PREM14A 1 d812272dprem14a.htm PREM14A PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

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 under §240.14a-12

INSTRUCTURE, 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:

 

38,190,190 shares of Instructure, Inc. common stock (“Instructure common stock”); options to purchase 667,775 shares of Instructure common stock; and 2,536,121 shares of Instructure common stock underlying Company RSU awards.

 

(2)

 

Aggregate number of securities to which transaction applies:

 

As of the close of business on December 6, 2019, 38,190,190 shares of Instructure common stock;

 

(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):

 

The maximum aggregate value was determined based upon the sum of: (A) 38,190,190 shares of Instructure common stock multiplied by $47.60 per share; (B) options to purchase 667,775 shares of Instructure common stock multiplied by $30.02 (the difference between $47.60 and the weighted average exercise price of $17.58 per share); and (C) 2,536,121 shares of Instructure common stock underlying Company RSU awards multiplied by $47.60.

 

(4)

 

Proposed maximum aggregate value of transaction:

 

$1,958,616,297.20

 

(5)

 

Total fee paid:

 

$254,228.40

 

In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filed fee was determined by multiplying $1,958,616,297.20 by 0.0001298.

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) 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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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED DECEMBER 23, 2019

 

LOGO

Instructure, Inc.

6330 South 3000 East, Suite 700

Salt Lake City, Utah 84121

             [], 2020

Dear Instructure Stockholder:

You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of Instructure, Inc. (“Instructure” or the “Company”) to be held on [●], 2020, at Instructure’s office, located at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, at [●], Mountain Time.

At the Special Meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated as of December 4, 2019 (the “Merger Agreement”), by and among Instructure, PIV Purchaser, LLC, a Delaware limited liability company (“Parent”), and PIV Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Instructure’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. Parent and Merger Sub are entities that are affiliated with Thoma Bravo, LLC, a private equity investment firm. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Instructure and the separate corporate existence of Merger Sub will cease, with Instructure continuing as the surviving corporation (the “Merger”) and a wholly owned subsidiary of Parent.

If the Merger is completed, you will be entitled to receive $47.60 in cash, less any applicable withholding taxes, for each share of Instructure common stock that you own (unless you have properly exercised your appraisal rights).

The Board of Directors of Instructure (the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has unanimously: (i) determined that it is in the best interests of Instructure and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (ii) approved the execution and delivery of the Merger Agreement by Instructure, the performance by Instructure of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (iii) resolved to recommend that Instructure stockholders adopt the Merger Agreement and approve the Merger in accordance with the General Corporation Law of the State of Delaware. The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.

The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.


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Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of Instructure common stock entitled to vote at the Special Meeting.

If you have any questions or need assistance voting your shares, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

(212) 929-5500 (Call Collect)

Call Toll-free: (800) 322-2885

proxy@mackenziepartners.com

On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of this matter.

 

Sincerely,

     

Joshua Coates

Executive Chairman of the Board of Directors

The accompanying proxy statement is dated January [●], 2020 and, together with the enclosed form of proxy card, is first being mailed on or about January [●], 2020.


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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED DECEMBER 23, 2019

 

 

LOGO

Instructure, Inc.

6330 South 3000 East, Suite 700

Salt Lake City, Utah 84121

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [], 2020

Notice is hereby given that a special meeting of stockholders (including any adjournments or postponements thereof, the “Special Meeting”) of Instructure, Inc., a Delaware corporation (“Instructure”), will be held on [●], 2020 at Instructure’s office, located at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, at [●], Mountain time, for the following purposes:

1. To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of December 4, 2019, (the “Merger Agreement”), by and among Instructure, PIV Purchaser, LLC, a Delaware limited liability company (“Parent”), and PIV Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Instructure and the separate corporate existence of Merger Sub will cease, with Instructure continuing as the surviving corporation (the “Merger”) and a wholly owned subsidiary of Parent;

2. To consider and vote on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Instructure’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”); and

3. To consider and vote on any proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Only Instructure stockholders of record as of the close of business on January [●], 2020, are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.


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Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote “FOR” the adoption of the Merger Agreement, “FOR”, on an advisory (non-binding) basis, the Compensation Proposal and “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

By Order of the Board of Directors,

     

Joshua Coates

Executive Chairman of the Board of Directors

Dated: January [●], 2020


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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

If you are an Instructure stockholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.

If you fail to (1) return your proxy card, (2) grant your proxy electronically over the Internet or by telephone or (3) vote by ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the adjournment proposal.

You should carefully read and consider the entire accompanying proxy statement and its annexes, including, but not limited to, the Merger Agreement, along with all of the documents incorporated by reference into the accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Instructure common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

(212) 929-5500 (Call Collect)

Call Toll-free: (800) 322-2885

proxy@mackenziepartners.com


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TABLE OF CONTENTS

 

SUMMARY

     1  

Parties Involved in the Merger

     1  

The Merger

     2  

Merger Consideration

     2  

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

     3  

Appraisal Rights

     4  

Regulatory Approvals Required for the Merger

     4  

Closing Conditions

     5  

Financing of the Merger

     5  

Required Stockholder Approval

     6  

The Special Meeting

     6  

Recommendation of the Instructure Board of Directors

     6  

Opinion of J.P. Morgan Securities LLC

     7  

Interests of Instructure’s Directors and Executive Officers in the Merger

     8  

Alternative Acquisition Proposals

     8  

Termination of the Merger Agreement

     10  

Effect on Instructure if the Merger is Not Completed

     10  

QUESTIONS AND ANSWERS

     11  

FORWARD-LOOKING STATEMENTS

     17  

THE SPECIAL MEETING

     19  

Date, Time and Place

     19  

Purpose of the Special Meeting

     19  

Record Date; Shares Entitled to Vote; Quorum

     19  

Vote Required; Abstentions and Broker Non-Votes

     19  

Shares Held by Instructure’s Directors and Executive Officers

     20  

Voting of Proxies

     20  

Revocability of Proxies

     21  

Board of Directors’ Recommendation

     21  

Solicitation of Proxies

     21  

Anticipated Date of Completion of the Merger

     22  

Appraisal Rights

     22  

Delisting and Deregistration of Instructure common stock

     23  

Other Matters

     23  

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [●], 2020

     23  

Householding of Special Meeting Materials

     23  

Questions and Additional Information

     23  

 

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THE MERGER

     24  

Parties Involved in the Merger

     24  

Effect of the Merger

     25  

Effect on Instructure if the Merger is Not Completed

     25  

Merger Consideration

     25  

Background of the Merger

     26  

Recommendation of the Board of Directors and Reasons for the Merger

     42  

Management Projections

     54  

Interests of Instructure’s Directors and Executive Officers in the Merger

     56  

Equity Interests of Instructure’s Executive Officers and Non-employee Directors

     62  

This number reflects the number of shares of common stock subject to Company RSU Awards that were not vested as of December 6, 2019. Financing of the Merger

     62  

Closing and Effective Time

     64  

Appraisal Rights

     64  

Accounting Treatment

     69  

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

     69  

Regulatory Approvals Required for the Merger

     73  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     75  

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

     75  

Closing and Effective Time

     76  

Merger Consideration

     76  

Exchange and Payment Procedures

     77  

Representations and Warranties

     77  

Conduct of Business Pending the Merger

     81  

The “Go Shop” Period—Solicitation of Other Offers

     82  

The “No Shop” Period—No Solicitation of Other Offers

     84  

The Board of Directors’ Recommendation; Company Board Recommendation Change

     86  

Employee Benefits

     88  

Efforts to Close the Merger

     90  

Cooperation with Debt Financing

     90  

Indemnification and Insurance

     92  

Other Covenants

     93  

Conditions to the Closing of the Merger

     93  

Termination of the Merger Agreement

     94  

Termination Fee

     95  

Specific Performance

     96  

Limitations of Liability

     97  

Amendment

     97  

Governing Law

     97  

 

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PROPOSAL 2: THE INSTRUCTURE COMPENSATION PROPOSAL

     98  

Vote Required and Board of Directors Recommendation

     98  

PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

     99  

MARKET PRICES AND DIVIDEND DATA

     100  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS AND MANAGEMENT

     101  

FUTURE STOCKHOLDER PROPOSALS

     104  

WHERE YOU CAN FIND MORE INFORMATION

     105  

MISCELLANEOUS

     107  

 

Annexes

  

Annex A

   The Merger Agreement

Annex B

   Opinion of J.P. Morgan Securities LLC

Annex C

   Section 262 of the General Corporation Law of Delaware

 

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SUMMARY

This summary highlights selected information from this proxy statement related to the merger of PIV Merger Sub, Inc. with and into Instructure, Inc. (the “Merger”), and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.” The Merger Agreement (as defined below) is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.

Except as otherwise specifically noted in this proxy statement, “Instructure,” “we,” “our,” “us,” the “Company” and similar words refer to Instructure, Inc. Throughout this proxy statement, we refer to PIV Purchaser, LLC as “Parent” and PIV Merger Sub, Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated December 4, 2019, by and among Instructure, Parent and Merger Sub, as the “Merger Agreement,” our common stock, par value $0.0001 per share as “Instructure common stock” and the holders of Instructure common stock, as “Instructure stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.

Parties Involved in the Merger

Instructure, Inc.

Headquartered in Salt Lake City, Utah, Instructure is a leading software-as-a-service technology company that provides learning management system software to the global education market and employee development and engagement solutions for people-focused companies via its Bridge platform. Instructure’s software solutions enable organizations to develop, deliver and manage engaging face-to-face and online learning experiences. Instructure common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “INST.”

PIV Purchaser, LLC

Parent was formed on November 26, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.

PIV Merger Sub, Inc.

Merger Sub is a wholly owned subsidiary of Parent and was formed on November 26, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.

Parent and Merger Sub are each affiliated with Thoma Bravo Fund XIII, L.P. (the “Thoma Bravo Fund”), and Parent, Merger Sub and the Thoma Bravo Fund are each affiliated with Thoma Bravo, LLC (“Thoma Bravo”). Thoma Bravo is a leading private equity firm focused on the software and technology-enabled services sectors. At the Effective Time, Instructure, as the Surviving Corporation, will be indirectly owned by the Thoma Bravo Fund, Thoma Bravo Fund XIII-A, L.P. and Thoma Bravo Executive Fund XIII, L.P., each an affiliate of Thoma Bravo.



 

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In connection with the transactions contemplated by the Merger Agreement, the Thoma Bravo Fund has provided Parent with an equity commitment sufficient to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund, together with cash on hand at Instructure, certain fees and expenses to be paid at the closing of the Merger, subject to the terms and conditions of the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

The Merger

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Instructure and the separate corporate existence of Merger Sub will cease, with Instructure continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, Instructure common stock will no longer be publicly traded and will be delisted from NYSE. In addition, Instructure common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Instructure will no longer file periodic reports with the United States Securities and Exchange Commission (the “SEC”). If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the General Corporation Law of the State of Delaware (the “DGCL”) (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent, Merger Sub and Instructure and specified in the certificate of merger, being referred to herein as the “Effective Time”).

Merger Consideration

Instructure common stock

At the Effective Time, each then outstanding share of Instructure common stock (other than shares of Instructure common stock (1) held by Instructure as treasury stock, (2) owned by Parent or Merger Sub, (3) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub or (4) owned by Instructure stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of Instructure common stock in accordance with Section 262 of the DGCL, collectively, the “Excluded Shares”) will be cancelled and extinguished and automatically converted into the right to receive an amount in cash equal to $47.60, without interest thereon (the “Per Share Merger Consideration”), less any applicable withholding taxes.

At or prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate Per Share Merger Consideration with a designated payment agent for payment of each share of Instructure common stock owned by each Instructure stockholder. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”

After the Merger is completed, you will have the right to receive the Per Share Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive payment for the “fair value” of their shares determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

Treatment of Company Options and Company RSU Awards

The Merger Agreement provides that equity awards granted under Instructure’s equity incentive plans, including options to purchase shares of Instructure common stock and restricted stock unit awards covering shares of Instructure common stock will be cancelled and converted into cash consideration equal to $47.60 multiplied by



 

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the number of vested shares subject to the equity award (less the applicable per share exercise price of those vested shares, with respect to any options), subject to any required tax withholdings, payable shortly after the closing of the Merger (the “Vested Award Cash-out Payment”). Equity awards that are outstanding and unvested as of immediately before the Effective Time will be cancelled and converted into cash consideration (the “Cash Replacement Amount”) equal to $47.60 multiplied by the number of unvested shares subject to the equity award (less the applicable per share exercise price of those unvested shares, with respect to any options), subject to any required tax withholdings, which consideration will be subject to generally the same terms as the corresponding, cancelled equity award, including vesting conditions. Any options with a per share exercise price equal to or greater than $47.60 will be cancelled at the Effective Time for no payment or consideration. Instructure’s equity incentive plans will terminate as of the Effective Time. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Outstanding Company Options and Company RSU Awards.”

Treatment of Purchase Rights under the Instructure Employee Stock Purchase Plan

The Merger Agreement generally provides that no new offering periods or purchase periods will begin under Instructure’s Employee Stock Purchase Plan (the “ESPP”) after December 4, 2019, any outstanding offering period will end no later than five days before the Effective Time, and the ESPP will terminate as of the Effective Time. In addition, no new participants will be permitted in the ESPP following December 4, 2019, and with respect to any offering periods in effect on December 4, 2019, as of and following such date, existing participants in the ESPP will not be allowed to increase payroll contribution rates or make separate non-payroll contributions to the ESPP, except as required by applicable law. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Treatment of Purchase Rights under the Employee Stock Purchase Plan.”

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

The receipt of cash by Instructure stockholders in exchange for shares of Instructure common stock in the Merger will be a taxable transaction to Instructure stockholders for U.S. federal income tax purposes. Such receipt of cash by each Instructure stockholder that is a U.S. Holder (as defined under the caption, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Instructure common stock surrendered in the Merger by such stockholder. Backup withholding taxes may also apply to the cash payments made pursuant to the Merger, unless such U.S. Holder complies with certification procedures under the backup withholding rules.

An Instructure stockholder that is a Non-U.S. Holder (as defined under the caption, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Instructure common stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. Holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.

Instructure stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”

Instructure stockholders should also consult their own tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under U.S. federal estate, gift and other non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction.



 

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Appraisal Rights

If the Merger is consummated and certain conditions are met, Instructure stockholders who continuously hold shares of Instructure common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that Instructure stockholders may be entitled to have their shares of Instructure common stock appraised by the Delaware Court of Chancery, and to receive payment in cash of the “fair value” of their shares of Instructure common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, Instructure stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Instructure stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Instructure common stock.

To exercise appraisal rights, Instructure stockholders must: (1) submit a written demand for appraisal to Instructure before the vote is taken on the proposal to adopt the Merger Agreement; (2) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (3) continue to hold shares of Instructure common stock of record through the Effective Time; and (4) strictly comply with all other procedures for exercising appraisal rights under the DGCL. Failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Instructure unless certain stock ownership conditions are satisfied by the Instructure stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced in Annex C to this proxy statement. If you hold your shares of Instructure common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

Regulatory Approvals Required for the Merger

Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated. For more information, please see the section of this proxy captioned “The Merger—Regulatory Approvals Required for the Merger.”

