| Item 1.01 | Entry into a Material Definitive Agreement. |
On March 3, 2021 (the “Agreement Date”), Okta, Inc. (“Okta”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ardbeg Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Okta (“Merger Sub”), Auth0, Inc., a Delaware corporation (the “Company”), and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as the securityholder representative thereunder. Pursuant to the terms of, and subject to the conditions set forth in, the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), and upon consummation of the Merger, Merger Sub will cease to exist and the Company will become a wholly owned subsidiary of Okta.
Pursuant to the terms of, and subject to the conditions set forth in, the Merger Agreement which has been approved by the board of directors of each of the Company, Merger Sub, and Okta, upon consummation of the Merger and the other transactions contemplated by the Merger Agreement (the “Closing”), all outstanding shares of Company capital stock, restricted stock units, options to purchase Company capital stock, and phantom units will be cancelled and converted into the right to receive aggregate consideration of $6.5 billion, subject to adjustments set forth in the Merger Agreement, in the form of shares of Class A Common Stock of Okta, par value $0.0001 per share (“Okta Class A Common Stock”) (the “Stock Consideration”), corresponding options to purchase Okta stock or corresponding restricted stock units of Okta; provided, that (a) shares of Company capital stock held by unaccredited stockholders may receive cash in lieu of the Stock Consideration, (b) certain specified awards of the Company will be converted into cash awards and (c) any unvested outstanding options to purchase Company capital stock and unvested phantom units to purchase Company capital stock, in each case, held by any former employees, will be cancelled for no consideration. No Company warrants shall be assumed by Okta, and each such warrant shall be terminated or exercised in accordance with its terms prior to the Closing. The number of shares to be issued in connection with the Stock Consideration will be calculated based on a fixed value of $276.2147 per share, which represents the average of the daily volume-weighted average sales price per share of Okta Class A Common Stock on the Nasdaq Global Select Market, as such daily volume-weighted average sales price per share is reported by Bloomberg L.P., calculated to four decimal places and determined without regard to after-hours trading or any other trading outside the regular trading session trading hours, for each of the twenty consecutive trading days ending on and including the third trading day immediately preceding the Agreement Date. In addition, Okta will establish a retention pool in an aggregate amount of $25 million in a form to be determined in Okta’s discretion that will be granted to Company employees in accordance with the terms of the Merger Agreement.
The Merger Agreement contains customary representations, warranties and covenants by Okta and the Company. A portion of the aggregate consideration will be held back by Okta to secure the indemnification obligations of the Company securityholders. The Closing is subject to customary closing conditions, including, but not limited to, (a) the requisite adoption of the Merger Agreement and approval of the Merger by the stockholders of the Company, (b) the receipt of specified regulatory approvals and the expiration or termination of applicable waiting periods, including the expiration or termination of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (c) the absence of any order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger, (d) the shares of Okta Class A Common Stock to be issued in the Merger being approved for listing on the Nasdaq Global Select Market, (e) certain key employees of the Company remaining employed by the Company as of immediately prior to the closing of the Merger, (f) subject to certain materiality exceptions, the accuracy of certain representations and warranties of each of the Company and Okta contained in the Merger Agreement and the compliance in all material respects by each party with the covenants contained in the Merger Agreement, and (g) the absence of a material adverse effect with respect to each of the Company and Okta. The Closing is expected to occur during Okta’s second quarter of fiscal year 2022, the quarter ending July 31, 2021.
Okta intends to issue the shares of Okta Class A Common Stock described herein in reliance upon the exemptions from registration afforded by Section 4(a)(2) and Rule 506 promulgated under the Securities Act of 1933, as amended. Under the terms of the Merger Agreement, Okta has agreed to file a Resale Registration Statement on Form S-3 covering the resale of the shares of Okta Class A Common Stock to be issued to eligible Company securityholders (the “Resale Registration Statement”). After the Closing, the Company’s stockholders will be subject to certain lock-up restrictions (the “Lock-up Restrictions”) with respect to 75% of the Stock Consideration received in connection with the Merger (the “Lock-up Stock”) for a period of up to 90 days following the date the
