Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On May 11, 2022, Switch, Inc., a Nevada corporation (the “Company”), Switch,
Ltd., a Nevada limited liability company (“Company Ltd.”), Sunshine Bidco Inc.,
a Delaware corporation (“Parent”), Sunshine Merger Sub, Ltd., a Nevada limited
liability company and a direct wholly owned subsidiary of the Company (“Company
Merger Sub”), and Sunshine Parent Merger Sub Inc., a Nevada corporation and a
wholly owned subsidiary of Parent (“Parent Merger Sub”) entered into an
Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement
provides that, upon the terms and subject to the conditions set forth therein,
Parent Merger Sub will merge with and into the Company with the Company
remaining as the surviving entity (the “Merger”), and immediately following the
Merger, Company Merger Sub will merge with and into Company Ltd. (the “LLC
Merger” and, together with the Merger, the “Mergers”). The Mergers and the other
transactions contemplated by the Merger Agreement were approved by the Company’s
Board of Directors (the “Company Board”) and the Special Committee of the
Company Board.
Subject to the terms and conditions of the Merger Agreement, (i) at the
effective time of the Merger (the “Effective Time”), (A) each issued and
outstanding share of Class A common stock, par value $0.001 per share, of the
Company (the “Company Class A Common Stock”) not owned by the Company as
treasury stock or by any direct or indirect wholly owned subsidiary of the
Company, will be cancelled and converted into the right to receive $34.25 per
share in cash, without interest (the “Merger Consideration”), and (B) each share
of Class B common stock, par value $0.001 per share, of the Company (the
“Company Class B Common Stock”) issued and outstanding immediately prior to the
Effective Time shall be cancelled and cease to exist, and each holder of Company
Class B Common Stock shall cease to have any rights with respect thereto,
subject to (1) the right of the holder of any related Company Ltd. Common Unit
(other than any Rollover Member (as defined below) with respect to its Rollover
Units (as defined below)) to receive the Merger Consideration and (2) the right
of any holder of Company Class B Common Stock issued and outstanding immediately
prior to the Effective Time to properly demand payment for such shares pursuant
to the Nevada Revised Statutes and (ii) at the effective time of the LLC Merger
(the “LLC Merger Effective Time”), each issued and outstanding unit of limited
liability company interest in Company Ltd. (each such unit, a “Company Ltd.
Common Unit”) (other than Company Ltd. Common Units owned, directly or
indirectly, by the Company or any of its subsidiaries and Rollover Units), and
all rights in respect thereof, shall be automatically cancelled and converted
into and shall thereafter represent only the right to receive the Merger
Consideration.
In addition, at the Effective Time, equity awards, consisting of stock options,
restricted stock unit awards that correspond to shares of Company Class A Common
Stock and restricted stock unit awards that correspond to shares of Company
Class A Common Stock that vest based on the achievement of performance goals
will each automatically become fully vested (to the extent unvested) and be
converted into the right to receive the Merger Consideration, less the exercise
price in the case of stock options, plus the amount of any accrued dividend
equivalents with respect to such equity awards, to the extent applicable.
The Merger Agreement contains customary representations, warranties and
covenants, including, among others, covenants of the Company to use commercially
reasonable efforts to conduct its business in all material respects in the
ordinary course of business consistent with past practice, subject to certain
exceptions, during the period between the execution of the Merger Agreement and
the consummation of the Mergers.
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The Company has agreed to customary “no-shop” restrictions on its ability to
solicit alternative acquisition proposals from third parties and engage in
discussions or negotiations with third parties regarding alternative acquisition
proposals. Notwithstanding these restrictions, the Company may under certain
circumstances and subject to the terms and conditions set forth in the Merger
Agreement, provide information to and participate in discussions or negotiations
with third parties with respect to alternative acquisition proposals.
The consummation of the Merger is subject to certain customary closing
conditions and the transactions contemplated by the Land Purchase Agreement (as
defined below) and customary termination rights in favor of the Company or
Parent. Upon a termination of the Merger Agreement, (i) under certain
circumstances, including in order to enter into a superior proposal, the Company
will be required to pay a termination fee to Parent of $260,000,000 and
(ii) under certain circumstances, including due to a breach of Parent’s
obligations under the Merger Agreement or Parent’s failure to consummate the
Mergers when required by the Merger Agreement, Parent will be required to pay a
termination fee to the Company of $693,000,000.