Instructure and Thoma Bravo Fund XIII-A, L.P. made the filings required under the HSR Act on December 18, 2019.



 

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Closing Conditions

The obligations of Instructure, Parent and Merger Sub, as applicable, to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions), the following:

 

   

the absence of any laws or court orders making the Merger illegal or otherwise prohibiting the Merger;

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;

 

   

the expiration or termination of the applicable waiting period under the HSR Act;

 

   

in the case of Parent and Merger Sub, the absence of any continuing change, event, violation, inaccuracy, effect or circumstance at Instructure that, individually or in the aggregate, generally: (1) is or would reasonably be expected to be materially adverse (with certain limitations) to the business, financial condition, assets and liabilities or results of operations of Instructure and its subsidiaries (the “Instructure Group”), taken as a whole; or (2) would reasonably be expected to prevent, materially impair or materially delay the consummation of the Merger prior to the Termination Date;

 

   

the accuracy of the representations and warranties of Instructure, Parent and Merger Sub in the Merger Agreement, subject to materiality qualifiers, as of the Effective Time or the date in respect of which such representation or warranty was specifically made; and

 

   

the performance in all material respects by Instructure, Parent and Merger Sub of their respective obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time.

Financing of the Merger

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $2 billion. This amount includes funds needed to: (1) pay Instructure stockholders the amounts due under the Merger Agreement and (2) make payments in respect of our outstanding equity-based awards payable at closing of the Merger pursuant to the Merger Agreement. In connection with the financing of the Merger, the Thoma Bravo Fund and Parent have entered into an equity commitment letter, dated as of December 4, 2019 (the “Equity Commitment Letter”), pursuant to which the Thoma Bravo Fund has agreed to provide Parent with an equity commitment sufficient to fund (i) the aggregate purchase price required to be paid at the closing of the Merger, (ii) repayment or refinancing of the indebtedness of the Instructure Group outstanding under that certain Second Amended and Restated Loan And Security Agreement, dated as of June 22, 2017, by and among Instructure, Silicon Valley Bank and the other parties thereto, as the same may from time to time be amended, modified, supplemented or restated (the “Credit Facility”) and (iii) all other fees and expenses to be paid at the closing of the Merger by Instructure, Parent or Merger Sub contemplated by, and subject to the terms and conditions of, the Merger Agreement. Instructure has a contractual right to enforce the foregoing Equity Commitment Letter against the Thoma Bravo Fund, and under the terms of the Merger Agreement, Instructure has the unqualified right to specifically enforce Parent’s obligation to consummate the Merger upon receipt of the proceeds of the foregoing equity commitment.

Pursuant to the limited guaranty delivered by the Thoma Bravo Fund in favor of Instructure, dated as of December 4, 2019 (the “Guaranty”), the Thoma Bravo Fund has agreed to guarantee the payment of the liabilities and obligations of Parent or Merger Sub under the Merger Agreement, which are subject to an aggregate cap equal to $136,857,000, including amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Instructure, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”



 

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Required Stockholder Approval

The affirmative vote of the holders of a majority of the outstanding shares of Instructure common stock is required to adopt the Merger Agreement. As of the Record Date, [●] votes constitute a majority of the outstanding shares of Instructure common stock. Approval of the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Instructure’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”) and the proposal to adjourn the Special Meeting (the “adjournment proposal”), whether or not a quorum is present, requires the affirmative vote of a majority of the shares of Instructure common stock present in person, by remote communication, or represented by proxy at the Special Meeting and entitled to vote on the subject matter. The approval of the Compensation Proposal is advisory (non-binding) and is not a condition to the completion of the Merger.

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [●] shares of Instructure common stock, representing approximately [●]% of the shares of Instructure common stock outstanding as of the Record Date (and approximately [●]% of the shares of Instructure common stock outstanding when taking into account Company Options and Company RSU Awards held, in the aggregate, by our directors and executive officers).

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of Instructure common stock: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment proposal.

The Special Meeting

Date, Time and Place

A special meeting of Instructure stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on [●], 2020, at Instructure’s offices, located at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, at [●], Mountain time (the “Special Meeting”).

Record Date; Shares Entitled to Vote

You are entitled to vote at the Special Meeting if you owned shares of Instructure common stock at the close of business on January [●], 2020 (the “Record Date”). Each holder of Instructure common stock shall be entitled to one (1) vote for each such share owned at the close of business on the Record Date.

Quorum

As of the Record Date, there were [●] shares of Instructure common stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the shares of Instructure common stock issued and outstanding and entitled to vote thereat, present in person, by remote communication, or represented by proxy, will constitute a quorum at the Special Meeting.

Recommendation of the Instructure Board of Directors

The Board of Directors has unanimously: (1) determined that it is in the best interests of Instructure and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (2) approved the execution and delivery of the Merger Agreement by Instructure, the performance by Instructure of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (3) resolved to recommend that Instructure stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL.



 

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The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Prior to the adoption of the Merger Agreement by Instructure stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its financial advisor and its outside legal counsel) that failure to do so would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent and its representatives in good faith over a two business day period so that a failure to make a Company Board Recommendation Change (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change”) would no longer be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. The termination of the Merger Agreement by Instructure following the Board of Directors’ authorization for Instructure to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Instructure of a termination fee of either (1) $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (2) $63,540,750, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”

Opinion of J.P. Morgan Securities LLC

Pursuant to an engagement letter dated January 20, 2019 and amended and restated on August 2, 2019, Instructure retained J.P. Morgan Securities LLC (“J.P. Morgan”) as its financial advisor in connection with a possible acquisition of Instructure and to deliver a fairness opinion in connection with the proposed Merger, based on its J.P. Morgan’s qualifications, expertise, reputation and knowledge of Instructure’s business and the industry in which Instructure operates.

At the meeting of the Board of Directors on December 3, 2019, J.P. Morgan rendered its oral opinion to the Board of Directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the Per Share Merger Consideration to be paid to the holders of Instructure common stock in the proposed Merger was fair, from a financial point of view, to such holders. J.P. Morgan confirmed its December 3, 2019 oral opinion by delivering its written opinion to the Board of Directors, dated December 4, 2019 (the “Opinion”), that, as of the date of the Opinion, the Per Share Merger Consideration to be paid to the holders of Instructure common stock in the proposed Merger was fair, from a financial point of view, to such holders.

The full text of the Opinion, dated December 4, 2019, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the Opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the Opinion. Instructure stockholders are urged to read the Opinion in its entirety.

The Opinion was addressed to the Board of Directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the Per Share Merger Consideration to be paid to the holders of Instructure common stock in the proposed Merger and did not address any other aspect of the Merger. J.P. Morgan expressed no opinion as to the fairness of the Per Share Merger Consideration to the holders of any other class of securities, creditors or other constituencies of Instructure or as to the underlying



 

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decision by Instructure to engage in the proposed Merger. The issuance of the Opinion was approved by a fairness committee of J.P. Morgan. The Opinion does not constitute a recommendation to any Instructure stockholder as to how such stockholder should vote with respect to the proposed Merger or any other matter.

For more information, see the section of this proxy statement captioned “The Merger—Opinion of J.P. Morgan Securities LLC.”

Interests of Instructure’s Directors and Executive Officers in the Merger

When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, Instructure stockholders should be aware that Instructure’s directors and executive officers may have interests in the Merger that are different from, or in addition to, Instructure stockholders more generally. In (1) evaluating and negotiating the Merger Agreement, (2) approving the Merger Agreement and the Merger and (3) recommending that the Merger Agreement be adopted by stockholders, the Board of Directors was aware of and considered these interests, among other matters, to the extent that these interests existed at the time. These interests include:

 

   

at the Effective Time of the Merger, each Company Option and Company RSU Award will receive the treatment described in the section of this proxy statement captioned “The Merger—Interests of Instructure’s Directors and Executive Officers in the Merger—Treatment of Company Options and Company RSU Awards”;

 

   

continued eligibility of Instructure’s executive officers to receive severance payments and benefits (including equity award vesting acceleration) under their employment agreement or change in control severance agreement, as applicable, with Instructure, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Instructure’s Directors and Executive Officers in the Merger—Payments Upon Termination At or Following Change in Control”;

 

   

at the Effective Time, each unvested equity award held by Instructure’s non-employee directors will become fully vested and, as applicable, exercisable pursuant to the terms of Instructure’s Non-Employee Director Equity Compensation Policy; and

 

   

continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.

If the proposal to adopt the Merger Agreement is approved, the shares of Instructure common stock held by Instructure directors and executive officers will be treated in the same manner as outstanding shares of Instructure common stock held by all other stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of Instructure’s Directors and Executive Officers in the Merger.”

Alternative Acquisition Proposals

The “Go Shop” Period—Solicitation of Other Acquisition Proposals

Under the Merger Agreement, from the date of the Merger Agreement until 11:59 p.m., Pacific time on January 8, 2020 (the “No Shop Period Start Date”), Instructure, its affiliates and their respective representatives have the right to: (1) solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any inquiries regarding any proposal or inquiry that constitutes, could constitute or is reasonably expected to lead to, an Acquisition Proposal, (2) subject to an acceptable confidentiality agreement. provide any non-public information to, any person with the intent to facilitate the making of an Acquisition Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘Go Shop’ Period—Solicitation of Other Offers”) and (3) continue, enter into, maintain, participate or otherwise engage in discussions with any third person (and its representatives and financing sources) with respect to an Acquisition Proposal.



 

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The termination of the Merger Agreement by Instructure following the Board of Directors’ authorization for Instructure to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Instructure of a termination fee of either (1) $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (2) $63,540,750, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”

The “No Shop” Period—No Solicitation of Other Acquisition Proposals

Under the Merger Agreement, from the No Shop Period Start Date until the Effective Time, Instructure may not: (1) solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any inquiries regarding any Acquisition Proposal or (2) engage in discussions or negotiations with, or provide any non-public information to, any person relating to, an Acquisition Proposal.

Notwithstanding the foregoing restrictions, under specified certain circumstances, from the No Shop Period Start Date until the adoption of the Merger Agreement by Instructure’s stockholders, Instructure may provide information to, and engage or participate in negotiations or substantive discussions with, a person in respect of a bona fide Acquisition Proposal, and otherwise facilitate such Acquisition Proposal or assist such person (and its Representatives and financing sources) with such Acquisition Proposal (in each case, if requested by such person and such Acquisition Proposal did not result from any material breach of Instructure’s obligations, as described in the immediately preceding paragraph) if (and only if) the Board of Directors (or a committee thereof) determines in good faith (after consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal, and, in each case, the failure to take such actions in respect of such Acquisition Proposal would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘No Shop’ Period—No Solicitation of Other Offers.”

After the No Shop Period Start Date but prior to the adoption of the Merger Agreement by Instructure’s stockholders, Instructure is entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal if it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a two business day period in an effort to amend the terms and conditions of the Merger Agreement, so that such Superior Proposal no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.

The termination of the Merger Agreement by Instructure following the Board of Directors’ authorization for Instructure to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Instructure of a termination fee of either (1) $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (2) $63,540,750, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”



 

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Termination of the Merger Agreement

In addition to the circumstances described above, Parent and Instructure have certain rights to terminate the Merger Agreement under customary circumstances, including by mutual agreement, the imposition of laws or non-appealable court orders that make the Merger illegal or otherwise prohibit the Merger, an uncured breach of the Merger Agreement by the other party, if the Merger has not been consummated by 11:59 p.m., Pacific time, on April 2, 2020, or if Instructure stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof). Under some circumstances, (1) Instructure is required to pay Parent a termination fee equal to either $63,540,750 or $29,326,500; and (2) Parent is required to pay Instructure a termination fee equal to $136,857,000. Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Effect on Instructure if the Merger is Not Completed

If the Merger Agreement is not adopted by Instructure stockholders, or if the Merger is not completed for any other reason:

 

  i.

the stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Instructure common stock pursuant to the Merger Agreement;

 

  ii.

(a) Instructure will remain an independent public company; (b) Instructure common stock will continue to be listed and traded on NYSE and registered under the Exchange Act; and (c) Instructure will continue to file periodic reports with the SEC; and

 

  iii.

under certain specified circumstances, Instructure will be required to pay Parent a termination fee of either $63,540,750 or $29,326,500, upon the termination of the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”



 

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”

 

Q:

Why am I receiving these materials?

 

A:

The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Instructure common stock in connection with the solicitation of proxies to be voted at the Special Meeting.

 

Q:

When and where is the Special Meeting?

 

A:

The Special Meeting will take place on [●], 2020, at Instructure’s offices, located at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, at [●], Mountain time.

 

Q:

What am I being asked to vote on at the Special Meeting?

 

A:

You are being asked to vote on the following proposals:

 

   

to adopt the Merger Agreement pursuant to which Merger Sub will merge with and into Instructure, and Instructure will become a wholly owned subsidiary of Parent;

 

   

to approve, on an advisory (non-binding) basis, the Compensation Proposal; and

 

   

to approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

Q:

Who is entitled to vote at the Special Meeting?

 

A:

Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Instructure common stock shall be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each such share owned at the close of business on the Record Date.

 

Q:

May I attend the Special Meeting and vote in person?

 

A:

Yes. All stockholders as of the Record Date may attend the Special Meeting and vote in person. Seating will be limited. Stockholders will need to present proof of ownership of shares of Instructure common stock, such as a bank or brokerage account statement, and a form of personal identification to be admitted to the Special Meeting. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Special Meeting.

Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker

 

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or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:

What will I receive if the Merger is completed?

 

A:

Upon completion of the Merger, you will be entitled to receive the Per Share Merger Consideration of $47.60 in cash, less any applicable withholding taxes, for each share of Instructure common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of Instructure common stock, you will receive $4,760 in cash in exchange for your shares of Instructure common stock, less any applicable withholding taxes.

 

Q:

What vote is required to adopt the Merger Agreement?

 

A:

The affirmative vote of the holders of a majority of the outstanding shares of Instructure common stock is required to adopt the Merger Agreement.

If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (1) submit a signed proxy card; (2) grant a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (3) vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

Q:

What happens if the Merger is not completed?

 

A:

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of Instructure common stock. Instead, Instructure will remain an independent public company, Instructure common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and we will continue to file periodic reports with the SEC.

Under specified circumstances, Instructure will be required to pay Parent a termination fee of either $63,540,750 or $29,326,500, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

 

Q:

Why are the stockholders being asked to cast an advisory (non-binding) vote to approve the Compensation Proposal?

 

A:

The Exchange Act and applicable SEC rules thereunder require Instructure to seek an advisory (non-binding) vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger.

 

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Q:

What vote is required to approve the Compensation Proposal?

 

A:

The affirmative vote of the holders of a majority of the shares present in person, by remote communication, or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Compensation Proposal.

 

Q:

What will happen if the stockholders do not approve the Compensation Proposal at the Special Meeting?

 

A:

Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Instructure. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Instructure’s named executive officers in accordance with the terms and conditions of the applicable agreements.

 

Q:

What do I need to do now?

