| Item 1.01 | Entry into a Material Definitive Agreement. |
On October 12, 2020 (the “Agreement Date”), Twilio Inc. (“Twilio”) entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with Scorpio Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Twilio (“Merger Sub”), Segment.io, Inc., a Delaware corporation (the “Company”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative of certain Company securityholders.
Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), and upon consummation of the Merger, Merger Sub will cease to exist and the Company will become a wholly owned subsidiary of Twilio.
Upon consummation of the transactions contemplated by the Merger Agreement (the “Closing”), all outstanding shares of Company capital stock, restricted stock units representing the right to receive Company capital stock, options to purchase Company capital stock and warrants to purchase Company capital stock will be cancelled in exchange for aggregate consideration of $3,200,000,000, subject to certain adjustments, in the form of shares of Class A Common Stock of Twilio, par value $0.001 per share (“Twilio Class A Common Stock”) (the “Stock Consideration”); provided, that (a) shares of Company capital stock held by unaccredited stockholders, vested restricted stock units representing the right to receive Company capital stock, and vested options to purchase Company capital stock will receive cash in lieu of the Stock Consideration, (b) unvested options to purchase Company capital stock and unvested restricted stock units representing the right to receive Company capital stock, in each case, held by employees of the Company who remain or become employees of Twilio or any of its subsidiaries following the Closing will be assumed by Twilio or substituted with a corresponding unvested stock option of Twilio to purchase shares of Twilio Class A Common Stock or a corresponding unvested restricted stock unit representing the right to receive Twilio capital stock, as the case may be, and (c) all unvested restricted stock units representing the right to receive Company capital stock and all unvested options to purchase Company capital stock, in each case, held by any former employees, will be cancelled for no consideration. The number of shares to be issued in connection with the Stock Consideration will be calculated based on a fixed value of $277.1920 per share, which is the average of the daily volume-weighted average sales price per share of Twilio Class A Common Stock on the New York Stock Exchange, as such daily volume-weighted average sales price per share is reported by Bloomberg L.P., calculated to four decimal places and determined without regard to after-hours trading or any other trading outside the regular trading session trading hours, for each of the ten consecutive trading days ending on and including the trading day immediately preceding the Agreement Date. In addition, Twilio will establish a retention pool in an aggregate amount of $50,000,000 in the form of restricted stock units covering shares of Twilio Class A Common Stock that will be granted to certain Company employees in accordance with the terms of the Merger Agreement.
The Merger Agreement contains customary representations, warranties and covenants by Twilio and the Company. A portion of the aggregate consideration will be held in escrow to secure the indemnification obligations of the Company securityholders. The Closing is subject to customary closing conditions, including regulatory approvals, and is expected to occur in 2020. Under the terms of the Merger Agreement, Twilio has agreed to file a Resale Registration Statement on Form S-3 covering the resale of the shares of Twilio Class A Common Stock to be issued to eligible Company securityholders (the “Resale Registration Statement”).
Either Twilio or the Company may terminate the Merger Agreement if the Closing has not occurred on or before January 15, 2021, (which shall be extended for an additional 90 days if, as of January 15, 2021, all closing conditions have been completed except for the receipt of certain regulatory approvals).
Twilio intends to issue the shares of Twilio Class A Common Stock described herein in reliance upon the exemptions from registration afforded by Section 4(a)(2) and Rule 506 promulgated under the Securities Act of 1933, as amended.
The foregoing summary of the Merger Agreement and the transactions contemplated thereby do not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which will be filed as an exhibit on the earlier to be filed following the Closing of (i) Twilio’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2020 and (ii) the Resale Registration Statement.
