
<PAGE>
 
                                                                    Exhibit 10.6
                                                                                

            MOTOROLA SHARE OPTION PLAN OF 1996,  as amended 8/15/96
            -----------------------------------                    


1.   NAME AND PURPOSE
     ----------------

     1.1  Name.  The name of this plan is the Motorola Share Option Plan of 1996
(the "Plan").

     1.2  Purpose.  Motorola has established the Plan to promote the interests
of Motorola and its stockholders by providing full and part-time employees of
Motorola or its Subsidiaries and members of Motorola's Board who are not
employees of Motorola or any of its Subsidiaries (each a "Non-Employee
Director") with additional incentive to increase their efforts on Motorola's
behalf and to remain in the employ or service of Motorola or its Subsidiaries
and with the opportunity, through stock ownership, to increase their proprietary
interest in Motorola and their personal interest in its continued success and
progress.

2.   DEFINITIONS
     -----------

     2.1  General Definitions.  The following words and phrases, when used
herein, unless otherwise specifically defined or unless the context clearly
indicates otherwise, shall have the following meanings:

          (a)  Affiliate.  Any corporation, partnership, joint venture or other
business entity in which Motorola or a Subsidiary holds an ownership interest.

          (b)  Board.  The Board of Directors of Motorola.

          (c)  Change in Control.  The events described in Section 11.2.

          (d)  Code.  The Internal Revenue Code of 1986, as amended, and the
regulations promulgated pursuant thereto.

          (e)  Committee.  The Compensation Committee of the Board.

          (f)  Common Stock.  Motorola's common stock, $3 par value per Share.

          (g)  Directors.  Members of the Board of Motorola.

          (h)  Disinterested Person.  A person described in Rule 16b-3(c)(2) or
any successor definition adopted by the SEC.

          (i)  Effective Date.  The date that the Plan is approved by both the

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directors of Motorola and the stockholders of Motorola, and if not approved by
both on the same day, the date of the last approval.

          (j)  Employee.  Any person employed by Motorola or a Subsidiary on a
full or part-time basis.

          (k)  Employee Stock Options.  Stock Options granted to an Employee
under Article 4 of the Plan, including both NSOs and ISOs.

          (l)  Exchange Act.  The Securities Exchange Act of 1934, as amended.

          (m)  Fair Market Value. The average of the high and low sale prices of
Shares as reported for the New York Stock Exchange - Composite Transactions on a
given date, or, in the absence of sales on a given date, the average of the high
and low sale prices (as so reported) for the New York Stock Exchange - Composite
Transactions on the last previous day on which a sale occurred prior to such
date. With respect to an ISO, as defined below, if such method of determining
Fair Market Value shall not be consistent with the then current regulations of
the U.S. Secretary of the Treasury, Fair Market Value shall be determined in
accordance with those regulations.

          (n)  ISO.  An incentive stock option that meets the requirements of
Section 422 (or any successor section) of the Code.

          (o)  Motorola.  Motorola, Inc. or any successor.

          (p)  NSO.  A Stock Option that does not qualify as an ISO.

          (q)  Non-Employee Director.  Is defined in Section 1.2.

          (r)  Non-Employee Stock Option Period.  Is defined in Section 5.3.

          (s)  Non-Employee Stock Option.  Is defined in Section 5.1.

          (t)  Non-Exercise Period.  The period, for each Employee Stock Option,
ending twelve (12) months from the date of its grant, or any longer period or
periods determined by the Committee and set forth in, or incorporated by
reference into, the Employee Stock Option.

          (u)  Optionee.  An Employee who has been granted an Employee Stock
Option under the Plan.

          (v)  Participant. An individual who is granted a Stock Option under in
the Plan.

          (w)  Plan.  The Motorola Share Option Plan of 1996 and all 
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amendments and supplements thereto.

          (x)  Plan Year.  The calendar year.

          (y)  Rule 16b-3. Rule 16b-3 promulgated by the SEC, as amended, or any
successor rule in effect from time to time.

          (z)  SEC.  The Securities and Exchange Commission.

          (aa) Share.  A share of Common Stock.

          (bb) Stock Options.  Employee Stock Options and Non-Employee Stock
Options.

          (cc) Subsidiary; Subsidiaries.  Any corporation or other entity in
which a fifty percent (50%) or greater interest is, at the time, directly or
indirectly owned by Motorola or by one or more Subsidiaries or by Motorola and
one or more Subsidiaries, except that:  (i) with respect to ISOs, "Subsidiary"
shall mean "subsidiary corporation" as defined in Section 424(f) of the Code,
and (ii) with respect to Directors and any elected officer of Motorola or a
Subsidiary subject to Section 16 of the Exchange Act, the terms "Subsidiary" or
"Subsidiaries" mean and include any corporation or other entity at least a
majority of the outstanding voting shares of which (other than directors'
qualifying shares) is, at the time, directly or indirectly owned by Motorola or
by one or more Subsidiaries or by Motorola and one or more Subsidiaries.

          (dd) Successor-in-Interest.  Is defined in Section 4.5(a)(ii).

          (ee) Total and Permanent Disability.  Is defined in Section 4.5(a)(i).

     2.2  Other Definitions.  In addition to the above definitions, certain
words and phrases used in the Plan and any Stock Option certificate may be
defined elsewhere in the Plan or in such Stock Option certificate.

