In considering the recommendation of the Board of Directors that Splunk Stockholders vote to adopt the Merger Agreement, Splunk Stockholders should be aware that Splunk’s executive officers and non-employee directors have interests in the Merger that may be different from, or in addition to, those of Splunk Stockholders generally. The Board of Directors was aware of and considered these interests, among other matters, in approving the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by Splunk Stockholders.
Executive Officers and Non-Employee Directors
For purposes of this disclosure, Splunk’s current executive officers are as follows:
Name | | | Position |
Gary Steele* | | | President and Chief Executive Officer |
Tom Casey | | | Senior Vice President, Products & Technology |
Scott Morgan* | | | Senior Vice President, Chief Legal Officer, Global Affairs and Secretary |
Brian Roberts* | | | Senior Vice President and Chief Financial Officer |
Christian Smith | | | Senior Vice President and Chief Revenue Officer |
* | Each of Messrs. Steele, Morgan and Roberts were “named executive officers” for purposes of Splunk’s annual proxy statement for fiscal year ended January 31, 2023. |
Although the following individuals are considered executive officers for purposes of this disclosure, none hold any unvested or outstanding Splunk equity awards or have any interests in the Merger except as they may be Splunk Stockholders: (i) Jason Child, the former Senior Vice President and Chief Financial Officer of Splunk, who terminated employment with Splunk effective as of November 1, 2022; (ii) Teresa Carlson, the former President and Chief Growth Officer of Splunk, who terminated employment with Splunk effective as of March 31, 2022; and (iii) Shawn Bice, the former President of Products and Technology of Splunk, who terminated employment with Splunk effective as of June 16, 2022.
Graham Smith, our current Chairman of the Board of Directors and former Interim Chief Executive Officer, who stepped down from such position upon the appointment of Mr. Steele in April 2022, is also considered an executive officer for purposes of this disclosure. Mr. Smith did not receive any equity-based compensation from Splunk in respect of his service as Interim Chief Executive Officer, and has no other interests in the Merger except as he holds Company RSUs in respect of his service as a non-employee member of the Board of Directors and as he is a Splunk Stockholder.
For purposes of this disclosure, Splunk’s current non-employee directors are as follows:
Name | | | |
Mark Carges | | | |
Kenneth Hao | | | |
Patricia Morrison | | | |
Yamini Rangan | | | |
Graham Smith | | | |
Elisa Steele | | | |
David Tunnell | | | |
General Dennis Via | | | |
Luis Visoso | | | |
Richard Wallace | | |
Although the following individuals are considered non-employee directors for purposes of this disclosure, none hold any unvested or outstanding Splunk equity awards or have any interests in the Merger except as they may be Splunk Stockholders: (i) Sean Boyle, who ceased serving on the Board of Directors effective as of March 16, 2023; (ii) Stephen Newberry, who ceased serving on the Board of Directors effective as of December 12, 2022; (iii) Sara Baack, who ceased serving on the Board of Directors effective as of December 12, 2022; and (iv) Sri Viswanath, who ceased serving on the Board of Directors effective as of June 16, 2022.
Certain Assumptions
Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:
• | The Effective Time is October 15, 2023, which is the assumed date of the Closing solely for purposes of the disclosure in this section; |
• | Each executive officer of Splunk experiences a qualifying termination of employment (i.e., a termination of employment by Splunk and/or Parent without “cause” or by the executive officer for “good reason,” as such terms are defined in the relevant plans and agreements) immediately following the assumed Effective Time of October 15, 2023; |
• | The performance metrics applicable to Company PSUs granted in and after our fiscal year 2023 will have been achieved at the maximum level of performance, and the stock price metrics applicable to Company PSUs granted prior to our fiscal year 2023 will not have been achieved; |
• | The potential payments and benefits described in this section are not at a level subject to a “cutback” to avoid the “golden parachute” excise tax that may be imposed under Section 4999 of the Code; and |
• | No director or executive officer receives any additional equity grants or other awards on or prior to the assumed Effective Time of October 15, 2023. |
None of our executive officers or non-employee directors hold Unvested Company Options or Unvested Company Shares. As the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur or be accurate as of the date referenced, the actual amounts, if any, that may be paid or become payable may materially differ from the amounts set forth below.
Treatment and Quantification of Company Equity Awards
Vested Company Equity Awards
At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Vested Company RSU that is outstanding and has not yet been settled as of immediately prior to the Effective Time, and each Vested Company PSU that is outstanding and has not yet been settled as of immediately prior to the Effective Time will terminate and be converted into and represent the right to receive the applicable Cash-Out Amount from Parent for such Vested Company RSU or Vested Company PSU, less any applicable taxes.
For each Vested Company RSU, including each Company RSU held by a non-employee director, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk Common Stock issuable upon settlement of such Vested Company RSU by (y) the Per Share Merger Consideration.
For each Vested Company PSU, including each Company PSU that vests effective as of the Effective Time based on attainment of the actual level of performance as determined prior to the Closing by the Board of Directors or a committee thereof in accordance solely with the terms of the applicable contract with the Company as in effect immediately prior to the Effective Time, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk Common Stock issuable upon settlement of such Vested Company PSU by (y) the Per Share Merger Consideration.
Unvested Company Equity Awards
Unvested Company RSUs. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Unvested Company RSU that is outstanding as of immediately prior to the Effective Time, will be converted into and represent the right to receive the applicable Cash-Out Amount from Parent for such Unvested Company RSU (such amount, the “Unvested Cash (RSUs)”). Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, the Unvested Cash (RSUs) will vest and become payable at the same time as the Unvested Company RSU, as applicable, from which such resulting Unvested Cash (RSUs) was converted would have vested and been payable pursuant to its terms and will otherwise remain subject to the same terms, conditions, restrictions and service-based vesting arrangements that were applicable to such Unvested Company RSUs, as applicable, including those provisions for accelerated vesting on certain terminations of employment, in each case, as in effect from time to time unless otherwise superseded by any applicable contract between the holder thereof and Splunk or Parent or their respective affiliates, but effective from and after the Effective Time.
