Commitments and Contingencies

Purchase Commitments

In March 2017, the Company entered into a firm Power Purchase & Sale Agreement of electricity with Morgan Stanley Capital Group Inc. to purchase a minimum of 40 megawatts per energy hour for a term of 36 months, or a minimum purchase commitment of $33.4 million during the term, starting June 1, 2017. In addition, the agreement also contains a variable cost component for any megawatt hours in excess of the minimum megawatt hour commitment. The remaining minimum purchase commitment is $26.9 million as of December 31, 2017. Future minimum power purchase commitments for 2018, 2019, and 2020 are $11.1 million, $11.1 million, and $4.7 million, respectively, with no additional commitments upon termination of the agreement thereafter.

In December 2016, the Company notified the landlord for its data center building and land in Michigan of its intent to exercise the purchase option pursuant to the lease agreement. The purchase price of $25.0 million, less 65% of all rent payments made to the landlord, was payable at closing of the sale in December 2017. The Company recorded the present value of the adjusted purchase price within accrued Michigan building and land purchase on the consolidated balance sheet as of December 31, 2016.

In September 2016, the Company entered into a take-or-pay contract with a lit fiber transport services vendor whereby the Company will be required to purchase a minimum of $75,000 in eligible services on a monthly basis for a term equal to or greater than 24 months beginning 12 months after the eligible services are made available. The eligible services were made available in September 2017.

In June 2015, the Company entered into an agreement for the purchase of three parcels of land in northern Nevada. The first closing on two of the land parcels was completed in August 2015 in accordance with the agreement. The second closing on the third land parcel with a purchase price of $5.4 million will occur on or before 36 months after the date of the first closing, or by August 2018.

PEC Purchase Commitments

In November 2015, the Company entered into a five-year contract beginning January 1, 2016 with the Southern Nevada Water Authority ("SNWA") to purchase an estimated 82 million in PECs, or a minimum remaining purchase commitment of $508,000 as of December 31, 2017, from the 14 megawatt solar photovoltaic generating plant constructed at SNWA's River Mountains Water Treatment Facility to meet its anticipated requirements under the State of Nevada's Renewal Portfolio Standard Statute.

In November 2015, the Company entered into a renewable energy agreement with NV Energy to purchase all PECs realized from Switch Station 2, a 79 megawatt photovoltaic solar generation facility, for a minimum purchase commitment of $13.2 million during the remaining term as of December 31, 2017. The term of the renewable energy agreement is 20 years from the commercial operation date of Switch Station 2, which achieved commercial operation on October 11, 2017.

In June 2015, the Company entered into a renewable energy agreement with NV Energy to purchase all PECs realized from Switch Station 1, a 100 megawatt photovoltaic solar generation facility, not to exceed the Company's total electric load from its data center facilities, for a minimum purchase commitment of $21.6 million during the remaining term as of December 31, 2017. The term of the renewable energy agreement is 20 years from the commercial operation date of Switch Station 1, which was July 21, 2017. As of December 31, 2017, future minimum PEC purchase commitments are as follows (in thousands):



2018	$	1,908
2019	1,908
2020	1,908
2021	1,738
2022	1,738
Thereafter	26,079
	$	35,279

Impact Fee Expense

On September 30, 2016, Switch filed its application with the PUCN to become an unbundled purchaser of energy, capacity, and/or ancillary services in Nevada from a new provider of electric resources. The application was approved on December 28, 2016 and Switch paid the impact fee of $27.0 million in a lump sum on May 31, 2017 to NV Energy, the Company's energy provider in Nevada through May 31, 2017, and became an unbundled purchaser of energy in Nevada on June 1, 2017. As there is no future economic benefit to the Company from the impact fee, it was recognized as an expense within impact fee expense during the year ended December 31, 2016 in the consolidated statements of operations and comprehensive income (loss).

For the year ended December 31, 2017, the Company also incurred an additional $649,000 in impact fee expense related to deferred energy adjustments representing the difference between actual costs and amounts collected by NV Energy for fuel and purchased power. Similarly, as no future economic benefit is realized by the Company from the deferred energy adjustments, it was recognized as an expense during the year ended December 31, 2017 in the consolidated statements of operations and comprehensive income (loss).