3.   SHARES SUBJECT TO PLAN
     ----------------------

     3.1  Number of Shares.  The number of Shares for which Stock Options may be
granted under the Plan shall be (i) 29,000,000 Shares, plus (ii) the total
number of Shares with respect to which no options have been granted under
Motorola's Share Option Plan of 1991 on the Effective Date,  plus (iii) the
number of Shares as to which options granted under Motorola's Share Option Plan
of 1991 terminate or expire without being fully exercised, subject, in each
case, to Sections 3.2 and 3.3.  Shares issued under the Plan may be either
authorized and unissued Shares or issued Shares reacquired by Motorola.  No
Employee may receive Stock Options relating to more than 300,000  Shares in any
Plan Year (as adjusted pursuant to Section 3.3).

     3.2  Reusage.  If a Stock Option expires or is terminated, surrendered or
canceled without having been fully exercised, the Shares covered by such Option

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shall again be available for use under the Plan.

     3.3  Adjustments.  If there is any change in the Common Stock by reason of
any stock split, stock dividend, spin-off, split-up, spin-out, recapitalization,
merger, consolidation, reorganization, combination or exchange of shares, the
number and class of Shares available for  Stock Options the number of Shares to
be automatically granted under Section 5.1 hereof and the number of Shares
subject to outstanding Stock Options and the price of each of the foregoing, as
applicable, shall be appropriately adjusted by the Committee to provide
Participants with the same relative rights before and after such adjustment.

4.   EMPLOYEE STOCK OPTIONS
     ----------------------

     4.1  Grant of Employee  Stock Options.  The Committee shall have authority
to grant Stock Options (ISOs or NSOs)  to Employees.  The Committee shall
determine the number of Shares subject to each Employee Stock Option, the
purchase price per Share, the term of the Employee Stock Option, the time or
times at which the Employee Stock Option may be exercised, and all other terms
and conditions of the Employee Stock Option.  The Option exercise price per
Share of an Employee Stock Option may not be less than the Fair Market Value of
a Share on the date of grant. The Committee may accelerate the exercisability of
any Employee Stock Option, including the waiver or modification of any
installment exercise provisions.  The Committee may in its discretion, delegate
to members of the Committee and/or one or more elected officers of Motorola the
authority to grant Stock Options to Employees who are not subject to Section 16
of the Exchange Act.

     4.2  NSOs and ISOs.

          (a)  The Stock Option exercise price of any Stock Option may not be
less than the Fair Market Value on the date of grant of the Shares of the Common
Stock subject to the Stock Option.

          (b)  ISOs.  The following additional terms and conditions shall apply
to ISOs:
     
               (i)  No ISO shall be granted to any Participant who, at the time
the Employee Stock Option is granted, would own (within the meaning of Section
422(b) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of Motorola.

               (ii) The aggregate Fair Market Value (determined as of the time
the Employee Stock Option is granted) of the Shares of Common Stock with respect
to which one or more ISO's are exercisable for the first time by any individual
Optionee during any calendar year (under all plans of Motorola and its
Subsidiaries) shall not exceed $100,000.00.

              (iii) Each ISO, by its terms, shall (1) not be exercisable after
the 

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expiration often (10) years after the date it is granted and (2) not be
transferrable by the Optionee otherwise than by will or the applicable laws of
descent and distribution or by operation of a death beneficiary designation made
by the Optionee in accordance with rules established by the Committee and shall
be exercisable during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative if the Optionee is legally
incompetent.

     4.3  Exercise of Employee Stock Options; Payment.

          (a)  An Employee Stock Option may be exercised by the Optionee
submitting to Motorola such form(s) as are prescribed for such purpose.
Motorola may require the surrender of the Employee Stock Option certificate if
one has been issued.  No Employee Stock Option shall be exercisable for less
than a minimum of fifty (50) Shares except in cases where the number of Shares
represented by the Employee Stock Option being exercised is less than fifty
(50), in which case, the Employee Stock Option shall not be exercisable for less
than all shares represented by such Option.

          (b)  Payment for Shares purchased upon exercise of an Employee Stock
Option shall be paid in full as permitted by Section 13 for all Shares purchased
at the time of purchase. No fractional Shares may be purchased.

     4.4  Non-Exercise Period.  Except as provided herein for Optionees who die
while in the employ of Motorola or any Subsidiary or for a Change in Control, no
Employee Stock Option granted under the Plan may be exercised prior to the
expiration of the Non-Exercise Period.  No Employee Stock Option may be
exercised after expiration of its stated term.

     4.5  Effect of Termination of Employment on Employee  Stock Options:

     (a) Termination of Employment During the Non-Exercise Period.

               (i)  Except for a Change in Control and except for a disability
leave of absence as provided in Section 4.5(a)(iii) hereof, if, during the
NonExercise Period, the Optionee's employment with Motorola and its Subsidiaries
shall terminate for any reason (including retirement) other than death, transfer
to an Affiliate and other than Total and Permanent Disability (as that term is
defined in the Motorola Profit Sharing and Investment Plan) of the Optionee, as
determined by the Committee or its designee, the Optionee's right to exercise
the Employee Stock Option shall terminate and all rights thereunder shall cease;
provided, however, if the Optionee's employment terminates by reason of the
transfer of such Optionee to an Affiliate, the Committee shall have the power
and authority, in its discretion, to determine whether or not any or all of the
Employee Stock Options held by the Optionee shall terminate or shall continue in
effect (in which case such Options shall be subject to all of the conditions of
the Plan, including this Section 4.5, and such other conditions as the Committee
may impose, with "termination of employment," "employment is terminated" or
"employment shall have been terminated" or words of like import or intent
meaning termination of employment with the Affiliate.)