 

A:

You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card), so that your shares can be voted at the Special Meeting, unless you wish to seek appraisal. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares.

 

Q:

Should I surrender my book-entry shares now?

 

A:

No. After the Merger is completed, the payment agent will send each holder of record a letter of transmittal and written instructions that explain how to exchange shares of Instructure common stock represented by such holder’s book-entry shares for merger consideration.

 

Q:

What happens if I sell or otherwise transfer my shares of Instructure common stock after the Record Date but before the Special Meeting?

 

A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Instructure common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Instructure in writing of such special arrangements, you will transfer the right to receive the Per Share Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of Instructure common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card).

 

Q:

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

 

A:

If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Instructure.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of Instructure common stock held in “street name.” In that case, this proxy statement has been

 

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forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:

How may I vote?

 

A:

If you are a stockholder of record (that is, if your shares of Instructure common stock are registered in your name with Computershare, our transfer agent), there are four ways to vote:

 

   

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;

 

   

by visiting the Internet at the address on your proxy card;

 

   

by calling toll-free (within the U.S. or Canada) at the phone number on your proxy card; or

 

   

by attending the Special Meeting and voting in person by ballot.

A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Instructure common stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet or by telephone, you may incur costs such as Internet access and telephone charges for which you will be responsible.

Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of Instructure common stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Instructure common stock in person by ballot at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person by ballot, your previous vote by proxy will not be counted.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.

 

Q:

If my broker holds my shares in “street name,” will my broker vote my shares for me?

 

A:

No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement but will have no effect on the adjournment proposal.

 

Q:

May I change my vote after I have mailed my signed and dated proxy card?

 

A:

Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

   

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

   

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

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delivering a written notice of revocation to the Secretary of Instructure; or

 

   

attending the Special Meeting and voting in person by ballot.

If you hold your shares of Instructure common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person to vote your shares of Instructure common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Instructure common stock is called a “proxy card.” Dan Goldsmith, our Chief Executive Officer, and Matthew Kaminer, our Chief Legal Officer, are the proxy holders for the Special Meeting, with full power of substitution and re-substitution.

 

Q:

If a stockholder gives a proxy, how are the shares voted?

 

A:

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

Q:

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

 

A:

Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive.

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.

 

Q:

Where can I find the voting results of the Special Meeting?

 

A:

Instructure intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Instructure files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.”

 

Q:

When do you expect the Merger to be completed?

 

A:

We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the first calendar quarter of 2020. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.

 

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Q:

Who can help answer my questions?

 

A:

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Instructure common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

(212) 929-5500 (Call Collect)

Call Toll-free: (800) 322-2885

proxy@mackenziepartners.com

 

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FORWARD-LOOKING STATEMENTS

This proxy statement, and any documents to which Instructure refers to in this proxy statement, contains not only historical information, but also forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Instructure’s current expectations or beliefs concerning future events, including but not limited to the expected completion and timing of the proposed transaction, expected benefits and costs of the proposed transaction, management plans and other information relating to the proposed transaction, strategies and objectives of Instructure for future operations and other information relating to the proposed transaction. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “forecasts,” “should,” “estimates,” “contemplate,” “future,” “goal,” “potential,” “predict,” “project,” “projection,” “target,” “seek,” “may,” “will,” “could,” “should,” “would,” “assuming,” “depend” and similar expressions are intended to identify forward-looking statements. Stockholders are cautioned that any forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including in our most recent filings on Forms 10-K and 10-Q, factors and matters described or incorporated by reference in this proxy statement, and the following factors:

 

   

the inability to complete the Merger due to the failure to obtain stockholder approval or failure to satisfy the other conditions to the completion of the Merger, including, but not limited to, receipt of required regulatory approvals;

 

   

the risk that the Merger Agreement may be terminated in certain circumstances that require us to pay Parent a termination fee of either $29,326,500 or $63,540,750;

 

   

the outcome of any legal proceedings that may be instituted against us and others related to the Merger Agreement;

 

   

risks that the proposed Merger disrupts our current operations or affects our ability to retain or recruit key employees;

 

   

the fact that receipt of the all-cash Per Share Merger Consideration would be taxable to Instructure stockholders that are treated as U.S. Holders (as defined under the caption “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) for U.S. federal income tax purposes;

 

   

the fact that, if the Merger is completed, stockholders will forgo the opportunity to realize the potential long-term value of the successful execution of Instructure’s current strategy as an independent public company;

 

   

the fact that under the terms of the Merger Agreement, Instructure is unable to solicit other Acquisition Proposals after the No Shop Period Start Date;

 

   

the effect of the announcement or pendency of the Merger on our business relationships, operating results and business generally;

 

   

the amount of the costs, fees, expenses and charges related to the Merger Agreement or the Merger;

 

   

risks related to the Merger diverting management’s or employees’ attention from ongoing business operations;

 

   

risks that our stock price may decline significantly if the Merger is not completed; and

 

   

risks related to obtaining the requisite consents to the Merger, including the timing and receipt of regulatory approvals from various governmental entities, including any conditions, limitations or restrictions placed on these approvals, and the risk that one or more governmental entities may deny approval.

Consequently, all of the forward-looking statements that we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including: (1) the information contained under this

 

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caption; and (2) the information contained under the caption “Risk Factors,” and information in our consolidated financial statements and notes thereto included in our most recent filings on Forms 10-K and 10-Q. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

Except as required by applicable law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any future disclosures that we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.

Date, Time and Place

We will hold the Special Meeting on [●], 2020, at Instructure’s principal offices, located at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, at [●], Mountain Time.

Purpose of the Special Meeting

At the Special Meeting, we will ask stockholders to vote on proposals to: (1) adopt the Merger Agreement; (2) approve, on an advisory (non-binding) basis, the Compensation Proposal; and (3) adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Record Date; Shares Entitled to Vote; Quorum

Only stockholders of record as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A list of stockholders entitled to vote at the Special Meeting will be available at our principal executive offices located at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, during regular business hours for a period of no less than 10 days before the Special Meeting and at the place of the Special Meeting during the meeting.

As of the Record Date, there were [●] shares of Instructure common stock outstanding and entitled to vote at the Special Meeting.

The holders of a majority of the stock issued and outstanding and entitled to vote there at, present in person, by remote communication or represented by proxy, will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the holders of a majority of the outstanding shares of Instructure common stock is required to adopt the Merger Agreement. As of the Record Date, [●] votes constitute a majority of the outstanding shares of Instructure common stock. Adoption of the Merger Agreement by stockholders is a condition to the closing of the Merger.

The affirmative vote of the holders of a majority of the shares present in person, by remote communication or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required to approve, on an advisory (non-binding) basis, the Compensation Proposal.

Approval of the proposal to adjourn the Special Meeting, whether or not a quorum is present, requires the affirmative vote of a majority of the shares present in person, by remote communication or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement and “AGAINST” the proposal to approve, on an advisory (non-binding) basis, the Compensation Proposal. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted “AGAINST” any proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

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Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Instructure does not expect any broker non-votes at the Instructure special meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas each of the proposals to be presented at the Instructure special meeting is considered non-routine. As a result, no broker will be permitted to vote your shares of Instructure common stock at the Instructure special meeting without receiving instructions. Failure to instruct your broker on how to vote your shares will have the same effect as a vote “against” the proposal to adopt the Merger Agreement.

Shares Held by Instructure’s Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [●] shares of Instructure common stock, representing approximately [●]% of the shares of Instructure common stock outstanding on the Record Date (and approximately [●]% of the total shares of Instructure common stock outstanding when taking into account Company Options and Company RSU Awards held, in the aggregate, by our directors and executive officers).

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of Instructure common stock (1) “FOR” the adoption of the Merger Agreement, (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal, and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Voting of Proxies

If your shares are registered in your name with our transfer agent, Computershare, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card available and follow the instructions on the proxy card in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you plan to attend the Special Meeting and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any previously submitted proxy.

Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

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If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will not have any effect on the Compensation Proposal or the adjournment proposal.

Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

   

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

   

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to our Corporate Secretary; or

 

   

attending the Special Meeting and voting in person by ballot.

If you have submitted a proxy, your appearance at the Special Meeting will not have the effect of revoking your prior proxy; provided that you do not vote in person or submit an additional proxy or revocation, which, in each case, will have the effect of revoking your proxy.

If you hold your shares of Instructure common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.

Board of Directors’ Recommendation

The Board of Directors has unanimously: (1) determined that it is in the best interests of Instructure and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (2) approved the execution and delivery of the Merger Agreement by Instructure, the performance by Instructure of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (3) resolved to recommend that Instructure stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL.

The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Solicitation of Proxies

The expense of soliciting proxies will be borne by Instructure. We have retained MacKenzie Partners, Inc. (“MacKenzie”), a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of

 

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approximately $18,500 plus expenses. We will also indemnify MacKenzie against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the first calendar quarter of 2020.

Appraisal Rights

If the Merger is consummated, stockholders who continuously hold shares of Instructure common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Instructure common stock who perfect their appraisal rights, who do not thereafter withdraw their demand for appraisal, and who follow the procedures in the manner prescribed by Section 262 of the DGCL may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Instructure common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be fair value, if any, (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to review Section 262 of the DGCL carefully and to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares.

To exercise your appraisal rights, you must: (1) submit a written demand for appraisal to Instructure before the vote is taken on the adoption of the Merger Agreement; (2) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (3) continue to hold your shares of Instructure common stock of record through the Effective Time; and (4) strictly comply with all other procedures for exercising appraisal rights under Section 262 of the DGCL. Your failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the Merger unless certain stock ownership conditions are satisfied by the stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced and attached as Annex C to this proxy statement and incorporated herein by reference. If you hold your shares of Instructure common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.

 

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Delisting and Deregistration of Instructure common stock

If the Merger is completed, the shares of Instructure common stock will be delisted from NYSE and deregistered under the Exchange Act, and shares of Instructure common stock will no longer be publicly traded.

Other Matters

At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of Instructure common stock will be voted in accordance with the discretion of the appointed proxy holders.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [], 2020

The proxy statement is available at https://ir.instructure.com/overview/default.aspx and clicking on the link titled “SEC Filings”.

Householding of Special Meeting Materials

Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.

If you would like to receive your own set of our disclosure documents this year or in future years, please contact us using the instructions set forth below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.

If you are a stockholder of record, you may contact us by writing to Instructure at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

Questions and Additional Information

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Instructure common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

(212) 929-5500 (Call Collect)

Call Toll-free: (800) 322-2885

proxy@mackenziepartners.com

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.

Parties Involved in the Merger

Instructure, Inc.

6330 South 3000 East, Suite 700

Salt Lake City, Utah 84121

(800) 203-6755

Headquartered in Salt Lake City, Utah, Instructure is a leading software-as-a-service technology company that provides learning management system software to the global education market and employee development and engagement solutions for people-focused companies via its Bridge platform. Instructure’s software solutions enable organizations to develop, deliver and manage engaging face-to-face and online learning experiences. Instructure common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “INST.”

PIV Purchaser, LLC

c/o Thoma Bravo, LLC

600 Montgomery Street, 20th Floor

San Francisco, CA 94111

(415) 263-3660

Parent was formed on November 26, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.

PIV Merger Sub, Inc.

c/o Thoma Bravo, LLC

600 Montgomery Street, 20th Floor

San Francisco, CA 94111

(415) 263-3660

Merger Sub is a wholly owned subsidiary of Parent and was formed on November 26, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.

Parent and Merger Sub are each affiliated with Thoma Bravo Fund XIII, L.P. (the “Thoma Bravo Fund”), and Parent, Merger Sub and the Thoma Bravo Fund are each affiliated with Thoma Bravo, LLC (“Thoma Bravo”). Thoma Bravo is a leading private equity investment firm focused on the software and technology-enabled services sectors. At the Effective Time, Instructure, as the Surviving Corporation, will be indirectly owned by the Thoma Bravo Fund, Thoma Bravo Fund XIII-A, L.P. and Thoma Bravo Executive Fund XIII, L.P., each an affiliate of Thoma Bravo.

In connection with the transactions contemplated by the Merger Agreement, the Thoma Bravo Fund has provided Parent with an equity commitment sufficient to fund the aggregate purchase price required to be paid at the

 

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closing of the Merger, and to also fund, together with cash on hand at Instructure, the repayment and refinancing of the indebtedness of the Instructure Group under the Credit Facility and all other fees and expenses to be paid at the closing of the Merger by Instructure, Parent or Merger Sub, contemplated by, and subject to the terms and conditions of, the Merger Agreement. For more information, please see the section of this proxy statement captioned “ —Financing of the Merger.”

Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Instructure and the separate corporate existence of Merger Sub will cease, with Instructure continuing as the Surviving Corporation. As a result of the Merger, Instructure will become a wholly owned subsidiary of Parent, and Instructure common stock will no longer be publicly traded and will be delisted from NYSE. In addition, Instructure common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).

Effect on Instructure if the Merger is Not Completed

If the Merger Agreement is not adopted by stockholders, or if the Merger is not completed for any other reason:

 

  i.

the stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Instructure common stock pursuant to the Merger Agreement;

 

  ii.

(a) Instructure will remain an independent public company; (b) Instructure common stock will continue to be listed and traded on NYSE and registered under the Exchange Act; and (c) Instructure will continue to file periodic reports with the SEC;

 

  iii.

we anticipate that (a) management will operate the business in a manner similar to that in which it is being operated today and (b) stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect to Instructure’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which Instructure operates and economic conditions;

 

  iv.

the price of Instructure common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of Instructure common stock would return to the price at which it trades as of the date of this proxy statement;

 

  v.

the Board of Directors will continue to evaluate and review Instructure’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that Instructure’s business, prospects and results of operations will be adversely impacted; and

 

  vi.

under specified circumstances, Instructure will be required to pay Parent a termination fee of either $63,540,750 or $29,326,500, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Merger Consideration

At the Effective Time, each share of Instructure common stock (other than Excluded Shares, which include, for example, shares of Instructure common stock owned by stockholders who have properly and validly exercised

 

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their statutory rights of appraisal in accordance with Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the Per Share Merger Consideration, less any applicable withholding taxes.

After the Merger is completed, you will have the right to receive the Per Share Merger Consideration in respect of each share of Instructure common stock that you own (less any applicable withholding taxes), but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights will have a right to receive payment of the “fair value” of their shares as determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “ —Appraisal Rights.”

Background of the Merger

The Board of Directors, with Instructure senior management and outside advisors, regularly and in the ordinary course of business, reviews and assesses Instructure’s long-term strategy, financial performance and operations in light of developments in Instructure’s business and overall developments in the industry in which it operates, taking into account the overall performance of the market and the software and education industries generally. As part of this ongoing review and assessment, the Board of Directors considers various alternatives to Instructure’s long-term strategy, including alternatives involving the continuation of Instructure’s long-term business plan, possible strategic acquisitions to expand the markets that Instructure serves or increase the service offerings in its existing markets and possible strategic transactions with third parties, and regularly engages with its stockholders to discuss and to solicit feedback on their views and perspectives of Instructure’s long-term business plan, strategic opportunities and value.

