains provisions for convening meetings of the holders of
debt securities of a series issued thereunder if debt securities of that series
are issuable in whole or in part as bearer securities. (section 1401 of each
indenture.) The trustee for those debt securities may call a meeting at any
time or upon our request or the request of holders of at least 10% in principal
amount of the outstanding debt securities of such series, in any such case upon
notice given in accordance with the applicable indenture. (section 1402 of each
indenture.) Except for any consent that must be given by each holder of a debt
security affected, and except as described below, any resolution presented at a
meeting or adjourned meeting at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding debt securities of that series. Any resolution with respect to any
consent which may be given by the holders of not less than 66 2/3% in principal
amount of the outstanding debt securities of a series issued under an
indenture, except for any consent that must be given by each holder of a debt
security affected, may be adopted at a meeting or an adjourned meeting at which
a quorum is present only by the affirmative vote of the holders of 66 2/3% in
principal amount of such outstanding debt securities of that series. Further,
any resolution with respect to any demand, consent, waiver or other action
which may be made, given or taken by the holders of a specified percentage,
which is less than a majority, in principal amount of the outstanding debt
securities of a series issued under one of the indentures may be adopted at a
meeting or adjourned meeting at which a quorum is present by the affirmative
vote of the holders of such specified percentage in principal amount of the
outstanding debt securities of that series. (section 1404 of each indenture.)
Any resolution passed or decision taken at any meeting of holders of debt
securities of any series duly held in accordance with the applicable indenture
with respect thereto will be binding on all holders of debt
11
securities of that series and the related coupons issued under that indenture.
The quorum at any meeting of holders of a series of debt securities called to
adopt a resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding debt securities
of such series. However, if any action is to be taken at such meeting with
respect to a consent which may be given by the holders of not less than 66 2/3%
in principal amount of the outstanding debt securities of a series, the persons
holding or representing 66 2/3% in principal amount of the outstanding debt
securities of such series issued under that indenture will constitute a quorum.
(section 1404 of each indenture.)
Consolidation, Merger, Conveyance, Transfer or Lease
We may, without the consent of any holders of outstanding debt securities,
consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any entity, and any other entity may
consolidate or merge with or into, or transfer or lease our assets
substantially as an entirety to, us, provided that:
. the entity other than us formed by such consolidation or into which we
are merged or which acquires or leases our assets is organized and
existing under the laws of any United States jurisdiction and assumes
our obligations on the debt securities and under the applicable
indenture;
. after giving effect to the transaction, no event of default, and no
event which, after notice or lapse of time or both, would become an
event of default, has happened and is continuing, provided that a
transaction will only be deemed to be in violation of this condition as
to any series of debt securities as to which such event of default or
such event has happened and is continuing; and
. certain other conditions are met. (article eight of each indenture.)
Form, Denominations, Exchange, Registration and Transfer
We may issue debt securities as registered securities or bearer securities,
and may be issued in global form. Global securities are described below under
"--Global Securities." Unless we otherwise provide in the applicable prospectus
supplement, we will issue registered securities in denominations of $1,000 and
integral multiples thereof and we will issue bearer securities in denominations
of $5,000 and integral multiples thereof. Unless we otherwise indicate in the
applicable prospectus supplement, bearer securities will have interest coupons
attached. (section 201 of each indenture.)
Our registered securities will be exchangeable for other registered
securities of the same series. In addition, if we issue a series of debt
securities as both registered securities and bearer securities, subject to
certain conditions, holders may exchange bearer securities for registered
securities. Our registered securities generally may not be exchanged for bearer
securities unless we provide for such an exchange in the applicable prospectus
supplement. (section 305 of each indenture.)
We will not mail bearer securities in connection with their original
issuance to any location in the United States. In addition, the United States
Internal Revenue Code of 1986, as amended, requires us to obtain written
certification from the initial purchaser of a bearer security to the effect
that:
. the bearer security is not being acquired by or on behalf of a United
States person;
. if a beneficial interest in the bearer security is being acquired by or
on behalf of a United States person, that the United States person is a
foreign branch of a United States financial institution that is
purchasing for its own account or for resale or the person is acquiring
the bearer security through the foreign branch of a United States
financial institution and the financial institution agrees, in either
case, to comply with certain requirements of the Internal Revenue Code;
or
. the bearer security is being acquired by a United States or foreign
financial institution for resale during the restricted period and has
not been acquired for purposes of resale directly or indirectly to a
United States person or to a person within the United States or its
possessions. (section 303 of each indenture.)
12
You may present registered securities for registration of transfer at the
office of the trustee, or at the office of any transfer agent we designate
without service charge and upon payment of any taxes and other governmental
charges. (section 305 of each indenture.) We may change transfer agents or
designate additional transfer agents at any time, except that, if we have
issued a series of debt securities solely as registered securities, we must
maintain a transfer agent in each place of payment for such series and, if we
have issued a series of debt securities as bearer securities, we must maintain
a transfer agent in a place of payment for such series located outside the
United States. (section 1002 of each indenture.)
