ZEBRA TECHNOLOGIES CORP (Form: 10-Q, Received: 08/01/2012 13:46:10)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-19406

Zebra Technologies Corporation

(Exact name of registrant as specified in its charter)

Delaware

36-2675536

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

475 Half Day Road, Suite 500, Lincolnshire, IL 60069

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 634-6700

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of July 20, 2012, there were 51,683,363 shares of Class A Common Stock, $.01 par value, outstanding.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED JUNE 30, 2012

INDEX


		PAGE

PART I - FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011		3

	Consolidated Statements of Earnings (unaudited) for the three and six months ended June 30, 2012 and July 2, 2011		4

	Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2012 and July 2, 2011		5

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2012 and July 2, 2011		6

	Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		34

Item 4.	Controls and Procedures		35

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		36

Item 1A.	Risk Factors		36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36

Item 6.	Exhibits		37

SIGNATURES			38

PART I - FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	105,368		$	36,418
Investments and marketable securities		147,485			182,398
Accounts receivable, net		156,146			155,230
Receivable from buyer		13,790			27,580
Inventories, net		116,689			133,288
Deferred income taxes		13,170			13,931
Income tax receivable		3,629			13,111
Prepaid expenses and other current assets		25,473			22,917

Total current assets		581,750			584,873

Property and equipment at cost, less accumulated depreciation and amortization		100,992			97,822
Long-term deferred income taxes		12,260			11,866
Goodwill		79,703			79,703
Other intangibles, net		11,127			12,667
Long-term investments and marketable securities		133,969			107,879
Other assets		8,989			4,196

Total assets	$	928,790		$	899,006

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	29,216		$	33,273
Accrued liabilities		53,117			64,612
Deferred revenue		11,992			11,089

Total current liabilities		94,325			108,974
Deferred rent		1,521			1,592
Other long-term liabilities		11,965			11,515

Total liabilities		107,811			122,081

Stockholders’ equity:
Preferred Stock		0			0
Class A Common Stock		722			722
Additional paid-in capital		131,881			131,422
Treasury stock		(612,310	)		(596,622	)
Retained earnings		1,306,433			1,245,616
Accumulated other comprehensive loss		(5,747	)		(4,213	)

Total stockholders’ equity		820,979			776,925

Total liabilities and stockholders’ equity	$	928,790		$	899,006

See accompanying notes to consolidated financial statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Net sales
Net sales of tangible products	$	234,708		$	232,762		$	467,184		$	458,882
Revenue from services and software		12,369			12,779			23,768			23,960

Total net sales		247,077			245,541			490,952			482,842


Cost of sales
Cost of sales of tangible products		119,980			117,732			239,013			228,513
Cost of services and software		6,720			6,111			11,679			12,633

Total cost of sales		126,700			123,843			250,692			241,146


Gross profit		120,377			121,698			240,260			241,696


Operating expenses:
Selling and marketing		32,158			30,950			64,272			59,478
Research and development		22,336			22,487			42,752			44,168
General and administrative		24,402			20,688			48,722			43,394
Amortization of intangible assets		770			836			1,540			1,671
Acquisition costs		1,252			0			1,506			0
Exit and restructuring costs		0			66			0			1,952

Total operating expenses		80,918			75,027			158,792			150,663


Operating income		39,459			46,671			81,468			91,033


Other income (expense):
Investment income		826			656			1,418			1,216
Foreign exchange loss		(80	)		(833	)		(422	)		(1,127	)
Other, net		(486	)		(243	)		(850	)		(497	)

Total other income (expense)		260			(420	)		146			(408	)


Income from continuing operations before income taxes		39,719			46,251			81,614			90,625
Income taxes		9,366			13,082			21,097			27,328

Income from continuing operations		30,353			33,169			60,517			63,297
Income (loss) from discontinued operations, net of tax		300			(205	)		300			31,301

Net income	$	30,653		$	32,964		$	60,817		$	94,598


Basic earnings per share:
Income from continuing operations	$	0.58		$	0.60		$	1.16		$	1.15
Income (loss) from discontinued operations		0.01			(0.00	)		0.01			0.57

Net income	$	0.59		$	0.60		$	1.17		$	1.72

Diluted earnings per share:
Income from continuing operations	$	0.58		$	0.60		$	1.16		$	1.14
Income (loss) from discontinued operations		0.01			(0.00	)		0.01			0.57

Net income	$	0.59		$	0.60		$	1.17		$	1.71


Basic weighted average shares outstanding		51,771			54,546			51,881			54,981
Diluted weighted average and equivalent shares outstanding		52,030			54,958			52,156			55,395

See accompanying notes to consolidated financial statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Net income	$	30,653		$	32,964		$	60,817		$	94,598
Other comprehensive income (loss):
Unrealized gains (losses) on hedging transactions, net of income taxes		2,400			(21	)		(2,246	)		(2,777	)
Unrealized holding gains (losses) on investments, net of income taxes		(46	)		347			524			333
Foreign currency translation adjustment		105			(247	)		188			(802	)

Comprehensive income	$	33,112		$	33,043		$	59,283		$	91,352

See accompanying notes to consolidated financial statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Six Months Ended
	June 30, 2012			July 2, 2011
Cash flows from operating activities:
Net income	$	60,817		$	94,598
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		11,964			12,151
Equity-based compensation		8,045			8,013
Excess tax benefit from equity-based compensation		(1,358	)		(1,234	)
Loss on sale of property and equipment		147			5
Gain on sale of business		(613	)		(68,001	)
Deferred income taxes		367			3,899
Changes in assets and liabilities:
Accounts receivable, net		(657	)		5,862
Inventories, net		16,599			(4,704	)
Other assets		527			(2,319	)
Accounts payable		(9,594	)		(4,695	)
Accrued liabilities		(11,422	)		(13,614	)
Deferred revenue		1,460			(14,738	)
Income taxes		10,714			(4,333	)
Other operating activities		(2,341	)		(3,402	)

Net cash provided by operating activities		84,655			7,488


Cash flows from investing activities:
Purchases of property and equipment		(10,599	)		(11,232	)
Proceeds from the sale of business		13,790			161,008
Purchase of long-term equity investment		(5,000	)		0
Purchases of investments and marketable securities		(313,863	)		(573,686	)
Maturities of investments and marketable securities		228,105			351,722
Proceeds from sales of investments and marketable securities		95,106			183,485

Net cash provided by investing activities		7,539			111,297


Cash flows from financing activities:
Purchase of treasury stock		(24,645	)		(82,388	)
Proceeds from exercise of stock options and stock purchase plan purchases		142			8,096
Excess tax benefit from equity-based compensation		1,358			1,234

Net cash used in financing activities		(23,145	)		(73,058	)

Effect of exchange rate changes on cash		(99	)		239


Net increase in cash and cash equivalents		68,950			45,966
Cash balance of discontinued operations at beginning of period		0			1,301
Less: Cash balance of discontinued operations at end of period		0			486
Cash and cash equivalents at beginning of period		36,418			46,175

Cash and cash equivalents at end of period	$	105,368		$	92,956


Supplemental disclosures of cash flow information:
Income taxes paid	$	13,479		$	52,819

See accompanying notes to consolidated financial statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

Management prepared these unaudited interim consolidated financial statements for Zebra Technologies Corporation and subsidiaries (“Zebra”) according to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. These financial statements do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in Zebra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

The consolidated balance sheet as of December 31, 2011 included in this Form 10-Q is taken from the audited consolidated balance sheet in our Form 10-K. These interim financial statements include all adjustments (of a normal, recurring nature) necessary to present fairly Zebra’s consolidated financial position as of June 30, 2012, the consolidated statement of earnings for the three and six months ended June 30, 2012 and July 2, 2011, and consolidated statement of comprehensive income for the three and six months ended June 30, 2012 and July 2, 2011, and the consolidated statement of cash flows for the six months ended June 30, 2012 and July 2, 2011. These results, however, are not necessarily indicative of results for the full year.

Reclassifications . Prior-period amounts will differ from amounts previously reported because certain immaterial amounts in the prior years’ financial statements have been reclassified to conform to the current year’s presentation.

Note 2 – Fair Value Measurements

Financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Zebra uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (i.e. U.S. Treasuries and money market funds).

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in the assessment of fair value. Included in our investment portfolio at June 30, 2012, is an auction rate security which is classified as available for sale and is reflected at fair value. Due to events in credit markets, however, the auction event for the instrument held by Zebra is failed. Therefore, the fair value of this security is estimated utilizing broker quotations, discounted cash flow analysis or other types of valuation adjustment methodologies at June 30, 2012. These analyses consider, among other items, the collateral underlying the security instruments, the creditworthiness of the counterparty, the timing of expected future cash flows, estimates of the next time the security is expected to have a successful auction, and Zebra’s intent and ability to hold such securities until credit markets improve. The security was also compared, when possible, to other securities with similar characteristics.

The decline in the market value of our auction rate security discussed above is considered temporary and has been recorded in accumulated other comprehensive income loss on Zebra’s balance sheet. Since Zebra has the intent and ability to hold this auction rate security until it is sold at auction, redeemed at carrying value or reaches maturity, we have classified it as a long-term investment on the balance sheet.

Financial assets and liabilities carried at fair value as of June 30, 2012, are classified below (in thousands):


	Level 1		Level 2		Level 3		Total
Assets:
U.S. government and agency securities	$	41,915	$	21,887	$	0	$	63,802
Obligations of government-sponsored enterprises (1)		0		12,241		0		12,241
State and municipal bonds		0		103,869		0		103,869
Corporate securities		0		98,918		2,588		101,506
Other investments		0		36		0		36

Investments subtotal		41,915		236,951		2,588		281,454
Forward contracts (2)		3,451		5,868		0		9,319
Money market investments related to the deferred compensation plan		3,088		0		0		3,088

Total assets at fair value	$	48,454	$	242,819	$	2,588	$	293,861


Liabilities:
Liabilities related to the deferred compensation plan	$	3,088	$	0	$	0	$	3,088

Total liabilities at fair value	$	3,088	$	0	$	0	$	3,088

Financial assets and liabilities carried at fair value as of December 31, 2011, are classified below (in thousands):


	Level 1		Level 2		Level 3		Total
Assets:
U.S. government and agency securities	$	25,540	$	25,307	$	0	$	50,847
Obligations of government-sponsored enterprises (1)		0		16,612		0		16,612
State and municipal bonds		0		142,873		0		142,873
Corporate securities		0		77,321		2,588		79,909
Other investments		0		36		0		36

Investments subtotal		25,540		262,149		2,588		290,277
Forward contracts (2)		2,626		6,584		0		9,210
Money market investments related to the deferred compensation plan		3,199		0		0		3,199

Total assets at fair value	$	31,365	$	268,733	$	2,588	$	302,686


Liabilities:
Liabilities related to the deferred compensation plan	$	3,199	$	0	$	0	$	3,199

Total liabilities at fair value	$	3,199	$	0	$	0	$	3,199

(1)	Includes investments in notes issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Farm Credit Banks and the Federal Home Loan Bank.

(2)	The fair value of forward contracts are calculated as follows:

Fair value of forward collar contract associated with forecasted sales hedges are calculated using the midpoint of ask and bid rates for similar contracts.

Fair value of regular forward contracts associated with forecasted sales hedges are calculated using the period-end exchange rate adjusted for the discount rate (3 month LIBOR rate).

Fair value of balance sheet hedges are calculated at the period end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period end. If this is the case, the fair value is calculated at the rate at which the hedge is being settled.

The following table presents Zebra’s activity for assets measured at fair value on a recurring basis using significant unobservable inputs, Level 3, for the following periods (in thousands):


	Six Months Ended
	June 30, 2012		July 2, 2011
Balance at beginning of the year	$	2,588	$	5,597
Transfers to Level 3		0		0
Total losses (realized or unrealized):
Included in earnings		0		(36	)
Included in other comprehensive income (loss)		0		317
Purchases and settlements (net)		0		(2,964	)

Balance at end of period	$	2,588	$	2,914

Total gains and (losses) for the period included in earnings attributable to the change in unrealized losses relating to assets still held at end of period	$	0	$	0

The following is a summary of short-term and long-term investments (in thousands):


	As of June 30, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government and agency securities	$	63,742	$	70	$	(10	)	$	63,802
Obligations of government-sponsored enterprises		12,230		12		(1	)		12,241
State and municipal bonds		103,700		204		(35	)		103,869
Corporate securities		101,749		400		(643	)		101,506
Other investments		36		0		0			36

Total investments	$	281,457	$	686	$	(689	)	$	281,454


	As of December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government and agency securities	$	50,738	$	115	$	(6	)	$	50,847
Obligations of government-sponsored enterprises		16,581		32		(1	)		16,612
State and municipal bonds		142,586		330		(43	)		142,873
Corporate securities		81,132		164		(1,387	)		79,909
Other investments		36		0		0			36

Total investments	$	291,073	$	641	$	(1,437	)	$	290,277

The maturity dates of investments are as follows (in thousands):


	As of June 30, 2012
	Amortized Cost		Estimated Fair Value
Less than 1 year	$	147,504	$	147,485
1 to 5 years		128,678		129,058
6 to 10 years		5,275		4,911
Thereafter		0		0

Total	$	281,457	$	281,454

The carrying value for Zebra’s financial instruments classified as current assets (other than short-term investments) and current liabilities approximate fair value due to their short maturities.

Note 3 – Investments and Marketable Securities

We classify our investments in marketable debt securities as available-for-sale. As of June 30, 2012, all of our investments in marketable debt securities with maturities greater than one year are classified as long-term investments on the balance sheet due to our ability and intent to hold them until maturity.

Changes in the market value of available-for-sale securities are reflected in the accumulated other comprehensive income caption of stockholders’ equity in the balance sheet, until we dispose of the securities. Once these securities are disposed of, either by sale or maturity, the accumulated changes in market value are transferred to investment income. On the statement of cash flows, changes in the balances of available-for-sale securities are shown as purchases, sales and maturities of investments and marketable securities under investing activities.

Changes in market value of trading securities would be recorded in investment income as they occur, and the related statement of cash flows would include changes in the balances of trading securities as operating cash flows. See Note 15 Other Comprehensive Income.

Included in Zebra’s cash and investments and marketable securities are amounts held by foreign subsidiaries which are generally invested in U.S. dollar-denominated holdings. Zebra had foreign cash and investments of $138,655,000 as of June 30, 2012, and $96,829,000 as of December 31, 2011. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation, however, Zebra does not intend to repatriate these funds.

Note 4 – Accounts Receivable

The components of accounts receivable are as follows (in thousands):


	As of
	June 30, 2012			December 31, 2011
Gross accounts receivable	$	157,203		$	156,790
Accounts receivable reserves		(1,057	)		(1,560	)

Accounts receivable, net	$	156,146		$	155,230

Note 5 – Inventories

The components of inventories are as follows (in thousands):


	As of
	June 30, 2012			December 31, 2011
Raw material	$	42,406		$	45,795
Work in process		373			872
Deferred costs of long-term contracts		304			220
Finished goods		89,428			101,111

Inventories, gross		132,511			147,998
Inventory reserves		(15,822	)		(14,710	)

Inventories, net	$	116,689		$	133,288

Note 6 – Goodwill and Other Intangible Assets

Intangible assets are as follows (in thousands):


	As of June 30, 2012
	Gross Amount		Accumulated Amortization			Net Amount
Current technology	$	12,718	$	(11,611	)	$	1,107
Patent and patent rights		23,392		(13,385	)		10,007
Customer relationships		1,773		(1,760	)		13

Other intangibles, net	$	37,883	$	(26,756	)	$	11,127


Amortization expense for the six months ended June 30, 2012			$	1,540


	As of December 31, 2011
	Gross Amount		Accumulated Amortization			Net Amount
Current technology	$	12,718	$	(11,403	)	$	1,315
Patent and patent rights		23,392		(12,079	)		11,313
Customer relationships		1,773		(1,734	)		39

Other intangibles, net	$	37,883	$	(25,216	)	$	12,667

Amortization expense for the six months ended July 2, 2011			$	1,671

We test goodwill for impairment on an annual basis or more frequently if we believe indicators of impairment exist. Factors considered that may trigger an impairment review consist of:

•

Significant underperformance relative to historical or projected future operating results,

•

Significant changes in the manner of use of the acquired assets or the strategy for the overall business,

•

Significant negative industry or economic trends,

•

Significant decline in Zebra’s stock price for a sustained period, and

•

Significant decline in market capitalization relative to net book value.

If we believe that one or more of the above indicators of impairment have occurred, we perform an impairment test. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We generally determine the fair value of our reporting units using three valuation methods: Income Approach – Discounted Cash Flow Analysis, Market Approach – Guideline Public Company Method, and Market Approach – Comparative Transactions Method. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill.

We performed our annual impairment test in June 2012 and determined that our goodwill was not impaired as of the end of May 2012. See Valuation of Goodwill under Critical Accounting Policies and Estimates in Item 2 of this Form 10-Q for specific information regarding the sensitivities surrounding the goodwill impairment test.

Note 7 – Costs Associated with Exit and Restructuring Activities

In January 2011, we announced an agreement to sell a significant portion of the Zebra Enterprise Solutions (ZES) segment, which primarily consisted of Navis, to Cargotec Corporation. We retained the Location Solutions products from the former ZES, which included active RFID real-time location solutions and associated tags and readers. In the first quarter of 2011, we also announced a plan to consolidate any remaining administrative and accounting functions from the former ZES into our corporate facilities in Illinois. The costs for 2011 below represent the costs related to the consolidation and relocation of the administrative and accounting functions. We do not anticipate costs in 2012 related to this restructuring.

The following is a summary of exit and restructuring costs incurred (in thousands):


	Three Months Ended			Six Months Ended
Type of Cost:	July 2, 2011			July 2, 2011
Severance, stay bonuses, and other employee-related expenses	$	(208	)	$	1,071
Professional services		295			847
Relocation and transition costs		5			34
Other exit costs		(26	)		0

Total	$	66		$	1,952

Liabilities and expenses related to exit and restructuring activities were as follows (in thousands):


	Six Months Ended
	June 30, 2012			July 2, 2011
Balance at beginning of period	$	1,048		$	1,301
Charged to earnings		0			1,952
Cash paid		(380	)		(1,696	)

Balance at the end of period	$	668		$	1,557

Liabilities related to exit and restructuring activities are included in the accrued liabilities line item on the balance sheet. All exit costs are included in operating expenses under the line item exit and restructuring costs.

Note 8 – Derivative Instruments

In the normal course of business, portions of our operations are subject to fluctuations in currency values. Zebra Technologies Corporation and its principal subsidiaries are all designated US dollar functional currency. Certain other subsidiaries are designated in functional local currency due to legal requirements or the nature of their business.

We manage these currency risks using derivative financial instruments. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. Our objective is to preserve the economic value of non-functional currency denominated cash flows. We attempt to hedge transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign exchange forward and option contracts with third parties.

Credit and market risk

Financial instruments, including derivatives, expose us to counter party credit risk for nonperformance and to market risk related to interest and currency exchange rates. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. Our counterparties in derivative transactions are commercial banks with significant experience using derivative instruments. We monitor the impact of market risk on the fair value and cash flows of our derivative and other financial instruments considering reasonably possible changes in interest rates and currency exchange rates and restrict the use of derivative financial instruments to hedging activities.

We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer.

Fair Value of Derivative Instruments

Zebra has determined that derivative instruments for hedges that have traded but have not settled are considered Level 1 in the fair value hierarchy, and hedges that have not traded are considered Level 2 in the fair value hierarchy. Derivative instruments are used to manage risk and are not used for trading or other speculative purposes, nor do we use leveraged derivative financial instruments. Our foreign currency exchange contracts are valued using broker quotations or market transactions, in either the listed or over-the-counter markets.

Hedging of Net Assets

We use forward contracts and options to manage exposure related to our pound and euro-denominated net assets. Forward contracts typically mature within three months after execution of the contracts. We record gains and losses on these contracts and options in income each quarter along with the transaction gains and losses related to our net asset positions, which would ordinarily offset each other.