For each Unvested Company RSU, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk Common Stock issuable upon settlement of such Unvested Company RSU by (y) the Per Share Merger Consideration.
Unvested Company PSUs. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Unvested Company PSU that is outstanding immediately prior to the Effective Time will be converted into and represent the right to receive the applicable Cash-Out Amount from Parent for such Unvested Company PSU (the “Unvested Cash (PSUs)”). Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, the Unvested Cash (PSUs) will vest and be payable at the same time as the Unvested Company PSU from which such Unvested Cash (PSUs) was converted would have vested and been payable pursuant to its terms and will otherwise remain subject to the same terms, conditions, restrictions and service-based vesting arrangements that were applicable to such Unvested Company PSUs, including those provisions for accelerated vesting on certain terminations of employment, in each case, as in effect from time to time unless otherwise superseded by any applicable contract between the holder thereof and Splunk or Parent or their respective affiliates, but effective from and after the Effective Time.
For each Unvested Company PSU, the Cash-Out Amount will be determined by multiplying (x) the total number of shares of Splunk common stock underlying such Company PSU based on the attainment of the applicable performance metrics at the actual level of performance through Closing as determined prior to the Closing by the Board of Directors or committee thereof in accordance solely with the terms applicable to such Unvested Company PSU, by (y) the Per Share Merger Consideration.
Quantification of Company Equity Awards
At the Effective Time, each Vested Company RSU (the only type of equity award held by the non-employee members of the Board of Directors) will convert into Per Share Merger Consideration in the manner described above. Based on the assumptions described above under the section of this proxy statement captioned “—Interests of Executive Officers and Directors of Splunk in the Merger—Certain Assumptions,” the estimated aggregate amount that would become payable to Splunk’s ten (10) non-employee directors in respect of their Vested Company RSUs is $5,325,597, which excludes any grants of Company RSUs that may be made by Splunk to the non-employee directors following the date of this proxy statement.
At the Effective Time, each Unvested Company RSU and Unvested Company PSU held by Splunk’s executive officers will convert into unvested cash awards in the manner described above and will generally remain subject to the same time-based vesting conditions and other terms and conditions as were applicable immediately prior to and after giving effect to the Effective Time, except as described below under the section of this proxy statement captioned “—Interests of Executive Officers and Directors of Splunk in the Merger—Compensation Arrangements with Parent.” Each unvested cash award will vest in the event that the executive officer experiences a termination of employment by Splunk and/or Parent without cause or by the executive officer for good reason, in either case, within six (6) months prior to the Effective Time or within eighteen (18) months following the Effective Time. At the Effective Time, and as a result of the attainment of the performance metrics applicable to Company PSUs at the actual level of performance, a portion of each Company PSU will become a Vested Company PSU and will be paid to the executive officers shortly following the Effective Time. With respect to the Company PSUs granted in our fiscal years 2023 and 2024, except as described below under the section of this proxy statement captioned “—Interests of Executive Officers and Directors of Splunk in the Merger—Compensation Arrangements with Parent—Treatment of Mr. Steele’s Splunk Equity Awards,” (i) the applicable performance metrics will be determined by the Board of Directors or a committee thereof as of immediately prior to the Effective Time, and the Company PSUs will correspondingly performance-vest, effective as of the Effective Time, (ii) a portion of the performance-vested Company PSUs will become Vested Company PSUs effective as of the Effective Time on a prorated basis (based on months of service in such performance period through such date), and (iii) the portion of the performance-vested Company PSUs that do not become Vested Company PSUs will remain Unvested Company PSUs as described above. Company PSUs granted prior to our fiscal year 2023 will not become Vested Company PSUs solely as a result of the Effective Time.
See the section of this proxy statement captioned “—Interests of Executive Officers and Directors of Splunk in the Merger—Golden Parachute Compensation” for an estimate of the amounts that would become payable to each Splunk named executive officer in respect of his Unvested Company RSUs, Unvested Company PSUs and Vested
Company PSUs. Based on the assumptions described above under the section of this proxy statement captioned “—Interests of Executive Officers and Directors of Splunk in the Merger—Certain Assumptions,” the estimated aggregate amounts that would become payable to Splunk’s two current executive officers who are not named executive officers in respect of their Unvested Company RSUs is $26,411,325, Unvested Company PSUs is $30,025,465, and Vested Company PSUs is $15,605,957.
Potential Severance Payments Upon a Qualifying Termination Prior to or Following the Effective Time
Employment Agreements
Splunk maintains employment agreements with each of its current executive officers (the “Employment Agreements”). The Employment Agreements generally provide that if the executive officer is terminated by Splunk and/or Parent without cause or by the executive officer for good reason, in either case, within six (6) months prior to the Effective Time or within eighteen (18) months following the Effective Time, then the executive officer will receive:
• | a lump sum payment equal to twelve (12) months of the executive officer’s then-current base salary (twenty-four (24) months, in the case of Mr. Steele), plus 100% of the executive officer’s annual target bonus for the year of termination (twenty-four (24) months of annual target bonus plus a pro-rated portion of the annual target bonus for the year of termination, in the case of Mr. Steele), less any amounts already paid for such year; |
• | payment of up to twelve (12) months of COBRA premiums to continue health insurance coverage for our executive officers and their eligible dependents (eighteen (18) months, in the case of Mr. Steele) or a lump sum payment of $24,000 ($36,000, in the case of Mr. Steele); and |
• | accelerated vesting of then-outstanding equity awards, as discussed above in “—Interests of Executive Officers and Directors of Splunk in the Merger— Quantification of Company Equity Awards”. |
Severance benefits are subject to the executive officer timely executing and not revoking a release of claims in favor of Splunk. The Employment Agreements further provide that if an executive officer receives any amount that is subject to the “golden parachute” excise tax imposed pursuant to Section 4999 of the Code, the amount of the payments to be made to the executive officer will be reduced to the extent necessary to avoid imposition of the excise tax, but only if the after-tax amount of the reduced payments exceeds the after-tax amount that the executive officer would receive without any such reduction following imposition of the excise tax and all income and related taxes.