If we elect or are required to redeem or exchange particular debt
securities, we will not be required to:
. issue, register the transfer of or exchange those debt securities for a
period of 15 days before the first publication or mailing of the notice
of redemption or exchange;
. register the transfer of or exchange any registered security selected
for redemption; or
. exchange any bearer security selected for redemption except that a
bearer security selected for redemption may be exchanged for a
registered security that will be surrendered for redemption. (section
305 of each indenture.)
Global Securities
The following will apply to debt securities of any series, unless the
prospectus supplement relating to that series provides otherwise.
Upon issuance, we will deposit with, or on behalf of, the depositary and
will register in the name of the depositary or a nominee of the depositary one
or more "global securities" to represent the debt securities of each series.
Unless we otherwise indicate in the prospectus supplement relating to a series
of debt securities, The Depository Trust Company will act as the depositary
and we will deposit the global securities with, or on behalf of, DTC or its
nominee, and we will register registered securities in the name of a nominee
of DTC. Except under limited circumstances described below, global securities
will not be exchangeable for definitive certificated debt securities.
Upon the issuance of a global security, DTC will credit on its book-entry
registration and transfer system the principal amounts of the individual debt
securities represented by such global security to the accounts of persons that
have accounts with DTC, generally known as DTC participants. Ownership of
beneficial interests in a global security will be limited to DTC participants
or persons that may hold interests through DTC participants. Ownership of
beneficial interests in such global security will be shown on, and the
transfer of that ownership will be effected only through, records maintained
by DTC with respect to interests of DTC participants and records of DTC
participants, with respect to interests of persons who hold through DTC
participants. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, pledge or transfer
beneficial interest in a global security.
So long as the depositary is the registered owner of a global security,
the depositary will be considered the sole owner or holder of the debt
securities represented by such global security for all purposes under the
applicable indenture. Except as provided below, owners of beneficial interests
in a global security will not be entitled to have any of the individual debt
securities registered in their names, will not receive or be entitled to
receive physical delivery of any such debt securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
We will make payments of principal of and any interest, and premium, if
any, on individual debt securities represented by a global security to DTC or
its nominee, as the case may be, as the sole registered owner of such global
security and the sole holder of the debt securities represented by the global
security for all purposes under the applicable indenture. Neither we nor the
trustee, nor any of our agents or the trustee, will
13
have any responsibility or liability for any aspect of DTC's records relating
to or payments made on account of beneficial ownership interests in the global
securities representing any debt securities or for maintaining, supervising or
reviewing any of DTC's records relating to those beneficial ownership
interests.
We have been advised by DTC that, upon receipt of any payment in respect of
a global security, DTC will immediately credit DTC participants' accounts for
their pro rata share of such payments. We also expect that payments by DTC
participants to owners of beneficial interests in global securities held
through such DTC participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." These payments will
be the sole responsibility of the DTC participants.
Global securities may not be transferred except as a whole by DTC to a
nominee of DTC. Global securities representing debt securities are exchangeable
for certificated debt securities only if:
. DTC or its nominee notifies us that it is unwilling or unable to
continue as depositary for these global securities;
. DTC ceases to be qualified as required by the applicable indenture;
. we instruct the trustee in accordance with the applicable indenture that
those global securities will be so exchangeable; or
. there shall have occurred and be continuing an event of default or an
event which after notice or lapse of time would be an event of default
with respect to the debt securities represented by such global security.
Any global securities that are exchangeable as described above shall be
exchangeable for certificated debt securities issuable in denominations of
$1,000, or $5,000 in the case of bearer debt securities, and integral multiples
of $1,000, or $5,000 in the case of bearer debt securities, in excess thereof
and registered in the names DTC directs. Subject to the foregoing, global
securities are not exchangeable, except for global securities of like
denomination to be registered in the name of DTC or its nominee. If we issue
debt securities subsequently in registered form, they would thereafter be
transferred or exchanged without any service charge at the corporate trust
office of the trustee or at any other office or agency we maintain for such
purpose.
So long as DTC or its nominee is the registered holder and owner of global
securities, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the debt securities represented by the global securities for
the purposes of receiving payment on the debt securities, receiving notices and
for all other purposes under the applicable indenture and the debt securities.
Except as provided above, owners of beneficial interests in global securities
will not be entitled to receive physical delivery of debt securities in
definitive form and will not be considered the holders thereof for any purpose
under the applicable indenture. Accordingly, each person owning a beneficial
interest in the global securities must rely on the procedures of DTC and, if
such person is not a DTC participant, on the procedures of the DTC participant
through which such person owns its interest, to exercise any rights of a holder
under the applicable indenture. The indentures provide that DTC may grant
proxies and otherwise authorize DTC participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the applicable indenture. We
understand that under existing industry practices in the event that we request
any action of holders or that an owner of a beneficial interest in global
securities desires to give or take any action which a holder is entitled to
give or take under the applicable indenture, DTC would authorize the DTC
participants holding the relevant beneficial interests to give or take such
action, and such DTC participants would authorize beneficial owners owning
through such DTC participants to give or take such action or would otherwise
act upon the instructions of beneficial owners through them.
