Item 1.01. Entry Into a Material Definitive Agreement.
Agreement and Plan of Merger
On June 24, 2022, Zendesk, Inc. (the "Company" or "Zendesk") entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Zoro BidCo, Inc., a
Delaware corporation ("Parent"), and Zoro Merger Sub, Inc., a Delaware
corporation and a direct wholly owned subsidiary of Parent ("Merger Sub").
Parent and Merger Sub are affiliates of funds advised by Hellman & Friedman LLC
("H&F") and Permira Advisers LLC ("Permira"). Platinum Falcon B 2018 RSC Limited
("PF") and an affiliate of GIC Private Limited will also be a direct or indirect
investor in Parent ("GIC" and, each of H&F, Permira, PF and GIC, an "Investor"
and, together, the "Investors").
The Merger Agreement provides that, among other things and on the terms and
subject to the conditions of the Merger Agreement, (a) Merger Sub will merge
with and into the Company (the "Merger"), with the Company surviving the Merger
as a wholly owned subsidiary of Parent, and (b) at the effective time of the
Merger (the "Effective Time"), each issued and outstanding share of common stock
of the Company, par value $0.01 per share (the "Company Common Stock") (other
than (i) certain shares of Company Common Stock that are issued and outstanding
and owned, directly or indirectly, by Parent or its subsidiaries, including
Merger Sub, or held by the Company or its wholly owned subsidiaries, in each
case immediately prior to the Effective Time, (ii) shares of Company Common
Stock that are issued and outstanding immediately prior to the Effective Time
and that are held by holders who have not voted in favor of the adoption of the
Merger Agreement and who have properly exercised appraisal rights in accordance
with, and who have complied with, Section 262 of the General Corporation Law of
the State of Delaware and (iii) shares of Company Common Stock underlying or
comprising unexercised, unvested or unsettled Company Stock Options and Company
RSU Awards (in each case, as defined below)) will be converted into the right to
receive $77.50 in cash, without interest (the "Merger Consideration"), subject
to any required tax withholding as provided in the Merger Agreement.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and the transactions contemplated thereby and, subject to certain
exceptions set forth in the Merger Agreement, resolved to recommend that the
Company's stockholders approve the adoption of the Merger Agreement.
If the Merger is consummated, the Company Common Stock will be delisted from the
New York Stock Exchange and deregistered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), at or after the Effective Time.
Treatment of the Company Equity Awards
At the Effective Time, each restricted stock unit award (each, a "Company RSU
Award") and option to purchase shares of Company Common Stock under the Company
stock plans (each, a "Company Stock Option") that are vested as of immediately
prior to the Effective Time (assuming achievement of performance for
performance-based Company RSU Award using the same formula provided for in the
applicable award agreement) will be converted into the right to receive an
amount in cash equal to the product of (x) the total number of shares of Company
Common Stock subject to such award and (y) the Merger Consideration (and for
Company Stock Options, less the exercise price per share of Company Common Stock
subject to such Company Stock Option (the "Cash Amount")), less any required tax
withholding and deductions. Company Stock Options with per share exercise prices
that are equal to or less than the Merger Consideration will be cancelled for no
consideration. Any unvested Company Stock Option that is in-the-money and
unvested Company RSU Award will be cancelled and converted into a cash award for
the Cash Amount (assuming achievement of performance for performance-based RSU
Awards using the same formula provided for in the applicable award agreement),
with such cash awards being subject to the same time-vesting terms and
conditions that applied to the associated award, as applicable (except for
performance-based vesting conditions), immediately prior to the Effective Time.
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Conditions to the Merger
The completion of the Merger is subject to the fulfillment or waiver of certain
customary mutual closing conditions, including (a) the affirmative vote of
holders of a majority of the outstanding shares of Company Common Stock having
approved adoption of the Merger Agreement (the "Company Stockholder Approval"),
(b) the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
receipt of certain other regulatory approvals, including from the Committee on
Foreign Investment in the United States, and (c) the absence of any law or order
by a court or other governmental entity of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the Merger. The
obligation of each party to consummate the Merger is also conditioned upon the
other party's representations and warranties being true and correct (subject to
certain customary materiality exceptions) and the other party having performed
in all material respects its obligations under the Merger Agreement, and the
obligation of Parent to consummate the Merger is additionally conditioned upon
the absence of a material adverse effect on the Company that is continuing. The
consummation of the Merger is not subject to any financing condition.