Messrs. Steele, Smith and Casey have entered into employment agreements with Parent providing for severance benefits, as described below under “—Compensation Arrangements with Parent.” See the section of this proxy statement captioned “—Interests of Executive Officers and Directors of Splunk in the Merger—Golden Parachute Compensation” for an estimate of the amounts that each of Splunk’s named executive officers would receive under their respective employment agreements upon a qualifying termination of employment. Based on the assumptions described above under “—Certain Assumptions”, the estimated aggregate amount of the cash severance payments to be provided to Splunk’s two executive officers who are not named executive officers under their employment agreements with Parent upon a qualifying termination of employment is $2,115,000.
FY25 Annual Bonus
To the extent the Effective Time occurs in Splunk’s fiscal year 2025 or prior to the payment of annual incentive bonuses in respect of fiscal year 2025, and if a continuing employee, including our executive officers, is terminated from employment following the Effective Time by Parent and its affiliates (including the Surviving Corporation and its subsidiaries) without cause, the continuing employee would receive a bonus for fiscal year 2025 of no less than the pro-rata portion of such annual bonus that such continuing employee would have been entitled to receive under the applicable annual incentive plan determined based on the level of achievement of the applicable performance criteria as of the Effective Time as determined by the Board of Directors or a committee thereof prior to the Effective Time, and pro-rated based on the number of days in the applicable portion of the performance period that have elapsed as of the Effective Time. As the Effective Time for purposes of this disclosure is assumed to be October 15, 2023, termination without cause protection for the pre-Closing portion of the fiscal year 2025 annual bonus will not be in effect.
FY26 Annual Bonus
To the extent the Effective Time occurs in Splunk’s fiscal year 2026 or prior to the payment of annual incentive bonuses in respect of fiscal year 2026, and if a continuing employee, including our executive officers, is terminated from
employment following the Effective Time by Parent and its affiliates (including the Surviving Corporation and its subsidiaries) without cause, the continuing employee would receive a bonus for fiscal year 2026 of no less than the pro-rata portion of such annual bonus that such continuing employee would have been entitled to receive under the applicable annual incentive plan determined based on the level of achievement of the applicable performance criteria as of the Effective Time as determined by the Board of Directors or a committee thereof prior to the Effective Time, and pro-rated based on the number of days in the applicable portion of the performance period that have elapsed as of the Effective Time. As the Effective Time for purposes of this disclosure is assumed to be October 15, 2023, termination without cause protection for the pre-Closing portion of the fiscal year 2026 annual bonus will not be in effect.
Retention Bonus
Splunk is permitted to provide Mr. Roberts with a cash retention bonus of $4,000,000. As of the date of this proxy statement, Mr. Roberts has not yet received the retention bonus.
280G Mitigation Actions
In connection with the Merger, Splunk may, subject to prior consultation with Parent, take certain tax-planning actions to mitigate any adverse tax consequences under the “golden parachute” provisions of Sections 280G and 4999 of the Code that could arise in connection with the completion of the Merger. The tax-planning and mitigation actions may include accelerating payments that would have vested and otherwise become payable in calendar year 2024 or later in the ordinary course of business. As of the date of this proxy statement, the Board of Directors or a committee thereof has not approved specific actions that it will take to mitigate the potential impact of the excise tax imposed on amounts that constitute “excess parachute payments” under Section 280G of the Code on any affected individuals (including Splunk’s executive officers).
Compensation Arrangements with Parent
On September 20, 2023, Parent entered into an at-will employment agreement with each of Messrs. Steele, Casey and Smith (collectively, the “Parent Employment Agreements”), setting forth the terms and conditions of these executives’ continued employment with Parent from and after Closing. The effectiveness of the Parent Employment Agreements is contingent on Closing. The chairman of our Board of Directors approved the retention of outside legal counsel to represent the executives in the Parent Employment Agreement negotiations.
The Parent Employment Agreements provide, following the Effective Time of the Merger, for (a) a base salary of $900,000, $575,000 and $600,000 for Messrs. Steele, Casey and Smith, respectively, (b) participation in Parent’s bonus plan, (c) payment of a cash retention bonus equal to (i) for Mr. Steele, $15,000,000, of which $5,000,000 will vest on the 12-month anniversary of Closing and the remainder will vest in quarterly installments over the immediately following twenty-four (24) months and (ii) for each of Messrs. Casey and Smith, $12,000,000, of which $2,400,000 will vest upon Closing and the remainder will vest in quarterly installments over a three-year period ending on the third anniversary of Closing, in each case, subject to continued employment on the applicable vesting date, (d) for each of Messrs. Casey and Smith, a one-time award of restricted stock units of Parent with a grant date value of $6,000,000, of which one-third will vest on the first anniversary of Closing and the remainder will vest in equal quarterly installments over the following two-year period ending on the third anniversary of Closing, subject to continued employment on the applicable vesting date, and (e) for Mr. Smith, payment of a cash bridging bonus of $120,000 for each of the next three years following his commencement of employment with Parent, subject to continued employment on the applicable payment date.
Treatment of Mr. Steele’s Splunk Equity Awards
Under Mr. Steele’s Parent Employment Agreement, (a) Mr. Steele’s Company RSUs that are converted into Unvested Cash (RSUs) shall be subject to the same vesting schedule as Mr. Steele’s corresponding Splunk RSUs, provided that all outstanding Unvested Cash (RSUs) shall vest and be paid on the first anniversary of Closing and (b) Mr. Steele’s Company PSUs that are converted into Unvested Cash (PSUs) will vest and be paid 50% on Closing and 50% on the first anniversary of Closing, in each case, subject to Mr. Steele’s continued employment through the applicable vesting date.