14
DTC has advised us as follows:
. DTC is:
. a limited-purpose trust company organized under the New York Banking
Law;
. a "banking organization" within the meaning of the New York Banking
Law;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
. a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
. DTC holds securities that DTC participants deposit with DTC.
. DTC also facilitates the settlement among DTC participants of securities
transactions, such as transfers and pledges in deposited securities
through electronic computerized book-entry changes in DTC participants'
accounts, thereby eliminating the need for physical movement of
securities certificates.
. Direct DTC participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations.
DTC is owned by a number of direct DTC participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
. Access to DTC's system is also available to others, such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct DTC participant, either
directly or indirectly.
. The rules applicable to DTC and DTC participants are on file with the
SEC.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended
to serve as a representation, warranty or contract modification of any kind.
Payment and Paying Agents
Unless the applicable prospectus supplement provides otherwise, the place
of payment for all registered securities will be Chicago, Illinois, U.S.A.,
and we will initially designate the corporate trust office of the applicable
trustee for this purpose. At our option, we may pay interest, if any, on
registered securities by check mailed to the address of the person entitled
thereto as such person's address appears in the security register or by wire
transfer to an account located in the United States maintained by the person
entitled thereto as specified in the security register. (sections 307, 1001
and 1002 of each indenture.) Unless the applicable prospectus supplement
provides otherwise, we will make payment of any installment of interest on
registered securities to the person in whose name such registered security is
registered at the close of business on the record date for such interest.
(section 307 of each indenture.)
If we issue bearer securities, we must maintain an office or agency
outside the United States at which the principal of, and premium, if any, and
interest, if any, on the bearer securities will be paid. (section 1002 of each
indenture.) The initial locations of such offices and agencies will be
specified in the applicable prospectus supplement. Unless the applicable
prospectus supplement provides otherwise, we will make payments with respect
to bearer securities, at the holder's option, by check in the currency
designated in the bearer security presented or mailed to an address outside
the United States or paid by wire transfer to an account in such currency
maintained at a bank located outside the United States. We will not make
payments in the United States. (sections 307 and 1002 of each indenture.)
Nevertheless, we will make payments with respect to bearer securities payable
in U.S. dollars at the office of our paying agent in Chicago, Illinois if, but
only if, payment
15
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions and the trustee has received an opinion
of counsel that such payment within the United States is legal. (sections 307
and 1002 of each indenture.) Unless the applicable prospectus supplement
provides otherwise, we will make payment of installments of interest on any
bearer securities on or before maturity only against surrender of coupons for
such interest installments as they mature. (section 1001 of each indenture.)
Unless the applicable prospectus supplement provides otherwise, we will
make all payments of principal of, and premium, if any, and interest, if any,
on any debt security that is payable in a currency other than U.S. dollars in
U.S. dollars if such currency:
. ceases to be used both by the government of the country that issued the
currency and by a central bank or other public institution of or within
the international banking community for the settlement of transactions;
. is the euro and ceases to be used both within the European Monetary
Union and for the settlement of transactions by public institutions of
or within the European Union; or
. is any currency unit, or composite currency, other than the euro and
ceases to be used for the purposes for which it was established.
(section 312 of each indenture.)
We may designate additional offices or agencies for payment with respect to
any debt securities, approve a change in the location of any such office or
agency and, except as provided above, rescind the designation of any such
office or agency.
All moneys deposited with a paying agent or held for the payment of
principal of, or premium, if any, or interest, if any, on any debt security
that remains unclaimed at the end of two years after such payment has become
due will, at our request, be repaid to us, or discharged from trust, and the
holder of such debt security may thereafter look only to us for payment
thereof. (section 1003 of each indenture.)
Subordinated Indenture Provisions
Our subordinated securities are subordinate and junior in right of payment,
to the extent set forth in the subordinated indenture, to the prior payment in
full of all existing and future senior debt of ours. (section 1601 of the
subordinated indenture.)
