MSI Motorola Solutions Inc

The transactions described in this Item 1.01 and in Item 8.01 of this Current Report on Form 8-K are collectively referred to as the “Silver Lake Transactions.”

New Investment Agreement

Issuance of Convertible Notes

On September 5, 2019, Motorola Solutions, Inc. (the “Company” or “Motorola Solutions”) entered into an investment agreement (the “New Investment Agreement”) with Silver Lake Alpine, L.P. and Silver Lake Alpine (Offshore Master), L.P. (collectively, “Silver Lake Alpine” and, together with their affiliates, “Silver Lake”), relating to the issuance to Silver Lake of $1 billion in aggregate principal amount of 1.75% convertible senior notes, due 2024 (the “2024 Notes”).

Board Representation

Egon Durban and Greg Mondre, both managing partners of Silver Lake, will continue to serve on the board of directors of the Company (the “Board”), subject to the terms and conditions of the New Investment Agreement. Silver Lake’s right to Board representation will terminate under certain circumstances, as described in the New Investment Agreement, including if Silver Lake and its affiliates beneficially own less than 50% of the shares of common stock of the Company (“Common Stock”) (on an as-converted basis assuming any conversion is settled solely in shares) owned by Silver Lake immediately following the closing of the transactions contemplated by the New Investment Agreement (the “Closing”). The Company also has the right to require that one director affiliated with Silver Lake resign from the Board if Silver Lake and its affiliates beneficially own less than 75% of the Common Stock (on an as-converted basis assuming any conversion is settled solely in shares) owned by Silver Lake and its affiliates immediately following the Closing. In addition, the Company has the right to require that one director affiliated with Silver Lake resign from the Board after the 18 month anniversary of the Closing.

For so long as Silver Lake has rights to nominate a director to the Board, the Company has agreed to include such person in its slate of nominees for election to the Board at each of the Company’s meetings of stockholders in which directors are to be elected and to use its reasonable efforts to cause the election of such person.

Standstill and Voting Obligations

Pursuant to the New Investment Agreement, Silver Lake has agreed, subject to certain exceptions, that until the earliest of (A) the later of (1) 90 days after Silver Lake no longer has a representative or rights to have a representative on the Board and (2) the three-year anniversary of the Closing, (B) the effective date of a change of control of the Company and (C) 90 days after Silver Lake does not beneficially own any 2024 Notes or shares of Common Stock other than the shares issued to Silver Lake designees as compensation for their service on the Board (the “Standstill Period”), Silver Lake and its affiliates and associates will not, among other things: (i) acquire any securities of the Company if, immediately after such acquisition, Silver Lake and certain of its affiliates would collectively own in the aggregate more than 12.5% of the then outstanding voting securities of the Company, (ii) propose or seek to effect any tender or exchange offer, merger or other business combination involving the Company, or make any public statement with respect to such transaction, (iii) make, or in any way participate in any “proxy contest” or other solicitation of proxies, (iv) sell, transfer or otherwise dispose of any voting securities of the Company to any person who is (or will become upon consummation of such sale, transfer or other disposition) a beneficial owner of 12.5% or more of the outstanding voting securities of the Company, or (v) call or seek to call any meeting of stockholders or other referendum or consent solicitation.

In addition, Silver Lake has agreed to vote any shares of Common Stock beneficially owned by it in support of Company-nominated directors and otherwise in accordance with the recommendations of the Board.

Conversion and Transfer Restrictions / Registration Rights

The New Investment Agreement restricts Silver Lake’s ability to transfer or convert the 2024 Notes to Common Stock, subject to certain exceptions specified in the New Investment Agreement and summarized below.

Except as described below, prior to the earlier of (i) the second anniversary of the Closing, (ii) such time as there is no Silver Lake affiliated director on the Board (subject to certain exceptions) and (iii) a change of control of the Company, Silver Lake will be restricted from transferring or entering into an agreement that transfers the economic consequences of ownership of the 2024 Notes or converting the 2024 Notes. Exceptions include, among others, an exception with respect to pledging the 2024 Notes or satisfying obligations related to pledged 2024 Notes.

Subject to certain limitations, the New Investment Agreement provides Silver Lake with certain registration rights for the 2024 Notes and the shares of Common Stock issuable upon conversion of the 2024 Notes.

