Item 1.01
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Entry into a Material Definitive Agreement.
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The Merger Agreement
On July 2, 2018, Dell Technologies Inc. (the Company) announced that it has completed its evaluation of potential strategic business
opportunities. As a result of such evaluation, the Company has determined to pursue a recapitalization transaction and has entered into an Agreement and Plan of Merger (the Merger Agreement), dated July 1, 2018, with Teton Merger
Sub Inc. (Merger Sub), a Delaware corporation and wholly owned subsidiary of the Company. The Merger Agreement provides, among other things and subject to the terms and conditions set forth therein, that Merger Sub will be merged with
and into the Company (the Merger), with the Company continuing as the surviving corporation.
The Merger Agreement provides that, subject to
the terms and conditions thereof, at the effective time of the Merger (the Effective Time), each share of Class V common stock, par value $0.01 per share, of the Company (the Class V Common Stock) that is issued and
outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to receive, at the holders election: (i) 1.3665 shares (the Share Consideration) of Class C Common Stock, par value $0.01 per
share, of the Company (the Class C Common Stock) or (ii) $109.00 in cash, without interest (the Cash Consideration), subject to an aggregate amount of Cash Consideration that may be received by holders of
Class V Common Stock in the Merger not exceeding $9 billion (the Aggregate Cash Consideration Cap). If the total amount of Cash Consideration elected by holders of Class V Common Stock would exceed the Aggregate Cash
Consideration Cap, then, a portion of the shares with respect to which a holder elects to receive the Cash Consideration equal to a fraction, the numerator of which is the Aggregate Cash Consideration Cap and the denominator of which is the
aggregate amount of Cash Consideration elected by holders, shall be converted into the right to receive the Cash Consideration and the remaining portion of such shares held by such holders shall be converted into the right to receive the Share
Consideration. Any share of Class V Common Stock for which a valid election to receive Cash Consideration is not in effect at the Effective Time shall be converted into Share Consideration. Upon consummation of the Merger, all shares of the
Class V Common Stock would be delisted from the New York Stock Exchange.
In addition, pursuant to the Merger Agreement, as of the Effective Time and
unless otherwise agreed by the Company and a holder of a Class V Common Stock-based equity award granted by the Company (a Class V Award), each Class V Award will be converted into a new equity award on the same terms and
conditions (including applicable vesting requirements and deferral provisions) with respect to the number of shares of Class C Common Stock that is equal to the number of shares of Class V Common Stock that were subject to the Class V
Award multiplied by 1.3665 (rounded down to the nearest whole share). The exercise price for any Class V Award options so converted shall equal the exercise price of such Class V Award options immediately prior to the Effective Time
divided by 1.3665 (rounded up to the nearest whole penny).
The board of directors of the Company (the Board) has unanimously
(i) determined that the Merger in accordance with the terms of the Merger Agreement, the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger and the adoption of the amended and restated
certificate of incorporation of the Company attached thereto (the Amended and Restated Charter), are advisable and in the best interests of the Company and its stockholders, (ii) adopted the Merger Agreement, has approved the
execution, delivery and performance of the Merger Agreement by the Company and the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the Amended and Restated Charter, and (iii) recommended the
adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the Amended and Restated Charter, by the stockholders of the Company. The Merger Agreement, the Merger and the other transactions
contemplated thereby have also been unanimously approved and recommended for adoption by holders of the Class V Common Stock by a special committee of independent directors of the Board (the Special Committee) that was created to
act solely in the interests of holders of the Class V Common Stock and to make a recommendation to such holders.
Conditions to the Merger
The obligation of the Company to complete the Merger is subject to certain closing conditions, including, among others, (i) the adoption of the Merger
Agreement and transactions contemplated thereby by the holders of a majority of outstanding shares of (A) the Class A Common Stock voting as a separate class, (B) the B Common Stock voting as a separate class, (C) the
Class V Common Stock (excluding shares held by affiliates of the Company) voting as a separate class, and (D) all of the Companys capital stock voting together as a single class, in each case entitled to vote thereon at a
stockholders meeting duly called and held for such purpose (the Requisite Company Vote), (ii) a payment of a special cash dividend to the common stockholders of VMware, Inc. (VMware), (iii) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with respect to the exchange of shares of Class V Common Stock for shares Class C Common Stock in accordance with the Merger Agreement, (iv) the approval of the
Class C Common Stock for listing on the New York Stock Exchange, (v) the absence of any law, order or injunction of a court or governmental entity of competent jurisdiction prohibiting the consummation of the Merger or the other
transactions contemplated thereby and (vi) the absence of a Material Adverse Effect (as defined in the Merger Agreement) on either the Company or VMware since February 2, 2018.