Senior debt is defined in the subordinated indenture as the principal of,
and premium, if any, and interest on, including interest accruing after the
filing of a petition initiating any proceeding pursuant to any bankruptcy law,
and other amounts due on or in connection with any debt incurred, assumed or
guaranteed by us, whether outstanding on the date of the subordinated indenture
or thereafter incurred, assumed or guaranteed, and all renewals, extensions and
refundings of any such debt. Excluded from the definition of senior debt are
the following:
. any debt which expressly provides:
. that such debt is not senior in right of payment to the subordinated
securities; or
. that such debt is subordinated to any other debt of ours, unless
such debt expressly provides that such debt is senior in right of
payment to the subordinated securities;
. debt of ours in respect of the subordinated securities;
. debt of ours in respect of our outstanding Liquid Yield Option(TM) Notes
due 2009 and our outstanding Liquid Yield Option(TM) Notes due 2013,
which 2009 LYONs and 2013 LYONs rank on a parity with the subordinated
securities;
16
. debt of ours in respect of the extension notes which may be issued in
the future, at specified dates, in respect of the 2009 LYONs and in
payment of the purchase price thereof, which extension notes would rank
on a parity with the subordinated securities and any 2009 LYONs and 2013
LYONs remaining outstanding (section 101 of the subordinated indenture);
and
. debt of ours in respect of our 6.68% deferrable interest junior
subordinated debentures due March 31, 2039 representing a long-term loan
made to us by Motorola Capital Trust I, a Delaware statutory business
trust and our wholly-owned subsidiary, and our obligations related to
our guarantee of certain obligations of the trust under its 6.68% Trust
Originated Preferred SecuritiesSM.
There are no restrictions in the subordinated indenture on the creation of
additional senior debt, or any other indebtedness. (section 101 of the
subordinated indenture.) The prospectus supplement with respect to any
subordinated securities will set forth:
. the aggregate amount of consolidated indebtedness outstanding as of the
most recent practicable date that would constitute either senior debt or
indebtedness of our subsidiaries;
. the aggregate amount of outstanding indebtedness as of the most recent
practicable date that would rank on a parity with the subordinated
securities; and
. any then-existing limitation on the issuance of additional senior debt.
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets:
. the holders of all senior debt will first be entitled to receive payment
in full of all amounts due or to become due thereon, or payment of such
amounts shall have been provided for, before the holders of subordinated
securities would be entitled to receive any payment or distribution with
respect to such securities;
. the holders of subordinated securities will be required to pay over
their share of such distribution to the holders of senior debt until
such senior debt is paid in full; and
. our creditors who are not holders of subordinated securities or holders
of senior debt may recover less, ratably, than holders of senior debt
and may recover more, ratably, than the holders of subordinated
securities. (section 1602 of the subordinated indenture.)
Unless the applicable prospectus supplement provides otherwise, in the
event that the subordinated securities are declared due and payable prior to
their Stated Maturity by reason of the occurrence of an event of default, then
we would be obligated to promptly notify holders of senior debt of such
acceleration. Unless the applicable prospectus supplement provides otherwise,
we may not pay the subordinated securities until 120 days have passed after
such acceleration occurs and may thereafter pay the subordinated securities if
the terms of the subordinated indenture otherwise permit payment at that time.
(section 1603 of the subordinated indenture.)
Unless the applicable prospectus supplement provides otherwise, we may not
make any payment of the principal, and premium, if any, or interest, if any,
with respect to any of the subordinated securities, except we may acquire
subordinated securities for our common stock or other capital stock or as
otherwise set forth in the subordinated indenture, if any default with respect
to senior debt occurs and is continuing that permits the acceleration of the
maturity thereof and such default is either the subject of judicial proceedings
or we receive notice of the default, unless 120 days pass after notice of the
default is given and such default is not then the subject of judicial
proceedings or the default with respect to the senior debt is cured or the
terms of the subordinated indenture otherwise permit the payment or acquisition
of the subordinated securities at that time. (section 1604 of the subordinated
indenture.)
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(TM)Trademark of Merrill Lynch & Co.
SM"Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co.
17
The Trustee
Bank One Trust Company, N.A. is trustee under:
. the senior indenture relating to:
. our 6.75% notes due February 1, 2006;
. our 5.80% notes due October 15, 2008;
. our 7 5/8% notes due November 15, 2010;
. our Puttable Reset Securities PURSSM due February 1, 2011;
. our 7 1/2% debentures due May 15, 2025;
. our 6 1/2% debentures due September 1, 2025;
. our 6 1/2% debentures due November 15, 2028;
. our 5.22% debentures due October 1, 2097;
. the indenture dated as of September 1, 1989 relating to our 2009 LYONs;
and
. the indenture dated as of September 1, 1993 relating to our 2013 LYONs.
We maintain various banking relationships with Bank One, N.A., an affiliate
of the trustee. As one of our principal commercial banks, Bank One, N.A.
provides several foreign exchange and cash management services to us and has
extended several credit facilities to us. Bank One, N.A. is also an issuing and
paying agent for various commercial paper we have issued.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is subject to the detailed
provisions of our restated certificate of incorporation, as amended, and
bylaws, as amended, and to the rights agreement described below. This
description does not purport to be complete and is qualified in its entirety by
reference to the terms of the certificate of incorporation, the bylaws and the
rights agreement, which are filed as exhibits to the registration statement.
See "Where You Can Find More Information."
