DEFM14A 1 d13689ddefm14a.htm DEFM14A DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

SLACK TECHNOLOGIES, INC.

(Name of registrant as specified in its charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 240.0-11 and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

Slack Technologies, Inc.

500 Howard Street

San Francisco, California 94105

LETTER TO STOCKHOLDERS OF SLACK TECHNOLOGIES, INC.

Dear Slack Stockholder:

On December 1, 2020, Slack Technologies, Inc. (which we refer to as “Slack” or the “Company”) entered into an Agreement and Plan of Merger (which, as it may be amended from time to time, we refer to as the “merger agreement”) with salesforce.com, inc. (which we refer to as “Salesforce”), Skyline Strategies I Inc. (which we refer to as “Merger Sub I”), and Skyline Strategies II LLC (which we refer to as “Merger Sub II”). The merger agreement provides for the merger of Merger Sub I with and into Slack, with Slack continuing as the surviving corporation (which we refer to as the “first merger”), immediately followed by a second merger of the surviving corporation into either Merger Sub II or Salesforce, with either Merger Sub II or Salesforce continuing as the surviving company, as applicable (which we refer to as the “second merger” and together with the first merger, the “mergers”).

Slack stockholders as of the close of business on the record date are invited to virtually attend a special meeting of Slack stockholders on March 2, 2021, at 10:00 a.m. Pacific Time, to consider and vote upon a proposal to adopt the merger agreement and approve the transactions contemplated thereby, a non-binding advisory proposal to approve certain compensation that may be paid or become payable to Slack’s named executive officers that is based on or otherwise relates to the mergers, and a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the transactions contemplated thereby.

Subject to the terms and conditions of the merger agreement, at the first effective time of the first merger (which we refer to as the “first effective time”), each outstanding share of Slack Class A common stock and Slack Class B common stock (other than shares of Slack common stock owned directly or indirectly by Salesforce, Slack or any of their respective subsidiaries immediately prior to the first effective time, shares of Slack common stock as to which dissenters’ rights have been properly perfected, and shares of Slack common stock covered by Slack restricted share awards) will be converted in the first merger into the right to receive 0.0776 shares of Salesforce common stock and the right to receive $26.79 in cash, without interest (which we refer to as the “merger consideration”).

Based on the closing price of Salesforce common stock on November 24, 2020, the last full unaffected trading day before the first published rumor regarding a potential merger transaction, the value of the per share merger consideration payable to holders of Slack common stock upon completion of the first merger was approximately $47.03. Based on the closing price of Salesforce common stock on January 28, 2021, the last practicable date before the date of the proxy statement/prospectus accompanying this notice, the value of the merger consideration payable to holders of Slack common stock upon completion of the first merger was approximately $44.37. Slack stockholders should obtain current stock price quotations for Salesforce common stock and Slack common stock. Salesforce common stock is traded on the New York Stock Exchange under the symbol “CRM,” and Slack common stock is traded on the New York Stock Exchange under the symbol “WORK.”

The Slack board of directors has unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the mergers, are fair to, and in the best interests of, Slack and its stockholders; has unanimously approved and declared advisable the merger agreement and the transactions contemplated thereby, including the mergers; and unanimously recommends that Slack stockholders vote “FOR” the adoption of the merger agreement and “FOR” the other proposals described in the accompanying proxy statement/prospectus.

Slack will hold a virtual special meeting of its stockholders to consider certain matters relating to the mergers. Salesforce and Slack cannot complete the mergers unless, among other things, Slack stockholders adopt the merger agreement and approve the transactions contemplated thereby.

Your vote is very important. To ensure your representation at the special meeting, complete and return the applicable enclosed proxy card or submit your proxy by phone or the Internet. Please vote promptly whether or not you expect to virtually attend the special meeting. Submitting a proxy now will not prevent you from being able to vote at the special meeting.

The proxy statement/prospectus accompanying this notice is also being delivered to Slack’s stockholders as Salesforce’s prospectus for its offering of shares of Salesforce common stock in connection with the mergers.

The obligations of Salesforce and Slack to complete the mergers are subject to the satisfaction or waiver of the conditions set forth in the merger agreement, a copy of which is included as part of the accompanying proxy statement/prospectus. The proxy statement/prospectus provides you with detailed information about the mergers. It also contains or references information about Salesforce and Slack and certain related matters. You are encouraged to read the proxy statement/prospectus carefully and in its entirety. In particular, you should carefully read the section entitled “Risk Factors” for a discussion of risks you should consider in evaluating the mergers and the issuance of shares of Salesforce common stock in connection with the mergers and how they will affect you.

 

Sincerely,

 

 

LOGO

Stewart Butterfield

Co-Founder, Chief Executive Officer and Chairperson of the Board of Directors

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying proxy statement/prospectus or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The proxy statement/prospectus is dated January 29, 2021 and is first being mailed to stockholders of Slack on or about January 29, 2021.


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LOGO

 

Slack Technologies, Inc.

500 Howard Street

San Francisco, California 94105

NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD VIRTUALLY VIA THE INTERNET ON MARCH 2, 2021

Notice is hereby given that a special meeting of stockholders of Slack Technologies, Inc. (which we refer to as “Slack”) will be held on March 2, 2021 at 10:00 a.m. Pacific Time via a live interactive audio webcast on the Internet (which we refer to as the “Slack special meeting”). You will be able to vote and submit your questions at www.virtualshareholdermeeting.com/WORK2021SM during the meeting. We are holding the special meeting for the following purposes, which are more fully described in the accompanying proxy statement/prospectus:

 

   

to adopt the Agreement and Plan of Merger, dated as of December 1, 2020 (which, as it may be amended from time to time, we refer to as the “merger agreement”), among salesforce.com, inc. (which we refer to as “Salesforce”), Skyline Strategies I Inc. (which we refer to as “Merger Sub I”), Skyline Strategies II LLC (which we refer to as “Merger Sub II”) and Slack and approve the transactions contemplated thereby (which we refer to as the “merger proposal”); and

 

   

to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Slack’s named executive officers that is based on or otherwise relates to the mergers contemplated by the merger agreement (which we refer to as the “non-binding compensation advisory proposal”).

Slack stockholder approval of the merger proposal is required to complete the mergers as contemplated by the merger agreement. Slack stockholders will also be asked to approve the non-binding compensation advisory proposal. Slack will transact no other business at the Slack special meeting. The record date for the Slack special meeting has been set as January 25, 2021. Only Slack stockholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the Slack special meeting via the Slack special meeting website or any adjournments and postponements of the Slack special meeting. For additional information regarding the Slack special meeting, see the section entitled “Special Meeting of Slack Stockholders.”

The Slack board of directors unanimously recommends that you vote “FOR” the merger proposal and “FOR” the non-binding compensation advisory proposal.

The Slack proposals are described in more detail in the accompanying proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement/prospectus.

PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE SLACK SPECIAL MEETING VIA THE SLACK SPECIAL MEETING WEBSITE. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.


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Your vote is very important. Approval of the merger proposal by the Slack stockholders is a condition to the mergers and requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote on the proposal. Slack stockholders are requested to complete, date, sign and return the enclosed proxy in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes by phone or the Internet. Simply follow the instructions provided on the enclosed proxy card. Abstentions, failure to submit a proxy or vote via the Slack special meeting website and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

 

By Order of the Board of Directors,

LOGO

David Schellhase

General Counsel and Corporate Secretary

 

San Francisco, California


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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about salesforce.com, inc. (which we refer to as “Salesforce”) and Slack Technologies, Inc. (which we refer to as “Slack”) from other documents that are not included in or delivered with this proxy statement/prospectus, including documents that Salesforce and Slack have filed with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). For a listing of documents incorporated by reference herein, see the section entitled “Where You Can Find More Information.” This information is available for you to review free of charge through the SEC’s website at www.sec.gov.

You may request copies of this proxy statement/prospectus and any of the documents incorporated by reference herein or other information concerning Salesforce or Slack, without charge, upon written or oral request to the applicable company’s principal executive offices. The respective addresses and phone numbers of such principal executive offices are listed below.

 

Salesforce   Slack

salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Attention: Investor Relations

(415) 536-6250

 

Slack Technologies, Inc.

500 Howard Street

San Francisco, California 94105

Attention: Investor Relations

(415) 630-7943

To obtain timely delivery of these documents before the Slack special meeting, Slack stockholders must request the information no later than February 23, 2021 (which is five business days before the date of the Slack special meeting).

In addition, if you have questions about the mergers or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, contact MacKenzie Partners, Inc., the proxy solicitor for Slack, toll-free at (800) 322-2885, or for brokers and banks, collect at (212) 929-5500, or by email at proxy@mackenziepartners.com. You will not be charged for any of these documents that you request.


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Salesforce (File No. 333-251658), constitutes a prospectus of Salesforce under Section 5 of the Securities Act of 1933, as amended (which we refer to as the “Securities Act”) with respect to the shares of common stock of Salesforce, par value $0.001 per share (which we refer to as “Salesforce common stock”) to be issued to Slack stockholders pursuant to the Agreement and Plan of Merger, dated as of December 1, 2020 (which, as it may be amended from time to time, we refer to as the “merger agreement”), among Salesforce, Skyline Strategies I Inc. (which we refer to as “Merger Sub I”), Skyline Strategies II LLC (which we refer to as “Merger Sub II”) and Slack.

This document also constitutes a notice of meeting and proxy statement of Slack under Section 14(a) of the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”).

Salesforce has supplied all information contained or incorporated by reference herein relating to Salesforce, and Slack has supplied all information contained or incorporated by reference herein relating to Slack.

You should rely only on the information contained in or incorporated by reference herein in connection with any vote, the giving or withholding of any proxy or any investment decision in connection with the merger agreement. Salesforce and Slack have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference herein. This proxy statement/prospectus is dated January 29, 2021, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein. Further, you should not assume that the information incorporated by reference herein is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Slack stockholders nor the issuance by Salesforce of shares of Salesforce common stock pursuant to the merger agreement will create any implication to the contrary.

All currency amounts referenced in this proxy statement/prospectus are in U.S. dollars.


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QUESTIONS AND ANSWERS ABOUT THE MERGERS AND THE SLACK SPECIAL MEETING

     1  

SUMMARY

     12  

Information About the Companies

     12  

The Mergers and the Merger Agreement

     13  

Merger Consideration

     14  

Risk Factors

     14  

Treatment of Slack Equity Awards

     14  

Salesforce’s Reasons for the Mergers

     15  

Recommendation of the Slack Board and Reasons for the Mergers

     15  

Opinions of Slack Financial Advisors

     15  

Special Meeting of Slack Stockholders

     16  

Interests of Slack Directors and Executive Officers in the Mergers

     18  

Conditions to the Mergers

     18  

No Solicitation of Other Offers by Slack

     19  

Change of Recommendation; Match Rights

     21  

Termination of the Merger Agreement

     21  

Termination Fee

     22  

HSR and Other Regulatory Approvals

     23  

Financing of the Mergers

     23  

Voting and Support Agreement

     23  

Appraisal Rights

     24  

Material U.S. Federal Income Tax Consequences of the Mergers

     24  

Litigation Relating to the Mergers

     25  

Comparison of Stockholders’ Rights

     25  

Listing of Salesforce Common Stock; Delisting and Deregistration of Slack Common Stock

     25  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SALESFORCE

     26  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SLACK

     28  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     31  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     32  

RISK FACTORS

     33  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     43  

INFORMATION ABOUT THE COMPANIES

     46  

SPECIAL MEETING OF SLACK STOCKHOLDERS

     48  

SLACK PROPOSALS

     53  

THE MERGERS

     54  

Transaction Structure

     54  

Consideration to Slack Stockholders

     54  

Background of the Mergers

     54  

Recommendation of the Slack Board and Reasons for the Mergers

     63  

Projected Financial Information

     67  

Opinion of Qatalyst Partners LP, Slack’s Financial Advisor

     70  

Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor

     77  

Salesforce’s Reasons for the Mergers

     88  

Regulatory Approvals

     90  

Interests of Slack Directors and Executive Officers in the Mergers

     91  

 

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Treatment of Slack Equity Awards

     94  

Indemnification and Insurance

     96  

Listing of Salesforce Shares; Delisting and Deregistration of Slack Common Stock

     96  

Accounting Treatment of the Mergers

     96  

Treatment of Indebtedness

     97  

Financing of the Mergers

     97  

Tax Treatment of the Mergers

     98  

Litigation Relating to the Mergers

     98  

THE MERGER AGREEMENT

     100  

The Mergers

     100  

Completion and Effectiveness of the Mergers

     100  

Merger Consideration

     101  

Fractional Shares

     102  

Exchange of Slack Common Stock for the Merger Consideration

     102  

Treatment of Slack Equity Awards

     102  

Representations and Warranties

     104  

Material Adverse Effect

     106  

Conduct of Business Before Completion of the Mergers

     107  

Slack Special Meeting and Board Recommendation

     111  

No Solicitation of Other Offers by Slack

     112  

Change of Recommendation; Match Rights

     115  

Access

     116  

Tax Matters

     116  

Financing Cooperation

     117  

Treatment of Indebtedness

     117  

HSR and Other Regulatory Approvals

     118  

Employee Matters

     120  

Directors’ and Officers’ Indemnification and Insurance

     120  

Other Covenants and Agreements

     121  

Conditions to the Mergers

     121  

Termination of the Merger Agreement

     123  

Termination Fee

     125  

Effect of Termination

     126  

Expenses

     126  

Amendments, Enforcements and Remedies, Extensions and Waivers

     126  

VOTING AND SUPPORT AGREEMENT

     127  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS

     129  

DESCRIPTION OF SALESFORCE CAPITAL STOCK

     133  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     135  

APPRAISAL RIGHTS

     141  

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/DIRECTORS OF SLACK

     146  

LEGAL MATTERS

     150  

EXPERTS

     151  

HOUSEHOLDING OF PROXY MATERIALS

     152  

FUTURE STOCKHOLDER PROPOSALS

     153  

WHERE YOU CAN FIND MORE INFORMATION

     154  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGERS AND THE SLACK SPECIAL MEETING

The following are answers to certain questions that you may have regarding the Slack special meeting. You are urged to read carefully the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this document.

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

You are receiving this proxy statement/prospectus because Salesforce, Slack, Merger Sub I and Merger Sub II have entered into the merger agreement. The merger agreement provides for two mergers: (a) Merger Sub I will be merged with and into Slack, with Slack continuing as the surviving corporation (which we refer to as the “first merger”), and (b) immediately following the first merger, Slack, as the surviving corporation in the first merger, will be merged with and into either (i) if a revised structure notice (as defined in “—The Mergers and the Merger Agreement”) has not been delivered by Salesforce before the closing, Merger Sub II, with Merger Sub II continuing as a wholly owned subsidiary of Salesforce, or (ii) if a revised structure notice has been delivered by Salesforce before the closing, Salesforce, with Salesforce surviving the second merger (which we refer to as the “second merger” and together with the first merger, the “mergers”), and your vote is required in connection with the mergers. The merger agreement, which governs the terms of the mergers, is attached to this proxy statement/prospectus as Annex A.

The merger agreement must be adopted by the Slack stockholders in accordance with the General Corporation Law of the State of Delaware (which we refer to as the “DGCL”) in order for the mergers to be consummated. Slack is holding a virtual special meeting of its stockholders (which we refer to as the “Slack special meeting”) to obtain that approval. Slack stockholders will also be asked to vote on a non-binding advisory proposal to approve certain compensation that may be paid or become payable to Slack’s named executive officers that is based on or otherwise relates to the mergers and to approve the adjournment of the special meeting, from time to time, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the merger proposal. Your vote is very important. We encourage you to submit a proxy to have your shares of Class A common stock, par value $0.0001 per share, of Slack (which we refer to as “Slack Class A common stock”) and Class B common stock, par value $0.0001 per share, of Slack (which we refer to as “Slack Class B common stock” and collectively with the Slack Class A common stock, the “Slack common stock”) voted as soon as possible.

 

Q:

When and where will the special meeting take place?

 

A:

The Slack special meeting will be held virtually via the Internet at 10:00 a.m. Pacific Time, on March 2, 2021. The Slack special meeting will be held solely via live webcast and there will not be a physical meeting location. Slack stockholders will be able to attend the Slack special meeting online and vote their shares electronically during the meeting by visiting www.virtualshareholdermeeting.com/WORK2021SM, which we refer to as the “Slack special meeting website.”

 

Q:

What matters will be considered at the special meeting?

 

A:

The Slack stockholders are being asked to consider and vote on:

 

   

a proposal to adopt the merger agreement and approve the transactions contemplated thereby (which we refer to as the “merger proposal”); and

 

   

to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Slack’s named executive officers that is based on or otherwise relates to the mergers contemplated by the merger agreement (which we refer to as the “non-binding compensation advisory proposal”).

 

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Q:

Is my vote important?

 

A:

Yes. Your vote is very important. The mergers cannot be completed unless the merger proposal is approved by the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote on the proposal. Only Slack stockholders as of the close of business on the record date are entitled to vote at the Slack special meeting. The board of directors of Slack (which we refer to as the “Slack board”) unanimously recommends that such Slack stockholders vote “FOR” the approval of the merger proposal and “FOR” the approval of the non-binding compensation advisory proposal.

 

Q:

If my shares of Slack common stock are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee automatically vote those shares for me?

 

A:

If your shares are held through a broker, bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” The “record holder” of such shares is your broker, bank or other nominee, and not you. If this is the case, this proxy statement/prospectus has been forwarded to you by your broker, bank or other nominee. You must provide the record holder of your shares with instructions on how to vote your shares. Otherwise, your broker, bank or other nominee may not vote your shares on any of the proposals to be considered at the Slack special meeting. A so called “broker non-vote” will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter.

Under the current rules of the NYSE, brokers, banks or other nominees do not have discretionary authority to vote on any of the proposals at the Slack special meeting. Because the only proposals for consideration at the Slack special meeting are nondiscretionary proposals, it is not expected that there will be any broker non-votes at the Slack special meeting. However, if there are any broker non-votes, they will have (i) the same effect as a vote “AGAINST” the merger proposal and (ii) no effect on the non-binding compensation advisory proposal.

 

Q:

What Slack stockholder vote is required for the approval of the merger proposal and non-binding compensation advisory proposal?

 

A:

The merger proposal. Approval of the merger proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the merger proposal will have the same effect as a vote “AGAINST” the merger proposal.

The non-binding compensation advisory proposal. Approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock present via the Slack special meeting website or by proxy at the Slack special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote. As an advisory vote, this proposal is not binding upon Slack or the Slack board or Salesforce or the board of directors of Salesforce (which we refer to as the “Salesforce board”), and approval of this proposal is not a condition to completion of the mergers.

 

Q:

Who will count the votes?

 

A:

The votes at the Slack special meeting will be counted by an independent inspector of elections appointed by the Slack board.

 

Q:

What will Slack stockholders receive if the mergers are completed?

 

A:

As a result of the first merger, each share of Slack common stock issued and outstanding immediately prior to the effective time of the first merger (which we refer to as the “first effective time”) (other than any

 

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  excluded shares and dissenting shares, as defined in the section entitled “The Merger Agreement—Merger Consideration,” and any Slack restricted stock awards, as defined and discussed in the Question and Answer below, not treated as shares of Slack common stock) will be converted in the first merger into the right to receive (a) 0.0776 shares of Salesforce common stock, with cash in lieu of any fractional shares of Salesforce common stock and (b) $26.79 in cash, without interest (which we refer to as the “merger consideration”). We refer to such shares of Slack common stock eligible to receive the merger consideration as “eligible shares.”

If you receive the merger consideration and would otherwise be entitled to receive a fractional share of Salesforce common stock, you will receive cash in lieu of such fractional share, and you will not be entitled to dividends, voting rights or any other rights in respect of such fractional share. For additional information regarding the merger consideration, see the sections entitled “The Merger—Consideration to Slack Stockholders” and “The Merger Agreement—Merger Consideration.

 

Q:

What is the difference between Slack Class A common stock and Slack Class B common stock? Will they receive the same merger consideration?

 

A:

Under Slack’s amended and restated certificate of incorporation (which we refer to as the “Slack charter”), each share of Slack Class A common stock entitles the holder to one vote while each share of Slack Class B common stock entitles the holder to 10 votes. If the first merger is successfully completed, holders of shares of Slack Class A common stock and Slack Class B common stock will both receive the same merger consideration.

 

Q:

What will happen to my Slack options?

 

A:

At the first effective time, each option to purchase shares of Slack common stock (each of which we refer to as a “Slack option”) that is held by an individual who is not an employee of Slack and that is outstanding and unexercised immediately prior to the first effective time will be cancelled and such holders will be entitled to receive the merger consideration in respect of the number of shares of Slack common stock covered by the Slack option, less a number of shares having a value equal to the total exercise price applicable to such option. At the first effective time, all other Slack options that are outstanding and unexercised immediately prior to the first effective time of Slack will be assumed and automatically converted into an option (which we refer to as an “adjusted option”) to purchase a number of shares of Salesforce common stock determined by multiplying the number of shares of Slack common stock equal to the number of shares covered by the Slack option by the option/RSU conversion ratio (as defined below), at a per share exercise price equal to the per share exercise price of the Slack option divided by the option/RSU conversion ratio. The adjusted option will otherwise be subject to the same terms and conditions as were applicable to the corresponding Slack option prior to the first effective time, including vesting terms.

As used in this proxy statement/prospectus, (1) the “Salesforce trading price” means the volume weighted average closing price of Salesforce common stock as reported on the NYSE for the 10 consecutive trading day period ending on the trading day immediately preceding the closing date, (2) the “exchange ratio” means 0.0776, and (3) the “option/RSU conversion ratio” means the sum of (a) the exchange ratio and (b) the cash consideration divided by the Salesforce trading price. See the section entitled “The Merger Agreement—Treatment of Slack Equity Awards” for more information.

 

Q:

What will happen to my Slack restricted stock units and restricted share awards?

 

A:

At the first effective time, each Slack restricted stock unit (each of which we refer to as a “Slack RSU award”) and each award of restricted Slack common stock (each of which we refer to as a “Slack restricted share award”) that is outstanding immediately prior to the first effective time held by a non-employee director of Slack will vest as of the first effective time and will be cancelled and converted into the right to receive the merger consideration in respect of each share of Slack common stock subject to such Slack RSU award or Slack restricted share award.

 

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At the first effective time, each Slack RSU award (other than any such award held by any current or former non-employee director) will be assumed and converted into a restricted stock unit (each of which we refer to as an “adjusted RSU award”) with respect to a number of shares of Salesforce common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of Slack common stock subject to the Slack RSU award by the Option/RSU conversion ratio. Each adjusted RSU award will be subject to the same terms and conditions as were applicable to the corresponding Slack RSU award prior to the first effective time, including vesting terms.

At the first effective time, each Slack restricted share award (other than any such award held by any current or former non-employee director) that is outstanding immediately prior to the first effective time will be assumed and converted into a restricted share award (each of which we refer to as an “adjusted restricted share award”) with respect to a number of shares of Salesforce common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of Slack common stock subject to the Slack restricted share award by 0.1804; provided that the holder of a Slack restricted share award is entitled to cash in an amount equal to such fractional share multiplied by $260.50, rounded to the nearest cent. Each adjusted restricted share award will be subject to the same terms and conditions as were applicable to the corresponding Slack restricted share award prior to the first effective time, including vesting terms except that any applicable repurchase price per share of Salesforce common stock (rounded up to the nearest whole cent) will be determined by dividing the per share repurchase price of the Slack restricted share award by 0.1804.

See the section entitled “The Merger Agreement—Treatment of Slack Equity Awards” for more information.

 

Q:

What will happen to the Slack Employee Stock Purchase Plan?

 

A:

Any Slack employee who is not a participant in any offering period in effect as of the date of the merger agreement (which we refer to as the “current ESPP offering periods”), may not become a participant in the current offering period and no current participant may increase the percentage of his or her payroll deduction election from that in effect on the date of the merger agreement for such current ESPP offering period. If the first effective time occurs after April 9, 2021 (the end of the current ESPP offering period), then the ESPP will be suspended and no new offering period will commence under the ESPP prior to the termination of the merger agreement. If the first effective time occurs before April 9, 2021 (the end of the current ESPP offering period), then the last day of the current ESPP offering period will be accelerated to a date that is three business days prior to the closing date. Subject to the consummation of the mergers, the ESPP will terminate effective immediately prior to the first effective time.

See the section entitled “The Merger Agreement—Treatment of Slack Equity Awards” for more information.

 

Q:

What equity stake will Slack stockholders hold in Salesforce immediately following the merger?

 

A:

Based on the number of issued and outstanding shares of Salesforce and Slack common stock as of December 16, 2020, and the exchange ratio of 0.0776 shares of Salesforce common stock for each share of Slack common stock, holders of shares of Slack common stock as of immediately prior to the first effective time would hold, in the aggregate, approximately 5% of the issued and outstanding shares of Salesforce common stock immediately following the first effective time, without giving effect to any shares of Salesforce common stock held by Slack stockholders prior to the completion of the first merger and disregarding stock options, restricted stock units and other equity awards or rights to acquire shares that may be issued by Salesforce or Slack pursuant to any employee stock plan. The exact equity stake of Slack stockholders in Salesforce immediately following the first effective time will depend on the number of shares of Salesforce common stock and Slack common stock issued and outstanding immediately prior to the first effective time, as provided in the section entitled “The Merger Agreement—Merger Consideration.

 

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Q:

How does the Slack board recommend that I vote?

 

A:

The Slack board unanimously recommends that Slack stockholders vote “FOR” the approval of the merger proposal and “FOR” the approval of the non-binding compensation advisory proposal. For additional information regarding how the Slack board recommends that Slack stockholders vote, see the section entitled “The Mergers—Recommendation of the Slack Board and Reasons for the Mergers.

 

Q:

Why are Slack stockholders being asked to vote on executive officer compensation?

 

A:

The SEC has adopted rules that require Slack to seek a non-binding advisory vote on certain compensation that may be paid or become payable to Slack’s named executive officers that is based on or otherwise relates to the mergers. Slack urges its stockholders to read the section entitled “The Mergers—Interests of Slack Directors and Executive Officers in the Mergers.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

The Slack board has fixed January 25, 2021 as the record date for the Slack special meeting. All holders of record of shares of Slack common stock as of the close of business on the record date are entitled to receive notice of, and to vote at, the Slack special meeting via the Slack special meeting website, provided that those shares remain outstanding on the date of the Slack special meeting. As of the record date, there were 501,490,143 shares of Slack Class A common stock outstanding and 79,094,868 shares of Class B common stock outstanding. Attendance at the Slack special meeting via the Slack special meeting website is not required to vote. Instructions on how to vote your shares without virtually attending the Slack special meeting are provided in this section below.

 

Q:

How many votes do I have?

 

A:

Each share of Class A common stock is entitled to one vote on each proposal and each share of Class B common stock is entitled to 10 votes on each proposal.

 

Q:

What constitutes a quorum for the Slack special meeting?

 

A:

A quorum of Slack stockholders is necessary to hold a valid meeting. The presence at the Slack special meeting, in person (including via the Slack special meeting website) or by proxy, of the holders of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote at the Slack special meeting constitutes a quorum. Abstentions, withhold votes and broker non-votes are counted as shares present and entitled to vote for the purposes of determining a quorum.

 

Q:

What will happen to Slack as a result of the mergers?

 

A:

If the first merger is completed, Merger Sub I will merge with and into Slack. As a result of the first merger, the separate corporate existence of Merger Sub I will cease, and Slack will continue as the surviving corporation in the first merger and as a wholly owned subsidiary of Salesforce. Immediately after the first merger, Slack, as the surviving corporation in the first merger, will merge into either Merger Sub II or Salesforce. As a result of the second merger, the separate corporate existence of Slack will cease, and either Merger Sub II will continue as the surviving company and as a wholly owned subsidiary of Salesforce or Salesforce will continue as the surviving company. Furthermore, shares of Slack Class A common stock will be delisted from the NYSE and will no longer be publicly traded.

 

Q:

I own shares of Slack common stock. What will happen to those shares as a result of the mergers?

 

A:

If the first merger is completed, your shares of Slack common stock will be converted into the right to receive the merger consideration. All such shares of Slack common stock, when so converted, will cease to

 

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  be outstanding and will automatically be cancelled. Each holder of a share of Slack common stock that was outstanding immediately prior to the first effective time will cease to have any rights with respect to shares of Slack common stock except the right to receive the merger consideration, any dividends or distributions made with respect to shares of Salesforce common stock with a record date after the first effective time of the first merger, and any cash to be paid in lieu of any fractional shares of Salesforce common stock, in each case to be issued or paid upon the exchange of any certificates or book-entry shares of Slack common stock for merger consideration. For additional information, see the sections entitled “The Mergers—Consideration to Slack Stockholders” and “The Merger Agreement—Merger Consideration.

 

Q:

Where will the Salesforce common stock that Slack stockholders receive in the first merger be publicly traded?

 

A:

Assuming the first merger is completed, the shares of Salesforce common stock that Slack stockholders receive in the first merger will be listed and traded on the NYSE.

 

Q:

What happens if the mergers are not completed?

 

A:

If the merger proposal is not approved by Slack stockholders or if the mergers are not completed for any other reason, Slack stockholders will not receive any merger consideration in connection with the mergers, and their shares of Slack common stock will remain outstanding. Slack will remain an independent public company and Slack common stock will continue to be listed and traded on the NYSE. Additionally, if the merger proposal is not approved by Slack stockholders or if the mergers are not completed for any other reason, Salesforce will not issue shares of Salesforce common stock to Slack stockholders. If the merger agreement is terminated under specified circumstances, Slack may be required to pay Salesforce a termination fee. For a more detailed discussion of the termination-related fee, see “The Merger Agreement—Termination.

 

Q:

What happens if the non-binding compensation advisory proposal is not approved?

 

A:

This vote is advisory and non-binding, and the mergers are not conditioned or dependent upon the approval of the non-binding compensation advisory proposal. However, Slack and Salesforce value the opinions of Slack stockholders and Salesforce expects to consider the outcome of the vote, along with other relevant factors, when considering future executive compensation, assuming the mergers are completed.

 

Q:

What is a proxy and how can I vote my shares via the Slack special meeting website?

 

A:

A proxy is a legal designation of another person to vote the stock you own. Shares of Slack common stock held directly in your name as the stockholder of record as of the close of business on January 25, 2021, the record date, may be voted at the Slack special meeting via the Slack special meeting website. If you choose to attend the Slack special meeting and vote your shares via the Slack special meeting website, you will need the 16-digit control number included on your proxy card. If you are a beneficial owner of Slack common stock but not the stockholder of record of such shares of Slack common stock, you have the right to direct your broker, bank, or other nominee as to how to vote your shares if you follow the instructions you receive from your broker, bank, or nominee. You can also choose to vote your shares before the Slack special meeting via the Slack special meeting website, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

 

Q:

How can I vote my shares without attending the special meeting?

 

A:

If you are a stockholder of record, there are four ways to vote:

 

   

by Internet at www.proxyvote.com 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on March 1, 2021 (have your Notice or proxy card in hand when you visit the website);

 

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by toll-free telephone at 1-800-690-6903, until 11:59 p.m. Eastern Time on March 1, 2021 (have your Notice or proxy card in hand when you call);

 

   

by completing and mailing your proxy card; or

 

   

by Internet during the Slack special meeting. Instructions on how to attend and vote at the Slack special meeting are described at www.virtualshareholdermeeting.com/WORK2021SM.

In order to be counted, proxies submitted by telephone or Internet must be received by 11:59 p.m. Eastern Time on March 1, 2021. Proxies submitted by U.S. mail must be received before the start of the Slack special meeting.

If you are a street name stockholder, please follow the instructions from your broker, bank, or other nominee to vote by Internet, telephone, or mail before the meeting, or by Internet during the Slack special meeting, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

Registered Stockholders. If shares of Slack common stock are registered directly in your name with our transfer agent, Computershare, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote by Internet during the meeting or vote through the Internet, by telephone, or by filling out and returning the proxy card.

Street Name Stockholders. If shares of Slack common stock are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” and the notice was forwarded to you by your broker or nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other nominee as to how to vote your shares if you follow the instructions you receive from your broker, bank, or nominee. You can also choose to vote your shares before the special meeting by Internet or telephone or by Internet during the special meeting, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials relating to the Slack special meeting if you hold shares of Slack common stock in “street name” and also directly in your name as a stockholder of record or otherwise or if you hold shares of Slack common stock in more than one brokerage account.

Stockholders of record. For shares of Slack common stock held directly, complete, sign, date and return each proxy card (or cast your vote by phone or the Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your shares of Slack common stock are voted.

Shares instreet name.” For shares of Slack common stock held in “street name” through a broker, bank or other nominee, follow the instructions provided by your broker, bank or other nominee to vote your shares.

 

Q:

If a stockholder gives a proxy, how will the shares of Slack common stock covered by the proxy be voted?

 

A:

If you provide a proxy, regardless of whether you provide that proxy by phone, the Internet or completing and returning the applicable enclosed proxy card, the individuals named on the enclosed proxy card will vote your shares of Slack common stock in the way that you indicate when providing your proxy in respect of the shares of common stock you hold in such company. When completing the phone or Internet processes

 

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  or the proxy card, you may specify whether your shares of Slack common stock should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the Slack special meeting.

 

Q:

How will my shares of common stock be voted if I return a blank proxy?

 

A:

If you sign, date and return your proxy and do not indicate how you want your shares of Slack common stock to be voted, then your shares of Slack common stock will be voted “FOR” the approval of the merger proposal and “FOR” the approval of the non-binding compensation advisory proposal.

 

Q:

Can I change my vote after I have submitted my proxy?

 

A:

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy by:

 

   

notifying Slack’s Corporate Secretary, in writing, at Slack Technologies, Inc., 500 Howard Street, San Francisco, California 94105. Such notice must be received at the above location before 11:59 p.m. Eastern Time on March 1, 2021;

 

   

voting again using the telephone or Internet before 11:59 p.m. Eastern Time on March 1, 2021 (your latest telephone or Internet proxy is the one that will be counted); or

 

   

attending and voting during the Slack special meeting. Simply logging into the Slack special meeting will not, by itself, revoke your proxy.

In light of shelter-in-place restrictions currently in place due to the recent coronavirus (which we refer to as “COVID-19”) pandemic, we encourage stockholders to change their vote by voting again using the telephone or Internet.

If you are a street name stockholder, you may revoke any prior voting instructions by contacting your broker, bank or other nominee or by attending the Slack special meeting and voting by Internet during the meeting by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

 

Q:

Where can I find the voting results of the special meeting?

 

A:

Within four business days following certification of the final voting results, Slack intends to file the final voting results of its special meeting with the SEC in a Current Report on Form 8-K.

 

Q:

If I do not favor the merger as a Slack stockholder, what are my rights?

 

A:

Pursuant to Section 262 of the DGCL, holders of Slack common stock who hold their shares through the first effective time, do not vote their shares in favor of adoption of the merger agreement and who comply fully with and properly demand appraisal for their shares under the applicable requirements of Section 262 of the DGCL and do not otherwise withdraw or lose the right to appraisal under Delaware law, have the right to seek appraisal of the fair value of their shares of Slack common stock, as determined by the Delaware Court of Chancery, if the first merger is completed. The “fair value” of shares of Slack common stock as determined by the Delaware Court of Chancery may be more than, less than, or equal to the value of the merger consideration that Slack stockholders would otherwise be entitled to receive under the terms of the merger agreement. Slack stockholders also should be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the first merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Holders of Slack common stock who wish to preserve any appraisal rights they may have, must so advise Slack by submitting a written demand for appraisal prior to the vote to adopt the merger agreement and approve the transactions contemplated thereby, and must otherwise follow fully the procedures prescribed by Section 262 of the DGCL.

 

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Q:

Are there any risks that I should consider as a Slack stockholder in deciding how to vote?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors.” You also should read and carefully consider the risk factors of Salesforce and Slack contained in the documents that are incorporated by reference in this proxy statement/prospectus.

 

Q:

What happens if I sell my shares before the special meeting?

 

A:

The record date for Slack stockholders entitled to vote at the Slack special meeting is earlier than the date of the Slack special meeting. If you transfer your shares of Slack common stock after the record date but before the Slack special meeting, you will, unless special arrangements are made, retain your right to vote at the Slack special meeting but will have transferred the right to receive the merger consideration to the person to whom you transferred your shares of Slack common stock.

 

Q:

What are the material U.S. federal income tax consequences of the merger to Slack stockholders?

 

A:

The mergers, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”). It is a condition to the completion of the mergers that each of Salesforce and Slack receives an opinion from its respective counsel, dated as of the closing date, to the effect that the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this proxy statement/prospectus is a part, each of Wachtell, Lipton, Rosen & Katz and Latham & Watkins LLP has delivered an opinion to Salesforce and Slack, respectively, to the same effect as the opinions described in the preceding sentence. Each of the foregoing opinions of counsel is or will be based on, among other things, certain factual representations made by Salesforce and Slack and certain assumptions, all of which must be consistent with the state of facts existing at the time of the mergers. If any of these representations and assumptions are, or become, inaccurate or incomplete, such opinions may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the Internal Revenue Service (which we refer to as the “IRS”) or the courts, which may not agree with the conclusions set forth in such opinion.