Termination Protections for Mr. Steele
Under Mr. Steele’s Parent Employment Agreement, (a) if Mr. Steele’s employment is terminated without cause, (b) if Mr. Steele resigns with good reason, (c) in the event of Mr. Steele’s death or permanent disability, or (d) if Mr. Steele voluntarily terminates active employment following the first anniversary of Closing (as such terms are defined in
Mr. Steele’s Parent Employment Agreement), in each case, within eighteen (18) months following Closing, then, subject to Mr. Steele’s execution of an effective release of claims, Mr. Steele will be entitled to receive (i) a cash amount as severance equal to the sum of (x) twenty-four (24) months of Mr. Steele’s monthly base salary, (y) two times 125% of Mr. Steele’s annual base salary, and (z) a pro-rated portion of Mr. Steele’s target annual bonus, (ii) the cost of COBRA coverage for eighteen (18) months, which amount will be grossed up to cover applicable taxes, and (iii) if such termination occurs within twelve (12) months following Closing, an amount equal to one-third of Mr. Steele’s retention bonus, as described above.
Under Mr. Steele’s Parent Employment Agreement, (a) if Mr. Steele’s employment is terminated without cause, (b) if Mr. Steele resigns with good reason, or (c) in the event of Mr. Steele’s death or permanent disability, then, subject to Mr. Steele’s execution of an effective release of claims, any Unvested Cash (RSUs) or Unvested Cash (PSUs) held by Mr. Steele will vest.
Termination Protections for Messrs. Casey and Smith
Under each of Messrs. Casey’s and Smith’s Parent Employment Agreement, (a) if an executive’s employment is terminated without cause, (b) if an executive resigns with good reason, or (c) in the event of an executive’s death or permanent disability (as such terms are defined in Messrs. Casey’s and Smith’s Parent Employment Agreement), in each case, within eighteen (18) months following Closing, then, subject to executive’s execution of an effective release of claims, such executive will be entitled to receive (i) a cash amount as severance equal to the sum of (x) twelve (12) months of executive’s monthly base salary, and (y) a target annual bonus for the year in which executive’s termination occurs, and (ii) the cost of COBRA coverage for twelve (12) months, which amount will be grossed up to cover applicable taxes.
Under each of Messrs. Casey’s and Smith’s Parent Employment Agreement, (a) if an executive’s employment is terminated without cause, (b) if an executive resigns with good reason, or (c) in the event of executive’s death or permanent disability, in each case, within thirty-six (36) months of Closing, then, subject to executive’s execution of an effective release of claims, any Unvested Cash (RSUs) or Unvested Cash (PSUs) held by such executive will vest.
Following Closing, the severance benefits set forth in the Parent Employment Agreements will supersede the severance benefits previously set forth in the executives’ Employment Agreements.
The Parent Employment Agreements require each executive to execute a non-competition agreement restricting the executive from competing with Parent and from soliciting employees of Parent, (a) with respect to Mr. Steele, until the second anniversary of Closing and (b) with respect to Messrs. Casey and Smith, during employment and for a period of twelve (12) months following termination of employment.
As of the date of this proxy statement, no other Splunk executive officers or any non-employee directors of Splunk have entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or one or more of its affiliates. The Merger is not conditioned upon any executive officer or director of Splunk entering into any such agreement, arrangement or understanding. However, it is anticipated that some or all of the other Splunk executive officers may discuss or enter into agreements with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or one or more of its affiliates, effective as of the completion of the Merger.
Indemnification and Insurance
Pursuant to the terms of the Merger Agreement, Splunk’s directors and executive officers will be entitled to certain ongoing indemnification and coverage for a period of six (6) years following the effective time under directors’ and officers’ liability insurance policies from the surviving corporation. This indemnification and insurance coverage is further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”
Golden Parachute Compensation
The table below sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive officer of Splunk that is based on or otherwise relates to the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the Merger-related compensation payable to the named executive officers of Splunk.
The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table,
and do not reflect certain compensation actions that may occur before completion of the Merger transaction. For purposes of calculating such amounts, the following assumptions were used:
• | The Effective Time is October 15, 2023, which is the assumed date of Closing solely for purposes of the disclosure in this section; |
• | Each named executive officer of Splunk experiences a qualifying termination of employment (i.e., a termination of employment by Splunk and/or Parent without “cause” or by the executive officer for “good reason,” as such terms are defined in the relevant plans and agreements) immediately following the assumed Effective Time of October 15, 2023; |
• | The performance metrics applicable to Company PSUs granted in and after our fiscal year 2023 will have been achieved at the maximum level of performance, and the stock price metrics applicable to Company PSUs granted prior to our fiscal year 2023 will not have been achieved; |
• | The potential payments and benefits described in this section are not at a level subject to a “cutback” to avoid the “golden parachute” excise tax that may be imposed under Section 4999 of the Code; and |
• | No named executive officer receives any additional equity grants or other awards on or prior to the assumed Effective Time of October 15, 2023. |
For purposes of this disclosure, Splunk’s named executive officers are: (i) Gary Steele, President and Chief Executive Officer; (ii) Graham Smith, former Interim Chief Executive Officer and current non-employee Chairman of the Board of Directors; (iii) Brian Roberts, Senior Vice President and Chief Financial Officer; and (iv) Scott Morgan, Senior Vice President, Chief Legal Officer, Global Affairs and Secretary.
Although the following individuals are considered named executive officers for purposes of this disclosure, none hold any unvested or outstanding Splunk equity awards or have any interests in the Merger except as they may be Splunk Stockholders: (i) Jason Child, the former Senior Vice President and Chief Financial Officer of Splunk, who terminated employment with Splunk effective as of November 1, 2022; (ii) Teresa Carlson, the former President and Chief Growth Officer of Splunk, who terminated employment with Splunk effective as of March 31, 2022; and (iii) Shawn Bice, the former President of Products and Technology of Splunk, who terminated employment with Splunk effective as of June 16, 2022.