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               (ii) If, during the Non-Exercise Period, an Optionee dies while
in the employ of Motorola or any Subsidiary, the deceased Optionee's Successor-
in-Interest shall have the right to exercise, in whole or in part, at any time
during the remainder of the term of such Employee Stock Option, the entire
amount of the Shares subject to such Employee Stock Option (without regard to
any installment limitation on the exercise of the Employee Stock Option). For
purposes of the Plan, the term "Successor-in-Interest" shall mean the deceased
Optionee's death beneficiary, personal representative, or any person who
acquired the right to exercise such Employee Stock Option by bequest or
inheritance or by reason of the laws of descent and distribution.

               (iii) If, during the Non-Exercise Period, an Optionee's
employment with Motorola and its Subsidiaries shall terminate because of the
Total and Permanent Disability of the Optionee or if the Optionee shall be put
on disability leave of absence status because of the Total and Permanent
Disability of the Optionee, each Employee Stock Option held by such an Optionee
which has a Non-Exercise Period in effect at the time of termination of
employment or commencement of the disability leave of absence shall become
exercisable at the time the applicable Non-Exercise Period elapses or
terminates, and the Optionee shall then have the right to exercise, in whole or
in part, each such Employee Stock Option for the entire amount of Shares subject
to each such Employee Stock Option (without regard to any installment limitation
on exercise of the Employee Stock Option) at any time during the remainder of
the term of the Employee Stock Option. The unexercised portion of each Employee
Stock Option shall terminate upon expiration of the term of such Stock Option,
and any unexercised portion shall terminate immediately if and when the Optionee
is employed by a competitor of Motorola or any Subsidiary without written
consent of the Committee.

          (b) Termination of Employment After the Non-Exercise Period.

               (i) By Termination of Employment Without Cause. If the Non-
Exercise Period shall have elapsed or terminated and the Optionee's employment
with Motorola and its Subsidiaries shall have been terminated thereafter by
Motorola or any Subsidiary without cause, the Optionee shall have the right to
exercise the then presently exercisable unexercised portion of the Employee
Stock Option at any time during a period of twelve (12) months after the date of
termination of employment. The unexercised portion of the Employee Stock Option
may be exercised, in whole or in part, for the number of Shares which were or
would have become exercisable to the extent the Optionee could have exercised
such Employee Stock Option had the Optionee remained in the employ of Motorola
or any Subsidiary during the twelve (12) month period immediately following the
date of termination of employment. Except as otherwise provided in Section
4.5(b)(vii) hereof, the unexercised and/or unexercisable portion of each
Employee Stock Option shall terminate twelve (12) months after an Optionee's
employment with Motorola and its Subsidiaries shall have been so terminated, and
any unexercised and/or unexercisable portion shall terminate immediately if and
when the Optionee is employed by a competitor of Motorola or any
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                                       7

Subsidiary without the written consent of the Committee.

               (ii) By Termination of Employment for Cause. If the Non-Exercise
Period shall have elapsed or terminated and the Optionee's employment is
terminated by Motorola or any Subsidiary for cause, any unexercised portion of
any Employee Stock Option granted to the Optionee shall terminate with the
Optionee's termination of employment. As used herein, the term "cause" means (a)
the failure of the Optionee to carry out the duties assigned to the Optionee as
a result of incompetence or willful neglect, as determined by the Committee, or
(b) such other reasons, including the existence of a conflict of interest, as
the Committee may determine.

               (iii) By Voluntary Termination of Employment. If the Non-Exercise
Period shall have elapsed or terminated and the Optionee voluntarily terminates
employment with Motorola or any Subsidiary for reasons other than the retirement
of the Optionee, any unexercised portion of the Optionee's Employee Stock Option
shall terminate with the Optionee's termination of employment.

               (iv) By Retirement. If the Non-Exercise Period shall have elapsed
or terminated and the Optionee's employment with Motorola or any Subsidiary
shall have been terminated because of the retirement of the Optionee from
Motorola or any Subsidiary at age 55 or older, the Optionee shall have the right
to exercise, in whole or in part, the unexercised portion of any Employee Stock
Option held by such Optionee for the entire amount of Shares subject to such
Stock Option (without regard to any installment limitation on exercise of the
Employee Stock Option) at any time during the remainder of the term of such
Stock Option. The unexercised portion of each Employee Stock Option shall
terminate upon expiration of the term applicable to each such Employee Stock
Option, and any unexercised portion shall terminate immediately if and when the
Optionee is employed by a competitor of Motorola or any Subsidiary without the
written consent of the Committee.

                    For purposes of this Section 4.5, if the Optionee is a
participant in Motorola's pension plan or the pension plan of any Subsidiary,
the term "retirement" shall mean the Optionee's retirement as provided for in
the applicable pension plan. If the Optionee is not a participant in Motorola's
pension plan or the pension plan of any Subsidiary, "retirement" of an Optionee
shall be determined by the Committee. In no event can retirement take place
prior to age 55 even if permitted under the applicable pension plan.

               (v) By Total and Permanent Disability. If the Non-Exercise Period
shall have elapsed or terminated, and the Optionee's employment with Motorola
and its Subsidiaries shall have been terminated because of the Total and
Permanent Disability of the Optionee or if the Optionee shall be put on
disability leave of absence status because of the Total and Permanent Disability
of the Optionee, the Optionee shall have the right to exercise, in whole or in
part, the unexercised portion of any Employee Stock Option held by such Optionee
for the entire amount of Shares subject to such Employee Stock Option (without
regard to any installment limitation on
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                                       8

exercise of the Employee Stock Option) at any time during the remainder of the
term of the Employee Stock Option. The unexercised portion of each Employee
Stock Option shall terminate upon expiration of the term of each such Employee
Stock Option, and any unexercised portion shall terminate immediately if and
when the Optionee is employed by a competitor of Motorola or any Subsidiary
without the written consent of the Committee.