Assuming that the mergers, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. Holder (as defined under the section entitled “Material U.S. Federal Income Tax Consequences of the Mergers”) will generally recognize gain (but not loss) in an amount equal to the lesser of: (1) the sum of the amount of cash consideration (other than cash in lieu of a fractional share of Salesforce common stock) and the fair market value of the Salesforce common stock received, minus such holder’s adjusted tax basis in its shares of Slack common stock surrendered, and (2) the amount of cash consideration received. (other than cash in lieu of a fractional share of Salesforce common stock). For additional information, please read the section entitled “Material U.S. Federal Income Tax Consequences of the Mergers.”

The tax consequences to you of the mergers will depend on your particular facts and circumstances. Please consult your tax advisor as to the tax consequences of the mergers in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

 

Q:

When are the mergers expected to be completed?

 

A:

Salesforce and Slack are working to complete the mergers as quickly as possible. Subject to the satisfaction or waiver of the conditions described in the section entitled “The Merger Agreement—Conditions to the Completion of the Mergers,” including the approval of the merger proposal by Slack stockholders at the Slack special meeting, the transaction is expected to close in the second quarter of Salesforce’s fiscal year 2022. However, neither Salesforce nor Slack can predict the actual date on which the mergers will be completed, nor can the parties assure you that the mergers will be completed, because completion is subject

 

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  to conditions beyond either company’s control. In addition, if the mergers are not completed by August 1, 2021, subject to two three-month extensions in order to obtain required regulatory approvals, either Salesforce or Slack may choose not to proceed with the mergers by terminating the merger agreement.

 

Q:

If I am a Slack stockholder, how will I receive the merger consideration to which I am entitled?

 

A:

If you are a holder of book-entry shares representing eligible shares of Slack common stock (which we refer to as “Slack book-entry shares”) which are held through the Depository Trust Company (which we refer to as “DTC”), the exchange agent will transmit to DTC or its nominees as soon as reasonably practicable on or after the closing date, the merger consideration, cash in lieu of any fractional shares of Salesforce common stock and any dividends and other distributions on the shares of Salesforce common stock issuable as merger consideration, in each case, for such Slack book-entry shares held through DTC.

If you are a holder of record of Slack book-entry shares which are not held through DTC, the exchange agent will deliver to you, as soon as practicable after the first effective time, (i) a notice advising you of the effectiveness of the first merger, (ii) a statement reflecting the aggregate whole number of shares of Salesforce common stock (which will be in uncertificated book-entry form) that you have a right to receive pursuant to the merger agreement and (iii) a check in the amount equal to the cash payable in lieu of any fractional shares of Salesforce common stock and dividends and other distributions on the shares of Salesforce common stock issuable to you as merger consideration.

No interest will be paid or accrued on any amount payable for shares of Slack common stock eligible to receive the merger consideration pursuant to the merger agreement.

For additional information on the exchange of Slack common stock for the merger consideration, see the section entitled “The Merger Agreement—Payment for Securities; Exchange.

 

Q:

If I am a holder of Slack common stock, will the shares of Salesforce common stock issued in the first merger receive a dividend?

 

A:

After the completion of the first merger, the shares of Salesforce common stock issued in connection with the first merger will carry with them the right to receive the same dividends on shares of Salesforce common stock as all other holders of shares of Salesforce common stock, for any dividend the record date for which occurs after the mergers are completed.

Salesforce has never paid any cash dividends on its common stock. Salesforce’s board of directors currently intends to retain any future earnings to support operations and to finance the growth and development of its business and does not intend to pay cash dividends on its common stock for the foreseeable future. Any future determination related to its dividend policy will be made at the discretion of Salesforce’s board.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Slack has retained MacKenzie Partners, Inc. (which we refer to as “MacKenzie Partners”) to assist in the solicitation process. Slack will pay MacKenzie Partners a fee of approximately $20,000, as well as reasonable and customary documented expenses. Slack also has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

 

Q:

What is “householding”?

 

A:

Slack has adopted a procedure called “householding,” which the SEC has approved. Under this procedure, Slack delivers a single copy of the Notice and proxy materials to multiple stockholders who share the same address, unless Slack has received contrary instructions from one or more of such stockholders. This procedure reduces printing costs, mailing costs and fees. Stockholders who participate in householding will

 

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  continue to be able to access and receive separate proxy cards. Upon written or oral request, Slack will deliver promptly a separate copy of the Notice and proxy materials to any stockholder at a shared address to which Slack delivered a single copy of any of these materials. Street name stockholders may contact their broker, bank, or other nominee to request information about householding.

 

Q:

What should I do now?

 

A:

You should read this proxy statement/prospectus carefully and in its entirety, including the annexes, and return your completed, signed and dated proxy card by mail in the enclosed postage-paid envelope or submit your voting instructions by phone or the Internet as soon as possible so that your shares of Slack common stock will be voted in accordance with your instructions.

 

Q:

Who can answer my questions about the Slack special meeting or the transactions contemplated by the merger agreement?

 

A:

If you have questions about the Slack special meeting or the information contained in this proxy statement/prospectus, or desire additional copies of this proxy statement/prospectus or additional proxies, contact Slack’s proxy solicitor:

 

 

LOGO

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

(800) 322-2885

Banks and Brokers: (212) 929-5500

Email: proxy@mackenziepartners.com

 

Q:

Where can I find more information about Salesforce, Slack and the mergers?

 

A:

You can find out more information about Salesforce, Slack and the mergers by reading this proxy statement/prospectus and, with respect to Salesforce and Slack, from various sources described in the section entitled “Where You Can Find More Information.

 

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SUMMARY

This summary highlights selected information included in this proxy statement/prospectus and does not contain all of the information that may be important to you. You should read this proxy statement/prospectus and its annexes carefully and in its entirety and the other documents referred to in this proxy statement/prospectus before you decide how to vote with respect to the proposals to be considered and voted on at the Slack special meeting. In addition, Salesforce and Slack incorporate by reference important business and financial information about Salesforce and Slack into this proxy statement/prospectus, as further described in the section entitled “Where You Can Find More Information.” You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information.” Each item in this summary includes a page reference directing you to a more complete description of that item in this proxy statement/prospectus.

Information About the Companies (page 46)

Salesforce

salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Phone: (415) 901-7000

Salesforce, a Delaware corporation, is a global leader in customer relationship management, or CRM, technology that brings companies and customers together. Founded in 1999, Salesforce enables companies of every size and industry to connect with their customers in new ways through existing and emerging technologies, including cloud, mobile, social, blockchain, voice and artificial intelligence, to transform their businesses. Salesforce’s Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single source of truth about their customers. Salesforce’s service offerings are designed to be intuitive and easy to use. They can generally be deployed quickly, configured easily and integrated with other platforms and enterprise applications. Salesforce sells to businesses worldwide primarily on a subscription basis, through direct sales efforts and also indirectly through partners. Through Salesforce’s platform and other developer tools, Salesforce also enables third parties to develop additional functionality and new applications, or apps that run on Salesforce’s platform, which are sold separately from— or in conjunction with—Salesforce’s service offerings.

Salesforce common stock is traded on the New York Stock Exchange (which we refer to as the “NYSE”) under the ticker symbol “CRM.”

Merger Sub I

Skyline Strategies I Inc.

c/o salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Phone: (415) 901-7000

Merger Sub I, a Delaware corporation, is a wholly owned subsidiary of Salesforce. Merger Sub I is newly formed, and was organized for the purpose of entering into the merger agreement and effecting the first merger. Merger Sub I has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the mergers.



 

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Merger Sub II

Skyline Strategies II LLC

c/o salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Phone: (415) 901-7000

Merger Sub II, a Delaware limited liability corporation, is a wholly owned subsidiary of Salesforce. Merger Sub II is newly formed, and was organized for the purpose of entering into the merger agreement and effecting the second merger. Merger Sub II has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the mergers.

Slack

Slack Technologies, Inc.

500 Howard Street

San Francisco, California 94105

Phone: (415) 630-7943

Slack, whose legal name is Slack Technologies, Inc., has transformed business communication. It’s the leading channel-based messaging platform, used by millions to align their teams, unify their systems, and drive their businesses forward. Only Slack offers a secure, enterprise-grade environment that can scale with the largest companies in the world. It is a new layer of the business technology stack where people can work together more effectively, connect all their other software tools and services, and find the information they need to do their best work. Slack is where work happens. Slack was originally incorporated in Delaware in 2009 as Tiny Speck, Inc. In 2014, the company changed its name to Slack Technologies, Inc. and publicly launched its current offering. Slack is headquartered in San Francisco, California.

The Mergers and the Merger Agreement (page 100)

The terms and conditions of the mergers are contained in the merger agreement, which is attached to this document as Annex A and is incorporated by reference herein in its entirety. Salesforce and Slack encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the mergers.

Pursuant to the terms and subject to the conditions included in the merger agreement, Salesforce has agreed to acquire Slack. The Slack board has unanimously approved the merger agreement and the transactions contemplated by the merger agreement.

The merger agreement provides for two mergers: (a) Merger Sub I will be merged with and into Slack, with Slack continuing as the surviving corporation in the first merger and as a wholly owned subsidiary of Salesforce (we refer to Slack after completion of the first merger as the “surviving corporation”) and (b) immediately following the first merger, Slack, as the surviving corporation in the first merger, will be merged with and into either: (i) if a revised structure notice (as defined below) has not been delivered by Salesforce before the closing, Merger Sub II, with Merger Sub II continuing as a wholly owned subsidiary of Salesforce, or (ii) if a revised structure notice has been delivered by Salesforce before the closing, Salesforce, with Salesforce surviving the second merger (we refer to Merger Sub II or Salesforce, as applicable, after completion of the second merger, as the “surviving company”).



 

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Pursuant to the merger agreement, Salesforce may elect the alternative transaction structure (as defined below) upon written notice to Slack (which we refer to as a “revised structure notice”) in the event that 10 business days before the closing, Salesforce and the trustee under that certain Indenture, dated as of April 9, 2020, between Slack and U.S. Bank National Association, as trustee (which we refer to as the “convertible notes indenture”) have not each executed a supplemental indenture to the convertible notes indenture amending the terms thereof to permit the consummation of the second merger with Merger Sub II at the second effective time (as defined in the section entitled “The Merger Agreement—Completion and Effectiveness of the Mergers” without giving rise to a breach of, or any default under, any provision of the convertible notes indenture. Upon delivery of the revised structure notice, the structure of the second merger will be modified to consist of Slack, as the surviving corporation in the first merger, merging with and into Salesforce, with Salesforce continuing as the surviving company (which we refer to as the “alternative transaction structure”).

Merger Consideration (page 101)

As a result of the first merger, each eligible share of Slack Class A common stock and each share of Slack Class B common stock issued and outstanding immediately prior to the first effective time will be automatically cancelled and converted into the right to receive (a) 0.0776 shares of Salesforce common stock, with cash in lieu of any fractional shares of Salesforce common stock, and (b) $26.79 in cash, without interest).

Salesforce will not issue fractional shares of Salesforce common stock in the first merger. Instead, each holder of Slack common stock who otherwise would be entitled to receive fractional shares of Salesforce common stock (after aggregating all shares of such holder) will be entitled to receive, in lieu of fraction shares, an amount in cash, without interest, equal to such fraction of a share of Salesforce common stock to which such holder would otherwise be entitled multiplied by $260.50, rounded to the nearest whole cent.

Risk Factors (page 33)

The mergers and an investment in Salesforce common stock involve risks, some of which are related to the transactions contemplated by the merger agreement. You should carefully consider the information about these risks set forth under the section entitled “Risk Factors,” together with the other information included or incorporated by reference in this proxy statement/prospectus, particularly the risk factors contained in Salesforce’s and Slack’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Slack stockholders should carefully consider the risks set out in that section before deciding how to vote with respect to the merger proposal and non-binding compensation advisory proposal to be considered and voted on at the Slack special meeting. For additional information, see the section entitled “Where You Can Find More Information.”

Treatment of Slack Equity Awards (pages 94 and 102)

At the first effective time:

 

   

each outstanding and unexercised Slack option held by any individual who is not an employee of Slack or any of its subsidiaries immediately before the first effective time will be cancelled and converted into the right to receive the merger consideration in respect of the number of shares of Slack common stock covered by the Slack option, less a number of shares having a value equal to the total exercise price applicable to such option;

 

   

each outstanding and unexercised Slack option held by an individual who is an employee of Slack or any of its subsidiaries immediately before the first effective time will be assumed and automatically converted into an adjusted option;



 

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each outstanding Slack RSU award and each Slack restricted share award that is held by a non-employee director of Slack will vest as of the first effective time and will be cancelled and converted into the right to receive the merger consideration in respect of each share of Slack common stock subject to such Slack RSU award or Slack restricted share award;

 

   

each Slack RSU award (other than any such award held by any current or former non-employee director) will be assumed and converted into an adjusted RSU award (as defined in the section entitled “The Merger Agreement—Treatment of Slack Equity Awards—Consideration for Slack Restricted Stock Units and Restricted Share Awards”); and

 

   

each Slack restricted share award (other than any Slack restricted share award held by any current or former non-employee director of Slack) that is outstanding immediately prior to the first effective time will be assumed and converted into an adjusted restricted share award (as defined in the section entitled “The Merger Agreement—Treatment of Slack Equity Awards—Consideration for Slack Restricted Stock Units and Restricted Share Awards”).

Salesforces Reasons for the Mergers (page 88)

Salesforce believes that the acquisition of Slack by Salesforce will provide significant long-term growth prospects and increased stockholder value for the combined company, including as a result of the substantial anticipated synergies resulting from the acquisition.

Recommendation of the Slack Board and Reasons for the Mergers (page 63)

The Slack board unanimously recommends that you vote “FOR” the merger proposal and “FOR” the non-binding compensation advisory proposal. For the factors considered by the Slack board in reaching this decision and additional information on the recommendation of the Slack board, see the section entitled “The Mergers—Recommendation of the Slack Board and Reasons for the Mergers.”

Opinions of Slack Financial Advisors (pages 70 and 77)

Opinion of Qatalyst Partners LP, Slack’s Financial Advisor

Slack engaged Qatalyst Partners LP (which we refer to as “Qatalyst Partners”) to provide financial advice in connection with the proposed mergers based on Qatalyst Partners’ qualifications, expertise, reputation and knowledge of our business and the industry in which we operate. At the meeting of Slack’s board on December 1, 2020, Qatalyst Partners rendered to Slack’s board its oral opinion, subsequently confirmed in writing, to the effect that, as of December 1, 2020 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the consideration of $26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack Class A common stock to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Slack Class A common stock, in their capacity as holders of Slack Class A common stock (other than Salesforce or any of its affiliates), was fair, from a financial point of view, to such holders.

The full text of the written opinion of Qatalyst Partners, dated as of December 1, 2020, is attached to this proxy statement/prospectus as Annex B and is incorporated into this proxy statement/prospectus by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. You should read the opinion carefully in its entirety.

Qatalyst Partners’ opinion was provided to Slack’s board and addressed only, as of the date of the opinion, the fairness, from a financial point of view, of the consideration of $26.79 in cash and 0.0776 shares of



 

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Salesforce common stock per share of Slack Class A common stock to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Slack Class A common stock, in their capacity as such holders, to such holders. It does not address any other aspect of the mergers. It does not constitute a recommendation to any Slack stockholder as to how to vote with respect to the mergers or any other matter and does not in any manner address the price at which the shares of Slack Class A common stock will trade at any time. Qatalyst Partners expressed no opinion regarding the consideration to be received by any holder of Slack Class B common stock under the merger agreement in such holder’s capacity as a holder of Slack Class B common stock.

For a description of the opinion that Slack’s board received from Qatalyst Partners, see the section captioned “The Merger—Opinion of Qatalyst Partners LP, Slack’s Financial Advisor.”

Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor

At a meeting of the Slack board held on December 1, 2020, Goldman Sachs rendered to the Slack board its oral opinion, subsequently confirmed in its written opinion dated December 1, 2020, that, as of the date of the written opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, taken in the aggregate, pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated December 1, 2020, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Slack board in connection with its consideration of the mergers and other transactions contemplated by the merger agreement (which are together referred to in this section of the proxy statement/prospectus as the “transaction”). The Goldman Sachs opinion does not constitute a recommendation as to how any holder of shares of Slack common stock should vote with respect to the transaction or any other matter.

Special Meeting of Slack Stockholders (page 48)

Date, Time, Place and Purpose of the Slack Special Meeting

The Slack special meeting will be held virtually via the Internet on March 2, 2021 at 10:00 a.m. Pacific Time. The Slack special meeting will be held solely via live webcast and there will not be a physical meeting location. Slack stockholders will be able to attend the Slack special meeting online and vote their shares electronically during the meeting by visiting the Slack special meeting website at www.virtualshareholdermeeting.com/WORK2021SM. Slack stockholders will need the 16-digit control number found on their proxy card in order to access the Slack special meeting website.

The purpose of the Slack special meeting is to consider and vote on the merger proposal and the non-binding compensation advisory proposal. Approval of the merger proposal is a condition to the obligation of Slack and Salesforce to complete the mergers. Approval of the non-binding compensation advisory proposal is not a condition to the obligation of either Slack or Salesforce to complete the mergers.

Record Date and Outstanding Shares of Slack Common Stock

Only holders of record of issued and outstanding shares of either class of Slack common stock as of the close of business on January 25, 2021, the record date for the Slack special meeting, are entitled to notice of, and to vote at, the Slack special meeting via the Slack special meeting website or any adjournment or postponement of the Slack special meeting.



 

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As of the close of business on the record date, there were 501,490,143 shares of Slack Class A common stock and 79,094,868 shares of Slack Class B common stock outstanding and entitled to vote at the Slack special meeting. Each share of Class A common stock is entitled to one vote on each proposal and each share of Class B common stock is entitled to 10 votes on each proposal.

A complete list of Slack stockholders entitled to vote at the Slack special meeting will be available for inspection at Slack’s principal place of business during regular business hours for a period of no less than 10 days before the Slack special meeting at 500 Howard Street, San Francisco, California 94105. If Slack’s headquarters are closed for health and safety reasons related to the COVID-19 pandemic during such period, the list of Slack stockholders will be made available for inspection upon request to Slack’s corporate secretary at 500 Howard Street, San Francisco, California 94105, subject to the satisfactory verification of stockholder status. The list of Slack stockholders entitled to vote at the Slack special meeting will also be made available for inspection during the Slack special meeting via the Slack special meeting website at www.virtualshareholdermeeting.com/WORK2021SM.

Quorum; Abstentions and Broker Non-Votes

A quorum of Slack stockholders is necessary to hold a valid meeting. The presence at the Slack special meeting, in person (including via the Slack special meeting website) or by proxy, of the holders of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote at the Slack special meeting constitutes a quorum. Abstentions, withhold votes, and broker non-votes are counted as shares present and entitled to vote for the purposes of determining a quorum.

Required Vote to Approve the Merger Proposal

Approval of the merger proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal. Failure to vote on the merger proposal will have the same effect as a vote “AGAINST” the merger proposal.

The merger proposal is described in the section entitled “Slack Proposals.”

Required Vote to Approve the Non-Binding Compensation Advisory Proposal

Approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock present via the Slack special meeting website or represented by proxy at the Slack special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

The non-binding compensation advisory proposal is described in the section entitled “Slack Proposals.”

Voting by Directors and Executive Officers

As of December 16, 2020, Slack directors, executive officers, and their respective affiliates, as a group, beneficially held and were entitled to vote 7,688,272 shares of Slack Class A common stock and 82,661,892 shares of Class B common stock, representing 62.8% of the voting power of Slack common stock, including the shares covered by voting agreements in favor of Stewart Butterfield.

Slack currently expects that all of its directors and executive officers will vote their shares “FOR” the merger proposal and “FOR” the non-binding compensation advisory proposal.



 

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Adjournment

If a quorum is not present or if there are not sufficient votes for the approval of the merger proposal, Slack expects that the Slack special meeting will be adjourned by the chairman of the Slack special meeting to solicit additional proxies in accordance with the merger agreement. At any subsequent reconvening of the Slack special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Slack special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

Interests of Slack Directors and Executive Officers in the Mergers (page 91)

In considering the recommendation of the Slack board with respect to the merger proposal and the non-binding compensation advisory proposal, Slack stockholders should be aware that the directors and executive officers of Slack have interests in the mergers that may be different from, or in addition to, the interests of Slack stockholders generally. The members of the Slack board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, in approving the merger agreement and in determining to recommend that Slack stockholders approve the merger proposal.

Conditions to the Mergers (page 121)

The obligations of Salesforce and Slack to consummate the mergers will be subject to the satisfaction or waiver of the following conditions:

 

   

Slack Stockholder Approval—The approval of the first merger and the adoption of the merger agreement by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of Slack common stock (which we refer to as the “Slack stockholder approval”);

 

   

NYSE Listing—The approval of the shares of Salesforce common stock to be issued in the first merger for listing on the NYSE, subject to official notice of issuance;

 

   

Registration Statement—The effectiveness under the Securities Act of the registration statement of which this proxy statement/prospectus forms a part of and the absence of any stop order or proceeding seeking a stop order;

 

   

Government Consents—(i) The expiration or termination of any waiting period (or extensions thereof) applicable to the mergers under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (which we refer to as the “HSR Act”), and (ii) the approval, expiration, termination or receipt of, as applicable, all applicable filings, registrations, waiting periods (or extensions thereof) and approvals under certain specified antitrust and foreign investment laws; and

 

   

No Legal Prohibition—No governmental entity of competent jurisdiction has (i) enacted, issued or promulgated any law that is in effect as of immediately prior to the first effective time or the second effective time, as applicable or (ii) issued or granted any order or injunction (whether temporary, preliminary or permanent) that is in effect as of immediately prior to the first effective time or the second effective time, as applicable, which, in each case, has the effect of restraining or enjoining or otherwise prohibiting the consummation of the mergers.



 

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The obligations of Salesforce, Merger Sub I and Merger Sub II to consummate the mergers will be further subject to the satisfaction or waiver of the following conditions:

 

   

Accuracy of Representations and Warranties—The accuracy of representations and warranties of Slack in the merger agreement, subject to specified materiality standards discussed in the section entitled “The Merger Agreement—Conditions to the Mergers”;

 

   

Compliance with Covenants—Performance or compliance in all material respects by Slack of the obligations, covenants and agreements required to be performed or complied with by it at or prior to the closing;

 

   

No Material Adverse Effect—There not having occurred any material adverse effect (as defined in the section entitled “The Merger AgreementMaterial Adverse Effect”) with respect to Slack since December 1, 2020, and that is continuing as of immediately prior to the closing;

 

   

Officer Certificate—The receipt by Salesforce of a certificate, dated as of the closing date, signed by the chief executive officer or chief financial officer of Slack, certifying that the conditions set forth in the three bullet points immediately above have been satisfied; and

 

   

Tax Opinion—The receipt by Salesforce of a written opinion from legal counsel to Salesforce, in form and substance reasonably satisfactory to Salesforce, dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, for U.S. federal income tax purposes the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

The obligations of Slack to consummate the mergers will be further subject to the satisfaction or waiver of the following conditions:

 

   

Accuracy of Representations and Warranties—The accuracy of representations and warranties of Salesforce, Merger Sub I and Merger Sub II in the merger agreement, subject to specified materiality standards discussed in the section entitled “The Merger Agreement—Conditions to the Mergers”;

 

   

Compliance with Covenants—Performance or compliance in all material respects by Salesforce, Merger Sub I and Merger Sub II of the obligations, covenants and agreements required to be performed or complied with by it at or prior to the closing;

 

   

Officer Certificate—The receipt by Slack of a certificate, dated as of the closing date, signed by the chief executive officer or chief financial officer of Salesforce certifying that the conditions set forth in the two bullet points immediately above have been satisfied; and

 

   

Tax Opinion—The receipt by Slack of a written opinion from legal counsel to Slack, in form and substance reasonably satisfactory to Slack, dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, for U.S. federal income tax purposes the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

No Solicitation of Other Offers by Slack (page 112)

Under the terms of the merger agreement, subject to certain exceptions described below, Slack has agreed that, from December 1, 2020 until the earlier of the first effective time or the date (if any) on which the merger agreement is terminated, Slack will not and will cause its subsidiaries, and its and their respective officers and directors not to, and Slack will use reasonable best efforts to cause its and its subsidiaries’ other representatives to not, directly or indirectly:

 

   

solicit, initiate or knowingly encourage or facilitate (including by way of providing information or taking any other action) any inquiry, proposal or offer, or the making, submission or announcement of



 

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any inquiry, proposal or offer, which constitutes or would reasonably be expected to lead to an acquisition proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of Other Offers by Slack”);

 

   

participate in any negotiations regarding, or furnish to any person any information relating to Slack or any of its subsidiaries in connection with, an actual or potential acquisition proposal;

 

   

adopt, approve, endorse or recommend, or propose to adopt, approve, endorse or recommend, any acquisition proposal;

 

   

withdraw, change, amend, modify or qualify, or otherwise propose to withdraw, change, amend, modify or qualify, in a manner adverse to Salesforce, the Slack board’s recommendation that Slack stockholders approve the transactions, including the first merger, and adopt the merger agreement and approve the transactions contemplated thereby (which we refer to as the “Slack board recommendation”), or resolve or agree to take any such action;

 

   

if an acquisition proposal has been publicly disclosed, fail to publicly recommend against any such acquisition proposal within 10 business days after the public disclosure of such acquisition proposal (or subsequently withdraw, change, amend, modify or qualify, in a manner adverse to Salesforce, such rejection of such acquisition proposal) and reaffirm the Slack board recommendation within such 10-business-day period (or, if earlier, by the second business day prior to the Slack special meeting);

 

   

fail to include the Slack board recommendation in this proxy statement/prospectus;

 

   

approve, or authorize, or cause or permit Slack or any of its subsidiaries to enter into, any merger agreement, acquisition agreement, reorganization agreement, letter of intent, memorandum of understanding, agreement in principle, option agreement, joint venture agreement, partnership agreement or similar agreement or document with respect to, or any other agreement or commitment providing for, any acquisition proposal (other than certain confidentiality agreements);

 

   

call or convene a meeting of Slack stockholders to consider a proposal that would reasonably be expected to materially impair, prevent or delay the consummation of the transactions contemplated by the merger agreement; or

 

   

resolve or agree to do any of the foregoing.

In addition, under the merger agreement, Slack has agreed that it will and will cause its subsidiaries, and its and their respective officers and directors to, and Slack will use its reasonable best efforts to cause its and its subsidiaries’ other representatives to, immediately cease any and all solicitation, encouragement, discussions or negotiations with any persons, or provision of any information to any persons, with respect to any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal.

Notwithstanding the prohibitions described above, if Slack receives, prior to the receipt of the Slack stockholder approval, an unsolicited bona fide written acquisition proposal that did not result from a breach of Slack’s non-solicitation obligations, Slack, its subsidiaries and its representatives are permitted to contact the person or any of its representatives who has made such acquisition proposal to clarify (and not to negotiate or engage in any discussions regarding or relating to) the material terms and conditions of such acquisition proposal so that Slack may inform itself about such acquisition proposal. Subject to the conditions discussed in the section entitled “The Merger Agreement—No Solicitation of Other Offers by Slack,” Slack, its subsidiaries and its representatives are permitted to furnish non-public information to such person and engage in discussions or negotiations with such person with respect to the acquisition proposal.



 

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Change of Recommendation; Match Rights (page 115)

Slack Restrictions on Changes of Recommendation

Subject to certain exceptions described below, the Slack board may not effect a change of recommendation (as defined in the section entitled “The Merger AgreementChange of Recommendation; Match Rights”).

Permitted Changes of Recommendation in Connection with a Superior Proposal or Intervening Event

Prior to, but not after, the time the merger proposal has been approved by Slack stockholders:

 

   

the Slack board may make a change of recommendation (but may not terminate the merger agreement) in response to an intervening event (as defined in the section entitled “The Merger AgreementChanges of Recommendation; Match Rights”) if the Slack board has determined in good faith, after consultation with Slack’s outside legal counsel and financial advisors, that the failure to take such action would be reasonably likely to violate the directors’ fiduciary duties under applicable law; or

 

   

the Slack board may make a change of recommendation and cause Slack to terminate the merger agreement in order to enter into a definitive agreement providing for an unsolicited acquisition proposal received after December 1, 2020 that did not result from a breach of Slack’s non-solicitation obligations and such acquisition proposal is not withdrawn (subject to payment by Slack to Salesforce of the termination fee described under the sections entitled “The Merger AgreementTermination Fee” and “The Merger AgreementExpenses”), which the Slack board has determined in good faith after consultation with Slack’s outside legal counsel and financial advisors that such acquisition proposal constitutes a superior proposal, but only if the Slack board has determined in good faith, after consultation with Slack’s outside legal counsel and financial advisors, that the failure to take such action would be reasonably likely to violate the directors’ fiduciary duties under applicable law.

Prior to making a change of recommendation for any reason set forth above, Slack must provide Salesforce with four business days’ prior written notice advising Salesforce that the Slack board intends to make a change of recommendation. In each case, Slack must cause its representatives to negotiate in good faith (to the extent Salesforce desires to negotiate) any proposal by Salesforce to amend the merger agreement in a manner that would eliminate the need for the Slack board to make such change of recommendation, and the Slack board must make the required determination regarding its fiduciary duties again at the end of such four business day negotiation period (after taking into account in good faith the amendments to the merger agreement proposed by Salesforce, if any).

Termination of the Merger Agreement (page 123)

Termination by Salesforce or Slack

The merger agreement may be terminated at any time before the closing by mutual written consent of Salesforce and Slack. The merger agreement may also be terminated at any time before the closing by either Salesforce or Slack, if:

 

   

any governmental entity of competent jurisdiction has issued a final, non-appealable order, injunction, decree or ruling permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement;

 

   

the closing has not occurred on or before August 1, 2021, subject to (a) an automatic extension to November 1, 2021, if all of the conditions to closing, other than those pertaining to (i) the expiration of the waiting period under the HSR Act and certain other specified antitrust or foreign direct investment laws or (ii) any order or injunction prohibiting the transaction under regulatory laws (which we refer to together as the “regulatory conditions”), have been satisfied or waived and (b) another automatic extension to February 1, 2022 if on November 1, 2021 one or both of the regulatory conditions have



 

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not been fulfilled but all other conditions to closing have been satisfied or waived (we refer to August 1, 2021, as so extended, as the “outside date”), and further subject to the exceptions discussed in the section entitled “The Merger AgreementTerminationTermination by Salesforce or Slack”; and

 

   

the Slack stockholder approval has not been obtained upon a vote taken thereon at the Slack special meeting.

Termination by Slack

The merger agreement may be terminated at any time before the closing by Slack if:

 

   

the Slack board effects a change of recommendation and Slack substantially concurrently enters into a definitive agreement providing for a superior proposal, as long as (1) Slack has complied in all material respects with its obligations to provide notice and negotiate with Salesforce regarding amendments to the merger agreement, as described under the sections entitled “The Merger Agreement—No Solicitation of Other Officers by Slack” and “The Merger AgreementChanges of Recommendation; Match Rights” and (2) substantially concurrently with or prior to (and as a condition to) such termination, Slack pays to Salesforce the $900 million termination fee described below; or

 

   

upon a Salesforce breach termination event (as defined in the section entitled “The Merger AgreementTerminationTermination by Slack”).

Termination by Salesforce

The merger agreement may be terminated by Salesforce:

 

   

at any time before the receipt of the Slack stockholder approval, if the Slack board has effected a change of recommendation or Slack has materially breached its obligations described under the sections entitled “The Merger Agreement—No Solicitation of Other Offers by Slack” or “The Merger AgreementChange of Recommendation; Match Rights”; or

 

   

upon a Slack breach termination event (as defined in the section entitled “The Merger AgreementTerminationTermination by Salesforce”).

Termination Fee (page 125)

The merger agreement provides that Slack will pay Salesforce a termination fee of $900 million (which we refer to as the “termination fee”) if all of the following occurs:

 

   

(1)(a) Salesforce or Slack terminates the merger agreement as a result of (x) the closing having not occurred on or before the outside date or (y) the Slack stockholder approval having not been obtained, or (b) Salesforce terminates the merger agreement as a result of breach, failure to perform or violation of the merger agreement by Slack that (except for a breach of Slack’s non-solicitation obligations) first occurred following the making of an acquisition proposal of the type described in (2);

 

   

(2) after the date of the merger agreement and prior to the date of the termination (or prior to the receipt of the Slack stockholder approval in the case of a termination as a result of the Slack stockholder approval having not been obtained), a bona fide acquisition proposal has been publicly disclosed or otherwise made known to the Slack board or management and in each case is not withdrawn (publicly, if publicly disclosed) at least three business days prior to the earlier of the Slack special meeting and such termination; and

 

   

(3) within 12 months of such termination, an acquisition proposal is consummated or a definitive agreement providing for an acquisition proposal is entered into.



 

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In addition, the merger agreement requires Slack to pay Salesforce the termination fee if any of the following occurs:

 

   

(1) Salesforce terminates the merger agreement because the Slack board has effected a change of recommendation or Slack has materially breached its obligations described under the sections entitled “The Merger Agreement—No Solicitation of Other Offers by Slack” or “The Merger AgreementChange of Recommendation; Match Rights;”

 

   

(2) Slack terminates the merger agreement because the closing has not occurred on or before the outside date, at a time when Salesforce would be permitted to terminate the merger agreement because the Slack board has effected a change of recommendation or Slack has materially breached its obligations described under the sections entitled “The Merger AgreementNo Solicitation of Other Offers by Slack” or “The Merger AgreementChange of Recommendation; Match Rights;” or

 

   

(3) Slack terminates the merger agreement in order to enter into a definitive agreement providing for a superior proposal.

In no event will Slack be required to pay the termination fee on more than one occasion.

HSR and Other Regulatory Approvals (page 118)

The completion of the mergers is subject to the expiration or termination of the applicable waiting periods under the HSR Act and the obtaining of any required pre-closing approvals, consents, waivers or clearances under certain specified antitrust and foreign investment laws. This requirement is discussed under “The Mergers—Regulatory Approvals.”

For additional information, see the section entitled “The Merger Agreement—HSR and Other Regulatory Approvals.”

Financing of the Mergers (page 97)

Salesforce anticipates that the funds needed to complete the transactions contemplated by the merger agreement will be derived from a combination of (i) available cash on hand and (ii) third party debt financing. See “The Mergers—Financing of the Mergers” for additional information regarding the anticipated financing of the mergers.

Salesforce’s obligation to complete the mergers is not conditioned upon the receipt of any financing.

Voting and Support Agreement (page 127)

Concurrently with the execution of the merger agreement, certain Slack stockholders, including Stewart Butterfield, Eric Costello, Cal Henderson and Serguei Mourachov (whom we refer to collectively as the “founders”) entered into a voting and support agreement with Salesforce (which, as it may be amended from time to time, we refer to as the “voting and support agreement”), pursuant to which, among other things, and subject to the terms and conditions of the voting and support agreement, each founder agreed to vote, or cause to be voted, all shares of Slack common stock beneficially owned by such founder (i) in favor of the approval and adoption of the merger agreement and the transactions contemplated by the merger agreement and (ii) against any acquisition proposal or any action or agreement that is in opposition to the mergers. The voting and support agreement terminates upon certain events, including the termination of the merger agreement in accordance with its terms.



 

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As of December 16, 2020, the shares of Slack common stock subject to the voting and support agreement represent approximately 13.1% of the outstanding Slack Class A common stock and Slack Class B common stock, or approximately 55.8% of the total aggregate voting power of the shares of Slack Class A common stock and Slack Class B common stock issued and outstanding.

For more information, see the section entitled “Voting and Support Agreement” and Annex D to this proxy statement/prospectus.

Appraisal Rights (page 51 and 141)

Pursuant to Section 262 of the DGCL, holders of Slack common stock who hold their shares through the first effective time, do not vote their shares in favor of adoption of the merger agreement and who comply fully with and properly demand appraisal for their shares under the applicable requirements of Section 262 of the DGCL and do not otherwise withdraw or lose the right to appraisal under Delaware law, have the right to seek appraisal of the fair value of their shares of Slack common stock, as determined by the Delaware Court of Chancery, if the first merger is completed. The “fair value” of shares of Slack common stock as determined by the Delaware Court of Chancery may be more than, less than, or equal to the value of the merger consideration that Slack stockholders would otherwise be entitled to receive under the terms of the merger agreement. Slack stockholders also should be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the first merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Holders of Slack common stock who wish to preserve any appraisal rights they may have, must so advise Slack by submitting a written demand for appraisal prior to the vote to adopt the merger agreement and approve the transactions contemplated thereby, and must otherwise follow fully the procedures prescribed by Section 262 of the DGCL.

Material U.S. Federal Income Tax Consequences of the Mergers (page 129)

The mergers, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the completion of the mergers that each of Salesforce and Slack receives an opinion from its respective counsel dated as of the closing date to the effect that the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this proxy statement/prospectus is a part, each of Wachtell, Lipton, Rosen & Katz and Latham & Watkins LLP has delivered an opinion to Salesforce and Slack, respectively, to the same effect as the opinions described in the preceding sentence. Each of the foregoing opinions of counsel is or will be based on, among other things, certain factual representations made by Salesforce and Slack and certain assumptions, all of which must be consistent with the state of facts existing at the time of the mergers. If any of these representations and assumptions are, or become, inaccurate or incomplete, such opinions may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

Assuming that the mergers, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. Holder (as defined under the section entitled “Material U.S. Federal Income Tax Consequences of the Mergers”) will generally recognize gain (but not loss) in an amount equal to the lesser of: (1) the sum of the amount of cash consideration (other than cash in lieu of a fractional share of Salesforce common stock) and the fair market value of the Salesforce common stock received, minus such holder’s adjusted tax basis in its shares of Slack common stock surrendered, and (2) the amount of cash consideration received (other than cash in lieu of a fractional share of Salesforce common stock). For additional information, please read the section entitled “Material U.S. Federal Income Tax Consequences of the Mergers.”