Common and Preferred Stock
Our authorized capital stock consists of 4,200,000,000 shares of common
stock, par value $3 per share, and 500,000 shares of preferred stock, par value
$100 per share, issuable in series. There are no shares of preferred stock
presently outstanding. Our board of directors is authorized to create and issue
one or more series of preferred stock and to determine the rights and
preferences of each series, to the extent permitted by our certificate of
incorporation. The holders of shares of our common stock are entitled to one
vote for each share held and each share of our common stock is entitled to
participate equally in dividends out of funds legally available therefor, as
and when declared by our board of directors, and in the distribution of assets
in the event of liquidation. The shares of our common stock have no preemptive
or conversion rights, redemption provisions or sinking fund provisions. The
outstanding shares of our common stock are duly and validly issued, fully paid
and nonassessable, and any shares of our common stock issued in an offering
pursuant to this prospectus and any shares of common stock issuable upon the
exercise of common stock warrants or conversion or exchange of debt securities
which are convertible into or exchangeable for our common stock, or in
connection with the obligations of a holder of stock purchase contracts to
purchase our common stock, will be duly and validly issued, fully paid and
nonassessable.
Preferred Stock Purchase Rights
On November 5, 1998, we authorized a new rights agreement between us and
Harris Trust and Savings Bank, as rights agent to replace the existing rights
agreement dated as of November 9, 1988, as amended, and the associated rights,
which expired as of the close of business on November 20, 1998. The following
summary of certain provisions of the rights agreement does not
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SM Service Mark of Goldman, Sachs & Co.
18
purport to be complete and is qualified in its entirety by reference to all of
the provisions of the rights agreement, including particular provisions or
defined terms of the rights agreement. See "Where You Can Find More
Information."
Under the rights agreement, each outstanding share of our common stock is
accompanied by a preferred stock purchase right. Each right entitles the
registered holder to purchase from us one thirty-thousandth of a share, as
adjusted to reflect our 3-for-1 stock split in the form of a 200% stock
dividend paid on June 1, 2000, of our Junior Participating Preferred Stock,
Series B, $100 par value per share, at a price of $66.66 per one thirty-
thousandth, or $200 per one ten-thousandth, of a preferred share, subject to
adjustment. The rights attach to shares of our common stock outstanding as of
the close of business on November 20, 1998 and to shares of our common stock
which become outstanding thereafter prior to the earliest of the distribution
date, the redemption of the rights, the exchange of the rights and the
expiration of the rights, and, in certain cases, following the distribution
date.
The rights have certain anti-takeover effects. The rights may cause
substantial dilution to a person or group that attempts to acquire us on terms
not approved by the board of directors, except pursuant to an offer conditioned
on a substantial number of rights being acquired. The rights should not
interfere with any merger or other business combination approved by our board
of directors because of the ability of our board of directors to redeem the
rights.
Until the earlier to occur of 10 days following a public announcement that
a person or group of affiliated or associated persons (referred to herein as an
"acquiring person") acquired, or obtained the right to acquire, beneficial
ownership of 10% or more of the outstanding shares of our common stock and 10
days following the commencement or announcement of a tender offer or exchange
offer for 10% or more of such outstanding shares of our common stock (the
earlier of such dates being called the "distribution date"), the rights will be
evidenced, with respect to any of our common stock certificates outstanding as
of November 20, 1998, by such common stock certificate. The rights agreement
provides that, until the distribution date, the rights will be transferred with
and only with the shares of our common stock. Until the distribution date, or
earlier redemption or expiration of the rights, new common stock certificates
issued after November 20, 1998, upon the transfer or new issuance of shares of
common stock, including, unless the applicable prospectus supplement provides
otherwise, the shares of common stock issued:
. in an offering pursuant to this prospectus;
. upon exercise of any common stock warrants;
. upon conversion or exchange of debt securities which are convertible
into or exchangeable for common stock; or
. in connection with the obligations of a holder of stock purchase
contracts to purchase common stock;
will contain a notation incorporating the rights agreement by reference.
Until the distribution date, or earlier redemption or expiration of the
rights, the surrender for transfer of any certificate for shares of our common
stock, outstanding as of November 20, 1998, with or without such notation or a
copy of a summary of rights being attached thereto, will also constitute the
transfer of the rights associated with the shares of our common stock
represented by such certificate. As soon as practicable following the
distribution date, we will mail separate certificates evidencing the rights to
holders of record of the common stock as of the close of business on the
distribution date and such separate right certificates alone will evidence the
rights.
The rights are not exercisable until the distribution date. The rights will
expire on November 20, 2008, unless we earlier redeemed them as described
below.
19
The preferred share purchase price payable, and the number of preferred
shares or other securities, cash or other property issuable, upon exercise of
the rights are subject to adjustment from time to time to prevent dilution:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the common stock;
. upon the grant to holders of our common stock of certain rights or
warrants to subscribe for common stock or convertible securities at less
than the current market price of our common stock;
. upon the distribution to holders of our common stock of evidences of
indebtedness or assets, excluding regular periodic cash dividends; and
. in connection with any recapitalization of us.