               (vi) By Death. If the Non-Exercise Period shall have elapsed or
terminated and the Optionee dies while in the employ of Motorola or any
Subsidiary, the unexercised portion of the Employee Stock Option may be
exercised, in whole or in part, at any time during the remainder of the term of
the Employee Stock Option by the Optionee's Successor-in-Interest, for the
entire number of Shares subject to the Employee Stock Option (without regard to
any installment limitation on exercise of the Employee Stock Option).

               (vii) Effect of Death After Termination of Employment Without
Cause or Retirement. If the Non-Exercise Period shall have elapsed or terminated
and the Optionee dies during the twelve (12) month period immediately following
the Optionee's termination of employment by Motorola or any Subsidiary without
cause and at the time of death such Optionee is not employed by a competitor of
Motorola or any Subsidiary (or while employed by a competitor of Motorola or any
Subsidiary with the written consent of the Committee), the unexercised portion
of the Employee Stock Option may be exercised by the Optionee's Successor-in-
Interest at any time during the remainder of the term of the Employee Stock
Option, in whole or in part, for the number of Shares which were or would have
become exercisable had the Optionee survived for the remainder of the term of
the Employee Stock Option, without regard to the requirement of exercise within
twelve (12) months after termination of employment without cause.

                    If the Non-Exercise Period shall have elapsed or terminated
and the Optionee dies after retirement prior to the expiration of the term of
the Employee Stock Option, and, if at the time of death such Optionee is not
employed by a competitor of Motorola or any Subsidiary (or while employed by a
competitor of Motorola or any Subsidiary with the written consent of the
Committee), the unexercised portion of the Employee Stock Option may be
exercised for the entire number of Shares subject to such Employee Stock Option
(without regard to any installment limitation on exercise of the Employee Stock
Option), by the Optionee's Successor-in-Interest at any time during the
remainder of the term of the Employee Stock Option.

               (viii) By Transfer of Optionee to an Affiliate. If the Non-
Exercise Period shall have elapsed or terminated and the Optionee's employment
with Motorola and its Subsidiaries shall terminate by reason of the transfer of
such Optionee to an Affiliate, the Committee shall have the power and authority,
in its discretion, to determine whether or not any or all of the Employee Stock
Options held by the Optionee shall continue in effect for the remainder of the
term of such Employee Stock Option or for the period otherwise applicable under
the provisions of the Plan.
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                                       9

Any Employee Stock Option which the Committee permits to continue in effect
beyond the period otherwise applicable under the Plan shall be subject to all of
the terms and conditions of the Plan, including this Section 4.5 and such other
conditions as the Committee may impose (with "termination of employment",
"employment shall terminate", "terminates employment", "employment is
terminated" or "employment shall have been terminated" or words of like import
or intent meaning termination of employment with the Affiliate).

     (c)  Procedure on Death.

     No transfer of an Employee Stock Option pursuant to Section 4.5 (a)(ii),
(b)(vi) and (b)(vii) above, by will or by the laws of descent and distribution,
shall be effective unless Motorola shall have been furnished with written notice
thereof and a copy of the will, if any, and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the Successor-in-interest or Successors-in-interest of the terms
and conditions of the Employee Stock Option, and under no circumstances shall
the right of any such Successor-in-Interest to exercise any such Employee Stock
Option extend beyond the applicable period specified in sub-paragraph (a)(ii),
(b)(vi) or (b)(vii) above, or beyond the expiration of the term of such Employee
Stock Option.

     (d)  Leaves of Absence and Lay-offs.

     If an Optionee is placed on leave of absence status (except as provided in
Section 4.5 (a)(iii) or (b)(v) above) by Motorola or any Subsidiary, each
Employee Stock Option then held by the optionee, whether exercisable or
nonexercisable, shall be suspended at such time, but the period of time during
which the Optionee is on leave of absence shall be counted in determining when
the Non-Exercise Period elapses. If an Optionee is placed on lay-off status by
Motorola or any Subsidiary, any then non-exercisable Employee Stock Option shall
terminate and any then exercisable Employee Stock Option may be exercised during
the period of twelve (12) months from the date the Optionee is placed on lay-off
status and shall be suspended thereafter to the extent not exercised. In any
case, the unexercised portion of each suspended Employe Stock Option shall
either (i) terminate upon the Optionee's termination of employment with Motorola
and its Subsidiaries or (ii) be reinstated upon such Optionee returning from
leave of absence or lay-off status to active employment status with Motorola or
any Subsidiary.

     (e) Meaning of Termination of Employment.

     Wherever in this Article or elsewhere in the Plan the words "termination of
employment, employment is terminated, employment shall terminate or employment
shall have been terminated" or words of like import or intent are used, they
shall mean the last day worked by the Participant rather than the last day the
Participant is on the payroll of Motorola or any Subsidiary.

5.   NON-EMPLOYEE STOCK OPTIONS
     --------------------------
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     5.1 Automatic Grant of Non-Employee Stock Options. On June 1, 1996 and on
June 1 of each Plan Year after 1996 in which the Plan is in effect, each
individual elected, re-elected or continuing as a Non-Employee Director shall
automatically receive a NSO covering 1,000 Shares (a "Non-Employee Stock
Option"). Notwithstanding the foregoing, if, on that day, the General Counsel of
Motorola determines, in his or her sole discretion, that Motorola is in
possession of material, undisclosed information about Motorola, then the annual
grant of NSO's to Non-Employee Directors shall be suspended until the second day
after public dissemination of such information and the price, exercisability
date and Non-Employee Stock Option Period shall then be determined by reference
to such later date. If Common Stock is not reported as traded on the New York
Stock Exchange - Composite Transactions on any date a grant would otherwise be
awarded, then the grant shall be made the next day thereafter on which Common
Stock is so traded.