Termination
The Merger Agreement contains termination rights for each of the Company and
Parent, including, among others, (a) if the consummation of the Merger does not
occur on or before March 24, 2023 (the "End Date"), (b) if the Company
Stockholder Approval is not obtained following the meeting of the Company's
stockholders for purposes of obtaining such Company Stockholder Approval and
(c) subject to certain conditions, (i) by Parent if the Board of Directors of
the Company makes an adverse recommendation change with respect to the Merger or
(ii) by the Company if the Company wishes to terminate the Merger Agreement to
enter into a definitive agreement with respect to a Superior Proposal (as
defined by the Merger Agreement). The Company and Parent may also terminate the
Merger Agreement by mutual written consent.
The Company is required to pay Parent a termination fee of $254 million in cash
upon termination of the Merger Agreement under specified circumstances,
including, among others, the termination by Parent in the event of an adverse
recommendation change by the Board of Directors of the Company or the
termination by the Company to enter into an agreement in connection with a
Superior Proposal. The Merger Agreement also provides that a reverse termination
fee of $610 million will be payable by Parent to the Company under specified
circumstances, including, among others, if (a) Parent fails to consummate the
Merger following satisfaction or waiver of certain closing conditions and the
Company's irrevocable confirmation that it is ready to consummate the closing or
(b) Parent otherwise breaches its obligations under the Merger Agreement such
that there is a failure of certain conditions to the Merger that cannot be cured
by the End Date. The Merger Agreement also provides that, in certain
circumstances, either party may seek to compel the other party to specifically
perform its obligations under the Merger Agreement.
Financing
Parent has obtained equity, debt and preferred equity financing commitments for
the purpose of financing the transactions contemplated by the Merger Agreement.
Funds advised by the Investors have committed to capitalize Parent at the
closing of the Merger with an aggregate equity contribution equal to
$6.32 billion on the terms and subject to the conditions set forth in an equity
commitment letter. In addition, the Investors have guaranteed payment of the
reverse termination fee payable by Parent under certain circumstances, as well
as certain indemnification and reimbursement obligations that may be owed by
Parent pursuant to the Merger Agreement, subject to the terms and conditions set
forth in the Merger Agreement and a fee funding agreement provided by each
Investor to the Company.
Parent's debt commitments to finance in part the transactions contemplated by
the Merger Agreement include a $3.75 billion senior secured term loan facility
and a $350 million senior secured revolving credit facility on the terms set
forth in a debt commitment letter. The obligations of the lenders to provide
debt financing under the debt commitment letter are subject to a number of
customary conditions.
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Parent's preferred equity commitments to finance in part the transactions
contemplated by the Merger Agreement consist of $500 million of Series A
preferred equity on the terms set forth in a preferred equity commitment letter.
The obligations of the purchasers to provide preferred equity financing under
the preferred equity commitment letter are subject to a number of customary
conditions.
Pursuant to the Merger Agreement, the Company is required to use reasonable best
efforts to provide Parent with customary cooperation in connection with the debt
financing and the preferred equity financing.
Other Terms of the Merger Agreement
The Merger Agreement contains customary representations and warranties of the
Company, Parent and Merger Sub, in each case generally subject to customary
materiality qualifiers. Additionally, the Merger Agreement provides for
. . .
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On June 23, 2022, the Compensation Committee of the Board of Directors of the
Company adopted and approved a severance plan, effective June 24, 2022, for all
salaried employees of the Company, including the Company's executive
officers. This severance plan provides for different levels of severance
benefits depending on the participant's seniority with the Company in connection
with a termination of the participant's employment by the Company without cause
or by the participant for good reason (each term as defined in the severance
plan). For the Company's executive officers, those severance benefits are: (a) a
lump sum severance payment equal to the sum of the participant's (i) annual rate
of base salary and (ii) annual target bonus opportunity; (b) 12 months of COBRA
continuation; and (c) either (i) if the termination occurs prior to the
Effective Time, acceleration of equity awards that
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would have become vested within six months after termination, or (ii) if the
termination occurs during the one year after the Effective Time, acceleration of
equity awards in full pursuant to the Change in Control Acceleration Plan, which
was filed with the SEC as Exhibit 10.1 on the Current Report on Form 8-K filed
on May 15, 2015. The severance plan does not provide for a gross-up payment to
any of the executive officers, or any other eligible employee, to offset any
excise taxes that may be imposed under Section 4999 of the Internal Revenue Code
of 1986, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description of Exhibit
2.1† Agreement and Plan of Merger, dated as of June 24, 2022, by and
among Zendesk, Inc., Zoro BidCo, Inc. and Zoro Merger Sub, Inc.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The
registrant hereby undertakes to furnish supplementally copies of any of the
omitted schedules upon request by the SEC.