Self-Insurance Reserves

Effective January 1, 2017, the Company is self-insured for various levels of employee health coverage. Insurance reserves include accruals for estimated settlements for known claims, as well as accruals for estimates of incurred but not reported claims. As of December 31, 2017, the estimated liabilities for unpaid and incurred but not reported claims totaled $417,000, which is included within accrued salaries and benefits on the consolidated balance sheets.

Energy Litigation

In July 2016, Switch filed a lawsuit in the U.S. District Court for the District of Nevada against, among other parties, the PUCN and the former Commissioners of the PUCN, NV Energy, and the former General Counsel to the PUCN Commissioners. The lawsuit alleged, among other things, that the defendants violated state and federal law to conspire and defraud Switch so that NV Energy could unlawfully retain Switch as a customer of NV Energy and impair renewable energy development in the state of Nevada. Switch sought damages, attorneys' fees, costs and preliminary injunctive relief. On December 21, 2016, Switch and NV Energy agreed to settle the lawsuit on confidential terms which do not create any material financial liability to Switch. On January 4, 2017, Switch filed a voluntary dismissal of the energy litigation lawsuit with the U.S. District Court for the District of Nevada.

Patent Litigation

On August 7, 2017, Switch filed a lawsuit in the U.S. District Court for the Eastern District of Texas against Aligned Data Centers LLC, or ("Aligned"), and MTechnology Inc. The lawsuit alleges, among other things, that Aligned has used and promoted technology at its data centers to attract clients to its facility, directly and indirectly infringing at least three of Switch's patents and using Switch's patented technology to attempt to unlawfully compete with Switch. The complaint also alleges that Aligned hired a consultant to design their data centers; that this consultant had toured Switch under non-disclosure agreement; and that this consultant breached his confidentiality agreements with Switch by using Switch's designs to design the Aligned data centers. Switch is seeking an injunction to prevent the defendants in the lawsuit from infringing Switch's patents, as well as other remedies. On August 16, 2017, Aligned filed an answer to the complaint and a motion to dismiss the lawsuit. Among other things, Aligned alleges in its answer that Switch's patents in question should be declared invalid, and countersued for declaratory judgment of the non-infringement of certain of Switch's patents, injunctive relief, and damages for alleged anti-competition practices involving Aligned's trademarks in violation of the Lanham Act, tortious interference with Aligned's business, and disparagement of Aligned's business. Switch has retained outside counsel to represent it and is vigorously defending its rights and interests. Given certain jurisdictional issues, Switch filed a separate complaint in the Eighth Judicial District of Nevada against the consultant, Stephen Fairfax, and his business, MTechnology, on September 12, 2017. Among other claims, Switch has raised allegations of breach of contract and misappropriation of trade secrets. The outcome of Switch's legal proceedings is inherently unpredictable, subject to significant uncertainties, and could be material to the Company's financial condition, results of operations, and cash flows for a particular period. For the pending matter described above, it is not possible to estimate the reasonably possible loss or range of loss.

Cobalt Litigation

On September 7, 2017, Switch, Ltd. and Switch, Inc. (collectively, the "Defendants"), were named in a lawsuit filed in the U.S. District Court for the District of Nevada by V5 Technologies formerly d/b/a Cobalt Data Centers (now defunct). The lawsuit alleges, among other things, that the Defendants have monopolized the Las Vegas Metropolitan area of Southern Nevada's data center colocation market and have engaged in unfair business practices leading to the failure of Cobalt Data Centers in 2015 and seeks monetary damages in an amount yet to be disclosed. The Defendants have retained outside counsel and are vigorously pursuing their rights and interests. The outcome of the Defendants' legal proceedings is inherently unpredictable, subject to significant uncertainties, and could be material to the Company's financial condition, results of operations, and cash flows for a particular period. For the pending matter described above, it is not possible to estimate the reasonably possible loss or range of loss.