In the event that a person becomes an acquiring person, each right, other
than rights that are or were beneficially owned by the acquiring person and
certain related persons and transferees, which will thereafter be void, shall
thereafter be exercisable not for our preferred shares, but for a number of
shares of our common stock, or, in certain cases, fractional shares of our
preferred stock, other common stock equivalents or cash, having a market value
of two times the exercise price of the right. In the event that, at the time or
after a person becomes an acquiring person, we are involved in a merger or
other business combination in which:
. we are not the surviving corporation;
. our common stock is changed or exchanged; or
. 50% or more of our consolidated assets or earning power are sold;
then each right, other than rights that are or were owned by the acquiring
person and certain related persons and transferees, which will thereafter be
void, shall thereafter be exercisable for a number of shares of common stock of
the acquiring company having a market value of two times the exercise price of
the right.
In addition, at any time after a triggering event and before a person has
acquired beneficial ownership of 50% or more of our outstanding common stock,
we may elect to exchange all or part of the rights, excluding void rights held
by an acquiring person and certain related persons and transferees, at an
exchange ratio of one share of our common stock, or one thirty-thousandth,
subject to adjustment, of a preferred share, or other common stock equivalent,
per right.
At any time prior to a triggering event, our board of directors may redeem
the rights in whole, but not in part, at a price of $.0033 per right, as
adjusted to reflect our 3-for-1 stock split in the form of a 200% stock
dividend paid on June 1, 2000. Immediately upon the action of our board of
directors ordering redemption of the rights, the right to exercise the rights
will terminate and the only right of the holders of rights will be to receive
the rights redemption amount.
Until a right is exercised, the holder thereof, as such, will have no
rights as one of our stockholders, including, without limitation, the right to
vote or to receive dividends.
At any time prior to a triggering event, we may amend or supplement the
rights agreement without the approval of the rights agent or any holder of the
rights. Thereafter, no amendment may adversely affect the interests of the
rights holders, other than an acquiring person.
The preferred shares purchasable upon exercise of the rights will not be
redeemable. Each preferred share will be entitled to a minimum preferential
quarterly dividend payment equal to the greater of $250 per share and 30,000
times the dividend declared per share of our common stock. In the event of
liquidation, the holders of our preferred shares will be entitled to a minimum
preferential liquidation payment equal to the greater of $1,000 per share and
30,000 times the payment made per share of our common stock. Each preferred
share will have 30,000 votes per share, voting together with the common stock.
In the event of any merger, consolidation
20
or other transaction in which our common stock is exchanged, each preferred
share will be entitled to receive 30,000 times the amount received per share of
our common stock.
Because of the nature of the preferred shares' dividend, liquidation and
voting rights, the value of the one thirty-thousandth interest in a preferred
share that may be purchased upon exercise of each right should approximate the
value of one share of our common stock.
No fractional shares of common stock or preferred shares will be required
to be issued upon the exercise of a right, other than fractions of preferred
shares that are integral multiples of one thirty-thousandth of a preferred
share, which may, at our election, be evidenced by depositary receipts, and in
lieu thereof, an adjustment in cash will be made based on the market price of
our common stock or preferred shares on the last trading day prior to the date
of exercise.
21
DESCRIPTION OF SECURITIES WARRANTS
We may issue warrants for the purchase of our debt securities or common
stock, either independently or together with debt securities. We will issue
each series of warrants under a separate warrant agreement between us and a
bank or trust company, as agent. The warrant agent will act solely as our agent
and will not assume any obligation for any warrant holders. Copies of the forms
of warrant agreements and the forms of warrant certificates are filed as
exhibits to the registration statement. The following description of certain
provisions of the forms of warrant agreements and warrant certificates does not
purport to be complete and is qualified in its entirety by reference to all the
provisions of the warrant agreements and the warrant certificates.
General
If we offer warrants for the purchase of debt securities, the applicable
prospectus supplement will describe their terms, which may include the
following:
. the title and aggregate number of the warrants;
. the title, rank, aggregate principal amount, denomination, and terms of
the underlying debt securities;
. the currency of the underlying debt securities or of payment of the
exercise price;
. whether the warrants are issued as a unit with a debt security, and if
so, the number of warrants attached to each such debt security;
. the date, if any, on and after which such warrants and any related
securities will be transferable separately;
. the principal amount of the debt securities purchasable upon exercise of
each warrant and the price, or the manner of determining the price, at
which such debt securities may be purchased upon exercise;
. when the warrants may be exercised and the expiration date;
. whether the warrant certificates will be issued in registered or bearer
form;
. United States federal income tax consequences;
. the terms of any right of ours to redeem or accelerate the
exercisability of such warrants;
. whether the warrants are to be issued with any other securities;
. the offering price; and
. any other terms of the warrants.