Name | | | Cash ($)(1) | | | Equity ($)(2) | | | Perquisites/ Benefits ($)(3) | | | Total ($)(4) |
Gary Steele | | | $9,842,123 | | | $90,343,609 | | | $30,802 | | | $100,216,534 |
Graham Smith | | | — | | | $327,031 | | | — | | | $327,031 |
Brian Roberts | | | $5,150,000 | | | $50,700,324 | | | $32,624 | | | $55,882,948 |
Scott Morgan | | | $945,000 | | | $22,965,865 | | | $33,386 | | | $23,944,251 |
(1) | Cash. Represents (i) the cash severance payable to Messrs. Steele, Roberts and Morgan upon a termination of employment by Splunk and/or Parent without cause or by such named executive officer for good reason, in each case, pursuant to the named executive officer’s Employment Agreement (or, in the case of Mr. Steele after the Effective Time, his Parent Employment Agreement) and (ii) for Mr. Roberts, and to the extent Splunk provides him with the permitted cash retention bonus, his $4,000,000 retention bonus. The cash severance payable to Messrs. Steele, Roberts and Morgan are “double-trigger” payments, which means that the amounts will become payable only upon a qualifying termination of employment within six (6) months prior to and eighteen (18) months following Closing. The portion of the retention bonus under Mr. Steele’s Parent Employment Agreement included in this disclosure is “double-trigger” in nature in that it becomes payable to him by Parent upon a termination of employment within twelve (12) months following Closing. The retention bonus that may become payable to Mr. Roberts is deemed to be “single-trigger” in nature in that it is being paid to him by Splunk in connection with the transaction. Mr. Smith does not have any entitlement to any transaction-related cash compensation. For further details regarding the cash severance and the retention bonus that may become payable to Splunk’s named executive officers, see “—Interests of Executive Officers and Directors of Splunk in the Merger—Employment Agreements,” “—Interests of Executive Officers and Directors of Splunk in the Merger—Retention Bonus” and “—Interests of Executive Officers and Directors of Splunk in the Merger—Compensation Arrangements with Parent.” The estimated amount of each such payment is shown in the following table: |
Name | | | Base Salary Severance ($) | | | Annual Target Bonus Severance ($) | | | Prorated Annual Target Bonus ($) | | | Retention Bonus ($) | | | Total ($) |
Gary Steele | | | $1,800,000 | | | $2,250,000 | | | $792,123 | | | $5,000,000 | | | $9,842,123 |
Brian Roberts | | | $575,000 | | | $575,000 | | | — | | | $4,000,000 | | | $5,150,000 |
Scott Morgan | | | $525,000 | | | $420,000 | | | — | | | — | | | $945,000 |
(2) | Equity. Represents (i) the value of those Company PSUs held by Messrs. Steele, Roberts and Morgan that will become Vested Company PSUs in accordance with their terms (or, in the case of Mr. Steele, in accordance with the terms of his Parent Employment Agreement) and in connection with the Effective Time, (ii) the value of those Company RSUs held by Mr. Smith that will become Vested Company RSUs effective as of the Effective Time, and (iii) the value of those Unvested Company RSUs and Unvested Company PSUs held by Messrs. Steele, Roberts and Morgan that will vest and become payable upon a termination of employment by Splunk and/or Parent without cause or by such named executive officer for good reason, in each case, pursuant to the named executive officer’s Employment Agreement (or, in the case of Mr. Steele after the Effective Time, his Parent Employment Agreement). The accelerated vesting of those Company PSUs that become Vested Company PSUs in accordance with their terms (or, in the case of Mr. Steele after the Effective Time, in accordance with the terms of his Parent Employment Agreement) and in connection with the Effective Time are “single-trigger” payments, which means that the amounts will vest and become payable solely as a result of continued employment through the Effective Time. The accelerated vesting of those Company RSUs held by Mr. Smith that become Vested Company RSUs in accordance with their terms and in connection with the Effective Time are also “single-trigger” payments. The accelerated vesting of Unvested Company RSUs and Unvested Company PSUs held by Messrs. Steele, Roberts and Morgan are “double-trigger” payments, which means that they will vest and become only upon a qualifying termination of employment within six (6) months prior to and eighteen (18) months following the Closing. For further details regarding the treatment of the Company Equity Awards held by the named executive officers, see “—Interests of Executive Officers and Directors of Splunk in the Merger—Treatment and Quantification of Company Equity Awards,” “—Interests of Executive Officers and Directors of Splunk in the Merger—Employment Agreements” and “—Interests of Executive Officers and Directors of Splunk in the Merger—Compensation Arrangements with Parent.” The estimated amount of each such payment is shown in the following table: |
Name | | | Vested Company PSUs | | | Unvested Company PSUs | | | Vested Company RSUs | | | Unvested Company RSUs | | | Total ($) | ||||||||||||
| | Number (#) | | | Value ($) | | | Number (#) | | | Value (#) | | | Number (#) | | | Value ($) | | | Number (#) | | | Value ($) | | ||||
Gary Steele | | | 223,291 | | | $35,056,765 | | | 223,292 | | | $35,056,766 | | | — | | | — | | | 128,854 | | | $20,230,078 | | | $90,343,609 |
Graham Smith | | | — | | | — | | | — | | | — | | | 2,083 | | | $327,031 | | | — | | | — | | | $327,031 |
Brian Roberts | | | 72,482 | | | $11,379,674 | | | 190,648 | | | $29,931,736 | | | — | | | — | | | 59,802 | | | $9,388,914 | | | $50,700,324 |
Scott Morgan | | | 40,857 | | | $6,414,549 | | | 73,205 | | | $11,493,247 | | | — | | | — | | | 32,217 | | | $5,058,069 | | | $22,965,865 |
(3) | Perquisites/Benefits. Represents the estimated total cost to Splunk and/or Parent of the continued medical, dental and vision benefits provided to Messrs. Steele, Roberts and Morgan pursuant to the Employment Agreements and after the Effective Time to Mr. Steele pursuant to his Parent Employment Agreement. The amounts shown in this column are “double-trigger” and will not be payable unless the named executive officer’s employment is terminated by the employer without cause or by the named executive officer for good reason, in each case within six (6) months prior to and eighteen (18) months following the Closing. Mr. Smith does not have any entitlement to any transaction-related benefits. For further details regarding these benefits, see “—Interests of Executive Officers and Directors of Splunk in the Merger—Employment Agreements” and “—Interests of Executive Officers and Directors of Splunk in the Merger—Compensation Arrangements with Parent—Termination Protections for Mr. Steele.” |
(4) | Section 280G. The total amounts do not reflect any reductions to “parachute payments” as defined by Code Section 280G in order to avoid any applicable excise tax thereunder. A definitive analysis of the need, if any, for such reductions will depend on the effective time, the date of termination (if any) of the named executive officer and certain other assumptions used in the applicable calculations. |
Parent and Merger Sub have represented to Splunk that, as of September 20, 2023, they had and will have available to them sufficient funds to make the payments required to be paid at the Effective Time by Parent and Merger Sub under the Merger Agreement. This includes funds needed to: (1) pay Splunk Stockholders the amounts due under the Merger Agreement for their Splunk common stock and (2) make payments in respect of outstanding Company Options, Company RSUs and Company PSUs payable at the Effective Time pursuant to the Merger Agreement. Notwithstanding anything in the Merger Agreement to the contrary, in no event shall the receipt or availability of any funds or financing by or to Parent or any of its affiliates or any other financing transaction be a condition to any of the obligations of Parent or Merger Sub under the Merger Agreement.