 

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The tax consequences to you of the mergers will depend on your particular facts and circumstances. Please consult your tax advisor as to the tax consequences of the mergers in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

Litigation Relating to the Mergers (page 98)

Between December 28, 2020 and January 25, 2021, five lawsuits were filed by purported Slack stockholders in the United States District Court for the Northern District of California and six lawsuits were filed by purported Slack stockholders in the United States District Court for the Southern District of New York, each in connection with the mergers. The complaints name as defendants Slack, the members of the Slack board, and, with respect to three of the actions, Salesforce, Merger Sub I and Merger Sub II. The complaints allege, among other things, that the defendants caused a materially incomplete and misleading proxy statement relating to the proposed mergers to be filed with the SEC in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and in alleged breach of their fiduciary duties. The complaints allege that Slack’s board of directors breached their fiduciary duties and that Slack, Salesforce, Merger Sub I and Merger Sub II aided and abetted the breaches of fiduciary duty by Slack’s directors. The complaints seek, among other things, injunctive relief, including enjoining defendants from proceeding with or consummating the mergers and directing defendants to commence a sale process reasonably designed to secure the best possible consideration, rescinding the mergers in the event consummated (or awarding rescissory damages), declaratory relief, unspecified monetary damages, and an award of attorneys’ and experts’ fees.

Each of Salesforce and Slack believes that the claims asserted in the lawsuits are without merit and intends to defend vigorously against all claims asserted. For additional information, see the section entitled “The Mergers—Litigation Relating to the Mergers.

Comparison of Stockholders’ Rights (page 135)

Both Salesforce and Slack are incorporated under the laws of the State of Delaware, and accordingly, the rights of the stockholders of each are currently, and will continue to be governed by the DGCL. However, Salesforce stockholders and Slack stockholders have different rights pursuant to the constituent documents of each of Salesforce and Slack. Upon the completion of the mergers, Slack stockholders will become Salesforce stockholders and will have rights different from those they currently have as Slack stockholders. Certain differences between the constituent documents of Salesforce and Slack are described in the section entitled “Comparison of Stockholders’ Rights.

Listing of Salesforce Common Stock; Delisting and Deregistration of Slack Common Stock (page 96)

If the mergers are completed, the shares of Salesforce common stock to be issued in the first merger will be listed for trading on the NYSE, shares of Slack common stock will be delisted from the NYSE and deregistered under the Exchange Act, and Slack will no longer be required to file periodic reports with the SEC pursuant to the Exchange Act.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SALESFORCE

The following table sets forth selected historical consolidated financial data of Salesforce (i) as of and for each of the five years ended January 31, 2020, 2019, 2018, 2017 and 2016 and (ii) as of and for the nine months ended October 31, 2020 and 2019. All references to “fiscal years,” unless otherwise noted, refer to the 12-month fiscal year.

The consolidated statement of operations data for the fiscal years ended January 31, 2020, 2019 and 2018, and the consolidated balance sheet data as of January 31, 2020 and 2019, are derived from, and are qualified by reference to, Salesforce’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended January 31, 2020, previously filed with the SEC on March 5, 2020, and incorporated by reference into this document. The consolidated statement of operations data for the fiscal years ended January 31, 2017 and 2016, and the consolidated balance sheet data as of October 31, 2019, and January 31, 2018, 2017 and 2016, are derived from Salesforce’s consolidated financial statements not included or incorporated by reference into this document. The selected historical consolidated financial data as of October 31, 2020, and for the nine months ended October 31, 2020 and 2019, are derived from Salesforce’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2020, previously filed with the SEC on December 4, 2020, and incorporated by reference into this document.

The following selected historical consolidated financial data is only a summary and is not necessarily indicative of future results. Such financial data should be read together with, and is qualified in its entirety by reference to, Salesforce’s historical consolidated financial statements and the accompanying notes and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are set forth in Salesforce’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020, previously filed with the SEC on March 5, 2020, and incorporated by reference into this document, and in Salesforce’s Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2020, previously filed with the SEC on December 4, 2020 and incorporated by reference into this document.

The consolidated statement of operations data for fiscal years 2020, 2019 and 2018 and for the nine months ended October 31, 2020 and 2019, and the selected consolidated balance sheet data as of October 31, 2020 and 2019, and January 31, 2020, 2019, 2018 and 2017, reflect the retrospective adoption of Accounting Standards Update (which we refer to as “ASU”) 2014-09, “Revenue from Contracts with Customers” (which we refer to as “Topic 606”). The consolidated statement of operations data for fiscal years 2020 and 2019 and for the nine months ended October 31, 2020 and 2019 and the selected consolidated balance sheet data as of October 31, 2020 and 2019, and January 31, 2020 and 2019, reflect the prospective adoption of ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10)” (which we refer to as “ASU 2016-01”). The consolidated statement of operations data for fiscal year 2020 and the nine months ended October 31, 2020 and 2019, and the selected consolidated balance sheet data as of October 31, 2020 and 2019 and January 31, 2020 reflect the prospective adoption of ASU 2016-02, “Leases (Topic 842).”

 

(in millions, except per share data)    Nine Months Ended
October 31,
     Fiscal Year Ended January 31,  
   2020      2019      2020      2019      2018
(as adjusted)
     2017
(as adjusted)
     2016  

Consolidated Statement of Operations:

                    

Revenues:

                    

Subscription and support

   $ 14,500      $ 11,480      $ 16,043      $ 12,413      $ 9,766      $ 7,799      $ 6,205  

Professional services and other

     935        767        1,055        869        774        638        462  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 15,435      $ 12,247      $ 17,098      $ 13,282      $ 10,540      $ 8,437      $ 6,667  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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(in millions, except per share data)    Nine Months Ended
October 31,
     Fiscal Year Ended January 31,  
   2020      2019      2020      2019      2018
(as adjusted)
     2017
(as adjusted)
     2016  

Income from operations(1)

   $ 262      $ 333      $ 297      $ 535      $ 454      $ 218        155  

Gains (losses) on strategic investments, net

   $ 1,910      $ 396      $ 427      $ 542      $ 19      $ 31        (16

Net income (loss)

   $ 3,805      $ 374      $ 126      $ 1,110      $ 360      $ 323      $ (47

Basic net income (loss) per share

   $ 4.20      $ 0.46      $ 0.15      $ 1.48      $ 0.50      $ 0.47      $ (0.07

Diluted net income (loss) per share

   $ 4.11      $ 0.45      $ 0.15      $ 1.43      $ 0.49      $ 0.46      $ (0.07

Shares used in computing basic net income (loss) per share

     905        809        829        751        715        688        662  

Shares used in computing diluted net income (loss) per share

     926        829        850        775        735        700        662  

 

     As of October 31,      As of January 31,  
(in millions)    2020      2019      2020      2019     2018
(as adjusted)
    2017
(as adjusted)
    2016  

Consolidated Balance Sheet Data:

                 

Cash, cash equivalents, and marketable securities

   $ 9,492      $ 6,529      $ 7,947      $ 4,342     $ 4,521     $ 2,209     $ 2,725  

(Negative) working capital(2)

     2,712        552        1,118        (572     (483     (1,013     90  

Total assets

     59,136        49,942        55,126        30,737       21,984       18,286       12,763  

Noncurrent debt and other noncurrent liabilities(3)

     6,592        6,189        6,396        3,877       1,541       2,824       2,119  

Total liabilities

     18,826        16,663        21,241        15,132       11,608       10,056       7,760  

Retained earnings (accumulated deficit)

     5,666        2,109        1,861        1,735       635       275       (653

Total stockholders’ equity

     40,310        33,279        33,885        15,605       10,376       8,230       5,003  

 

(1)

Fiscal year 2020 income from operations includes a $166 million one-time non-cash charge related to the accounting for Salesforce’s business combination with Salesforce.org, in which there was the settlement of the reseller agreement between the two companies.

(2)

Salesforce considers all of its marketable debt securities to be available to support current liquidity needs including those with maturity dates beyond one year, and therefore Salesforce classifies these securities within current assets on the consolidated balance sheets. For consistency in presentation, (negative) working capital in the table above as of January 31, 2016 includes amounts previously reported in marketable securities, noncurrent. In addition, other reclassifications were made to balances as of January 31, 2018, 2017, and 2016 to conform to the current period presentation.

(3)

Amounts include noncurrent operating lease liabilities of (i) $2.4 billion as of October 31, 2020 and $2.5 billion as of October 31, 2019 and (ii) $2.4 billion as of January 31, 2020 and $0 as of January 31, 2019, 2018, 2017 and 2016, respectively.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SLACK

The following table sets forth selected historical consolidated financial data of Slack (i) as of and for each of the four years ended January 31, 2020, 2019, 2018 and 2017 and (ii) as of and for the nine months ended October 31, 2020 and 2019. All references to “fiscal years,” unless otherwise noted, refer to the 12-month fiscal year.

The consolidated financial data for the fiscal years ended January 31, 2020, 2019 and 2018, and as of January 31, 2020 and 2019 have been derived from, and are qualified by reference to, Slack’s selected financial data and audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended January 31, 2020, which is incorporated by reference into this document. The selected historical consolidated financial data of Slack for the year ended January 31, 2017 and as of January 31, 2018 and 2017 have been derived from Slack’s selected financial data and audited consolidated financial statements for such years, which have not been incorporated by reference herein. The selected historical consolidated financial data for the nine months ended October 31, 2020 and 2019 and as of October 31, 2020 have been derived from Slack’s unaudited consolidated financial data included in its Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, which is incorporated by reference into this document. The selected balance sheet data as of October 31, 2019 has been derived from Slack’s unaudited consolidated financial statements as of October 31, 2019, which have not been incorporated by reference herein.

The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Slack nor does it include the effects of the mergers. This summary should be read together with the consolidated financial statements, the related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Slack’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, each of which is incorporated by reference herein in its entirety. For additional information, see the section entitled “Where You Can Find More Information.”

 

     Nine Months Ended
October 31,
    Year Ended January 31,  
     2020     2019     2020     2019     2018     2017  
     (In thousands, except per share data)  

Consolidated Statements of Operations Data:

            

Revenue

   $ 652,012     $ 448,519     $ 630,422     $ 400,552     $ 220,544     $ 105,153  

Cost of revenue(1)

     86,517       72,820       97,191       51,301       26,364       15,517  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     565,495       375,699       533,231       349,251       194,180       89,636  

Operating expenses:

            

Research and development(1)

     281,450       363,725       457,364       157,538       141,350       96,678  

Sales and marketing(1)

     338,787       299,440       402,780       233,191       140,188       104,006  

General and administrative(1)

     155,710       209,624       261,365       112,730       56,493       37,455  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     775,947       872,789       1,121,509       503,459       338,031       238,139  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (210,452     (497,090     (588,278     (154,208     (143,851     (148,503

Interest income (expense) and other income, net

     (1,832     17,323       20,510       16,146       4,581       1,749  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (212,284     (479,767     (567,768     (138,062     (139,270     (146,754

Benefit (provision) for income taxes

     1,101       504       (589     (840     (793     (155
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (211,183     (479,263     (568,357     (138,902     (140,063     (146,909

 

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     Nine Months Ended
October 31,
    Year Ended January 31,  
     2020     2019     2020     2019     2018     2017  
     (In thousands, except per share data)  

Net income (loss) attributable to noncontrolling interest(2)

     7,278       2,792       2,701       1,781       22       (45
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Slack

     (218,461     (482,055     (571,058     (140,683     (140,085     (146,864

Less: Deemed dividends to preferred stockholders

     —         —         —         —         40,883       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Slack common stockholders

   $ (218,461   $ (482,055   $ (571,058   $ (140,683   $ (180,968   $ (146,864
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per share:

            

Net loss per share attributable to Slack common stockholders, basic and diluted

   $ (0.39   $ (1.38   $ (1.43   $ (1.16   $ (1.47   $ (1.28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used in computing net loss per share attributable to Slack common stockholders, basic and diluted

     564,095       348,580       399,461       121,732       122,865       114,887  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Includes stock-based compensation as follows:

 

     Nine Months Ended
October 31,
     Year Ended January 31,  
     2020      2019      2020      2019      2018      2017  
     (In thousands)  

Cost of revenue

   $ 7,543      $ 13,671      $ 16,013      $ 732      $ 491      $ 630  

Research and development

     85,705        193,117        226,507        9,948        35,260        34,546  

Sales and marketing

     44,695        82,792        98,797        2,677        8,044        9,744  

General and administrative

     31,656        73,707        85,207        9,775        4,288        5,171  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $ 169,599      $ 363,287      $ 426,524      $ 23,132      $ 48,083      $ 50,091  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

In fiscal year 2020, Slack recorded cumulative stock-based compensation of $245.1 million for all outstanding RSUs as the performance vesting condition was satisfied upon the completion of Slack’s direct listing of its Class A common stock, or the direct listing. Stock-based compensation for fiscal years 2020, 2019, 2018, and 2017 included compensation expense of $0, $14.8 million, $0, and $26.5 million, respectively, related to secondary sales of common stock by certain current and former employees and $0, $0, $39.4 million, and $8.0 million, respectively, related to cash payments attributable to tender offers and repurchases for outstanding common stock.

 

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(2)

Slack’s consolidated financial statements include Slack’s majority-owned subsidiary, Slack Fund. The ownership interest of minority investors in Slack Fund is recorded as a non-controlling interest.

 

     October 31,      January 31,  
     2020      2019      2020      2019      2018  
     (In thousands)  

Consolidated Balance Sheet Data:

              

Cash, cash equivalents, and marketable securities

   $ 1,575,497      $ 774,106      $ 768,592      $ 841,071      $ 548,761  

Working capital

     1,197,957        512,375        450,463        650,324        440,258  

Total assets

     2,311,257        1,184,852        1,441,706        1,198,956        697,780  

Total deferred revenue

     401,280        303,924        376,714        241,873        125,453  

Convertible senior notes, net

     640,767        —          —          —          —    

Convertible preferred stock(1)

     —          —          —          1,392,101        965,221  

Total stockholders’ equity

     877,008        747,231        723,899        841,606        519,288  

 

(1)

Prior to the completion of the direct listing in fiscal year 2020, all of the 373.4 million shares of convertible preferred stock converted into an equivalent number of shares of Class B common stock.

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table reflects historical information about basic and diluted earnings (loss) per share for the fiscal year ended January 31, 2020 and the nine months ended October 31, 2020, as well as book value per share as of October 31, 2020, on a historical basis, and for Salesforce and Slack on an unaudited pro forma combined basis after giving effect to the mergers as if they had been completed on February 1, 2019. The pro forma data of the combined companies assumes the acquisition of 100% of the Slack Class A common stock and Slack Class B common stock by Salesforce and was derived by combining the historical consolidated financial information of Salesforce and Slack, as described previously in this document.

Slack stockholders should read the information presented in the following table together with the historical financial statements of Salesforce and Slack. The pro forma data is unaudited and is presented for illustrative purposes only. Slack stockholders should not rely on this information as being indicative of the historical results that would have been achieved during the periods presented had the companies always been combined or the future results that the combined company will achieve after the consummation of the mergers. This pro forma information is subject to risks and uncertainties, including those discussed in “Risk Factors.”

 

     Salesforce
Historical
     Slack
Historical
    Pro Forma
Combined
     Pro Forma
Equivalent
Slack
Share(1)
 

Fiscal year ended January 31, 2020 for Salesforce and the fiscal year ended January 31, 2020 for Slack

          

Net income (loss) per share attributable to common stockholders:

          

Basic earnings (loss) per share

   $ 0.15      $ (1.43   $ (1.54)      $ (0.12)  

Diluted earnings (loss) per share

   $ 0.15      $ (1.43   $ (1.54)      $ (0.12)  

Cash dividends declared per share

     0        0       0        0  

Nine months ended October 31, 2020 for Salesforce and the nine months ended October 31, 2020 for Slack:

          

Net income (loss) per share attributable to common stockholders:

          

Basic earnings (loss) per share

   $ 4.20      $ (0.39   $ 2.59      $ 0.20  

Diluted earnings (loss) per share

   $ 4.11      $ (0.39   $ 2.51      $ 0.20  

Cash dividends declared per share

     0        0       0        0  

Book value per share as of October 31, 2020 for Salesforce and October 31, 2020 for Slack

   $ 44.10      $ 1.52     $ 51.72      $ 4.01  

 

(1)

The Slack pro forma equivalent per share amounts were calculated by multiplying the pro forma combined amounts by the exchange ratio of 0.0776.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Market Prices

Salesforce common stock is listed on the NYSE under the symbol “CRM,” and Slack Class A common stock is listed on the NYSE under the symbol “WORK.” The Slack Class B common stock is not publicly traded but converts, on a one-for-one basis, into Slack Class A common stock at the election of the holder.

The following table sets forth the closing sale price per share of Salesforce common stock and Slack Class A common stock reported on the NYSE as of (1) November 24, 2020, the trading day prior to the release of media reports regarding the transaction, (2) November 30, 2020, the trading day before the public announcement of the execution of the merger agreement and (3) January 28, 2021 the latest practicable trading date before the date of this proxy statement/prospectus. The table also shows the estimated implied value of the per share merger consideration for each share of Slack common stock as of the same three days. This implied value was calculated by multiplying the closing prices per share of Salesforce common stock on those dates by an exchange ratio of 0.0776 and adding the cash portion of the merger consideration of $26.79 per share, without interest.

 

     Salesforce
Common Stock
     Slack Class A
Common Stock
     Implied Per Share Value
of Merger Consideration
 

November 24, 2020

   $ 260.84      $ 29.58      $ 47.03  

November 30, 2020

   $ 245.80      $ 40.67      $ 45.86  

January 28, 2021

   $ 226.50      $ 42.24      $ 44.37  

The market prices of Salesforce common stock and Slack Class A common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Slack special meeting and the date the mergers are completed and thereafter (in the case of Salesforce common stock). The value of the merger consideration to be received in exchange for each share of Slack common stock will fluctuate with changes in the market value of Salesforce common stock until the last trading day before the mergers are complete.

The value of the merger consideration to be received in exchange for each share of Slack common stock when received by Slack stockholders after the mergers are completed could be greater than, less than or the same as shown in the table above. Accordingly, Slack stockholders are advised to obtain current market quotations for Salesforce common stock and Slack Class A common stock in deciding whether to vote in favor of the merger proposal.

Dividends

Salesforce has never paid any cash dividends on its common stock. The Salesforce board currently intends to retain any future earnings to support operations and to finance the growth and development of its business and does not intend to pay cash dividends on its common stock for the foreseeable future. Any future determination related to Salesforce’s dividend policy will be made at the discretion of the Salesforce board.

Slack has never paid any cash dividends on its common stock. Under the terms of the merger agreement, prior to the completion of the mergers, Slack is not permitted to declare, set aside, authorize, make or pay any dividend or other distribution without the consent in writing of Salesforce.

 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference herein, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” Slack stockholders should carefully consider the following risks before deciding how to vote with respect to the merger proposal and non-binding compensation advisory proposal to be considered and voted on at the Slack special meeting, together with general investment risks and all of the other information included in, or incorporated by reference into this proxy statement/prospectus. This proxy statement/prospectus also contains forward-looking statements that involve risks and uncertainties. Please read the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

The risks described below are certain material risks, although not the only risks, relating to the transactions contemplated by the merger agreement and each of Salesforce, Slack, the surviving corporation and the surviving company in relation to the mergers. The risks described below are not the only risks that Salesforce or Slack currently face or that Salesforce, the surviving corporation or the surviving company will face after the completion of the mergers. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect the business, financial condition and results of operations of Salesforce, the surviving corporation or the surviving company, or the market price of Salesforce common stock following the completion of the mergers.

If any of the following risks and uncertainties develop into actual events, these events could have a material adverse effect on the business, financial condition and results of operations of Salesforce, Slack, the surviving corporation and/or the surviving company. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Risk Factors Relating to the Mergers

The merger consideration is fixed and will not be adjusted. Because the market price of Salesforce common stock may fluctuate, Slack stockholders cannot be sure of the market value of the stock consideration they will receive in exchange for their shares of Slack common stock in connection with the transactions.

In connection with the mergers, each share of Slack common stock issued and outstanding immediately prior to the first effective time (other than dissenting shares, cancelled shares or shares covered by Slack restricted share awards) will be converted into (a) 0.0776 shares of Salesforce common stock and (b) the right to receive $26.79 in cash, without interest. Accordingly, the market value of the stock consideration that you will receive will vary based on the price of Salesforce common stock at the time you receive the merger consideration. The market price of Salesforce common stock may decline after the date of this document, after you exchange your shares and/or after the closing.

A decline in the market price of Salesforce common stock could result from a variety of factors beyond Salesforce’s control, including, among other things, the possibility that Salesforce may not achieve the expected benefits of the acquisition of Slack as rapidly or to the extent anticipated, Slack’s business may not perform as anticipated following the closing, the effect of Salesforce’s acquisition of Slack on Salesforce’s financial results may not meet the expectations of Salesforce, financial analysts or investors, or the addition and integration of Slack’s business may be unsuccessful, may take longer or be more disruptive than anticipated, as well as numerous factors affecting Salesforce and its businesses that are unrelated to Slack.

If the mergers are completed, there will be a lapse of time between each of the date of this proxy statement/prospectus, the date on which Slack stockholders vote to approve the Slack merger proposal at the Slack special meeting, and the date on which Slack stockholders entitled to receive the merger consideration actually receive the merger consideration. The market value of shares of Salesforce common stock may decline during and after

 

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these periods as a result of a variety of factors, and consequently, at the time Slack stockholders must decide whether to approve the merger proposal, they will not know the actual market value of any merger consideration they will receive when the mergers are completed. The actual value of any merger consideration received by Slack stockholders at the completion of the mergers will depend on the market value of the shares of Salesforce common stock at that time.

You are urged to obtain current market quotations for shares of Slack Class A common stock and for shares of Salesforce common stock.

If the mergers are completed, Slack stockholders will receive Salesforce shares as part of the merger consideration and will accordingly become Salesforce stockholders. Salesforce common stock may be affected by different factors than those that affect Slack common stock, and Salesforce stockholders will have different rights than Slack stockholders.

Upon consummation of the transactions, Slack stockholders will receive Salesforce shares as part of the merger consideration and will accordingly become Salesforce stockholders. Salesforce’s business differs from that of Slack, and Salesforce’s results of operations and stock price may be adversely affected by factors different from those that would affect Slack’s results of operations and stock price. Following the completion of the mergers, Slack will be part of a larger company, so decisions affecting Slack may be made in respect of the larger combined business as a whole rather than the Slack business individually. For a discussion of the businesses of Salesforce and Slack and of some important factors to consider in connection with those businesses, see the section entitled “Information About the Companies” and the documents incorporated by reference in the section entitled “Where You Can Find More Information,” including, in particular, in the sections entitled “Risk Factors” in each of Salesforce’s and Slack’s Annual Report on Form 10-K for the year ended January 31, 2020 and Quarterly Reports on Form 10-Q for the quarters ended April 30, 2020, July 31, 2020 and October 31, 2020.

In addition, holders of shares of Salesforce common stock will have rights as Salesforce stockholders that differ from the rights they had as Slack stockholders before the transactions. For a comparison of the rights of Salesforce stockholders to the rights of Slack stockholders, see the section entitled “Comparison of Stockholders’ Rights.”

Slack stockholders will be forfeiting all rights with respect to their shares of Slack common stock other than the right to receive the merger consideration, including the right to participate directly in any earnings or future growth of Slack.

If the mergers are completed, Slack stockholders will cease to have any equity interest in Slack and will not participate in its earnings or any future growth, except indirectly through ownership of Salesforce shares received as part of the merger consideration.

Slack directors and officers potentially have interests in the transaction that differ from, or are in addition to, the interests of Slack stockholders generally.

You should be aware that some of the officers and directors of Slack may be deemed to have interests in the mergers that are different from, or in addition to, your interests as a Slack stockholder. These interests may include, among others, agreements that certain officers have entered into with Slack that provide for the acceleration of Slack options, Slack RSU awards and Slack restricted share awards in the event the officer experiences a qualifying termination of employment within a specified period following a change of control of Slack, payments of severance benefits under Slack’s change-in-control severance agreements with executive officers, agreements that certain executive officers have entered into with Salesforce that provide for grants of Salesforce equity awards following the first effective time and certain indemnification obligations. For additional information, see the sections entitled “The Mergers—Interests of Slack Directors and Executive Officers in the Mergers” and “The Merger Agreement—Employee Matters.

 

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As of December 16, 2020, Slack directors, executive officers, and their respective affiliates, as a group, beneficially held and were entitled to vote 7,688,272 shares of Slack Class A common stock and 82,661,892 shares of Class B common stock, representing 62.8% of the voting power of Slack common stock, including the shares covered by voting agreements in favor of Stewart Butterfield.

Concurrently with the execution of the merger agreement, certain Slack stockholders, including Slack’s founders, Stewart Butterfield, Eric Costello, Cal Henderson and Serguei Mourachov, entered into a voting and support agreement with Salesforce, pursuant to which, among other things, and subject to the terms and conditions of the voting and support agreement, each founder agreed to vote, or cause to be voted, all shares of Slack common stock beneficially owned by such founder, (i) in favor of the approval and adoption of the merger agreement and the transactions contemplated by the merger agreement and (ii) against any acquisition proposal or any action or agreement that is in opposition to the mergers. The voting and support agreement terminates upon certain events, including the termination of the merger agreement in accordance with its terms. As of December 16, 2020, the shares of Slack common stock subject to the voting and support agreement represent approximately 13.1% of the outstanding Slack Class A common stock and Slack Class B common stock, or approximately 55.8% of the total aggregate voting power of the shares of Slack Class A common stock and Slack Class B common stock issued and outstanding. For more information, see the section entitled “Voting and Support Agreement” and Annex D to this proxy statement/prospectus.

Slack stockholders will have a reduced ownership and voting interest in Salesforce as compared to their ownership and voting interest in Slack and will exercise less influence over management.

Currently, Slack stockholders have the right to vote in the election of the Slack board and the power to approve or reject any matters requiring stockholder approval under Delaware law and the Slack certificate of incorporation and bylaws. Upon completion of the first merger, each Slack stockholder who receives shares of Salesforce common stock in the first merger will become a stockholder of Salesforce with a percentage ownership of Salesforce that is smaller than the Slack stockholder’s current percentage ownership of Slack. Based on the number of issued and outstanding shares of Salesforce common stock and shares of Slack common stock as of December 16, 2020 and the exchange ratio of 0.0776, after the first merger Slack stockholders are expected to become owners of approximately 5% of the outstanding shares of Salesforce common stock, without giving effect to any shares of Salesforce common stock held by Slack stockholders prior to the completion of the first merger and disregarding stock options, restricted stock units and other equity awards or rights to acquire shares that may be issued by Salesforce or Slack pursuant to any employee stock plan. Additionally, whereas shares of Slack Class B common stock are entitled to 10 votes per share, which generally provides such stockholders greater influence on the management and policies of Slack, all Salesforce shares are entitled to one vote per share.

Consequently, even if all former Slack stockholders voted together on all matters presented to Salesforce stockholders from time to time, the former Slack stockholders would exercise significantly less influence over Salesforce after the completion of the mergers relative to their influence over Slack prior to the completion of the mergers, and thus would have a less significant impact on the approval or rejection of future Salesforce proposals submitted to a stockholder vote.

The mergers may not be accretive, and may be dilutive, to Salesforce’s earnings per share, which may negatively affect the market price of Salesforce common stock.

In connection with the completion of the mergers, based on the number of issued and outstanding shares of Slack common stock as of December 16, 2020 and the number of outstanding Slack equity awards currently estimated to be payable in Salesforce common stock following the mergers, Salesforce could issue up to approximately 51,798,184 shares of Salesforce common stock. The issuance of these new shares of Salesforce common stock could have the effect of depressing the market price of Salesforce common stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, Salesforce’s earnings per share could cause the price of shares of Salesforce common stock to decline or increase at a reduced rate.

 

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Salesforce and Slack will incur significant transaction and merger-related costs in connection with the mergers, which may be in excess of those anticipated by Salesforce or Slack.

Each of Salesforce and Slack has incurred and expects to continue to incur a number of non-recurring costs associated with negotiating and completing the mergers, combining the operations of the two companies and achieving desired synergies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the mergers and include, among others, employee retention costs, fees paid to financial, legal and accounting advisors, severance and benefit costs, proxy solicitation costs and filing fees.

Salesforce and Slack will also incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Salesforce and Slack will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the mergers and the integration of the two companies’ businesses. Although Salesforce and Slack each expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Salesforce and Slack to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. For additional information, see the risk factor entitled “The integration of Slack into Salesforce may not be as successful as anticipated” below.

The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of Salesforce following the completion of the mergers.

Many of these costs will be borne by Salesforce or Slack even if the mergers are not completed.

Lawsuits have been filed against Slack, Salesforce, Merger Sub I, Merger Sub II and the members of the Slack board in connection with the mergers and additional lawsuits may be filed in the future. An adverse ruling in any such lawsuit could result in an injunction preventing the completion of the mergers and/or substantial costs to Salesforce and Slack.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements like the merger agreement. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Salesforce’s and Slack’s respective liquidity and financial condition.

Between December 28, 2020 and January 25, 2021, five lawsuits were filed by purported Slack stockholders in the United States District Court for the Northern District of California and six lawsuits were filed by purported Slack stockholders in the United States District Court for the Southern District of New York, each in connection with the mergers. The complaints name as defendants Slack, the members of the Slack board, and, with respect to three of the actions, Salesforce, Merger Sub I and Merger Sub II. The complaints allege, among other things, that the defendants caused a materially incomplete and misleading proxy statement relating to the proposed mergers to be filed with the SEC in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The Fonseca, Estrada, and Hodges complaints also allege that Slack’s board of directors breached their fiduciary duties in connection with the mergers. The Estrada complaint further alleges that Slack, Salesforce, Merger Sub I, and Merger Sub II aided and abetted the breaches of fiduciary duty by Slack’s directors. The complaints seek, among other things, injunctive relief, including enjoining defendants from proceeding with or consummating the mergers and directing defendants to commence a sale process reasonably designed to secure the best possible consideration, rescinding the mergers in the event consummated (or awarding rescissory damages), declaratory relief, unspecified monetary damages, and an award of attorneys’ and experts’ fees. Each of Salesforce and Slack believes that the claims asserted in the lawsuits are without merit and intends to defend vigorously against all claims asserted. For additional information, see the section entitled “The Mergers—Litigation Relating to the Mergers.”

One of the conditions to the closing of the mergers is that no injunction by any governmental entity having jurisdiction over Salesforce, Slack, Merger Sub I or Merger Sub II has been entered and continues to be in effect and no law has been adopted, in either case that prohibits the closing of the mergers. Consequently, if a plaintiff

 

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is successful in obtaining an injunction prohibiting completion of the mergers, that injunction may delay or prevent the mergers from being completed within the expected time frame or at all, which may adversely affect Salesforce’s and Slack’s respective business, financial position and results of operations.

There can be no assurance that any of the defendants will be successful in the outcome of the lawsuits filed thus far or any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the mergers are completed may adversely affect Salesforce’s or Slack’s business, financial condition, results of operations and cash flows.

The opinions of Slack’s financial advisors will not reflect changes in circumstances between the signing of the merger agreement and the completion of the mergers.

Slack has received opinions from Qatalyst Partners and Goldman Sachs in connection with the signing of the merger agreement, but has not obtained updated opinions from either financial advisor as of the date of this proxy statement/prospectus. Changes in the operations and prospects of Salesforce or Slack, general market and economic conditions and other factors that may be beyond the control of Salesforce or Slack, and on which Slack’s financial advisors’ opinions were based, may significantly alter the value of Salesforce or Slack or the prices of the shares of Salesforce common stock or of the shares of Slack common stock by the time the mergers are completed. The opinions do not speak as of the time the mergers will be completed or as of any date other than the date of such opinions. Because Slack does not currently anticipate asking its financial advisors to update their opinions, the opinions will not address the fairness of the merger consideration or the exchange ratio, as applicable, from a financial point of view at the time the mergers are completed. The Slack board’s recommendation that Slack stockholders vote “FOR” approval of the merger proposal and the non-binding compensation advisory proposal, however, is made as of the date of this proxy statement/prospectus.

For a description of the opinions that Slack received from its financial advisors, see the sections entitled “The Mergers—Opinion of Qatalyst Partners LP, Slack’s Financial Advisor” and “The Mergers—Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor.” A copy of the opinion of Qatalyst Partners, Slack’s financial advisor, is attached as Annex B to this proxy statement/prospectus and a copy of the opinion of Goldman Sachs, Slack’s financial advisor, is attached as Annex C to this proxy statement/prospectus, and each is incorporated by reference herein in its entirety.

The merger agreement limits Slack’s ability to pursue alternatives to the mergers, may discourage certain other companies from making favorable alternative transaction proposals and, in specified circumstances, could require Slack to pay Salesforce a termination fee.

The merger agreement contains provisions that may discourage a third party from submitting an acquisition proposal to Slack that might result in greater value to Slack’s stockholders than the mergers, or may result in a potential competing acquirer of Slack proposing to pay a lower per share price to acquire Slack than it might otherwise have proposed to pay. These provisions include a general prohibition on Slack from soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by the Slack board, entering into discussions with any third party regarding any acquisition proposal for Slack or offer for a competing transaction. Further, even if the Slack board withholds, withdraws, qualifies or modifies its recommendation with respect to the merger proposal, unless the merger agreement has been terminated in accordance with its terms, Slack will still have an obligation to submit the merger proposal to a vote by its stockholders. The merger agreement further provides that under specified circumstances, including after a change of recommendation by the Slack board and a subsequent termination of the merger agreement by the other party in accordance with its terms, Slack may be required to pay Salesforce a cash termination fee of $900 million. For additional information, see the sections entitled “The Merger Agreement—No Solicitation of Other Offers by Slack,” “The Merger Agreement—Change of Recommendation; Match Rights” and “The Merger Agreement—Termination of the Merger Agreement.

 

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Salesforce expects to obtain financing in connection with the mergers and cannot guarantee that it will be able to obtain such financing on favorable terms or at all.

Salesforce anticipates that the funds needed to complete the transactions contemplated by the merger agreement will be derived from a combination of (i) available cash on hand and (ii) third party debt financing. See “The Mergers—Financing of the Mergers” for additional information regarding the anticipated financing of the mergers. Salesforce’s ability to obtain any such new debt financing will depend on, among other factors, prevailing market conditions and other factors beyond Salesforce’s control. Salesforce cannot assure you that it will be able to obtain new debt financing on terms acceptable to it or at all, and any such failure could materially adversely affect its operations and financial condition. Salesforce’s obligation to complete the mergers is not conditioned upon the receipt of any financing.

The mergers may not be completed and the merger agreement may be terminated in accordance with its terms.

The mergers are subject to a number of conditions that must be satisfied or waived prior to the closing, which are described in the section entitled “The Merger Agreement—Conditions to the Mergers.” These conditions to the closing may not be satisfied or waived in a timely manner or at all, and, accordingly, the mergers may be delayed or may not be completed.

In addition, if the closing has not occurred on or before the outside date, either Salesforce or Slack may choose not to proceed with the mergers by terminating the merger agreement, and the parties can mutually decide to terminate the merger agreement at any time, before or after Slack stockholder approval. In addition, Salesforce and Slack may elect to terminate the merger agreement in certain other circumstances as further detailed in the section entitled “The Merger Agreement—Termination of the Merger Agreement.”

Failure to complete the mergers could negatively impact the price of shares of Salesforce common stock and the price of shares of Slack common stock, as well as Salesforce’s and Slack’s respective future businesses and financial results.

The merger agreement contains a number of conditions that must be satisfied or waived prior to the completion of the mergers, which are described in the section entitled “The Merger Agreement—Conditions to the Mergers.” There can be no assurance that all of the conditions to the mergers will be so satisfied or waived. If these conditions are not satisfied or waived, Salesforce and Slack will be unable to complete the mergers.

If the mergers are not completed for any reason, including the failure to receive the Slack stockholder approval, Salesforce’s and Slack’s respective businesses and financial results may be adversely affected, including as follows:

 

   

Salesforce and Slack may experience negative reactions from the financial markets, including negative impacts on the market price of Salesforce common stock and Slack common stock;

 

   

the manner in which industry contacts, business partners and other third parties perceive Salesforce and Slack may be negatively impacted, which in turn could affect Salesforce’s and Slack’s marketing operations or their ability to compete for new business or obtain renewals in the marketplace more broadly;

 

   

Salesforce and Slack may experience negative reactions from employees; and

 

   

Salesforce and Slack will have expended time and resources that could otherwise have been spent on Salesforce’s and Slack’s existing businesses and the pursuit of other opportunities that could have been beneficial to each company, and Salesforce’s and Slack’s ongoing business and financial results may be adversely affected.

In addition to the above risks, if the merger agreement is terminated and either party’s board seeks an alternative transaction, such party’s stockholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the mergers.