Summary financial information related to these activities included in our consolidated statement of earnings as other income (expense) is as follows (in thousands):


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Change in gains (losses) from foreign exchange derivatives	$	3,476		$	(1,442	)	$	1,441		$	(6,263	)
Gain on net foreign currency assets		(3,556	)		609			(1,863	)		5,136

Foreign exchange loss	$	(80	)	$	(833	)	$	(422	)	$	(1,127	)


	As of
	June 30, 2012			December 31, 2011
Notional balance of outstanding contracts:
Pound/US dollar	£	2,433		£	6,016
Euro/US dollar	€	35,305		€	36,684
Net fair value of outstanding contracts	$	(211	)	$	54

Hedging of Anticipated Sales

We manage the exchange rate risk of anticipated euro-denominated sales using purchased options, forward contracts, participating forwards and option collars. We designate these contracts as cash flow hedges which mature within twelve months after the execution of the contracts. Gains and losses on these contracts are deferred in other comprehensive income until the contracts are settled and the hedged sales are realized, the deferred gains or losses will then be reported as an increase or decrease to sales.

Summary financial information related to the cash flow hedges is as follows (in thousands):


	As of
	June 30, 2012			July 2, 2011
Unrealized losses on hedging transactions:
Gross	$	(3,338	)	$	(4,453	)
Income tax expense (benefit)		(1,092	)		(1,676	)

Net	$	(2,246	)	$	(2,777	)

Summary financial information related to the cash flow hedges of future revenues follows (in thousands, except percentages):


	As of
	June 30, 2012			December 31, 2011
Notional balance of outstanding contracts versus the dollar	€	95,550		€	92,305
Hedge effectiveness		100	%		100	%


	Three Months Ended					Six Months Ended
	June 30, 2012		July 2, 2011			June 30, 2012		July 2, 2011
Net gains and (losses) included in revenue	$	1,492	$	(1,819	)	$	2,649	$	(2,785	)

Forward contracts

We record our forward contracts at fair value on our consolidated balance sheet which are included in either of the following lines on the balance sheet, prepaid expenses and other current assets or accrued liabilities, depending upon the fair value calculation as detailed in Note 2 of Zebra’s financial statements. The amounts recorded on our consolidated balance sheet are as follows (in thousands):


	As of
	June 30, 2012		December 31, 2011
Assets:
Prepaid expenses and other current assets	$	9,319	$	9,210

Total	$	9,319	$	9,210

Note 9 – Warranty

In general, Zebra provides warranty coverage of one year on printers against defects in material and workmanship. Printheads are warranted for nine months and batteries are warranted for one year. Battery based products, such as location tags, are covered by a 30-day warranty. A provision for warranty expense is recorded at the time of shipment and adjusted quarterly based on historical warranty experience.

The following table is a summary of Zebra’s accrued warranty obligation (in thousands):


	Six Months Ended
	June 30, 2012			July 2, 2011
Balance at the beginning of the year	$	4,613		$	4,554
Warranty expense		3,279			2,167
Warranty payments		(3,612	)		(2,461	)

Balance at the end of the period	$	4,280		$	4,260

Note 10 – Contingencies

We are subject to a variety of investigations, claims, suits and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort and breach of contract matters. We currently believe that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on our business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and management’s view of these matters and their potential effects may change in the future.

Note 11 – Stockholders’ Equity

Share count and par value data related to stockholders’ equity are as follows:


	As of
	June 30, 2012		December 31, 2011
Preferred Stock
Par value per share	$	0.01	$	0.01
Shares authorized		10,000,000		10,000,000
Shares outstanding		0		0
Common Stock - Class A
Par value per share	$	0.01	$	0.01
Shares authorized		150,000,000		150,000,000
Shares issued		72,151,857		72,151,857
Shares outstanding		51,683,426		52,095,166
Treasury stock
Shares held		20,468,431		20,056,691

During the six month period ended June 30, 2012, Zebra purchased 673,863 shares of common stock for $24,645,000 under a board authorized share repurchase plan, compared with purchases of 2,100,000 shares of common stock for $82,388,000 for the six month period ended July 2, 2011.

A roll forward of Class A common shares outstanding is as follows:


	Six Months Ended
	June 30, 2012			July 2, 2011
Balance at the beginning of the year		52,095,166			55,711,325
Repurchases		(673,863	)		(2,100,000	)
Stock option and ESPP issuances		98,315			409,550
Restricted share issuances		231,243			209,168
Restricted share forfeitures		(5,655	)		(8,445	)
Shares withheld for tax obligations		(61,780	)		(51,460	)

Balance at the end of the period		51,683,426			54,170,138

Note 12 – Earnings Per Share

Earnings per share were computed as follows (in thousands, except per share amounts):


	Three Months Ended					Six Months Ended
	June 30, 2012		July 2, 2011			June 30, 2012		July 2, 2011
Weighted average shares:
Weighted average common shares outstanding		51,771		54,546			51,881		54,981
Effect of dilutive securities outstanding		259		412			275		414

Diluted weighted average shares outstanding		52,030		54,958			52,156		55,395


Earnings (loss):
Income from continuing operations	$	30,353	$	33,169		$	60,517	$	63,297
Income (loss) from discontinued operations		300		(205	)		300		31,301

Net income	$	30,653	$	32,964		$	60,817	$	94,598


Basic per share amounts:
Income from continuing operations	$	0.58	$	0.60		$	1.16	$	1.15
Income (loss) from discontinued operations		0.01		(0.00	)		0.01		0.57

Net income	$	0.59	$	0.60		$	1.17	$	1.72


Diluted per share amounts:
Income from continuing operations	$	0.58	$	0.60		$	1.16	$	1.14
Income (loss) from discontinued operations		0.01		(0.00	)		0.01		0.57

Net income	$	0.59	$	0.60		$	1.17	$	1.71

Potentially dilutive securities that were excluded from the earnings per share calculation consist of options and stock appreciation rights (SARs) with an exercise price or base price greater than the average market closing price of the Class A common stock during the respective periods. These excluded options and SARs were as follows:

Three Months Ended

Six Months Ended

June 30, 2012

July 2, 2011

June 30, 2012

July 2, 2011

Potentially dilutive shares

2,183,000

1,436,000

1,799,000

1,437,000

Note 13 – Equity-Based Compensation

Zebra has an equity-based compensation plan and a stock purchase plan available for future grants. Zebra recognizes compensation costs using the straight-line method over the vesting period of up to 5 years.

The compensation expense and the related tax benefit for equity-based payments were included in the Consolidated Statement of Earnings as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2012		July 2, 2011		June 30, 2012		July 2, 2011
Cost of sales	$	298	$	299	$	533	$	537
Selling and marketing		399		264		760		774
Research and development		434		347		822		694
General and administrative		3,114		2,570		5,930		4,945

Total compensation	$	4,245	$	3,480	$	8,045	$	6,950

Income tax benefit	$	1,766	$	1,201	$	2,786	$	2,398

Cash flows resulting from the tax benefits of tax deductions in excess of the compensation cost recognized (excess tax benefits) are classified as financing cash flows in the statement of cash flows. The tax benefits classified as financing cash flows for the six months ended June 30, 2012 was $1,358,000 and for the six months ended July 2, 2011 was $1,234,000.

The fair value of equity-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an average of the implied volatility in the open market and the annualized volatility of Zebra stock prices over our entire stock history. Grants in the tables below include both stock options, all of which were non-qualified, and stock appreciation rights (SAR) that will be settled in Zebra stock. The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value of the grants based on those assumptions:


	Six Months Ended
	June 30, 2012			July 2, 2011
Expected dividend yield		0	%		0	%
Forfeiture rate		10.21	%		11.50	%
Volatility		35.90	%		35.33	%
Risk free interest rate		.94	%		2.01	%
Range of interest rates		0.07% -1.95	%		0.01% -3.18	%
Expected weighted-average life		5.48 years			5.42 years
Fair value of stock appreciation rights (SARs) granted	$	5,490,000		$	5,347,000
Weighted-average grant date fair value of SARs granted	$	12.84		$	14.39

SAR activity was as follows:


	Six Months Ended June 30, 2012
SARs	Shares			Weighted-Average Exercise Price
Outstanding at beginning of year		1,287,724		$	28.91
Granted		427,621			38.52
Exercised		(37,572	)		22.91
Forfeited		(16,606	)		33.67

Outstanding at end of period		1,661,167		$	31.47

Exercisable at end of period		572,231		$	26.36

Intrinsic value of exercised SARs	$	573,670

The terms of the SARs are established under either the 2006 Incentive Compensation Plan or the 2011 Long-Term Incentive Plan (the “Plans”) and the applicable SAR agreement. Once vested, a SAR entitles the holder to receive a payment equal to the difference between the per-share base price of the SAR and the fair market value of a share of Zebra stock on the date the SAR is exercised, multiplied by the number of SARs exercised. Exercised SARs are settled in whole shares of Zebra stock, and any fraction of a share is settled in cash. The SARs granted typically vest annually in four equal amounts on each of the first four anniversaries of the grant date, with some SARs vesting over a period of five years and SAR’s granted in 2012 to non-employee directors being fully vested upon grant. All SARs expire 10 years after the grant date.

The following table summarizes information about SARs outstanding at June 30, 2012:


	Outstanding						Exercisable
Range of Exercise Prices	Number of Shares		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number of Shares		Weighted-Average Exercise Price
$ 19.56-$19.56		387,075		6.77 years	$	19.56		272,497	$	19.56
$ 21.83-$27.50		57,014		7.35 years		24.83		39,708		24.55
$ 27.82-$27.82		413,710		7.80 years		27.82		137,065		27.82
$ 28.33-$40.10		461,104		9.67 years		38.05		24,755		35.17
$ 40.10-$42.36		342,264		8.81 years		41.61		98,206		41.70

		1,661,167						572,231


	Outstanding		Exercisable
Aggregate intrinsic value	$	11,705,000	$	6,670,000
Weighted-average remaining contractual term		8.3 years		7.5 years

Stock option activity was as follows:


	Six Months Ended June 30, 2012
Options	Shares			Weighted-Average Exercise Price
Outstanding at beginning of year		1,702,650		$	40.43
Granted		0			0.00
Exercised		(49,119	)		27.05
Forfeited		(1,663	)		36.36
Expired		(12,150	)		45.93

Outstanding at end of period		1,639,718		$	40.79

Exercisable at end of period		1,634,032		$	40.87

Intrinsic value of exercised options	$	546,203

The following table summarizes information about stock options outstanding at June 30, 2012:


	Outstanding						Exercisable
Range of Exercise Prices	Number of Shares		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number of Shares		Weighted-Average Exercise Price
$ 1.29-$36.49		477,100		4.59 years	$	32.25		471,414	$	32.41
$ 36.80-$41.25		384,646		4.81 years		39.80		384,646		39.80
$ 42.28-$45.62		401,316		3.24 years		44.51		401,316		44.51
$ 46.18-$51.62		374,856		2.45 years		48.63		374,856		48.63
$ 53.92-$53.92		1,800		1.91 years		53.92		1,800		53.92

		1,639,718						1,634,032


	Outstanding		Exercisable
Aggregate intrinsic value	$	2,421,000	$	2,318,000
Weighted-average remaining contractual term		3.8 years		3.8 years

Restricted stock award activity was as follows:


	Six Months Ended June 30, 2012
Restricted Stock Awards	Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		836,141		$	28.34
Granted		231,311			38.62
Released		(205,702	)		20.31
Forfeited		(5,655	)		33.37

Outstanding at end of period		856,095		$	33.02

Zebra’s restricted stock awards are expensed over the vesting period of the related award, typically three to five years. Compensation cost is calculated as the market date fair value on the grant date multiplied by the number of shares granted.


	As of June 30, 2012
Awards granted under Zebra’s equity based compensation plans:
Unearned compensation costs related to awards granted	$	25,063,000
Period expected to be recognized over		2.8 years

The fair value of the purchase rights of all Zebra employees issued under the stock purchase plan is estimated using the following weighted-average assumptions for purchase rights granted. Expected lives of three months to one year have been used along with these assumptions.


	Six Months Ended
	June 30, 2012			July 2, 2011
Fair market value	$	35.20		$	38.52
Option price	$	33.44		$	36.60
Expected dividend yield		0	%		0	%
Expected volatility		22	%		26	%
Risk free interest rate		0.04	%		0.11	%

Note 14 – Income Taxes

Zebra has identified, evaluated, and measured the amount of income tax benefits to be recognized for all of our income tax positions. Included in deferred tax assets are amounts related to federal and state net operating losses that resulted from our acquisition of WhereNet Corp in 2007. We intend to utilize these net operating loss carryforwards to offset future income taxes.

Zebra earns a significant amount of our operating income outside of the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. Zebra does not intend to repatriate funds, however, should Zebra require more capital in the U.S. than is generated by our operations locally, Zebra could elect to repatriate funds held in foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates or increased interest expense.

U.S. federal tax returns for years 2008 through 2010 are currently under audit by the Internal Revenue Service. The tax years 2008 through 2010 remain open to examination by multiple state taxing jurisdictions. Tax authorities in the United Kingdom have completed income tax audits for tax years through 2006.

Zebra’s continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. For the six months ended June 30, 2012 and July 2, 2011, we did not accrue any interest or penalties into income tax expense.


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Effective tax rate		23.6	%		28.3	%		25.8	%		30.2	%

Zebra’s estimates of taxes for interim periods are based upon the annual effective tax rate for the full-year, adjusted for any discrete items that relate to an interim period. The estimated annual effective tax rate is determined using projections of full-year taxable income by each Zebra legal entity with the appropriate statutory tax rate for that subsidiary applied. The effective rate may change during the year, typically due to the change in our estimated taxable income by jurisdiction as each year progresses.

The 2012 tax rate decline reflects the implementation of a new structure for Zebra’s international subsidiaries which has contributed to reducing the effective tax rate by 3.3% in the second quarter. In addition, the statutory tax rate in the UK was also reduced in 2012. Zebra’s rate in 2011 included a tax valuation allowance in the first quarter of 2011 against a subsequently disposed subsidiary.

Note 15 – Other Comprehensive Income

Stockholders’ equity includes certain items classified as accumulated other comprehensive income, including:

•

Unrealized gains (losses) on hedging transactions relate to derivative instruments used to hedge the currency exchange rates for forecasted euro sales. These hedges are designated as cash flow hedges, and we have deferred income statement recognition of gains and losses until the hedged transaction occurs. See Note 8 for more details.

•

Unrealized gains (losses) on investments are deferred from income statement recognition until the gains or losses are realized.

•

Foreign currency translation adjustment relates to our non-U.S. subsidiary companies that have designated a functional currency other than the U.S. dollar. We are required to translate the subsidiary functional currency financial statements to dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of other comprehensive income.

The components of other comprehensive income gross and net of income tax are as follows (in thousands):


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Unrealized gains (losses) on hedging transactions:
Gross	$	3,160		$	(34	)	$	(3,338	)	$	(4,453	)
Income tax (benefit)		760			(13	)		(1,092	)		(1,676	)

Net	$	2,400		$	(21	)	$	(2,246	)	$	(2,777	)

Unrealized gains (losses) on investments:
Gross	$	(72	)	$	556		$	797		$	534
Income tax (benefit)		(26	)		209			273			201

Net	$	(46	)	$	347		$	524		$	333

The components of accumulated other comprehensive income (loss) included in the Consolidated Balance Sheets are as follows (in thousands):


	As of
	June 30, 2012			December 31, 2011
Unrealized gains and (losses) on hedging transactions:
Gross	$	4,017		$	7,355
Income tax (benefit)		1,004			2,096

Net		3,013			5,259

Unrealized gains and (losses) on investments classified as available-for-sale:
Gross		0			(797	)
Income tax (benefit)		(15	)		(288	)

Net		15			(509	)

Foreign currency translation adjustments		(8,775	)		(8,963	)

Total accumulated other comprehensive loss	$	(5,747	)	$	(4,213	)

Note 16 – New Accounting Pronouncements

In June 2011, the FASB issued update 2011-05, ASC 220, Comprehensive Income: Presentation of Comprehensive Income and in December 2011, the FASB issued update 2011-12, ASC 220, Comprehensive Income: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-12 is to defer only those changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments, while the Board is re-deliberating; entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. This standard is effective for interim and annual periods beginning after December 15, 2011. The adoption of this standard moved the Other Comprehensive Income statement disclosure from our footnote to its own financial statement for our 10-Q filings in 2012.

In September 2011, the FASB issued update 2011-08, ASC 350, Intangibles Goodwill and Other: Testing Goodwill for Impairment . This updated guidance simplifies how companies test goodwill for impairment. Essentially, companies are no longer required to calculate the fair value of a reporting unit unless the entity determines that it is more-likely-than-not that its fair value is less than its carrying amount using a qualitative assessment. This standard is effective for fiscal years beginning after December 15, 2011. The adoption of this standard did not have any effect upon our consolidated financial statements.

Note 17 Discontinued Operations

Sale of Navis, LLC - On March 18, 2011, we sold our Navis marine terminal solutions business and the related WhereNet marine terminal solutions product line of our Zebra Enterprise Solutions (“ZES”) business segment for approximately $188,588,000 in cash to Cargotec Corporation. During the first quarter of 2012, we received $13,790,000 of the previously escrowed funds and at June 30, 2012, Zebra has a remaining short term receivable from the buyer in the amount of $13,790,000 which represents the remaining funds held in escrow that are subject to adjustment according to terms of the agreement.

Sale of proveo AG - On August 3, 2011, we entered into a Share Purchase Agreement with F Two NV (a Belgium company) to sell all of our interest in Zebra Enterprise Solutions GmbH (formerly proveo AG) business. The loss recorded upon divestiture was $1,248,000. As part of the sale, Zebra agreed with the buyer to provide a revolving loan of up to €1,000,000 which is due August 3, 2012 and bears interest at 6.5%. Zebra realized tax benefits in the amount of $13,308,000 with the divestiture of proveo AG. These tax benefits are primarily related to the difference in book basis versus tax basis. On June 29, 2012 F Two NV (a Belgium company) sold the business and assigned the revolving loan to OBQ SA (a Luxembourg company) with Zebra’s consent. The revolving loan commitment was reduced to a lesser amount of up to €526,058. The due date for borrowings under the agreement was extended from August 3, 2012 to December 31, 2012. The interest rate remains unchanged at 6.5%.

Beginning in the first quarter of 2011, Zebra reported the results of these businesses as discontinued operations. The amounts presented below for discontinued operations include the operating results of Navis and proveo for the three and six months ended June 30, 2012 and July 2, 2011. After the Navis sale, Zebra consolidated the remaining Location Solutions product lines.