The closing of the Merger will take place at a time specified by Splunk, Parent and Merger Sub on the third (3rd) business day following the satisfaction or waiver of all conditions to closing of the Merger (other than conditions that by their terms are to be satisfied at the closing but subject to the satisfaction or waiver of such conditions) (as described in the section of this proxy statement captioned, “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger”) or such other time agreed to in writing by Parent, Splunk and Merger Sub.
General
Under the DGCL, Splunk Stockholders have the right to demand appraisal and to receive payment in cash for the fair value of their shares of Splunk common stock as determined by the Delaware Court of Chancery, together with interest, if any, as determined by the Delaware Court of Chancery, in lieu of the Per Share Merger Consideration,
subject to the requirements and limitations set forth in Section 262 of the DGCL described herein. These rights are known as appraisal rights. Splunk Stockholders of record and beneficial owners electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. Strict compliance with the statutory procedures is required to perfect appraisal rights under Delaware law.
This section is intended as a brief summary of the material provisions of Delaware law pertaining to appraisal rights. The following discussion, however, is not a complete summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, which is attached to this proxy statement as Annex D and incorporated into this proxy statement by reference. Failure to comply strictly with the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights. The following discussion does not constitute any legal or other advice, nor does it constitute a recommendation as to whether or not a Splunk Stockholder of record or beneficial owner should exercise his, her or its right to seek appraisal under Section 262 of the DGCL.
Subject to certain exceptions specified in Section 262 of the DGCL and summarized below, holders of record, and beneficial owners, of shares of Splunk common stock who: (1) submit a written demand for appraisal of such Person’s shares to Splunk prior to the vote on the Merger Agreement; (2) have not consented to or otherwise voted in favor of the Merger Agreement or otherwise withdrawn, lost or waived appraisal rights; (3) continuously are the record holders or beneficial holders, as applicable, of such shares through the Effective Time; and (4) otherwise comply with the applicable procedures and requirements set forth in Section 262 of the DGCL will be entitled to have their shares appraised by the Delaware Court of Chancery and receive payment in cash of the “fair value” of such shares (as determined by the Delaware Court of Chancery, exclusive of any element of value arising from the accomplishment or expectation of the Merger) as of the completion of the Merger instead of the Per Share Merger Consideration. Any such Splunk Stockholder of record or beneficial holder awarded “fair value” for the holder’s shares by the court would receive payment of that fair value in cash, together with interest, if any, in lieu of the right to receive the Per Share Merger Consideration. It is possible that any such “fair value” as determined by the Delaware Court of Chancery may be more or less than, or the same as the Per Share Merger Consideration.
Section 262 of the DGCL requires that Splunk Stockholders for whom appraisal rights are available be notified not less than 20 days before the Special Meeting. Either a copy of Section 262 of the DGCL or information directing Splunk Stockholders to a publicly available electronic resource at which Section 262 of the DGCL may be accessed without subscription or cost must be included with such notice. This Proxy Statement constitutes our notice to the Splunk Stockholders of the availability of appraisal rights in connection with the Merger in compliance with the requirements of Section 262 of the DGCL, which is attached to this proxy statement as Annex D and incorporated into this proxy statement by reference. Splunk Stockholders of record and beneficial owners who wish to exercise appraisal rights or who wish to preserve the right to do so should review the following summary and the applicable statutory provisions carefully. Failure to comply with the procedures of Section 262 of the DGCL in a timely and proper manner will result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Splunk unless certain stock ownership conditions are satisfied by the Splunk Stockholders of record and beneficial owners seeking appraisal. Because of the complexity of the procedures for exercising the right to seek appraisal, Splunk Stockholders of record and beneficial owners who wish to exercise appraisal rights are urged to consult with their own legal and financial advisors in connection with compliance under Section 262 of the DGCL. A Splunk Stockholder of record or beneficial owner who loses, waives or otherwise fails to properly exercise his, her or its appraisal rights will be entitled to receive the Per Share Merger Consideration.
How to Exercise and Perfect Your Appraisal Rights
If you are a Splunk Stockholder of record or a beneficial holder and wish to exercise the right to seek an appraisal of your shares of Splunk common stock, you must satisfy each of the following conditions:
• | You must deliver to Splunk a written demand for appraisal before the vote on approval of the Merger Agreement at the Special Meeting. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the Merger Agreement. Voting against or failing to vote for the Merger Agreement by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL. The demand must reasonably inform us of the identity of the Splunk Stockholder of record or beneficial holder and the intention of such holder to demand appraisal of his, her or its shares. A failure by such holder to make a written demand for appraisal before the vote with respect to the Merger Agreement is taken will constitute a waiver of appraisal rights. |
• | In the case of a Splunk Stockholder of record, you must not vote in favor of, or consent in writing to, the Merger Agreement. A vote in favor of the Merger Agreement, by proxy submitted by mail, over the Internet or by telephone, will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. A proxy which does not contain voting instructions will, unless revoked, be voted in favor of the Merger Agreement. Therefore, a Splunk Stockholder who submits a proxy and who wishes to exercise appraisal rights must instruct the proxy to vote against the Merger Agreement or abstain from voting on the Merger Agreement. In the case of a beneficial owner, you must not instruct your broker, bank or other nominee to vote your share(s), or abstain from voting, in favor of the Merger Agreement; |
• | You must continuously hold or beneficially own, as applicable, shares of Splunk common stock from the date of making the demand through the Effective Time. You will lose your appraisal rights if you transfer the shares before the Effective Time; and |
• | You must otherwise comply with the requirements of Section 262 of the DGCL, including the requirement that you, another Company Stockholder who has complied with the requirements of Section 262 or Splunk must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. Splunk is under no obligation to file any petition and has no present intention of doing so. |
If you fail to comply with any of these conditions and the Merger is completed, you will be entitled to receive the Per Share Merger Consideration, but you will have no appraisal rights with respect to your shares of Splunk common stock.