If we offer warrants for the purchase of our common stock, the applicable
prospectus supplement will describe their terms, which may include the
following:
. the title and aggregate number of the warrants and whether the warrants
will be sold with other securities;
. the number of shares of common stock that may be purchased on exercise
of each warrant;
. the price or manner of determining the price, the manner in which the
exercise price may be paid and any minimum number of warrants
exercisable at one time;
. the terms of any right of ours to redeem the warrants;
. the date, if any, on and after which the warrants and any related series
of debt securities will be transferable separately;
22
. when the warrants may be exercisable and the expiration date;
. the terms of any right of ours to accelerate the exercisability of the
warrants;
. United States federal income tax consequences; and
. any other terms of the warrants.
Warrants for the purchase of our common stock will be offered and
exercisable for U.S. dollars only.
Warrants may be exchanged for new warrants of different denominations,
may, if in registered form, be presented for registration of transfer and may
be exercised at the corporate trust office of the warrant agent or any other
office indicated in the applicable prospectus supplement. No service charge
will be made for any permitted transfer or exchange of warrant certificates,
but holders must pay any tax or other applicable governmental charge. Prior to
the exercise of any warrant to purchase underlying debt securities, holders of
such warrants will not have any of the rights of holders of the debt
securities purchasable upon such exercise, including the right to receive
payments of principal of, or premium, if any, or interest, if any, on the debt
securities purchasable upon such exercise or to enforce covenants in the
applicable indenture. Prior to the exercise of any warrants to purchase our
common stock, holders of such warrants will not have any rights of holders of
our common stock purchasable upon such exercise, including the right to
receive payments of dividends, if any, on our common stock purchasable upon
such exercise or to exercise any applicable right to vote.
Exercise of Warrants
Each warrant will entitle the holder to purchase underlying debt
securities or our common stock, as the case may be, at the exercise price
described in, or calculable from, the applicable prospectus supplement.
Unexercised warrants will become void after the close of business on the
expiration date.
Holders can exercise warrants by delivering the exercise price and certain
required information to the warrant agent. Warrants will be deemed to have
been exercised upon receipt of payment of the exercise price, subject to the
receipt, within five business days, of the warrant certificate. Upon receipt
of such payment and such warrant certificate properly completed and duly
executed at the corporate trust office of the warrant agent or any other
office indicated in the applicable prospectus supplement, we will, as soon as
practicable, issue and deliver the underlying debt securities or our common
stock, as the case may be, purchasable upon such exercise. If fewer than all
of the warrants represented by a warrant certificate are exercised, we will
issue a new warrant certificate for the remaining warrants. The holder of a
warrant must pay any tax or other governmental charge imposed in connection
with the issuance of underlying debt securities or our common stock purchased
upon exercise of a warrant.
Modifications
The warrant agreements and the terms of the warrants may be modified or
amended by us and the warrant agent, without the consent of any holder, for
the purpose of curing any ambiguity, or of curing, correcting or supplementing
any defective or inconsistent provision contained therein, or in any other
manner that we deem necessary or desirable and that will not materially
adversely affect the interests of the holders of the warrants.
Together with the warrant agent, we may also modify or amend the warrant
agreement and the terms of the warrants with the consent of a majority of the
holders of the then outstanding unexercised warrants affected thereby. No
modification or amendment of that type that accelerates the expiration date,
increases the exercise price, reduces the number of outstanding warrants
required for consent of any such modification or amendment, or otherwise
materially adversely affects the rights of the holders of the warrants, may be
made without the consent of each holder affected thereby.
23
Common Stock Warrant Adjustments
The terms and conditions on which the exercise price of and/or the number
of shares of our common stock covered by a warrant are subject to adjustment
will be set forth in the warrant certificate and the applicable prospectus
supplement. Such terms will include:
. provisions for adjusting the exercise price and/or the number of shares
of our common stock covered by the warrant;
. the events requiring an adjustment;
. the events upon which we may, in lieu of making an adjustment, make
proper provisions so that the holder of the warrant, upon its exercise,
would be treated as if the holder had exercised the warrant prior to the
occurrence of the events; and
. provisions affecting exercise in the event of certain events affecting
our common stock.
DESCRIPTION OF THE STOCK PURCHASE CONTRACTS
AND THE STOCK PURCHASE UNITS
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of our common stock (or a range of numbers of shares pursuant to a
predetermined formula) at a future date or dates. The price per share of common
stock and the number of shares of common stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, often known as stock purchase units, consisting of a stock purchase
contract and either:
. our debt securities; or
. debt obligations of third parties, including U.S. Treasury securities;
securing the holders' obligations to purchase the common stock under the stock
purchase contracts.
The stock purchase contracts may require us to make periodic payments to
the holders of the stock purchase units or vice versa, and such payments may be
unsecured or prefunded on some basis. The stock purchase contracts may require
holders to secure their obligations in a specified manner and in certain
circumstances we may deliver newly issued prepaid stock purchase contracts,
often known as prepaid securities, upon release to a holder of any collateral
securing such holder's obligations under the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, prepaid
securities. The description in the applicable prospectus supplement will not
contain all of the information that you may find useful. For more information,
you should review the stock purchase contracts, the collateral arrangements and
depositary arrangements, if applicable, relating to such stock purchase
contracts or stock purchase units and, if applicable, the prepaid securities
and the document pursuant to which the prepaid securities will be issued. These
documents will be filed with the SEC promptly after the offering of the stock
purchase contracts or stock purchase units. Material United States federal
income tax considerations applicable to the stock purchase contracts and the
stock purchase units will also be discussed in the applicable prospectus
supplement.