The Fifth Amended and Restated Certificate of Incorporation
In connection with the Merger, the Board has adopted the Amended and Restated Charter, in the form attached to the Merger Agreement, to become the certificate
of incorporation of the surviving corporation at the Effective Time, contingent upon approval by the Companys stockholders in accordance with the terms of the Companys Fourth Amended and Restated Certificate of Incorporation (the
Existing Charter). The Amended and Restated Charter amends and restates the Existing Charter in order to (i) provide that the Merger will be treated in a manner that is consistent with an initial underwritten public offering of
Class C Common Stock under the terms of the Existing Charter, (ii) remove the ability of the Company to issue any shares of Class V Common Stock from and after the Effective Time and (iii) increase the maximum number of permitted
directors from seven to twenty. The primary impact of these amendments will be that following the Merger, (w) all members of the Board will belong to a single class of directors elected annually by the Companys Class A Common Stock,
Class B Common Stock and Class C Common Stock voting together as a single class, (x) each director of the Company will be entitled to one vote on the Board, (y) the Class A Common Stock will no longer have a consent right
with respect to the removal of the Companys chief executive officer or separation of the roles of chairman of the Board and chief executive officer and (z) the number of directors who may sit on the Board will be increased.
The foregoing description of the Amended and Restated Charter does not purport to be complete and is qualified in its entirety by reference to the full text
of the Amended and Restated Charter, which is attached hereto as Exhibit A to the Merger Agreement and is incorporated by reference herein.
The Voting
and Support Agreement
In connection with the execution of the Merger Agreement, the Company entered into a Voting and Support Agreement (the
Voting and Support Agreement) with Michael Dell, the Susan Lieberman Dell Separate Property Trust, MSDC Denali Investors, L.P., MSDC Denali EIV, LLC, Silver Lake Partners III, L.P., Silver Lake Technology Investors III, L.P., Silver Lake
Partners IV, L.P., Silver Lake Technology Investors IV, L.P. and SLP Denali
Co-Invest,
L.P. (together, the Stockholders). Subject to the terms and conditions set forth therein, the Stockholders
have agreed, among other things, to vote the shares of the Companys capital stock over which they have voting power in favor of the adoption of the Merger Agreement and Amended and Restated Charter, approval of the Merger and the transactions
contemplated by the Merger Agreement and against any action that could reasonably be expected to impede, interfere with, delay, postpone or adversely affect the Merger or other transactions contemplated by the Merger Agreement in any material
respect. The Stockholders have also consented to the Merger Agreement, the Merger and the other transactions contemplated thereby pursuant to the Amended and Restated Sponsor Stockholders Agreement with the Company. In addition, the Voting and
Support Agreement contains restrictions on the transfer of shares of the Companys capital stock by the Stockholders until the consummation of the Merger, subject to certain exceptions.
The Stockholders and the Company have further agreed to amend certain existing stockholders agreements and a registration rights agreement as of the
consummation of the Merger to, among other things, (i) prohibit the Stockholders and other holders of the Companys Class A Common Stock, Class B Common Stock and Class C Common Stock from transferring such shares for 180
days after consummation of the Merger, subject to certain
exceptions, and (ii) terminate, as of consummation of the Merger, the contractual consent rights that Michael Dell and the investors affiliated with Silver Lake Partners have over certain
corporate actions related to the Company and its subsidiaries. In addition, the Stockholders agreed to cause the Company to terminate the existing employee liquidity program at the closing of the Merger and to modify the transfer restrictions
applicable to employees such that, beginning 180 days following the consummation of the Merger, current employees will be permitted to sell shares of the Companys common stock on the open market, subject to certain volume limitations for two
years.
The Voting and Support Agreement will terminate upon the valid termination of the Merger Agreement in accordance with its terms.
The foregoing description of the Voting and Support Agreement does not purport to be complete and is qualified in its entirety by reference to the full text
of such agreement, which is attached hereto as Exhibit 10.1 and is incorporated by reference herein.
The VMware Letter Agreement
In connection with the execution of the Merger Agreement and in furtherance of the transactions contemplated thereby, the Company entered into a letter
agreement with VMware (the VMware Letter) on July 1, 2018. Subject to the terms and conditions set forth therein, the Company agreed (i) to announce that it has concluded its review of potential business opportunities and
decided not to pursue a business combination with VMware, (ii) to use its reasonable best efforts to consummate the Merger on the same date that the Company receives the special cash dividend from VMware and (iii) not to terminate the
Merger Agreement by mutual consent with Merger Sub without VMwares consent. Additionally, the VMware Letter requires that any future request from the Company or its affiliates that VMware issue a special dividend and any acquisition of VMware
common stock by the Company or its affiliates that would cause VMware to cease to be a publicly traded company will be subject to approval by a special committee of the VMware board of directors comprised solely of independent and disinterested
directors. The VMware Letter will terminate on the earlier of (x) July 1, 2028 and (y) the date that no shares of VMwares Class A Common Stock, or any other class or series of securities into which such shares may convert
or otherwise become, remain outstanding (other than shares beneficially owned, directly or indirectly, by the Company and its affiliates).
The foregoing
description of the VMware Letter does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, which is attached hereto as Exhibit 10.2 and is incorporated by reference herein.