Additional Information and Where to Find It
This communication relates to the proposed transaction involving Zendesk, Inc.
("Zendesk"). In connection with the proposed transaction, Zendesk will file
relevant materials with the U.S. Securities and Exchange Commission (the "SEC"),
including Zendesk's proxy statement on Schedule 14A (the "Proxy Statement").
This communication is not a substitute for the Proxy Statement or for any other
document that Zendesk may file with the SEC and send to its stockholders in
connection with the proposed transaction. The proposed transaction will be
submitted to Zendesk's stockholders for their consideration. Before making any
voting decision, Zendesk's stockholders are urged to read all relevant documents
filed or to be filed with the SEC, including the Proxy Statement, as well as any
amendments or supplements to those documents, when they become available because
they will contain important information about the proposed transaction.
Zendesk's stockholders will be able to obtain a free copy of the Proxy
Statement, as well as other filings containing information about Zendesk,
without charge, at the SEC's website (www.sec.gov). Copies of the Proxy
Statement and the filings with the SEC that will be incorporated by reference
therein can also be obtained, without charge, by directing a request to Zendesk,
Inc., 989 Market Street, San Francisco, CA 94103, Attention: Investor Relations,
email: ir@zendesk.com, or from Zendesk's website www.zendesk.com.
Participants in the Solicitation
Zendesk and certain of its directors, executive officers and employees may be
deemed to be participants in the solicitation of proxies in respect of the
proposed transaction. Information regarding Zendesk's directors and executive
officers is available in Zendesk's Annual Report on Form 10-K/A, which was filed
with the SEC on May 2, 2022. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the Proxy Statement and
other relevant materials to be filed with the SEC in connection with the
proposed transaction when they become available. Free copies of the Proxy
Statement and such other materials may be obtained as described in the preceding
paragraph.
Forward-Looking Statements
This communication includes information that could constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. These statements include those set forth above
relating to the proposed transaction as well as those that may be identified by
words such as "will," "intend," "expect," "anticipate," "should," "could" and
similar expressions. These statements are subject to risks and uncertainties,
and actual results and events could differ materially from what presently is
expected, including regarding the proposed transaction. Factors leading thereto
may include, without limitation, the risks related to Ukraine conflict or the
COVID-19 pandemic on the global economy and financial markets; the uncertainties
relating to the impact of the Ukraine conflict or the COVID-19 pandemic on
Zendesk's business; economic or other conditions in the markets
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Zendesk is engaged in; impacts of actions and behaviors of customers, suppliers
and competitors; technological developments, as well as legal and regulatory
rules and processes affecting Zendesk's business; the timing, receipt and terms
and conditions of any required governmental and regulatory approvals of the
proposed transaction that could reduce anticipated benefits or cause the parties
to abandon the proposed transaction; the occurrence of any event, change or
other circumstances that could give rise to the termination of the merger
agreement entered into pursuant to the proposed transaction; the possibility
that Zendesk stockholders may not approve the proposed transaction; the risk
that the parties to the merger agreement may not be able to satisfy the
conditions to the proposed transaction in a timely manner or at all; risks
related to disruption of management time from ongoing business operations due to
the proposed transaction; the risk that any announcements relating to the
proposed transaction could have adverse effects on the market price of Zendesk's
common stock; the risk of any unexpected costs or expenses resulting from the
proposed transaction; the risk of any litigation relating to the proposed
transaction; the risk that the proposed transaction and its announcement could
have an adverse effect on the ability of Zendesk to retain customers and retain
and hire key personnel and maintain relationships with customers, suppliers,
employees, stockholders and other business relationships and on its operating
results and business generally; the risk the pending proposed transaction could
distract management of Zendesk; and other specific risk factors that are
outlined in Zendesk's disclosure filings and materials, which you can find on
www.zendesk.com, such as its 10-K, 10-Q and 8-K reports that have been filed
with the SEC. Please consult these documents for a more complete understanding
of these risks and uncertainties. This list of factors is not intended to be
exhaustive. Such forward-looking statements only speak as of the date of these
materials, and Zendesk assumes no obligation to update any written or oral
forward-looking statement made by Zendesk or on its behalf as a result of new
information, future events or other factors, except as required by law.
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