     5.2 Price. The Stock Option exercise price of a Non-Employee Stock Option
shall be the Fair Market Value of the Shares subject to such Stock Option on the
date of grant.

     5.3 Exercisability. A Non-Employee Stock Option granted under the Plan
shall become exercisable twelve months after the date of grant (except as
otherwise provided in Section 5.6 for retirement and Section 5.7 for death which
occurs during such period and in Article 11 if a Change in Control occurs during
such period) and shall expire, except as otherwise provided herein, 10 years
after the date of grant ("Non-Employee Stock Option Period").

     5.4 Payment. The Non-Employee Stock Option exercise price shall be paid in
full as permitted by Section 13 for all Shares purchased at the time the Non-
Employee Stock Option is exercised. No fractional Shares may be purchased.
Motorola may require the surrender of the Non-Employee Stock Option certificate
if one has been issued, and no Non-Employee Stock Option may be exercised for
less than fifty (50) Shares, except in cases where the number of shares
represented by the Non-Employee Stock Option being exercised is less than fifty
(50), in which case the Non-Employee Stock Option shall not be exercisable for
less than all Shares represented by such Stock Option.

     5.5 Termination. Upon cessation of services as a Non-Employee Director (for
reasons other than retirement as defined in Section 5.6 hereof or death) only
those Non-Employee Stock Options immediately exercisable at the date of
cessation of service shall be exercisable by the Non-Employee Director. Such 
Non-Employee Stock Options must be exercised within 30 days after cessation of
service (but in no event after the expiration of the Non-Employee Stock Option
Period) or they shall be forfeited. If, however, the Non-Employee Director
during or after his or her service on the Board, engages, directly or
indirectly, in any activity which is in competition with any activity of
Motorola or any Subsidiary or in any action or conduct which is in any manner
adverse or in any way contrary to the interests of Motorola, or any Subsidiary,
any unexercised portion of such Non-Employee Stock Options shall immediately
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                                       11

terminate, unless otherwise determined by the Chief Executive Officer of
Motorola. The determination of whether a Director is or has engaged in any
competitive activity or in any action or conduct which is adverse or contrary to
the interests of Motorola or any of its Subsidiaries shall be made by the Chief
Executive Officer of Motorola, and such determination shall be conclusive and
binding upon all parties.

     5.6 Retirement. As used in this Article 5, the term "retirement" shall
mean, for Non-Employee Directors, resignation at or after age 65, failure to
stand for re-election at or after age 65 or failure to be re-elected at or after
age 65. Upon retirement, all Non-Employee Stock Options previously granted to a
Non-Employee Director shall become or continue to be exercisable, except as
otherwise provided herein. Such Non-Employee Stock Options must be exercised
prior to the expiration of the Non-Employee Stock Option Period or they shall be
forfeited.

     5.7 Death. Upon the death of a Non-Employee Director, all Non-Employee
Stock Options previously granted to the Non-Employee Director shall become
exercisable by his or her Successor-in-Interest, except as otherwise provided
herein. Such Non-Employee Stock Options can be exercised during the remainder of
the Non-Employee Stock Option Period.

     5.8 Amendments. An amendment of this Article 5 amending provisions of the
kind described in Rule 16b-3(c)(2)(ii)(A) under the Exchange Act shall not be
made more frequently than once every six months unless necessary to comply with
the Code. No amendment may revoke or alter in a manner unfavorable to a Non-
Employee Director holding Non-Employee Stock Options any Non-Employee Stock
Options then outstanding, without such Non-Employee Director's approval.

     5.9 Interpretation. The Chief Executive Officer of Motorola shall
administer, construe and interpret this Article 5, whose decisions shall be
conclusive and binding on all parties. The Chief Executive Officer of Motorola
is authorized, subject to the provisions of this Article 5, from time to time to
establish such rules and regulations as he or she may deem appropriate for the
proper administration or operation of this Article 5. Non-Employee Stock Options
may be evidenced by certificates at the option of the Chief Executive Officer of
Motorola.

6.   ELIGIBILITY
     -----------

     The Participants shall be determined by the Committee, except for Non-
Employee Stock Options which shall be automatically granted to Non-Employee
Directors under Article 5 and except to the extent authority has been delegated
under Section 7.1 hereof. In making its determinations, the Committee shall
consider past, present and expected future contributions of Employees to
Motorola and its Subsidiaries.

7.   ADMINISTRATION
     --------------

     7.1 Committee. The Plan (except for Article 5 and the Non-Employee Stock
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                                       12

Options automatically granted thereunder) shall be administered by the
Committee; provided, however, if at any time Rule 16b-3 and Section 162(m) of
the Code, and any implementing regulations (and any successor provisions
thereof), so permit without adversely affecting the ability of the Plan to
comply with the conditions for exemption from Section 16 of the Exchange Act (or
any successor provision) provided by Rule 16b-3 and the exemption from the
limitations on the deductibility of certain executive compensation provided by
Section 162(m), the Committee may delegate the administration of the Plan in
whole or in part, on such terms and conditions, to such other person or persons
as it may determine in its discretion. References to the Committee hereunder
shall include the Board where appropriate. The membership of the Committee or
such successor committee shall be constituted so as to comply at all times with
the applicable requirements of Rule 16b-3 and Section 162(m). No member of the
Committee shall have within one year prior to his appointment received awards
under the Plan or under any other plan, program or arrangement of Motorola or
any of its affiliates if such receipt would cause such member to cease to be a
"disinterested person" under Rule 16b-3; provided that if at any time Rule 16b-3
so permits without adversely affecting the ability of the Plan to comply with
the conditions for exemption from Section 16 of the Exchange Act (or any
successor provision) provided by Rule 16b-3, one or more members of the
Committee may cease to be a "disinterested person."