The foregoing description of the New Investment Agreement is qualified in its entirety by reference to the New Investment Agreement, which is attached hereto as Exhibit 10.1, and incorporated herein by reference.

Convertible Notes

In connection with the issuance of the 2024 Notes, on September 5, 2019, the Company entered into an indenture (the “New Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”). The 2024 Notes bear interest at a rate of 1.75% per annum, payable semiannually in cash, and will mature on September 15, 2024, subject to earlier redemption at the option of the Company or conversion pursuant to the terms of the New Indenture.

The 2024 Notes are convertible into cash and, at the Company’s option, shares of Common Stock or a combination thereof, based on a conversion rate of 4.9140 per $1,000 principal amount of the 2024 Notes (which is equal to an initial conversion price of $203.50 per share), in each case subject to customary anti-dilution and other adjustments, including a make-whole adjustment in connection with certain extraordinary transactions.

With certain exceptions, upon a change of control of the Company or the failure of the Common Stock to be listed on certain stock exchanges (a “Fundamental Change”), the holders of the 2024 Notes may require that the Company repurchase all or part of the principal amount of the 2024 Notes at purchase price of par plus accrued and unpaid interest.    

The New Indenture provides that on and after September 15, 2022, in certain circumstances, the Company may, from time to time, at its option, redeem for cash up to an aggregate of $490 million in aggregate principal amount of the 2024 Notes, upon notice, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to the applicable redemption date.

The New Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2024 Notes under the New Indenture. The New Indenture also includes customary covenants for convertible notes of this type.

The foregoing description of the New Indenture and the 2024 Notes is qualified in its entirety by reference to the New Indenture and the 2024 Notes, which are attached hereto as Exhibit 10.2 and Exhibit 10.3, respectively, and incorporated herein by reference.

Amendment to Existing Silver Lake Investment Agreement

The Company is party to that certain Investment Agreement by and among the Company, Silver Lake Partners IV, L.P. and Silver Lake Partners IV Cayman (AIV II), L.P. (collectively, “SLP IV”), dated as of August 4, 2015 (the “Existing Investment Agreement”).

Upon the entrance by the Company and Silver Lake Alpine into the New Investment Agreement, the Company and SLP IV entered into an amendment to the Existing Investment Agreement (the “Existing Investment Agreement Amendment”) to terminate the Board nomination rights of SLP IV under the Existing Investment Agreement, effective as of the Closing.

The foregoing description of the Existing Investment Agreement Amendment is qualified in its entirety by reference to the Existing Investment Agreement Amendment, which is attached hereto as Exhibit 10.4 and incorporated herein by reference.

disruption in the Company’s IT systems, those of its partners or suppliers or those it sells to or operates or maintains for its customers; (8) the outcome of ongoing and future tax matters; (9) the Company’s ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions and reductions in the Company’s purchasing power; (10) risks related to dependence on certain key suppliers, subcontractors, third-party distributors and other representatives; (11) the impact on the Company’s performance and financial results from strategic acquisitions or divestitures; (12) risks related to the Company’s manufacturing and business operations in foreign countries; (13) the creditworthiness of the Company’s customers and distributors, particularly purchasers of large infrastructure systems; (14) the ownership of certain logos, trademarks, trade names and service marks including “MOTOROLA” by Motorola Mobility Holdings, Inc.; (15) variability in income received from licensing the Company’s intellectual property to others, as well as expenses incurred when the Company licenses intellectual property from others; (16) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (17) the impact of the percentage of cash and cash equivalents held outside of the United States; (18) the ability of the Company to pay future dividends due to possible adverse market conditions or adverse impacts on the Company’s cash flow; (19) the ability of the Company to complete acquisitions or repurchase shares under its repurchase program due to possible adverse market conditions or adverse impacts on the Company’s cash flow; (20) the impact of changes in governmental policies, laws or regulations; (21) negative consequences from the Company’s use of third party vendors for various activities, including certain manufacturing operations, information technology and administrative functions; (22) the Company’s ability to settle the par value of the 2024 Notes in cash and (23) statements relating to the investment by Silver Lake and the use of the proceeds and benefits thereof. Motorola Solutions undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.