From time to time, representatives of Instructure, including senior management and members of the Board of Directors, have had discussions with market participants, including financial sponsors and strategic parties, regarding potential strategic transactions at the direction of the Board of Directors in order to understand market developments and how these developments may affect its long-term strategy. Before 2019, none of these discussions progressed beyond preliminary discussions or the exploratory stage with respect to a sale of Instructure, nor did Instructure share confidential information with such parties regarding its business and operations, nor did any such party enter into a confidentially agreement.

On January 8, 2019, a financial sponsor (“Sponsor A”) requested a meeting with Joshua Coates, the Executive Chairman of Instructure. In response to Sponsor A’s inbound inquiry, Mr. Coates had a call with Sponsor A that same day during which Sponsor A expressed an interest in acquiring Instructure for $53.00 to $55.00 per share. On the same day, the Board of Directors held a meeting to discuss Sponsor A’s expression of interest.

On January 9, 2019, Sponsor A sent Mr. Coates a preliminary, non-binding, written proposal to acquire Instructure for $53.00 to $55.00 per share, assuming a fully diluted share count of approximately 37.67 million shares of Instructure common stock. Later that day, Mr. Coates shared such proposal with the Board of Directors.

On January 16, 2019, a representative of Thoma Bravo emailed Dan Goldsmith, Instructure’s Chief Executive Officer, to share that Thoma Bravo had been following Instructure and to congratulate Mr. Goldsmith on his recent appointment as CEO of Instructure. Mr. Goldsmith shared such contact with the Board of Directors that same day.

Between January 16, 2019 and January 19, 2019, in response to the in-bound expression of interest from Sponsor A and, based on the general discussions that Instructure had with other parties, from time to time, members of Instructure senior management and members of the Board of Directors, including Mr. Coates and Kevin Thompson, met with five potential financial advisors, including J.P. Morgan, as recommended by the Board of Directors. The financial advisors were invited to provide an overall market assessment, analysis of potential participants in any potential strategic process and viewpoints on the likelihood and benefits of a strategic

 

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transaction, and were also asked to disclose any potential conflicts of interest related to Sponsor A and other potential logical process participants. Members of Instructure senior management and the members of the Board of Directors participating in such appointment process, asked pertinent questions regarding the qualifications of each of the potential financial advisors and considered the relative qualifications of the potential financial advisors with respect to each advisor’s reputation in the marketplace and experience with strategic transactions involving the software and education industries. In light of these considerations, its reputation in the marketplace, its experience in negotiating similar strategic transactions and its familiarity with the software and education industries, the Board of Directors determined that J.P. Morgan should serve as its exclusive financial advisor in connection with any potential strategic transaction, subject to the review of engagement letter terms from J.P. Morgan.

On January 20, 2019, the Board of Directors reviewed the proposed final terms of engagement with J.P. Morgan, and formally approved the engagement of J.P. Morgan as Instructure’s financial advisor via unanimous written consent.

On January 21, 2019, Sponsor A visited Instructure’s headquarters and met with members of Instructure senior management to discuss Instructure’s business model and strategy, and Instructure provided Sponsor A with preliminary due diligence information about its business. On that same day, at the direction of the Board of Directors, members of Instructure senior management met with J.P. Morgan to discuss the proposal by Sponsor A.

On January 22, 2019, the Board of Directors held a telephonic meeting with members of Instructure senior management, representatives of J.P. Morgan and representatives of Cooley LLP (“Cooley”), Instructure’s general outside legal counsel who from time to time has advised Instructure on a number of matters, including preceding its initial public offering. Representatives of Cooley advised the Board of Directors and members of Instructure senior management with respect to fiduciary duties attendant to addressing inbound inquiries and any strategic transaction process, should such activity materialize. Representatives of Cooley met separately with the Board of Directors in executive session (without members of Instructure senior management) to discuss the proposal by Sponsor A. The Board of Directors then discussed the utilization of a strategic transaction committee (the “Advisory Committee”), in order to ensure that the Board of Directors’ could appropriately evaluate, oversee and manage a strategic transaction process if one resulted specifically from the interest of Sponsor A. At the conclusion of this discussion, the Board of Directors established the Advisory Committee and designated Mr. Coates and William M. Conroy as members of the Advisory Committee due to their experience with strategic transactions, existing roles on the Board of Directors, and willingness to serve on the Advisory Committee. The Board of Directors delegated to the Advisory Committee the authority to evaluate and make recommendations to the Board of Directors regarding any indications of interest, to review, and to advise and oversee Instructure senior management in the review and negotiation of any strategic alternatives, noting that such utilization was for convenience only and not to address any conflicts of interest. In addition, the Board of Directors authorized Instructure senior management to continue having discussions with Sponsor A to explore Sponsor A’s interest in pursuing a strategic transaction with Instructure.

On January 24, 2019, a financial sponsor (“Sponsor B”) requested that a member of the Board of Directors introduce Sponsor B to the management team of Instructure.

On January 26, 2019, Sponsor A provided an updated non-binding, written proposal to acquire Instructure for $49.00 to $51.00 per share, assuming a fully diluted share count of approximately 37.67 million shares of Instructure common stock.

On January 29, 2019, Instructure and Sponsor A entered into a confidentiality agreement to enable further due diligence discussions with respect to Sponsor A’s proposal. The confidentiality agreement contained standstill provisions, including a provision prohibiting Sponsor A from, publicly or privately, requesting a waiver of the standstill (however, the standstill provision still allowed Sponsor A to privately and confidentially approach

 

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Instructure senior management, the Board of Directors or J.P. Morgan at any time to make acquisition proposals). In addition, all of the other confidentiality agreements with potential transaction counterparties referred to in this section of the proxy statement contained standstill provisions with such terms.

On January 30, 2019, the Board of Directors held a telephonic meeting with members of Instructure senior management, representatives of J.P. Morgan and representatives of Cooley to discuss the proposal by Sponsor A and the recommendation of the Advisory Committee that such proposal was not a sufficiently compelling offer to cause Instructure to depart from its strategic plan and was unlikely to be consummated at the proposed price, because of the incomplete state of its diligence, the fact that Sponsor A had reduced its proposal from $53.00-$55.00 per share to $49.00-$51.00 per share, and Sponsor A had requested a twenty-five day period of exclusivity without confirming the exact price of its offer and its ability to complete due diligence and consummate a transaction in that time frame, highlighting, in the Advisory Committee’s view, the uncertain nature of the proposal and the possibility of further adverse changes to the proposal, during the requested exclusivity period. Representatives of J.P. Morgan and Cooley reviewed the proposal by Sponsor A and the status of discussions to date. Members of the Board of Directors engaged in active discussion regarding the proposal by Sponsor A, including whether such transaction would be in the best interests of the stockholders of Instructure; the merits and risks of soliciting proposals from third parties regarding a strategic transaction; and how the timing of a strategic transaction would fit within Instructure’s long-term strategy. Following such discussion, the Board of Directors also concluded that it would not move forward with Sponsor A’s proposal or contact any additional financial sponsors regarding a potential strategic transaction at such time, and disbanded the Advisory Committee. The Board of Directors also discussed certain guidelines that should be followed if Instructure received further inbound interest from any person, including Sponsor A or Sponsor B. In this regard, the Board of Directors determined that members of the Board of Directors or management who are contacted by an interested party should inform them that Instructure was not actively pursuing a strategic transaction at such time but that it remained open to having a dialogue. Moreover, if an interested party wanted to pursue a dialogue, the Board of Directors also directed management to have such person enter into a customary confidentiality agreement for a transaction to the extent management determined such course of action was advisable. Following the meeting, at the direction of the Board of Directors, J.P. Morgan advised Sponsor A that Instructure would not be moving forward with a strategic transaction with Sponsor A at such time.

On January 31, 2019, Sponsor B contacted Mr. Goldsmith to express interest in exploring a strategic transaction. Further to the instructions of the Board of Directors regarding how communications with respect to third parties that expressed an interest in a potential strategic transaction should be conducted, Mr. Goldsmith informed Sponsor B that Instructure would be open to continuing a dialogue, but that Instructure was not actively pursuing a strategic transaction at such time. Such message was also conveyed to the other potential transaction counterparties mentioned below that contacted Instructure prior to the formation of the Transaction Committee.

On April 11, 2019, representatives of a new financial sponsor (“Sponsor C”) reached out to Mr. Goldsmith for a preliminary call and to express interest in learning more about Instructure’s strategic plan and its positioning in the higher education market. Mr. Goldsmith subsequently reported this communication to the Board of Directors and, at the direction of the Board of Directors, had such preliminary discussion with Sponsor C that same day.

On April 15, 2019, Praesidium Investment Management Co LLC (“Praesidium”) filed a Schedule 13D disclosing a 5.0% ownership interest in Instructure common stock and that Praesidium intended to engage in discussions with Instructure concerning potential business combinations and dispositions involving Instructure or certain of its businesses. Members of the Board of Directors, including Mr. Coates and Lloyd G. Waterhouse, engaged in a dialogue with Praesidium regarding its views of Instructure, and discussed their communications with Praesidium and considerations with respect to how Instructure would proactively communicate with its stockholders. Consistent with Instructure’s regular engagement with its stockholders, from time to time after April 15,

 

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Instructure engaged in discussions and other communications with Praesidium about Praesidium’s views of Instructure’s strategic opportunities and value.

On April 16, 2019, at the request of a new financial sponsor (“Sponsor D”), a member of the Board of Directors provided a representative of Sponsor D with an introduction to Mr. Goldsmith via email, and Mr. Goldsmith subsequently had a preliminary discussion with such representative of Sponsor D. Mr. Goldsmith subsequently reported this discussion to the Board of Directors that same day.

On June 12, 2019, Mr. Goldsmith received a call from a representative of Thoma Bravo to discuss Thoma Bravo’s interest in pursuing a strategic transaction with Instructure. Mr. Goldsmith subsequently reported this discussion to the Board of Directors that same day.

On June 18, 2019, Instructure entered into a confidentiality agreement with Thoma Bravo.

On June 24, 2019, representatives of Sponsor C contacted Mr. Goldsmith to reiterate their interest in Instructure.

On June 25, 2019, each of Sponsor B, Sponsor C and a new financial sponsor who was introduced by a member of the Board of Directors (“Sponsor E”) entered into a confidentiality agreement with Instructure. On that same day, Mr. Goldsmith provided an update to the Board of Directors regarding the interest of potential counterparties.

During the next several weeks, at the direction of the Board of Directors, Mr. Goldsmith and members of Instructure senior management engaged in calls and discussions with each of Sponsor C, Thoma Bravo and Sponsor E regarding the interests of such parties in pursuing a strategic transaction with Instructure and the initial due diligence inquiries of such parties.

On July 17, 2019, the Board of Directors held a telephonic meeting with representatives of J.P. Morgan. The Board of Directors then discussed establishing a strategic actions committee (the “Strategic Actions Committee”), in order to evaluate Instructure’s business model and strategic options, including: the capital requirements of Instructure; the operations of the Bridge segment and possible changes to increase its profitability and/or effect the separation of such segment; acquisitions of other businesses; extending and building commercial relationships with other parties in the education market; possible mergers of combinations with other businesses; leveraged recapitalization transactions; private placements of debt or equity securities, including to finance possible acquisitions; acceleration of the growth and scope of the education segment; the possible sale of Instructure; and certain other potential cost-savings initiatives. Following extensive discussion by the Board of Directors about these potential courses of action, the Board of Directors determined to evaluate such opportunities further by establishing the Strategic Actions Committee and designated Mr. Goldsmith, Mr. Thompson and Mr. Waterhouse as members of the Strategic Actions Committee due to their experience with strategic transactions, existing roles on the Board of Directors, and willingness to serve on the Strategic Actions Committee. In designating the members of the Strategic Actions Committee, the Board of Directors considered Mr. Goldsmith’s role as Chief Executive Officer of Instructure and his integral role in developing and executing Instructure’s long term strategy; Mr. Waterhouse’s role as an independent director, his prior service as the Chief Executive Officer of McGraw-Hill Education from 2012 to 2014, and his unique perspective in the educational space; and Mr. Thompson’s role as an independent director and his role as the Chief Executive Officer of SolarWinds Inc., a public company that had been taken private by Silver Lake Partners and Thoma Bravo in 2016, and his experience in negotiating merger and acquisition transactions. The Board of Directors delegated to the Strategic Actions Committee the authority to evaluate and make recommendations to the Board of Directors regarding the development of any strategic initiatives or proposals, to review, and to advise and oversee Instructure senior management in the review and negotiation of any strategic alternatives, noting that such utilization was for convenience only and not to address any conflicts of interest. In addition, the Board of Directors instructed the Strategic Actions Committee to continue discussions with financial sponsors, with an objective of building relationships with such parties and to understand how such parties viewed Instructure and its model, and not with any specific aim or objective of pursuing a strategic transaction. The Board of Directors further directed Matthew Kaminer, the Chief Legal Officer and Secretary of Instructure, to maintain a log of all

 

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communications with parties that contacted Instructure in connection with a strategic transaction, and to make such log available to the Board of Directors and its advisors. The Board of Directors instructed the Strategic Actions Committee to consider all alternatives available to Instructure in order to maximize value for stockholders.

On July 24, 2019, the Strategic Actions Committee held a telephonic meeting with Instructure senior management and reviewed the various meetings requested by Sponsor B, Sponsor C, Sponsor E and Thoma Bravo, and directed Instructure senior management to engage in further discussions with these parties to more fully gauge the interests and commitment of each party with respect to a possible strategic transaction, including by re-initiating a dialogue with Sponsor A, and to report back to the Strategic Actions Committee such parties’ interests in a potential transaction. During August 2019, Mr. Goldsmith, Steve Kaminsky, Chief Financial Officer of Instructure, and Mr. Kaminer had calls and/or meetings with representatives of each Sponsor A, Sponsor B, Sponsor C, Sponsor E and Thoma Bravo, during which Instructure senior management provided an update regarding Instructure’s business. In addition to the discussions regarding the financial sponsors, the Strategic Actions Committee also discussed other potential opportunities, including a potential private investment to fund potential transactions, potential merger and acquisitions targets and potential strategic transactions involving Bridge.

On August 26, 2019, Sponsor D entered into a confidentiality agreement with Instructure.

On September 4, 2019, the Strategic Actions Committee had a telephonic meeting, and Mr. Goldsmith provided an update regarding its discussions with the representatives of the financial sponsors who had expressed an interest in pursuing a strategic transaction. The Strategic Actions Committee directed Instructure senior management to continue to engage in preliminary discussions with financial sponsors. At this meeting, the Strategic Actions Committee also continued its ongoing review and evaluation of other strategic alternatives.

Over the next several weeks, Instructure senior management met with representatives of Sponsor D and Sponsor E to address their respective diligence inquiries and Instructure’s financial performance and plan.