     7.2 Authority. Subject to the terms of the Plan, and except for the Non-
Employee Stock Options granted under Article 5 (over which the Committee shall
have no discretion), the Committee shall have complete power and authority to:

          (a) determine the individuals to whom Employee Stock Options are
granted, the type and amounts to be granted and the time of all such grants;

          (b) determine the terms, conditions and provisions of, and
restrictions relating to, each Employee Stock Option granted;

          (c) administer, interpret and construe the Plan and the Employee Stock
Options;

          (d) prescribe, amend and revoke rules and regulations relating to the
Plan;
          
          (e) maintain accounts, records and ledgers relating to the Plan;

          (f) maintain records concerning its decisions and proceedings;

          (g) employ agents, attorneys, accountants or other persons for such
purposes as the Committee considers necessary or desirable;

          (h) take, at any time, any action permitted by Section 11.1
irrespective of whether any Change in Control has occurred or is imminent; and

          (i) do and perform all acts which it may deem necessary or appropriate
<PAGE>
 
                                       13

for the administration of the Plan and carry out the purposes of the Plan.

     7.3 Determinations. All determinations of the Committee shall be final,
binding and conclusive upon all persons, including Motorola and its Subsidiaries
and Participants and their respective legal representatives, Successors-in
Interest and permitted assigns and upon all other persons claiming by, through,
under or against any of them.

8.   AMENDMENT
     ---------

     Except as hereinafter provided, and except as may be required for
compliance with Rule 16b-3 and Section 162(m) of the Code, the Board or the
Committee shall have the right and power to amend the Plan at any time and from
time to time. Only the Board may amend Article 5 of the Plan, subject to such
Article and subject to compliance with Rule 16b-3. Neither the Board nor the
Committee may amend the Plan in a manner which would impair or adversely affect
the rights of the holder of a Stock Option without the holder's consent. If the
Code or any other applicable statute, rule or regulation, including, but not
limited to, those of any securities exchange, requires stockholder approval with
respect to the Plan or any type of Plan amendment, then to the extent so
required, stockholder approval shall be obtained.

9.   TERM AND TERMINATION
     --------------------

     9.1 Term. The Plan shall commence as of the Effective Date and, subject to
the terms of the Plan, including those in Section 14.7 requiring stockholder
approval for implementation or limiting the period over which ISOs may be
granted, shall continue in full force and effect until five (5) years from the
Effective Date, unless sooner terminated by the Board.

     9.2 Termination. The Plan may be terminated at any time by the Board.
Termination shall not in any manner impair or adversely affect any Stock Option
outstanding at the time of termination.

10.  MODIFICATION OR TERMINATION
     ---------------------------

     10.1 General. Subject to the provisions of Section 10.2, the amendment or
termination of the Plan shall not impair or adversely affect a Participant's
right to any Stock Option granted prior to such amendment or termination.

     10.2 Committee's Right. Any Stock Option granted may be converted,
modified, forfeited or canceled, in whole or in part, by the Committee if and to
the extent permitted in the Plan or applicable Stock Option certificate or with
the consent of the Participant to whom such Stock Option was granted. Subject to
the limitations in the Plan, the Committee may grant Stock Options on such terms
and conditions, which may be different than those specified in the Plan, as it
may deem desirable in order to comply with, or make available the benefits of,
the laws of any foreign jurisdiction.
<PAGE>
 
                                       14

11.  CHANGE IN CONTROL
     -----------------

     11.1 Stock Option Vesting and Payment. Upon the occurrence of a Change in
Control, each Stock Option outstanding on the date on which the Change in
Control occurs shall immediately become exercisable in full for the remainder of
its term and each Participant holding Stock Options shall have the right, at his
or her election made during a period of sixty (60) days following the date on
which the Change in Control occurs, to have Motorola purchase any or all such
Stock Options for an immediate lump-sum cash payment equal to the product of (1)
the excess, if any, of the higher of (i) the average of the high and low sale
prices of the Common Stock as reported on the New York Stock Exchange -Composite
Transactions on the date immediately prior to the date of payment, or if Shares
did not trade on such date, on the last previous day on which Shares traded
prior to such date, or (ii) the highest per Share price for Common Stock
actually paid in connection with the Change in Control, over the per Share
exercise price of each such Stock Option held, and (2) the number of Shares
covered by each such Stock Option.

     11.2 Change in Control.  A Change in Control shall mean:

     A Change in Control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act whether or not Motorola is then subject to such reporting
requirement; provided that, without limitation, such a Change in Control shall
be deemed to have occurred if (A) any "person" or "group" (as such terms are
used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Motorola representing 20% or more of the
combined voting power of Motorola's then outstanding securities (other than
Motorola or any employee benefit plan of Motorola; and, for purposes of the
Plan, no Change in Control shall be deemed to have occurred as a result of the
"beneficial ownership," or changes therein, of Motorola's securities by either
of the foregoing), (B) there shall be consummated (i) any consolidation or
merger of Motorola in which Motorola is not the surviving or continuing
corporation or pursuant to which Shares of Common Stock would be converted into
cash, securities or other property, other than a merger of Motorola in which the
holders of Common Stock immediately prior to the merger have (directly or
indirectly) at least an 80% ownership interest in the outstanding common stock
of the surviving corporation immediately after the merger, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of Motorola, (C) the
stockholders of Motorola approve any plan or proposal for the liquidation or
dissolution of Motorola, or (D) as the result of, or in connection with, any
cash tender offer, exchange offer, merger or other business combination, sale of
assets, proxy or consent solicitation (other than by the Board), contested
election or substantial stock accumulation (a "Control Transaction"), the
members of the Board immediately prior to the first public announcement relating
to such Control Transaction shall thereafter cease to constitute a majority of
the Board.