Summary results for discontinued operations in our unaudited consolidated statement of earnings are as follows (in thousands):


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Net sales	$	0		$	1,079		$	0		$	13,712

Loss from discontinued operations	$	(150	)	$	(1,097	)	$	(150	)	$	(12,724	)
Income tax (expense) benefit		(163	)		104			(163	)		1,105
Gain on sale of discontinued operations		613			788			613			68,001
Income tax expense on sale		0			0			0			(25,081	)

Income (loss) from discontinued operations	$	300		$	(205	)	$	300		$	31,301

The components of cash flows of discontinued operations in our unaudited consolidated statement of cash flows are as follows (in thousands):


	Six Months Ended
	June 30, 2012		July 2, 2011
Cash flows from discontinued operations:
Net cash used by operating activities	$	0	$	(827	)
Net cash provided by (used in) investing activities		0		0
Net cash provided by (used in) financing activities		0		0
Effect of exchange rate changes on cash		0		12

Net decrease in cash and cash equivalents		0		(815	)
Cash and cash equivalents at beginning of period		0		1,301

Cash and cash equivalents at end of period	$	0	$	486

Note 18 Subsequent Events

On June 28, 2012, Zebra entered into an agreement to purchase LaserBand, LLC (a Missouri limited liability company) for approximately $58,404,000 in cash, subject to a working capital adjustment. LaserBand, LLC is based in St Louis, Missouri, and is a leader in patient identification wristbands and related products. LaserBand, LLC strengthens Zebra’s product and patent portfolio and enables Zebra to offer a wider array of products to hospitals, other healthcare organizations and other wristband customers. The acquisition closed on July 13, 2012.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations: Second Quarter of 2012 versus Second Quarter of 2011

Consolidated Results of Operations

(Amounts in thousands, except percentages):


	Three Months Ended
	June 30, 2012		July 2, 2011			Percent Change			Percent of Net Sales - 2012		Percent of Net Sales - 2011
Net sales
Net sales of tangible products	$	234,708	$	232,762			0.8			95.0		94.8
Revenue from services & software		12,369		12,779			(3.2	)		5.0		5.2

Total net sales		247,077		245,541			0.6			100.0		100.0
Cost of Sales
Cost of sales of tangible products		119,980		117,732			1.9			48.6		47.9
Cost of services & software		6,720		6,111			10.0			2.7		2.5

Total cost of sales		126,700		123,843			2.3			51.3		50.4

Gross profit		120,377		121,698			(1.1	)		48.7		49.6
Operating expenses		80,918		75,027			7.9			32.8		30.6

Operating income		39,459		46,671			(15.5	)		15.9		19.0
Other income (expense)		260		(420	)		N/M			0.1		(0.2	)

Income from continuing operations before income taxes		39,719		46,251			(14.1	)		16.0		18.8
Income taxes		9,366		13,082			(28.4	)		3.8		5.3

Income from continuing operations		30,353		33,169			(8.5	)		12.2		13.5
Income (loss) from discontinued operations, net of tax		300		(205	)		N/M			0.2		(0.1	)

Net income	$	30,653	$	32,964			(7.0	)		12.4		13.4

Diluted earnings per share:
Income from continuing operations	$	0.58	$	0.60			(3.3	)
Income from discontinued operations		0.01		(0.00	)		N/M

Net income	$	0.59	$	0.60			(1.7	)

Consolidated Results of Operations – Second quarter

Sales

Net sales for the second quarter of 2012, compared with the corresponding 2011 quarter, increased 0.6%. The slight increase in sales was largely attributable to 1.2% growth in hardware sales. Printer unit volume increased 19.4% from the second quarter of 2011 primarily due to volume increases in desktop, mobile, kiosk, and card printers.

Sales by product category were as follows (amounts in thousands, except percentages):


	Three Months Ended
Product Category	June 30, 2012		July 2, 2011		Percent Change			Percent of Net Sales - 2012		Percent of Net Sales - 2011
Hardware	$	183,973	$	181,758		1.2			74.5		74.0
Supplies		49,508		49,578		(0.1	)		20.0		20.2
Service and software		12,369		12,779		(3.2	)		5.0		5.2

Subtotal products		245,850		244,115		0.7			99.5		99.4
Shipping and handling		1,227		1,426		(14.0	)		0.5		0.6

Total net sales	$	247,077	$	245,541		0.6			100.0		100.0

Sales increased in Latin America due to geographic expansion with notable increases in mobile, desktop and card printer sales. Sales in North America increased due to increased sales to retail and manufacturing customers and a strong demand for desktop, card and mobile printers. Zebra continues to build a broader base of customers to penetrate targeted industries more deeply. Movements in foreign exchange rates decreased sales by $4,846,000 in the Europe, Middle East and Africa regions for the quarter due principally to a weaker euro against the U.S. dollar.

Sales to customers by geographic region were as follows (in thousands, except percentages):


	Three Months Ended
Geographic Region	June 30, 2012		July 2, 2011		Percent Change			Percent of Net Sales - 2012		Percent of Net Sales - 2011
Europe, Middle East and Africa	$	77,857	$	85,391		(8.8	)		31.5		34.8
Latin America		25,371		24,065		5.4			10.3		9.8
Asia-Pacific		35,921		38,299		(6.2	)		14.5		15.6

Total International		139,149		147,755		(5.8	)		56.3		60.2
North America		107,928		97,786		10.4			43.7		39.8

Total net sales	$	247,077	$	245,541		0.6			100.0		100.0

Gross Profit

Gross profit of 48.7%, versus 49.6% in 2011, reflects unfavorable movements in foreign exchange rates and product mix. Unfavorable foreign currency movements decreased second quarter gross profit by $3,974,000.

Printer unit volumes and average selling price information is summarized below:


	Three Months Ended
	June 30, 2012		July 2, 2011		Percent Change
Total printers shipped		330,186		276,563		19.4
Average selling price of printers shipped	$	471	$	558		(15.6	)

For the second quarter of 2012, unit volumes increased in desktop, mobile, kiosk, and card printers compared to the same period of 2011. The 15.6% decrease in average selling price is a result primarily of a change in product mix from one quarter compared to the other.

Operating Expenses

Operating expenses for the quarter increased 7.9% due mainly to greater selling and marketing expenses, general and administrative expenses and acquisition costs. These increases are principally related to activities supporting Zebra’s geographic expansion and market development activities. Compensation costs, which primarily relate to higher headcount, increased over most categories when compared to 2011. Business development, outside professional services, travel and entertainment, rent, depreciation and information systems expenses all increased over 2011 levels. Acquisition costs in 2012 relate to investigated and completed merger and acquisition activity during the period.

Operating expenses are summarized below (in thousands, except percentages):


	Three Months Ended
Operating Expenses	June 30, 2012		July 2, 2011		Percent Change			Percent of Net Sales 2012		Percent of Net Sales 2011
Selling and marketing	$	32,158	$	30,950		3.9			13.0		12.6
Research and development		22,336		22,487		(0.7	)		9.0		9.2
General and administrative		24,402		20,688		18.0			10.0		8.4
Amortization of intangible assets		770		836		(7.9	)		0.3		0.3
Acquisition costs		1,252		0		N/M			0.5		N/M
Exit and restructuring costs		0		66		N/M			N/M		0.1

Total operating expenses	$	80,918	$	75,027		7.9			32.8		30.6

Operating Income

The operating income decreased 15.5% for the second quarter of 2012 versus 2011 as a result of a slight decrease in gross profits and increased operating expenses as noted above.

Other Income (Expense)

Investment income increased slightly from higher cash and investment amounts in 2012 compared with 2011, primarily related to increased cash from operations. Zebra recorded a higher foreign exchange loss in 2011 as the U.S. dollar weakened against the euro.

Zebra’s non-operating income and expense items are summarized in the following table (in thousands):


	Three Months Ended
	June 30, 2012			July 2, 2011
Investment income	$	826		$	656
Foreign exchange loss		(80	)		(833	)
Other, net		(486	)		(243	)

Total other income (expense)	$	260		$	(420	)

Income Taxes

The effective income tax rate for the second quarter of 2012 was 23.6% compared with 28.3% for the second quarter of 2011. The 2012 effective tax rate decline reflects the implementation of a new structure for Zebra’s international subsidiaries which has contributed to reducing the effective tax rate by 3.3% in the second quarter. In addition, the statutory tax rate in the UK was also reduced in 2012.

Income from Discontinued Operations

Beginning in the first quarter of 2011, Zebra reported the results of Navis and proveo as discontinued operations. Each of these businesses were sold during 2011. The income from discontinued operations in 2012 is primarily related to the amendment and extension of the proveo loan agreement. The losses in 2011 relate to the discontinued proveo business operations in the comparable period.

Results of Operations: Six months ended June 30, 2012 versus six months ended July 2, 2011

Consolidated Results of Operations

(Amounts in thousands, except percentages):


	Six Months Ended
	June 30, 2012		July 2, 2011			Percent Change			Percent of Net Sales - 2012		Percent of Net Sales - 2011
Net sales
Net sales of tangible products	$	467,184	$	458,882			1.8			95.2		95.0
Revenue from services & software		23,768		23,960			(0.8	)		4.8		5.0

Total net sales		490,952		482,842			1.7			100.0		100.0
Cost of Sales
Cost of sales of tangible products		239,013		228,513			4.6			48.7		47.3
Cost of services & software		11,679		12,633			(7.6	)		2.4		2.6

Total cost of sales		250,692		241,146			4.0			51.1		49.9

Gross profit		240,260		241,696			(0.6	)		48.9		50.1
Operating expenses		158,792		150,663			5.4			32.3		31.2

Operating income		81,468		91,033			(10.5	)		16.6		18.9
Other income (expense)		146		(408	)		N/M			0.0		(0.1	)

Income from continuing operations before income taxes		81,614		90,625			(9.9	)		16.6		18.8
Income taxes		21,097		27,328			(22.8	)		4.3		5.7

Income from continuing operations		60,517		63,297			(4.4	)		12.3		13.1
Income (loss) discontinued operations, net of tax		300		31,301			(99.0	)		0.1		6.5

Net Income	$	60,817	$	94,598			(35.7	)		12.4		19.6

Diluted earnings per share
Income from continuing operations	$	1.16	$	1.14			1.8
Income from discontinued operations		0.01		0.57			N/M

Net income	$	1.17	$	1.71			(31.6	)

Consolidated Results of Operations – Year to date

Sales

Net sales for the first six months of 2012 compared with the same 2011 period increased 1.7% due to a broad based demand despite a struggling economy. The increase in sales was largely attributable to 5.6% growth in supplies including labels, card printer supplies and aftermarket parts. Supplies sales increased from greater shipments of labels and thermal ribbons. Printer unit volume increased 12.0% for the first six months of 2012 compared to levels in 2011 primarily due to volume increases in desktop, mobile and card printers.

Sales by product category were as follows (amounts in thousands, except percentages):


	Six Months Ended
Product Category	June 30, 2012		July 2, 2011		Percent Change			Percent of Net Sales - 2012		Percent of Net Sales - 2011
Hardware	$	365,169	$	361,895		0.9			74.4		75.0
Supplies		99,470		94,213		5.6			20.3		19.5
Service and software		23,768		23,960		(0.8	)		4.8		4.9

Subtotal products		488,407		480,068		1.7			99.5		99.4
Shipping and handling		2,545		2,774		(8.3	)		0.5		0.6

Total net sales	$	490,952	$	482,842		1.7			100.0		100.0

Sales increased in Latin America due to geographic expansion with notable increases in card, mobile, and desktop printer sales for the first six months of 2012 compared to the same period in 2011. Latin America also benefitted from increased aftermarket sales in 2012 over 2011 levels. Sales in North America increased due to increased sales of aftermarket supplies and a strong demand for desktop, card and midrange printers. Zebra continues to build a broader base of customers to penetrate targeted industries more deeply. Movements in foreign exchange rates decreased sales by $6,514,000 in the Europe, Middle East and Africa regions due principally to a weaker euro against the U.S. dollar.

Sales to customers by geographic region were as follows (in thousands, except percentages):


	Six Months Ended
Geographic Region	June 30, 2012		July 2, 2011		Percent Change			Percent of Net Sales - 2012		Percent of Net Sales - 2011
Europe, Middle East and Africa	$	163,978	$	169,621		(3.3	)		33.4		35.1
Latin America		47,658		44,169		7.9			9.7		9.1
Asia-Pacific		69,069		70,794		(2.4	)		14.1		14.7

Total International		280,705		284,584		(1.4	)		57.2		58.9
North America		210,247		198,258		6.0			42.8		41.1

Total net sales	$	490,952	$	482,842		1.7			100.0		100.0

Gross Profit

Gross profit decreased 0.6% due to unfavorable movements in product mix. Gross profit was affected by unfavorable foreign currency movements which decreased gross profit by $5,177,000. The above factors contributed to the decrease in gross margin from 50.1%. to 48.9%.

Printer unit volumes and average selling price information is summarized below:


	Six Months Ended
	June 30, 2012		July 2, 2011		Percent Change
Total printers shipped		627,855		560,740		12.0
Average selling price of printers shipped	$	486	$	541		(10.1	)

For the first six months of 2012, unit volumes increased in nearly all printer product lines compared to the same period of 2011, with notable volume increase in desktop, mobile and card printers. The 10.1% decrease in average selling price is a result primarily of a change in product mix.

Operating Expenses

Operating expenses for the six month period increased 5.4% due to greater selling and marketing and general and administrative expenses. Several categories accounted for these increases, including compensation costs, business development, outside professional services, travel and entertainment, rent, depreciation and information systems expenses. These increases are principally related to activities supporting Zebra’s geographic expansion and market development activities. Acquisition costs in 2012 relate to investigated and completed acquisitions during the period. Exit and restructuring costs in 2011 relate to the relocation and consolidation of administrative, accounting and distribution functions of our Location Solutions product line.

Operating expenses are summarized below (in thousands, except percentages):


	Six Months Ended
Operating Expenses	June 30, 2012		July 2, 2011		Percent Change			Percent of Net Sales 2012		Percent of Net Sales 2011
Selling and marketing	$	64,272	$	59,478		8.1			13.1		12.3
Research and development		42,752		44,168		(3.2	)		8.7		9.1
General and administrative		48,722		43,394		12.3			9.9		9.0
Amortization of intangible assets		1,540		1,671		(7.8	)		0.3		0.4
Acquisition costs		1,506		0		N/M			0.3		0.0
Exit and restructuring costs		0		1,952		N/M			0.0		0.4

Total operating expenses	$	158,792	$	150,663		5.4			32.3		31.2

Operating Income

The operating income decrease for the first six months of 2012 was the result of increased operating expenses as noted above.

Other Income (Expense)

Investment income increased slightly from increased cash and investment balances in 2012 compared with 2011. Zebra recorded a larger foreign exchange loss in 2011.

Zebra’s non-operating income and expense items are summarized in the following table (in thousands):


	Six Months Ended
	June 30, 2012			July 2, 2011
Investment income	$	1,418		$	1,216
Foreign exchange loss		(422	)		(1,127	)
Other, net		(850	)		(497	)

Total other income (expense)	$	146		$	(408	)

Income Taxes

The effective income tax rate for the first six months of 2012 was 25.8% compared with an income tax rate of 30.2% for the first six months of 2011. The 2012 effective tax rate decline reflects the implementation of a new structure for Zebra’s international subsidiaries which has contributed to reducing the effective tax rate. In addition, the statutory tax rate in the UK was also reduced in 2012. Zebra’s rate in 2011 included a tax valuation allowance in the first quarter of 2011 against a subsequently disposed subsidiary.

Income from Discontinued Operations

Liquidity and Capital Resources

(Amounts in thousands, except percentages):


	Six Months Ended
Rate of Return Analysis:	June 30, 2012			July 2, 2011
Average cash and marketable securities balances	$	356,759		$	300,738
Annualized rate of return		0.8	%		0.8	%

Average cash and marketable securities balances for the first six months of 2012 increased compared to 2011 as a result of increased cash provided by operating activities and from the collection of the escrowed proceeds from the sale of Navis.

As of June 30, 2012, Zebra had $386,822,000 in cash and investments and marketable securities, compared with $326,695,000 at December 31, 2011. Factors affecting cash and investment balances during the first six months of 2012 include the following (changes below include the impact of foreign currency):

•

Inventories decreased $16,599,000 due to decreases in raw materials and finished goods.

•

Accounts payable decreased $9,594,000 due to the timing of payments at period end.

•

Accrued liabilities decreased $11,422,000 due to the timing of annual bonus payments and regular payroll.

•

Income taxes payable increased $10,714,000 due to the timing of tax payments.

•

Purchases of property and equipment totaled $10,599,000.

•

Half of the escrowed proceeds from the sale of Navis totaling $13,790,000 were received.

•

Purchases of treasury shares totaled $24,645,000.

Management believes that existing capital resources and funds generated from operations are sufficient to finance anticipated capital requirements, which included the purchase of LaserBand, LLC in July 2012 which utilized approximately $58,404,000 in cash.

Critical Accounting Policies and Estimates

Management prepared the consolidated financial statements of Zebra under accounting principles generally accepted in the United States of America. These principles require the use of estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we used are reasonable, based upon the information available.

Our estimates and assumptions affect the reported amounts in our financial statements. The following accounting policies comprise those that we believe are the most critical in understanding and evaluating Zebra’s reported financial results.

Revenue Recognition

Product revenue is recognized once four criteria are met: (1) we have persuasive evidence that an arrangement exists; (2) delivery has occurred and title has passed to the customer, which generally happens at the point of shipment provided that no significant obligations remain; (3) the price is fixed and determinable; and (4) collectability is reasonably assured. Other items that affect our revenue recognition include:

Customer Returns

Customers have the right to return products that do not function properly within a limited time after delivery. We monitor and track product returns and record a provision for the estimated future returns based on historical experience and any notification received of pending returns. Returns have historically been within expectations and the provisions established, but Zebra cannot guarantee that it will continue to experience return rates consistent with historical patterns. Historically, our product returns have not been significant. However, if a significant issue should arise, it could have a material impact on our financial statements.

Growth Rebates

Some of our channel program partners are offered incentive rebates based on the attainment of specific growth targets related to products they purchase from us over a quarter or year. These rebates are recorded as a reduction to revenue. Each quarter, we estimate the amount of outstanding rebates and establish a reserve for them based on shipment history. Historically, actual rebates have been in line with our estimates.

Pass Through Rebate Program

Some of our distributors are offered monthly rebates based on distribution of products to our program partners. These rebates are recorded as a reduction to revenue. Each month we estimate the amount of rebate earned and establish a reserve for them based on recent trends of actual activity. The actual distributor rebates paid have historically been in line with our estimates.

Price Protection

Some of our customers are offered price protection by Zebra as an incentive to carry inventory of our product. These price protection plans provide that if we lower prices, we will credit them for the price decrease on inventory they hold. We estimate future payments under price protection programs quarterly and establish a reserve, which is charged against revenue. Our customers typically carry limited amounts of inventory, and Zebra infrequently lowers prices on current products. As a result, the amounts paid under these plans have been minimal.

Software Revenue

We sell three types of software and record revenue as follows:

•

Our printers contain embedded firmware, which is part of the hardware purchase. We consider the sale of this firmware to be incidental to the sale of the printer and do not attribute any revenue to it.

•

We sell a limited amount of prepackaged, or off-the-shelf, software for the creation of bar code labels using our printers. There is no customization required to use this software, and we have no post-shipment obligations on the software. Revenue is recognized at the time this prepackaged software is shipped.

•

We sometimes provide custom software as part of a printer installation project. We bill custom software development services separate from the related hardware. Revenue related to custom software is recognized once the custom software development services have been completed and accepted by the customer.

•

We recognize license revenue when (1) a signed contract is obtained; (2) delivery of the product has occurred; (3) the license fee is fixed or determinable; and (4) collection is probable.

Maintenance and Support Agreements

We enter into post-contract maintenance and support agreements. Revenues are recognized ratably over the service period and the cost of providing these services is expensed as incurred.

Shipping and Handling

We charge our customers for shipping and handling services based upon our internal price list for these items. The amounts billed to customers are recorded as revenue when the product ships. Any costs incurred related to these services are included in cost of sales.

Zebra enters into sales transactions that include more than one product type. This bundle of products might include printers, current or future supplies, and services. When this type of transaction occurs, we allocate the purchase price to each product type based on the fair value of the individual products determined by vendor specific objective evidence. The revenue for each individual product is then recognized when the recognition criteria for that product is fully met.

Investments and Marketable Securities

Investments and marketable securities at June 30, 2012, consisted of the following:


U.S. government and agency securities	22.7	%
Obligations of government-sponsored enterprises (1)	4.3	%
State and municipal bonds	36.9	%
Corporate securities	36.1	%

(1)	Includes investments in notes issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Farm Credit Banks and the Federal Home Loan Bank.

We classify our debt and marketable equity securities in one of three categories: trading, available-for-sale or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those debt securities that Zebra has the ability and intent to hold until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale.

Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of discounts or premiums. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders’ equity until realized. As of June 30, 2012, Zebra’s investments in marketable debt securities are classified as available-for-sale. In addition, as of June 30, 2012, all of our investments in marketable debt securities with maturities greater than one year are classified as long-term investments in the balance sheet due to our ability and intent to hold them until maturity.

Accounts Receivable

We have standardized credit granting and review policies and procedures for all customer accounts, including:

•

Credit reviews of all new customer accounts,

•

Ongoing credit evaluations of current customers,

•

Credit limits and payment terms based on available credit information,

•

Adjustments to credit limits based upon payment history and the customer’s current credit worthiness,

•

An active collection effort by regional credit functions, reporting directly to the corporate financial officers, and

•

Limited credit insurance on the majority of our international receivables.