 

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Completion of the mergers may trigger change-in-control or other provisions in certain agreements to which Slack is a party.

The completion of the mergers may trigger change-in-control or other provisions in certain agreements to which Slack is a party. If Salesforce and Slack are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Salesforce and Slack are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Slack.

Risk Factors Relating to Salesforce and the Surviving Company

Salesforce and the surviving company will be subject to risks arising from the ongoing COVID-19 pandemic.

The COVID-19 pandemic and related public health measures have materially affected how Salesforce and its customers are operating their businesses, and have materially affected Salesforce’s operating results and cash flows; the duration and extent to which this will impact Salesforce’s and the surviving company’s future results remain uncertain. Salesforce’s operations have been, and the surviving company’s operations may be, negatively affected by a range of external factors related to the COVID-19 pandemic that are not within its control. Authorities throughout the world have implemented numerous preventative measures to contain or mitigate further spread of the virus, such as travel bans and restrictions, limitations on business activity, quarantines, work-from-home directives and shelter-in-place orders. These public health measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide, which have impacted Salesforce’s and may impact the surviving company’s business and results of operations and cash flows. For example, these measures and related economic effects contributed to certain customers’ reluctance or inability to submit payments to Salesforce (as well as changes in billing frequency), and adversely impacted the effectiveness of outsourced service providers Salesforce uses to collect payments, and these conditions may persist or worsen. The extent and duration of these measures could also impact Salesforce’s and the surviving company’s ability to address cybersecurity incidents, have resulted in increased internet demand which could cause access issues, could affect Salesforce’s and the surviving company’s ability to develop and support products and services, and could cause issues with access to data centers. As Salesforce continues to monitor the situation and public health guidance, Salesforce may adjust its current policies and practices, and existing and new precautionary measures could negatively affect Salesforce’s and the surviving company’s operations.

The extent of the impact of COVID-19 on Salesforce’s and the surviving company’s operational and financial performance will depend on certain developments, including the duration and spread of the pandemic, future spikes of COVID-19 infections resulting in additional preventative measures to contain or mitigate the spread of the virus, severity of the economic decline attributable to the pandemic and timing and nature of a potential economic recovery, impact on Salesforce’s and the surviving company’s customers and their sales cycles, Salesforce’s and the surviving company’s ability to generate new business leads, impact on Salesforce’s and the surviving company’s customer, employee and industry events, and effect on Salesforce’s and the surviving company’s vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which the pandemic may impact Salesforce’s and the surviving company’s financial condition or results of operations, including Salesforce’s and the surviving company’s long-range plan, is uncertain. Due to Salesforce’s subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in its results of operations until future periods. In addition, uncertainty regarding the impact of COVID-19 on Salesforce’s and the surviving company’s future operating results and financial condition may result in Salesforce and the surviving company taking cost-cutting measures, reducing the level of Salesforce’s and the surviving company’s capital investments and delaying or canceling the implementation of strategic initiatives, any of which may negatively impact their respective business and reputation. If the COVID-19 pandemic has a substantial impact on Salesforce’s or the surviving company’s employees’, partners’ or customers’ business and productivity, Salesforce’s and the surviving company’s results of operations and overall financial performance may be harmed. The global macroeconomic effects of the COVID-19 pandemic and related impacts on Salesforce’s and

 

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the surviving company’s customers’ business operations and their demand for their products and services may persist for an indefinite period, even after the COVID-19 pandemic has subsided.

The integration of Slack into Salesforce may not be as successful as anticipated.

The mergers involve numerous operational, strategic, financial, accounting, legal, tax and other risks, potential liabilities associated with the acquired businesses, and uncertainties related to design, operation and integration of Slack’s internal control over financial reporting. Difficulties in integrating Slack into Salesforce may result in Slack performing differently than expected, in operational challenges or in the failure to realize anticipated expense-related efficiencies. Salesforce’s and Slack’s existing businesses could also be negatively impacted by the mergers. Potential difficulties that may be encountered in the integration process include, among other factors:

 

   

the inability to successfully integrate Slack into Salesforce in a manner that permits Salesforce to achieve the full revenue and cost savings anticipated from the mergers;

 

   

complexities associated with managing the larger, more complex, integrated business;

 

   

not realizing anticipated operating synergies;

 

   

integrating personnel from the two companies and the loss of key employees;

 

   

potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the mergers;

 

   

integrating relationships with industry contacts and business partners;

 

   

performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the mergers and integrating Slack’s operations into Salesforce; and

 

   

the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.

Salesforce may fail to realize all of the anticipated benefits of the mergers or those benefits may take longer to realize than expected.

Salesforce believes that there are significant benefits and synergies that may be realized through leveraging the products, scale and combined enterprise customer bases of Salesforce and Slack. However, the efforts to realize these benefits and synergies will be a complex process and may disrupt both companies’ existing operations if not implemented in a timely and efficient manner. The full benefits of the transactions contemplated by the merger agreement, including the anticipated sales or growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all. Failure to achieve the anticipated benefits of the mergers could adversely affect Salesforce’s results of operations or cash flows, cause dilution to the earnings per share of Salesforce, decrease or delay any accretive effect of the mergers and negatively impact the price of Salesforce common stock.

Following completion of the mergers, Salesforce’s success will depend, in part, on its ability to manage its expansion, which poses numerous risks and uncertainties, including the need to integrate the operations and business of Slack into its existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with industry contacts and business partners.

In addition, Salesforce and Slack will be required to devote significant attention and resources prior to closing to prepare for the post-closing integration and operation of the surviving company, and Salesforce will be required post-closing to devote significant attention and resources to successfully align the business practices and operations of Salesforce and Slack. This process may disrupt the businesses and, if ineffective, would limit the anticipated benefits of the mergers.

 

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Salesforce and Slack will incur direct and indirect costs as a result of the mergers.

Salesforce and Slack will incur substantial expenses in connection with and as a result of completing the mergers, and, following the completion of the mergers, Salesforce expects to incur additional expenses in connection with combining the businesses and operations of Salesforce and Slack. Factors beyond Salesforce’s control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately. Moreover, diversion of management focus and resources from the day-to-day operation of the business to matters relating to the transactions could adversely affect each company’s business, regardless of whether the mergers are completed.

Uncertainties associated with the mergers may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

Salesforce and Slack are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Each company’s success until the mergers and the surviving company’s success after the mergers will depend in part upon the ability of Salesforce and Slack to retain key management personnel and other key employees. Current and prospective employees of Salesforce and Slack may experience uncertainty about their roles within the combined company following the mergers, which may have an adverse effect on the ability of each of Salesforce and Slack to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of Salesforce and Slack to the same extent that Salesforce and Slack have previously been able to attract or retain their own employees.

Sales of substantial amounts of Salesforce shares in the open market by former Slack stockholders could depress its stock price.

Other than shares held by persons who will be affiliates of Salesforce after the closing, Salesforce shares that are issued to Slack stockholders, including those shares issued upon the exercise of outstanding stock options or restricted stock units, will be freely tradable without restrictions or further registration under the Securities Act. If the mergers are completed and if former Slack stockholders and Slack employees sell substantial amounts of Salesforce common stock in the public market following consummation of the mergers, the market price of Salesforce common stock may decrease.

Salesforce has outstanding debt.

Salesforce has outstanding debt and other financial obligations, each of which subjects Salesforce to certain risks, including, among others, increasing Salesforce’s vulnerability to general adverse economic and industry conditions, requiring Salesforce to dedicate a portion of its cash flow from operations to payments on its debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes, and potentially limiting Salesforce’s ability to borrow additional funds or to borrow funds at rates or on other terms it finds acceptable.

The agreements governing Salesforce’s existing debt (and it is expected that any agreements governing any additional debt that Salesforce may incur or assume to facilitate the mergers or otherwise would) impose restrictions on Salesforce and require Salesforce to maintain compliance with specified covenants. In addition, Salesforce’s existing credit facility requires it to comply with a maximum consolidated leverage ratio covenant, and its future credit facilities may also contain financial covenants. Any failure to comply with such restrictions may result in an event of default under such agreements. Such default may allow the applicable creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt. Furthermore, if future debt financing is not available when required or is not available on acceptable terms, Salesforce may be unable to grow its business, take advantage of business opportunities, respond to competitive pressures or refinance maturing debt, any of which could have a material adverse effect on its operating results and financial condition.

 

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Salesforce’s and Slack’s business relationships may be subject to disruption due to uncertainty associated with the mergers.

Parties with which Salesforce or Slack do business may experience uncertainty associated with the mergers, including with respect to current or future business relationships with Salesforce or Slack. Salesforce’s and Slack’s business relationships may be subject to disruption as parties with which Salesforce or Slack do business may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Salesforce or Slack. These disruptions could have an adverse effect on the businesses, financial condition, results of operations or prospects of each company, including an adverse effect on Salesforce’s ability to realize the anticipated benefits of the mergers. The risk, and adverse effect, of such disruptions could be exacerbated by a delay in completion of the mergers or termination of the merger agreement.

Risks Related to Salesforce’s Business

You should read and consider the risk factors specific to Salesforce’s business that will also affect the surviving company after the closing. These risks are described in Salesforce’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 and its Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2020, which are incorporated by reference into this document, and in other documents that are incorporated by reference into this document. For additional information, see the section entitled “Where You Can Find More Information.”

Risks Related to Slack’s Business

You should read and consider the risk factors specific to Slack’s business that will also affect the surviving company after the closing. These risks are described in Slack’s Annual Report on Form 10-K for the year ended January 31, 2020 and its Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2020, which are incorporated by reference into this document, and in other documents that are incorporated by reference into this document. For additional information, see the section entitled “Where You Can Find More Information.”

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus, and the documents to which Slack and Salesforce refer you in this proxy statement/prospectus, as well as oral statements made or to be made by Slack and Salesforce, may include certain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to future events and anticipated results of operations and business strategies, statements regarding the mergers, including the anticipated benefits of the mergers, the anticipated impact of the mergers on the combined company’s business and future financial and operating results, the expected amount and timing of synergies from the mergers, and the anticipated closing date for the proposed transaction and other aspects of operations or operating results. These forward-looking statements generally can be identified by phrases such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of the combined company or the price of Salesforce or Slack stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond the parties’ control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to:

 

   

the impact of public health crises, such as pandemics (including COVID-19) and epidemics and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets;

 

   

the effect of the announcement of the mergers on the ability of Salesforce or Slack to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom Salesforce or Slack do business, or on Salesforce’s or Slack’s operating results and business generally;

 

   

risks that the mergers disrupt current plans and operations and the potential difficulties in employee retention as a result of the mergers;

 

   

the outcome of any legal proceedings related to the mergers;

 

   

the ability of the parties to consummate the mergers on a timely basis or at all;

 

   

the satisfaction of the conditions precedent to consummation of the mergers, including the ability to secure regulatory approvals on the terms expected, at all or in a timely manner;

 

   

the ability of Salesforce to successfully integrate Slack’s operations;

 

   

the ability of Salesforce to implement its plans, forecasts and other expectations with respect to Salesforce’s business after the completion of the mergers and realize expected synergies;

 

   

business disruption following the mergers;

 

   

the ability to realize the anticipated benefits of the mergers, including the possibility that the expected benefits from the mergers will not be realized or will not be realized within the expected time period;

 

   

the amount of the costs, fees, expenses and charges related to the mergers;

 

   

unknown liabilities;

 

   

the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement;

 

   

the effect of general economic and market conditions;

 

   

the impact of foreign currency exchange rate and interest rate fluctuations on Salesforce’s or Slack’s results;

 

   

Salesforce’s business strategy and plan to build its business, including its strategy to be the leading provider of enterprise cloud computing applications and platforms;

 

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the pace of change and innovation in enterprise cloud computing services;

 

   

the seasonal nature of Salesforce’s sales cycles;

 

   

the competitive nature of the market in which the parties participate;

 

   

Salesforce’s or Slack’s international expansion strategy;

 

   

Salesforce’s or Slack’s service performance and security, including the resources and costs required to avoid unanticipated downtime and prevent, detect and remediate potential security breaches;

 

   

the expenses associated with new data centers and third-party infrastructure providers;

 

   

additional data center capacity;

 

   

real estate and office facilities space;

 

   

Salesforce’s operating results and cash flows;

 

   

new services and product features;

 

   

Salesforce’s or Slack’s strategy of acquiring or making investments in complementary businesses, joint ventures, services, technologies and intellectual property rights;

 

   

the performance and fair value of Salesforce’s investments in complementary businesses through Salesforce’s strategic investment portfolio;

 

   

Salesforce’s or Slack’s ability to realize the benefits from strategic partnerships and investments;

 

   

the impact of future gains or losses from Salesforce’s strategic investment portfolio, including gains or losses from overall market conditions that may affect the publicly traded companies within Salesforce’s strategic investment portfolio;

 

   

Salesforce’s or Slack’s ability to execute its business plans;

 

   

Salesforce’s ability to successfully integrate acquired businesses and technologies;

 

   

Salesforce’s ability to continue to grow unearned revenue and remaining performance obligations;

 

   

Salesforce’s or Slack’s ability to protect its intellectual property rights;

 

   

Salesforce’s or Slack’s ability to develop its brands;

 

   

Salesforce’s or Slack’s reliance on third-party hardware, software and platform providers;

 

   

Salesforce’s dependency on the development and maintenance of the infrastructure of the Internet;

 

   

the effect of evolving domestic and foreign government regulations, including those related to the provision of services on the Internet, those related to accessing the Internet, and those addressing data privacy, cross-border data transfers and import and export controls;

 

   

the valuation of Salesforce’s deferred tax assets;

 

   

the impact of new accounting pronouncements and tax laws;

 

   

uncertainties affecting Salesforce’s ability to estimate its tax rate;

 

   

the impact of expensing stock options and other equity awards;

 

   

the sufficiency of Salesforce’s capital resources;

 

   

compliance with Salesforce’s or Slack’s debt covenants and lease obligations;

 

   

current and potential litigation involving Salesforce or Slack; and

 

   

the impact of climate change.

 

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All of the forward-looking statements Salesforce and Slack make in this proxy statement/prospectus are qualified by the information contained or incorporated by reference herein, including the information contained in this section and the information detailed in Salesforce’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 and Salesforce’s Quarterly Reports on Form 10-Q for the quarterly periods ended April 30, 2020, July 31, 2020 and October 31, 2020, Current Reports on Form 8-K and other filings Salesforce makes with the SEC, which are incorporated herein by reference, and in Slack’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 and Slack’s Quarterly Reports on Form 10-Q for the quarterly periods ended April 30, 2020, July 31, 2020 and October 31, 2020, Current Reports on Form 8-K and other filings Slack makes with the SEC, which are incorporated herein by reference. For additional information, see the sections entitled “Risk Factors” and “Where You Can Find More Information.”

Except as required by law, neither Salesforce nor Slack undertakes or assumes any obligation to update any forward-looking statements, whether as a result of new information or to reflect subsequent events or circumstances or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 

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INFORMATION ABOUT THE COMPANIES

Salesforce

salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Phone: (415) 901-7000

Salesforce, a Delaware corporation, is a global leader in customer relationship management, or CRM, technology that brings companies and customers together. Founded in 1999, Salesforce enables companies of every size and industry to connect with their customers in new ways through existing and emerging technologies, including cloud, mobile, social, blockchain, voice and artificial intelligence, to transform their businesses. Salesforce’s Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single source of truth about their customers. Salesforce’s service offerings are designed to be intuitive and easy to use. They can generally be deployed quickly, configured easily and integrated with other platforms and enterprise applications. Salesforce sells to businesses worldwide primarily on a subscription basis, through direct sales efforts and also indirectly through partners. Through Salesforce’s platform and other developer tools, Salesforce also enables third parties to develop additional functionality and new applications, or apps that run on Salesforce’s platform, which are sold separately from—or in conjunction with—Salesforce’s service offerings.

Merger Sub I

Skyline Strategies I Inc.

c/o salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Phone: (415) 901-7000

Merger Sub I, a Delaware corporation, is a wholly owned subsidiary of Salesforce. Merger Sub I is newly formed, and was organized for the purpose of entering into the merger agreement and effecting the first merger. Merger Sub I has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the mergers.

Merger Sub II

Skyline Strategies II LLC

c/o salesforce.com, inc.

Salesforce Tower

415 Mission Street, 3rd Floor

San Francisco, California 94105

Phone: (415) 901-7000

Merger Sub II, a Delaware limited liability corporation, is a wholly owned subsidiary of Salesforce. Merger Sub II is newly formed, and was organized for the purpose of entering into the merger agreement and effecting the second merger. Merger Sub II has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the mergers.

 

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Slack

Slack Technologies, Inc.

500 Howard Street

San Francisco, California 94105

Phone: (415) 630-7943

Slack, whose legal name is Slack Technologies, Inc., has transformed business communication. It’s the leading channel-based messaging platform, used by millions to align their teams, unify their systems, and drive their businesses forward. Only Slack offers a secure, enterprise-grade environment that can scale with the largest companies in the world. It is a new layer of the business technology stack where people can work together more effectively, connect all their other software tools and services, and find the information they need to do their best work. Slack is where work happens. Slack was originally incorporated in Delaware in 2009 as Tiny Speck, Inc. In 2014, the company changed its name to Slack Technologies, Inc. and publicly launched its current offering. Slack is headquartered in San Francisco, California.

 

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SPECIAL MEETING OF SLACK STOCKHOLDERS

Date, Time and Place

The Slack special meeting will be held virtually via the Internet on March 2, 2021 at 10:00 a.m. Pacific Time. The Slack special meeting will be held solely via live webcast and there will not be a physical meeting location. Slack stockholders will be able to attend the Slack special meeting online and vote their shares electronically during the meeting by visiting the Slack special meeting website at www.virtualshareholdermeeting.com/WORK2021SM. Slack stockholders will need the 16-digit control number found on their proxy card in order to access the Slack special meeting website.

Purpose of the Slack Special Meeting

The purpose of the Slack special meeting is to consider and vote on:

 

   

the merger proposal; and

 

   

the non-binding compensation advisory proposal.

Slack will transact no other business at the Slack special meeting.

Recommendation of the Slack Board

The Slack board unanimously recommends that Slack stockholders vote:

 

   

FOR” the merger proposal; and

 

   

FOR” the non-binding compensation advisory proposal.

For additional information on the recommendation of the Slack board, see the section entitled “The Mergers—Recommendation of the Slack Board and Reasons for the Mergers.

Record Date and Outstanding Shares of Slack Common Stock

Only holders of record of issued and outstanding shares of either class of Slack common stock as of the close of business on January 25, 2021, the record date for the Slack special meeting, are entitled to notice of, and to vote at, the Slack special meeting via the Slack special meeting website or any adjournment or postponement of the Slack special meeting.

As of the close of business on the record date, there were 501,490,143 shares of Slack Class A common stock and 79,094,868 shares of Slack Class B common stock outstanding and entitled to vote at the Slack special meeting. Each share of Class A common stock is entitled to one vote on each proposal and each share of Class B common stock is entitled to 10 votes on each proposal.

A complete list of Slack stockholders entitled to vote at the Slack special meeting will be available for inspection at Slack’s principal place of business during regular business hours for a period of no less than 10 days before the Slack special meeting at 500 Howard Street, San Francisco, California 94105. If Slack’s headquarters are closed for health and safety reasons related to the COVID-19 pandemic during such period, the list of Slack stockholders will be made available for inspection upon request to Slack’s corporate secretary at 500 Howard Street, San Francisco, California 94105, subject to the satisfactory verification of stockholder status. The list of Slack stockholders entitled to vote at the Slack special meeting will also be made available for inspection during the Slack special meeting via the Slack special meeting website at www.virtualshareholdermeeting.com/WORK2021SM.

 

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Quorum; Abstentions and Broker Non-Votes

A quorum of Slack stockholders is necessary to hold a valid meeting. The presence at the Slack special meeting, in person (including via the Slack special meeting website) or by proxy, of the holders of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote at the Slack special meeting constitutes a quorum. Abstentions, withhold votes, and broker non-votes are counted as shares present and entitled to vote for the purposes of determining a quorum.

Required Vote

Approval of the merger proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the merger proposal will have the same effect as a vote “AGAINST” the merger proposal.

Approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock present via the Slack special meeting website or represented by proxy at the Slack special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

The merger proposal and non-binding compensation advisory proposal are described in the section entitled “Slack Proposals.

Methods of Voting

Slack stockholders of record may vote their shares in four ways:

 

   

by Internet at www.proxyvote.com 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on March 1, 2021 (have your Notice or proxy card in hand when you visit the website);

 

   

by toll-free telephone at 1-800-690-6903, until 11:59 p.m. Eastern Time on March 1, 2021 (have your Notice or proxy card in hand when you visit the website);

 

   

by completing and mailing your proxy card; or

 

   

by Internet during the Annual Meeting. Instructions on how to attend and vote at the Annual Meeting are described at www.virtualshareholdermeeting.com/WORK2021SM.

In order to be counted, proxies submitted by telephone or Internet must be received by 11:59 p.m. Eastern Time on March 1, 2021. Proxies submitted by U.S. mail must be received before the start of the Slack special meeting.

If you are a street name stockholder, please follow the instructions from your broker, bank, or other nominee to vote by Internet, telephone, or mail before the meeting, or by Internet during the Slack special meeting, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

Voting via the Slack Special Meeting Website

Shares held directly in your name as stockholder of record may be voted at the Slack special meeting via the Slack special meeting website. If you choose to virtually attend the Slack special meeting website and vote your shares at the meeting via the Slack special meeting website, you will need the 16-digit control number included on your proxy card.

 

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If you are a beneficial holder, you will need to obtain a specific control number from your broker, bank or other nominee holder of record giving you the right to vote the shares.

Even if you plan to virtually attend the Slack special meeting, the Slack board recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Slack special meeting.

Voting by Proxy

You may direct your vote by proxy without virtually attending the Slack special meeting. You can vote by proxy by phone, the Internet or mail by following the instructions provided in the enclosed proxy card. If you are a street name stockholder, please follow the instructions from your broker, bank, or other nominee to vote by Internet, telephone, or mail before the meeting, or by Internet during the Slack special meeting, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your shares of Slack common stock, you may contact MacKenzie Partners, Inc., Slack’s proxy solicitor, toll-free at (800) 322-2885, or for brokers and banks, collect at (212) 929-5500 or via email at proxy@mackenziepartners.com.

Adjournment

In accordance with the Slack bylaws, whether or not a quorum is present, the chairman of the Slack special meeting will have the power to adjourn the Slack special meeting from time to time, without notice other than announcement at the meeting. If the Slack special meeting is adjourned, Slack stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use. At any subsequent reconvening of the Slack special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Slack special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

In addition, the merger agreement provides that Slack may adjourn or postpone the Slack special meeting (i) after consultation with Salesforce, to the extent necessary to ensure that any supplement or amendment to this proxy statement/prospectus that is required by applicable law is provided to the Slack stockholders within a reasonable amount of time in advance of the Slack special meeting or (ii) if, as of the time the Slack special meeting is scheduled, there are not sufficient affirmative votes in person or proxy at the Slack special meeting to constitute a quorum or to obtain the approval of the merger proposal; provided that Slack will only be permitted to effect one such adjournment or postponement under the circumstances described in clause (ii). If requested by Salesforce under the circumstances described in clause (ii), Slack will be required to adjourn or postpone the special meeting once for a period of up to 10 business days. However, the Slack special meeting will not be adjourned or postponed if it would require a change in the record date.

Revocability of Proxies

If you are a stockholder of record, you can change your vote or revoke your proxy by:

 

   

notifying Slack’s Corporate Secretary, in writing, at Slack Technologies, Inc., 500 Howard Street, San Francisco, California 94105. Such notice must be received at the above location before 11:59 p.m. Eastern Time on March 1, 2021;

 

   

voting again using the telephone or Internet before 11:59 p.m. Eastern Time on March 1, 2021 (your latest telephone or Internet proxy is the one that will be counted); or

 

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attending and voting during the Slack special meeting. Simply logging into the Slack special meeting will not, by itself, revoke your proxy.

In light of shelter-in-place restrictions currently in place due to COVID-19, stockholders are encouraged to change their vote by voting again using the telephone or Internet.

If you are a street name stockholder, you may revoke any prior voting instructions by contacting your broker, bank or other nominee or by attending the Slack special meeting and voting by Internet during the meeting by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

Proxy Solicitation Costs

The enclosed proxy card is being solicited by Slack and the Slack board. In addition to solicitation by mail, Slack’s directors, officers and employees may solicit proxies in person, by phone or by electronic means. These persons will not be specifically compensated for conducting such solicitation.

Slack has retained MacKenzie Partners to assist in the solicitation process. Slack will pay MacKenzie Partners a fee of approximately $20,000, as well as reasonable and customary documented expenses. Slack also has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

Slack will ask brokers, banks and other nominees to forward the proxy solicitation materials to the beneficial owners of shares of Slack common stock held of record by such nominee holders. Slack will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

Appraisal Rights

Pursuant to Section 262 of the DGCL, holders of Slack common stock who hold their shares through the first effective time, do not vote their shares in favor of adoption of the merger agreement and who comply fully with and properly demand appraisal for their shares under the applicable requirements of Section 262 of the DGCL and do not otherwise withdraw or lose the right to appraisal under Delaware law, have the right to seek appraisal of the fair value of their shares of Slack common stock, as determined by the Delaware Court of Chancery, if the first merger is completed. The “fair value” of shares of Slack common stock as determined by the Delaware Court of Chancery may be more than, less than, or equal to the value of the merger consideration that Slack stockholders would otherwise be entitled to receive under the terms of the merger agreement. Slack stockholders also should be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the first merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Holders of Slack common stock who wish to preserve any appraisal rights they may have, must so advise Slack by submitting a written demand for appraisal prior to the vote to adopt the merger agreement and approve the transactions contemplated thereby, and must otherwise follow fully the procedures prescribed by Section 262 of the DGCL.

Other Information

The matters to be considered at the Slack special meeting are of great importance to the Slack stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this proxy statement/prospectus and submit your proxy by phone or the Internet or complete, date, sign and promptly return the enclosed proxy card in the enclosed postage-paid envelope. If you submit your proxy by phone or the Internet, you do not need to return the enclosed proxy card.

 

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Assistance

If you need assistance in completing your proxy card or have questions regarding the Slack special meeting, contact:

 

 

LOGO

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

(800) 322-2885

Banks and Brokers: (212) 929-5500

Email: proxy@mackenziepartners.com

Vote of Slack’s Directors and Executive Officers

As of December 16, 2020, Slack directors, executive officers, and their respective affiliates, as a group, beneficially held and were entitled to vote 7,688,272 shares of Slack Class A common stock and 82,661,892 shares of Class B common stock, representing 62.8% of the voting power of Slack common stock, including the shares covered by voting agreements in favor of Stewart Butterfield.

Slack currently expects that all of its directors and executive officers will vote their shares “FOR” the merger proposal and “FOR” the non-binding compensation advisory proposal.

Attending the Slack Special Meeting Virtually

You are entitled to attend the Slack special meeting only if you were a stockholder of record of Slack at the close of business on the record date or you held your shares of Slack beneficially in the name of a broker, bank or other nominee as of the record date, or you hold a valid proxy for the Slack special meeting.

If you were a stockholder of record of Slack at the close of business on the record date and wish to attend the Slack special meeting, you will need the 16-digit control number located on your proxy card.

If a broker, bank or other nominee is the record owner of your shares of Slack common stock, you will need to obtain your specific control number and further instructions from your bank, broker or other nominee.

Results of the Slack Special Meeting

Within four business days following the Slack special meeting, Slack intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four-business day period, Slack will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four days of the date that the final results are certified.

SLACK STOCKHOLDERS SHOULD CAREFULLY READ THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE MERGER PROPOSAL AND THE NON-BINDING COMPENSATION ADVISORY PROPOSAL.

 

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SLACK PROPOSALS

Merger Proposal

It is a condition to the completion of the mergers that Slack stockholders approve the merger proposal. In the first merger, each Slack stockholder will receive, for each eligible share of Slack common stock that is issued and outstanding as of immediately prior to the first effective time, the merger consideration of 0.0776 shares of Salesforce common stock and $26.79 in cash, without interest, further described in the sections entitled “The Mergers—Consideration to Slack Stockholders” and “The Merger Agreement—Merger Consideration.

The approval by such stockholders of this proposal is required by Section 251 of the DGCL and is a condition to the completion of the mergers.

Approval of the merger proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal. Failure to vote on the merger proposal will have the same effect as a vote “AGAINST” the merger proposal.

The Slack board unanimously recommends a vote “FOR” the merger proposal.

Non-Binding Compensation Advisory Proposal

As required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, which were enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Slack is required to provide its stockholders the opportunity to vote to approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to Slack’s named executive officers that is based on or otherwise relates to the mergers, as described in the section entitled “The Mergers—Merger-Related Compensation.” Accordingly, Slack stockholders are being provided the opportunity to cast an advisory vote on such payments.

As an advisory vote, this proposal is not binding upon Slack or the Slack board or Salesforce or the Salesforce board, and approval of this proposal is not a condition to completion of the mergers and is a vote separate and apart from the merger proposal. Accordingly, you may vote to approve the merger proposal and vote not to approve the non-binding compensation advisory proposal and vice versa. Because the merger-related executive compensation to be paid in connection with the mergers is based on the terms of the merger agreement as well as the contractual arrangements with Slack’s named executive officers, such compensation will be payable, regardless of the outcome of this advisory vote, if the merger proposal is approved (subject only to the contractual conditions applicable thereto). However, Slack seeks the support of its stockholders and believes that stockholder support is appropriate as the executive compensation programs are designed to incentivize executives to successfully execute a transaction such as that contemplated by the merger proposal from its early stages until consummation. Accordingly, holders of shares of Slack common stock are being asked to vote on the following resolution:

RESOLVED, that the stockholders of Slack Technologies, Inc. approve, on an advisory, non-binding basis, certain compensation that may be paid or become payable to the named executive officers of Slack Technologies, Inc. that is based on or otherwise relates to the mergers, as disclosed pursuant to Item 402(t) of Regulation S-K under the section entitled “The MergersMerger-Related Compensation.

Approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the voting power of all issued and outstanding shares of Slack common stock present via the Slack special meeting website or represented by proxy at the Slack special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

The Slack board unanimously recommends a vote “FOR” the non-binding compensation advisory proposal.    

 

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THE MERGERS

This discussion of the mergers is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement/prospectus as Annex A and incorporated by reference herein in its entirety. You should read the entire merger agreement carefully as it is the legal document that governs the mergers.

Transaction Structure

The merger agreement provides for two mergers: (a) Merger Sub I will be merged with and into Slack, with Slack continuing as the surviving corporation in the first merger and as a wholly owned subsidiary of Salesforce and (b) immediately following the first merger, Slack, as the surviving corporation in the first merger, will be merged with and into either: (i) if a revised structure notice has not been delivered by Salesforce before the closing, Merger Sub II, with Merger Sub II continuing as a wholly owned subsidiary of Salesforce, or (ii) if a revised structure notice has been delivered by Salesforce before the closing, Salesforce, with Salesforce surviving the second merger.

Pursuant to the merger agreement, Salesforce may elect the alternative transaction structure upon delivering a revised structure notice to Slack in the event that 10 business days before the closing, Salesforce and the trustee under the convertible notes indenture have not each executed a supplemental indenture to the convertible notes indenture amending the terms thereof to permit the consummation of the second merger with Merger Sub II at the second effective time without giving rise to a breach of, or any default under, any provision of the convertible notes indenture. Upon delivery of the revised structure notice, the structure of the second merger will be modified to consist of Slack, as the surviving corporation in the first merger, merging with and into Salesforce, with Salesforce continuing as the surviving company.

Consideration to Slack Stockholders

As a result of the first merger, each eligible share of Slack common stock issued and outstanding immediately prior to the first effective time will be automatically cancelled and converted into the right to receive (a) 0.0776 shares of Salesforce common stock, with cash in lieu of any fractional shares of Salesforce common stock, and (b) the right to receive $26.79 in cash, without interest.

Salesforce will not issue fractional shares of Salesforce common stock in the first merger. Instead, each holder of Slack common stock who otherwise would be entitled to receive fractional shares of Salesforce common stock (after aggregating all shares of such holder) will be entitled to an amount in cash, without interest, equal to such fraction of a share of Salesforce common stock multiplied by $260.50, rounded to the nearest whole cent.

Background of the Mergers

The Slack board, together with Slack’s senior management, regularly reviews and assesses Slack’s performance, share price, risks, opportunities and strategy in light of the current business and economic environment, as well as evolving industry dynamics, as they may affect Slack’s long-term strategic goals and plans. As a matter of practice, the Slack board and Slack’s senior management, together with their professional advisors, regularly review and evaluate a wide range of strategic opportunities for business combinations, acquisitions and other financial and strategic alternatives for Slack, including continuing as a standalone company, with a view to maximizing stockholder value.

The Salesforce board of directors, together with members of Salesforce’s management team, regularly consider and pursue opportunities to enhance Salesforce’s product suite, improve customer satisfaction and unlock stockholder value. In this regard, members of Salesforce’s management team have reviewed and discussed business, operational and strategic plans to enhance and complement Salesforce’s existing product

 

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suite in light of the current business and economic environment, as well as evolving industry dynamics. As part of Salesforce’s ongoing evaluation of such opportunities, Salesforce’s senior management identified Slack as a potential candidate for a strategic transaction with Salesforce.

Over the past several years, as part of Slack’s and Salesforce’s existing commercial relationships, Mr. Stewart Butterfield, Slack’s Chief Executive Officer, and other representatives of Slack, on the one hand, and Mr. Bret Taylor, Salesforce’s President and Chief Operating Officer, and other representatives of Salesforce, on the other hand, have had discussions from time to time to better understand each other’s respective businesses, platforms and products, and to explore various ways in which they could collaborate in order to advance their shared business objectives.

Prior to August 2020, none of the discussions between representatives of Slack and Salesforce involved the possibility of an acquisition of Slack.

In furtherance of Slack’s strategic priorities, in March 2020, Mr. Butterfield met with Mr. Taylor and indicated that Slack was interested in acquiring Quip from Salesforce. Slack’s indication of interest did not progress into negotiations between the parties, and there were no further developments with respect to Slack’s interest in acquiring Quip through August 27, 2020.

On August 27, 2020, in connection with Salesforce’s regular and ongoing consideration and evaluation of strategic opportunities, Mr. Taylor contacted Mr. Butterfield by phone and indicated that, while Salesforce was not interested in selling Quip, Salesforce had been contemplating possible ways in which the companies could work together in the future. During this conversation and two subsequent phone calls on September 1, 2020 and September 3, 2020, Mr. Taylor raised the possibility of a potential acquisition of Slack. No purchase price or other material terms were discussed by Mr. Taylor and Mr. Butterfield during these conversations.

Subsequent to such discussions, senior executives at Salesforce had numerous internal discussions regarding a potential acquisition of Slack.

On September 7, 2020, Mr. Butterfield reported his conversation with Mr. Taylor to members of the Slack board. Following discussion, the Slack board authorized Mr. Butterfield to further pursue discussions with Salesforce regarding a potential acquisition of Slack, including the provision of high priority diligence information subject to entry into a customary confidentiality agreement.

On September 9, 2020, Ms. Amy Weaver, Salesforce’s President and Chief Legal Officer, and Mr. John Somorjai, Salesforce’s Executive Vice President, Corporate Development & Salesforce Ventures, contacted Mr. David Schellhase, Slack’s General Counsel, by email to circulate a draft confidentiality agreement in connection with continuing the discussion of a potential acquisition of Slack.

On September 10, 2020, Slack and Salesforce entered into a confidentiality agreement to explore a business opportunity of mutual interest. Also on September 10, 2020, Mr. Butterfield spoke with Mr. Taylor about Salesforce’s interest in a potential acquisition of Slack. No purchase price or other material terms were discussed by Mr. Taylor and Mr. Butterfield.

On September 11, 2020, Mr. Butterfield spoke with Mr. Marc Benioff, Salesforce’s Chair and Chief Executive Officer, about Salesforce’s interest in a potential acquisition of Slack. No offer to acquire Slack was made by Mr. Benioff, and no purchase price or other material terms were discussed by Mr. Benioff and Mr. Butterfield.

On September 14, 2020, Salesforce provided Slack with an initial list of high priority diligence requests related to Slack’s business, and Mr. Butterfield, Mr. Schellhase and Mr. Allen Shim, Slack’s Chief Financial Officer, met with Mr. Taylor, Mr. Somorjai, Ms. Weaver and a representative of BofA Securities, Inc.,

 

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Salesforce’s financial advisor in connection with the potential transaction (which we refer to as “BofA Securities”), to discuss a potential acquisition of Slack, including the agenda for a preliminary due diligence meeting the following day. Also on September 14, 2020, the Slack board convened for a special meeting via videoconference, and Mr. Butterfield provided an update to the Slack board on the possible acquisition of Slack by Salesforce.

On September 15, 2020, members of Slack senior management held preliminary due diligence discussions in which high-level diligence information was exchanged with members of Salesforce senior management and representatives of BofA Securities.