12.  CERTIFICATES AND TRANSFER OF STOCK OPTIONS
     ------------------------------------------
<PAGE>
 
                                      15


     12.1 Provisions of Stock Option Certificates. ISOs may be evidenced by
Incentive Stock Option certificates and NSOs may be evidenced by Non-Qualified
Stock Option certificates. Each certificate may include, but shall not be
limited to, the following: description of the type of Stock Option; the Stock
Option's duration; its transferability; the exercise price; the exercise period;
the Non-Exercise Period; the person or persons who may exercise the Stock
Option; the effect upon such Stock Option of the Participant's death or other
termination of employment; and the Stock Option's conditions.

     12.2 Transfer of Stock Options. Except as set forth in the next sentence of
this Section 12.2, a Stock Option shall not be transferable by a Participant
other than by operation of a death beneficiary designation made by the
Participant in accordance with rules established by the Committee, or the Chief
Executive Officer of Motorola, as appropriate, by will or the applicable laws of
descent and distribution and shall be exercisable during the Participant's
lifetime only by him or her or his or her guardian or legal representative if
the Participant is legally incompetent. Notwithstanding the foregoing, except to
the extent that it would cause the Plan to fail to meet the conditions required
to be met under Rule 16b-3, the Committee shall have the power and authority to
provide, as a term of any NSO, including any outstanding NSO held by a Non-
Employee Director or an Optionee, that such NSO may be transferred without
consideration by the Non-Employee Director or the Optionee to a member or
members of his or her immediate family (i.e., a child, children, grandchild,
grandchildren, or spouse) and/or to a trust or trusts for the benefit of an
immediate family member or family members.

13.  PAYMENT
     -------

     Upon the exercise of a Stock Option, the amount due Motorola is to be paid:

          (a)  in cash;

          (b) by the transfer to Motorola of Shares owned by the Participant
valued at Fair Market Value on the date of transfer;

          (c) by any combination of the payment methods specified in (a) and (b)
above; or

          (d) such other manner as may be authorized from time to time by the
Committee.

Notwithstanding the foregoing, any method of payment other than (a) and (b) may
be used only with the approval of the Committee or if and to the extent so
provided in the applicable Stock Option certificate.

14.  GENERAL
     -------
<PAGE>
 
                                      16


     14.1 Tax Withholding. At the time Motorola is required to withhold any
Federal Insurance Contribution Act ("FICA") tax and/or any federal, state or
local tax of any kind with respect to the exercise of any Stock Option, the
Participant shall pay to Motorola the amount of any such FICA, federal, state or
local tax or taxes required to be withheld. The obligations of Motorola under
the Plan shall be conditional on payment of all withholding taxes, and Motorola
shall have the right to deduct any such taxes from any payment of any kind under
the Plan or otherwise due to the Participant. Withholding tax obligations may be
settled, in whole or in part, with Common Stock. At any time when a Participant
is required to pay to Motorola an amount required to be withheld under
applicable tax laws upon exercise of a Stock Option, the Participant may satisfy
this obligation in whole or in part by transfer to Motorola of Shares previously
owned by the Participant, by electing (the "Election") to have Motorola withhold
from the distribution Shares of Common Stock having a value equal (as near as
possible) to the amount required to be withheld or by a combination of such
means, provided, however, that the amount of federal, state and local income
taxes that may be paid by transfer or withholding of Shares shall not exceed the
statutory minimum withholding requirements. The amount of any withholding tax
not paid by transfer or withholding of Shares shall be paid to Motorola in cash.
The value of the Shares transferred or to be withheld shall be based on the Fair
Market Value of the Common Stock on the date that the amount of tax to be
withheld shall be determined ("Tax Date") or if Shares did not trade on the New
York Stock Exchange on the Tax Date, as of the last previous date Shares did so
trade. Each Election must be made on or prior to the Tax Date. The Committee may
disapprove of any Election or may suspend, condition, restrict or terminate the
right to make Elections. An Election is irrevocable, unless revocation is
approved by the Committee.

     14.2 Compliance With Legal Requirements. Anything in the Plan to the
contrary notwithstanding: (a) Motorola may, if it shall determine it necessary
or desirable for any reason, at the time of award of any Stock Option or the
issuance of any Shares of Common Stock, require the recipient of the Stock
Option, as a condition to the receipt thereof or to the receipt of Shares of
Common Stock issued pursuant thereto, to deliver to Motorola a written
representation of present intention to acquire the Stock Option or the Shares of
Common Stock issued pursuant thereto for his or her own account for investment
and not for distribution; and (b) if at any time Motorola further determines
that the listing, registration or qualification (or any updating of any such
document) of any Stock Option or the Shares of Common Stock issuable pursuant
thereto is necessary on any securities exchange or under any federal or state
securities or blue sky law, or that the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with the grant of any Stock Option or the issuance of Shares of Common Stock
pursuant thereto, such Stock Option shall not be granted or such Shares of
Common Stock shall not be issued, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to Motorola. In
addition, Motorola may terminate any Stock Option or terminate, condition,
restrict or limit the issuance or delivery of any Shares of Common Stock if it
determines that such Stock Option or delivery violates any applicable laws,
regulations or rules, including but not limited to, those of any
<PAGE>
 
                                      17


stock exchange or Rule 16b-3.