On September 23, 2019, the Board of Directors met in person, together with members of Instructure senior management and representatives of J.P. Morgan and Cooley, to review business strategy, messaging and approach with respect to the third quarter earnings call scheduled to take place on October 28, 2019, market messaging and approach and a financial plan update. At this meeting, the Board assessed the current performance of Instructure, the financial forecast and strategic plans, the possibility of additional acquisitions and divestiture of the Bridge business. In connection with the discussion of the current performance of Instructure, the Board of Directors considered Instructure’s internal operating plan and long-term financial plan, as presented by members of Instructure senior management, and the considerations related thereto. The Board of Directors directed Instructure senior management to share selected portions of the financial plan and strategy at an analyst day meeting with analysts and investors in early December, to further explain the evolution of Instructure’s model which would focus on the education space. At the direction of the Board of Directors, Mr. Waterhouse provided an update on communications with stockholders who sought to provide their views concerning Instructure’s strategic plans, governance and capital structure. Mr. Waterhouse informed the Board of Directors that the stockholder outreach effort included a significant stockholder that entered into a customary non-disclosure agreement, as Instructure sought to understand a fully informed perspective of stockholder who had the benefit of reviewing the plans and strategy of Instructure. Mr. Goldsmith provided details on the financial performance of Bridge; the position of Bridge within the employment development category and what would need to happen for Bridge to be successful moving forward. The Board of Directors then solicited the views of Mr. Goldsmith and members of Instructure senior management to better understand the challenges of separating the Bridge business, to provide additional context regarding when and how the Bridge business could operate as a standalone business and the timing and capital investments that would be required to facilitate such a separation. Following such presentations, the Board of Directors discussed the timeline for Instructure to achieve profitability, an education focused strategy, cost-realignment plans, and changes that would need to be implemented for Instructure to

 

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achieve status as a “Rule of 40” software company with a combined growth rate and profit margin of at least 40%. Despite the execution risk of successfully implementing these plans while reporting financial performance and providing earnings guidance on a quarterly basis, the Board of Directors expressed a preference for Instructure to remain a public company, absent a compelling proposal.

On that same day, Mr. Goldsmith and a representative of Sponsor D had a call during which Sponsor D expressed interest in making a private investment in Instructure. Mr. Goldsmith subsequently shared such contact with the Board of Directors that same day. Instructure senior management and representatives of Sponsor D discussed such possible investment and the due diligence inquiries of Sponsor D over the course of the next week.

On September 30, 2019 and October 1, 2019, Mr. Goldsmith provided updates to the financial sponsors who had expressed interest in an ongoing dialogue regarding Instructure’s business. During this same time period, Instructure provided due diligence materials to Thoma Bravo, Sponsor C and Sponsor D in connection with such financial sponsors’ due diligence investigations.

On October 3, 2019, the Strategic Actions Committee, Mr. Coates and members of Instructure senior management met to discuss various options available to Instructure to enhance stockholder value. These considerations included Instructure’s continued operation as a standalone company, the proposal of Sponsor D for a private investment transaction which could finance further acquisitions and/or other initiatives identified by Sponsor D, a review of discussions to date with the other financial sponsors, and potential strategic transactions involving Bridge. During the course of the discussions involving Bridge, senior management provided the feedback that they had received from J.P. Morgan and other potential financial advisors regarding the receptiveness of financial sponsors and strategic parties to a transaction involving Bridge. In addition, during the course of these discussions, the Strategic Actions Committee considered whether to run a public process for the sale of Instructure. In order to assist the Strategic Actions Committee with that determination, the Strategic Actions Committee determined to conduct a limited market check with potentially interested parties. However, in order to allow Instructure’s management to focus on operating the business without undue interference and distraction from a process, the Strategic Actions Committee carefully considered whom it should contact. After identifying the list of counterparties to contact, which included the financial sponsors that had entered into a confidentiality agreement, the Strategic Actions Committee authorized senior management to engage in such discussions. The Strategic Actions Committee acknowledged that if such market check provided bona fide, actionable indications of interest and the Board of Directors decided to formally pursue strategic alternatives, then a broader process could be conducted in order to maximize stockholder value.

On October 18, 2019, Mr. Goldsmith and Mr. Kaminer had calls with representatives of Thoma Bravo and Sponsor C, during which Mr. Goldsmith provided Thoma Bravo and Sponsor C with an update regarding Instructure’s business.

On October 22, 2019, the Board of Directors held a meeting with members of Instructure senior management to review Instructure’s operating model, execution of its financial plan and any strategic proposals received to date. At the outset of the meeting, the Board of Directors met in executive session without management to discuss if the Board of Directors should disband the Strategic Actions Committee, which had been tasked with considering and evaluating a broad range of strategic alternatives and form a committee with a focus on evaluating the potential for a strategic transaction. The Board of Directors discussed the potential strategic alternatives available to it, including, based on the evaluations of the Strategic Actions Committee and feedback and information it had from stockholders and potentially interested parties over the course of the year. Based on the Board of Directors’ belief that exploring a potential strategic acquisition of Instructure would be in the best of interests of stockholders—including as a result of the risks identified in the section entitled “The Merger—Reasons for the Merger—More Attractive Value than Alternatives”—the Board of Directors decided to establish a strategic transaction committee (the “Transaction Committee”) and disband the Strategic Actions Committee. The Board of Directors then turned to the composition of the Transaction Committee. The Board of Directors reached the consensus that it would be important, for a variety of reasons, including the distraction that could result from senior management’s time being spent evaluating potential transactions and the desire to keep interested parties

 

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from discussing terms of employment with such persons, for the Transaction Committee to have only non-executive directors serve on it. The Board of Directors also considered whether Mr. Waterhouse, the lead independent director of Instructure, should serve on the Transaction Committee. In this regard, the Board of Directors noted the importance of Mr. Waterhouse’s on-going regular communications with Instructure’s stockholders and did not want his service on the Transaction Committee to impede his ability to continue to engage in those communications. Accordingly, the Board of Directors requested that Mr. Waterhouse participate, on a non-member basis, in the activities of the Transaction Committee and provide feedback to the Transaction Committee with respect to matters considered by the committee on a regular and as-needed basis. Following these and other discussions about the composition of the Transaction Committee, the Board of Directors designated Mr. Coates and Mr. Thompson as members of the Transaction Committee due to their experience with strategic transactions, existing roles on the Board of Directors, knowledge of Instructure’s business and financial position and willingness to serve on the Transaction Committee. In addition, the Board of Directors delegated to the Transaction Committee the authority to evaluate and make recommendations to the Board of Directors regarding the development of any indications of interest, to review, and to advise and oversee Instructure senior management in the review and negotiation of any strategic transactions, subject to the review and consideration of any such strategic transaction by the entire Board of Directors. The Board of Directors further noted that such committee was established and would be utilized to ensure that such strategic transaction process would be run as efficiently as practicable and in a manner that, consistent with the fiduciary duties of the Board of Directors, would maximize stockholder value and not to address any conflicts of interest. In particular, the Board of Directors determined that the strategic transaction process would include all parties that previously expressed interest in a strategic transaction during the past twelve months and strategic parties, regardless of the positioning of such parties with respect to any particular business strategy, management construct or commercial posture, and further emphasized that strategic parties be afforded sufficient time to submit credible proposals. After management joined the meeting, the Board of Directors instructed Instructure management that negotiations with parties interested in the strategic process, including matters as to process and price, would be conducted by the Transaction Committee and the company’s advisors, and further instructed the management team to limit their conversations with such parties to due diligence matters and not to have any discussions or enter into any arrangements with respect to employment matters with any parties involved in the strategic process.

On October 23, 2019, the Transaction Committee met with Mr. Kaminer and representatives of J.P. Morgan and Cooley, and reviewed potential participants deemed most likely to actively participate in any strategic discussion, including both strategic parties and financial sponsors. With the assistance of representatives of J.P. Morgan, the Transaction Committee considered various approaches to the process. Cooley advised the Transaction Committee with respect to the fiduciary duties of the Board of Directors in connection with such activities. J.P. Morgan also provided an overview of a potential timeline and strategic process outline if the Board of Directors decided to move forward with strategic discussions with these or other parties. The Board of Directors, in consultation with J.P. Morgan, segmented such parties into tiers based on, among other relevant factors (i) strategic rationale for a transaction, (ii) historical interest in Instructure, (iii) ability and track record of financing similarly sized transactions and (iv) track record of acquiring software as a service or education technology companies, in order to sequence engagement with such parties and implement a process that would maximize value for stockholders. The Transaction Committee concluded that it was an appropriate time to engage with the parties who were viewed as “tier 1” parties which included the seven financial sponsors that had expressed interest in a strategic transaction with Instructure to date and an additional four strategic parties. The Transaction Committee instructed J.P. Morgan to promptly contact such parties.

Over the next several days, at the direction of the Board of Directors, J.P. Morgan made outbound inquiries to the eleven parties who were viewed as “tier 1” parties, including Sponsor A, Sponsor B, Sponsor C, Sponsor D, Sponsor E, Thoma Bravo, a financial sponsor that had indicated an interest in a possible strategic transaction with Instructure in 2018 (“Sponsor F”), a strategic party who had an existing commercial relationship with Instructure (“Industry Participant G”), a strategic party that had been engaged in on-going discussions with Instructure regarding commercial arrangements, including a possible partnership arrangement

 

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(“Industry Participant H”), and two new strategic parties (“Industry Participant I”) and (“Industry Participant J”). At the direction of the Transaction Committee, J.P. Morgan requested that the seven financial sponsors that had been involved in the process to date provide an indication of interest prior to the previously scheduled November 1, 2019 meeting of the Board of Directors, including an indicative price for a strategic transaction. In its communications with the strategic parties, the Transaction Committee directed J.P. Morgan to request such parties provide feedback regarding their level of interest as promptly as possible, given their internal processes, without setting any specific time restraints, and further indicated to such strategic parties that if there was bona fide interest, then such party would be provided with an appropriate amount of time to submit a proposal. Starting on October 24, 2019, Instructure senior management provided each of the “tier 1” parties who had executed a confidentiality agreement with more detail confidential information about Instructure’s business and financial performance, and then subsequently provided such materials to Industry Participant H on October 26, 2019.

During the course of October 25, 2019 and October 26, 2019, Mr. Goldsmith, Mr. Kaminer and Mr. Kaminsky and representatives of J.P. Morgan had due diligence calls with representatives of each of Sponsor A, Sponsor C, Sponsor D, Sponsor E and Thoma Bravo.

On October 28, 2019, Instructure conducted its previously scheduled third quarter earnings call. During this call, Mr. Goldsmith provided an update regarding the performance of the Canvas education segment, a shift in approach on stock based compensation to limit overall share growth count, and the decision to consolidate the focus of Instructure within the education space and to reorganize and operate Bridge independently from the education business. Mr. Goldsmith further notified stockholders that Instructure planned to provide details on its strategic plan during the analyst day planned for December 3, 2019, including a number of value creation initiatives, financial status and goals with clear milestones and target dates specifically focused on profitability and growth for Canvas, Bridge and Instructure overall. As is customary for a public company, no comments were made in respect of any specific potential strategic transaction during the course of the earnings call.

Later that same day, Mr. Goldsmith had separate calls with a representative of each of Sponsor A, Sponsor C, Sponsor D, Industry Participant H and Thoma Bravo, and updated each such representative on the announcement on the earnings call that Mr. Kaminsky would retire in 2020 after nearly eight years of service.

On that same day, J.P. Morgan received an inbound inquiry from a new financial sponsor (“Sponsor K”).

On October 29, 2019, Sponsor F entered into a confidentiality agreement with Instructure and representatives of J.P. Morgan had discussions with Industry Participant H about a potential strategic transaction with the Company. On the same day, the Transaction Committee met with Mr. Goldsmith, Mr. Kaminer and representatives of J.P. Morgan and Cooley to discuss the status of the various participants in the strategic process and the information that had been provided to each such participant.

On October 30, 2019, Instructure senior management had follow-up meetings with representatives of Sponsor A, Sponsor C and Industry Participant H to discuss due diligence and the third quarter earnings conference call that occurred on October 28, 2019. On the same day, representatives of J.P. Morgan also had a further discussion with Industry Participant H regarding its due diligence investigation of Instructure.

On October 31, 2019, Industry Participant H entered into a confidentiality agreement with Instructure. Later that day, (i) Sponsor B and Sponsor D informed representatives of Instructure that they had determined not to submit a written proposal, (ii) Thoma Bravo submitted a proposal to acquire Instructure for $50.00 per share, (iii) Sponsor E submitted a proposal to acquire Instructure in the range of $48.00 to $51.50 per share, (iv) Sponsor C submitted a proposal to acquire Instructure in the range of $49.00 to $51.00 per share, (v) Sponsor A submitted a proposal to acquire Instructure in the range of $45.00 to $47.00 per share, and (vi) Industry Participant H had verbally expressed potential interest in a strategic transaction with Instructure but did not submit a proposal. On the same day, the Transaction Committee met to review and assess the written proposals

 

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received to date with Mr. Kaminer and representatives of J.P. Morgan and Cooley. Representatives of J.P. Morgan discussed the terms of the proposal with the Transaction Committee. The Transaction Committee further discussed the potential timeline for soliciting final bids and executing definitive documentation, taking into account that each of Thoma Bravo, Sponsor A, Sponsor C and Sponsor E had indicated in their respective indication of interest letters that such party was prepared to promptly enter into definitive documentation with respect to the strategic transaction. The Transaction Committee instructed J.P. Morgan to discuss a timeline with each of the parties culminating in final bids and signed acquisition agreements towards the end of November.

On that same day, Reuters published an article (without Instructure’s input or comment) that stated that activist investor Sachem Head Capital Management had accumulated a position in Instructure common stock and wanted Instructure to pursue a full sale process.

On November 1, 2019, the Board of Directors held a meeting with members of Instructure senior management and representatives of J.P. Morgan. Representatives of J.P. Morgan reviewed the proposals and the strategic process to date. Following this discussion, the Board of Directors discussed with Instructure senior management aspects of the long-term financial plan and projections prepared by Instructure management, including the fact that such projections would, (i) rely only upon future financial performance of the Instructure Canvas segment, and would include future financial performance of the Bridge segment separately because such separation was under active consideration, rather than present such presentations on a basis both with and without Bridge and (ii) include an increase in operating expenses starting in January 2020 attributable to Instructure’s recent modifications of its stock-based compensation policies that would increase the proportion of base compensation that would be paid in the form of cash and reduce the dilutive effect of further stock grants. Following such discussion, the Board of Directors determined that such long-term financial plans and projections, in the opinion of the Board of Directors, the most current and predictive forecasts of the future financial performance of Instructure (for more information regarding these projections, see the section titled “The Merger—Management Projections.”). The Board of Directors then directed J.P. Morgan to use such projections for any related financial analysis, and instructed J.P. Morgan to share a subset of those projections with Thoma Bravo, Sponsor C and other parties as appropriate. Also at this meeting, at the request of the Board of Directors, J.P. Morgan provided a preliminary overview of the financial analyses that would be useful to the Board of Directors in assessing the relative proposals to date. After the Board of Directors engaged in active discussions with members of Instructure senior management, the Board of Directors met in executive session (without members of Instructure senior management or J.P. Morgan). The Board of Directors in executive session discussed whether to publicly announce a strategic process or whether to limit discussions to those financial sponsors and strategic parties that proactively requested discussions with Instructure and had engaged in preliminary due diligence. Members of Instructure senior management then rejoined the Board of Directors, and discussed next steps in the strategic discussions. Representatives of J.P. Morgan then rejoined the Board of Directors, and discussed the strategic process. The Board of Directors instructed representatives of Cooley to prepare a proposed form acquisition agreement to be used in connection with a transaction. The Board of Directors discussed expanding the outreach and instructed J.P. Morgan to work with the Transaction Committee to solicit indications of interest from an additional set of parties which were viewed as “tier 2” parties (i.e., parties less likely, for a variety of reasons, to have the strategic interest, resources, commitment or ability to enter into in a strategic transaction, relative to the “tier 1” parties).