On September 16, 2020, the Mergers and Acquisitions Committee of the Salesforce board of directors (which we refer to as the “Salesforce M&A Committee”) held a regularly scheduled meeting via videoconference to discuss and review, among other things, the possible acquisition of Slack. After discussions, the Salesforce M&A Committee authorized management to continue to pursue negotiations with Slack and to submit a non-binding proposal to acquire Slack for a price of $35.00 per share, with 40% of the consideration to be Salesforce common stock and 60% of the consideration to be cash. At the invitation of the Salesforce M&A Committee, members of Salesforce management, representatives of BofA Securities and representatives of Wachtell, Lipton, Rosen & Katz (which we refer to as “Wachtell Lipton”), Salesforce’s outside legal counsel in connection with the potential transaction, attended the meeting.

On September 16, 2020, Mr. Taylor and Mr. Somorjai delivered to Mr. Butterfield a non-binding written proposal to acquire Slack at a price per share of $35.00, with 40% of the consideration to be Salesforce common stock and 60% of the consideration to be cash (although Salesforce indicated an openness to discussing a different mix of cash and stock if preferred by the Slack board). Later that same day, the Slack board discussed the proposal with senior management. Following discussion, the Slack board unanimously concluded that the price per share in the September 16 offer was not compelling enough to warrant further engagement with Salesforce or a change in Slack’s plans to continue to operate as a standalone company. The Slack board instructed senior management to inform Salesforce that any offer for a strategic combination would need to be significantly higher to warrant further engagement.

On September 17, 2020, at a regularly scheduled meeting of the Salesforce board of directors held via videoconference, with members of Salesforce management also in attendance, Mr. Taylor and Mr. Somorjai provided an update to the Salesforce board of directors regarding Salesforce’s merger and acquisition strategy, including a potential acquisition of Slack. At the invitation of the Salesforce board of directors, representatives of BofA Securities attended the meeting.

On September 17, 2020, Mr. Butterfield called Mr. Taylor to convey the Slack board’s position.

On September 21, 2020, Mr. Taylor called Mr. Butterfield to discuss Salesforce’s proposal and conveyed Salesforce’s continued interest in a potential acquisition of Slack.

On September 26, 2020, the Slack board held a special meeting via videoconference with senior management and representatives of Qatalyst Partners LP (which we refer to as “Qatalyst Partners”) present at the invitation of the Slack board. Mr. Butterfield updated the Slack board on his conversations with Salesforce executives about a possible acquisition. Representatives of Qatalyst Partners led a discussion regarding Slack’s current valuation, prospects for growth and for improved valuation, certain market and financial perspectives, Salesforce’s prior acquisition activity, how a negotiation with Salesforce was likely to unfold, other potential acquirers and related matters. After discussion, the Slack board concluded that Slack should continue discussions with Salesforce and determined to have Mike McNamara, John O’Farrell and Graham Smith, all of whom are nonexecutive, independent directors, constitute a special strategic transaction committee of Slack’s board (which we refer to as the “Slack committee”) and be available to assist Mr. Butterfield and the Slack board on matters associated with a possible strategic transaction, and to select financial advisors and negotiate the terms of the financial advisor engagements.

 

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On September 27, 2020, the Slack board held a special meeting via videoconference with senior management and representatives of Goldman Sachs & Co. LLC (which we refer to as “Goldman Sachs”) present at the invitation of the Slack board. At the direction of the Slack board, representatives of Goldman Sachs led a discussion regarding Slack’s current valuation, prospects for growth and improved valuation, certain market and financial perspectives, Salesforce’s prior acquisition activity, how a negotiation with Salesforce was likely to unfold, other potential acquirers and related matters.

On September 28, 2020, the Slack committee held a meeting via videoconference with senior management and a representative of Goodwin Procter LLP, Slack’s outside legal counsel (which we refer to as “Goodwin”) present. The Slack committee reviewed and discussed potential financial advisor choices, relevant qualifications (including previous sell-side engagements opposite Salesforce and the merits of retaining two financial advisors), senior management’s recommendation following the meetings with the potential financial advisors and the absence of any potential conflicts with Salesforce. Following these discussions, the Slack committee approved the engagement of Qatalyst Partners and Goldman Sachs as financial advisors in connection with the exploration of Slack’s strategic options, including the possible acquisition of Slack by Salesforce. The Slack committee discussed economic and other material terms attendant to engagement of financial advisors and authorized management to finalize its engagement with each of Qatalyst Partners and Goldman Sachs within specified parameters.

On September 30, 2020, Mr. Shim, with the approval of the Slack committee, executed an engagement letter formalizing Qatalyst Partners’ engagement to act as financial advisor to the Slack board in connection with a potential transaction.

On October 2, 2020, at the direction of the Slack committee, representatives of Qatalyst Partners and Goldman Sachs discussed the recent Salesforce proposal with representatives of BofA Securities. During this discussion, representatives of Qatalyst Partners and Goldman Sachs reiterated the position of the Slack board that any offer for a strategic combination would need to be significantly higher to warrant further engagement.

Also on October 2, 2020, Mr. Schellhase, with the approval of the Slack board, executed an engagement letter formalizing Goldman Sachs’ engagement to act as financial advisor to the Slack board in connection with a potential transaction. In addition, Goldman Sachs provided a letter to Slack confirming that in the two years preceding the date of the letter, the Investment Banking Division of Goldman Sachs had not been engaged by Salesforce to provide financial advisory or underwriting services for which Goldman Sachs had recognized compensation and disclosing Slack’s entry into capped call transactions (which are referred to in this proxy statement/prospectus as the “capped call transactions”) with Goldman Sachs with respect to Slack’s 0.50% Convertible Senior Notes due 2025 (which are referred to in this proxy statement/prospectus as the “convertible notes”). The section “—Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor” of this proxy statement/prospectus describes certain financial advisory and/or underwriting services Goldman Sachs has provided to Slack and its affiliates for the two years preceding December 1, 2020. The Slack board considered the letter, together with certain disclosures regarding Goldman Sachs’ involvement with the capped call transactions, and confirmed that nothing would limit Goldman Sachs’ ability to fulfill its potential responsibilities as financial advisor to the Slack board in connection with the potential transaction.

On October 4, 2020, Mr. Butterfield and Mr. Taylor discussed the Slack and Salesforce positions regarding the September 16 offer. Later on October 4, 2020, Mr. Butterfield spoke again with Mr. Taylor and indicated that the Slack board’s position was firm that the price per share in the September 16 offer was not compelling enough to warrant further engagement with Salesforce or a change in Slack’s plans to continue to operate as a standalone company.

On October 15, 2020, Mr. Taylor contacted Mr. Butterfield to arrange a conversation about Salesforce’s interest in a potential acquisition of Slack and timing of a potential revised non-binding written proposal to acquire Slack.

 

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On October 17, 2020, Mr. Butterfield and Mr. Taylor spoke by phone, and Mr. Taylor indicated that Salesforce was contemplating delivering a revised non-binding written proposal following a special meeting of the Salesforce M&A Committee on October 21, 2020.

On October 21, 2020, the Salesforce M&A Committee held a special meeting via videoconference to discuss and review the status of, and negotiations with respect to, the potential acquisition of Slack. After discussions, the Salesforce M&A Committee authorized management to continue to pursue negotiations with Slack and to submit a revised proposal to acquire Slack. At the invitation of the Salesforce M&A Committee, members of Salesforce management and representatives of BofA Securities and Wachtell Lipton attended the meeting.

On October 21, 2020, following the authorization by the Salesforce M&A Committee, Mr. Somorjai delivered to Mr. Butterfield a revised non-binding written proposal to acquire Slack at a price per share of $42.50, with 50% of the consideration to be Salesforce common stock and 50% of the consideration to be cash (although Salesforce indicated an openness to discussing a different mix of cash and stock if preferred by the Slack board). The proposal was promptly distributed to the Slack board for review. The Slack committee met that same day via videoconference with senior management and representatives of Goodwin, Qatalyst Partners and Goldman Sachs. Mr. Butterfield updated the Slack committee on the status of discussions with Salesforce and the latest proposal received from Salesforce. The Slack committee discussed whether there was any merit to reaching out to any other potential acquirers. Based on discussions between Mr. Butterfield and Mr. Taylor to date, the Slack committee concluded that to optimize the negotiations with Salesforce, they should continue negotiating directly with Salesforce.

On October 22, 2020, the Slack committee again met via videoconference with senior management and representatives of Goodwin, Qatalyst Partners and Goldman Sachs. After discussion, the Slack committee instructed Mr. Butterfield to communicate a counter-proposal of $53.50 per share to Salesforce. Also on October 22, 2020, Mr. Butterfield spoke with Mr. Taylor about arranging a meeting with Mr. Benioff to discuss strategy and potential synergies in connection with a possible transaction.

On October 23, 2020, at the direction of the Slack committee, representatives of Qatalyst Partners and Goldman Sachs held a telephonic discussion with BofA Securities during which representatives of Qatalyst Partners and representatives of Goldman Sachs stated that Salesforce’s October 21 proposal to acquire Slack for $42.50 per share was insufficient and made a counter-proposal of $53.50 per share. Later on October 23, 2020, Mr. Benioff contacted a representative of Goldman Sachs by phone, and the representative of Goldman Sachs reaffirmed Slack’s position that the price to be offered by Salesforce was insufficient.

On October 26, 2020, Mr. Taylor contacted Mr. Butterfield by phone to discuss the latest proposals of each party. Mr. Taylor indicated that Salesforce would be willing to increase its offer to acquire Slack to a price per share of $46.50 per share. Mr. Butterfield indicated that a proposal to acquire Slack for $46.50 per share was insufficient based on his prior discussions with the Slack board and made a counter-proposal of $48.00 per share.

Later on October 26, 2020, Mr. Taylor called Mr. Butterfield by phone again and indicated that Salesforce would be willing to increase its offer to acquire Slack to a price per share of $47.50. Later during the same evening, Mr. Somorjai delivered to Mr. Butterfield a revised written proposal (which had been authorized by the Salesforce M&A Committee in its previous meetings) from Salesforce proposing the acquisition of all of the outstanding shares of Slack for a purchase price of $47.50 per share of Slack class A common stock and class B common stock, with the consideration consisting of 50% Salesforce common stock (to be based on a fixed exchange ratio determined prior to signing) and 50% cash. The revised proposal also included a draft exclusivity agreement, which provided that Slack would engage in exclusive discussions with Salesforce until November 24, 2020, with the possibility of automatic extension for an additional five business days thereafter, unless a party had terminated discussions.

On October 26, 2020, the closing trading price of a share of Salesforce common stock was $241.98 and the closing trading price of a share of Slack Class A common stock was $27.75.

 

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On October 27, 2020, the Slack board held a special meeting via videoconference with representatives of Goodwin, Qatalyst Partners and Goldman Sachs present. At the direction of the Slack board, representatives of Qatalyst Partners discussed the proposal received from Salesforce. The Slack board directed representatives of Qatalyst Partners and Goldman Sachs to discuss with Salesforce the possibility of consideration to be in the form of 60% cash and 40% Salesforce common stock. A representative of Goodwin reviewed the Slack board’s fiduciary duties in considering a potential change-in-control transaction and an agreement to enter into exclusivity regarding such a transaction. After further discussion of the likelihood that another strategic buyer would make a superior offer to acquire Slack, the Slack board authorized Mr. Butterfield to enter into the exclusivity agreement with Salesforce on behalf of Slack and to continue discussions regarding the potential transaction at a price of $47.50 per share. Later on October 27, 2020, Mr. Schellhase, Ms. Weaver and Mr. Somorjai exchanged drafts of an exclusivity agreement, and Mr. Somorjai delivered a revised non-binding written proposal to acquire Slack at a price per share of $47.50 per share with 40% of the consideration to be Salesforce common stock and 60% of the consideration to be cash.

On October 28, 2020, representatives of Slack and Salesforce finalized the terms of the exclusivity agreement, which the parties executed. The executed exclusivity agreement provided that exclusivity would automatically expire in the event that Salesforce voluntarily proposed any reduction in price or change in mix of the per share consideration to be paid to Slack stockholders in connection with the transaction (as outlined in the latest Salesforce proposal).

On November 1, 2020, Slack granted Salesforce and its advisors access to due diligence information provided in a virtual data room. From November 1, 2020 until the execution and delivery of the merger agreement, Salesforce and its representatives conducted due diligence on Slack and participated in multiple due diligence discussions with Slack’s management and Slack’s representatives.

On November 3, 2020, the Slack committee met with senior management and a representative of Goodwin. At the direction of the Slack committee, representatives of Goldman Sachs also attended to lead a discussion regarding the mechanics and economics of unwinding Slack’s outstanding convertible notes and capped call transactions in the event of a strategic transaction. Mr. Shim reviewed Slack’s Initial Three-Year Plan (as defined below) and provided an update on discussions with Salesforce. After discussion, the Slack committee authorized Slack senior management to provide the Initial Three-Year Plan to Salesforce.

On November 4, 2020, Salesforce was provided additional access to substantial materials regarding Slack’s business, financials, material contracts and other matters in a virtual data room.

On November 5, 2020, Salesforce was provided with a copy of Slack’s Initial Three-Year Plan. On the same day, representatives of Salesforce’s and Slack’s respective management teams and their respective advisor teams held a videoconference meeting at which Slack’s management presented an overview of various aspects of Slack’s business in order to facilitate Salesforce’s due diligence.

On November 6, 2020, representatives of Wachtell Lipton furnished initial drafts of the merger agreement and the voting and support agreement to Latham & Watkins LLP, Slack’s outside legal counsel in connection with the potential transaction (which we refer to as “Latham”). The initial draft merger agreement contemplated a “no-shop” provision restricting Slack from soliciting alternative acquisition proposals and without any ability for the Slack board to terminate the merger agreement with Salesforce in favor of an unsolicited superior proposal. The draft voting and support agreement also contemplated that the Slack founders, who collectively controlled a majority of the outstanding voting power, would be obligated to vote in favor of the transaction with Salesforce, ensuring the approval of the transaction with Salesforce for so long as there is no change of board recommendation, and that upon a change of board recommendation (including as a result of an unsolicited superior proposal), shares representing 33.3% of the outstanding voting power would be required to be voted in favor of the transaction with Salesforce. From November 6, 2020 to December 1, 2020, representatives of Salesforce and Slack, with the assistance of Wachtell Lipton and Latham and other professional advisors, negotiated the terms of the merger agreement, the voting and support agreement and related documents.

 

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Additional due diligence sessions involving the Salesforce and Slack management teams and their respective legal and financial advisors occurred on November 9 and November 10, 2020 by videoconference.

On November 12, 2020, the Salesforce board of directors held a special meeting via videoconference to discuss and review the status of negotiations and due diligence regarding the potential acquisition of Slack, including preliminary due diligence findings developed over the course of the substantial diligence performed to date. At the invitation of the Salesforce board, members of Salesforce management and representatives of BofA Securities and Wachtell Lipton attended the meeting.

On November 12, 2020, the Slack committee met via videoconference with members of senior management and representatives of Latham, Goodwin, Qatalyst Partners and Goldman Sachs. At the direction of the Slack committee, representatives of senior management, Qatalyst Partners and Goldman Sachs led a discussion on the status of the transaction, and representatives of Latham reviewed the principal terms of the merger agreement that were subject to ongoing negotiation between the parties. The Slack committee instructed senior management and Latham to reject the voting and support agreement construct proposed by Salesforce and to negotiate for a fiduciary termination right in connection with a superior proposal under the merger agreement, with as low a termination fee as possible.

On November 13, 2020, representatives of Latham furnished revised drafts of the merger agreement and the voting and support agreement to Wachtell Lipton. The revised merger agreement included a fiduciary termination right and a termination fee of 2.5% of Slack’s equity value. The revised voting and support agreement removed the construct proposed by Salesforce that, upon a change of board recommendation (including as a result of an unsolicited superior proposal), shares representing 33.3% of the outstanding voting power would be required to be voted in favor of the transaction with Salesforce.

On November 17, 2020, representatives of Wachtell Lipton furnished revised drafts of the merger agreement and the voting and support agreement to Latham. The revised merger agreement provided for a termination fee of 3.6% of Slack’s equity value and noted that the fiduciary termination right remained an open point.

On November 20, 2020, representatives of Latham furnished a revised draft of the merger agreement to Wachtell Lipton, which provided for a termination fee of 2.75% of Slack’s equity value and a fiduciary termination right.

On November 21, 2020, Slack and representatives of Qatalyst Partners, Goldman Sachs, Goodwin and Latham held reverse due diligence discussions with members of Salesforce senior management regarding several topics, including finance and legal matters. It was agreed that a follow-up reverse due diligence discussion would be scheduled once Salesforce’s quarterly actual results and expected guidance for the next quarter and fiscal year were closer to finalization.

On November 22, 2020, representatives of Wachtell Lipton furnished a revised draft of the merger agreement to Latham. Representatives of Wachtell Lipton conveyed to representatives of Latham that Salesforce would be willing to accept a fiduciary termination right in exchange for a termination fee of 3.3% of Slack’s equity value instead of the 2.75% of Slack’s equity value proposed by Slack.

On November 23, 2020, the Salesforce M&A Committee held a special meeting via videoconference to discuss and review the status of the potential acquisition of Slack, including the due diligence findings developed over the course of the substantial diligence undertaken to date, the expected costs of operating Slack’s business after closing and recent changes in market conditions. Following discussions, the Salesforce M&A Committee remained supportive of the potential transaction, but directed Salesforce management to submit a revised proposal to Slack reflecting these considerations. At the invitation of the Salesforce M&A Committee, members of Salesforce management and representatives of BofA Securities and Wachtell Lipton attended the meeting.

 

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On November 23, 2020, the Slack committee met via videoconference with members of senior management and representatives of Latham, Goodwin, Qatalyst Partners and Goldman Sachs. At the direction of the Slack committee, representatives of senior management, Qatalyst Partners and Goldman Sachs led a discussion on the status of the transaction and the status and results of the reverse due diligence investigations. Representatives of Latham and Goodwin reviewed the principal terms of the merger agreement that were subject to ongoing negotiation between the parties, expected timing for regulatory approvals and Salesforce’s process around financing for the transaction. Mr. Schellhase and Mr. Shim discussed the transaction’s potential to provide a greater potential distribution of the Slack product and allow Slack (as part of the combined company) to more effectively compete. As part of the discussion of transaction terms, representatives of Latham informed the Slack committee that Salesforce had agreed to include a fiduciary termination right, but that, in exchange, Salesforce had requested a termination fee of 3.3% of Slack’s equity value instead of the 2.75% of Slack’s equity value proposed by Slack. The Slack committee instructed management and Latham to negotiate a termination fee as close to 3.0% of Slack’s equity value as possible. The Slack committee also approved the Updated Three-Year Plan (as defined below) and authorized Slack senior management to provide the Updated Three-Year Plan to Salesforce. Later on November 23, 2020, Salesforce was provided with a copy of the Updated Three-Year Plan.

On November 24, 2020, Mr. Taylor contacted Mr. Butterfield and, in connection with the completion of due diligence and in consideration of expected costs of operating Slack’s business after closing and recent changes in market conditions, proposed a reduced price per share of Slack common stock in the transaction of $45.50 per share, which caused exclusivity with Salesforce to automatically expire. On November 24, 2020, the closing trading price of a share of Salesforce common stock was $260.84 and the closing trading price of a share of Slack Class A common stock was $29.58.

On November 25, 2020, a representative of BofA Securities contacted a representative of Qatalyst Partners via phone to provide additional context around the decision to propose a reduced price per share of Slack common stock in the transaction. The representative of Qatalyst Partners indicated that he was confident that the Slack board would have an extremely negative reaction to the proposed reduction.

During market hours on November 25, 2020, the Wall Street Journal reported that Salesforce was in advanced talks to acquire Slack. Slack and Salesforce did not comment with respect to the market rumors. The closing trading price of a share of Salesforce common stock was $246.82 and the closing trading price of a share of Slack Class A common stock was $40.70.

Later that same day, the Slack committee met via videoconference with members of senior management and representatives of Latham, Qatalyst Partners and Goldman Sachs. Representatives of senior management, Qatalyst Partners and Goldman Sachs led a discussion on the status of the transaction and discussions with Salesforce. The Slack committee discussed the revised proposal received from Salesforce. Following discussion, the Slack committee authorized Mr. Butterfield to contact Mr. Taylor and convey that the revised offer would need to be higher to warrant further engagement. The Slack committee also instructed Goldman Sachs to contact Mr. Benioff and convey that the revised proposal from Salesforce was unacceptable and could result in termination of discussions.

Following the Slack committee meeting, a representative of Qatalyst Partners contacted Mr. Butterfield via phone. In light of the decline in the Salesforce share price following the publication of the Wall Street Journal article and the resulting decrease in the value of the stock portion of the deal consideration when measured based on the current Salesforce stock price (as opposed to the unaffected average daily volume weighted average price for a trailing five-day period that would likely be used to determine the exchange ratio), it was agreed that Mr. Butterfield would provide a counter-proposal to Mr. Taylor of approximately $47.00 per share. Subsequently, Mr. Butterfield contacted Mr. Taylor via phone and made the counter-proposal.

Separately, at the direction of the Slack committee, a representative of Goldman Sachs had discussions with Mr. Benioff and Mr. Taylor regarding the revised proposal from Salesforce.

 

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Later on November 25, 2020, at the direction of the Slack board, representatives of Qatalyst Partners and BofA Securities formalized the revised purchase price terms and reached agreement to fix the per share consideration to be paid to Slack stockholders at a per share price of $26.79 in cash and 0.0776 shares of Salesforce common stock, which represented a per share price of approximately $47.00 per share of Slack class A common stock based on the five-day trailing volume weighted average price of a share of Salesforce common stock ending on November 24, 2020.

Separately, representatives of Latham furnished a revised draft of the merger agreement to Wachtell Lipton, which provided for a termination fee of 3.0% of Slack’s equity value and a fiduciary termination right.

Also on November 25, 2020, representatives of Slack held a follow-up reverse due diligence discussion with members of Salesforce senior management to review the latest quarterly actual results of Salesforce and anticipated guidance for the next quarter and fiscal year (which guidance was made public by Salesforce on December 1, 2020).

On November 27, 2020, Slack and Salesforce agreed to reinstate the terms of the exclusivity agreement and extend the exclusivity period through December 1, 2020.

Over the course of November 27 to November 30, representatives of Latham and Wachtell Lipton exchanged several revised versions of the draft merger agreement and the voting and support agreement reflecting the parties’ discussions, with the final terms of the merger agreement (pending approval by each of the Slack board and the Salesforce board) reflecting a termination fee of $900 million (approximately 3.1% of Slack’s equity value) and a fiduciary termination right.

On November 29, 2020, the Slack board met with representatives of senior management and representatives of Latham, Qatalyst Partners and Goldman Sachs. Representatives of Qatalyst Partners reviewed and discussed Qatalyst Partners’ financial analyses regarding the proposed merger consideration contemplated by the proposal received from Salesforce based on the Management Projections (as defined below). Representatives of Latham reviewed the status of the merger agreement and discussed the key provisions including, without limitation, the structure of the transaction, treatment of securities and other equity instruments, provisions related to required regulatory approvals, closing conditions, non-solicitation covenants, the termination fee and termination rights. Thereafter, representatives of Latham reviewed the Slack board’s fiduciary duties in considering a potential sale of Slack. Representatives of Goldman Sachs reviewed and discussed their financial analyses regarding the proposed merger consideration contemplated by the proposal received from Salesforce based on the Management Projections. During the meeting, Mr. Butterfield also informed the Slack board that he had received informal messages from representatives of two large publicly traded U.S. technology companies, each of whom expressed a desire to discuss the market rumors that Salesforce was in advanced talks to acquire Slack on November 25, 2020. However, the Slack board discussed the fact that neither of those parties (nor any other potential acquirers) had made any offers, despite the November 25, 2020 market rumors, and that any potential engagement with additional parties would jeopardize the potential transaction with Salesforce. Following discussion, the Slack board determined that it was unlikely that any other potential acquirer would make a superior proposal to acquire Slack and that it was not in the best interests of Slack or its stockholders to delay the process with Salesforce so that Slack could engage with other parties.

On November 30, 2020, the Salesforce board of directors held a special meeting via videoconference to consider and discuss the terms of the proposed acquisition of Slack by Salesforce. At the invitation of the Salesforce board of directors, members of Salesforce management, representatives of BofA Securities and representatives of Wachtell Lipton attended the meeting. The Salesforce board of directors reviewed the material terms and conditions of the proposed transaction. Representatives of BofA Securities discussed with the directors certain financial aspects of the proposed transaction. Salesforce’s management reviewed the proposed per share consideration to be paid to Slack stockholders at a per share price of $26.79 in cash and 0.0776 shares of Salesforce common stock, which represented (i) $45.86 per share of Slack Class A common stock based on

 

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Salesforce’s closing stock price on November 30, 2020 and (ii) approximately $46.01 per share of Slack class A common stock based on Salesforce’s closing stock price on November 27, 2020. The Salesforce board of directors then engaged in discussion and deliberations, following which the Salesforce board of directors approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the mergers and the issuance of Salesforce shares in connection therewith, were advisable and fair to, and in the best interests of, Salesforce and its stockholders.

On December 1, 2020, the Slack board met, together with representatives of senior management and representatives of Latham, Qatalyst Partners and Goldman Sachs. Representatives of Latham reviewed with the Slack board its fiduciary duties in connection with a decision to sell Slack. Representatives of Qatalyst Partners and Goldman Sachs reviewed and discussed their respective financial analyses regarding the proposed merger consideration contemplated by the proposal received from Salesforce based on the Management Projections. Thereafter, at the request of the Slack board, Qatalyst Partners rendered its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated December 1, 2020, to the Slack board that, as of December 1, 2020, based upon and subject to the procedures followed and assumptions, qualifications and limitations considered in connection with the preparation of the opinion, the merger consideration to be received pursuant to, and in accordance with, the terms of the merger agreement, by the holders of Slack Class A common stock, in their capacity as such holders, was fair, from a financial point of view, to such holders, as further described in the section “—Opinion of Qatalyst Partners LP, Slack’s Financial Advisor.” Representatives of Goldman Sachs then rendered Goldman Sachs’ oral opinion, subsequently confirmed in writing, that, as of the date of such opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, taken in the aggregate, pursuant to the merger agreement was fair, from a financial point of view, to such holders as further described in the section “—Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor.

After discussion and taking into account the factors described below in greater detail in the section “—Recommendation of the Slack Board and Reasons for the Mergers,” the Slack board unanimously (i) determined the terms of the merger agreement and transactions contemplated thereby, including the mergers, to be fair to and in the best interests of Slack and its stockholders, (ii) determined that it is in the best interests of Slack and its stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by Slack of the merger agreement, the performance by Slack of its covenants and agreements contained therein and the consummation of the Mergers and the other transactions contemplated by the merger agreement upon the terms and subject to the conditions contained therein and (iv) directed that the merger agreement be submitted for consideration at a meeting of Slack’s stockholders and recommending that the holders of Slack’s common stock approve the transactions contemplated by the merger agreement, including the first merger, and adopt the merger agreement, subject to Section 5.3 of the merger agreement.

On December 1, 2020, after market close, Slack, Salesforce, Merger Sub I and Merger Sub II executed the merger agreement and related transaction documents. Shortly following the execution of the merger agreement, Slack and Salesforce published a joint press release announcing the transaction.

Recommendation of the Slack Board and Reasons for the Mergers

By unanimous vote, the Slack board, at a special meeting held on December 1, 2020, determined that the merger agreement and the transactions contemplated by the merger agreement, including the mergers, are fair to, and in the best interests of Slack and its stockholders; approved and declared advisable the merger agreement and the transactions contemplated thereby, including the mergers; and resolved to recommend that Slack stockholders approve the transactions contemplated by the merger agreement, including the first merger, and adopt the merger agreement. The Slack board unanimously recommends that you vote “FOR” the merger proposal and “FOR” the non-binding compensation advisory proposal.

 

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In evaluating the mergers, the Slack board consulted with Slack’s senior management team, as well as Slack’s outside legal and financial advisors, and, in reaching its decision to approve the merger agreement and declare its advisability and to recommend that Slack’s stockholders vote in favor of the adoption of the merger agreement, the Slack board considered a number of factors, including, but not limited to, the following:

 

   

Premium to Current Equity Price. The default merger consideration to be paid by Salesforce of 0.0776 shares of Salesforce common stock and $26.79 in cash, which implied (i) an equity value of $45.86 per share of Slack common stock, based on Salesforce’s closing stock price on November 30, 2020, the last full trading day before the date of the merger agreement, and would provide Slack’s stockholders with the opportunity to receive approximately (1) a 55% premium over the unaffected closing price of $29.58 per share of Slack Class A common stock on November 24, 2020, the last full trading day before the first published rumor regarding a potential merger transaction, (2) a 62% premium over the 90-day unaffected volume weighted average price of $28.34 and (3) a 15% premium over the unaffected all-time high closing price of $39.90 and (ii) an equity value of $47.03 per share of Slack common stock based on the unaffected closing price of Salesforce common stock as of November 24, 2020, the last full trading day before the first published rumor regarding a potential merger transaction, and would provide Slack’s stockholders with the opportunity to receive approximately (1) a 59% premium over the unaffected closing price of $29.58 per share of Slack Class A common stock on November 24, 2020, (2) a 66% premium over the 90-day unaffected volume weighted average price of $28.34 and (3) an 18% premium over the unaffected all-time high closing price of $39.90.

 

   

Liquidity and Certainty of Value. The merger consideration to be paid to Slack’s stockholders will consist of cash, which provides immediate liquidity and certainty of value to Slack’s stockholders, and freely tradable Salesforce common stock.

 

   

Future Appreciation. The aggregate consideration to be received by Slack’s stockholders in the first merger consists, as of the unaffected date, of 43% Salesforce common stock, which allows Slack’s stockholders to participate in the future growth of Salesforce and, indirectly, Slack, including any potential appreciation that may be reflected in the value of the combined company (including any resulting synergies) and to attain liquidity should any Slack stockholder choose not to retain its shares of Salesforce common stock.

 

   

Salesforce’s Business Condition and Prospects. The Slack board considered information with respect to Salesforce’s financial condition, results of operations, business, competitive position and business prospects and risks, both on a historical and prospective basis, as well as current industry, economic and market conditions and trends. In considering Salesforce’s condition and prospects, Slack’s board reviewed information regarding Salesforce’s historical performance and received reports from Slack’s senior management team regarding its due diligence review of Salesforce’s business and legal affairs and Salesforce’s management.

 

   

Strategic Benefits. The transaction would leverage Slack’s proven business collaboration technology offerings across Salesforce’s broader platform. The combined company would facilitate a diversity of service offerings, client relationships, geographies and end markets and allow Slack (as part of the combined company) to more effectively compete against third parties. Slack and Salesforce also have similar cultures, including with respect to corporate purpose, focus on customer success and innovation and vibrant user communities.

 

   

Extensive Negotiations. The Slack board considered the fact that the merger consideration reflected extensive negotiations between Slack and Salesforce and their respective advisors, and the belief of the Slack board that the merger consideration represents the best proposal and economic value available to Slack’s stockholders.

 

   

Tax Treatment. The Slack board considered the fact that the transaction is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

 

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Terms of the Merger Agreement. The Slack board, with the assistance of legal advisors, reviewed the terms of the merger agreement, including:

 

   

the ability of Slack’s board, subject to specified limitations, to respond to and engage in discussions or negotiations regarding unsolicited third-party acquisition proposals under certain circumstances and, ultimately, to terminate the merger agreement in order to accept a superior proposal under specified circumstances;

 

   

the fact that Slack’s board has the right, after complying with specified covenants and prior to the Slack stockholder approval being obtained, to change its recommendation to the Slack stockholders that they vote in favor of the adoption of the merger agreement if Slack’s board determines in good faith after consultation with Slack’s outside legal counsel and financial advisors, that as a result of a superior proposal or certain intervening events the failure to change its recommendation would be reasonably likely to violate its fiduciary duties to Slack’s stockholders under applicable law; and

 

   

Slack’s right to terminate the merger agreement under certain circumstances, including in order to accept and enter into a definitive agreement with respect to an unsolicited superior offer in certain circumstances, subject to providing Salesforce an opportunity to match such proposal prior to taking such action, and payment to Salesforce of a termination fee of $900 million if the merger agreement is so terminated, which amount the Slack board believes to be reasonable under the circumstances and taking into account the range of such termination fees in similar transactions.

 

   

Likelihood of Completion. The likelihood that the mergers will be consummated, based on, among other things, the limited number of conditions to the mergers, the absence of a financing condition or similar contingency that is based on Salesforce’s ability to obtain financing, the relative likelihood of obtaining required regulatory approvals, the remedies available under the merger agreement to Slack in the event of various breaches by Salesforce, and Salesforce’s reputation in the business technology industry, its financial capacity to complete an acquisition of this size and its prior track record of successfully completing acquisitions, which the Slack board believed supported the conclusion that a transaction with Salesforce could be completed relatively quickly and in an orderly manner.

 

   

Regulatory Matters. The Slack board considered the regulatory clearances that would be required as a condition to the mergers and the prospects and anticipated timing of obtaining those clearances.

 

   

Opinions of Financial Advisors.

 

   

The Slack board considered the opinion of Qatalyst Partners to the effect that, as of December 1, 2020, and based upon and subject to the assumptions, qualifications, limitations and other matters set forth in such opinion, the merger consideration to be received pursuant to, and in accordance with, the merger agreement by the holders of shares of Slack Class A common stock, in their capacity as such holders of Slack Class A common stock (other than Salesforce or any of its affiliates), was fair, from a financial point of view, to such holders, as more fully described below under the section entitled “—Opinion of Qatalyst Partners LP, Slack’s Financial Advisor” and the full text of the written opinion is attached as Annex B to this proxy statement/prospectus.

 

   

The Slack board also considered the opinion, dated December 1, 2020, of Goldman Sachs to the Slack board that as of such date and subject to the factors and assumptions set forth therein, the merger consideration to be paid to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, taken in the aggregate, pursuant to the merger agreement was fair from a financial point of view to such holders as more fully described below in the section entitled “—Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor” and the full text of the written opinion is attached as Annex C to this proxy statement/prospectus.

 

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Slack’s board also considered a number of potentially negative factors in its deliberations concerning the merger agreement and the mergers, including:

 

   

Risk Associated with Failure to Consummate the Mergers. The possibility that the mergers might not be completed on a timely basis or at all as a result of the failure to receive the required regulatory clearances or satisfy other closing conditions, which could divert Slack management attention and resources from the operation of Slack’s business and increase expenses from an unsuccessful attempt to complete the mergers.

 

   

Incurred Costs. The costs to be incurred in connection with the mergers, regardless of whether the mergers are completed and the risks and contingencies relating to the announcement and pendency of the mergers and the risks and costs to Slack if the transactions are not completed on a timely basis or at all.

 

   

Impact of Announcement. The uncertainty about the effect of the proposed mergers, regardless of whether the mergers are completed, on Slack’s employees, customers and other parties, may impair Slack’s ability to attract, retain and motivate key personnel, and could cause customers, suppliers and others to seek to change existing business relationships with Slack.

 

   

Risk of Failure to Consummate the Mergers. The risk that adverse changes to the business, assets, liabilities, condition (financial or otherwise) or operating results of Slack or Salesforce could result in a failure to complete the mergers.

 

   

Difficulties of Integrating the Businesses. The potential difficulties of integrating the businesses of Salesforce and Slack and the risk that all or some portion of the potential benefits of the mergers might not be realized or might take longer to realize than expected.

 

   

Restrictions on Conducting Business. The fact that, under the terms of the merger agreement, prior to the completion of the mergers or termination of the merger agreement, Slack is required to conduct its business only in the ordinary course and is subject to specified restrictions on its ability to conduct its business, including in respect of entering into or terminating material contracts, commencing or settling litigation or increasing the compensation of its employees.

 

   

Inability to Solicit Other Takeover Proposals and Termination Fee. Slack’s inability to solicit competing acquisition proposals and the possibility that the termination fee payable by Slack upon termination of the merger agreement could discourage other potential acquirers from making a competing offer to purchase Slack and cause significant cash flow difficulties for Slack if it were required to pay the termination fee of $900 million to Salesforce.

 

   

Salesforce Common Stock as Merger Consideration. The fact that the value of the merger consideration will fluctuate depending on the performance of Salesforce common stock prior to closing of the first merger, and that the merger agreement does not provide termination or walk-away rights to Slack in the event of a decline in the price of Salesforce common stock.

 

   

Risk to Salesforce Common Stock Price Post-Mergers. The risk of significant selling pressure on the price of Salesforce common stock immediately following the closing of the first merger if a significant number of Slack stockholders seek to sell the Salesforce common stock they received as merger consideration.

In the judgment of Slack’s board, however, these potential risks were more than offset by the potential benefits of the mergers discussed above.

The foregoing discussion of the information and factors considered by the Slack board is not intended to be exhaustive, but includes the material factors that the Slack board considered. In reaching its decision to approve the merger agreement, the mergers, and the other transactions contemplated by the merger agreement, the Slack board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Slack board considered all these factors as a whole, and overall

 

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considered the factors to be favorable to, and to support, its determination. The Slack board conducted an overall review of the factors described above, and reached the consensus that the mergers are fair to, advisable to, and in the best interests of, Slack and Slack’s stockholders.

In considering the recommendation of Slack’s board to adopt the merger agreement, Slack’s stockholders should be aware that the executive officers and directors of Slack have certain interests in the mergers that may be different from, or in addition to, the interests of Slack stockholders generally, as more fully described below under the section captioned “—Interests of Slack Directors and Executive Officers in the Mergers.” The Slack board was aware of these interests and considered them when adopting the merger agreement and recommending that Slack stockholders vote to adopt the merger agreement.