We reserve for estimated credit losses based upon historical experience and specific customer collection issues. Over the last three years, accounts receivable reserves varied from 0.7% to 1.2% of total accounts receivable. Accounts receivable reserves as of June 30, 2012, were $1,057,000, or 0.7% of the balance due. Accounts receivable reserves as of December 31, 2011, were $1,560,000, or 1.0% of the balance due. We believe our reserve level is appropriate considering the quality of the portfolio as of June 30, 2012. While credit losses have historically been within expectations and the provisions established, we cannot guarantee that our credit loss experience will continue to be consistent with historical experience.

Inventories

We value our inventories at the lower of the actual cost to purchase or manufacture using the first-in, first-out (FIFO) method, or the current estimated market value. We review inventory quantities on hand and record a provision for excess and obsolete inventory based on forecasts of product demand and production requirements for the subsequent twelve months.

Over the last three years, our reserves for excess and obsolete inventories have ranged from 8.0% to 11.9% of gross inventory. As of June 30, 2012, inventory reserves were $15,822,000, or 11.9% of gross inventory compared to inventory reserves of $14,710,000, or 9.9% of gross inventory as of December 31, 2011. We believe our reserve level is appropriate considering the quantities and quality of the inventories as of June 30, 2012.

Valuation of Goodwill

We test the impairment of goodwill each year as of the end of May or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We completed our annual assessment during June 2012 and determined that our goodwill was not impaired as of the end of May 2012.

Goodwill of a reporting unit is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Examples of such events or circumstances include:

•

Significant adverse change in legal factors or in the business climate,

•

Adverse action or assessment by a regulator,

•

Unanticipated competition,

•

Loss of key personnel,

•

More-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of,

•

Testing for recoverability of a significant asset group within a reporting unit, or

•

Allocation of a portion of goodwill to a business to be disposed of.

If we believe that one or more of the above indicators of impairment have occurred, we perform an impairment test. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We generally determine the fair value of our reporting units using three valuation methods: Income Approach – Discounted Cash Flow Analysis, Market Approach – Guideline Public Company Method and Market Approach – Comparative Transactions Method. The approach defined below is based upon our last impairment test conducted in June 2012 as of the end of May 2012.

Under the “Income Approach – Discounted Cash Flow Analysis” the key assumptions consider sales, cost of sales and operating expenses projected through the year 2021. These assumptions were determined by management utilizing our internal operating plan and assuming growth rates for revenues and operating expenses, and margin assumptions. The fourth key assumption under this approach is the discount rate which is determined by looking at current risk-free rates of capital, current market interest rates and the evaluation of risk premium relevant to the business segment. If our assumptions relative to growth rates were to change or were incorrect, our fair value calculation may change which could result in impairment.

Under the “Market Approach – Guideline Company Method” we identified 20 publicly traded companies, including Zebra, which we believe have significant relevant similarities. For these 20 companies we calculated the mean ratio of invested capital to revenues and invested capital to EBITDA. Similar to the Income approach discussed above, sales, cost

of sales, operating expenses and their respective growth rates were the key assumptions utilized. The market prices of Zebra and other guideline company shares are key assumptions. If these market prices increase, the estimated market value would increase. If the market prices decrease, the estimated market value would decrease.

Under the “Market Approach – Comparative Transactions Method” we looked at 19 market based transactions for companies that have similarities to our business segment, including similarities to one or more of the business lines, markets, growth prospects, margins and size. We calculated mean revenue and EBITDA multiples for the selected transactions. These multiples were applied to forecasted Zebra results for that segment to estimate market value. The key assumptions and impact to changes to those assumptions would be similar to those assumptions under the “Income Approach – Discounted Cash Flow Analysis” and the “Market Approach – Guideline Company Method”.

The results of these three methods are weighted based upon management’s determination with more weighing upon the Income approach because it considers anticipated future financial performance. The Market approaches are based upon historical and current economic conditions which might not reflect the long term prospects or opportunities for our business segment being evaluated.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill. Zebra has two reporting units required for its annual goodwill impairment test. The larger of the two reporting units’ fair value exceeded its carrying value by a significant amount. For the second, smaller reporting unit the amount by which the fair value exceeded the carrying value ranged from approximately 8% under the Income Approach and 31% under the Market Approach. A 1% movement in the discount rate or a small deterioration in operating results could result in a requirement to perform an additional impairment test for this reporting unit and may result in a goodwill impairment charge of up to $9,100,000 related to this reporting unit.

There have not been any significant changes to our impairment testing methodology other than updating the assumptions to reflect the current market environment. As discussed above, key assumptions used in the first step of the goodwill impairment test were determined by management utilizing the internal operating plan. The key assumptions utilized include forecasted growth rates for revenues and operating expenses as well as a discount rate which is determined by looking at current risk-free rates of capital, current market interest rates and the evaluation of risk premium relevant to the business segment. Our fair value calculation could change and possibly result in impairment if our assumptions relative to growth rates were to change or were incorrect or our forecast of revenues and operating expenses are not met. Also, changes to the discount rate which would be driven by any changes in the risk-free rate, or changes market interest rates could impact the fair value changes. As such, any negative changes in the above rates or factors could change the fair value calculation and could cause the failure of the first step of the impairment for the smaller reporting unit. Zebra will monitor future results and if necessary will perform at test if indicators trigger an impairment review.

Valuation of Long-Lived and Other Intangible Assets

We evaluate the impairment of identifiable intangibles and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered that may trigger an impairment review consist of:

•

Significant underperformance relative to expected historical or projected future operating results,

•

Significant changes in the manner of use of the acquired assets or the strategy for the overall business,

•

Significant negative industry or economic trends,

•

Significant decline in Zebra’s stock price for a sustained period, and

•

Significant decline in market capitalization relative to net book value.

If we believe that one or more of the above indicators of impairment have occurred and the undiscounted cash flow test has failed in the case of amortizable assets, we measure impairment based on projected discounted cash flows using a discount rate that incorporates the risk inherent in the cash flows.

Net intangible assets, long-lived assets and goodwill amounted to $191,822,000 as of June 30, 2012.

Acquisition Costs

Zebra expenses acquisition costs as incurred. Acquisition costs are included as a component of operating expenses.

Income Taxes

Zebra has identified, evaluated, and measured the amount of income tax benefits to be recognized for all of our income tax positions. Included in deferred tax assets are amounts related to federal and state net operating losses that resulted from our acquisition of WhereNet Corp. Zebra’s intention is to utilize these net operating loss carryforwards to offset future income taxes.

Zebra is currently under U.S. federal income tax audits for years of 2008 through 2010. The tax years 2006 through 2010 remain open to examination by multiple state taxing jurisdictions. Tax authorities in the United Kingdom have completed income tax audits for tax years through 2006.

Zebra’s continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. For the six month ended June 30, 2012 and July 2, 2011, we did not accrue any interest or penalties into income tax expense.


	Six Months Ended
	June 30, 2012			July 2, 2011
Effective tax rate		25.8	%		30.2	%

The 2012 effective tax rate decline reflects the implementation of a new structure for Zebra’s international subsidiaries which has contributed to reducing the effective tax rate in the second quarter. In addition, the statutory tax rate in the UK was also reduced in 2012. Zebra’s rate in 2011 included a tax valuation allowance in the first quarter of 2011 against a subsequently disposed subsidiary.

Significant Customer

Our net sales to significant customers as a percentage of total net sales were as follows:


	Three Months Ended						Six Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Customer A		20.8	%		18.9	%		21.1	%		19.2	%
Customer B		10.6	%		10.5	%		10.8	%		10.7	%

No other customer accounted for 10% or more of total net sales during these periods. The customers disclosed above are distributors (i.e. not end users) of Zebra’s products.

Safe Harbor

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors which could cause actual results to differ materially from those reflected or implied in such forward looking statements. These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in Zebra’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:

•

Market acceptance of Zebra’s printers, other hardware and software products and competitors’ product offerings and the potential effects of technological changes,

•

The effect of market conditions in our geographic regions of North America, Europe, Middle East and Africa, Asia Pacific and Latin America,

•

Our ability to control manufacturing and operating costs,

•

Success of acquisitions and their integration, including the realization of revenue and cost synergies,

•

Interest rate and financial market conditions because of our large investment portfolio,

•

The growing regulatory burdens imposed by federal, state and local governments,

•

The effect of natural disasters on our business,

•

Currency exchange rates due to the large percentage of our sales and operations outside of the U.S., and

•

The outcome of litigation in which Zebra is involved, particularly litigation or claims related to infringement of third-party intellectual property rights.

When used in this document and documents referenced, the words “anticipate,” “believe,” “estimate,” “will” and “expect” and similar expressions as they relate to Zebra or its management are intended to identify such forward-looking statements. We encourage readers of this report to review Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, for a further discussion of issues that could affect Zebra’s future results. Zebra undertakes no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this report.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in Zebra’s market risk during the quarter ended June 30, 2012. For additional information on market risk, refer to the “Quantitative and Qualitative Disclosures About Market Risk” section of our Form 10-K for the year ended December 31, 2011. See Note 3 to the Consolidated Financial Statements included in this report for further discussion of investments and marketable securities.

In the normal course of business, portions of Zebra’s operations are subject to fluctuations in currency values. We manage these risks using derivative financial instruments. See Note 8 to the Consolidated Financial Statements included in this report for further discussion of derivative instruments.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Form 10-Q. The evaluation was conducted under the supervision of our Disclosure Committee, and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by us in our reports that we file or furnish under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Zebra began a program to update substantially all of its key financial systems in 2008. As portions of these systems are completed, they will be subject to the requirements related to internal control over financial reporting. The requirements for internal control over financial reporting will be a fundamental element of the design and implementation of these systems.

As of February 27, 2012, we completed the implementation of the new systems for our North America region. This implementation included customer order entry and invoicing, inventory procurement and management, certain accounts payable activity, and other related operational systems. As part of the implementation, we changed many of the related internal controls substantially by reducing the number of manual controls with system controls and streamlining Zebra’s internal operations. These new controls will be subject to testing throughout 2012. The effectiveness of these new controls will be disclosed in our December 31, 2012 internal control report.

During 2012, we made additional changes to our controls and procedures as part of our ongoing monitoring of our controls. None of these changes has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In addition, there were no other changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Zebra have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

See Note 10 to the Consolidated Financial Statements included in this report.

Item 1A.

Risk Factors

In addition to the other information included in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, and the factors identified under “Safe Harbor” at the end of Item 2 of Part I of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, cash flows or results of operations. The risks described in our Annual Report on Form 10-K are not the only risks facing Zebra. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, cash flows and/or results of operations.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Treasury Shares

During the second quarter of 2012, Zebra purchased 409,296 shares of Zebra’s Class A Common Stock at a weighted average share price of $36.33 per share, as follows:

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced programs		Maximum number of shares that may yet be purchased under the program
April 2012 (April 1 – April 28)		166,176	$	37.43		166,176		3,065,456
May 2012 (April 29 – May 26)		153,036	$	37.45		153,036		2,912,420
June 2012 (May 27 – June 30)		90,084	$	32.40		90,084		2,822,336

(1)	On November 4, 2011, Zebra’s Board authorized the purchase of up to an additional 3,000,000 shares under our stock repurchase program. This authorization does not have an expiration date.

(2)	During the second quarter, Zebra acquired 61,780 shares of Zebra Class A Common Stock through the withholding of shares necessary to satisfy tax withholding obligations upon the vesting of restricted stock awards. These shares were acquired at an average price of $37.62 per share.

Item 6.

Exhibits


10.1		Form of 2012 time-vested stock appreciation rights agreement for employees other than CEO. +

10.2		Form of 2012 time-vested restricted stock agreement for employees other than CEO. +

10.3		Form of 2012 performance-based restricted stock agreement for employees other than CEO. +

10.4		Form of 2012 time-vested stock appreciation rights agreement for CEO. +

10.5		Form of 2012 time-vested restricted stock agreement for CEO. +

10.6		Form of 2012 performance-based restricted stock agreement for CEO. +

10.7		Form of 2012 stock appreciation rights agreement for non-employee directors. +

31.1		Rule 13a-14(a)/15d-14(a) Certification

31.2		Rule 13a-14(a)/15d-14(a) Certification

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following financial information from Zebra Technologies Corporation Quarterly Report on Form 10-Q, for the quarter ended June 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the consolidated balance sheets; (ii) the consolidated statements of earnings; (iii) the consolidated statements of comprehensive income, (iv) the consolidated statements of cash flows; and (v) notes to consolidated financial statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ZEBRA TECHNOLOGIES CORPORATION

Date: August 1, 2012	By:	/s/ Anders Gustafsson
		Anders Gustafsson
		Chief Executive Officer

Date: August 1, 2012	By:	/s/ Michael C. Smiley
		Michael C. Smiley
		Chief Financial Officer

Exhibit 10.1

S TOCK A PPRECIATION R IGHTS A GREEMENT

This STOCK APPRECIATION RIGHTS AGREEMENT (this “SAR Agreement”), dated as of %%OPTION_DATE,’MM/DD/YYYY’%-% (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and %%FIRST_NAME%-% %%LAST_NAME%-% (the “Participant”), relating to a stock appreciation right granted under the 2011 Zebra Technologies Corporation Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this SAR Agreement without definitions shall have the meanings ascribed to such terms in the Plan.

1.	Grant of Stock Appreciation Right .

(a)

Grant . Subject to the provisions of this SAR Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date a stock appreciation right (the “SAR”) covering %%TOTAL_SHARES_GRANTED,’999,999,999’%-% shares (the “SAR Shares”) of the Company’s Class A Common Stock, $0.01 par value per share (the “Stock”), at a price of %%OPTION_PRICE,’$999,999,999.99’%- per share (the “SAR Price”). The SAR is not issued in tandem with an Option. This SAR Agreement shall be null and void unless the Participant accepts this SAR Agreement by either (i) electronically accepting this SAR Agreement through the Company’s electronic delivery and acceptance process operated by E*TRADE or (ii) executing this SAR Agreement in the space provided below and returning it to the Company not later than 30-days following the Grant Date.

(b)

Term of the SAR . Unless the SAR terminates earlier pursuant to other provisions of the SAR Agreement, the SAR shall expire on the tenth (10 ^th ) anniversary of the Grant Date (the “Expiration Date”).

(c)

Nontransferability . The SAR shall be nontransferable, except by will or the laws of descent and distribution, or as otherwise permitted under the Plan.

2.	Vesting of the SAR .

(a)

General Vesting Rule . Prior to the Expiration Date, the SAR shall

(b)

shall become and be exercisable as follows:


(c) Vesting Date Anniversary	Percentage of SAR Exercisable
Prior to the first anniversary of the Grant Date	0	%
On or after the first anniversary of the Grant Date	25	%
On or after the second anniversary of the Grant Date, an additional	25	%
On or after the third anniversary of the Grant Date, an additional	25	%
On or after the fourth anniversary of the Grant Date, an additional	25	%

provided, however, except as otherwise provided for under this SAR Agreement, the Participant must remain employed by the Company or any Subsidiary continuously through the applicable vesting dates.

(d)

Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the SAR shall be subject to the following additional vesting rules in the following circumstances:

(i)

Death or Disability . In the event the Participant’s employment with the Company and/or any Subsidiary is terminated due to the Participant’s death or Disability, any unvested portion of the SAR as of the date of the Participant’s termination of employment shall immediately become fully vested and exercisable and, along with any unexercised vested portion of the SAR, shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

one (1) year after the date of the Participant’s termination of employment due to the Participant’s death or Disability.

In the event of the Participant’s death, the Participant’s beneficiary or estate may exercise the vested SAR.

(ii)

Retirement . In the event the Participant’s employment with the Company and/or any Subsidiary is terminated due to Retirement, any unexercised vested portion of the SAR as of the date of the Participant’s termination of employment shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

one (1) year after the date of the Participant’s termination of employment due to Retirement.

For purposes of this SAR Agreement, “Retirement” means the Participant’s voluntary termination of employment with the Company and/or any Subsidiary after attaining either:

•

age fifty-five (55) with ten (10) or more complete years of service with the Company and/or any Subsidiary; or

•

age sixty-five (65).

(iii)

Termination for Cause . In the event the Participant’s employment with the Company and/or any Subsidiary is terminated for Cause, any unexercised SAR, whether vested or not, shall expire immediately, be forfeited, and be considered null and void. For purposes of this SAR Agreement, “Cause” has the meaning set forth in the employment agreement, if any, between the Company and/or any Subsidiary and the Participant or, if the Participant is not a party to such an agreement, “Cause” has the meaning, as determined by the Company in its sole discretion, set forth in the Plan.

(iv)

Other Termination of Employment . In the event the Participant’s employment with the Company and/or any Subsidiary is terminated for any reason other than as provided in Section 2(b)(i), (ii) or (iii) or Section 5 hereof, the unexercised vested portion of the SAR as of the date of the Participant’s termination of employment shall remain exercisable until the earliest of:

(A)

the Expiration Date; or

(B)

ninety (90) days after the date of the Participant’s involuntary (as to the Participant) termination of employment for reasons other than death, Disability, Retirement, or Cause; or

(C)

thirty (30) days after the date of the Participant’s voluntary termination of employment for reasons other than Retirement.

3.	Exercise of SAR .

(a) Notice of Exercise . Prior to the Expiration Date, the vested portion of the SAR may be exercised, in whole or in part, by delivering written notice to the Company in accordance with Section 7(j) hereof and in such form as the Company may require from time to time. Such notice of exercise shall specify the number of SAR Shares to be exercised.

(b) Payment . As of the date of exercise of the SAR, the Company shall settle the exercised portion of the SAR as provided in Section 6.6 of the Plan. The amount of the payment for each SAR Share exercised shall equal (i) the Fair Market Value of a share of Stock on the date of exercise, less (ii) the SAR Price for each such exercised SAR Share. The exercised SAR shall be settled in whole shares of Stock, and cash for the value of a fractional share of Stock.

(c) Payment of Taxes . If the Company is obligated to withhold an amount on account of any tax imposed as a result of the exercise of the SAR, the Participant shall be required to pay such amount to the Company, as provided in Section 9,10 of the Plan. Alternatively, subject to Company approval, the Participant may elect to withhold a portion of the SAR exercise payment equal to the minimum statutory tax that would be imposed on the exercise, as provided under Section 9.10 of the Plan. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the grant of the SAR and its exercise.

(d) Death Prior to Exercise . In the event of the Participant’s death prior to the exercise of any vested portion of the SAR, the Participant’s beneficiary or estate may exercise the vested SAR.

Compliance with Federal and State Law . The Company reserves the right to delay the Participant’s exercise of any portion of the SAR if (a) the Company’s issuance of Stock upon such exercise would violate any applicable federal or state securities laws or any other applicable laws or regulations, or (b) the Company reasonably determines that payment of such SAR portion would not be deductible under Code Section 162(m). The Participant may not sell or otherwise dispose of any portion of the SAR in violation of any applicable law. The Company may postpone issuing and delivering any Stock in payment for the exercise of such portion of the SAR for so long as the Company reasonably determines to be necessary to satisfy the following:

(i)

its completing or amending any securities registration or qualification of the Stock or it or the Participant satisfying any exemption from registration under any federal or state law, rule, or regulation;

(ii)

its receiving proof it considers satisfactory that a person seeking to exercise the SAR after the Participant’s death is entitled to do so; and

(iii)

the Participant complying with any federal, state, or local tax withholding obligations.