In addition, because shares of Splunk common stock are listed on a national securities exchange and is expected to continue to be listed on such exchange immediately prior to the consummation of the Merger, the Delaware Court of Chancery will dismiss appraisal proceedings as to all shares of Splunk common stock, unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Splunk common stock eligible for appraisal or (2) the value of the Per Share Merger Consideration for such total number of shares entitled to appraisal exceeds $1 million (collectively, the “Ownership Thresholds”). At least one of the Ownership Thresholds must be met in order for Splunk Stockholders to be entitled to seek appraisal with respect to such shares of Splunk common stock.
In the case of a record holder of shares of Splunk common stock, voting, via the Internet during the Special Meeting or by proxy, against, abstaining from voting on or failing to vote on the Merger Agreement will not constitute a written demand for appraisal as required by Section 262 of the DGCL. The written demand for appraisal is in addition to and separate from any proxy or vote. If you want to exercise your appraisal rights, you must not vote your shares of Splunk common stock via the Internet during the Special Meeting or by proxy in favor of the Merger Agreement.
In the case of a beneficial owner of shares of Splunk common stock, brokers, banks and other nominees that hold shares in “street name” for their customers do not have discretionary authority to vote those shares on the Merger Agreement without specific voting instructions from the beneficial owner on such proposal, but such brokers, banks or other nominees will vote such shares as instructed if the beneficial owner provides such instructions. If a beneficial owner of shares of Splunk common stock held in “street name” instructs such person’s broker, bank or other nominee to vote such person’s shares in favor of the Merger Agreement, and does not revoke such instruction prior to the vote on the Merger Agreement, then such shares will be voted in favor of the Merger Agreement, and it will constitute a waiver of such beneficial owner’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, if you are a beneficial owner of shares of Splunk common stock who wishes to exercise appraisal rights, you must either not provide any instructions to your broker, bank or other nominee how to vote on the Merger Agreement or instruct such broker, bank or other nominee to vote against the Merger Agreement or abstain from voting on such proposal.
Who May Exercise Appraisal Rights
A holder of record or beneficial owner of shares of Splunk common stock issued and outstanding immediately prior to the Effective Time may assert appraisal rights for the shares of Splunk common stock held of record or beneficially in that holder’s name. A demand for appraisal must be executed by or on behalf of the Splunk Stockholder of record or beneficial owner, as applicable, and must reasonably inform Splunk of the identity of the Splunk Stockholder of record or beneficial owner and that the Splunk Stockholder intends to demand appraisal of his, her or its shares of Splunk common stock. In addition, in the case of a demand for appraisal made by a beneficial owner, the demand
must (1) reasonably identify the holder of record of the shares for which the demand is made, (2) provide documentary evidence of such beneficial owner’s beneficial ownership and a statement that such documentary evidence is a true and correct copy of what it purports to be and (3) provide an address at which such beneficial owner consents to receive notices given by Splunk and to be set forth on the verified list of persons who have demanded appraisal for their shares pursuant to Section 262(f) of the DGCL. A holder of record, such as a bank, broker or other nominee, who holds shares of Splunk common stock as a nominee or intermediary for others, may exercise his, her or its right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the holder of record.
If you elect to exercise appraisal rights under Section 262 of the DGCL, you should mail or deliver a written demand to:
Splunk Inc.
Attention: Chief Legal Officer and Corporate Secretary
270 Brannan Street
San Francisco, California 94107
(415) 848-8400
Following the announcement of the proposed transaction, Splunk received demands on behalf of purported stockholders alleging that the proxy statement filed in connection with the Merger between Splunk and Parent omitted certain purportedly material information regarding Splunk’s financial projections and Qatalyst Partners’ and Morgan Stanley’s financial analyses. Each demand requests corrective disclosures in advance of the Special Meeting. Splunk believes the demands are without merit. It is possible additional demands may be sent or lawsuits may be filed between the date of this proxy statement and consummation of the Merger.
The Merger will be accounted for as a business combination, using the acquisition method of accounting, in accordance with Accounting Standards Codification 805, Business Combinations. Parent will record assets acquired, including identifiable intangible assets, and liabilities assumed from Splunk, at their respective estimated fair values at the date of completion of the acquisition.
The following is a discussion of the U.S. federal income tax consequences of the Merger that may be relevant to Splunk Stockholders that are U.S. Holders whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of Splunk common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes). This discussion assumes that the Merger will be consummated in accordance with the Merger Agreement and as described in this proxy statement.
This discussion is for general information purposes only and does not address all of the tax consequences that may be relevant to holders in light of their particular facts and circumstances, nor does it address any consequences to holders subject to special rules under the U.S. federal income tax laws, such as:
• | banks and other financial institutions; |
• | insurance companies; |
• | brokers or dealers in securities; |
• | traders in securities who elect to apply a mark-to-market method of accounting; |
• | regulated investment companies; |
• | real estate investment trusts; |
• | tax-exempt entities or governmental organizations; |
• | mutual funds; |
• | holders who hold their shares of Splunk common stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions; |
• | holders whose functional currency is not the U.S. dollar; |
• | partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities); |
• | persons subject to the minimum tax; |
• | U.S. expatriates and former citizens or long-term residents of the United States; |
• | persons subject to special tax accounting rules as a result of any item of gross income with respect to Splunk common stock being taken into account in an “applicable financial statement” as defined in Section 451(b) of the Code; |
• | holders of options granted under any Splunk benefit plan; |
• | holders that own or have owned (directly, indirectly or constructively) 5% or more of Splunk common stock (by vote or value); and |
• | holders that received their shares of Splunk common stock pursuant to the exercise of employee stock options, through a tax-qualified retirement plan or otherwise as compensation. |
This discussion does not address any U.S. federal tax consequences other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or non-U.S. income or non-income tax consequences, or the consequences of the Medicare tax on net investment income. If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Splunk common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding shares of Splunk common stock and partners therein should consult their own tax advisors regarding the consequences of the Merger to their particular circumstances.