Projected Financial Information

Although Slack has publicly issued limited short-term guidance concerning certain aspects of its expected financial performance, it does not, as a matter of course, make public disclosure of detailed forecasts or projections of its expected financial performance for extended periods due to, among other things, the inherent difficulty of accurately predicting future periods and the likelihood that the underlying assumptions and estimates may prove incorrect. However, in connection with the transaction with Salesforce, Slack’s senior management prepared and approved for use certain unaudited prospective financial information which was provided to and considered by the Slack board and Salesforce, and which was provided to each of Qatalyst Partners and Goldman Sachs, in each case as set forth herein.

Slack’s management initially prepared certain nonpublic, unaudited prospective financial information for fiscal years 2021 through 2024 in October and November 2020 and such non-public, unaudited prospective financial information was discussed with, and approved for use by, the Slack committee on November 3, 2020 (which we refer to as the “Initial Three-Year Plan”) in connection with the evaluation of the strategic transaction with Salesforce. The Initial Three-Year Plan was shared with representatives of Salesforce on November 5, 2020 in connection with their due diligence review.

In November 2020, the Initial Three-Year Plan was subsequently adjusted to reflect Slack’s actual operating results for its fiscal quarter ended October 31, 2020 (which we refer to as the “Updated Three-Year Plan”). The Updated Three-Year Plan (except for the calculations of “Unlevered Free Cash Flow” and “Unlevered Free Cash Flow Less Stock-Based Compensation” and the related “% Margins”) was shared with representatives of Salesforce on November 23, 2020 in connection with their due diligence review.

Slack’s senior management subsequently made certain unaudited prospective extrapolations based on the Updated Three-Year Plan for the fiscal years 2025 through 2031. The Slack board approved the Updated Three-Year Plan and such extrapolations on November 23, 2020. Such extrapolations were not provided to representatives of Salesforce in connection with the transaction. In connection with such approval, the Slack board directed Qatalyst Partners and Goldman Sachs to use the Updated Three-Year Plan and the related extrapolations for fiscal years 2025 through 2031, or a subset thereof, in performing their financial analyses in connection with their respective opinions, as described in more detail in the sections “Opinion of Qatalyst Partners LP, Slack’s Financial Advisor” and “Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor” below.

In November 2020, management prepared certain non-public, unaudited prospective financial information related to the expected utilization by Slack of certain federal net operating loss carryforwards and research and development tax credits of Slack for fiscal years 2022 through 2032 (which we refer to as the “NOL Schedule”) in connection with the evaluation of the strategic transaction with Salesforce. The NOL Schedule was provided to Qatalyst Partners and Goldman Sachs for use in performing their financial analyses in connection with their respective opinions, as described in more detail in the sections “Opinion of Qatalyst Partners LP, Slack’s Financial Advisor” and “Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor” below. The NOL Schedule was not provided to representatives of Salesforce in connection with the transaction.

 

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We refer to any of the Initial Three-Year Plan, the Updated Three-Year Plan and related extrapolated projections for fiscal years 2025 through 2031 and the NOL Schedule as the “Management Projections.” The Management Projections were prepared by Slack on a stand-alone basis and do not take into account the transactions, including any costs incurred in connection with the mergers or the other transactions contemplated thereby or any changes to Slack’s operations or strategy that may be implemented after the completion of the mergers. As a result, actual results likely will differ, and may differ materially, from those contained in the Management Projections.

The information and tables set forth below are included solely to give Slack stockholders access to relevant portions of the Management Projections and are not included in this proxy statement/prospectus to influence any Slack stockholder to vote their shares of Slack common stock in favor of the mergers or for any other purpose.

Initial Three-Year Plan

 

FYE Jan | $ in millions

     FQ4’21E      2022E     2023E     2024E  

Revenue

     $ 245      $ 1,188     $ 1,562     $ 2,012  

% Growth

       35 %       33 %      31 %      29 % 

Non-GAAP Gross Profit

     $ 214      $ 1,045     $ 1,388     $ 1,812  

% Margin

       87 %       88 %      89 %      90 % 

Non-GAAP Operating Income (Loss)1

     $ (9    $ 10     $ 155     $ 322  

% Margin

       (4 )%       1 %      10 %      16 % 

 

(1)

Excludes the impact of stock-based compensation.

Updated Three-Year Plan and Related Extrapolations

 

FYE Jan | $ in millions

   FQ4’21E     2022E     2023E     2024E     2025E     2026E     2027E     2028E     2029E     2030E     2031E  

Revenue

   $ 245     $ 1,188     $ 1,562     $ 2,012     $ 2,516     $ 3,082     $ 3,698     $ 4,363     $ 5,105     $ 5,922     $ 6,810  

% Growth

     35     32     31     29     25     23     20     18     17     16     15

Non-GAAP Gross Profit

   $ 214     $ 1,045     $ 1,388     $ 1,812     $ 2,265     $ 2,775     $ 3,330     $ 3,929     $ 4,597     $ 5,333     $ 6,133  

% Margin

     87     88     89     90     90     90     90     90     90     90     90

Non-GAAP Operating Income (Loss)1

   $ (9   $ 10     $ 155     $ 322     $ 503     $ 740     $ 998     $ 1,294     $ 1,532     $ 1,777     $ 2,043  

% Margin

     (4 )%      1     10     16     20     24     27     30     30     30     30

Unlevered Free Cash Flow1 2

   $ 19     $ 71     $ 166     $ 349     $ 557     $ 843     $ 1,101     $ 1,374     $ 1,606     $ 1,843     $ 2,127  

% Margin

     8     6     11     17     22     27     30     31     31     31     31

Unlevered Free Cash Flow Less Stock-Based Compensation3

   $ (43   $ (231   $ (235   $ (149   $ (15   $ 205     $ 408     $ 644     $ 854     $ 1,089     $ 1,397  

% Margin

     (17 )%      (19 )%      (15 )%      (7 )%      (1 )%      7     11     15     17     18     21

 

(1)

Excludes the impact of stock-based compensation.

(2)

Unlevered free cash flow is calculated as non-GAAP operating income (loss), subtracting the impact of cash taxes, and adding or subtracting (as applicable) the net impact of depreciation and amortization, capital expenditures, changes in net working capital, amortization of deferred costs, non-cash operating lease expense and payroll taxes related to stock-based compensation. Unlevered free cash flow excludes the impact of stock-based compensation. Unlevered free cash flow was used by Qatalyst Partners in performing its financial analysis in connection with its opinion as described in more detail in the section “—Opinion of Qatalyst Partners LP, Slack’s Financial Advisor.”

(3)

Unlevered free cash flow less stock-based compensation was used by Goldman Sachs in performing its financial analysis in connection with its opinion as described in more detail in the section “—Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor.”

 

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NOL Schedule

 

FYE Jan | $ in millions

   2022E      2023E      2024E      2025E      2026E     2027E     2028E     2029E     2030E     2031E     2032E  

Federal NOLs and R&D Tax Credits Gained (Used)

   $ 356      $ 309      $ 242      $ 141      $ (21   $ (184   $ (392   $ (564   $ (758   $ (991   $ (184

Federal Tax Savings1

   $ 0      $ 0      $ 0      $ 0      $ 4     $ 37     $ 78     $ 113     $ 152     $ 198     $ 37  

 

(1)

Assumes an effective tax rate of 20%.

Important Information About the Management Projections

The Management Projections were not prepared with a view toward public disclosure or toward complying with U.S. generally accepted accounting principles (which we refer to as “GAAP”), nor were they prepared with a view toward compliance with the published guidelines of the SEC, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of projections of prospective financial information. The non-GAAP financial measures used in the Management Projections were approved by Slack for the use by its financial advisors in connection with their respective opinions and were relied upon by the Slack board in connection with its consideration of the mergers and the transaction consideration. The SEC rules, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure, do not apply to non-GAAP financial measures provided to Qatalyst Partners, Goldman Sachs or to the Slack board in connection with a proposed business combination like the mergers if the disclosure is included in a document like this proxy statement/prospectus. In addition, reconciliations of non-GAAP financial measures to a GAAP financial measure were not relied upon by Qatalyst Partners or Goldman Sachs for purposes of its opinion or by the Slack board in connection with its consideration of the merger agreement, the mergers and the transaction consideration. Accordingly, Slack has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. In addition, the Management Projections were not prepared with a view towards complying with GAAP. The Management Projections may differ from published analyst estimates and forecasts and do not take into account any events or circumstances after the date they were prepared, including the announcement of the mergers.

While the Management Projections are presented with numerical specificity, the Management Projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond Slack management’s control. Further, given that the Management Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year beyond their preparation. Important factors that may affect actual results and may result in such projections not being achieved include: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, the inability to complete the mergers, or the failure to satisfy other conditions to completion of the mergers, including that a governmental entity may prohibit, delay or refuse to grant approval for the completion of the mergers, and risks and uncertainties pertaining to our business, including the risks and uncertainties detailed in our public periodic filings with the SEC. In addition, the ability to achieve the Management Projections may depend on, in part, whether or not the strategic goals, objectives and targets are reached over the applicable period. The assumptions upon which the Management Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industry in which Slack operates, and the risks and uncertainties described in the section “Cautionary Statements Regarding Forward-Looking Statements,” all of which are difficult or impossible to predict accurately and many of which are beyond our control. The Management Projections also reflect assumptions by Slack management that are subject to change and are susceptible to multiple interpretations and periodic revisions based on actual results, revised prospects for the Slack business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated when such projections were prepared.

 

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Accordingly, there can be no assurance that the Management Projections will be realized, and actual results may differ, and may differ materially, from those shown. The inclusion of the Management Projections in this proxy statement/prospectus should not be regarded as an indication that any of Slack, Qatalyst Partners, Goldman Sachs, Salesforce or any of their respective affiliates, officers, directors, advisors or other representatives considered or consider the Management Projections necessarily predictive of actual future events, and the Management Projections should not be relied upon as such. None of Slack, Qatalyst Partners, Goldman Sachs, Salesforce or any of their respective affiliates, officers, directors, advisors or other representatives can give any assurance that actual results will not differ from the Management Projections. None of Slack, Qatalyst Partners, Goldman Sachs, Salesforce or any of their respective affiliates, officers, directors, advisors or other representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of Slack compared to the information contained in the Management Projections or that forecasted results will be achieved.

In addition, the Management Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement/prospectus, and except as required by applicable securities laws, Slack does not intend to update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.

The Management Projections were prepared by, and are the responsibility of, Slack’s management. The Management Projections have not been audited. Neither the independent registered public accounting firm of Slack nor the independent registered public accounting firm of Salesforce or any other independent accountants, have compiled, examined or performed any procedures with respect to the Management Projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or their achievability, and the independent accounting firms of Slack and Salesforce assume no responsibility for, and disclaim any association with, the Management Projections.

Opinion of Qatalyst Partners LP, Slack’s Financial Advisor

Slack retained Qatalyst Partners to act as financial advisor to the Slack board in connection with a potential transaction such as the mergers and to evaluate whether the merger consideration to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Slack Class A common stock, in their capacity as holders of Slack Class A common stock (other than Salesforce or any of its affiliates), was fair, from a financial point of view, to such holders. Slack selected Qatalyst Partners to act as its financial advisor based on Qatalyst Partners’ qualifications, expertise, reputation and knowledge of the business and affairs of Slack and the industry in which it operates. Qatalyst Partners has provided its written consent to the reproduction of the Qatalyst Partners’ opinion in this proxy statement/prospectus. At the meeting of the Slack board on December 1, 2020, Qatalyst Partners rendered its oral opinion, subsequently confirmed in writing, that, as of such date and based upon and subject to the considerations, limitations and other matters set forth therein, the consideration of $26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack Class A common stock to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Slack Class A common stock, in their capacity as holders of Slack Class A common stock (other than Salesforce or any of its affiliates), was fair, from a financial point of view, to such holders. Qatalyst Partners delivered its written opinion, dated December 1, 2020, to the Slack board following the meeting of the Slack board.

The full text of Qatalyst Partners’ written opinion, dated December 1, 2020, to the Slack board is attached as Annex B to this proxy statement/prospectus and is incorporated by reference herein. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. Slack stockholders should read the opinion carefully and in its entirety.

Qatalyst Partners’ opinion was provided to the Slack board and addresses only, as of the date of the opinion, the fairness, from a financial point of view, of the consideration of $26.79 in cash and 0.0776 shares of

 

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Salesforce common stock per share of Slack Class A common stock to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Slack Class A common stock, other than Salesforce or any of its affiliates, and it does not address any other aspect of the mergers. It does not constitute a recommendation as to how any Slack stockholder should vote with respect to the merger proposal or any other matter and does not in any manner address the price at which the shares of Slack Class A common stock or shares of Salesforce common stock will trade at any time. The summary of Qatalyst Partners’ opinion set forth herein is qualified in its entirety by reference to the full text of the opinion attached as Annex B to this proxy statement/prospectus.

In arriving at its opinion, Qatalyst Partners reviewed the merger agreement, certain related documents, and certain publicly available financial statements and other business and financial information of Slack and Salesforce. Qatalyst Partners also reviewed certain forward-looking information relating to Slack prepared by the management of Slack, including financial projections and operating data of Slack, which are described above in the section entitled “—Projected Financial Information.” Additionally, Qatalyst Partners discussed the past and current operations and financial condition and the prospects of Slack and Salesforce, with senior management of Slack and Salesforce, respectively. Qatalyst Partners also reviewed the historical market prices and trading activity for the shares of Slack Class A common stock and shares of Salesforce common stock, and compared the financial performance of Slack and Salesforce and the prices and trading activity of Slack Class A common stock and Salesforce common stock with that of certain other selected publicly traded companies and their securities. In addition, Qatalyst Partners reviewed the financial terms, to the extent publicly available, of selected acquisition transactions and performed such other analyses, reviewed such other information and considered such other factors as Qatalyst Partners deemed appropriate.

In arriving at its opinion, Qatalyst Partners assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to, or discussed with, Qatalyst Partners by Slack and Salesforce. With respect to the Management Projections, Qatalyst Partners was advised by management of Slack, and Qatalyst Partners assumed, that such projections had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Slack of the future financial performance of Slack and other matters covered thereby. Qatalyst Partners assumed that the mergers will be consummated in accordance with the terms set forth in the merger agreement, without any modification, waiver or delay and that the mergers will have the tax consequences as set forth in the merger agreement and as described in discussions with representatives of Slack. In addition, Qatalyst Partners assumed that, in connection with the receipt of all the necessary approvals of the proposed mergers, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on Slack, Salesforce or the contemplated benefits expected to be derived in the proposed mergers. Qatalyst Partners did not make any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Slack or Salesforce or their respective affiliates, nor was Qatalyst Partners furnished with any such evaluation or appraisal. In arriving at its opinion, Qatalyst Partners was not authorized to solicit, and did not solicit, interest from any party with respect to an acquisition, business combination or other extraordinary transaction involving Slack. In addition, Qatalyst Partners relied, without independent verification, upon the assessment of the management of Slack as to the existing and future technology and products of Slack and the risks associated with such technology and products. Qatalyst Partners’ opinion has been approved by Qatalyst Partners’ opinion committee in accordance with its customary practice. Qatalyst Partners’ opinion does not constitute a recommendation as to how to vote with respect to the mergers or any other matter and does not in any manner address what the value of shares of Salesforce common stock actually will be when issued pursuant to the mergers or the price at which Slack Class A common stock or Salesforce common stock will trade or otherwise be transferable at any time.

Qatalyst Partners’ opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the date of the opinion may affect Qatalyst Partners’ opinion and the assumptions used in preparing it, and Qatalyst Partners has not assumed any obligation to update, revise or reaffirm its opinion. Qatalyst Partners’ opinion does

 

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not address the underlying business decision of Slack to engage in the mergers, or the relative merits of the mergers as compared to any strategic alternatives that may be available to Slack. Qatalyst Partners’ opinion is limited to the fairness, from a financial point of view, of the consideration of $26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack Class A common stock to be received pursuant to, and in accordance with, the terms of the merger agreement by Slack stockholders, other than Salesforce or any affiliates of Salesforce, and Qatalyst Partners expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of the officers, directors or employees of Salesforce or Slack or any of their respective affiliates, or any class of such persons, relative to such consideration. Qatalyst Partners expressed no opinion regarding the consideration to be received by any holder of Slack Class B common stock under the merger agreement in such holder’s capacity as a holder of Slack Class B common stock.

The following is a brief summary of the material analyses performed by Qatalyst Partners in connection with its opinion dated December 1, 2020. The analyses and factors described below must be considered as a whole; considering any portion of such analyses or factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Qatalyst Partners’ opinion. For purposes of its analyses, Qatalyst Partners utilized both the consensus of third-party research analysts’ projections of the future financial performance of Slack as of November 30, 2020 (which we refer to as the “analyst projections”) and the Management Projections.

Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Qatalyst Partners, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Qatalyst Partners’ financial analyses.

Illustrative Discounted Cash Flow Analysis

Qatalyst Partners performed an illustrative discounted cash flow (which we refer to as “DCF”) analysis, which is designed to imply a range of estimated potential, present values per share for Slack Class A common stock as of October 31, 2020 by:

 

   

adding:

 

   

the implied net present value of the estimated future unlevered free cash flows excluding the impact of stock-based compensation (which we refer to as “UFCF”) of Slack, based on the Management Projections, for fourth quarter of fiscal year 2021 through fiscal year 2026 (which implied present value was calculated by using a range of discount rates of 8.25% to 9.75%, based on an estimated weighted average cost of capital for Slack);

 

   

the implied net present value of a corresponding terminal value of Slack, calculated by multiplying Slack’s estimated UFCF in fiscal year 2027 of approximately $918 million, based on the Management Projections (but assuming an effective tax rate of 20%, as provided by Slack’s management, and which tax rate excludes the effect of Slack’s estimated remaining federal net operating losses and research and development tax credits for fiscal year 2027, as such tax attributes were separately valued, as described in the second succeeding bullet point below), by a range of fully diluted enterprise value to next-12-month’s estimated UFCF multiples of 30.0x to 45.0x, and discounted to present value using the same range of discount rates used in the calculation of the implied net present value of the estimated future UFCF of Slack described above;

 

   

the cash and cash equivalents of Slack as of October 31, 2020, as provided by Slack’s management; and

 

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the implied net present value of Slack’s estimated federal tax savings due to its net operating loss balance and research and development tax credits for the fiscal years 2027 and beyond (as provided by Slack’s management and set forth in the NOL Schedule), discounted to present value using the same range of discount rates used in the calculation of the implied net present value of the estimated future UFCF of Slack described above.

 

   

subtracting:

 

   

the face value of Slack’s outstanding convertible debt as of October 31, 2020, as provided by Slack’s management; and

 

   

the value of Slack’s non-controlling interest as of October 31, 2020, as provided by Slack’s management.

 

   

dividing the resulting amount by the number of fully-diluted shares of Slack common stock outstanding (calculated using the treasury stock method and including 0.6M shares of Slack common stock issuable under its employee share purchase program), adjusted for stock options, restricted stock units and restricted share awards, and in-the-money convertible debt (calculated using the net share settlement method and excluding any make-whole shares or other change of control adjustments), all as provided by Slack’s management as of November 27, 2020, with each of the above-referenced estimated future UFCFs, terminal value and federal tax savings due to net operating losses and research and development tax credits for the fiscal years 2027 and beyond having also been adjusted for the degree of estimated dilution to current stockholders through each respective applicable period (which totaled approximately 17% in the case of the terminal value) due to the estimated net effects of equity issuances and cancellations related to future equity compensation, based on estimates of future dilution provided by Slack’s management.

Based on the calculations set forth above, this analysis implied a range of values for Slack’s common stock of approximately $27.04 to $41.44 per share of Slack Class A common stock. Qatalyst Partners noted that the implied value of the consideration to be received by Slack stockholders pursuant to the merger agreement was $45.86 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 30, 2020 and $47.03 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 24, 2020, the last full trading day before the first published rumor regarding a potential merger transaction.

Selected Companies Analysis

Qatalyst Partners reviewed and compared selected financial information and public market multiples for Slack with publicly available information and public market multiples for selected companies. The companies used in this comparison were those companies listed below, which were selected by Qatalyst Partners in its professional judgment, based on factors including that they are publicly traded companies in similar lines of business to Slack, having a similar business model, having similar financial performance, or having other relevant or similar characteristics. Based upon research analyst consensus estimates for calendar year 2021, and using the closing prices as of November 30, 2020 for shares of the selected companies, Qatalyst Partners calculated, among other things, the implied fully-diluted enterprise value divided by estimated consensus revenue for calendar year 2021 (which we refer to as the “CY2021E revenue multiples”) for each of the selected companies.

 

Selected Companies    CY2021E Revenue
Multiple
 

Zoom Video Communications, Inc.

     45.4x  

Coupa Software Incorporated

     41.0x  

Datadog, Inc.

     40.6x  

ZoomInfo Technologies Inc.

     36.2x  

Okta, Inc.

     33.4x  

 

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Selected Companies    CY2021E Revenue
Multiple
 

Atlassian Corporation Plc

     28.8x  

DocuSign, Inc.

     26.1x  

Twilio Inc.

     24.8x 1 

RingCentral, Inc.

     20.2x  

Anaplan, Inc.

     19.5x  

Asana, Inc.

     19.3x  

HubSpot, Inc.

     17.8x  

AppFolio, Inc.

     16.2x  

Smartsheet Inc.

     15.2x  

Everbridge, Inc.

     14.7x  

Zendesk, Inc.

     13.2x  

 

1 

Reflects Twilio Inc.’s capitalization pro forma for its acquisition of Segment.io, Inc. based on Twilio Inc.’s public filings as of November 2, 2020.

The CY2021E revenue multiple for Slack was 15.5x based on the analyst projections using Slack’s closing share price on November 24, 2020.

Based on an analysis of the CY2021E revenue multiples for the selected companies and the application of its professional judgment, Qatalyst Partners selected a representative range of 15.0x to 33.0x and applied this range to Slack’s estimated calendar year 2021 revenue based on the analyst projections and to Slack’s estimated fiscal year 2022 revenue based on the Management Projections. Based on the same fully diluted share count as used in the above discounted cash flow analysis, this analysis implied a range of per share values of approximately $30.02 to $63.75 per share of Slack Class A common stock based on the Management Projections and approximately $28.64 to $60.84 per share of Slack Class A common stock based on the analyst projections. Qatalyst Partners noted that the implied value of the consideration to be received by Slack stockholders pursuant to the merger agreement was $45.86 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 30, 2020 and $47.03 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 24, 2020.

No company included in the selected companies analysis is identical to Slack. In evaluating the selected companies, Qatalyst Partners made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of Slack, such as the impact of competition on the business of Slack and the industry in general, industry growth and the absence of any material adverse change in the financial condition and prospects of Slack or the industry or in the financial markets in general. Individual multiples or mathematical analysis, such as determining the arithmetic mean, median, or the high or low, are not in itself a meaningful method of using selected company data.

Selected Transactions Analysis

Qatalyst Partners compared thirteen selected public company transactions involving companies in the software industry announced between August 2011 and June 2019, including transactions involving companies

 

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participating in similar lines of business to Slack, having similar business models, having similar financial performance, or having other relevant or similar characteristics. These transactions are listed below:

 

Announcement Date

 

Target

 

Acquirer

  Transaction Multiples  
  Revenue LTM     Revenue NTM  

June 10, 2019

  Tableau Software, Inc.   salesforce.com, inc.     13.2x       10.9x  

February 4, 2019

  The Ultimate Software Group, Inc.   Hellman & Friedman     10.0x       8.4x  

October 28, 2018

  Red Hat, Inc.   International Business Machines Corporation     10.6x       9.3x  

October 15, 2018

  SendGrid, Inc.   Twilio Inc.     14.3x       11.5x  

March 20, 2018

  MuleSoft, Inc.   salesforce.com, inc.     21.8x       15.7x  

January 29, 2018

  Callidus Software Inc.   SAP SE     9.8x       8.3x  

December 17, 2017

  Aconex Limited   Oracle Corporation     9.4x       8.1x  

July 28, 2016

  NetSuite Inc.   Oracle Corporation     11.8x       9.1x  

June 1, 2016

  Demandware, Inc.   salesforce.com, inc.     11.2x       8.9x  

September 18, 2014

  Concur Technologies, Inc.   SAP SE     12.6x       10.2x  

December 20, 2012

  Eloqua, Inc.   Oracle Corporation     9.8x       8.2x  

December 3, 2011

  SuccessFactors, Inc.   SAP SE     10.9x       8.7x  

August 18, 2011

  Autonomy Corporation plc   Hewlett-Packard Company     11.8x       9.6x  

For each of the transactions listed above, Qatalyst Partners reviewed, among other things, the implied fully-diluted enterprise value of the target company as a multiple of analyst estimates of the next-12-months revenue of the target company. Based on the analysis of such metrics for the transactions noted above, Qatalyst Partners selected a representative range of 10.0x to 20.0x applied to Slack’s estimated next-12-months revenue (calculated as the four quarters ending on July 31, 2021 and based on the analyst projections). Based on the same fully diluted share count as used in the above discounted cash flow analysis (with the exception of assuming cash settlement of the convertible notes with an assumed make-whole adjustment and cash settlement of the capped calls based on a Black-Scholes option calculation model, each based on an assumed March 15, 2021 closing date for the mergers), this analysis implied a range of values for Slack’s common stock of approximately $17.95 to $33.15 per share of Slack Class A common stock. Qatalyst Partners noted that the implied value of the consideration to be received by Slack stockholders pursuant to the merger agreement was $45.86 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 30, 2020 and $47.03 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 24, 2020.

For each of the transactions listed above, Qatalyst Partners also reviewed the implied fully-diluted enterprise value of the target company as a multiple of the last-12-months revenue of the target company. Based on the analysis of such metrics for the transactions noted above, Qatalyst Partners selected a representative range of 15.0x to 30.0x applied to Slack’s last-12-months revenue (calculated as the four quarters ending on July 31, 2020). Based on the same fully diluted share count as used in the immediately preceding paragraph, this analysis implied a range of values for Slack’s common stock of approximately $20.44 to $38.15 per share of Slack Class A common stock. Qatalyst Partners noted that the implied value of the consideration to be received by Slack stockholders pursuant to the merger agreement was $45.86 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 30, 2020 and $47.03 per share of Slack Class A common stock, based on Salesforce’s closing stock price on November 24, 2020.

No company or transaction utilized in the selected transactions analysis is identical to Slack or the mergers. In evaluating the selected transactions, Qatalyst Partners made judgments and assumptions with regard to general business, market and financial conditions and other matters, many of which are beyond the control of Slack, such as the impact of competition on the business of Slack or the industry generally, industry growth and the absence of any material adverse change in the financial condition of Slack or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions

 

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to which they are being compared. Individual multiples or mathematical analysis, such as determining the arithmetic mean, median, or the high or low, are not in itself a meaningful method of using selected company data. Because of the unique circumstances of each of these transactions and the mergers, Qatalyst Partners cautioned against placing undue reliance on this information.

Miscellaneous

In connection with the review of the mergers by the Slack board, Qatalyst Partners performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily amenable to a partial analysis or summary description. In arriving at its opinion, Qatalyst Partners considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Qatalyst Partners believes that selecting any portion of its analyses, without considering all analyses as a whole, could create a misleading or incomplete view of the process underlying its analyses and opinion. In addition, Qatalyst Partners may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Qatalyst Partners’ view of the actual value of Slack. In performing its analyses, Qatalyst Partners made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Slack. Any estimates contained in Qatalyst Partners’ analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Qatalyst Partners conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the consideration of $26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack Class A common stock to be received pursuant to, and in accordance with, the terms of the merger agreement by Slack stockholders, other than Salesforce or any affiliates of Salesforce, and in connection with the delivery of its opinion to the Slack board. Qatalyst Partners expressed no opinion regarding the consideration to be received by any holder of Slack Class B common stock under the merger agreement in such holder’s capacity as a holder of Slack Class B common stock. These analyses do not purport to be appraisals or to reflect the price at which Slack Class A common stock might actually trade.

Qatalyst Partners’ opinion and its presentation to the Slack board was one of many factors considered by the Slack board in deciding to approve the merger agreement. The analyses as described above should not be viewed as determinative of the opinion of the Slack board with respect to the consideration of $26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack Class A common stock to be received by Slack stockholders pursuant to the mergers or of whether the Slack board would have been willing to agree to a different consideration. The consideration of $26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack Class A common stock was determined through arm’s-length negotiations between Slack and Salesforce and was approved by the Slack board. Qatalyst Partners provided advice to Slack during these negotiations. Qatalyst Partners did not, however, recommend any specific consideration to Slack or that any specific consideration constituted the only appropriate consideration for the mergers.

Qatalyst Partners provides investment banking and other services to a wide range of corporations and individuals, domestically and offshore, from which conflicting interests or duties may arise. In the ordinary course of these activities, affiliates of Qatalyst Partners may at any time hold long or short positions, and may trade or otherwise effect transactions in debt or equity securities or loans of Slack, Salesforce or certain of their respective affiliates. During the two year period prior to December 1, 2020, the date of Qatalyst Partners’ written opinion, no material relationship existed between Qatalyst Partners or any of its affiliates and Slack or Salesforce pursuant to which compensation was received by Qatalyst Partners or its affiliates. Qatalyst Partners and/or its affiliates may in the future provide investment banking and other financial services to Slack or Salesforce or any of their respective affiliates for which it would expect to receive compensation.

 

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Under the terms of its engagement letter, Qatalyst Partners provided Slack with financial advisory services in connection with the proposed mergers for which it will be paid approximately $60 million (provided that the final actual fee will be, in part, based on an average of the closing price of Salesforce common stock over ten consecutive trading days up to and including the second trading day immediately preceding the closing of the mergers, and, accordingly, the final fee may vary significantly from this estimate), $5 million of which was payable upon delivery of its opinion dated December 1, 2020 (regardless of the conclusion reached in the opinion), and the remaining portion of which will be paid upon, and subject to, the closing of the mergers. Slack has also agreed to reimburse Qatalyst Partners for its expenses incurred in performing its services. Furthermore, Slack has also agreed to indemnify Qatalyst Partners and its affiliates, their respective members, directors, officers, partners, agents and employees and any person controlling Qatalyst Partners or any of its affiliates against certain liabilities, including liabilities under the federal securities laws, and expenses related to or arising out of Qatalyst Partners’ engagement.

Opinion of Goldman Sachs & Co. LLC, Slack’s Financial Advisor

At a meeting of the Slack board held on December 1, 2020, Goldman Sachs rendered to the Slack board its oral opinion, subsequently confirmed in its written opinion dated December 1, 2020, that, as of the date of the written opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, taken in the aggregate, pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated December 1, 2020, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Slack board in connection with its consideration of the mergers and other transactions contemplated by the merger agreement (which are together referred to in this section of the proxy statement/prospectus as the “transaction”). The Goldman Sachs opinion does not constitute a recommendation as to how any holder of shares of Slack common stock should vote with respect to the transaction or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the merger agreement;

 

   

the annual report to stockholders and Annual Report on Form 10-K of Slack for the fiscal year ended January 31, 2020;

 

   

the registration statement on Form S-1 of Slack, dated April 26, 2019, as amended, including the prospectus contained therein, relating to the registration and resale of Slack Class A common stock;

 

   

annual reports to stockholders and Annual Reports on Form 10-K of Salesforce for the five fiscal years ended January 31, 2020;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Slack and Salesforce;

 

   

certain other communications from Slack and Salesforce to their respective stockholders;

 

   

certain publicly available research analyst reports for Slack and Salesforce; and

 

   

the Management Projections, including certain analyses prepared by the management of Slack related to the expected utilization by Slack of certain net operating loss carryforwards of Slack, as approved for Goldman Sachs’ use by Slack, which are referred to as the “NOL Forecasts.”

Goldman Sachs also held discussions with members of senior managements of Slack and Salesforce regarding their assessment of the past and current business operations, financial condition, and future prospects

 

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of Salesforce, and with members of senior management of Slack regarding their assessment of the past and current business operations, financial condition and future prospects of Slack; reviewed the reported price and trading activity for shares of Slack Class A common stock and shares of Salesforce common stock; compared certain financial and stock market information for Slack and Salesforce with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the software industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering its opinion, Goldman Sachs, with the consent of the Slack board, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the consent of the Slack board that the Management Projections and the NOL Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Slack. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Slack or Salesforce or any of their respective subsidiaries and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transaction will be obtained without any adverse effect on Slack or Salesforce or on the expected benefits of the transaction in any way meaningful to its analysis. Goldman Sachs also assumed that the transaction will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of Slack to engage in the transaction or the relative merits of the transaction as compared to any strategic alternatives that may be available to Slack; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to the acquisition of, or other business combination with, Slack or any other alternative transaction. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of its opinion, to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, of the merger consideration to be paid to such holders, taken in the aggregate, pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the transaction or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transaction, including any ongoing obligations of Slack, any allocation of the merger consideration payable pursuant to the merger agreement, including among the holders of Slack Class A common stock and Slack Class B common stock, the fairness of the transaction to, or any consideration received in connection therewith, by the holders of any other class of securities, creditors, or other constituencies of Slack; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Slack, or class of such persons, in connection with the transaction, whether relative to the merger consideration to be paid to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, taken in the aggregate, pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the prices at which shares of Slack Class A common stock or Salesforce common stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on Slack, Salesforce or the transaction, or as to the impact of the transaction on the solvency or viability of Slack or Salesforce or the ability of Slack or Salesforce to pay their respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of its written opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its written opinion. Goldman Sachs’ advisory services and its opinion were provided for the information and assistance of the Slack board in connection with its consideration of the transaction and such opinion does not constitute a recommendation as to how any holder of shares of Slack common stock should vote with respect to such transaction or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

 

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Summary of Financial Analyses

The following is a summary of the material financial analyses presented by Goldman Sachs to the Slack board in connection with rendering to the Slack board the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 30, 2020, the last trading day before the public announcement of the transaction (which we refer to for the purposes of this section of the proxy statement/prospectus as the “pre-announcement date”) and is not necessarily indicative of current market conditions.

Implied Premia and Multiple Analysis

Goldman Sachs calculated and compared certain implied premia and multiples using an implied value of the merger consideration per share of Slack common stock as of November 24, 2020, the last trading date prior to the first media accounts regarding a possible acquisition of Slack by Salesforce (which is referred to in this section of the proxy statement/prospectus as the “unaffected date”) and as of the pre-announcement date. For purposes of its analysis, Goldman Sachs calculated an implied value of the merger consideration per share of Slack common stock of $47.03 as of the unaffected date (which is referred to in this section of the proxy statement/prospectus as the “unaffected implied merger consideration”) by adding (i) the cash consideration of $26.79 to (ii) an implied value of the stock consideration of $20.24, calculated by multiplying the exchange ratio of 0.0776 by the closing price per share of Salesforce common stock on the unaffected date of $260.84. Goldman Sachs also calculated an implied value of the merger consideration per share of Slack common stock of $45.86 as of the pre-announcement date (which is referred to in this section of the proxy statement/prospectus as the “pre-announcement implied merger consideration”) by adding (i) the cash consideration of $26.79 to (ii) an implied value of the stock consideration of $19.07, calculated by multiplying the exchange ratio of 0.0776 by the closing price per share of Salesforce common stock on the pre-announcement date of $245.80. Goldman Sachs then compared these implied merger considerations to (i) the closing price of shares of Slack Class A common stock on the unaffected date (which price is referred to in this section of the proxy statement/prospectus as the “unaffected closing price”), (ii) the volume weighted average price (which is referred to in this section of the proxy statement/prospectus as the “VWAP”) of shares of Slack Class A common stock during the 10 trading-day period ended on the unaffected date (which is referred to in this section of the proxy statement/prospectus as the “10-day VWAP”), (iii) the VWAP of shares of Slack Class A common stock during the 20 trading day period ended on the unaffected date (which is referred to in this section of the proxy statement/prospectus as the “20-day VWAP”), (iv) the VWAP of shares of Slack Class A common stock during the three calendar month period ended on the unaffected date (which is referred to in this section of the proxy statement/prospectus as the “three-month VWAP”), and (v) the highest closing price of shares of Slack Class A common stock over the 52-week period ended on the unaffected date (which is referred to in this section of the proxy statement/prospectus as the “52-week high”).

The results of these calculations are as follows:

 

Slack Common Stock Reference Price

  Implied Premium to Unaffected
Implied Merger Consideration
  Implied Premium to
Pre-Announcement Implied Merger
Consideration

Unaffected Closing Price of $29.58

  59%   55%

10-day VWAP of $29.52

  59%   55%

20-day VWAP of $26.92

  75%   70%

Three-month VWAP of $27.63

  70%   66%

52-Week High of $39.90

  18%   15%

 

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In addition, Goldman Sachs calculated implied equity values for Slack by multiplying (i) each of the unaffected implied merger consideration and the pre-announcement implied merger consideration by (ii) the number of fully diluted outstanding shares of Slack common stock as of such dates, as provided by the management of Slack and approved for Goldman Sachs’ use by the management of Slack. Goldman Sachs then calculated implied enterprise values for Slack (which are referred to in this section of the proxy statement/prospectus as “EV”) by adding to each of such implied equity values, Slack’s net debt as of such dates, as provided by the management of Slack and approved for Goldman Sachs’ use by the management of Slack. For purposes of this section of the proxy statement/prospectus, “net debt” refers to debt (including amounts associated with the assumed conversion of the convertible notes at their original conversion rate less amounts assumed to be received by Slack pursuant to the capped call transactions entered into by Slack in connection therewith) and non-controlling interests less cash.