5.	Change in Control . Subject to Section 9.8 of the Plan:

(a) Notwithstanding any provision in this Agreement, in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan in connection with which (i) holders of Shares receive consideration consisting solely of shares of common stock that are registered under Section 12 of the Exchange Act (and disregarding the payment of cash in lieu of fractional shares) and (ii) this SAR Agreement is assumed or provision is made for the continuation of this SAR Agreement, then subject to Section 4.3 of the Plan, this SAR Agreement shall continue in accordance with its terms, and there shall be substituted for each SAR Share then subject to this SAR Agreement, the number and class of shares into which each outstanding Share shall be converted pursuant to such Change in Control. In the event of any such substitution, the SAR Price shall be appropriately adjusted by the Board or Committee (whose determination shall be final, binding and conclusive), such adjustments to be made without an increase in the aggregate SAR Price. In the event the Participant’s employment with the Company and/or any Subsidiary is terminated by the Participant for Good Reason or by Zebra or any Subsidiary without Cause on or after the date of such Change in Control and on or prior to the one-year anniversary date of such Change in Control, then any unvested portion of the SAR as of the effective date of the Participant’s termination of employment shall immediately become fully vested and exercisable and, along with any unexercised vested portion of the SAR, shall remain exercisable until the earlier of (1) the Expiration Date or (2) one (1) year after the date of the Participant’s termination of employment. For purposes of this SAR Agreement, “Good Reason” has the meaning set forth in the employment agreement, if any, between the Company and/or any Subsidiary and the Participant or, if the Participant is not a party to such an agreement, “Good Reason” has the meaning set forth in the Plan.

(b) Notwithstanding any provision in this Agreement to the contrary, in the event of a Change in Control pursuant to Section 2.5(a) or (b) of the Plan, or in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan as to which Section 5(a) above does not apply, this grant shall be surrendered to the Company by the Participant, and this grant shall immediately be canceled by the Company, and the Participant shall receive, within 10 days following the effective date of the Change in Control, a cash payment from the Company in an amount equal to the number of SAR Shares then subject to this SAR, multiplied by the excess, if any, of the greater of (i) the highest per Share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (ii) the Fair Market Value of a Share on the effective date of the Change in Control, over the SAR Price.

6.	Confidentiality, Non-Solicitation and Non-Compete . The Participant agrees to, understands, and acknowledges the following:

(a)

Confidential Information . The Participant will be furnished, use or otherwise have access to certain Confidential Information of the Company and/or a Subsidiary. For purposes of this SAR Agreement, “Confidential Information” means any and all financial, technical, commercial or other information concerning the business and affairs of the Company and/or a Subsidiary that is confidential and proprietary to the Company and/or a Subsidiary, including without limitation:

(i)

information relating to the Company’s or Subsidiary’s past and existing customers and vendors and development of prospective customers and vendors, including specific customer product requirements, pricing arrangements, payment terms, customer lists and other similar information;

(ii)

inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

(iii)

the Company’s or Subsidiary’s proprietary programs, processes or software, consisting of, but not limited, to computer programs in source or object code and all related documentation and training materials, including all upgrades, updates, improvements, derivatives and modifications thereof and including programs and documentation in incomplete stages of design or research and development;

(iv)

the subject matter of the Company’s or Subsidiary’s patents, design patents, copyrights, trade secrets, trademarks, service marks, trade names, trade dress, manuals, operating instructions, training materials, and other industrial property, including such information in incomplete stages of design or research and development; and

(v)

other confidential and proprietary information or documents relating to the Company’s or Subsidiary’s products, business and marketing plans and techniques, sales and distribution networks and any other information or documents that the Company and/or a Subsidiary reasonably regards as being confidential.

The Company and its Subsidiaries devote significant financial, human and other resources to the development of their products, customer base and the general goodwill associated with their business, and the Company and its Subsidiaries diligently maintain the secrecy and confidentiality of their Confidential Information. Each and every component of the Confidential Information is sufficiently secret to derive economic value from its not being generally known to other persons. While employed by the Company and/or Subsidiary and thereafter, the Participant will hold in the strictest confidence and not use in any manner which is detrimental to the Company or its Subsidiaries or disclose to any individual or entity any Confidential Information, except as may be required by the Company or its Subsidiaries in connection with the Participant’s employment.

upon the termination of his or her employment for any reason, or during the Participant’s employment if so requested by the Company, the Participant will return all Company Materials and other physical property, and any reproduction thereof, excepting only the Participant’s copy of this Agreement. For purposes of this SAR Agreement, “Company Materials” means documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or future/strategic plans of the Company and/or any Subsidiary, whether such documents have been prepared by the Participant or by others.

(b)

Non-Solicitation and Non-Compete . Notwithstanding any provision of this SAR Agreement, if at any time prior to the date that is one year after the date of exercise of all or any portion of the SAR, the Participant directly or indirectly:

(i)

breaches or violates Section 6(a) of this SAR Agreement; or

(ii)

employs, recruits or solicits for employment any person who is (or was within the six (6) months prior to the Participant’s employment termination date) an employee of the Company and/or any Subsidiary; or

(iii)

accepts employment or engages in a competing business that may require contact, solicitation, interference or diverting of any of the Company’s or any Subsidiary’s customers, or that may result in the disclosure, divulging, or other use of Confidential Information or Company Materials acquired during the Participant’s employment with the Company or any Subsidiary; or

(iv)

solicits or encourages any customer, vendor or potential customer or vendor of the Company or any Subsidiary with whom the Participant had contact while employed by the Company or any Subsidiary to terminate or otherwise alter his, her or its relationship with the Company or any Subsidiary. The Participant understands that any person or entity that the Participant contacted during the twelve (12) months prior to the date of the Participant’s termination of employment for the purpose of soliciting sales from such person or entity shall be regarded as a “potential customer” of the Company to whom the Company or a Subsidiary has a protectable proprietary interest;

the SAR shall terminate automatically on the date the Participant engages in such activity and the Participant shall pay the Company, within five business days of receipt by the Participant of a written demand therefor, an amount in cash determined by multiplying the number of Shares as to which the SAR was exercised within the one-year period described above by the difference between (i) the Fair Market Value of a Share on the date of such exercise and (ii) the SAR Price per SAR (without reduction for any Shares withheld by the Company pursuant to Section 3(c)).

(c)

Remedies for Violation.

(i)

Injunctive Action . The Participant acknowledges that if he or she violates the terms of this Section 6, the injury that would be suffered by the Company and/or a Subsidiary as a result of a breach of the provisions of this SAR Agreement (including any provision of Section 6(a) or (b) hereof) would be irreparable and that an award of monetary damages to the Company and/or a Subsidiary for such a breach would be an inadequate remedy. Consequently, the Company and/or a Subsidiary will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this SAR Agreement, and the Company and/or Subsidiary will not be obligated to post bond or other security in seeking such relief. Without limiting the Company’s or Subsidiary’s rights under this Section 6 or any other remedies of the Company or a Subsidiary, if the Participant breaches any of the provisions of Section 6(a) or (b) hereof, the Company will have the right to cancel this SAR Agreement.

(ii)

Attorneys’ Fees; Set-off Right . In addition to the rights available to the Company and its Subsidiaries under Section 6(c)(i) hereof, if the Participant violates the terms of this Section 6 at any time, the Company shall be entitled to reimbursement from the Participant of any fees and expenses (including attorneys’ fees) incurred by or on behalf of the Company or any Subsidiary in enforcing the Company’s or a Subsidiary’s rights under this Section 6. By accepting this SAR grant, the Participant hereby consents to a deduction from any amounts the Company or any Subsidiary owes to the Participant from time to time (including amounts owed to the Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Participant by the Company or any Subsidiary), unless such amount is subject to Section 409A of the Code, to the extent of any amounts that the Participant owes the Company under this Section 6. In addition to any injunctive relief sought under Section 6(c)(i) hereof and whether or not the Company or any Subsidiary elects to make any set-off in whole or in part, if the Company or any Subsidiary does not recover by means of set-off the full amount the Participant owes to the Company or any Subsidiary, calculated as set forth in this Section 6(c)(ii), the Participant agrees to immediately pay the unpaid balance to the Company or any Subsidiary.

(d)

Enforceability of Restrictive Covenants . The scope and duration of the restrictive covenants contained in this SAR Agreement are reasonable and necessary to protect a legitimate, protectable interest of the Company and its Subsidiaries.

(e)

Written Acknowledgement by the Participant . The Committee, in its sole discretion, may require the Participant, as a condition to the exercise of this SAR, to acknowledge in writing that he or she has not engaged, and is not in the process of engaging, in any of the activities described in this Section 6.

7.	Miscellaneous Provisions .

(a)

No Service or Employment Rights . No provision of this SAR Agreement or of the SAR granted hereunder shall give the Participant any right to continue in the service or employ of the Company or any Subsidiary, create any inference as to the length of employment or service of the Participant, affect the right of the Company or any Subsidiary to terminate the employment or service of the Participant, with or without Cause, or give the Participant any right to participate in any employee welfare or benefit plan or other program (other than the Plan) of the Company or any Subsidiary.

(b)

Stockholder Rights . Until the SAR shall have been duly exercised into Stock and such Stock has been officially recorded as issued on the Company’s official stockholder records, no person or entity shall be entitled to vote, receive dividends or be deemed for any purpose the holder of such Stock, and adjustments for dividends or otherwise shall be made only if the record date thereof is subsequent to the date such shares are recorded and after the date of exercise and without duplication of any adjustment.

(c)

Plan Document Governs . The SAR is granted pursuant to the Plan, and the SAR and this SAR Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this SAR Agreement by reference or are expressly cited. Any inconsistency between the SAR Agreement and the Plan shall be resolved in favor of the Plan. The Participant hereby acknowledges receipt of a copy of the Plan.

(d)

Beneficiary Designation . The Participant may, from time to time, in accordance with procedures set forth by the Committee, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this SAR Agreement is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Committee during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate or exercised by the Participant’s estate.

(e)

Administration . This SAR Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this SAR Agreement, all of which shall be binding upon the Participant.

(f)

No Vested Right in Future Awards . The Participant acknowledges and agrees (by executing this SAR Agreement) that the granting of the SAR under this SAR Agreement is made on a fully discretionary basis by the Company and that this SAR Agreement does not lead to a vested right to further SAR or other awards in the future.

(g)

Use of Personal Data . By executing this SAR Agreement, the Participant acknowledges and agrees to the collection, use, processing and transfer of certain personal data, including his or her name, salary, nationality, job title, position, and details of all past Awards and current Awards outstanding under the Plan (“Data”), for the purpose of managing and administering the Plan. The Participant is not obliged to consent to such collection, use, processing and transfer of personal data, but a refusal to provide such consent may affect his or her ability to participate in the Plan. The Company or its Subsidiaries may transfer Data among themselves or to third parties as necessary for the purpose of implementation, administration and management of the Plan. These various recipients of Data may be located elsewhere throughout the world. The Participant authorizes these various recipients of Data to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan. The Participant may, at any time, review Data with respect to the Participant and require any necessary amendments to such Data. The Participant may withdraw his or her consent to use Data herein by notifying the Company in writing; however, the Participant understands that by withdrawing his or her consent to use Data, the Participant may affect his or her ability to participate in the Plan.

(h)

Severability . In the event that any provision of this SAR Agreement (including, without limitations, the provisions of Section 6 hereof) are held to be unenforceable under applicable law to any extent, such provision(s) shall, to that extent, be excluded from this SAR Agreement and the balance of the SAR Agreement shall be interpreted as if such provision(s) were so excluded to that extent and shall be enforceable in accordance with its terms.

(i)

Waiver; Cumulative Rights . The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

(j)

Notices . Any notice which either party hereto may be required or permitted to give the other shall be in writing and may be delivered personally or by mail, postage prepaid, addressed to the Secretary of the Company, at its then corporate headquarters, and the Participant at the Participant’s address (including any electronic mail address) as shown on the Company’s records, or to such other address as the Participant, by notice to the Company, may designate in writing from time to time. The Participant hereby consents to electronic delivery of any notices that may be made hereunder.

(k)

Counterparts . This SAR Agreement may be signed in counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

(l)

Successors and Assigns . This SAR Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon the Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.

(m)

Governing Law . This SAR Agreement and the SAR granted hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to provisions thereof regarding conflict of laws.

(n)

Entire Agreement . This SAR Agreement, together with the Plan, constitutes the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.

(o)

Amendment . Any amendment to this SAR Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.

(p)

Headings . The headings contained in this SAR Agreement are for reference purposes only and shall not affect the meaning or interpretation of this SAR Agreement.

IN WITNESS WHEREOF , the Company has caused this SAR Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has hereunto set his or her hand, all as of the day and year first above written.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Anders Gustafsson
Name:		Anders Gustafsson
Title:		Chief Executive Officer

Exhibit 10.2

R ESTRICTED S TOCK A GREEMENT

This RESTRICTED STOCK AGREEMENT (this “Stock Agreement”), dated as of %%OPTION_DATE,’MM/DD/YYYY’%-% (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and %%FIRST_NAME%-% %%LAST_NAME%-% (the “Participant”), relating to restricted stock granted under the Zebra Technologies Corporation 2011 Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this Stock Agreement without definition shall have the meanings ascribed to such terms in the Plan.

1. Grant of Restricted Stock .

(a) Grant . Subject to the provisions of this Stock Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date %%TOTAL_SHARES_GRANTED,’999,999,999’%-% shares of the Company’s Class A Common Stock, $.01 par value per share (the “Restricted Stock”). This Stock Agreement shall be null and void unless the Participant accepts this Stock Agreement by either (i) electronically accepting this Stock Agreement through the Company’s electronic delivery and acceptance process operated by E*TRADE or (ii) executing this Stock Agreement in the space provided below and returning it to the Company not later than 30-days following the Grant Date.

(b) Nontransferability . Except as otherwise permitted under the Plan or this Stock Agreement, the Restricted Stock granted hereunder shall be non-transferable by the Participant during the Period of Restriction set forth under Section 2 of this Stock Agreement.

2. Vesting of Restricted Stock .

(a) Period of Restriction . The Restricted Stock shall be forfeitable and non-transferable during the Period of Restriction. The “Period of Restriction” with respect to the Restricted Stock shall begin on the Grant Date and end at the close of business on the three year anniversary of %%VEST_BASE_DATE,’MM/DD/YYYY’%-%; provided, however, except as otherwise provided for under this Stock Agreement, that the Participant must remain employed by the Company or any Subsidiary continuously through the Period of Restriction.

(b) Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the Restricted Stock shall be subject to the following additional vesting rules in the following circumstances:

(i) Death,

Disability, Good Reason or Termination by the Company or any Subsidiary other than for Cause . In the event the Participant’s employment with the Company and its Subsidiaries is terminated due to death or Disability, or by reason of the Participant’s resignation for Good Reason, or by the Company and/or any Subsidiary other than for Cause, any unvested Restricted Stock as of the effective date of the Participant’s termination of employment shall immediately become fully vested and the remainder of the Period of Restriction relating to such Restricted Stock shall immediately lapse. For purposes of this Stock Agreement, “Good Reason” and “Cause” have the meanings set forth in the employment agreement, if any, between the Company and/or any Subsidiary and the Participant or, if the Participant is not a party to such an agreement, “Good Reason” has the meaning set forth in the Plan and “Cause” has the meaning, as determined by the Company in its sole discretion, set forth in the Plan.

(ii)

(iii) Other Termination of Employment . In the event the Participant’s employment with the Company and its Subsidiaries is terminated for any reason other than as provided in Section 2(b)(i), any unvested Restricted Stock as of the effective date of the Participant’s termination of employment shall immediately be forfeited to the Company.

3. Rights While Holding Restricted Stock .

(a) Custody and Availability of Shares. The Company shall hold the shares of Restricted Stock subject to this Agreement in uncertificated, book-entry form registered in the Participant’s name until the Restricted Stock shall have vested, in whole or in part, pursuant to Section 2. Subject to Section 4, if and to the extent shares of Restricted Stock become vested, the Company shall remove or cause the removal of the restrictions on transfer of such shares arising from this Stock Agreement. Such unrestricted shares shall be made available to the Participant in uncertificated, book-entry form registered in the Participant’s name.

(b) Rights as a Stockholder. During the period that shares of Restricted Stock remain unvested, the Participant shall have all of the rights of a stockholder of the Company with respect to the Restricted Stock including, but not limited to, the right to receive dividends paid on the shares of Restricted Stock and the full right to vote such shares.

(c) Section 83(b) Election . The Participant is not permitted to make a Section 83(b) election with respect to the Restricted Stock.

(d) Compliance with Federal and State Law . The Company may postpone issuing and delivering any Restricted Stock for so long as the Company reasonably determines to be necessary to satisfy the following:

(i) its completing or amending any securities registration or qualification of the Restricted Stock or it or the Participant satisfying any exemption from registration under any federal or state law, rule, or regulation;

(ii) the Participant complying with any federal, state, or local tax withholding obligations; and

(iii) its deferring payment of any amount that it reasonably determines would not be deductible under Code Section 162(m) until the earlier of:

(A)

the earliest date on which the Company reasonably determines that the deductibility of the payment will not be limited; or

(B)

the year following the Participant’s termination of employment.

4. Payment of Taxes . If the Company is obligated to withhold an amount on account of any tax imposed as a result of the issuance or vesting of the Restricted Stock, the Participant shall be required to pay such amount to the Company, as provided in Section 9.10 of the Plan. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the grant of the Restricted Stock and its vesting.

5. Change in Control . Subject to Section 9.8 of the Plan:

(b) Notwithstanding any provision in this Agreement to the contrary, in the event of a Change in Control pursuant to Section 2.5(a) or (b) of the Plan, or in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan as to which Section 5(a) above does not apply, this grant shall be surrendered to the Company by the Participant, and this grant shall immediately be canceled by the Company, and the Participant shall receive, within 10 days following the effective date of the Change in Control, a cash payment from the Company in an amount equal to the number of Shares of unvested Restricted Stock as of the effective date of the Change in Control, multiplied by the greater of (i) the highest per Share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (ii) the Fair Market Value of a Share on the effective date of the Change in Control.

6. Confidentiality, Non-Solicitation and Non-Compete . The Participant agrees to, understands and acknowledges the following:

(a) Confidential Information . The Participant will be furnished, use or otherwise have access to certain Confidential Information of the Company and/or a Subsidiary. For purposes of this Stock Agreement, “Confidential Information” means any and all financial, technical, commercial or other information concerning the business and affairs of the Company and/or a Subsidiary that is confidential and proprietary to the Company and/or a Subsidiary, including without limitation,

(i) information relating to the Company’s or Subsidiary’s past and existing customers and vendors and development of prospective customers and vendors, including specific customer product requirements, pricing arrangements, payment terms, customer lists and other similar information;

(ii) inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

(iii) the Company’s or Subsidiary’s proprietary programs, processes or software, consisting of but, not limited to, computer programs in source or object code and all related documentation and training materials, including all upgrades, updates, improvements, derivatives and modifications thereof and including programs and documentation in incomplete stages of design or research and development;

(iv) the subject matter of the Company’s or Subsidiary’s patents, design patents, copyrights, trade secrets, trademarks, service marks, trade names, trade dress, manuals, operating instructions, training materials, and other industrial property, including such information in incomplete stages of design or research and development; and

(v) other confidential and proprietary information or documents relating to the Company’s or Subsidiary’s products, business and marketing plans and techniques, sales and distribution networks and any other information or documents which the Company reasonably regards as being confidential.

The Company and its Subsidiaries devotes significant financial, human and other resources to the development of its products, its customer base and the general goodwill associated with its business, and the Company and its Subsidiaries diligently maintains the secrecy and confidentiality of their Confidential Information. Each and every component of the Confidential Information is sufficiently secret to derive economic value from its not being generally known to other persons. While employed by the Company and/or Subsidiary and thereafter, the Participant will hold in the strictest confidence and not use in any manner which is detrimental to the Company or its Subsidiaries or disclose to any individual or entity any Confidential Information, except as may be required by the Company or its Subsidiaries in connection with the Participant’s employment.

All Company Materials are and will be the sole property of the Company and/or Subsidiary. The Participant agrees that during and after his or her employment by the Company and/or Subsidiary, the Participant will not remove any Company Materials from the business premises of the Company or a Subsidiary or deliver any Company Materials to any person or entity outside the Company or a Subsidiary, except as the Participant is required to do so in connection with performing the duties of his or her employment. The Participant further agrees that, immediately upon the termination of his or her employment for any reason, or during the Participant’s employment if so requested by the Company, the Participant will return all Company Materials and other physical property, and any reproduction thereof, excepting only the Participant’s copy of this Agreement. For purposes of this Stock Agreement, “Company Materials” means documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or future/strategic plans of the Company and/or any Subsidiary, whether such documents have been prepared by the Participant or by others.