During the first week of November 2019, each of Sponsor A, Sponsor F and Industry Participant G informed representatives of J.P. Morgan that such party had declined to further pursue a strategic transaction with Instructure. In declining to pursue the transaction, Sponsor A indicated concerns about booking growth trajectory, the likelihood of profit margin expansion and the pace at which strategic changes and cost reductions could be implemented.

On November 5, 2019, the Transaction Committee met with Mr. Goldsmith, Mr. Kaminer and representatives of J.P. Morgan to review and assess the strategic process to date, as well as to review potential participants in the

 

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“tier 2” outreach. At such meeting, the Transaction Committee determined to contact eight additional “tier 2” strategic parties and instructed J.P. Morgan to promptly contact such parties.

On November 6, 2019, at the direction of the Transaction Committee, J.P. Morgan made outbound inquiries with respect to the eight “tier 2” parties including, a strategic party and its related financial sponsors (collectively, “Industry Participant L”) and seven other strategic parties (“Industry Participant M”, “Industry Participant N” and “Industry Participant O”, “Industry Participant P”, “Industry Participant Q”, “Industry Participant R” and “Industry Participant S” respectively). Each of these strategic parties subsequently declined to further pursue a strategic transaction.

Also on November 6, 2019, Bloomberg published an article (without Instructure’s input or comment) reporting that activist investor Praesidium had advocated that Instructure seek a sale transaction and that Praesidium had shared with Instructure management a list of strategic parties and financial sponsors that Praesidium believed might be interested in Instructure’s learning management platform.

On November 7, 2019, the Transaction Committee met with Mr. Goldsmith, Mr. Kaminer and representatives of J.P. Morgan to discuss a timeline and workplan for the financial sponsors and strategic parties engaged in strategic discussions with Instructure. In considering such workplan and outreach efforts, the Transaction Committee also considered the lists of prospective transaction parties which had been identified by Praesidium. Instructure senior management and representatives continued to respond to due diligence inquiries of the parties interested in pursuing a strategic transaction with Instructure, and provided further financial information with respect to Instructure’s current financial plan and potential cost savings initiatives.

Members of Instructure senior management and representatives of J.P. Morgan held a series of in person meeting in Salt Lake City with representatives of Sponsor C on November 11, 2019, Thoma Bravo on November 12, 2019 and Sponsor E on November 13, 2019. At these separate meetings with these financial sponsors, members of Instructure senior management and representatives of J.P. Morgan addressed a number of topics including Instructure’s business model and financial forecast and business strategy, and diligence inquiries raised by the respective financial sponsors at such meetings. The financial forecast presented to those parties included versions including Bridge and its contribution, and on a basis excluding Bridge.

On November 10, 2019, Sponsor K entered into a confidentiality agreement with Instructure.

On November 12, 2019, Industry Participant H declined to further pursue a strategic transaction with Instructure, referencing concerns about the strategic rationale for such a transaction and how a combination with Instructure would be viewed by its stockholders.

Also on November 13, 2019, Bloomberg published an additional article (without Instructure’s input or comment) reporting that Instructure was exploring strategic options including a sale following pressure from activist investors, and that a number of private equity firms were weighing bids for Instructure.

On November 14, 2019, prior to the opening of market trading, given the number of public reports regarding the strategic transaction process and requests for comment by Instructure to address these market rumors, Instructure decided to publicly announce that in response to interest received from multiple third parties, its Board of Directors, supported by Instructure senior management, had commenced a process to explore strategic alternatives in order to maximize stockholder value and had canceled the previously scheduled financial analyst day on December 3, 2019 to allow Instructure senior management and the Board of Directors to explore such strategic alternatives for Instructure.

On that same day, Instructure received inbound inquiries from three new financial sponsors (“Sponsor T”, “Sponsor U” and “Sponsor V”).

 

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On November 15, 2019, representatives of J.P. Morgan provided a draft acquisition agreement to representatives of Thoma Bravo, Sponsor C and Sponsor E. The draft acquisition agreement contemplated (i) a customary 40-day “go-shop” period for Instructure to solicit and consider superior proposals with a related 1.25% termination fee; (ii) a 2.5% termination fee for a superior proposal accepted after the go-shop period; (iii) a 7% termination fee payable by the acquirer if it fails to consummate the transaction under certain circumstances; (iv) a customary reasonable best efforts covenant from both parties to secure regulatory approval of the transaction with a “hell or high water” required divestiture provision; and (v) other customary terms for a strategic transaction of this nature.

On that same day, Instructure received an inbound inquiry from a new financial sponsor (“Sponsor W”).

Also on November 15, 2019, Sponsor V declined to further pursue a strategic transaction with Instructure.

On November 18, 2019, the Transaction Committee had a call with Mr. Kaminer and representatives of J.P. Morgan and Cooley, during which J.P. Morgan reviewed the strategic process to date. Attendees discussed additional financial sponsor and strategic parties that may be interested in participating in a strategic discussion to target with outbound inquiries, and the Transaction Committee instructed J.P. Morgan to further extend the outreach in the strategic transaction process to include parties which were viewed as “tier 3” parties (i.e., parties less likely, for a variety of reasons, to have the strategic interest, resources, commitment or ability to enter into in a strategic transaction, relative to the “tier 1” and “tier 2” parties ) given that Instructure had publicly confirmed that Instructure was in the process of considering strategic alternatives. The “tier 3” parties included substantially all of the remaining parties who had not already been contacted as part of the strategic transaction process that were suggested by several of Instructure’s larger shareholders. The Transaction Committee determined to contact ten additional “tier 3” parties and instructed J.P. Morgan to promptly contact such parties including three new strategic parties and, if applicable, their respective financial sponsors (“Industry Participant X”, “Industry Participant Y” and “Industry Participant Z”) and seven new financial sponsors (“Sponsor AA”, “Sponsor BB”, “Sponsor CC”, “Sponsor DD”, “Sponsor DE” “Sponsor FF” and “Sponsor GG”). The Transaction Committee further instructed J.P. Morgan to coordinate with parties submitting inbound indications of interests in a manner that would facilitate the involvement of parties with a bona fide interest in a strategic transaction and minimize distraction to Instructure and its management.

On that same day, Instructure received an inbound inquiry from a new financial sponsor (“Sponsor HH”) and entered into a confidentiality agreement with Industry Participant L.

On November 19, 2019, Mr. Goldsmith, Mr. Kaminer, Mitch Benson and representatives of J.P. Morgan met with representatives of Sponsor C in San Francisco, California, and discussed Instructure’s business model, estimated cost savings from Instructure no longer being a public company and strategy for operating the business on a going forward basis.

On that same day, Sponsor T entered into a confidentiality agreement with Instructure and Instructure received inbound inquiries from two additional financial sponsors (“Sponsor II” and “Sponsor JJ”, respectively).

On November 20, 2019, Mr. Goldsmith, Mr. Kaminer and Mr. Benson and representatives of J.P. Morgan had meetings in San Francisco with Sponsor E and Thoma Bravo. Members of Instructure senior management and representatives of J.P. Morgan met telephonically with Sponsor K on November 20, 2019, and had discussions with Industry Participant L on November 22, 2019. In each of these meetings, the relevant parties discussed Instructure’s business model, estimated cost savings from Instructure no longer being a public company and its strategy for operating the business on a going forward basis.

On that same day, Sponsor II and Sponsor JJ declined to further pursue a strategic transaction with Instructure.

On November 21, 2019, Sponsor T declined to further pursue a strategic transaction with Instructure. On the same day, each of Sponsor U and Sponsor HH entered into a confidentiality agreement with Instructure.

 

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On November 22, 2019, representatives of Kirkland & Ellis LLP (“Kirkland &Ellis”), outside counsel to Thoma Bravo, sent representatives of Cooley revised drafts of the Instructure draft acquisition agreement and other transaction documents, including an equity commitment letter. The revised acquisition agreement contained certain key differences from the Instructure form draft acquisition agreement, including (i) a requirement that directors and officers and other stockholders holding more than 7% of the issued and outstanding Instructure common stock sign a customary voting agreement to vote such individual’s shares of Instructure common stock in favor of the merger concurrently with the execution of the acquisition agreement; and (ii) a non-solicitation period (or “no-shop” period) commencing from the date of the execution of the agreement, without any “go-shop” period.

Over the next several days, members of Instructure management had calls with representatives of Sponsor C and Thoma Bravo, to discuss outstanding financial due diligence inquiries, including possible changes to Instructure’s cost structure, both with respect to estimated cost savings from Instructure no longer being a public company and broader changes to its operating costs; new bookings profile, as well as the views and plans of Sponsor C and Thoma Bravo with respect to such matters.

On November 22, 2019, Industry Participant I and Industry Participant J each declined to further pursue a strategic transaction.

On November 23, 2019, at the direction of the Transaction Committee, J.P. Morgan provided each of Sponsor C, Sponsor E and Thoma Bravo with updated financial information, including information with respect to potential operating expense reduction opportunities in response to each Sponsor’s inquiries.

On November 25, 2019, Sponsor W entered into a confidentiality agreement with Instructure and Instructure received an inbound inquiry from a new industry participant (“Industry Participant KK”).

On that same day, each of Sponsor E and Sponsor K declined to further pursue a strategic transaction with Instructure. In declining to pursue a transaction, Sponsor E indicated concerns about new bookings performance, the ability of Instructure to increase prices and the consequences of implementing cost reductions. Sponsor K indicated that Instructure did not fit within its investment profile.

On November 26, 2019, the Transaction Committee, Mr. Goldsmith, Mr. Kaminer and representatives of J.P. Morgan and Cooley met to review and assess the proposals received to date in connection with a strategic transaction. Representatives of J.P. Morgan reviewed the proposals and the status of the strategic process to date. J.P. Morgan advised that Sponsor C had completed its due diligence and provided a verbal proposal to acquire Instructure for $46.00 per share. In addition, J.P. Morgan noted that Thoma Bravo continued to work on its business model and had submitted a proposal for $47.00 per share. The Transaction Committee instructed J.P. Morgan to contact Sponsor C and Thoma Bravo to solicit improved bids by December 2, 2019.

On that same day, the Board of Directors held a meeting with representatives of J.P. Morgan and Cooley to review and assess the proposals received to date in connection with a strategic transaction, as well as the projections prepared for the years 2019 to 2033, which had been updated to include a 40% long-term EBITDA margin case in addition to the original 35% long-term EBITDA margin case (for more information regarding these projections, see the section titled “The Merger—Management Projections.”). Representatives of J.P. Morgan then reviewed the proposals and the strategic process to date. Representatives of J.P. Morgan and Mr. Goldsmith left the meeting and the remaining members of the Board of Directors engaged in active discussions regarding next steps in the strategic discussions. The Board of Directors concluded that it should reach out to the largest holders of Instructure common stock to discuss strategic alternatives in order to better understand whether such stockholders would be receptive to a possible strategic transaction.

On November 27, 2019, Mr. Coates and Mr. Waterhouse had separate calls with representatives of the largest holders of Instructure common stock seeking to enter into non-disclosure agreements to solicit the viewpoints of

 

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such stockholders with respect to Instructure’s strategic alternatives. Subsequently, three of the largest holders of Instructure common stock entered into non-disclosure agreements with Instructure.

On that same day, Mr. Coates had a call with representatives of Sponsor C and Thoma Bravo to discuss their proposals and whether they would be able to increase their bids in light of the operating cost changes presented by Instructure and the availability of debt financing for such a strategic transaction.

Also on November 27, 2019, Mr. Coates had a call with representatives of Sponsor F and Industry Participant G, each of whom declined to further pursue a strategic transaction with Instructure.

Later that same day, the Transaction Committee met with Mr. Kaminer, Mr. Waterhouse and representatives of J.P. Morgan and Cooley to discuss next steps in the strategic discussions.

On November 29, 2019, the Transaction Committee held a meeting with Mr. Kaminer, Mr. Waterhouse and representatives of J.P. Morgan and Cooley to review and assess the proposals received to date in connection with a strategic transaction, and to discuss next steps in the strategic discussion. On that same day, Industry Participant Z entered into a confidentiality agreement with Instructure and Party FF declined to further pursue a strategic transaction with Instructure.

Also, on November 29, 2019, Mr. Coates spoke with representatives of Sponsor C, which agreed to send a revised draft of the Instructure draft acquisition agreement with the per share price left blank, and indicated that its proposal to acquire Instructure would not exceed $47.00 per share. Mr. Coates also spoke with representatives of Thoma Bravo regarding its proposal.

Later that same day, the Transaction Committee reconvened, meeting with Mr. Kaminer and Mr. Waterhouse and representatives of J.P. Morgan and Cooley to further discuss next steps in the strategic discussion. Following such discussion, representatives of Cooley provided representatives of Kirkland & Ellis with a revised draft of the merger agreement.

On November 30, 2019, representatives of Simpson Thacher & Bartlett LLP (“Simpson Thacher”), outside counsel to Sponsor C, sent representatives of Cooley a revised draft of the Instructure draft acquisition agreement. The revised acquisition agreement had a few key differences from the Instructure form draft acquisition agreement, including (i) a requirement that Mr. Coates and any activist stockholder under a confidentiality agreement with Instructure sign a customary voting agreement to vote such individual’s shares of Instructure common stock in favor of the merger concurrently with the execution of the acquisition agreement; and (ii) shorter 30 day “go-shop” period. During the period between November 29, 2019 and December 3, 2019, Instructure, together with representatives of Cooley, and representatives of Sponsor C, together with representatives of Simpson Thacher, negotiated the terms of the proposed acquisition agreement and other transaction documents.

On that same day, members of the Board of Directors and representatives of J.P. Morgan reached out to Sponsor E and Industry Participant H to gauge their interest in pursuing a strategic transaction at a price per share in the high-$40s.

On December 1, 2019, at the direction of the Board, Mr. Goldsmith and Mr. Kaminer had a call with representatives of Sponsor C and representatives of each of Cooley and Simpson Thacher, to discuss Instructure’s financial plan. On the same day, Sponsor DD entered into a confidentiality agreement with Instructure.

On December 2, 2019 Industry Participant W declined to further pursue a strategic transaction with Instructure. On the same day, Sponsor BB entered into a confidentiality agreement with Instructure.