Using the foregoing, Goldman Sachs calculated the following implied multiples:

 

   

Implied EV of Slack, calculated as of the unaffected date, as a multiple of next twelve month (“NTM”) revenue of Slack, using Wall Street research analyst consensus estimates;

 

   

Implied EV of Slack, calculated as of the pre-announcement date, as a multiple of NTM revenue of Slack, using Wall Street research analyst consensus estimates;

 

   

Implied EV of Slack, calculated as of the unaffected date, as a multiple of fiscal year 2022 revenues of Slack using the Management Projections and Wall Street research analyst consensus estimates; and

 

   

Implied EV of Slack, calculated as of the pre-announcement date, as a multiple of fiscal year 2022 revenues of Slack using the Management Projections and Wall Street research analyst consensus estimates.

The results of these calculations are as follows:

 

Metric

  Implied EV//Revenue Multiple as of
Unaffected Date
  Implied EV/Revenue Multiple as of
Pre-Announcement Date

NTM Estimated Revenue (Wall Street Research Analyst Consensus Estimates)

  29.2x   28.4x

Fiscal year 2022E Revenue (Wall Street Research Analyst Estimates)

  25.5x   24.8x

Fiscal year 2022E Revenue (Management Projections)

  24.3x   23.6x

Illustrative Discounted Cash Flow Analysis

Using the Management Projections, Goldman Sachs performed an illustrative discounted cash flow analysis on Slack to derive a range of illustrative present values per share of Slack common stock. Using discount rates ranging from 6.5% to 9.5%, reflecting estimates of Slack’s weighted average cost of capital, and the mid-year convention, Goldman Sachs discounted to present value as of October 31, 2020 (i) estimates of unlevered free cash flow (which is referred to as “Unlevered Free Cash Flow Less Stock-Based Compensation” as described under the section entitled —“Projected Financial Information”) for Slack for the years 2021 through 2031 as reflected in the Management Projections and (ii) a range of illustrative terminal values for Slack, which were calculated by applying an illustrative range of terminal year multiples of 25.0x to 35.0x to an assumed terminal year NTM unlevered free cash flow (which analysis implied perpetuity growth rates ranging from 2.3% to 6.3%). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including Slack’s target capital structure weightings, the cost of long-term debt, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The illustrative terminal value to NTM unlevered free cash flow

 

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multiple range for Slack was derived by Goldman Sachs using its professional judgment and experience, taking into account, among other things, EV as of November 30, 2020 as a multiple of to NTM unlevered free cash flow for large cap software peers, based on financial and trading data as of November 30, 2020 and Institutional Brokers’ Estimate System (“IBES”) estimates (as described below under the section entitled “—Selected Companies Analysis”).

Goldman Sachs derived a range of illustrative enterprise values for Slack by adding the range of present values it calculated for the unlevered free cash flow and for the illustrative terminal values, as described above. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived for Slack, the net debt of Slack and added the net present value of the net operating losses as reflected in the NOL Forecasts, each as provided by the management of Slack and approved for Goldman Sachs’ use by the management of Slack, to derive a range of illustrative equity values for Slack. Goldman Sachs calculated the net present value of the net operating losses using an illustrative discount rate of 8.0%, reflecting an estimate of Slack’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of Slack common stock, as provided by the management of Slack and approved for Goldman Sachs’ use by the management of Slack and the treasury stock method, to derive a range of illustrative present values per share of Slack common stock, rounded to the nearest $1.00, of $26 to $46.

Illustrative Present Value of Future Share Price Analysis

Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Slack common stock. For this analysis, Goldman Sachs used the Management Projections for each of the fiscal years 2022 to 2024. Goldman Sachs first calculated the implied enterprise values for Slack as of January 31 for each of the fiscal years 2021 to 2023, by applying enterprise value to NTM revenue multiples, which are referred to in this section as “EV/NTM revenue,” of 16.0x to 20.0x to NTM revenue estimates for Slack for each of the fiscal years 2022 to 2024 based on the Management Projections. These illustrative multiple estimates were derived by Goldman Sachs using its professional judgment and experience, taking into account current and historical EV/NTM revenue multiples for Slack and for selected companies (as described below under the section entitled “—Selected Companies Analysis”). Goldman Sachs then subtracted the amount of Slack’s forecasted net debt for each of the fiscal years 2021 to 2023, respectively, as of the relevant year-end, each as provided by Slack and approved for Goldman Sachs’ use by the management of Slack, from the respective implied enterprise values in order to derive a range of illustrative equity values for Slack as of January 31 for each of the fiscal years 2021 to 2023. Goldman Sachs then divided the results by the number of projected year-end fully diluted outstanding shares of Slack common stock for each of the fiscal years 2021 to 2023, respectively, as provided by the management of Slack and approved for Goldman Sachs’ use by the management of Slack to derive a range of implied future share prices. Goldman Sachs then discounted the January 31, 2021 to January 31, 2023 implied future share price values back to October 31, 2020 using an illustrative discount rate of 8.0%, reflecting an estimate of Slack’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for Slack, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values per share of Slack common stock, rounded to the nearest $1.00, of $31 to $50 per share.

Selected Transactions Analysis

Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the software industry since 2016. For each of the selected transactions where information was publicly available, Goldman Sachs calculated and compared the implied EV/NTM revenue of the applicable target company based on the total consideration paid in the transaction as a multiple of the target company’s

 

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NTM revenue based on IBES estimates at the time each such selected transaction was announced. While none of the target companies that participated in the selected transactions are directly comparable to Slack, the target companies that participated in the selected transactions are companies with operations that, for the purpose of analysis, may be considered similar to certain of Slack’s results, market size and product profile.

The following table presents the results of this analysis:

 

Selected Precedent Transactions

 

Announcement
Date

  

Acquiror

  

Target

   EV/NTM
Revenue
 
April 2016    Oracle Corp.    Textura Corp.      6.1x  
May 2016    Vista Equity Partners (“Vista”)    Marketo, Inc.      5.9x  
June 2016    Microsoft Corp. (“Microsoft”)    LinkedIn Corp.      6.8x  
June 2016    Salesforce    Demandware, Inc.      8.9x  
July 2016    Oracle Corp.    NetSuite Inc.      9.2x  
January 2018    SAP SE (“SE”)    Callidus Software, Inc.      8.3x  
March 2018    Salesforce    MuleSoft Inc.      15.7x  
June 2018    Workday, Inc.    Adaptive Insights, Inc.      10.9x  
October 2018    Cloudera, Inc.    Hortonworks, Inc.      5.3x  
October 2018    International Business Machines Corp    Red Hat, Inc.      9.4x  
October 2018    Twilio Inc.    SendGrid, Inc.      11.5x  
November 2018    Vista    Apptio, Inc.      7.1x  
December 2018    Vista    Mindbody, Inc.      6.7x  
February 2019    Hellman & Friedman LLC    The Ultimate Software Group, Inc.      8.3x  
June 2019    Salesforce    Tableau Software, Inc.      11.0x  
Median      8.3x  
25th Percentile      6.7x  
75th Percentile      10.9x  

Based on the results of the foregoing calculations and Goldman Sachs’ analyses of the various transactions and its professional judgment, Goldman Sachs applied a reference range of EV/NTM revenue multiples of 10.0x to 20.0x to Slack’s NTM revenue for the quarter ended October 31, 2020, as provided by the management of Slack, as reflected in the Management Projections to derive a range of implied enterprise values for Slack. Goldman Sachs then subtracted from the range of implied enterprise values the net debt for Slack as of October 31, 2020 as provided by the management of Slack, to derive a range of illustrative equity values for Slack. Goldman Sachs divided the results by the number of fully diluted outstanding shares of Slack common stock as provided by the management of Slack, to derive a range of implied values per share of Slack common stock, rounded to the nearest $1.00, of $17 to $33.

Premia Analysis

Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for the selected transactions referred to above under the section entitled “—Selected Transactions Analysis,” to the extent premia data was available. Using publicly available information, Goldman Sachs calculated the median, 25th percentile and 75th percentile premia of the price paid in the transactions relative to the target’s last undisturbed closing stock price prior to the announcement of the transaction. This analysis indicated a median premium of 45%. This analysis also indicated a 25th percentile premium of 19% and a 75th percentile premium of 62%. Using this analysis, Goldman Sachs applied a reference range of illustrative premia of 19% to 62% to the unaffected closing price of $29.58, and calculated a range of implied equity values per share of Slack common stock, rounded to the nearest $1.00, of $35 to $48.

 

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Selected Companies Analysis

Goldman Sachs reviewed and compared certain financial and stock market information, ratios and public market multiples for Slack to corresponding financial and stock market information, ratios and public market multiples for the following software companies (the collaboration peers, high growth software peers, and SaaS application peers, collectively “selected companies”):

 

   

Collaboration Peers

 

   

Zoom Video Communications, Inc.

 

   

Atlassian, Inc.

 

   

DocuSign, Inc.

 

   

Dropbox Inc.

 

   

Box, Inc.

 

   

High Growth Software Peers

 

   

Shopify Inc.

 

   

Okta, Inc.

 

   

Twilio Inc.

 

   

Coupa Software Inc.

 

   

Zscaler, Inc.

 

   

HubSpot, Inc.

 

   

Elastic, Inc.

 

   

Anaplan, Inc.

 

   

SaaS Application Peers

 

   

Salesforce

 

   

ServiceNow, Inc.

 

   

Workday, Inc.

 

   

Large Cap Software Peers

 

   

Microsoft

 

   

Intuit Inc. (“Intuit”)

 

   

Autodesk Inc. (“Autodesk”)

 

   

SAP

Although none of the selected companies or large cap software peers are directly comparable to Slack, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Slack.

Goldman Sachs calculated and compared EV/NTM revenue multiples for Slack, the collaboration peers, the high growth software peers, and the SaaS application peers, based on financial and trading data as of November 30, 2020, information Goldman Sachs obtained from Bloomberg, publicly available historical data, market data and IBES estimates. Goldman Sachs calculated average EV/NTM revenue multiples over certain time periods prior to and including the pre-announcement date, except as otherwise indicated for Slack and Salesforce.

 

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Selected Companies

AVERAGE of

EV/NTM REVENUE MULTIPLES1

 

Period ending on
pre-announcement date
   Slack
(unaffected)2
     Salesforce
(unaffected)2
     Collaboration
Peers
     High Growth
Software Peers
     SaaS
Application
Peers
 

Three months

     16.7x        10.1x        24.0x        27.5x        11.4x  

Six months

     18.5x        9.0x        23.2x        26.8x        10.7x  

Post-COVID-193

     18.5x        8.2x        20.2x        22.6x        9.8x  

One year

     18.1x        8.0x        18.6x        21.3x        9.8x  

Direct Listing4

     19.4x        7.7x        16.0x        20.2x        10.1x  

Three years

     N/A        7.5x        12.2x        16.6x        10.1x  

10 years

     N/A        6.9x        9.5x        12.0x        9.4x  

 

1 

Multiples presented represent the average of the EV/NTM revenue for the subset of selected companies.

2 

Multiples are calculated for the specified periods prior to and including the unaffected date of November 24, 2020.

3 

“Post COVID-19” is considered to be the period starting from February 18, 2020.

4

“Direct Listing” refers to the period starting from June 20, 2019, the date on which Slack’s Class A common stock began trading on the NYSE.

Goldman Sachs also calculated and compared EV as of November 30, 2020 as a multiple of NTM unlevered free cash flow for the large cap software peers referred to above for calendar year 2021 based on financial and trading data as of November 30, 2020 and IBES estimates.

The following table presents the results of this analysis:

Large Cap Software Peers

EV to NTM Unlevered Free Cash Flow Multiple

Calendar Year 2021

 

Microsoft   Intuit   SAP   Autodesk
28.1x   32.1x   24.6x   38.1x

General

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Slack or Salesforce or the contemplated transaction.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Slack board as to the fairness from a financial point of view of the merger consideration to be paid to the holders (other than Salesforce and its affiliates) of shares of Slack common stock, taken in the aggregate, pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily

 

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indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Slack, Salesforce, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arm’s-length negotiations between Slack and Salesforce and was approved by the Slack board. Goldman Sachs provided advice to Slack during these negotiations. Goldman Sachs did not, however, recommend any specific merger consideration to Slack or the Slack board or that any specific merger consideration constituted the only appropriate consideration for the transaction.

As described above, Goldman Sachs’ opinion to the Slack board was one of many factors taken into consideration by the Slack board in making its determination to approve the transaction. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Slack, Salesforce, and any of their respective affiliates and third parties, or any currency or commodity that may be involved in the transaction. Goldman Sachs acted as financial advisor to Slack in connection with, and participated in certain of the negotiations leading to, the transaction. Goldman Sachs has provided certain financial advisory and/or underwriting services to Slack and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having acted as a financial advisor with respect to the direct listing of 118,429,640 shares of Slack Class A common stock in June 2019 and as bookrunner with respect to the public offering of the convertible notes (aggregate principal amount of $862,500,000) in April 2020. During the two year period ended December 1, 2020, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Slack and/or its affiliates of approximately $16.5 million. During the two year period ended December 1, 2020, the Investment Banking Division of Goldman Sachs has not been engaged by Salesforce or its affiliates to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Slack, Salesforce and their respective affiliates for which the Investment Banking Division of Goldman Sachs may receive compensation. In addition, a Director on the Slack board is currently affiliated with Goldman Sachs as a Senior Director.

In addition, concurrent with the issuance of the convertible notes in April 2020, Slack entered into the capped call transactions with Goldman Sachs (with respect to 25%) and other counterparties (which we refer to, collectively, as the “capped call counterparties”), each acting as principal for its own account. The capped call transactions consisted of the purchase by Slack of capped call options with respect to collectively approximately 27,826,837 shares of Slack Class A common stock, the aggregate number of shares of Slack Class A common stock into which the $862,500,000 aggregate principal amount of the convertible notes are convertible (at the initial conversion rate of 32.2630 shares of Slack Class A common stock per $1,000 in principal amount of convertible notes) and with an initial strike price equal to the conversion price of the convertible notes of approximately $31.00 per share of Slack Class A common stock, subject to an initial cap price of $48.62 per share of Slack Class A common stock. As of December 17, 2020, all of the capped call transactions remain outstanding, with a strike price of approximately $31.00 and a cap price of $48.62. The capped call transactions were intended to offset a portion of the potential dilutive effect on stockholders of Slack of the conversion of the convertible notes and/or any potential cash payment in excess of the principal amount of the convertible notes that Slack may make in connection with a cash settlement of the convertible notes, up to the cap price. The

 

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capped call transactions generally require the capped call counterparties to deliver to Slack in respect of each Convertible Note that is surrendered for conversion, a number of shares of Slack Class A common stock (and/or in certain circumstances, at Slack’s election, cash) determined based on the excess, if any, of the lower of the cap price and the price of the shares of Slack Class A common stock at that time (determined over a period specified in the capped call transactions) over the strike price per share of Slack Class A common stock.

The capped call transactions may be adjusted, exercised, cancelled and/or terminated in accordance with their terms in connection with certain events, including the announcement or consummation of the transaction. In particular, under the terms of the capped call transactions, each of Goldman Sachs and the other counterparties, each acting separately as calculation agent under the capped call transactions to which it is a party, is entitled in certain circumstances to make adjustments to the exercise price of the embedded call options sold by Slack to Goldman Sachs and the other counterparties to reflect the economic effect of the announcement of the transaction on the capped call transactions. In addition, each of Goldman Sachs and the other counterparties may, each acting separately as the calculation agent, determining party or otherwise as principal under the capped call transactions to which it is a party, determine such additional adjustments and/or value owed upon termination or cancellation in respect of such capped call transactions in accordance with their terms and pay any amounts due to Slack under various circumstances, including on or following consummation or abandonment of the transaction. All actions or exercises of judgment by Goldman Sachs, in its capacity as calculation agent, pursuant to the terms of the capped call transactions to which it is a party must be performed in good faith and a commercially reasonable manner.

As a result of the capped call transactions, the capped call counterparties are expected to have market exposure to the price of the shares of Slack Class A common stock. It is the ordinary practice of the capped call counterparties to engage in hedging activities to limit their respective market exposure to the price of the stock underlying privately negotiated equity derivative transactions with issuers of such stock, such as the capped call transactions. In connection with the capped call transactions to which it is a party, Goldman Sachs (and its affiliates) have engaged, and will continue to engage, in accordance with applicable law in hedging and other market transactions (which may include the entering into or unwinding of various derivative transactions with respect to Slack Class A common stock) that are generally intended to substantially neutralize Goldman Sachs’ exposure as a result of the capped call transactions to which it is a party to changes in the price of Slack Class A common stock. Such hedging activity is at Goldman Sachs’ own risk and may result in a gain or loss to Goldman Sachs that may be greater than or less than the initial expected contractual benefit to Goldman Sachs under the capped call transactions to which it is a party. The amount of any such gain or loss will not be known until the applicable capped call transactions have been exercised, expired or terminated in accordance with their terms and Goldman Sachs shall have completed all of its hedge unwind activities. In connection with the preparation of presentations to the senior management of Slack and the Slack board, personnel in Goldman Sachs’ Investment Banking Division, including the representatives of Goldman Sachs who have advised Slack in connection with the transaction, from time to time, have received or may receive input from personnel in Goldman Sachs’ Securities Division into how to model, or reports of historical measures or estimates of, Goldman Sachs’ and/or Goldman Sachs’ Investment Banking Division’s profit and/or loss over certain measurement periods related to the capped call transactions.

To mitigate the exposure from the capped call transactions, as of December 17, 2020, Goldman Sachs held a net long economic position of approximately one million shares of Slack Class A common stock and was long and short a small number of various other options on Slack Class A common stock.

Under the terms of the convertible notes, upon the consummation of a merger, tender offer or certain other events involving Slack (including the transaction), holders of the convertible notes may elect to convert their notes or put their notes to Slack at par. If holders of the convertible notes elect to convert or put their notes in these circumstances or otherwise under the terms of the convertible notes, a portion of the capped call transactions corresponding to the portion of the convertible notes that are converted or put may terminate. In the event of such termination, each capped call counterparty will determine the amount of any termination payment

 

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owed to Slack under its capped call transactions in accordance with the termination provisions of its capped call transactions, unless otherwise agreed by the parties. If any convertible notes are not converted or put in connection with a merger, tender offer or other event involving Slack (including the transaction) and remain outstanding following the consummation of such an event, a corresponding portion of the capped call transactions will remain outstanding, subject to any adjustments made to the terms of the capped call transactions as a result of the announcement and the consummation of a merger, tender offer or other event involving Slack (including the transaction), as described above.

On November 3, 2020, Goldman Sachs provided the Slack board with materials that summarized, based on theoretical models, the potential effects of the announcement and of the consummation of an acquisition of Slack on the capped call transactions to which Goldman Sachs is a counterparty. The materials included preliminary illustrative analyses by Goldman Sachs’ Investment Banking Division for a range of stated assumptions regarding takeout prices for shares of Slack Class A common stock and volatilities, as well as based on other reasonable assumptions, in the event of an acquisition of Slack for greater than 10% cash consideration. The materials calculated over a range of potential takeout prices for the shares of Slack common stock ranging from $35.00 per share to $55.00 per share) and volatilities (55%, 60%, 65% and 70%) and for an announcement date of December 1, 2020, and other stated assumptions that upon the full unwind of Goldman Sachs’ capped call transactions, Goldman Sachs might owe Slack a termination payment ranging from approximately $26.2 million to approximately $48.5 million and might realize a net gain (after taking into account any estimated hedging gains or losses) ranging from a net gain of approximately $2.5 million to a net gain of approximately $17.8 million. The materials also calculated under the stated assumptions that as the takeout price for shares of Slack Class A common stock increased from $35 per share to $55 per share, Goldman Sachs’ net gain under the capped call transactions (after taking into account any estimated hedging gains or losses) would increase under each assumed volatility scenario. In accordance with industry practice, Goldman Sachs maintains customary institutional information barriers reasonably designed to prevent the unauthorized disclosure of confidential information by personnel in its Investment Banking Division to the personnel in its Securities Division who are undertaking hedging and other market transactions with respect to Goldman Sachs’ capped call transactions. In connection with the preparation of presentations to Slack senior management and the Slack board, personnel in Goldman Sachs’ Investment Banking Division, including the representatives of Goldman Sachs who have advised Slack in connection with the transaction, from time to time, have received or may receive input from personnel in Goldman Sachs’ Securities Division into how to model, or reports of historical measures or estimates of, Goldman Sachs’ and/or Goldman Sachs’ Investment Banking Division’s profit and/or loss over certain measurement periods related to the capped call transactions.

The amount of any termination payment owed by a capped call counterparty to Slack as a result of the termination of its capped call transactions will vary depending on the number of convertible notes converted by note-holders, the actual conversion date(s) of the convertible notes, and market conditions (including, for example, interest rates and volatility and price of Slack common stock) and the valuation model used to determine such amount and, accordingly, the amount of any termination payment owed by a capped call counterparty to Slack may be significantly different from the illustrative amounts described above. The consummation of the transaction could result in a capped call counterparty paying Slack an amount that is greater than, equal to, or less than the amount such capped call counterparty would have paid or delivered to Slack upon exercise, expiration or termination of its capped call transactions in the absence of the transaction.

The indenture governing the convertible notes and the confirmations containing the terms of the capped call transactions were included as exhibits to Slack’s Current Report on Form 8-K filed with the SEC on April 9, 2020, which contains additional disclosure regarding the convertible notes and a description of the capped call transactions. All references in this section to share counts, conversion prices, cap prices and strike prices are subject to adjustment from time to time in accordance with the terms of the confirmations relating to the capped call transactions.

 

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The Slack board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction. Pursuant to a letter agreement dated October 2, 2020 Slack engaged Goldman Sachs to act as its financial advisor in connection with the transaction. The engagement letter between Slack and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of the announcement of the transaction, at approximately $38.9 million, all of which is contingent upon consummation of the transaction. In addition, Slack has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Salesforce’s Reasons for the Mergers

In reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement, the Salesforce board consulted with Salesforce’s management, as well as Salesforce’s legal and financial advisors, and considered a number of factors, including the following factors which it viewed as supporting its decision to approve the merger agreement and the transactions contemplated by the merger agreement (not in any relative order of importance):

 

   

the view that Slack is a premier channels-based messaging platform, which will enable Salesforce to play a greater role in driving digital transformation and create the operating system for a new way to work;

 

   

the view that Slack’s platform will enhance Salesforce’s value to its customers by seamlessly integrating with applications that customers use to collaborate, communicate and get work done;

 

   

the view that Slack’s platform, when combined with the Salesforce Customer 360, presents an opportunity to transform how customers communicate, collaborate and take action on their information across Salesforce as well as information from all of their other business applications and systems;

 

   

the view that Slack addresses a multi-billion dollar market opportunity that is growing at a fast rate, including in light of the shift to a work-from-anywhere environment;

 

   

Slack’s demonstrated ability to meaningfully scale its business with attractive growth prospects;

 

   

the expectation that the combined company would create additional growth opportunities by leveraging the respective strengths of each business, which is expected to create long-term stockholder value;

 

   

the strength of Slack’s management team and engineering team, and the cultural synergies between the two companies;

 

   

the view that the terms and conditions of the merger agreement and the transactions contemplated therein, including the representations, warranties, covenants, closing conditions and termination provisions, are comprehensive and favorable to completing the proposed transactions;

 

   

the fact that the merger agreement places limitations on Slack’s ability to seek a competing proposal and requires Slack to pay Salesforce a termination fee of $900 million if Salesforce or Slack terminates the merger agreement under certain circumstances, including if Slack consummates or enters into an agreement with respect to a competing acquisition proposal within a certain time period;

 

   

the expectation that the conditions to the consummation of the mergers will be satisfied on a timely basis;

 

   

the amount and form of consideration to be paid in the transaction, including the fact that the exchange ratio is fixed;

 

   

current financial market conditions and the current and historical market prices and volatility of, and trading information with respect to, shares of Salesforce common stock and Slack Class A common stock;

 

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the Salesforce board’s and the Salesforce management’s familiarity with the business operations, strategy, earnings and prospects of each of Salesforce and Slack and the scope and results of the due diligence investigation of Slack conducted by Salesforce;

 

   

the entry into the voting and support agreement by Slack’s founders, pursuant to which they agreed, among other things, to vote all of their shares of Slack Class A common stock and Class B common stock in favor of the adoption of the merger agreement and the approval of the merger proposal, subject to certain terms and conditions; and

 

   

Slack management’s endorsement of the mergers and the Slack board’s unanimous recommendation in favor of the mergers.

The Salesforce board also considered a variety of uncertainties and risks and other potentially negative factors concerning the transactions, including the following (not in any relative order of importance):

 

   

the risk that the potential benefits of the acquisition may not be fully or even partially achieved, or may not be achieved within the expected time frame;

 

   

costs associated with the transactions;

 

   

the risk that the transactions may not be consummated despite the parties’ efforts or that the closing of the transactions may be unduly delayed;

 

   

the risks associated with the occurrence of events which may materially and adversely affect the operations or financial condition of Slack and its subsidiaries, which may not entitle Salesforce to terminate the merger agreement;

 

   

the challenges and difficulties relating to combining the operations of Salesforce and Slack;

 

   

the risk of diverting Salesforce’s management’s focus and resources from other strategic opportunities and from operational matters while working to implement the acquisition of Slack, and other potential disruptions associated with combining the two companies;

 

   

the effects of and changes in general competitive, economic, political and market conditions, fluctuations and volatility on Salesforce, Slack or the combined company, including as a result of COVID-19; and

 

   

various other risks associated with the acquisition and the businesses of Salesforce, Slack and the combined company, some of which are described under the section entitled “Risk Factors.”

The Salesforce board concluded that the potential negative factors associated with the acquisition were outweighed by the potential benefits of the mergers. Accordingly, the Salesforce board approved the merger agreement and the transactions contemplated by the merger agreement.

The foregoing discussion of the information and factors considered by the Salesforce board is not intended to be exhaustive, but includes the material positive and negative factors considered by the Salesforce board. In view of the variety of factors considered in connection with its evaluation of the acquisition, the Salesforce board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, individual directors may have given different weights to different factors. The Salesforce board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Salesforce board based its determination on the totality of the information presented.

 

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Regulatory Approvals

U.S. Antitrust

Under the HSR Act and the rules and regulations promulgated thereunder, the mergers may not be completed until Salesforce and Slack each files a Notification and Report Form with the Federal Trade Commission (which we refer to as the “FTC”) and the Antitrust Division of the U.S. Department of Justice (which we refer to as the “DOJ”), and the applicable waiting period 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 or the early termination of that waiting period. If the FTC or DOJ issues a request for additional information and documents (which we refer to as the “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.

Salesforce and Slack each filed a Notification and Report Form with respect to the transaction with the FTC and DOJ on December 14, 2020. On January 13, 2021, Salesforce and Slack each voluntarily withdrew its HSR filing and re-filed it on January 15, 2021, restarting the 30-day waiting period. The waiting period with respect to the notification and report forms filed under the HSR Act is scheduled to expire at 11:59 p.m., Eastern Time, on February 16, 2021, unless extended or earlier terminated.

At any time before or after consummation of the transactions, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the mergers, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or to terminate existing relationships and contractual rights. At any time before or after the completion of the transactions, and notwithstanding the termination or expiration of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the mergers or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or to terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

There can be no assurance that a challenge to the transactions on antitrust grounds will not be made, or if such a challenge is made, what the result will be. The parties obligation to consummate the transaction is subject to certain conditions. See the section entitled “The Merger Agreement—Conditions to the Mergers.”

Foreign Regulatory Approvals

The mergers are also subject to clearance or approval by regulatory authorities in certain other jurisdictions. The merger cannot be completed until Salesforce and Slack obtain clearance to consummate the merger or applicable waiting periods have expired or been terminated in each applicable jurisdiction. Salesforce and Slack, in consultation and cooperation with each other, will file notifications, as required with regulatory authorities in certain other jurisdictions, as promptly as practicable after the date of the merger agreement. The relevant regulatory authorities could take such actions under the applicable regulatory laws as they deem necessary or desirable, including seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights.

Although Salesforce and Slack currently believe they should be able to obtain the required regulatory approvals described above in a timely manner, they cannot be certain when or if it will be obtained or, if obtained, whether such expiration, termination or approval will require terms, conditions or restrictions not currently contemplated that will be detrimental to Salesforce or its subsidiaries, the surviving corporation, or the surviving company after the completion of the mergers. Salesforce and Slack have agreed to take certain actions to obtain the required regulatory approvals. For additional information, see the section entitled “The Merger Agreement—HSR and Other Regulatory Approvals.

 

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Neither Salesforce nor Slack is aware of any material governmental approvals or actions that are required for completion of the mergers other than as described above. It is presently contemplated that if any such additional material governmental approvals or actions are required, those approvals or actions will be sought.

Interests of Slack Directors and Executive Officers in the Mergers

In considering the recommendation of the Slack board with respect to the merger proposal and the non-binding compensation advisory proposal, Slack stockholders should be aware that the directors and executive officers of Slack have interests in the mergers that may be different from, or in addition to, the interests of Slack stockholders generally. The members of the Slack board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, in approving the merger agreement and in determining to recommend that Slack stockholders approve the merger proposal.

Arrangements with Salesforce

Certain of Slack’s executive officers have interests in the form of continued employment with Salesforce following the completion of the mergers.

New Offer Letters with Salesforce

In connection with the merger agreement and contingent upon the closing of the mergers, each of Stewart Butterfield, Cal Henderson and Tamar Yehoshua entered into offer letters with Salesforce pursuant to which Mr. Butterfield will serve as President and Chief Executive Officer of Slack, Mr. Henderson will serve as Chief Technology Officer of Slack and Ms. Yehoshua will serve as Chief Product Officer of Slack. Under the offer letters, Mr. Butterfield is entitled to an annual base salary of $650,000, and Mr. Henderson and Ms. Yehoshua are each entitled to an annual base salary of $500,000. Mr. Butterfield will have a target annual bonus opportunity under the Salesforce Gratitude Bonus Plan of 100% of his annual base salary, and Mr. Henderson and Ms. Yehoshua’s target annual bonus opportunity under the Salesforce Gratitude Bonus Plan will be 50% of their annual base salary. The offer letters also provide for Salesforce to grant each of Mr. Henderson and Ms. Yehoshua the following Salesforce equity awards: (i) a number of restricted stock units (which we refer to as the “retention RSUs”) calculated by dividing $2,500,000 by the average closing sale price of one share of Salesforce common stock during the two calendar months preceding the month in which the retention RSUs will be granted and (ii) an option to acquire a number of shares of Salesforce common stock (which we refer to as the “retention options”) calculated by dividing $2,500,000 by the quotient obtained by dividing the average closing sale price of one share of Salesforce common stock during the two calendar months preceding the month in which the stock options will be granted by the Salesforce option conversion factor. The retention RSUs and retention options will vest as to 50% of the shares of Salesforce common stock underlying the awards on each of the third and fourth anniversaries of the grant date, subject to continued employment with Salesforce.

Waiver Letters with Salesforce

On November 30, 2020, each of Mr. Butterfield, Mr. Henderson and Ms. Yehoshua entered into a waiver and acknowledgment agreement with Salesforce and Slack (each of which we refer to as a “waiver letter” and collectively the “waiver letters”) that amends the rights that each executive has under the Executive Severance Plan (as defined in “—Slack Amended and Restated Executive Severance Plan”) in consideration for the benefits that each executive may receive as a result of the completion of the mergers and continued employment with Slack, Salesforce or one of their respective affiliates. Under the waiver letters, the vesting schedule of each Slack equity award held by Messrs. Butterfield and Henderson that is outstanding as of the closing of the mergers is amended to provide that 50% of the shares underlying such equity awards (determined on a tranche by tranche basis) will vest on each of the first and second anniversaries of the closing of the mergers, subject to continued employment with Salesforce. Under Ms. Yehoshua’s waiver letter, the vesting of any Slack equity award held by Ms. Yehoshua that remains outstanding and unvested as of the second anniversary of the closing of the mergers

 

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will fully accelerate on such second anniversary of the closing, subject to continued employment with Salesforce. The waiver letters also provide for the following: (i) the definition of “good reason” as it applies to the executive will no longer include a material diminution in the executive’s position, responsibilities, authority or duties as grounds for a resignation for good reason, (ii) Mr. Butterfield, Mr. Henderson and Ms. Yehoshua will not have the right to assert good reason under the terms of the Executive Severance Plan or any of executive’s equity award agreements with Slack as a result of any changes to executive’s position, responsibilities, authority or duties and (iii) the accelerated vesting of equity awards in connection with certain terminations of the executive’s employment will only apply to unvested awards held by the executive prior to the closing of the mergers. The waiver letters also provide that each executive will be eligible to participate in any Salesforce severance plan applicable to similarly situated employees of Salesforce once the Executive Severance Plan ceases to apply on the first anniversary of the closing of the mergers.

Treatment of Executive Officer and Director Equity Awards in the Mergers

Slack Restricted Stock Units and Slack Restricted Share Awards held by Non-Employee Directors

At the first effective time, each outstanding Slack RSU award and each Slack restricted share award that is held by a non-employee director of Slack will vest as of the first effective time and will be cancelled and converted into the right to receive the merger consideration in respect of each share of Slack common stock subject to such Slack RSU award or Slack restricted share award.

Slack Options, Slack Restricted Stock Units and Slack Restricted Share Awards held by Executive Officers

At the first effective time, each Slack option, Slack RSU award and Slack restricted share award that is outstanding immediately prior to the first effective time and held by an executive officer of Slack will be assumed at the first effective time and converted into an adjusted option, an adjusted RSU award or adjusted restricted share award in a manner that preserves the intrinsic value of the award as further described below in the section entitled “The Mergers—Treatment of Slack Equity Awards.” Under the Executive Severance Plan, each assumed option, adjusted RSU award and adjusted restricted share award will be subject to full vesting acceleration upon a termination of the executive officer’s employment by Salesforce without cause or by the executive for good reason prior to the first anniversary of the closing of the mergers as further described below under the section entitled “—Executive Severance Plan.” The Slack options, Slack RSU awards and Slack restricted share awards held by Messrs. Butterfield and Henderson and Ms. Yehoshua and assumed by Salesforce are subject to the modified and accelerated vesting terms provided in their waiver letters as described above under the section entitled “Waiver Letters with Salesforce.”

Quantification of Payments

For an estimate of the amounts that would be payable to each of Slack’s named executive officers on settlement of their assumed Slack equity awards, see the section entitled “ —Merger-Related Compensation—Golden Parachute Compensation” below. The estimated aggregate amount that would be payable to Slack’s three covered executive officers who are not named executive officers in settlement of their currently outstanding unvested options to purchase 385,446 shares of Slack common stock upon the first effective time of the first merger is $8,685,437, and the estimated aggregate amount that would be payable to Slack’s three covered executive officers who are not named executive officers in settlement of their 1,128,767 currently outstanding Slack RSUs upon the first effective time is $48,254,789. The estimated aggregate amount that would be payable to Slack’s seven non-employee directors in settlement of their 142,263 Slack RSUs that are currently outstanding is $6,081,743, and the estimated amount that would be payable to two of Slack’s non-employee directors in settlement of such directors’ 130,377 currently outstanding Slack restricted shares is $5,573,617. The amounts in this paragraph are determined using a per share price of Slack common stock of $42.75, the average closing price of a share of Slack Class A common stock over the first five business days following the first public announcement of the mergers.

 

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Slack Amended and Restated Executive Severance Plan

Each of Slack’s executive officers participates in the Slack Amended and Restated Executive Severance Plan (which, as amended or modified from time to time, we refer to as the “Executive Severance Plan”) that provides for severance and accelerated vesting benefits in connection with certain terminations of employment. Under the Executive Severance Plan, if an executive’s employment with Slack is terminated by Slack without cause or the executive resigns for good reason, as each is defined in the Executive Severance Plan, then, in exchange for a release of claims, the executive would be entitled to receive (i) a lump sum cash payment equal to 6, or, in the case of Mr. Butterfield, 12 months’ of the executive’s base salary and (ii) a monthly cash payment over 6 or, in the case of Mr. Butterfield, 12 months in an amount equal to Slack’s monthly contribution towards healthcare coverage. In the event the termination or resignation occurs within the period beginning three months prior to a change in control, including the mergers, and ending 12 months after the change in control, then, in lieu of the foregoing benefits, the executive would be entitled to receive (i) a lump sum cash payment equal to 12 months’ of the executive’s base salary, (ii) a monthly cash payment over 12 months in an amount equal to Slack’s monthly contribution towards healthcare coverage, (iii) accelerated vesting of all equity awards held by the executive; provided, that any equity awards subject to performance conditions will be deemed satisfied at the higher of target levels specified in the applicable award agreements or actual achievement, and (iv) a lump sum cash amount equal to the executive’s annual target bonus, pro-rated through the date of termination or resignation. Payments under the Executive Severance Plan are subject to a clawback in the event that Slack determines that after an eligible participant’s date of termination that circumstances constituting cause existed at or prior to the eligible participant’s date of termination.

No Section 280G Golden Parachute Excise Tax Gross-Ups

Neither the Executive Severance Plan, nor any other Slack plan, policy, agreement or arrangement provides any employee, officer or director with the right to a tax “gross-up” payment in connection with any “golden parachute” or other tax liability triggered in connection with the mergers.