(b) Non-Solicitation and Non-Compete . Notwithstanding any provision of this Stock Agreement, if at any time prior to the date that is one year after the date of vesting of all or any portion of the Restricted Stock, the Participant, directly or indirectly:

(i) breaches or violates Section 6(a) of this Stock Agreement; or

(ii) employs, recruits or solicits for employment any person who is (or was within six (6) months prior to the Participant’s employment termination date) an employee of the Company and/or any Subsidiary; or

(iii) accepts employment or engages in a competing business which may require contact, solicitation, interference or diverting of any of the Company’s or any Subsidiary’s customers, or that may result in the disclosure, divulging, or other use, of Confidential Information or Company Materials acquired during the Participant’s employment with the Company or any Subsidiary; or

(iv) solicits or encourages any customer, vendor or potential customer or vendor of the Company or any Subsidiary with whom the Participant had contact while employed by the Company or any Subsidiary to terminate or otherwise alter his, her or its relationship with the Company or any Subsidiary. The Participant understands that any person or entity that the Participant contacted during the twelve (12) months prior to the date of the Participant’s termination of employment for the purpose of soliciting sales from such person or entity shall be regarded as a “potential customer” of the Company to whom the Company or a Subsidiary has a protectable proprietary interest;

the unvested Restricted Stock shall be forfeited automatically on the date the Participant engages in such activity and then the Participant shall pay the Company, within five business days of receipt by the Participant of a written demand therefore, an amount in cash determined by multiplying the number of Shares of Restricted Stock subject to this Stock Agreement which vested within the one-year period described above by the Fair Market Value of a Share, determined as of the date of vesting.

(i) Injunctive Action . Participant acknowledges that if he or she violates the terms of this Section 6 the injury that would be suffered by the Company and/or a Subsidiary as a result of a breach of the provisions of this Stock Agreement (including any provision of Section 6(a) or (b) hereof) would be irreparable and that an award of monetary damages to the Company and/or a Subsidiary for such a breach would be an inadequate remedy. Consequently, the Company and/or a Subsidiary will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Stock Agreement, and the Company and/or a Subsidiary will not be obligated to post bond or other security in seeking such relief. Without limiting the Company’s or Subsidiary’s rights under this Section 6 or any other remedies of the Company or a Subsidiary, if the Participant breaches any of the provisions of Section 6(a) or (b) hereof, the Company will have the right to cancel this Stock Agreement.

(ii) Forfeiture of Restricted Stock. In addition to the rights available to the Company and its Subsidiaries under Section 6(c)(i) hereof, if the Participant violates the terms of this Section 6 at any time, the Participant, without any further action by the Company or the Participant, shall forfeit, as of the first day of any such violation, all right, title and interest to unvested Restricted Stock and the Company further shall be entitled to reimbursement from the Participant of any fees and expenses (including attorneys’ fees) incurred by or on behalf of the Company or any Subsidiary in enforcing the Company’s or a Subsidiary’s rights under this Section 6. By accepting this Restricted Stock grant, the Participant hereby consents to a

deduction from any amounts the Company or any Subsidiary owes to the Participant from time to time (including amounts owed to the Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Participant by the Company or any Subsidiary), unless such amount is subject to Section 409A of the Code, to the extent of any amounts that the Participant owes to the Company under this Section 6. In addition to any injunctive relief sought under Section 6(c)(i) hereof and whether or not the Company or any Subsidiary elects to make any set-off in whole or in part, if the Company or any Subsidiary does not recover by means of set-off the full amount the Participant owes to the Company or any Subsidiary, calculated as set forth in this Section 6(c)(ii), the Participant agrees to immediately pay the unpaid balance to the Company or any Subsidiary.

(d) Enforceability of Restrictive Covenants . The scope and duration of the restrictive covenants contained in this Stock Agreement are reasonable and necessary to protect a legitimate, protectable interest of the Company and its Subsidiaries.

(e) Written Acknowledgement by Participant . The Committee, in its sole discretion, may require the Participant, as a condition to lapsing any restriction on the Restricted Stock, to acknowledge in writing that the Participant has not engaged, and is not in the process of engaging, in any of the activities described in this Section 6.

7. Miscellaneous Provisions .

(a) No Service or Employment Rights . No provision of this Stock Agreement or of the Restricted Stock granted hereunder shall give the Participant any right to continue in the service or employ of the Company or any Subsidiary, create any inference as to the length of employment or service of the Participant, affect the right of the Company or any Subsidiary to terminate the employment or service of the Participant, with or without Cause, or give the Participant any right to participate in any employee welfare or benefit plan or other program (other than the Plan) of the Company or any Subsidiary.

(b) Plan Document Governs . The Restricted Stock is granted pursuant to the Plan, and the Restricted Stock and this Stock Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Stock Agreement by reference or are expressly cited. Any inconsistency between the Stock Agreement and the Plan shall be resolved in favor of the Plan. Participant hereby acknowledges receipt of a copy of the Plan.

(c) Beneficiary Designation . The Participant may, from time to time, in accordance with procedures set forth by the Committee, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Stock Agreement is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Committee during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate or exercised by the Participant’s estate.

(d) Administration . This Stock Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Stock Agreement, all of which shall be binding upon the Participant.

(e) No Vested Right In Future Awards . Participant acknowledges and agrees (by executing this Stock Agreement) that the granting of Restricted Stock under this Stock Agreement is made on a fully discretionary basis by the Company and that this Stock Agreement does not lead to a vested right to further restricted stock or other awards in the future.

(f) Use Of Personal Data . By executing this Stock Agreement, Participant acknowledges and agrees to the collection, use, processing and transfer of certain personal data, including his or her name, salary, nationality, job title, position and details of all past Awards and current Awards outstanding under the Plan (“Data”), for the purpose of managing and administering the Plan. The Participant is not obliged to consent to such collection, use, processing and transfer of personal data, but a refusal to provide such consent may affect his or her ability to participate in the Plan. The Company, or its Subsidiaries, may transfer Data among themselves or to third parties as necessary for the purpose of implementation, administration and management of the Plan. These various recipients of Data may be located elsewhere throughout the world. The Participant authorizes these various recipients of Data to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan. The Participant may, at any time, review Data with respect to the Participant and require any necessary amendments to such Data. The Participant may withdraw his or her consent to use Data herein by notifying the Company in writing; however, the Participant understands that by withdrawing his or her consent to use Data, the Participant may affect his or her ability to participate in the Plan.

(g) Severability . In the event that any provision of this Stock Agreement (including, without limitations, the provisions of Section 6 hereof) are held to be unenforceable under applicable law to any extent, such provision(s) shall, to that extent, be excluded from this Stock Agreement and the balance of the Stock Agreement shall be interpreted as if such provision(s) were so excluded to that extent and shall be enforceable in accordance with its terms.

(h) Waiver; Cumulative Rights . The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

(i) Notices . Any notice which either party hereto may be required or permitted to give the other shall be in writing and may be delivered personally or by mail, postage prepaid, addressed to the Secretary of the Company, at its then corporate headquarters, and the Participant at the Participant’s address (including any electronic mail address) as shown on the Company’s records, or to such other address as the Participant, by notice to the Company, may designate in writing from time to time. The Participant hereby consents to electronic delivery of any notices that may be made hereunder.

(j) Counterparts . This Stock Agreement may be signed in counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

(k) Successors and Assigns . This Stock Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon the Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.

(l) Governing Law . This Stock Agreement and the Restricted Stock granted hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to provisions thereof regarding conflict of laws.

(m) Entire Agreement . This Stock Agreement, together with the Plan, constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.

(n) Amendment . Any amendment to this Stock Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.

(o) Headings . The headings contained in this Stock Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Stock Agreement.

IN WITNESS WHEREOF , the Company has caused this Stock Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has hereunto set his or her hand, all as of the day and year first above written.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Anders Gustafsson
Name:		Anders Gustafsson
Title:		Chief Executive Officer

Exhibit 10.3

R ESTRICTED S TOCK A GREEMENT

This RESTRICTED STOCK AGREEMENT (this “Stock Agreement”), dated as of April 30, 2012 (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and %%FIRST_NAME%-% %%LAST_NAME%-% (the “Participant”), relating to restricted stock granted under the Zebra Technologies Corporation 2011 Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this Stock Agreement without definition shall have the meanings ascribed to such terms in the Plan.

1. Grant of Restricted Stock .

a .

Grant. Subject to the provisions of this Stock Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date %%TOTAL_SHARES_GRANTED,’999,999,999’%-% shares (the “Target Shares”) of the Company’s Class A Common Stock, $.01 par value per share (the “Restricted Stock”). This Stock Agreement shall be null and void unless the Participant accepts this Stock Agreement by either (i) electronically accepting this Stock Agreement through the Company’s electronic delivery and acceptance process operated by E*TRADE or (ii) executing this Stock Agreement in the space provided below and returning it to the Company not later than May 30, 2012.

b .

Nontransferability . Except as otherwise permitted under the Plan or this Stock Agreement, the Restricted Stock granted hereunder shall be non-transferable by the Participant during the Period of Restriction set forth under Section 2 of this Stock Agreement.

2. Vesting of Restricted Stock .

Period of Restriction and Performance Goal .

(i)

The Restricted Stock shall be forfeitable and non-transferable during the Period of Restriction. The “Period of Restriction” with respect to the Restricted Stock shall begin on the Grant Date and shall end at the close of business on April 30, 2015 provided, however, that the Period of Restriction shall lapse on April 30, 2015 in accordance with Exhibit A .

(ii)

Except as otherwise provided for under this Stock Agreement, the Participant must remain employed continuously through April 30, 2015.

Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the Restricted Stock shall be subject to the following additional vesting rules in the following circumstances:

(i)

Death or Disability . In the event the Participant’s employment with the Company and its Subsidiaries is terminated prior to December 31, 2014 due to death or Disability, a number of Shares equal to the Target Shares shall immediately become fully vested as of the effective date of the Participant’s

termination of employment and the remainder of the Period of Restriction relating to such Restricted Stock shall immediately lapse. In the event the Participant’s employment with the Company and its Subsidiaries is terminated on or after December 31, 2014 and on or prior to April 30, 2015 due to death or Disability, the Period of Restriction shall lapse as of the effective date of the Participant’s termination of employment in accordance with Exhibit A .

(ii)

Termination for Good Reason or by the Company or any Subsidiary other than for Cause . In the event the Participant’s employment with the Company and its Subsidiaries is terminated by reason of the Participant’s resignation for Good Reason or by the Company and/or any Subsidiary other than for Cause, the Period of Restriction shall lapse on April 30, 2015 in accordance with Exhibit A . For purposes of this Stock Agreement, “Good Reason” and “Cause” have the meanings set forth in the employment agreement, if any, between the Company and/or any Subsidiary and the Participant or, if the Participant is not a party to such an agreement, “Good Reason” has the meaning set forth in the Plan and “Cause” has the meaning, as determined by the Company in its sole discretion, set forth in the Plan.

(iii)

Other Termination of Employment . In the event the Participant’s employment with the Company and its Subsidiaries is terminated on or prior to April 30, 2015 for any reason other than as provided in Section 2(b)(i) or (ii) hereof, all Shares of Restricted Stock shall immediately be forfeited to the Company.

3. Rights While Holding Restricted Stock .

a. Custody and Availability of Shares. The Company shall hold the shares of Restricted Stock subject to this Agreement in uncertificated, book-entry form registered in the Participant’s name until the Restricted Stock shall have vested, in whole or in part, pursuant to Section 2. Subject to Section 4, if and to the extent shares of Restricted Stock become vested, the Company shall remove or cause the removal of the restrictions on transfer of such shares arising from this Stock Agreement. Such unrestricted shares shall be made available to the Participant in uncertificated, book-entry form registered in the Participant’s name.

b. Rights as a Stockholder . During the period that shares of Restricted Stock remain unvested, the Participant shall have all of the rights of a stockholder of the Company with respect to the Restricted Stock including, but not limited to, the right to receive dividends paid on the shares of Restricted Stock and the full right to vote such shares.

c. Section 83(b) Election . The Participant is not permitted to make a Section 83(b) election with respect to the Restricted Stock.

d. Compliance with Federal and State Law . The Company may postpone issuing and delivering any Restricted Stock for so long as the Company reasonably determines to be necessary to satisfy the following:

(ii) the Participant complying with any federal, state or local tax withholding obligations.

4. Payment of Taxes . If the Company is obligated to withhold an amount on account of any tax imposed as a result of the issuance of the Restricted Stock, the Participant shall be required to pay such amount to the Company, as provided under Section 9.10 of the Plan. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the grant of the Restricted Stock and its vesting.

5. Change in Control . Subject to Section 9.8 of the Plan:

(b) Notwithstanding any provision in this Agreement to the contrary, in the event of a Change in Control pursuant to Section 2.5(a) or (b) of the Plan, or in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan as to which Section 5(a) above does not apply, this grant shall be surrendered to the Company by the Participant, and this grant shall immediately be canceled by the Company, and the Participant shall receive, within 10 days following the effective date of the Change in Control, a cash payment from the Company in an amount equal to the number of Target Shares, multiplied by the greater of (i) the highest per Share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (ii) the Fair Market Value of a Share on the effective date of the Change in Control.

6. Confidentiality, Non-Solicitation and Non-Compete . Participant agrees to, understands and acknowledges the following:

a. Confidential Information . The Participant will be furnished, use or otherwise have access to certain Confidential Information of the Company and/or a Subsidiary. For purposes of this Stock Agreement, “Confidential Information” means any and all financial, technical, commercial or other information concerning the business and affairs of the Company and/or a Subsidiary that is confidential and proprietary to the Company and/or a Subsidiary, including without limitation,

(ii) inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

(iii) the Company’s or Subsidiary’s proprietary programs, processes or software, consisting of, but not limited to, computer programs in source or object code and all related documentation and training materials, including all upgrades, updates, improvements, derivatives and modifications thereof and including programs and documentation in incomplete stages of design or research and development;

Materials” means documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or future/strategic plans of the Company and/or any Subsidiary, whether such documents have been prepared by the Participant or by others.

b. Non-Solicitation and Non-Compete . Notwithstanding any provision of this Stock Agreement, if at any time prior to the date that is one year after the date of vesting of all or any portion of the Restricted Stock, the Participant directly or indirectly:

(i) breaches or violates Section 6(a) of this Stock Agreement; or

(iv) solicits or encourages any customer, vendor or potential customer or vendor of the Company with whom the Participant had contact while employed by the Company to terminate or otherwise alter his, her or its relationship with the Company or any Subsidiary. The Participant understands that any person or entity that Participant contacted during the twelve (12) months prior to the date of the Participant’s termination of employment for the purpose of soliciting sales from such person or entity shall be regarded as a “potential customer” of the Company to whom the Company or a Subsidiary has a protectable proprietary interest;

the unvested Restricted Stock shall be forfeited automatically on the date the Participant engages in such activity and the Participant shall pay the Company, within five business days of receipt by the Participant of a written demand therefor, an amount in cash determined by multiplying the number of Shares of Restricted Stock subject to this Stock Agreement which vested within the one-year period described above by the Fair Market Value of a Share, determined as of the date of vesting

c. Remedies for Violation .

post bond or other security in seeking such relief. Without limiting the Company’s or a Subsidiary’s rights under this Section 6 or any other remedies of the Company or Subsidiary, if the Participant breaches any of the provisions of Section 6(a) or (b) hereof, the Company will have the right to cancel this Stock Agreement.

(ii) Attorneys’ Fees; Set-off Right . In addition to the rights available to the Company and its Subsidiaries under Section 6(c)(i) hereof, if the Participant violates the terms of this Section 6 at any time, the Company shall be entitled to reimbursement from the Participant of any fees and expenses (including attorneys’ fees) incurred by or on behalf of the Company or any Subsidiary in enforcing the Company’s or a Subsidiary’s rights under this Section 6. By accepting this Restricted Stock grant, the Participant hereby consents to a deduction from any amounts the Company or any Subsidiary owes to the Participant from time to time (including amounts owed to the Participant as wages or other compensation, fringe benefits or vacation pay, as well as any other amounts owed to the Participant by the Company or any Subsidiary), unless such amount is subject to Section 409A of the Code, to the extent of any amounts that the Participant owes to the Company under this Section 6. In addition to any injunctive relief sought under Section 6(c)(i) hereof and whether or not the Company or any Subsidiary elects to make any set-off in whole or in part, if the Company or any Subsidiary does not recover by means of set-off the full amount the Participant owes to the Company or any Subsidiary, calculated as set forth in this Section 6(c)(ii), the Participant agrees to immediately pay the unpaid balance to the Company or any Subsidiary.

d. Enforceability of Restrictive Covenants . The scope and duration of the restrictive covenants contained in this Stock Agreement are reasonable and necessary to protect a legitimate, protectable interest of the Company and its Subsidiaries.

e. Written Acknowledgement by Participant . The Committee, in its sole discretion, may require the Participant, as a condition to lapsing any restriction on the Restricted Stock, to acknowledge in writing that the Participant has not engaged, and is not in the process of engaging, in any of the activities described in this Section 6.

7. Miscellaneous Provisions .

a. No Service or Employment Rights . No provision of this Stock Agreement or of the Restricted Stock granted hereunder shall give the Participant any right to continue in the service or employ of the Company or any Subsidiary, create any inference as to the length of employment or service of the Participant, affect the right of the Company or any Subsidiary to terminate the employment or service of the Participant, with or without Cause, or give the Participant any right to participate in any employee welfare or benefit plan or other program (other than the Plan) of the Company or any Subsidiary.

b. Plan Document Governs . The Restricted Stock is granted pursuant to the Plan, and the Restricted Stock and this Stock Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Stock Agreement by reference or are expressly cited. Any inconsistency between the Stock Agreement and the Plan shall be resolved in favor of the Plan. Participant hereby acknowledges receipt of a copy of the Plan.

c. Beneficiary Designation . The Participant may, from time to time, in accordance with procedures set forth by the Committee, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Stock Agreement is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Committee during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate or exercised by the Participant’s estate.

d. Administration . This Stock Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Stock Agreement, all of which shall be binding upon the Participant.

e. No Vested Right In Future Awards . Participant acknowledges and agrees (by executing this Stock Agreement) that the granting of Restricted Stock under this Stock Agreement is made on a fully discretionary basis by the Company and that this Stock Agreement does not lead to a vested right to further restricted stock or other awards in the future.

f. Use Of Personal Data . By executing this Stock Agreement, Participant acknowledges and agrees to the collection, use, processing and transfer of certain personal data, including his or her name, salary, nationality, job title, position and details of all past Awards and current Awards outstanding under the Plan (“Data”), for the purpose of managing and administering the Plan. The Participant is not obliged to consent to such collection, use, processing and transfer of personal data, but a refusal to provide such consent may affect his or her ability to participate in the Plan. The Company, or its Subsidiaries, may transfer Data among themselves or to third parties as necessary for the purpose of implementation, administration and management of the Plan. These various recipients of Data may be located elsewhere throughout the world. The Participant authorizes these various recipients of Data to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan. The Participant may, at any time, review Data with respect to the Participant and require any necessary amendments to such Data. The Participant may withdraw his or her consent to use Data herein by notifying the Company in writing; however, the Participant understands that by withdrawing his or her consent to use Data, the Participant may affect his or her ability to participate in the Plan.

g. Severability . If one or more provisions of this Stock Agreement (including, without limitations, the provisions of Section 6 hereof) are held to be unenforceable under applicable law to any extent, such provision(s) shall, to that extent, be excluded from this Stock Agreement and the balance of the Stock Agreement shall be interpreted as if such provision(s) were so excluded to that extent and shall be enforceable in accordance with its terms.

h. Waiver; Cumulative Rights . The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

i. Notices . Any notice which either party hereto may be required or permitted to give the other shall be in writing and may be delivered personally or by mail, postage prepaid, addressed to the Secretary of the Company, at its then corporate headquarters, and the Participant at the Participant’s address (including any electronic mail address) as shown on the Company’s records, or to such other address as the Participant, by notice to the Company, may designate in writing from time to time. The Participant hereby consents to electronic delivery of any notices that may be made hereunder.

j. Counterparts . This Stock Agreement may be signed in two counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

k. Successors and Assigns . This Stock Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon the Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.

l. Governing Law . This Stock Agreement and the Restricted Stock granted hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to provisions thereof regarding conflict of laws.

m. Entire Agreement . This Stock Agreement, together with the Plan, constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.

n. Amendment . Any amendment to this Stock Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.

o. Headings and Construction . The headings contained in this Stock Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Stock Agreement. This Stock Agreement is intended to be a stock right excluded from the requirements of Code Section 409A. The terms of this Stock Agreement shall be administered and construed in a manner consistent with the intent that it be a stock right excluded from the requirements of Code Section 409A.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Anders Gustafsson
Name:		Anders Gustafsson
Title:		Chief Executive Officer

Exhibit A

1.	Total Net Sales Performance Goal (Step 1) .


	Below Threshold			Threshold			Target			Maximum
Compounded Annual Growth Rate of Total Net Sales		< 5.00	%		5.00	%		7.50	%		10.00	%
Vested Percentage of Restricted Stock		0	%		50.00	%		100.00	%		150.00	%

Compounded Annual Growth Rate of Total Net Sales (“CAGR”) equals (A) the quotient obtained by dividing 2014 total net sales of the Company by 2011 total net sales of the Company, (B) raised to the one-third power, minus (C) one. CAGR shall be rounded to the nearest one-hundredth of one percent. For a CAGR between 5.00% and 10.00%, the Vested Percentage of Restricted Stock shall be interpolated on a straight line basis and rounded to the nearest one-hundredth of one percent.