 

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Later in the day, at the direction of the Board, Mr. Goldsmith and Mr. Kaminer had a call with representatives of Thoma Bravo and representatives of each of Cooley and Kirkland & Ellis, to discuss Instructure’s financial plan. Later in the day on December 2, 2019, pursuant to J.P. Morgan’s instructions to provide a revised proposal by such date, Sponsor C submitted a written proposal to acquire Instructure at a price per share of $47.00 (“Sponsor C $47.00 Proposal”) and Thoma Bravo submitted a written proposal to acquire Instructure at a price per share of $47.50 (“Thoma Bravo $47.50 Proposal”). On behalf of Thoma Bravo, Kirkland & Ellis delivered a revised draft of the merger agreement addressing, among other matters, restrictions on the interim operations of Instructure, the duration of the “go-shop” period, whether directors, officers and certain other stockholders would need to sign a voting agreement, certain aspects of the scope of the “go-shop” and “no shop” terms, including whether existing bidders would be subject to those restrictions, and the amount of termination fees and cap on damages that would be payable in connection with the termination of the acquisition agreement in certain circumstances.

Following the submission of the proposals, the Board of Directors held a meeting, with all members present (other than Mr. Thompson and Mr. Conroy), Mr. Kaminer and representatives of J.P. Morgan and Cooley. Representatives of J.P. Morgan reviewed the proposals and the strategic process to date and provided a customary conflicts disclosure. Cooley advised the Board of Directors of the fiduciary duties attendant to an assessment of the proposals. The Board of Directors then met in executive session (without members of Instructure senior management), and discussed the proposals. The Board of Directors instructed Mr. Coates to be responsible for further communications with Sponsor C and Thoma Bravo with respect to their proposals, acknowledging that Mr. Coates was best positioned to coordinate such request for final bids for a variety of reasons, including his knowledge of the operations and business of Instructure, his service as a member of the Transaction Committee overseeing the sales process, the absence of any actual or perceived conflicts with either party, his experience in negotiations, and his status as the Executive Chairman of the Board of Directors. The Board of Directors then instructed Mr. Coates to call the representatives of Sponsor C to discuss whether they would increase the Sponsor C $47.00 Proposal to match a higher proposal that Instructure had received. The Board of Directors was also notified that in connection with the entry into a definitive acquisition agreement, each of Thoma Bravo and Sponsor C requested that Mr. Goldsmith and Mr. Kaminer enter into letter agreements with Instructure to limit the acceleration of outstanding equity awards held by such executives upon the consummation of a strategic transaction, as, absent such an agreement such executives would be entitled to the full acceleration of their unvested equity awards upon the consummation of a transaction which results in Instructure no longer being publicly traded. The Board of Directors further requested such executives to confirm, and the relevant executives proceeded to confirm, that no arrangements with respect to employment, equity participation, governance matters or their respective roles in the operation of Instructure has been agreed with Thoma Bravo, Sponsor C or any of their respective representatives.

Later that same day, at the direction of the Board of Directors, Mr. Coates and a representative of Sponsor C discussed the Sponsor C $47.00 Proposal and Sponsor C agreed to increase the Sponsor C $47.00 Proposal to $47.50 per share (the “Sponsor C $47.50 Proposal”) and to provide an updated written proposal reflecting the same. Sponsor C explicitly stated that the Sponsor C $47.50 Proposal would be Sponsor C’s best and final offer, and that Sponsor C would not increase its offer further.

Later that evening, at the direction of the Board of Directors, Mr. Coates and Mr. Waterhouse reached out to a representative of Thoma Bravo. Subsequent to this discussion, Thoma Bravo increased its proposal to acquire Instructure to $47.60 per share (“Thoma Bravo $47.60 Proposal”) and committed to prompt finalization and execution of a definitive acquisition agreement, subject to exclusivity through the proposed announcement of the transaction on December 3, 2019 to complete definitive documentation. The Thoma Bravo $47.60 Proposal was accompanied by a revised merger agreement and other transaction documents, including an equity commitment letter and limited guaranty, each in substantially final form. Thoma Bravo also confirmed that the full purchase price would be backstopped by an equity commitment by the Thoma Bravo Fund.

 

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The Board of Directors then held a series of meetings with representatives of Instructure senior management, Cooley and J.P. Morgan. Representatives of J.P. Morgan reviewed for the Board of Directors the current status of discussions with applicable parties, including Thoma Bravo and Sponsor C. Representatives of J.P. Morgan and Cooley reviewed with the Board of Directors the key legal and financial terms of each of the Thoma Bravo $47.60 Proposal and the Sponsor C $47.50 Proposal, and representatives of J.P. Morgan then provided J.P. Morgan’s financial analyses of the Thoma Bravo $47.60 Proposal and the Sponsor C $47.50 Proposal. After discussions, the Board of Directors noted that the consummation of the Sponsor C $47.50 Proposal depended upon debt financing contemplated to be provided by third party debt financing sources and the recourse of Instructure if such financing failed to occur would be limited to a termination fee equal to 5.0% of the equity value of Instructure, whereas Thoma Bravo proposed a fully equity financed transaction. Moreover, the Thoma Bravo $47.60 Proposal was financially superior to the proposal from Sponsor C, and Thoma Bravo had indicated that the Thoma Bravo $47.60 Proposal was its best and final offer. The Board of Directors discussed overall timing of the strategic transaction process in light of the risk of carrying on the strategic process for any extended period of time could have adverse consequences on Instructure due to (i) the press coverage in Reuters, Bloomberg and other outlets regarding Instructure’s sale process and related impact of market rumors and destabilization of the trading price of Instructure common stock, (ii) the chilling effect that any delay could cause on the willingness of Sponsor C or Thoma Bravo to consummate a strategic transaction, (iii) the fact that Instructure engaged with 40 parties during the course of the strategic transaction process, and 19 of those parties entered into a confidentiality agreement with Instructure, and that each such confidentiality agreement included a provision that still allowed such party to privately and confidentially approach Instructure senior management, the Board of Directors or J.P. Morgan at any time to make acquisition proposals, (iv) the uncertainty that another potential participant in the strategic transaction process would submit a superior proposal, and (v) the potential opportunity for Instructure to continue soliciting a superior proposal for a period of time after signing a definitive merger agreement pursuant to the “go-shop” provision that Thoma Bravo was willing to provide in the Merger Agreement, which additional period would allow Instructure to further discussions with certain parties that had previously indicated some level of interest in a strategic transaction and an outreach to parties that had not been engaged in the strategic process. The Board of Directors continued to discuss the potential transaction with Thoma Bravo. At this meeting, the Board of Directors also considered an adjustment to the projections for the years 2019 to 2033. Following discussion, the Board of Directors authorized such adjustment to be incorporated into the projections for the years 2019 to 2033. For more information regarding these projections, see the section titled “The Merger—Management Projections.”

Throughout the evening of December 2, 2019 and during December 3, 2019, representatives of each of Cooley and Kirkland & Ellis continued to exchange drafts of Instructure’s draft acquisition agreement, the equity commitment letter and limited guaranty to be provided by the Thoma Bravo Fund and the proposed voting agreement to be entered into by certain stockholders of Instructure. During this period, Mr. Waterhouse engaged in discussions with certain stockholders of Instructure that had entered into confidentiality agreements with Instructure to solicit the viewpoints of these stockholders with respect to the proposed transaction with Thoma Bravo. At the request of Thoma Bravo, Mr. Waterhouse provided these stockholders with a draft of the acquisition agreement and a proposed voting agreement, highlighting the 35-day shop period included in the agreement to provide a post-signing go-shop, and a tiered termination fee, including a termination fee of 1.5% of the equity value in the case of a termination to enter into an alternative acquisition agreement with a party that submitted an acquisition proposal during the go-shop period. During the course of discussions with these stockholders, Mr. Waterhouse explained the terms of the transaction with Thoma Bravo and the rationale for why the Board of Directors considered such transaction to be in the best interests of the stockholders of Instructure, and Mr. Waterhouse sought to understand whether such stockholders expected to support or oppose such

 

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transaction. In his reports to the Board of Directors regarding these discussions, Mr. Waterhouse indicated that no such stockholder expressed any interest in financing a sale of Instructure, rolling over any Instructure common stock in such a transaction or otherwise participating in such transaction in a manner different from how the holders of outstanding shares of Instructure common stock will be treated as of the Closing. Mr. Waterhouse further reported to the Board of Directors that each such stockholder expressed reservations about executing a voting agreement, due to, among other things, a desire for capital flexibility and to review the transaction documents in further detail, and that no such stockholder was expected to execute such an agreement within the time period that Thoma Bravo had allotted to secure such agreements.

Throughout the day on December 3, 2019, representatives of each of Cooley and Kirkland & Ellis continued to exchange drafts of Instructure’s draft acquisition agreement and other transaction documents. Thoma Bravo removed any requirement or condition related to the execution of voting or stockholder support agreements, and agreed that Instructure would be entitled to a 35 day “go-shop” period, and would be required to pay a termination fee equal to 3.25% of the equity value and 1.5% of the equity value in certain circumstances upon the termination of the acquisition agreement. Additionally, each of Mr. Goldsmith and Mr. Kaminer, agreed to enter into a letter agreement with Instructure to limit the acceleration of a portion of their outstanding equity awards that such executives were entitled to pursuant to their employment agreements, each of which agreement was expressly conditioned upon the consummation of the transactions contemplated by the acquisition agreement with Thoma Bravo (collectively, the “Waiver Agreements”).

Later on the same day, after market close, the Board of Directors held a meeting with representatives of Instructure senior management, Cooley and J.P. Morgan. The Board of Directors considered a further minor adjustment to the projections for the calendar years 2019 to 2033, and authorized J.P. Morgan to use the projections with such adjustment (the “Management Projections”) in connection with its financial analysis of the transactions (for more information about the Management Projections, see “The Merger—Management Projections”). Representatives of J.P. Morgan reviewed for the Board of Directors the current status of the acquisition proposal submitted by Thoma Bravo. Representatives of J.P. Morgan and Cooley reviewed with the Board of Directors the key legal and financial terms of the Thoma Bravo $47.60 Proposal, and representatives of J.P. Morgan then provided J.P. Morgan’s financial analyses of the Thoma Bravo $47.60 Proposal. J.P. Morgan then rendered its oral opinion (subsequently confirmed in a written opinion, dated as of December 4, 2019) to the Board of Directors to the effect that, as of December 4, 2019 and based upon and subject to the factors and assumptions set forth in such opinion, the Per Share Merger Consideration (as proposed in the Thoma Bravo $47.60 Proposal) to be paid to the holders of Instructure common stock in the proposed Merger was fair, from a financial point of view, to such holders. For more information about J.P. Morgan’s opinion, see below under the caption “The Merger—Opinion of J.P. Morgan Securities LLC.” Representatives of Cooley then provided a review for the Board of Directors of its fiduciary duties, and reviewed certain material terms of the proposed final Merger Agreement with Thoma Bravo. Representatives of Cooley answered questions from members of the Board of Directors regarding the terms of the proposed Merger Agreement and Instructure’s ability to conduct its business during the pendency of the Merger. The Board of Directors continued to discuss the potential transaction with Thoma Bravo and the reasons that the Board of Directors believed that it was in the best interests of Instructure and its stockholders to enter into the Merger Agreement with Thoma Bravo and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement (for more information concerning the recommendation of the Board of Directors, see the section titled “The Merger Agreement—Reasons for the Merger”). Following such discussion, the Board of Directors unanimously (i) determined that it was in the best interests of Instructure and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (ii) approved the execution and delivery of the Merger Agreement by Instructure, the performance by Instructure of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (iii) resolved to recommend that Instructure stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL. The Board of Directors then excused each member of Instructure management who had participated in such meeting to separately discuss the status of the strategic transaction process, the proposed Waiver Agreements, and the possibility of establishing a small bonus pool for the purpose of recognizing the

 

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efforts of certain employees of Instructure team with respect to the Merger (excluding Mr. Goldsmith, who would not be invited to participate in such pool given his role as Chief Executive Officer and a member of the Board of Directors).

Later that evening, Instructure and Thoma Bravo executed the Merger Agreement and related agreements in connection with the transactions contemplated by the Merger Agreement. At the time of the execution of the Merger Agreement, Thoma Bravo and Instructure had not discussed the terms of any post-closing employment or equity participation for Instructure management, nor did any members of Instructure management have any such discussions with Thoma Bravo.

The following morning on December 4, 2019 before market open, Instructure issued a press release announcing the execution of the Merger Agreement.

Since the execution of the Merger Agreement, in connection with the “go-shop” period provided for in the Merger Agreement, which expires at 11:59 p.m. Pacific Time on January 8, 2020, at the direction of the Board of Directors, representatives of J.P. Morgan contacted and sought to re-engage in discussions with nine of the parties with whom Instructure had been engaged in on-going discussions regarding a potential strategic transaction prior to the execution of the Merger Agreement. Five of those parties declined to continue discussions with Instructure during the “go-shop” period. In addition, on behalf of Instructure, representatives of J.P. Morgan have communicated with fifteen additional parties to gauge such parties’ interest in making an alternative Acquisition Proposal. Of those fifteen parties, Instructure executed a confidentiality agreement with one party. To date, no party has made an alternative Acquisition Proposal.

Recommendation of the Board of Directors and Reasons for the Merger

Recommendation of the Board of Directors

The Board of Directors has unanimously: (i) determined that it is in the best interests of Instructure and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (ii) approved the execution and delivery of the Merger Agreement by Instructure, the performance by Instructure of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (iii) resolved to recommend that Instructure stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL.

The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Reasons for the Merger

In the course of reaching its determination and recommendation, the Board of Directors consulted with Instructure management, Cooley LLP, its outside legal advisor, and J.P. Morgan, its financial advisor. The Board of Directors considered a number of factors, including those below (which are not listed in any relative order of importance), all of which it viewed as generally supporting its (i) approval of the execution and delivery of the Merger Agreement by Instructure, the performance by Instructure of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (ii) resolution to recommend that Instructure stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL:

 

   

Attractive Value. The Board of Directors considered the current and historical market prices of the Instructure common stock, including the market performance of the common stock relative to those of other participants in the Instructure’s industry and general market indices, the increase in the price of the Instructure common stock several months prior to the Instructure’s public confirmation of its exploration of strategic alternatives and the sharp increase in the market price of the Instructure

 

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common stock thereafter, and the fact the current and historical trading price of Instructure common stock, including that the Per Share Merger Consideration constituted a premium of:

 

   

approximately 18% to the three-month volume-weighted average closing price of $40.47, ending on October 27, 2019, the last full trading day prior to Instructure’s third quarter earnings call in which the possibility of a potential transaction involving Bridge was publicly raised by Instructure.