Annual Cash Bonus

Executive officers will remain eligible for an annual cash bonus under the Slack 2021 Discretionary Bonus Plan based on the achievement of pre-established performance criteria. Slack expects to adopt a fiscal year 2022 bonus program in early 2021 consistent with the 2021 Discretionary Bonus Plan. If the closing of the mergers occurs on or after July 31, 2021, a pro-rated portion of the fiscal year 2022 Discretionary Bonus Plan will be paid out to Slack executive officers, as well as all other employees, immediately prior to the closing of the mergers based on 100% of target. As of the date of this proxy statement/prospectus, Slack has not determined the 2021 annual bonus amount for any executive officer.

Merger-Related Compensation

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of our named executive officers that is based on or otherwise relates to the mergers and that will or may become payable to the named executive officers at the completion of the mergers or on a qualifying termination of employment upon or following the consummation of the mergers. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules. The “golden parachute” compensation payable to these individuals is subject to a non-binding advisory vote of Slack stockholders. The “named executive officers” are the individuals listed as such in Slack’s most recent annual proxy statement.

The table below assumes that (i) the first effective time occurs on December 16, 2020; (ii) the employment of each named executive officer will be terminated immediately following the first effective time without cause or due to resignation for good reason entitling the named executive officer to receive severance payments and benefits under the Executive Severance Plan; (iii) the named executive officer’s base salary rate and annual target

 

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bonus remain unchanged from that in effect as of the date of this filing; (iv) the per share merger consideration is equal to $42.75; (v) no named executive officer receives any additional equity grants on or prior to the first effective time that will vest on or prior to the first effective time; and (vi) no named executive officer enters into a new agreement or is otherwise legally entitled to, prior to the first effective time, additional compensation or benefits.

Golden Parachute Compensation

 

Named Executive Officer    Cash ($)(1)      Equity ($)(2)      Perquisites/
Benefits ($)
     Total ($)  

Stewart Butterfield

     820,251        92,949,856        —          93,770,107  

Allen Shim

     620,120        21,150,293        —          22,029,213  

Robert Frati

     878,920        16,543,881        —          17,164,001  

 

(1)

The amounts for each named executive officer represent the aggregate dollar value of severance payments that the executive would be entitled to receive upon a termination of employment by Slack without cause or due to resignation for good reason under the Executive Severance Plan within the period commencing three months prior to and ending 12 months following a change in control of Slack as described in the subsection entitled “—Interests of Slack Directors and Executive Officers in the MergersSlack Amended and Restated Executive Severance Plan” above.

(2)

Amounts represent the value of unvested equity awards held by each named executive officer that would be accelerated upon a termination of employment by Slack without cause or due to resignation for good reason under the Executive Severance Plan within the period commencing three months prior to and ending 12 months following a change in control of Slack.

The following table shows the number and estimated value of the unvested Slack options and Slack RSU awards held by the named executive officers:

 

     Number of
Shares of Slack
Common Stock
underlying
Unvested
Options
     Value of
Unvested Slack
Options
     Number of
Unvested
Slack RSUs
and Shares
of
Restricted
Stock
     Value of
Unvested Slack
RSUs and
Restricted
Stock
     Total Value of
Unvested
Options,
RSUs and
Restricted
Stock
 
Named Executive Officer    (#)      ($)(A)      (#)      ($)(B)      ($)  

Stewart Butterfield

     697,471        12,861,365        1,873,415        80,088,491        92,949,856  

Allen Shim

     178,294        4,047,429        400,067        17,102,864        21,150,293  

Robert Frati

     244,809        5,624,590        255,422        10,919,291        16,543,881  

 

(A)

The estimated value of the Slack options equals the aggregate merger consideration in respect of each share covered by such Slack option, less a number of shares having a value equal to the aggregate exercise price of such option.

(B)

The estimated value of Slack RSUs and Slack restricted stock equals the aggregate number of shares underlying the Slack RSUs or Slack restricted stock multiplied by $42.75, the average closing price per share of Slack Class A common stock over the first five business days following the first public announcement of the transaction.

Treatment of Slack Equity Awards

Consideration for Slack Options in the Mergers—Generally

At the first effective time, each Slack option that is held by an individual who is not an employee of Slack and that is outstanding and unexercised immediately prior to the first effective time will be cancelled and such holders will be entitled to receive the merger consideration in respect of the number of shares of Slack common stock covered by the Slack option, less a number of shares having a value equal to the total exercise price applicable to such option.

 

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At the first effective time, all other Slack options that are outstanding and unexercised immediately prior to the first effective time of Slack will be assumed and automatically converted into an adjusted option to purchase a number of shares of Salesforce common stock determined by multiplying the number of shares of Slack common stock equal to the number of shares covered by the Slack option by the option/RSU conversion ratio, at a per share exercise price equal to the per share exercise price of the Slack option divided by the option/RSU conversion ratio. The adjusted option will otherwise be subject to the same terms and conditions as were applicable to the corresponding Slack option prior to the first effective time, including vesting terms.

Consideration for Slack Restricted Stock Units and Slack Restricted Share Awards in the Mergers—Generally

At the first effective time, each Slack RSU award and each Slack restricted share award that is outstanding immediately prior to the first effective time held by a non-employee director of Slack will vest as of the first effective time and will be cancelled and converted into the right to receive the merger consideration in respect of each share of Slack common stock subject to such Slack RSU award or Slack restricted share award.

At the first effective time, each Slack RSU award (other than any such award held by any current or former non-employee director) will be assumed and converted into an adjusted RSU award with respect to a number of shares of Salesforce common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of Slack common stock subject to the Slack RSU award by the option/RSU conversion ratio. Each adjusted RSU award will be subject to the same terms and conditions as were applicable to the corresponding Slack RSU award prior to the first effective time, including vesting terms.

At the first effective time, each Slack restricted share award (other than any such award held by any current or former non-employee director) that is outstanding immediately prior to the first effective time will be assumed and converted into an adjusted restricted share award with respect to a number of shares of Salesforce common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of Slack common stock subject to the Slack restricted share award by 0.1804; provided that the holder of a Slack restricted share award is entitled to cash in an amount equal to such fractional share multiplied by $260.50, rounded to the nearest cent. Each adjusted restricted share award will be subject to the same terms and conditions as were applicable to the corresponding Slack restricted share award prior to the first effective time, including vesting terms except that any applicable repurchase price per share of Salesforce common stock (rounded up to the nearest whole cent) will be determined by dividing the per share repurchase price of the Slack restricted share award by the restricted stock conversion ratio of 0.1804.

Slack Employee Stock Purchase Plan

Pursuant to the merger agreement, as soon as practicable following the date of the merger agreement, Slack shall take all actions with respect to the ESPP that are necessary to provide that: (i) with respect to the current ESPP offering period that ends on April 9, 2021, no Slack employee who is not a participant in the ESPP as of the date of the merger agreement may become a participant in the ESPP and no current participant may increase the percentage amount of such participant’s payroll deduction election from that in effect on the date of the merger agreement for the current ESPP offering period; (ii) subject to the consummation of the mergers, the ESPP shall terminate effective immediately prior to the first effective time; (iii) if the first effective time occurs after April 9, 2021 (the end of the current ESPP offering period), then the ESPP shall be suspended and no new offering period shall be commenced under the ESPP prior to the termination of the merger agreement; and (iv) if the first effective time occurs before April 9, 2021 (the end of the current ESPP offering period), then the last day of the current ESPP offering period shall be accelerated to a date three business days prior to the closing date of the mergers.

 

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Registration of Salesforce Common Stock

Pursuant to the merger agreement, as soon as reasonably practicable after the first effective time, Salesforce will file one or more appropriate registration statements with the SEC (on Form S-3 or Form S-8, or any successor or other appropriate forms) relating to the shares of Salesforce common stock issuable with respect to the adjusted options, adjusted RSU awards and adjusted restricted share awards. Salesforce will use commercially reasonable efforts to maintain the effectiveness of such registration statement or statements for so long as any adjusted options, adjusted RSU awards and adjusted restricted share awards remain outstanding.

Indemnification and Insurance

For six years after the first effective time, Salesforce must, or must cause the surviving company to, indemnify and hold harmless, to the fullest extent permitted under applicable law and the organizational documents of Slack or its subsidiaries, or any indemnification agreements in existence as of the date of the merger agreement that were provided to Salesforce, the indemnified parties against any costs and expenses (including advancing attorneys’ fees and expenses) in connection with any actual or threatened claims in respect of acts or omissions occurring or alleged to have occurred at or prior to the first effective time, whether asserted or claimed prior to, at or after the first effective time, in connection with such person serving as an executive officer, director, employee or other fiduciary of Slack, any of its subsidiaries or any other person if such service was at the request or for the benefit of Slack or any of its subsidiaries.

In addition, for a period of six years following the first effective time, Salesforce is required to maintain in effect the provisions in the organizational documents of Slack and any indemnification agreements in existence as of the date of the merger agreement that were provided to Salesforce (except to the extent such agreement provides for an earlier termination) regarding elimination of liability, indemnification of executive officers, directors and employees and advancement of expenses that are in existence as of the date of the merger agreement.

At or prior to the first effective time, Slack is required to purchase a directors’ and officers’ liability insurance and fiduciary liability insurance “tail” insurance policy for a period of six years after the first effective time with respect to matters arising at or prior to the first effective time, with a one-time cost not in excess of 300% of the last aggregate annual premium paid by Slack for its directors’ and officers’ liability insurance and fiduciary liability insurance prior to the date of the merger agreement, and if the cost of such “tail” insurance policy would otherwise exceed such amount, Slack may purchase as much coverage as reasonably practicable for such amount.

For additional information, see the section entitled “The Merger Agreement—Directors’ and Officers’ Indemnification Insurance.

Listing of Salesforce Shares; Delisting and Deregistration of Slack Common Stock

Salesforce will use its reasonable best efforts to cause the shares of Salesforce common stock to be issued in the first merger to be listed for trading on the NYSE, and following the first effective time, the parties will cooperate in taking, or causing to be taken, all actions necessary to delist the Class A common stock of Slack from the NYSE and deregister such shares under the Exchange Act, effectively terminating Slack’s obligations to file periodic reports with the SEC pursuant to the Exchange Act.

Accounting Treatment of the Mergers

Salesforce and Slack prepare their respective financial statements in accordance with GAAP. The accounting guidance for business combinations requires the use of the acquisition method of accounting for the mergers, which requires the determination of the acquirer, the purchase price, the acquisition date, the fair value of assets and liabilities of the acquiree and the measurement of goodwill. Salesforce will be treated as the acquirer for accounting purposes.

 

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Treatment of Indebtedness

For a description of Salesforce’s and Slack’s existing indebtedness, see Salesforce’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, filed on December 4, 2020, and Slack’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, filed on December 3, 2020, each of which is incorporated by reference into this proxy statement/prospectus.

On January 26, 2021, Salesforce began soliciting consents, on behalf of Slack, from holders of Slack’s convertible notes to certain proposed amendments to the convertible notes indenture, which we refer to as the consent solicitation. The consent solicitation is being made upon the terms and subject to the conditions set forth in the consent solicitation statement, dated as of January 26, 2021, which we refer to as the consent solicitation statement. The primary purpose of the consent solicitation is to amend the convertible notes indenture to modify the merger covenant with respect to Slack’s convertible notes to remove the requirement that the successor in any merger of Slack with or into another person be a corporation and to make certain other conforming changes, which we refer to as the proposed amendments. Upon effectiveness of the proposed amendments, the merger covenant applicable to Slack’s convertible notes will not prohibit Slack from merging into Merger Sub II, with Merger Sub II continuing as the surviving company, in the second merger. The proposed amendments would not affect the other rights of holders of Slack’s convertible notes, including rights with respect to events or transactions that constitute a make-whole fundamental change (as defined in the convertible notes indenture).

The consent solicitation will expire at 5:00 p.m., New York City time, on February 1, 2021, unless Salesforce earlier terminates or extends it. Consummation of the consent solicitation, and the effectiveness of the supplemental indenture implementing the proposed amendments, is conditioned on receipt of valid consents from holders of Slack’s convertible notes in respect of at least a majority of the aggregate principal amount of such notes (determined in accordance with the convertible notes indenture) and the satisfaction or waiver of certain other closing conditions described in the consent solicitation statement. If the consent solicitation is consummated, the proposed amendments will become operative upon the closing of the first merger and the payment of a consent fee in accordance with the consent solicitation statement. There can be no assurance that the consent solicitation will be consummated or that the proposed amendments will become operative.

For more details on the treatment of Slack’s existing indebtedness under the merger agreement, see the section entitled “The Merger Agreement—Treatment of Indebtedness.” The terms and timing of any offers to purchase and/or any other convertible note consent solicitations (as defined in the section entitled “The Merger Agreement—Treatment of Indebtedness”) discussed in this proxy statement/prospectus have not been determined as of the date of this proxy statement/prospectus.

This proxy statement/prospectus does not constitute an offer to sell or the solicitation of an offer to buy any debt securities of Salesforce or Slack. It does not constitute a prospectus or prospectus equivalent document for any such securities. No offering of any debt securities of Salesforce shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act or an exemption therefrom.

Financing of the Mergers

Salesforce anticipates that the funds needed to complete the transactions contemplated by the merger agreement will be derived from a combination of (i) available cash on hand and (ii) third party debt financing.

In connection with its entry into the merger agreement, Salesforce obtained a commitment from Citigroup Global Markets Inc., Bank of America, N.A., JPMorgan Chase Bank, N.A. and certain other financial institutions for a 364-day senior unsecured bridge loan facility, which we refer to as the “bridge loan facility”. The original commitments in respect of the bridge loan facility were $10.0 billion, but were reduced to $7.0 billion on December 23, 2020 following Salesforce’s entry into the term loan agreement referred to below. The availability of the bridge loan facility is conditioned on the consummation of the acquisition of Slack in accordance with the

 

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terms of the merger agreement (subject to certain exceptions and qualifications) and certain other conditions. Salesforce expects to replace the remaining commitments in respect of the bridge loan facility prior to the consummation of the mergers with the proceeds of the issuance of one or more series of senior unsecured debt securities and/or other incurrences of indebtedness (or commitments in respect thereof).

On December 23, 2020, Salesforce entered into a $3.0 billion three-year senior unsecured term loan agreement to finance a portion of the cash consideration payable by Salesforce in connection with the mergers, the repayment of certain debt of Slack and to pay fees, costs and expenses related thereto. The availability of the term loan facility is conditioned on the consummation of the acquisition of Slack in accordance with the terms of the merger agreement (subject to certain exceptions and qualifications) and certain other conditions.

Salesforce’s obligation to complete the mergers is not conditioned upon the receipt of any financing.

Tax Treatment of the Mergers

The mergers, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the completion of the mergers that each of Salesforce and Slack receives an opinion from its respective counsel dated as of the closing date to the effect that the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this proxy statement/prospectus is a part, each of Wachtell, Lipton, Rosen & Katz and Latham & Watkins LLP has delivered an opinion to Salesforce and Slack, respectively, to the same effect as the opinions described in the preceding sentence. Each of the foregoing opinions of counsel is or will be based on, among other things, certain factual representations made by Salesforce and Slack and certain assumptions, all of which must be consistent with the state of facts existing at the time of the mergers. If any of these representations and assumptions are, or become, inaccurate or incomplete, such opinions may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

Litigation Relating to the Mergers

Between December 28, 2020 and January 25, 2021, (i) five lawsuits were filed by purported Slack stockholders in the United States District Court for the Northern District of California, captioned Wang v. Slack Technologies, Inc., et al. (Case No. 3:20-cv-09369), filed on December 28, 2020, Lowinger v. Slack Technologies, Inc., et al. (Case No. 3:21-cv-00117), filed on January 7, 2021, Estrada v. Slack Technologies, Inc., et al. (Case No. 3:21-cv-00180), filed on January 8, 2021, Bushansky v. Slack Technologies, Inc., et al. (Case No. 3:21-cv-00488), filed on January 20, 2021, and Katz v. Slack Technologies, Inc., et al. (Case No. 3:21-cv-00555), filed on January 23, 2021, and (ii) six lawsuits were filed by purported Slack stockholders in the United States District Court for the Southern District of New York, captioned Vazirani v. Slack Technologies, Inc., et. al. (Case No. 1:21-cv-00089), filed on January 5, 2021, Fonseca v. Slack Technologies, Inc., et al., filed on January 6, 2021 (Case No. 1:21-cv-00105), Gillespie v. Slack Technologies, Inc., et al. (Case No. 1:21-cv-00115), filed on January 6, 2021, Pearson v. Slack Technologies, Inc., et al. (Case No. 1:21-cv-00335), filed on January 14, 2021, Hodges v. Slack Technologies, Inc., et al. (Case No. 1:21-cv-00551), filed January 21, 2021, and Suhovsky v. Slack Technologies, Inc., et al. (Case No. 1:21-cv-00592), filed January 22, 2021. The Estrada and Katz actions assert claims on behalf of a purported class of Slack stockholders, while the other actions assert claims individually. The complaints name as defendants Slack, the members of the Slack board, and, with respect to Gillespie, Estrada and Pearson, Salesforce, Merger Sub I and Merger Sub II. The complaints allege, among other things, that the defendants caused a materially incomplete and misleading proxy statement relating to the proposed mergers to be filed with the SEC in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The Fonseca, Estrada, and Hodges complaints also allege that Slack’s board of directors breached their fiduciary duties in connection with the mergers. The Estrada complaint further alleges that Slack, Salesforce, Merger Sub I, and Merger Sub II aided and abetted the breaches of fiduciary duty by

 

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Slack’s directors. The complaints seek, among other things, injunctive relief, including enjoining defendants from proceeding with or consummating the mergers and directing defendants to commence a sale process reasonably designed to secure the best possible consideration, rescinding the mergers in the event consummated (or awarding rescissory damages), declaratory relief, unspecified monetary damages, and an award of attorneys’ and experts’ fees.

Each of Salesforce and Slack believes that the claims asserted in the lawsuits are without merit and intends to defend vigorously against all claims asserted. Additional lawsuits arising out of or relating to the merger agreement and the mergers may be filed in the future. If additional similar complaints are filed, absent new or different allegations that are material, neither Salesforce nor Slack will necessarily announce such additional filings.

 

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THE MERGER AGREEMENT

The following summary describes certain material provisions of the merger agreement entered into by Salesforce, Merger Sub I, Merger Sub II and Slack, a copy of which is attached hereto as Annex A and is incorporated by reference herein in its entirety. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. You are encouraged to read the merger agreement carefully and in its entirety because it is the legal document that governs the mergers. The description of the merger agreement in this section and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement. The legal rights and obligations of the parties are governed by the specific language of the merger agreement and not this summary.

The Mergers

The merger agreement provides for two mergers: (a) Merger Sub I will be merged with and into Slack, with Slack continuing as the surviving corporation in the first merger and as a wholly owned subsidiary of Salesforce and (b) immediately following the first merger, Slack, as the surviving corporation in the first merger, will be merged with and into either: (i) if a revised structure notice (as defined below) has not been delivered by Salesforce before the closing, Merger Sub II, with Merger Sub II continuing as a wholly owned subsidiary of Salesforce, or (ii) if a revised structure notice has been delivered by Salesforce before the closing, Salesforce, with Salesforce surviving the second merger.

Pursuant to the merger agreement, Salesforce may elect the alternative transaction structure (as defined below) upon written notice to Slack (which we refer to as a “revised structure notice”) in the event that 10 business days before the closing, Salesforce and the trustee under the convertible notes indenture have not each executed a supplemental indenture to the convertible notes indenture amending the terms thereof to permit the consummation of the second merger with Merger Sub II at the second effective time without giving rise to a breach of, or any default under, any provision of the convertible notes indenture. Upon delivery of the revised structure notice, the structure of the second merger will be modified to consist of Slack, as the surviving company in the first merger, merging with and into Salesforce, with Salesforce continuing as the surviving company.

Completion and Effectiveness of the Mergers

Under the merger agreement, the closing of the mergers will take place virtually by exchange of documents and signatures at 4:00 a.m., Pacific Time, on the fifth business day after the satisfaction or, to the extent permitted by applicable law, waiver of the last of the conditions (other than any such conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or, to the extent permitted by applicable law, waiver of such conditions at the closing), unless another date or place is agreed to in writing by Salesforce and Slack. The merger agreement provides that in the event the closing would occur prior to March 15, 2021, Salesforce may elect to delay the closing, upon written notice delivered to Slack no later than three business days prior to the date on which the closing would have otherwise occurred and subject to certain conditions, until 4:00 a.m., Pacific Time, on March 15, 2021 (or on a date after the original closing date and prior to March 15, 2021, if Salesforce elects such other date by written notice delivered to Slack no later than two business days prior to such date). For more information on the conditions to the mergers, please see the section entitled “—Conditions to the Mergers.” We refer to the date on which the completion of the mergers occurs as the “closing date.”

On the closing date, the parties will cause a certificate of merger with respect to the first merger and a certificate of merger with respect to the second merger to be duly executed and filed with the Secretary of State of the State of Delaware as provided under the DGCL and the Delaware Limited Liability Company Act (which we refer to as the “DLLCA”), as applicable, and make any other filings, recordings or publications required to be made under the DGCL and DLLCA, as applicable, in connection with the mergers. The first merger will become effective at such time as the first certificate of merger is duly filed with the Secretary of State of the State of

 

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Delaware or at such other time as specified in the first certificate of merger. At the first effective time, all of the property, rights, privileges, immunities, powers and franchises of Slack and Merger Sub I will vest in Slack as the first surviving corporation, and all of the liabilities, obligations and duties of Slack and Merger Sub I will become liabilities, obligations and duties of Slack as the first surviving corporation. The second merger will become effective at such time as the second certificate of merger is duly filed with the Secretary of State of the State of Delaware or at such other time as specified in the second certificate of merger. We refer to the time at which such second merger becomes effective as the “second effective time.” At the second effective time, all of the property, rights, privileges, immunities, powers and franchises of Slack and Merger Sub II or Salesforce, as applicable, will vest in Merger Sub II or Salesforce, as applicable, as the surviving company, and all of the liabilities, obligations and duties of Slack and Merger Sub II or Salesforce, as applicable, will become liabilities, obligations and duties of Merger Sub II or Salesforce, as applicable, as the surviving company.

Merger Consideration

At the first effective time, by virtue of the first merger and without any action on the part of the holder thereof:

 

   

each share of Slack common stock issued and outstanding immediately prior to the first effective time (other than any shares of Slack common stock as to which dissenters’ rights have been properly perfected (which we refer to as “dissenting shares”), cancelled shares (as defined below) or shares covered by Slack restricted share awards) will be automatically cancelled and converted into the right to receive the merger consideration, consisting of (a) 0.0776 shares of Salesforce common stock, with cash in lieu of any fractional shares of Salesforce common stock, and (b) the right to receive $26.79 in cash, without interest;

 

   

each share of Slack common stock issued and outstanding immediately prior to the first effective time that is owned or held in treasury by Slack or is owned by Salesforce or any direct or indirect wholly owned subsidiary of Salesforce or Slack will be cancelled without any consideration delivered in exchange therefor (which we refer to as the “cancelled shares”); and

 

   

each share of common stock of Merger Sub I issued and outstanding immediately prior to the first effective time will automatically be converted into and become one validly issued, fully paid and nonassessable common share, par value $0.0001, of the surviving corporation (which we refer to as the “surviving corporation stock”).

Notwithstanding the above, if the percentage of aggregate Salesforce common stock consideration, disregarding any factional shares in respect of which cash is paid, to be delivered to the holders of Slack common stock is less than 41% of the aggregate merger consideration for U.S. federal income tax purposes, then the amount of cash otherwise payable to the holders of Slack common stock under the merger agreement (other than to holders of dissenting shares), equal to the amount of cash that would be necessary to cause such percentage to equal 41%, shall instead by payable to such holders in an equivalent amount of Salesforce common stock (with each share of Salesforce common stock valued for purposes of this paragraph at $260.50).

All such shares of Slack common stock, when so converted, will cease to be outstanding and will automatically be cancelled and cease to exist. Each holder of a share of Slack common stock that was outstanding immediately prior to the first effective time (excluding any dissenting shares, cancelled shares or shares covered by Slack restricted share awards) will cease to have any rights with respect thereto, except the right to receive the merger consideration to which such holder is entitled by virtue of the first merger and any dividends or other distributions payable to such holder with respect to such shares upon such surrender.

At the second effective time, by virtue of the second merger and without any action on the part of the holder thereof, (a) each share of surviving corporation stock issued and outstanding immediately prior to the second effective time will be automatically cancelled and (b) each limited liability company interest of Merger Sub II

 

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issued and outstanding prior to the second effective time will remain outstanding as a limited liability company interest of the surviving company, except that, in the event Salesforce has delivered the revised structure notice to Slack, each share of Salesforce common stock issued and outstanding immediately prior to the second effective time shall remain outstanding as a share of common stock of the surviving company.

Fractional Shares

Salesforce will not issue fractional shares of Salesforce common stock in the first merger. Instead, each holder of Slack common stock who otherwise would be entitled to receive fractional shares of Salesforce common stock (after aggregating all shares of such holder) will be entitled to an amount in cash, without interest, equal to such fraction of a share of Salesforce common stock multiplied by $260.50, rounded to the nearest whole cent.

Exchange of Slack Common Stock for the Merger Consideration

Salesforce anticipates retaining Computershare Trust Company, N.A., as the depositary and exchange agent for the first merger to handle the exchange of Slack common stock for the merger consideration.

Book-Entry Shares

No holder of book-entry shares of Slack common stock will be required to deliver a certificate or letter of transmittal or surrender such book-entry shares of Slack common stock to the exchange agent to receive the merger consideration. In lieu thereof, each book-entry share of Slack common stock will automatically upon the first effective time be entitled to receive, and Salesforce will cause the exchange agent to pay and deliver in exchange therefor as promptly as reasonably practicable after the first effective time (and in any event within five business days following the first effective time), the merger consideration (including cash in lieu of any fractional shares of Salesforce common stock), and the payment of any dividends or other distributions, without interest, which prior to proper exchange of such shares of Slack common stock had become payable with respect to the shares of Salesforce common stock issuable as merger consideration in respect of such shares of Slack common stock.

No Interest

No interest will be paid or will accrue on any portion of the merger consideration payable in respect of any Slack share.

Termination of Rights

At the first effective time, the stock transfer books of Slack will be closed immediately, and there will be no further registration of transfers on the stock transfer books of Slack of the shares of Slack common stock that were outstanding immediately prior to the first effective time. After the first effective time, each share of Slack common stock that has not been surrendered will represent only the right to receive, upon such surrender, the merger consideration to which such holder is entitled by virtue of the first merger and any dividends or other distributions payable to such holder with respect to such shares upon such surrender.

Treatment of Slack Equity Awards

Consideration for Slack Options in the Mergers—Generally

At the first effective time, each Slack option that is held by an individual who is not an employee of Slack and that is outstanding and unexercised immediately prior to the first effective time will be cancelled and such holders will be entitled to receive the merger consideration in respect of the number of shares of Slack common stock covered by the Slack option, less a number of shares having a value equal to the total exercise price applicable to such option.

 

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At the first effective time, all other Slack options that are outstanding and unexercised immediately prior to the first effective time of Slack will be assumed and automatically converted into an adjusted option to purchase a number of shares of Salesforce common stock determined by multiplying the number of shares of Slack common stock equal to the number of shares covered by the Slack option by the option/RSU conversion ratio, at a per share exercise price equal to the per share exercise price of the Slack option divided by the option/RSU conversion ratio. The adjusted option will otherwise be subject to the same terms and conditions as were applicable to the corresponding Slack option prior to the first effective time, including vesting terms.

Consideration for Slack Restricted Stock Units and Slack Restricted Share Awards in the Mergers—Generally

At the first effective time, each Slack RSU award and each Slack restricted share award that is outstanding immediately prior to the first effective time held by a non-employee director of Slack will vest as of the first effective time and will be cancelled and converted into the right to receive the merger consideration in respect of each share of Slack common stock subject to such Slack RSU award or Slack restricted share award.

At the first effective time, each Slack RSU award (other than any such award held by any current or former non-employee director) will be assumed and converted into an adjusted RSU award with respect to a number of shares of Salesforce common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of Slack common stock subject to the Slack RSU award by the option/RSU conversion ratio. Each adjusted RSU award will be subject to the same terms and conditions as were applicable to the corresponding Slack RSU award prior to the first effective time, including vesting terms.

At the first effective time, each Slack restricted share award (other than any such award held by any current or former non-employee director) that is outstanding immediately prior to the first effective time will be assumed and converted into an adjusted restricted share award with respect to a number of shares of Salesforce common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of Slack common stock subject to the Slack restricted share award by 0.1804; provided that the holder of a Slack restricted share award is entitled to cash in an amount equal to such fractional share multiplied by $260.50, rounded to the nearest cent. Each adjusted restricted share award will be subject to the same terms and conditions as were applicable to the corresponding Slack restricted share award prior to the first effective time, including vesting terms except that any applicable repurchase price per share of Salesforce common stock (rounded up to the nearest whole cent) will be determined by dividing the per share repurchase price of the Slack restricted share award by the restricted stock conversion ratio of 0.1804.

Slack Employee Stock Purchase Plan

Pursuant to the merger agreement, as soon as practicable following the date of the merger agreement, Slack shall take all actions with respect to the ESPP that are necessary to provide that: (a) with respect to the current ESPP offering period that ends on April 9, 2021, no Slack employee who is not a participant in the ESPP as of the date of the merger agreement may become a participant in the ESPP and no current participant may increase the percentage amount of such participant’s payroll deduction election from that in effect on the date of the merger agreement for the current ESPP offering period; (b) subject to the consummation of the mergers, the ESPP shall terminate effective immediately prior to the first effective time; (c) if the first effective time occurs after April 9, 2021 (the end of the current ESPP offering period), then the ESPP shall be suspended and no new offering period shall be commenced under the ESPP prior to the termination of the merger agreement; and (d) if the first effective time occurs before April 9, 2021 (the end of the current ESPP offering period), then the last day of the current ESPP offering period shall be accelerated to a date three business days prior to the closing date of the mergers.

Registration of Salesforce Common Stock

Pursuant to the merger agreement, at or as soon as reasonably practicable after the first effective time, Salesforce will file a registration statement with the SEC on Form S-8, or any successor form, to the extent such

 

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form is available, relating to the shares of Salesforce common stock issuable with respect to the adjusted options, adjusted restricted share awards and adjusted RSU awards. Salesforce will use commercially reasonable efforts to maintain the effectiveness of such registration statement or statements for as long as any adjusted options, adjusted restricted share awards and adjusted RSU awards remain outstanding.

Representations and Warranties

The merger agreement contains customary representations and warranties of the parties. These include representations and warranties of Slack with respect to:

 

   

organization and qualification;

 

   

subsidiaries;

 

   

capitalization;

 

   

corporate authority relative to the merger agreement;

 

   

requisite stockholder approval;

 

   

due execution, delivery and enforceability of the merger agreement;

 

   

required consents and approvals;

 

   

no violations;

 

   

SEC reports and filings;

 

   

financial statements;

 

   

internal controls and procedures;

 

   

the absence of undisclosed liabilities;

 

   

the absence of certain changes or events;

 

   

compliance with laws and permits;

 

   

employee benefit plans;

 

   

labor matters;

 

   

tax matters;

 

   

litigation, orders;

 

   

intellectual property;

 

   

privacy and data protection;

 

   

real property, assets;

 

   

material contracts;

 

   

environmental matters;

 

   

customers, suppliers, resellers, government entities;

 

   

insurance;

 

   

information supplied for SEC filings;

 

   

opinion of financial advisor;

 

   

takeover statutes;

 

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related party transactions; and

 

   

finders and brokers.

The merger agreement also contains customary representations and warranties of Salesforce, Merger Sub I and Merger Sub II, including with respect to:

 

   

organization and qualification;

 

   

subsidiaries;

 

   

capitalization;

 

   

corporate authority relative to the merger agreement;

 

   

due execution, delivery and enforceability of the merger agreement;

 

   

required consents and approvals;

 

   

no violations;

 

   

SEC reports and filings;

 

   

financial statements;

 

   

internal controls and procedures;

 

   

the absence of undisclosed liabilities;

 

   

absence of changes or events;

 

   

compliance with laws and permits;

 

   

litigation, orders;

 

   

information supplied for SEC filings;

 

   

sufficient funds and valid issuance of Salesforce common stock in the merger;

 

   

finders and brokers;

 

   

no Slack common stock ownership;

 

   

activity of Merger Sub I and Merger Sub II; and

 

   

tax matters.

Certain representations and warranties contained in the merger agreement are qualified by “material adverse effect,” as described below. The representations and warranties contained in the merger agreement will expire at the first effective time. The representations, warranties and covenants made by Slack in the merger agreement are qualified by information contained in Slack’s confidential disclosure letter delivered to Salesforce in connection with the execution of the merger agreement and by filings that Slack has made with the SEC since June 3, 2019 and publicly available before December 1, 2020 (the date of the merger agreement). The representations, warranties and covenants made by Salesforce, Merger Sub I and Merger Sub II in the merger agreement are qualified by information contained in Salesforce’s confidential disclosure letter delivered to Slack in connection with the execution of the merger agreement and by filings that Salesforce has made with the SEC since February 1, 2019 and publicly available before December 1, 2020 (the date of the merger agreement). The representations, warranties and covenants of each party in the merger agreement were made only for the purposes of, and were and are solely for the benefit of the parties to, the merger agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosure letters made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ

 

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from those applicable to holders of Slack common stock. Accordingly, the representations and warranties may not describe the actual state of affairs as of December 1, 2020 (the date of the merger agreement), or at any other time, and holders of Slack common stock should not rely on them as statements of fact. These confidential disclosure letters contain information that modifies, qualifies and creates exceptions to the representations and warranties and certain covenants set forth in the merger agreement. Holders of Slack common stock are not third-party beneficiaries of these representations, warranties and covenants under the merger agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Slack or any of its affiliates or of Salesforce or any of its affiliates.

Material Adverse Effect

A “material adverse effect” with respect to Salesforce or Slack means any change, effect, development, circumstance, condition, state of facts, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the financial condition, business or operations of such party and its subsidiaries, taken as a whole, except that no such change, effect, development, circumstance, condition, state of facts, event or occurrence to the extent resulting or arising from any of the following will be deemed to constitute a material adverse effect or will be taken into account when determining whether a material adverse effect exists or has occurred:

 

  (a)

any changes in U.S., regional, global or international economic conditions, including any changes affecting financial, credit, foreign exchange or capital market conditions;

 

  (b)

any changes in conditions in the business collaboration technology industry;

 

  (c)

any changes in political, geopolitical, regulatory or legislative conditions in the United States or any other country or region of the world;

 

  (d)

any changes after December 1, 2020 (the date of the merger agreement) in GAAP or the interpretation thereof;

 

  (e)

any changes after December 1, 2020 (the date of the merger agreement) in applicable law or the interpretation thereof;

 

  (f)

any failure by such party to meet any internal or published projections, estimates or expectations of such party’s revenue, earnings or other financial performance or results of operations for any period, in and of itself, or any failure by such party to meet its internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (it being understood that the facts or occurrences giving rise or contributing to such failure that are not otherwise excluded from the definition of a “material adverse effect” may be taken into account);

 

  (g)

any acts of terrorism or sabotage, war (whether or not declared), the commencement, continuation or escalation of a war, acts of armed hostility, weather conditions, natural disasters, epidemics or pandemics (including the COVID-19 pandemic) or other force majeure events, including any material worsening of such conditions threatened or existing as of December 1, 2020 (the date of the merger agreement);

 

  (h)

the execution and delivery of the merger agreement, the identity of Salesforce, Slack or any of their subsidiaries, as applicable, the pendency or consummation of the merger agreement, the transactions contemplated by the merger agreement, including the effect thereof on the relationships with current or prospective customers, suppliers, distributors, partners, financing sources, employees or sales representatives, or the public announcement of the merger agreement or the transactions contemplated by the merger agreement, including any litigation arising out of or relating to the merger agreement or the transactions contemplated by the merger agreement, in each case, only to the extent resulting from the execution and delivery of the merger agreement, the identity of Salesforce, Slack or any of their subsidiaries, as applicable, the pendency or consummation of the merger agreement, the transactions contemplated by the merger agreement, or the public announcement of the merger agreement or the

 

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  transactions contemplated by the merger agreement, as applicable (except that this clause (h) will not apply to any representation or warranty to the extent the purpose of such representation or warranty is to address, as applicable, the consequences resulting from the execution and delivery of the merger agreement, the pendency or consummation of the transactions contemplated by the merger agreement); and

 

  (i)

any action or failure to take any action which action or failure to act is requested in writing by the other party or otherwise expressly required by the terms of the merger agreement (other than pursuant to Slack’s covenant to use reasonable best efforts to conduct its business in all material respects in the ordinary course of business until the earlier of the first effective time or the date (if any) the merger agreement is terminated); provided that, with respect to the exceptions in clauses (a), (b), (c), (d), (e) and (g), if such change, effect, development, circumstance, condition, state of facts, event or occurrence has had a disproportionate adverse effect on such party relative to other companies operating in the business collaboration technology industry, then only the incremental disproportionate adverse effect of such change, effect, development, circumstance, condition, state of facts, event or occurrence will be taken into account for the purpose of deter