This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.
Splunk Inc.
270 Brannan Street
San Francisco, California 94107
(415) 848-8400
Splunk helps customers build a safer and more resilient digital world. We deliver innovative solutions that enable organizations to harness the value of their data to help keep their digital systems secure, available and performant. As organizations’ reliance on resilient systems continues to increase, it is critical that they keep pace with increasing complexity and potential vulnerabilities associated with these systems. Our solutions for security and observability empower Security Operations, IT Operations, and Development Operations teams to maintain resilient systems by monitoring and securing them more quickly and efficiently. We also believe our offerings empower operational transformation, helping customers move from reactive, non-scalable and ineffective approaches to proactive, automated, and machine learning-assisted processes that drive better outcomes even as the scale and complexity of their technology continue to grow. We believe that the increasing reliance on digital systems has made the resilience of these systems mission-critical for nearly every organization and the sustained ongoing importance of digital systems amidst the evolving threat landscape further elevates Splunk’s central role in enabling secure and reliable operations for our customers. We were incorporated in California in October 2003 and were reincorporated in Delaware in May 2006. Splunk common stock is listed on Nasdaq under the symbol “SPLK.”
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
(408) 526-4000
Parent designs and sells a broad range of technologies that power the Internet. Parent is integrating its product portfolios across networking, security, collaboration, applications and the cloud to create highly secure, intelligent platforms for our customers’ digital businesses. These platforms are designed to help Parent’s customers manage more users, devices and things connecting to their networks to enable Parent to provide customers with a highly secure, intelligent platform for their digital business. Parent conducts its business globally and manages its business by geography. Parent’s business is organized into the following three geographic segments: Americas; Europe, Middle East, and Africa; and Asia Pacific, Japan, and China.
Parent’s products and technologies are grouped into the following categories: Networking, Security, Collaboration, and Observability. In addition to Parent’s product offerings, Parent provides a broad range of service offerings, including technical support services and advanced services. Increasingly, Parent is delivering its technologies through software and services. Parent’s customers include businesses of all sizes, public institutions, governments, and service providers, including large webscale providers. These customers often look to Parent as a strategic partner to help them use information technology to differentiate themselves and drive positive business outcomes.
Parent was incorporated in California in 1984 and reincorporated in Delaware in 2021. Parent’s headquarters are in San Jose, California. Parent common stock is listed on Nasdaq under the symbol “CSCO.”
Spirit Merger Corp.
170 West Tasman Drive
San Jose, California 95134
(408) 526-4000
Merger Sub is a wholly owned subsidiary of Parent and was formed on September 14, 2023, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. It has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Splunk and the separate corporate existence of Merger Sub will cease, with Splunk continuing as the Surviving Corporation. As a result of the Merger, Splunk will become a wholly owned subsidiary of Parent, and Splunk common stock will no longer be publicly traded and will be delisted from Nasdaq. In addition, Splunk common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.
The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).
If the Merger Agreement is not adopted by Splunk Stockholders, or if the Merger is not completed for any other reason:
i. | Splunk Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Splunk common stock pursuant to the Merger Agreement; |
ii. | (a) Splunk will remain an independent public company; (b) Splunk common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act; and (c) Splunk will continue to file periodic reports with the SEC; |
iii. | we anticipate that (a) management will operate the business in a manner similar to that in which it is being operated today and (b) Splunk Stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect to Splunk’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which Splunk operates and economic conditions; |
iv. | the price of Splunk common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of Splunk common stock would return to the price at which it trades as of the date of this proxy statement; |
v. | the Board of Directors will continue to evaluate and review Splunk’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that Splunk’s business, prospects and results of operations will be adversely impacted; and |
vi. | under certain specified circumstances, Splunk is required to pay Parent a termination fee equal to $1,000,000,000, and under certain other specified circumstances, Parent is required to pay Splunk a termination fee equal to $1,478,000,000, in each case, in connection with, and upon, the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fees.” |
Splunk Common Stock
At the Effective Time, each share of Splunk common stock (other than Excluded Shares, which include, for example, shares of Splunk common stock owned by Splunk Stockholders who have properly exercised and not withdrawn their statutory rights of appraisal in accordance with Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the Per Share Merger Consideration, less any applicable withholding taxes.
After the Merger is completed, you will have the right to receive the Per Share Merger Consideration in respect of each share of Splunk common stock that you own (less any applicable withholding taxes), but you will no longer have any rights as a Splunk Stockholder (except that Splunk Stockholders who properly exercise their appraisal rights will have a right to receive payment of the “fair value” of their shares as determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “Merger Agreement—Dissenters’ Rights.”
Treatment of Company Equity Awards
The Merger Agreement provides that Company Equity Awards outstanding immediately prior to the Effective Time will be subject to the following treatment:
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 Option that is unexpired, unexercised and outstanding as of immediately prior to the Effective Time, 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 Option, Vested Company RSU or Vested Company PSU, less any applicable taxes.
For each Vested Company Option, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock subject to such Vested Company Option by (y) the Per Share Merger Consideration less the exercise price per share of such Vested Company Option in effect immediately prior to the Effective Time.
For each Vested 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 Vested Company RSU by (y) the Per Share Merger Consideration.
For each Vested Company PSU, 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 Shares. At the Effective Time, each Unvested Company Share will remain subject to the same restrictions, vesting arrangements or repurchase rights that were applicable to such Unvested Company Shares immediately prior to or at the Effective Time, and will become payable by Parent on the date that such Unvested Company Share would have become vested under the vesting schedule in place for such shares immediately prior to or at the Effective Time, and will otherwise remain subject to substantially the same terms and conditions as were applicable to the underlying Unvested Company Share immediately prior to the Effective Time, and each outstanding repurchase right will be assigned to Parent in the Merger and will thereafter be exercisable by Parent upon the same terms and subject to the same conditions that were in effect immediately prior to the Effective Time.
Unvested Company Options and 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 Option that is unexpired, unexercised and outstanding as of immediately prior to the Effective Time, and 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 Option or Unvested Company RSU (the “Unvested Cash (Options/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 (Options/RSUs) will vest and become payable at the same time as the Unvested Company Option or Unvested Company RSU, as applicable, from which such resulting Unvested Cash (Options/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 Options or 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 Option, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock subject to such Unvested Company Option by (y) the Per Share Merger Consideration less the exercise price per share of such Unvested Company Option in effect immediately prior to the Effective Time.