The foregoing description of the Merger Agreement is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and
incorporated herein by reference. The Merger Agreement has been attached as an
exhibit to provide shareholders with information regarding its terms. It is not
intended to provide any other factual or financial information about the
Company, Parent or any of their respective affiliates or businesses. The
representations, warranties, covenants and agreements contained in the Merger
Agreement were made only for the purposes of such agreement and as of specified
dates, were solely for the benefit of the parties to such agreement, and may be
subject to limitations agreed upon by the contracting parties. The
representations and warranties have been qualified by confidential disclosures
made for the purposes of allocating contractual risk between the parties to the
Merger Agreement instead of establishing these matters as facts, and may be
subject to standards of materiality applicable to the contracting parties that
differ from those applicable to investors. Shareholders should not rely on the
representations, warranties, covenants and agreements contained in the Merger
Agreement or any descriptions thereof as characterizations of the actual state
of facts or condition of the Company, Parent or any of their respective
affiliates or businesses. Moreover, information concerning the subject matter of
the representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in the
Company’s public disclosures. The Merger Agreement should not be read alone, but
should instead be read in conjunction with the other information regarding the
Company, Parent and their respective affiliates and the transactions
contemplated by the Merger Agreement that will be contained in or attached as an
annex to the proxy statement that the Company will file in connection with the
transactions contemplated by the Merger Agreement, as well as in the other
filings that the Company will make with the U.S. Securities and Exchange
Commission (the “SEC”).
Tax Receivable Agreement Amendment
Concurrent with the execution of the Merger Agreement, the Company, Company Ltd.
and members of Company Ltd. as of the date of the Tax Receivable Agreement,
dated as of October 5, 2017, by and among the Company, Company Ltd. and the
members of Company Ltd. party thereto (the “TRA”) other than the Company
executed Tax Receivable Agreement Amendment No. 1 (the “TRA Amendment”), which
provides that in exchange for the termination of the TRA and all rights
associated therewith, each member party thereto is entitled to receive a payment
in cash from the Corporation of $0.37 per Company Ltd. Common Unit.
The foregoing description of the TRA Amendment is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the full
text of the TRA Amendment, which is filed as Exhibit 10.1 hereto and
incorporated herein by reference.
Voting and Support Agreements
Concurrent with the execution of the Merger Agreement, Parent or the Company
entered into Voting and Support Agreements (each, a “Voting and Support
Agreement” and collectively, the “Voting and Support Agreements”) with certain
stockholders of the Company providing that, among other things, subject to the
terms and conditions set forth therein, such stockholder will support the
Mergers and the transactions contemplated thereby, including by voting to adopt
the Merger Agreement.
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Rollover Agreements
Concurrent with the execution of the Merger Agreement, Rob Roy, the Company’s
CEO, founder and chairman, and Thomas Morton, the Company’s President and Chief
Legal Officer, executed Rollover and Contribution Agreements (each, a “Rollover
Agreement” and collectively, the “Rollover Agreements”), providing that each of
Mr. Roy and Mr. Morton (together, the “Rollover Members”) will contribute to
Parent a certain number of Company Ltd. Common Units (the “Rollover Units”) in
exchange for a number of equity interests of Parent or one or more of its parent
entities.
Purchase and Sale Agreement
On May 10, 2022, in connection with the execution of the Merger Agreement,
. . .
Item 7.01 Regulation FD Disclosure.
On May 11, 2022, the Company issued a press release and a notice to the
Company’s employees announcing its entry into the Merger Agreement. The full
text of the press release and employee notice are attached hereto as Exhibit
99.1 and Exhibit 99.2 and are incorporated herein by reference.
The information furnished under this Item 7.01 of this Current Report on Form
8-K, including Exhibit 99.1 and Exhibit 99.2, shall not be deemed to be “filed”
for the purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liabilities of that section.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Exhibit Description
2.1 Agreement and Plan of Merger, dated May 11, 2022, by and among
Switch, Inc., Switch, Ltd., Sunshine Bidco Inc., Sunshine Merger Sub,
Ltd., and Sunshine Parent Merger Sub Inc.
10.1 Tax Receivable Agreement Amendment No. 1, dated May 11, 2022, by and
among Switch, Inc., Switch, Ltd. and the members of Switch, Ltd. party
thereto.
99.1 Press Release, dated May 11, 2022.
99.2 Employee Notice, dated May 11, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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