No ruling has been or will be sought from the IRS regarding the U.S. federal income tax consequences of the Merger described herein. This summary is not binding on the IRS or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged.
The following discussion does not address the tax consequences of any transactions effectuated before, after or at the same time as the Merger, whether or not in connection with the Merger, including, without limitation, the tax consequences to holders of options, warrants or similar rights to purchase shares of Splunk common stock.
THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATIONAL PURPOSES ONLY. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR OTHER TAX LAWS.
U.S. Holders
This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of Splunk common stock that is, for U.S. federal income tax purposes:
• | an individual who is a citizen or resident of the United States; |
• | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust (i) that is subject to the primary supervision of a court within the United States and one or more United States persons (as defined in Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person as defined in Section 7701(a)(30) of the Code. |
The receipt of cash by a U.S. Holder in exchange for shares of Splunk common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Splunk common stock surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Splunk common stock. Capital gains of a non-corporate U.S. Holder will generally be eligible for preferential U.S. federal income tax rates that are applicable to long-term capital gains if the U.S. Holder has held its Splunk common stock for more than one year as of the effective date of the Merger. Capital gains of a non-corporate U.S. Holder will generally be short-term capital gains (and taxed at ordinary income tax rates) if such U.S. Holder has held its Splunk common stock for one year or less as of the date of the Merger. The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of Splunk common stock at different times or different prices, such U.S. Holder must determine its tax basis and holding period separately for each block of Splunk common stock.
SPLUNK STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAX LAWS.
General
Splunk and Parent have agreed to use its respective reasonable best efforts to obtain all consents, waiting period expirations or terminations, waivers and approvals required to be obtained by it to consummate the Merger and the other transactions contemplated by the Merger Agreement. These approvals include approval under the HSR Act and certain other applicable antitrust and foreign investment laws.
In addition, each of Splunk and Parent have agreed, to the extent permitted by applicable legal requirements, to use its reasonable best efforts to (i) consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such filing and related submissions and presentations, (ii) coordinate with one another in preparing and exchanging such materials, (iii) keep the other party reasonably informed of the status of matters related to the Merger and the other transactions contemplated by the Merger Agreement and (iv) promptly provide one another (and its counsel) with copies of all filings, presentations (and a summary of any oral presentations) made by such party to any applicable governmental entity. Further, Parent and Splunk have agreed that no party will independently participate in any substantive meeting (including telephonically) with a governmental entity without first giving the other party notice of the meeting and, to the extent practicable and permitted by law and the governmental entity, the opportunity to attend and/or participate. Subject to these and certain other limitations, Parent shall control the strategy related to obtaining and/or satisfying all such applicable consents, waiting period expirations or terminations, waivers and approvals.
To the extent necessary to obtain such regulatory approvals, Parent will timely make proposals, execute or carry out agreements or submit to orders providing for (A) the sale, divestiture, license or other disposition or holding separate (through the establishment of a trust or otherwise) of any assets or categories of assets of Parent or Splunk or any of their respective affiliates, (B) the termination of existing relationships, contractual rights, or obligations of Parent or Splunk or any of their respective affiliates, other than in respect of foreign investment laws or (C) the termination of any venture or other arrangement of Parent or Splunk or any of their respective affiliates, other than in respect of foreign investment laws. Notwithstanding the foregoing, Parent will not be required to propose, execute, carry out or agree or submit to any action or remedy that would reasonably be expected to have, individually or in the aggregate, (i) a material impact on the Splunk business or Splunk and its subsidiaries, taken as a whole, (ii) a material impact on the benefits expected to be derived by Parent or its affiliates from the Merger and the other transactions contemplated by the Merger Agreement or (iii) a material impact on any business or product line of Parent or its affiliates (other than Splunk and its subsidiaries). Further, Parent and Splunk will, to the extent necessary to obtain the applicable regulatory approvals, engage in litigation to contest or resist any action instituted (or threatened to be
instituted) challenging the Merger as in violation of any antitrust law, or to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, limits or restricts consummation of the Merger, including by appeal of any adverse ruling.
HSR Act and U.S. Antitrust Matters
Under the HSR Act and the rules promulgated thereunder, the Merger may not be completed until Splunk and Parent each files a Notification and Report Form with the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable waiting period (and any extension thereof) has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification and report forms. If the FTC or DOJ issues a request for additional information and documents (which we refer to as a “Second Request”) prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the Second Request, unless the waiting period is terminated earlier or the parties otherwise agree to extend the waiting period.
Splunk and Parent each filed a Notification and Report Form under the HSR Act with respect to the Merger with the FTC and DOJ on October 12, 2023. The HSR waiting period is expected to expire at 11:59 p.m., Eastern time on November 13, 2023.
At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC, the DOJ or any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or seeking to require the parties to license or hold separate assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.
Other Regulatory Approvals
The Merger is also subject to clearance or approval under certain other antitrust regimes, including in the European Union. The Merger cannot be completed until all applicable waiting periods (and any extensions thereof) applicable to the Merger under the antitrust laws in the relevant jurisdictions have expired or otherwise been terminated, or all requisite clearances, consents and approvals pursuant thereto have been obtained.
The Merger is subject to the expiration or otherwise termination of the applicable review periods (and any extensions) under, or the receipt of approvals, clearances, consents and approvals under, the relevant foreign investment laws of certain jurisdictions. In addition, relevant regulatory bodies could take action under other applicable regulatory laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin or otherwise prevent the completion of the Merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under regulatory laws under some circumstances. There can be no assurance that a challenge to the Merger on regulatory grounds will not be made or, if such a challenge is made, that it would not be successful.