Annual Net Sales Performance Goal: The Participant is eligible for banking of a specified number of shares on an annual basis based upon an implied annual growth rate. Unless the Committee or the Board otherwise determines in its sole discretion, the implied annual growth target will be the same as the three-year CAGR target of 7.5%. If, as of December 31 of each calendar year commencing December 31, 2012, the implied annual target is achieved, 1/3 of the number of Target Shares (rounded to the nearest whole Share) shall be banked for further calculations in steps 1 and 2. If the implied annual target for such year is not achieved, then no Shares shall be banked for such year. No interpolation or pro-ration is applied to the number of Shares if the implied annual target is not achieved and, if the implied annual target is exceeded, no additional Target Shares in respect of such year shall be banked. The sum of the banked shares in respect of each calendar year, if any, shall be the “Minimum Initial Vested Shares”.

As of December 31, 2014, the greater of either (1) the Minimum Initial Vested Shares or (2) the number of Shares determined under this step 1 pursuant to the first paragraph in this Exhibit A shall be the initial number of Shares of Restricted Stock, if any, that vest and shall be rounded to the nearest whole Share (the “Initial Vested Shares”). The Vested Percentage of Restricted Stock, as so determined, shall be multiplied by the number of Target Shares to determine the number of Shares under this step 1.

Unless the Committee or the Board otherwise determines in its sole discretion, for purposes of calculating the CAGR and ROIC (as defined below and including the determination of Annual Fiscal ROIC and NOPAT), (A) net sales and ROIC of the Company derived from acquisitions shall be included and (B) divestitures of subsidiaries or businesses of the Company shall not affect the determination of total net sales or ROIC of the Company.

2.	Return on Invested Capital Modifier (Step 2) . If the number of Initial Vested Shares exceeds zero, then the number of “Vested Shares” shall equal the product of the Initial Vested Shares multiplied by the Modifier set forth in the following table (rounded to the nearest whole share):


ROIC	< 13.00%		13.00% to < 18.00%		18.00% to < 22.00		Equal to or greater than 22.00%
Modifier		0.6		0.8		1.0		1.2

ROIC equals the average of the Annual Fiscal ROIC for 2012, 2013, and 2014. Annual Fiscal ROIC is defined as net operating profit after tax (“NOPAT”) for the fiscal period divided by Invested Capital where (1) NOPAT equals Operating Income of the Company for the fiscal period multiplied by (1-budgeted tax rate for the fiscal period ) and (2) Invested Capital equals total assets, less cash and cash equivalents, current and long-term investments and marketable securities, and non-interest-bearing current liabilities, and which is calculated as the average Invested Capital reflected on five balance sheet dates (the ending balance for the prior fiscal year and the ending balance for all four fiscal quarters). “Operating Income” means the consolidated operating income of the Company for the fiscal year, adjusted to remove non-recurring charges and for acquisitions as described in this subsection.

Unless the Committee or the Board otherwise determines in its sole discretion, non-recurring charges specifically include such expense items as (i) one-time charges, non-operating charges or expenses incurred that are not under the control of operations management, as ratified by the Committee or the Board; (ii) restructuring expenses; (iii) exit expenses; (iv) integration expenses; (v) Board of Directors project activities (e.g.: director searches); or (vi) gains or losses on the sale of assets; (vii) acquired in-process technology or (viii) impairment charges. This list is not exhaustive and is meant to represent examples of the kind of expenses typically excluded from the calculations of income from operations. Unless the Committee or the Board otherwise determines in its sole discretion, an acquisition shall be included beginning with the first quarter beginning at least six months after the acquisition closes.

Changes in accounting principles shall be consistently applied.

Exhibit 10.4

S TOCK A PPRECIATION R IGHTS A GREEMENT

This STOCK APPRECIATION RIGHTS AGREEMENT (this “SAR Agreement”), dated as of April 30, 2012 (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and Anders Gustafsson (the “Participant”), relating to a stock appreciation right granted under the Zebra Technologies Corporation 2011 Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this SAR Agreement without definitions shall have the meanings ascribed to such terms in the Plan.

1.	Grant of Stock Appreciation Right .

(a)

Grant . Subject to the provisions of this SAR Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date a stock appreciation right (the “SAR”) covering %%TOTAL_SHARES_GRANTED,’999,999,999’%-% shares (the “SAR Shares”) of the Company’s Class A Common Stock, $0.01 par value per share (the “Stock”), at a price of %%OPTION_PRICE,’$999,999,999.99’%- per share (the “SAR Price”). The SAR is not issued in tandem with an Option. This SAR Agreement shall be null and void unless the Participant accepts this SAR Agreement by either (i) electronically accepting this SAR Agreement through the Company’s electronic delivery and acceptance process operated by e*Trade or (ii) executing this SAR Agreement in the space provided below and returning it to the Company not later than May 30, 2012.

(b)

(c)

Nontransferability . The SAR shall be nontransferable, except by will or the laws of descent and distribution, or as otherwise permitted under the Plan.

2.	Vesting of the SAR .

(a)

General Vesting Rule . Prior to the Expiration Date, the SAR shall become and be exercisable as follows:


Vesting Date Anniversary	Percentage of SAR Exercisable
Prior to the first anniversary of the Grant Date		0	%
On or after the first anniversary of the Grant Date		25	%
On or after the second anniversary of the Grant Date, an additional		25	%
On or after the third anniversary of the Grant Date, an additional		25	%
On or after the fourth anniversary of the Grant Date, an additional		25	%

provided, however, except as otherwise provided for under this SAR Agreement, the Participant must remain employed by the Company or any Subsidiary continuously through the applicable vesting dates.

(b)

Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the SAR shall be subject to the following additional vesting rules in the following circumstances:

(i)

Death, Disability, Good Reason or Termination by the Company or any Subsidiary other than for Cause . Notwithstanding the Employment Agreement between the Company and the Participant effective as of September 4, 2007, as amended (the “Employment Agreement”), and unless otherwise determined by the Board of Directors of the Company or the Compensation Committee of the Board of Directors, in the event the Participant’s employment with the Company is terminated due to the Participant’s death or Disability, or by reason of the Participant’s resignation for Good Reason, or by the Company other than for Cause, the number of SAR Shares that shall be vested as of the date of the Participant’s termination of employment shall equal the number obtained by (A) multiplying [insert total number of SARs] by a fraction, the numerator of which is the number of days from but excluding the Grant Date and to and including the date of the Participant’s termination of employment, and the denominator of which is 1461 and (B) subtracting from such product the number, if any, of SAR Shares that vested prior to the date of the Participant’s termination of employment in accordance with Section 2(a). Any unexercised vested portion of the SAR shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

one (1) year after the date of the Participant’s termination of employment due to the Participant’s death or Disability; or

(C)

ninety (90) days after the date of the Participant’s termination of employment by reason of the Participant’s resignation for Good Reason, or by the Company other than for Cause.

For purposes of this SAR Agreement, “Good Reason” and “Cause” have the meanings assigned to them in the Participant’s Employment Agreement. In the event of the Participant’s death, the Participant’s beneficiary or estate may exercise the vested SAR.

(ii)

Retirement . In the event the Participant’s employment with the Company is terminated due to Retirement, any unexercised vested portion of the SAR as of the date of the Participant’s termination of employment shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

one (1) year after the date of the Participant’s termination of employment due to Retirement.

For purposes of this SAR Agreement, “Retirement” means the Participant’s voluntary termination of employment with the Company after attaining either:

•

age fifty-five (55) with ten (10) or more complete years of service with the Company and/or any Subsidiary; or

•

age sixty-five (65).

(iii)

Termination for Cause . In the event the Participant’s employment with the Company is terminated for Cause, any unexercised SAR, whether vested or not, shall expire immediately, be forfeited, and be considered null and void.

(iv)

Other Termination of Employment . In the event the Participant’s employment with the Company is terminated for any reason other than as provided in Section 2(b)(i), (ii) or (iii) hereof, the unexercised vested portion of the SAR as of the date of the Participant’s termination of employment shall remain exercisable until the earliest of:

(A)

the Expiration Date; or

(B)

thirty (30) days after the date of the Participant’s termination of employment.

3.	Exercise of SAR .

(c) Payment of Taxes . If the Company is obligated to withhold an amount on account of any tax imposed as a result of the exercise of the SAR, the Participant shall be required to pay such amount to the Company, as provided in Section 9.10 of the Plan. Alternatively, subject to Company approval, the Participant may elect to withhold a portion of the SAR exercise payment equal to the minimum statutory tax that would be imposed on the exercise, as provided under Section 9.10 of the Plan. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the grant of the SAR and its exercise.

(i)

(ii)

its receiving proof it considers satisfactory that a person seeking to exercise the SAR after the Participant’s death is entitled to do so; and

(iii)

the Participant complying with any federal, state, or local tax withholding obligations.

5.	Change in Control . Subject to Section 9.8 of the Plan:

6.	Confidentiality, Non-Solicitation and Non-Compete . The Participant agrees to, understands, and acknowledges the following:

(a)

(i)

(ii)

inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

(iii)

(iv)

(v)

All Company Materials are and will be the sole property of the Company and/or Subsidiary. The Participant agrees that during and after his or her employment by the Company and/or Subsidiary, the Participant will not remove any Company Materials from the business premises of the Company or a Subsidiary or deliver any Company Materials to any person or entity outside the Company or a Subsidiary, except as the Participant is required to do so in connection with performing the duties of his or her employment. The Participant further agrees that, immediately upon the termination of his or her employment for any reason, or during the Participant’s employment if so requested by the Company, the Participant will return all Company Materials and other physical property, and any reproduction thereof, excepting only the Participant’s copy of this Agreement. For purposes of this SAR Agreement, “Company Materials” means documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or future/strategic plans of the Company and/or any Subsidiary, whether such documents have been prepared by the Participant or by others.

(b)

(i)

breaches or violates Section 6(a) of this SAR Agreement; or

(ii)

(iii)

(iv)

(c)

Remedies for Violation.

(i)

(ii)

(d)

(e)

7.	Miscellaneous Provisions .

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

Waiver; Cumulative Rights . The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

(j)

(k)

Counterparts . This SAR Agreement may be signed in counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

(l)

(m)

(n)

(o)

Amendment . Any amendment to this SAR Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.

(p)

Headings . The headings contained in this SAR Agreement are for reference purposes only and shall not affect the meaning or interpretation of this SAR Agreement.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Joanne Townsend
Name:		Joanne Townsend
Title:		Vice President, Human Resources

Exhibit 10.5

R ESTRICTED S TOCK A GREEMENT

This RESTRICTED STOCK AGREEMENT (this “Stock Agreement”), dated as of April 30, 2012 (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and Anders Gustafsson (the “Participant”), relating to restricted stock granted under the Zebra Technologies Corporation 2011 Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this Stock Agreement without definition shall have the meanings ascribed to such terms in the Plan.

1. Grant of Restricted Stock .

(a) Grant . Subject to the provisions of this Stock Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date %%OPTION_DATE,’MM/DD/YYYY’%-% shares of the Company’s Class A Common Stock, $.01 par value per share (the “Restricted Stock”). This Stock Agreement shall be null and void unless the Participant accepts this Stock Agreement by either (i) electronically accepting this Stock Agreement through the Company’s electronic delivery and acceptance process operated by e*Trade or (ii) executing this Stock Agreement in the space provided below and returning it to the Company not later than May 30, 2012.

2. Vesting of Restricted Stock .

(a) Period of Restriction . The Restricted Stock shall be forfeitable and non-transferable during the Period of Restriction. The “Period of Restriction” with respect to the Restricted Stock shall begin on the Grant Date and end at the close of business on April 30, 2015 (the “Vesting Date”); provided, however, except as otherwise provided for under this Stock Agreement, that the Participant must remain employed by the Company or any Subsidiary continuously through the Period of Restriction.

(b) Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the Restricted Stock shall be subject to the following additional vesting rules in the following circumstances:

(i) Death, Disability, Good Reason or Termination by the Company other than for Cause . Notwithstanding the Employment Agreement between the Company and the Participant effective as of September 4, 2007, as amended (the “Employment Agreement”), and unless otherwise determined by the Board of Directors of the Company or the Compensation Committee of the Board of Directors, in the event the Participant’s employment with the Company is terminated due to death or Disability, or by reason of the Participant’s resignation for Good Reason, or by the Company other than for Cause, the number of shares of Restricted Stock that shall be vested as of the date of the Participant’s termination of employment shall equal the number obtained by multiplying %%TOTAL_SHARES_GRANTED,’999,999,999’%-% by a fraction, the numerator of which is the number of days from but excluding the Grant Date and to and including the date of the Participant’s termination of employment, and the denominator of which is 1095. For purposes of this Stock Agreement, “Good Reason” and “Cause” have the meanings assigned to them in the Participant’s Employment Agreement.

(ii) Other Termination of Employment . In the event the Participant’s employment with the Company is terminated for any reason other than as provided in Section 2(b)(i), any unvested Restricted Stock as of the effective date of the Participant’s termination of employment shall immediately be forfeited to the Company.

3. Rights While Holding Restricted Stock .

(c) Section 83(b) Election . The Participant is not permitted to make a Section 83(b) election with respect to the Restricted Stock.

(ii) the Participant complying with any federal, state, or local tax withholding obligations; and

(iii) its deferring payment of any amount that it reasonably determines would not be deductible under Code Section 162(m) until the earlier of:

(A)

the earliest date on which the Company reasonably determines that the deductibility of the payment will not be limited; or

(B)

the year following the Participant’s termination of employment.

5. Change in Control . Subject to Section 9.8 of the Plan:

(b) Notwithstanding any provision in this Agreement to the contrary, in the event of a Change in Control pursuant to Section 2.5(a) or (b) of the Plan, or in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan as to which Section 5(a) above does not apply, this grant shall be surrendered to the Company by the Participant, and this grant shall immediately be canceled by the Company, and the Participant shall receive, within 10 days following the effective date of the Change in Control, a cash payment from the Company in an amount equal to the number of Shares of unvested Restricted Stock as of the effective date of the Change in Control, multiplied by the greater of (i) the highest per Share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (ii) the Fair Market Value of a Share on the effective date of the Change in Control.

6. Confidentiality, Non-Solicitation and Non-Compete . The Participant agrees to, understands and acknowledges the following:

(ii) inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

Participant’s employment if so requested by the Company, the Participant will return all Company Materials and other physical property, and any reproduction thereof, excepting only the Participant’s copy of this Agreement. For purposes of this Stock Agreement, “Company Materials” means documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or future/strategic plans of the Company and/or any Subsidiary, whether such documents have been prepared by the Participant or by others.

(i) breaches or violates Section 6(a) of this Stock Agreement; or

the unvested Restricted Stock shall be forfeited automatically on the date the Participant engages in such activity and then the Participant shall pay the Company, within five business days of receipt by the Participant of a written demand therefor, an amount in cash determined by multiplying the number of Shares of Restricted Stock subject to this Stock Agreement which vested within the one-year period described above by the Fair Market Value of a Share, determined as of the date of vesting.

(i) Injunctive Action . Participant acknowledges that if he or she violates the terms of this Section 6 the injury that would be suffered by the Company and/or a Subsidiary as a result of a breach of the provisions of this Stock Agreement (including any provision of Section 6(a) or (b) hereof) would be irreparable and that an award of monetary damages to the Company and/or a Subsidiary for such a breach would be an inadequate remedy. Consequently, the Company and/or a Subsidiary will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Stock Agreement, and the Company and/or a Subsidiary will not be obligated to post bond or other security in seeking such relief. Without limiting the Company’s or a Subsidiary’s rights under this Section 6 or any other remedies of the Company or a Subsidiary, if the Participant breaches any of the provisions of Section 6(a) or (b) hereof, the Company will have the right to cancel this Stock Agreement.

further shall be entitled to reimbursement from the Participant of any fees and expenses (including attorneys’ fees) incurred by or on behalf of the Company or any Subsidiary in enforcing the Company’s or a Subsidiary’s rights under this Section 6. By accepting this Restricted Stock grant, the Participant hereby consents to a deduction from any amounts the Company or any Subsidiary owes to the Participant from time to time (including amounts owed to the Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Participant by the Company or any Subsidiary), unless such amount is subject to Section 409A of the Code, to the extent of any amounts that the Participant owes to the Company under this Section 6. In addition to any injunctive relief sought under Section 6(c)(i) hereof and whether or not the Company or any Subsidiary elects to make any set-off in whole or in part, if the Company or any Subsidiary does not recover by means of set-off the full amount the Participant owes to the Company or any Subsidiary, calculated as set forth in this Section 6(c)(ii), the Participant agrees to immediately pay the unpaid balance to the Company or any Subsidiary.

7. Miscellaneous Provisions .

(j) Counterparts . This Stock Agreement may be signed in counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

(n) Amendment . Any amendment to this Stock Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.

(o) Headings . The headings contained in this Stock Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Stock Agreement.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Joanne Townsend
Name:		Joanne Townsend
Title:		Vice President, Human Resources

Exhibit 10.6

R ESTRICTED S TOCK A GREEMENT

This RESTRICTED STOCK AGREEMENT (this “Stock Agreement”), dated as of April 30, 2012 (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and Anders Gustafsson (the “Participant”), relating to restricted stock granted under the Zebra Technologies Corporation 2011 Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this Stock Agreement without definition shall have the meanings ascribed to such terms in the Plan.

1. Grant of Restricted Stock .

Grant . Subject to the provisions of this Stock Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date %%OPTION_DATE,’MM/DD/YYYY’%-% shares (the “Target Shares”) of the Company’s Class A Common Stock, $.01 par value per share (the “Restricted Stock”). This Stock Agreement shall be null and void unless the Participant accepts this Stock Agreement by either (i) electronically accepting this Stock Agreement through the Company’s electronic delivery and acceptance process operated by e*Trade or (ii) executing this Stock Agreement in the space provided below and returning it to the Company not later than May 30, 2012.

2. Vesting of Restricted Stock .

Period of Restriction and Performance Goal .

(i)

The Restricted Stock shall be forfeitable and non-transferable during the Period of Restriction. The “Period of Restriction” with respect to the Restricted Stock shall begin on the Grant Date and shall end at the close of business on April 30, 2015; provided, however, that the Period of Restriction shall lapse on April 30, 2015 in accordance with Exhibit A .

(ii)

Except as otherwise provided for under this Stock Agreement, the Participant must remain employed by the Company or any Subsidiary continuously through the Period of Restriction.

Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the Restricted Stock shall be subject to the following additional vesting rules in the following circumstances:

(i)

Directors, in the event the Participant’s employment with the Company and its Subsidiaries is terminated due to death or Disability, or by reason of the Participant’s resignation for Good Reason, or by the Company other than for Cause, the number of shares of Restricted Stock that shall be vested as of the date of the Participant’s termination of employment shall equal the number obtained by multiplying %%TOTAL_SHARES_GRANTED,’999,999,999’%-% by a fraction, the numerator of which is the number of days from but excluding the Grant Date and to and including the date of the Participant’s termination of employment, and the denominator of which is 1095. For purposes of this Stock Agreement, “Good Reason” and “Cause” have the meanings assigned to them in the Participant’s Employment Agreement.