24
PLAN OF DISTRIBUTION
We may sell the securities offered pursuant to this prospectus through
agents, through underwriters or dealers or directly to one or more purchasers.
Underwriters, dealers and agents that participate in the distribution of
the securities offered pursuant to this prospectus may be underwriters as
defined in the Securities Act of 1933 and any discounts or commissions received
by them from us and any profit on the resale of the offered securities by them
may be treated as underwriting discounts and commissions under the Securities
Act. Any underwriters or agents will be identified and their compensation,
including underwriting discount, will be described in the applicable prospectus
supplement. The prospectus supplement will also describe other terms of the
offering, including any discounts or concessions allowed or reallowed or paid
to dealers and any securities exchanges on which the offered securities may be
listed.
The distribution of the securities offered under this prospectus may occur
from time to time in one or more transactions at a fixed price or prices, which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
If the applicable prospectus supplement indicates, we will authorize
dealers or our agents to solicit offers by certain institutions to purchase
offered securities from us pursuant to contracts that provide for payment and
delivery on a future date. We must approve all institutions, but they may
include, among others:
. commercial and savings banks;
. insurance companies;
. pension funds;
. investment companies; and
. educational and charitable institutions.
The institutional purchaser's obligations under the contract are only
subject to the condition that the purchase of the offered securities at the
time of delivery is allowed by the laws that govern the purchaser. The dealers
and our agents will not be responsible for the validity or performance of the
contracts.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make as a result of those
certain civil liabilities.
When we issue the securities offered by this prospectus, except for shares
of our common stock, they may be new securities without an established trading
market. If we sell a security offered by this prospectus to an underwriter for
public offering and sale, the underwriter may make a market for that security,
but the underwriter will not be obligated to do so and could discontinue any
market making without notice at any time. Therefore, we cannot give any
assurances to you concerning the liquidity of any security offered by this
prospectus.
Underwriters and agents and their affiliates may be customers of, engage in
transactions with, or perform services for us or our subsidiaries in the
ordinary course of their and/or our businesses.
25
LEGAL MATTERS
Certain legal matters will be passed upon for us by Jeffrey A. Brown of our
Law Department and Winston & Strawn, Chicago, Illinois. As of September 30,
2001, Mr. Brown owned approximately 1,625 shares of our common stock and held
options to purchase 27,400 shares of our common stock, of which options to
purchase 5,375 shares were currently exercisable.
EXPERTS
The consolidated financial statements and schedule of Motorola and
subsidiaries as of December 31, 2000 and 1999 and for each of the years in the
three-year period ended December 31, 2000 have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent certified public accountants, incorporated by reference herein
and in the registration statement, and upon the authority of said firm as
experts in auditing and accounting.
26
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus
supplement or the accompanying prospectus. You must not rely on any
unauthorized information or representations. This prospectus supplement and the
accompanying prospectus are an offer to sell only the securities offered
hereby, but only under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus supplement and the
accompanying prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Where You Can Find More
Information............ S-2
Prospectus Supplement
Summary................ S-3
Risk Factors Relating to
the Units.............. S-16
Accounting Treatment.... S-19
Use of Proceeds......... S-20
Capitalization.......... S-20
Price Range of Common
Stock and Dividends ... S-21
Summary Selected
Financial Data......... S-22
Description of the
Equity Security Units.. S-23
Description of the
Senior Notes........... S-40
U.S. Federal Income Tax
Consequences........... S-44
ERISA Considerations.... S-49
Underwriting............ S-51
Legal Matters........... S-53
Experts................. S-53
Prospectus
About This Prospectus... 2
Where You Can Find More
Information............ 3
The Company............. 4
Use of Proceeds......... 4
Ratios of Earnings to
Fixed Charges.......... 5
Description of Debt
Securities............. 6
Description of Capital
Stock.................. 18
Description of
Securities Warrants.... 22
Description of the Stock
Purchase Contracts and
the Stock Purchase
Units.................. 24
Plan of Distribution.... 25
Legal Matters........... 26
Experts................. 26
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21,000,000
Motorola, Inc.
7.00% Equity Security Units
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[MOTOROLA LOGO]
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Goldman, Sachs & Co.
JPMorgan
Salomon Smith Barney
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ABN AMRO Rothschild LLC
Banc of America Securities LLC
Deutsche Banc Alex. Brown
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BMO Nesbitt Burns
BNP PARIBAS
Dresdner Kleinwort Wasserstein
Mizuho International plc
SG Cowen
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