     14.3 Indemnification and Exculpation. Each person, who is or shall have
been a member of the Board or of the Committee, shall be indemnified and held
harmless by Motorola against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by such person in
connection with or resulting from any claim, action, suit or proceeding to which
such person may be a party or in which such person may be involved by reason of
any action taken or failure to act under the Plan and against and from any and
all amounts paid by such person in settlement thereof (with Motorola's written
approval) or paid by such person in satisfaction of a judgment in any such
action, suit, or proceeding, except a judgment based upon a finding of such
person's bad faith, subject, however, to the condition that upon the institution
of any claim, action, suit or proceeding against such person, such person shall
in writing give Motorola an opportunity, at its own expense, to participate in,
and to the extent it may wish, to assume the defense thereof before such person
undertakes to handle it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law, under the Delaware General Corporation Law,
the Restated Certificate of Incorporation or By-Laws of Motorola or otherwise,
or any power that Motorola may have to indemnify such person or hold such person
harmless. Each member of the Board or of the Committee, and each officer and
employee of Motorola shall be fully justified in relying or acting upon any
information furnished on behalf of Motorola by any person or persons other than
himself or herself in connection with the administration of the Plan. In no
event shall any person who is or shall have been a member of the Board or of the
Committee, or an officer or employee of Motorola, be liable for any
determination made or other action taken or any omission to act in reliance upon
any such information, or for any action taken (including the furnishing of
information) or any failure to act, if in good faith.

     14.4 Headings. The headings of the sections and subsections of the Plan are
for convenience of reference only and shall not be used to construe any
provision of the Plan.

     14.5 Governing Law. The Plan shall be governed by, and construed and
administered in accordance with, the laws of the State of Illinois except to the
extent that any federal law otherwise controls.

     14.6 Employment Rights. Nothing in the Plan or in any grant of any Employee
Stock Option shall restrict the right of Motorola or any Subsidiary to terminate
the employment of any Participant at any time, with or without cause, or to
increase or decrease the compensation of any Participant.

     14.7 Approval by Stockholders. The Plan has been approved by the Board of
Directors and is subject to approval by the affirmative votes of the holders of
a majority of the Shares present, or represented, and entitled to vote at the
meeting of stockholders at which the Plan is submitted.
<PAGE>
 
                                      18


     14.8 Implementation of the Plan and Grant of Employee Stock Options Under
1991 Plan. If the Plan is implemented pursuant to Section 14.7, except as herein
provided, no further options will be granted under the Share Option Plan of
1991. If the Board of Directors terminates this Plan after it has been
implemented, stock options may be granted under the Share Option Plan of 1991,
but not as to any Shares issued or subject to Stock Options under this Plan.
<PAGE>
 
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S>  <C>                                                                    <C>
1.   NAME AND PURPOSE........................................................1
     1.1   Name..............................................................1
     1.2   Purpose...........................................................1
2.   DEFINITIONS.............................................................1
     2.1   General Definitions...............................................1
     2.2   Other Definitions.................................................3
3.   SHARES SUBJECT TO PLAN..................................................3
     3.1   Number of Shares..................................................3
     3.2   Reusage...........................................................3
     3.3   Adjustments.......................................................4
4.   EMPLOYEE STOCK OPTIONS..................................................4
     4.1   Grant of Employee Stock Options...................................4
     4.2   NSOs and ISOs.....................................................4
     4.3   Exercise of Employee Stock Options; Payment.......................5
     4.4   Non-Exercise Period...............................................5
     4.5   Effect of Termination of Employment on Employee Stock Options.....5
5.   NON-EMPLOYEE STOCK OPTIONS..............................................9
     5.1   Automatic Grant of Non-Employee Stock Options....................10
     5.2   Price............................................................10
     5.3   Exercisability...................................................10
     5.4   Payment..........................................................10
     5.5   Termination......................................................10
     5.6   Retirement.......................................................11
     5.7   Death............................................................11
     5.8   Amendments.......................................................11
     5.9   Interpretation...................................................11
6.   ELIGIBILITY............................................................11
7.   ADMINISTRATION.........................................................11
     7.1   Committee........................................................11
     7.2   Authority........................................................12
     7.3   Determinations...................................................13
8.   AMENDMENT..............................................................13
9.   TERM AND TERMINATION...................................................13
     9.1   Term.............................................................13
     9.2   Termination......................................................13
10.  MODIFICATION OR TERMINATION............................................13
     10.1  General..........................................................13
     10.2  Committee's Right................................................13
11.  CHANGE IN CONTROL......................................................14
     11.1  Stock Option Vesting and Payment.................................14
     11.2  Change in Control................................................14
12.  CERTIFICATES AND TRANSFER OF STOCK OPTIONS.............................14
     12.1  Provisions of Stock Option Certificates..........................15
     12.2  Transfer of Stock Options........................................15
13.  PAYMENT................................................................15
14.  GENERAL................................................................15
     14.1  Tax Withholding..................................................16
     14.2  Compliance with Legal Requirements...............................16
     14.3  Indemnification and Exculpation..................................17
     14.4  Headings.........................................................17
     14.5  Governing Law....................................................17
     14.6  Employment Rights................................................17
     14.7  Approval by Stockholders.........................................17
     14.8  Implementation of the Plan and Grant of Employee Stock Options
           Under 1991 Plan..................................................18
</TABLE>