(ii)

Other Termination of Employment . In the event the Participant’s employment with the Company is terminated for any reason other than as provided in Section 2(b)(i), any unvested Restricted Stock as of the effective date of the Participant’s termination of employment shall immediately be forfeited to the Company.

3. Rights While Holding Restricted Stock .

c. Section 83(b) Election . The Participant is not permitted to make a Section 83(b) election with respect to the Restricted Stock.

(ii) the Participant complying with any federal, state or local tax withholding obligations.

5. Change in Control . Subject to Section 9.8 of the Plan:

(b) Notwithstanding any provision in this Agreement to the contrary, in the event of a Change in Control pursuant to Section 2.5(a) or (b) of the Plan, or in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan as to which Section 5(a) above does not apply, this grant shall be surrendered to the Company by the Participant, and this grant shall immediately be canceled by the Company, and the Participant shall receive, within 10 days following the effective date of the Change in Control, a cash payment from the Company in an amount equal to the number of Target Shares, multiplied by the greater of (i) the highest per Share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (ii) the Fair Market Value of a Share on the effective date of the Change in Control.

6. Confidentiality, Non-Solicitation and Non-Compete . Participant agrees to, understands and acknowledges the following:

(ii) inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

(i) breaches or violates Section 6(a) of this Stock Agreement; or

c. Remedies for Violation .

(i) Injunctive Action . Participant acknowledges that if he or she violates the terms of this Section 6 the injury that would be suffered by the Company and/or a Subsidiary as a result of a breach of the provisions of this Stock Agreement (including any provision of Section 6(a) or (b) hereof) would be irreparable and that an award of monetary damages to the Company and/or a Subsidiary for such a breach would be an inadequate remedy. Consequently, the Company and/or a Subsidiary will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Stock Agreement, and the Company and/or a Subsidiary will not be obligated to post bond or other security in seeking such relief. Without limiting the Company’s or a Subsidiary’s rights under this Section 6 or any other remedies of the Company or a Subsidiary, if the Participant breaches any of the provisions of Section 6(a) or (b) hereof, the Company will have the right to cancel this Stock Agreement.

7. Miscellaneous Provisions .

obliged to consent to such collection, use, processing and transfer of personal data, but a refusal to provide such consent may affect his or her ability to participate in the Plan. The Company, or its Subsidiaries, may transfer Data among themselves or to third parties as necessary for the purpose of implementation, administration and management of the Plan. These various recipients of Data may be located elsewhere throughout the world. The Participant authorizes these various recipients of Data to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan. The Participant may, at any time, review Data with respect to the Participant and require any necessary amendments to such Data. The Participant may withdraw his or her consent to use Data herein by notifying the Company in writing; however, the Participant understands that by withdrawing his or her consent to use Data, the Participant may affect his or her ability to participate in the Plan.

h. Waiver; Cumulative Rights . The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

i. Notices . Any notice which either party hereto may be required or permitted to give the other shall be in writing and may be delivered personally or by mail, postage prepaid, addressed to the Secretary of the Company, at its then corporate headquarters, and the Participant at the Participant’s address (including any electronic mail address) as shown on the Company’s records, or to such other address as the Participant, by notice to the Company, may designate in writing from time to time. The Participant hereby consents to electronic delivery of any notices that may be made hereunder.

j. Counterparts . This Stock Agreement may be signed in two counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

m. Entire Agreement . This Stock Agreement, together with the Plan, constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.

n. Amendment . Any amendment to this Stock Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Joanne Townsend
Name:		Joanne Townsend
Title:		Vice President, Human Resources

Exhibit A

1.	Total Net Sales Performance Goal (Step 1).


	Below Threshold			Threshold			Target			Maximum
Compounded Annual Growth Rate of Total Net Sales		< 5.00	%		5.00	%		7.50	%		10.00	%
Vested Percentage of Restricted Stock		0	%		50.00	%		100.00	%		150.00	%

Unless the Committee or the Board otherwise determines in its sole discretion, for purposes of calculating the CAGR (A) net sales of the Company derived from acquisitions shall be included and (B) divestitures of subsidiaries or businesses of the Company shall not affect the 2011 total net sales of the Company.

2.	Return on Invested Capital Modifier (Step 2) . If the number of Initial Vested Shares exceeds zero, then the number of “Vested Shares” shall equal the product of the Initial Vested Shares multiplied by the Modifier set forth in the following table (rounded to the nearest whole share):


ROIC	< 13.00%		13.00% to < 18.00%		18.00% to < 22.00		Equal to or greater than 22.00%
Modifier		0.6		0.8		1.0		1.2

ROIC equals the average of the Annual Fiscal ROIC for 2012, 2013, and 2014. Annual Fiscal ROIC is defined as net operating profit after tax (“NOPAT”) for the fiscal period divided by Invested Capital where (1) NOPAT equals Operating Income of the Company for the fiscal period multiplied by (1-budgeted tax rate for the fiscal period ) and (2) Invested Capital equals total assets, less cash and cash equivalents, current and long-term investments and marketable securities, and non-interest-bearing current liabilities, and which is calculated as the average Invested Capital reflected on five balance sheet dates (the ending balance for the prior fiscal year and the ending balance for all four fiscal quarters. “Operating Income” means the consolidated operating income of the Company for the fiscal year, adjusted to remove non-recurring charges and for acquisitions as described in this subsection.

Changes in accounting principles shall be consistently applied.

Exhibit 10.7

S TOCK A PPRECIATION R IGHTS A GREEMENT

This STOCK APPRECIATION RIGHTS AGREEMENT (this “SAR Agreement”), dated as of May 19, 2011 (the “Grant Date”), is between ZEBRA TECHNOLOGIES CORPORATION , a Delaware corporation (the “Company”), and (the “Participant”), relating to a stock appreciation right granted under the 2011 Zebra Technologies Corporation Long-Term Incentive Plan (the “Plan”). Capitalized terms used in this SAR Agreement without definition shall have the meanings ascribed to such terms in the Plan.

1. Grant of Stock Appreciation Rights .

(a)

Grant . Subject to the provisions of this SAR Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant as of the Grant Date a stock appreciation right (the “SAR”) covering shares (the “SAR Shares”) of the Company’s Class A Common Stock, $0.01 par value per share (the “Stock”), at a price of per share (the “SAR Price”). The SAR is not issued in tandem with an Option. This SAR Agreement shall be null and void unless the Participant accepts this SAR Agreement by either (i) electronically accepting this SAR Agreement through the Company’s electronic delivery and acceptance process operated by e*Trade or (ii) executing this SAR Agreement in the space provided below and returning it to the Company not later than 30-days following the Grant Date.

(b)

(c)

Nontransferability . The SAR shall be nontransferable, except by will or the laws of descent and distribution, or as otherwise permitted under the Plan.

2. Vesting of the SAR .

(a)

General Vesting Rule . Prior to the Expiration Date, 100% of the SAR shall become and be exercisable on the earlier of (i) the one-year anniversary of the Grant Date and (ii) immediately prior to the next annual meeting of stockholders at which directors are to be elected (the “Vesting Date”); provided, however, except as otherwise provided for under this SAR Agreement, the Participant must remain a member of the Board of Directors of the Company (the “Board”) continuously through the Vesting Date.

(b)

Additional Vesting Rules . Notwithstanding Section 2(a) hereof, the SAR shall be subject to the following additional vesting rules in the following circumstances:

(i)

Death or Disability . In the event the Participant’s service on the Board is terminated due to death or Disability, any unvested portion of the SAR as of the effective date of the Participant’s termination of service shall immediately become fully vested and exercisable and, along with any unexercised vested portion of the SAR, shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

one (1) year after the date of the Participant’s termination of service on the Board due to the Participant’s death or Disability.

In the event of the Participant’s death, the Participant’s beneficiary or estate may exercise the vested SAR.

(ii)

Retirement . In the event the Participant’s service on the Board is terminated due to Retirement, any unexercised vested portion of the SAR as of the effective date of the Participant’s termination of service on the Board shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

one (1) year after the date of the Participant’s termination of service on the Board due to Retirement.

For purposes of this SAR Agreement, “Retirement” means the Participant’s voluntary termination of service on the Board after attaining either:

•

age fifty-five (55) with ten (10) or more complete years of service on the Board; or

•

age sixty-five (65).

(iii)

Other Termination of Service on the Board . In the event the Participant’s service on the Board is terminated for any reason other than as provided in Section 2(b)(i) or (ii) hereof or Section 5 hereof, the unexercised vested portion of the SAR as of the effective date of the Participant’s termination of service shall remain exercisable until the earlier of:

(A)

the Expiration Date; or

(B)

ninety (90) days after the date of the Participant’s termination of service on the Board.

3. Exercise of SAR .

(a)

Notice of Exercise . Prior to the Expiration Date, the vested portion of the SAR may be exercised, in whole or in part, by delivering written notice to the Company in accordance with Section 7(j) hereof and in such form as the Company may require from time to time. Such notice of exercise shall specify the number of SAR Shares to be exercised.

(b)

Payment . As of the date of exercise of the SAR, the Company shall settle the exercised portion of the SAR as provided in Section 6.6 of the Plan. The amount of the payment for each SAR Share exercised shall equal (i) the Fair Market Value of a share of Stock on the date of exercise, less (ii) the SAR Price for each such exercised SAR Share. The exercised SAR shall be settled in whole shares of Stock, and cash for the value of a fractional share of Stock.

(c)

Payment of Taxes . If the Company is obligated to withhold an amount on account of any tax imposed as a result of the exercise of the SAR, the Participant shall be required to remit such amount to the Company, as provided in Section 9.10 of the Plan. Alternatively, subject to Company approval, the Participant may elect to withhold a portion of the SAR exercise payment equal to the minimum statutory tax that would be imposed on the exercise, as provided under Section 9.10 of the Plan. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the grant of the SAR and its exercise.

(d)

Death Prior to Exercise . In the event of the Participant’s death prior to the exercise of any vested portion of the SAR, the Participant’s beneficiary or estate may exercise the vested SAR.

4. Compliance with Federal and State Law . The Company reserves the right to delay the Participant’s exercise of any portion of the SAR if (a) the Company’s issuance of Stock upon such exercise would violate any applicable federal or state securities laws or any other applicable laws or regulations, or (b) the Company reasonably determines that payment of such SAR portion would not be deductible under

Code Section 162(m). The Participant may not sell or otherwise dispose of any portion of the SAR in violation of any applicable law. The Company may postpone issuing and delivering any Stock in payment for the exercise of such portion of the SAR for so long as the Company reasonably determines to be necessary to satisfy the following:

(i)

(ii)

its receiving proof it considers satisfactory that a person seeking to exercise the SAR after the Participant’s death is entitled to do so; and

(iii)

the Participant complying with any federal, state, or local tax withholding obligations.

5. Change in Control . Subject to Section 9.8 of the Plan:

(a) Notwithstanding any provision in this Agreement, in the event of a Change in Control pursuant to Section 2.5(c) or (d) of the Plan in connection with which (i) holders of Shares receive consideration consisting solely of shares of common stock that are registered under Section 12 of the Exchange Act (and disregarding the payment of cash in lieu of fractional shares) and (ii) this SAR Agreement is assumed or provision is made for the continuation of this SAR Agreement, then subject to Section 4.3 of the Plan, this SAR Agreement shall continue in accordance with its terms, and there shall be substituted for each SAR Share then subject to this SAR Agreement, the number and class of shares into which each outstanding Share shall be converted pursuant to such Change in Control. In the event of any such substitution, the SAR Price shall be appropriately adjusted by the Board or Committee (whose determination shall be final, binding and conclusive), such adjustments to be made without an increase in the aggregate SAR Price. In the event the Participant’s service on the Board is terminated for any reason other than removal of the director for cause on or after the date of such Change in Control and on or prior to the one-year anniversary date of such Change in Control, then any unvested portion of the SAR as of the effective date of the Participant’s termination of service shall immediately become fully vested and exercisable. In the event the Participant’s service on the Board is terminated on or after the date of such Change in Control, then any unexercised vested portion of the SAR shall remain exercisable until the earlier of (1) the Expiration Date or (2) one (1) year after the date of the Participant’s termination of service on the Board.

6. Confidentiality, Non-Solicitation and Non-Compete . The Participant agrees to, understands and acknowledges the following:

(a)

(i)

(ii)

inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company and/or a Subsidiary;

(iii)

the Company’s or Subsidiary’s proprietary programs, processes or software, consisting of, but not limited to, computer programs in source or object code and all related documentation and training materials, including all upgrades, updates, improvements, derivatives and modifications thereof and including programs and documentation in incomplete stages of design or research and development;

(iv)

(v)

The Company and its Subsidiaries devote significant financial, human and other resources to the development of products, customer base and the general goodwill associated with their business, and the Company and its Subsidiaries diligently maintain the secrecy and confidentiality of their Confidential Information. Each and every component of the Confidential Information is sufficiently secret to derive economic value from its not being generally known to other persons. While serving on the Board and thereafter, the Participant will hold in the strictest confidence and not use in any manner which is detrimental to the Company or its Subsidiaries or disclose to any individual or entity any Confidential Information, except as may be required by the Company or its Subsidiaries in connection with the Participant’s service on the Board.

All Company Materials are and will be the sole property of the Company and/or Subsidiary. The Participant agrees that during and after his or her service on the Board, the Participant will not remove any Company Materials from the business premises of the Company or a Subsidiary or deliver any Company Materials to any person or entity outside the Company or a Subsidiary, except as the Participant is required to do so in connection with performing the duties as a member of the Board. The Participant further agrees that, immediately upon the termination of his or her service on the Board for any reason, or during the Participant’s tenure as a member of the Board if so requested by the Company, the Participant will return all Company Materials and other physical property, and any reproduction thereof, excepting only the Participant’s copy of this Agreement. For purposes of this SAR Agreement, “Company Materials” means documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or future/strategic plans of the Company and/or any Subsidiary, whether such documents have been prepared by the Participant or by others.

(b)

(i)

breaches or violates Section 6(a) of this SAR Agreement; or

(ii)

employs, recruits or solicits for employment any person who is (or was within the six (6) months prior to the date the Participant’s service on the Board terminated) an employee of the Company and/or any Subsidiary;

(iii)

accepts employment, serves on the board of directors of, or engages in a competing business that may require contact, solicitation, interference or diverting of any of the Company’s or any Subsidiary’s customers, or that may result in the disclosure, divulging, or other use of Confidential Information or Company Materials acquired during the Participant’s service on the Board; or

(iv)

solicits or encourages any customer, vendor or potential customer or vendor of the Company or any Subsidiary with whom the Participant had contact while serving on the Board to terminate or otherwise alter his, her or its relationship with the Company or any Subsidiary. The Participant understands that any person or entity that the Participant contacted during the twelve (12) months prior to the date of the Participant’s termination of service on the Board for the purpose of soliciting sales from such person or entity shall be regarded as a “potential customer” of the Company to whom the Company or a Subsidiary has a protectable proprietary interest;

(c)

Remedies for Violation .

(i)

Injunctive Action . The Participant acknowledges that if he or she violates the terms of this Section 6, the injury that would be suffered by the Company and/or a Subsidiary as a result of a breach of the provisions of this SAR Agreement (including any provision of Section 6(a) or (b) hereof) would be irreparable and that an award of monetary damages to the Company and/or a Subsidiary for such a breach would be an inadequate remedy. Consequently, the Company and/or its Subsidiary will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this SAR Agreement, and the Company and/or Subsidiary will not be obligated to post bond or other security in seeking such relief. Without limiting the Company’s or Subsidiary’s rights under this Section 6 or any other remedies of the Company or Subsidiary, if the Participant breaches any of the provisions of Section 6(a) or (b) hereof, the Participant, without any further action by the Company or the Participant, shall forfeit, as of the first day of any such violation, all right, title and interest to this SAR Agreement.

(ii)

Attorneys’ Fees; Set-off Right . In addition to the rights available to the Company and its Subsidiaries under Section 6(c)(i) hereof, if the Participant violates the terms of this Section 6 at any time, the Participant shall reimburse the Company for any fees and expenses (including attorneys’ fees) incurred by or on behalf of the Company or any Subsidiary in enforcing the Company’s or a Subsidiary’s rights under this Section 6. By accepting this SAR grant, the Participant hereby consents to a deduction from any amounts the Company or any Subsidiary owes to the Participant from time to time (including amounts owed to the Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Participant by the Company or any Subsidiary), unless such amount is subject to Section 409A of the Code, to the extent of any amounts that the Participant owes the Company under this Section 6. In addition to any injunctive relief sought under Section 6(c)(i) hereof and whether or not the Company or any Subsidiary elects to make any set-off in whole or in part, if the Company or any Subsidiary does not recover by means of set-off the full amount the Participant owes to the Company or any Subsidiary, calculated as set forth in this Section 6(c)(ii), the Participant agrees to immediately pay the unpaid balance to the Company or any Subsidiary.

(d)

(e)

Written Acknowledgement by Participant . The Committee, in its sole discretion, may require the Participant, as a condition to the exercise of this SAR, to acknowledge in writing that the Participant has not engaged, and is not in the process of engaging, in any of the activities described in this Section 6.

7. Miscellaneous Provisions .

(a)

No Service or Employment Rights . No provision of this SAR Agreement or of the SAR granted hereunder shall give the Participant any right to continue to serve on the Board or in the service or employ of the Company or any Subsidiary, create any inference as to the length of employment or service of the Participant, affect the right of the Company or any Subsidiary to terminate the employment or service of the Participant, with or without Cause, or give the Participant any right to participate in any employee welfare or benefit plan or other program (other than the Plan) of the Company or any Subsidiary.

(b)

(c)

(d)

(e)

(f)

(g)

Use of Personal Data . By executing this SAR Agreement, the Participant acknowledges and agrees to the collection, use, processing and transfer of certain personal data, including his or her name, compensation, nationality, job title, position, and details of all past Awards and current Awards outstanding under the Plan (“Data”), for the purpose of managing and administering the Plan. The Participant is not obliged to consent to such collection, use, processing and transfer of personal data, but a refusal to provide such consent may affect his or her ability to participate in the Plan. The Company, or its Subsidiaries, may transfer Data among themselves or to third parties as necessary for the purpose of implementation, administration and management of the Plan. These various recipients of Data may be located elsewhere throughout the world. The Participant authorizes these various recipients of Data to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan. The Participant may, at any time, review Data with respect to the Participant and require any necessary amendments to such Data. The Participant may withdraw his or her consent to use Data herein by notifying the Company in writing; however, the Participant understands that by withdrawing his or her consent to use Data, the Participant may affect his or her ability to participate in the Plan.

(h)

(i)

Waiver; Cumulative Rights . The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

(j)

(k)

Counterparts . This SAR Agreement may be signed in counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

(l)

(m)

(n)

Entire Agreement . This SAR Agreement, together with the Plan, constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.

(o)

Amendment . Any amendment to this SAR Agreement shall be in writing and signed by an executive officer of the Company or the Director of Compensation and Benefits.

(p)

Headings . The headings contained in this SAR Agreement are for reference purposes only and shall not affect the meaning or interpretation of this SAR Agreement.


ZEBRA TECHNOLOGIES CORPORATION

By:		/s/ Anders Gustafsson
Name:		Anders Gustafsson
Title:		Chief Executive Officer

Exhibit 31.1

CERTIFICATION

I, Anders Gustafsson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Zebra Technologies Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d) Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

CERTIFICATION

I, Michael C. Smiley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Zebra Technologies Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Zebra Technologies Corporation (Zebra) on Form 10-Q for the period that ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anders Gustafsson, Chief Executive Officer of Zebra, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Zebra.

A signed original of this written statement required by Section 906, or another document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Zebra and will be retained by Zebra and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Zebra Technologies Corporation (Zebra) on Form 10-Q for the period that ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Smiley, Chief Financial Officer of Zebra, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Zebra.

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Smaller reporting company