 

   

Best Alternative for Maximizing Stockholder Value / Thorough and Well Publicized Sale Process. The Board of Directors considered that the Per Share Merger Consideration was more favorable to Instructure stockholders than the potential value that might result from other alternatives reasonably available to Instructure, including, but not limited to, a merger with a different buyer, a leveraged recapitalization, a private placement of equity securities and the continued operation of Instructure on a stand-alone basis in light of a number of factors, including the following:

 

   

that Instructure, at the direction of the Board of Directors, the Transaction Committee and its lead independent director, conducted a lengthy and thorough process, during which representatives of Instructure contacted, or were contacted by, 40 potential participants, entered into non-disclosure agreements with and engaged in due diligence or provided management presentations or other information to 19 potential bidders, ultimately receiving indications of interest from 5 bidder groups, and negotiating with Thoma Bravo as well as 3 other bidding groups, none of which was willing to make a definitive offer at a price above $47.50, a price lower than the $47.60 price offered by Thoma Bravo;

 

   

the fact that, during the course of negotiations with Thoma Bravo (as described under the section titled “The Merger—Background of the Merger”), Thoma Bravo increased its initial offer from $47.00 per share on November 26, 2019 to $47.50 on December 2, 2019 and then to $47.60 per share on the evening of December 2, 2019;

 

   

the belief that the Per Share Merger Consideration represented the highest price that Thoma Bravo was willing to pay and the highest price per share value reasonably obtainable as of the date of the Merger Agreement and that the estimated cost savings from Instructure no longer being a public company were factored into Thoma Bravo’s final offer of $47.60 per share;

 

   

the fact that none of the parties who submitted an indication of interest, other than Thoma Bravo and Party C, submitted a definitive written proposal to acquire Instructure or indicated that such a proposal would be forthcoming, and that Party C had informed the Instructure’s representatives that $47.50 per share was its best and final offer;

 

   

that Instructure’s receptiveness to a sale transaction was well publicized, including as a result of Instructure’s public announcement on November 14, 2019 of its intent to explore a possible sale of Instructure in response to interest from third parties;

 

   

the fact that Instructure entered into non-disclosure agreements with a number of the largest holders of Instructure common stock shortly prior to the execution of the Merger Agreement to solicit the viewpoints of these stockholders to the potential transaction with Thoma Bravo, and that no such stockholder expressed any interest in financing a sale of Instructure, rolling over any Instructure common stock in such a transaction or otherwise participating in such transaction in a manner different from how the holders of outstanding shares of Instructure common stock will be treated as of the Closing; and

 

   

the potential risk of losing the favorable opportunity with Thoma Bravo in the event Instructure continued trying to obtain any additional offers at higher prices and the potential negative effect that a protracted sale process might have on Instructure’s business, especially in light of the “go-shop” provision Thoma Bravo was willing to provide that would allow for Instructure to solicit Acquisition Proposals.

 

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More Attractive Value Than Alternatives. On several occasions in 2019, including in-person meetings in October, November and December, the Board of Directors evaluated carefully, with the assistance of financial advisors, the risks and potential benefits associated with other strategic or financial alternatives and the potential for stockholder value creation associated with those alternatives, including the alternative of consummating a leveraged a recapitalization or a private placement of equity securities, as well as the alternative of not engaging in a strategic or financial transaction and executing on Instructure’s business plans. As part of these evaluations, the Board of Directors considered:

 

   

the belief that the Per Share Merger Consideration is more favorable to Instructure stockholders than the potential value that would reasonably be expected to result from other strategic and financial alternatives reasonably available, which could include:

 

   

the continuation of Instructure’s business plan as an independent, publicly-listed company, based on its historical results of operations, financial prospects and condition;

 

   

modifications to Instructure’s business and operations strategy, which was expected to include the separation, divestiture or discontinuation of Instructure’s corporate learning management system, Bridge, as Instructure had previously announced;

 

   

the incurrence of a significant amount of indebtedness to support a leveraged recapitalization or further acquisitions; or

 

   

potential expansion opportunities through acquisitions and combinations of Instructure with other businesses;

 

   

the belief that the aforementioned other alternatives were not reasonably likely to create greater value for Instructure’s stockholders than the Merger, taking into account, among other variables, execution risks as well as business, competitive, industry and market risks, particularly those in the software and education industries more generally, including

 

   

the risk that Instructure would not be able to successfully execute on its operating plan to significantly reduce net operating losses and become profitable while maintaining bookings growth, including its publicly stated plan to be a “Rule of 40” Instructure with a combined growth rate and profit margin of at least 40%,

 

   

the risk that Instructure may not be able to separate or divest Bridge in a timely or accretive manner, relative to the continued capital resources required to operate such business, the costs associated with shutting Bridge down, the costs expected to be incurred in connection with establishing Bridge as a standalone business including the time, capital and opportunity costs required to effect such efforts, and the other capital requirements of Instructure,

 

   

the risk that implementing the significant expense reductions in management’s strategic plan to rationalize the cost structure of Instructure would have a material and sustained negative impact on the revenue growth rate, revenue retention, net booking, employee retention, certain other key financial performance indicators, the ability of the Instructure to execute its strategic plan, and how such risks could be managed as a publicly-listed company,

 

   

the risk that Instructure may not be able to grow its learning management system market share at the rates reflected in Instructure’s business plan, given the intense competition that Instructure faces from other software companies that develop learning management systems,

 

   

the risk that Instructure may not be able to continue to generate new subscriptions or renewals of subscriptions to its learning management system and applications,

 

   

the risk that Instructure may not be able to increase revenues for its core products as much as projected, taking into account that Instructure’s applications, in particular a substantial portion of Canvas, use “open source” software that is generally freely accessible, usable and

 

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modifiable, and made available to the general public on an “as-is” basis under the terms of a non-negotiable license,

 

   

the risk that significant incremental capital would be required to consummate acquisitions necessary to increase the scale, applications and operations of the education applications that would be the sole business of Instructure following a separation, divestiture or discontinuation of Bridge, and

 

   

the risk that Instructure would not continue to be able to retain the services of key management or other personnel of Instructure.

 

   

Greater Certainty of Value. The Board of Directors considered that the all-cash Per Share Merger Consideration provides certainty of value and liquidity to stockholders, while eliminating the effect on stockholders of long-term business and execution risk, as well as risks related to the financial markets generally.

 

   

Likelihood of Completion. The Board of Directors considered the likelihood of completion of the Merger in light of the terms of the Merger Agreement and the closing conditions, including:

 

   

the conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of Instructure’s representations and warranties, are generally subject to a “material adverse effect” qualification;

 

   

the ability of the parties to consummate the Merger, including the fact that Parent’s obligation to complete the Merger is not conditioned upon, nor limited by, the receipt of third-party debt financing or the completion of any marketing period;

 

   

the fact that Parent has obtained committed equity financing for the transaction from the Thoma Bravo Fund sufficient to fund (i) the aggregate purchase price required to be paid at the closing of the Merger, and (ii) together with the cash on hand at Instructure, the repayment or refinancing of the indebtedness of the Instructure Group outstanding under the Credit Facility and all other fees and expenses required to be paid at the closing of the Merger by Instructure, Parent or Merger Sub contemplated by, and subject to the terms and conditions of the Merger Agreement, and the fact that Instructure is a named third party beneficiary of the Equity Commitment Letter;

 

   

Instructure’s right to specific performance to cause the equity financing contemplated by the Equity Commitment Letter to be funded, whether or not Thoma Bravo is able to procure any debt to finance the transaction, and to specifically enforce Parent’s obligation to consummate the Merger and to cause the equity financing sources to fund their contributions as contemplated by the Merger Agreement and the Equity Commitment Letter; and

 

   

the requirement that, in the event of a failure of the merger to be consummated under specified circumstances, particularly circumstances relating to the failure of equity financing sources to provide funds at closing, Parent will pay Instructure a termination fee of  $136,857,000 in cash, and the fact that Thoma Bravo Fund provided a limited guaranty in favor of Instructure, which guarantees the obligation to pay any termination fee, reimburse and indemnify Instructure with respect to certain expenses in connection with Parent’s debt financing and pay certain other amounts required under the Merger Agreement (as described in the below section captioned “—Financing of the Merger”).

 

   

Opportunity to Receive Alternative Proposals and to Terminate the Transaction in Order to Accept a Superior Proposal. The Board of Directors considered the terms of the Merger Agreement permitting Instructure to solicit alternative proposals during a 35 day “go-shop period” and receive unsolicited alternative proposals, and the other terms and conditions of the Merger Agreement, including:

 

   

the right, pursuant to a customary 35-day “go-shop” period beginning on December 4, 2019 and continuing until 11:59 p.m., Pacific time on January 8, 2020, to solicit alternative Acquisition

 

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Proposals from, and participate in discussions and negotiations with, third parties regarding any alternative Acquisition Proposals;

 

   

the ability, under certain circumstances after the No Shop Period Start Date, to furnish information to, and conduct negotiations with, third parties regarding bona fide Acquisition Proposals;

 

   

the fact that parties that had signed confidentiality agreements with Instructure could still make their interest known, continue to conduct their due diligence investigations during the “go-shop” period, and make an alternative Acquisition Proposal;

 

   

Parent’s obligation to pay Instructure a termination fee of $136,857,000, if the Merger Agreement is terminated by Instructure due to any breach of representations or covenants made by Parent or Merger Sub that causes a closing condition not to be met (following notice and an opportunity to cure) or in certain circumstances in which all other closing conditions have been met, but Parent or Merger Sub fails to close when required to do so under the Merger Agreement;

 

   

Instructure’s ability to terminate the Merger Agreement in order to accept a Superior Proposal, subject to certain conditions of the Merger Agreement and paying Parent a termination fee of either (i) $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (ii) $63,540,750, in the case of any other such termination;

 

   

the fact that the Board of Directors believed that the termination fee of either $29,326,500 or $63,540,750 payable by Instructure in the circumstances described above, which represents approximately 1.5% and 3.25%, respectively, of Instructure’s implied equity value in the Merger, is reasonable, is within the market averages for such fees, and is not preclusive of, or a substantial impediment to, other offers; and

 

   

the fact that as of  [●], 2019, the date of this proxy statement, [●] additional parties have executed confidentiality agreements to consider the possibility of a transaction involving Instructure, but no such third person has made an offer or proposal to acquire Instructure.

 

   

Opinion of J.P. Morgan. The Board of Directors considered the financial analysis presentations of J.P. Morgan and the oral opinion of J.P. Morgan, subsequently confirmed in writing, to the effect that, as of December 4, 2019, and based upon and subject to the various factors, qualifications, limitations and assumptions set forth therein, the Per Share Merger Consideration to be paid to the holders of Instructure common stock in the Merger is fair, from a financial point of view, to such holders, as more fully described below under the section of this proxy statement captioned “The Merger–Opinion of J.P. Morgan,” which full text of the written opinion is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety.

 

   

Additional Considerations and Risks. The Board of Directors also considered a number of uncertainties and risks concerning the Merger, including the following (which factors are not necessarily presented in order of relative importance):

 

   

the fact that Instructure would no longer exist as an independent, publicly traded company, and stockholders would no longer participate in any future earnings or growth and would not benefit from any potential future appreciation in value of Instructure;

 

   

the risks and costs to Instructure if the Merger is not completed in a timely manner or at all, including the potential adverse effect on Instructure’s ability to attract and retain key personnel, the diversion of management and employee attention and the potential disruptive effect on Instructure’s day-to-day operations and Instructure’s relationships with customers, suppliers and other third parties, any or all of which risks and costs, among other things, could adversely affect Instructure’s overall competitive position and the trading price of the common stock;

 

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the requirement that Instructure pay Parent a termination fee, under certain circumstances following termination of the Merger Agreement, including if the Board of Directors terminates the Merger Agreement to accept a Superior Proposal, of either (1) $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (2) $63,540,750, in the case of any other such termination;

 

   

if Parent fails to complete the Merger as a result of a breach of the Merger Agreement, depending upon the reason for not closing, remedies may be limited to the termination fee payable by Parent described above, which may be inadequate to compensate Instructure for the damage caused (and such termination fee is itself limited in certain situations), and if available, other rights and remedies may be expensive and difficult to enforce, and the success of any such action may be uncertain;

 

   

the restrictions on the conduct of Instructure’s business prior to the consummation of the Merger, including the requirement that Instructure use commercially reasonable efforts to conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Instructure from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, Instructure might have pursued;

 

   

the fact that an all cash transaction would be taxable to Instructure’s stockholders that are U.S. persons for U.S. federal income tax purposes;

 

   

the fact that under the terms of the Merger Agreement, Instructure is unable to solicit other Acquisition Proposals after the No Shop Period Start Date;

 

   

the significant costs involved in connection with entering into the Merger Agreement and completing the Merger (many of which are payable whether or not the Merger is consummated) and the substantial time and effort of Instructure management required to complete the Merger, which may disrupt its business operations and have a negative effect on its financial results;

 

   

the risk that the Merger might not be completed and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of Instructure common stock;

 

   

the fact that the completion of the Merger will require antitrust clearance in the United States;

 

   

the fact that Instructure’s directors and officers may have interests in the Merger that may be different from, or in addition to, those of Instructure’s stockholders (see below under the caption “—Interests of Instructure’s Directors and Executive Officers in the Merger”); and

 

   

the possible loss of key management or other personnel of Instructure during the pendency of the Merger.

The foregoing discussion of reasons for the recommendation to adopt the Merger Agreement and approve the Merger and the transactions contemplated thereby is not meant to be exhaustive but addresses the material information and factors considered by the Board of Directors in consideration of its recommendation. In view of the wide variety of factors considered by the Board of Directors in connection with its evaluation of the Merger and the complexity of these matters, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Board of Directors each applied his or her own personal business judgment to the process and may have given differing weights to differing factors. The Board of Directors based its unanimous recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Forward-Looking Statements.”

 

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Opinion of J.P. Morgan Securities LLC

Pursuant to an engagement letter dated January 20, 2019 and amended and restated on August 2, 2019, Instructure retained J.P. Morgan as its financial advisor in connection with the proposed Merger and to deliver a fairness opinion in connection with the proposed Merger.

At the meeting of the Board of Directors on December 3, 2019, J.P. Morgan rendered its oral opinion to the Board of Directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the Per Share Merger Consideration to be paid to Instructure’s common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders. J.P. Morgan has confirmed its December 3, 2019 oral opinion by delivering its written opinion to the Board of Directors of Instructure, that, as of such date, the Per Share Merger Consideration to be paid to Instructure’s common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders.    

The full text of the written opinion of J.P. Morgan dated December 4, 2019, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Instructure’s stockholders are urged to read the opinion in its entirety.

J.P. Morgan’s written opinion was addressed to the Board of Directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the Per Share Merger Consideration to be paid to Instructure’s common stockholders in the proposed Merger and did not address any other aspect of the proposed Merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of Instructure or as to the underlying decision by Instructure to engage in the proposed Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The opinion does not constitute a recommendation to any Instructure stockholder as to how such stockholder should vote with respect to the proposed Merger or any other matter.

In arriving at its opinion, J.P. Morgan, among other things:

 

   

reviewed the Merger Agreement, Equity Commitment Letter and the Guaranty;

 

   

reviewed certain publicly available business and financial information concerning Instructure and the industries in which it operates;

 

   

compared the proposed financial terms of the Merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;

 

   

compared the financial and operating performance of Instructure with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Instructure common stock and certain publicly traded securities of such other companies;

 

   

reviewed certain internal financial analyses and forecasts prepared by the management of Instructure relating to its business; and

 

   

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of Instructure with respect to certain aspects of the Merger, and the past and current business operations of Instructure, the financial condition and future prospects and operations of Instructure, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

 

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In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Instructure or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and, pursuant to its engagement letter with Instructure, did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Instructure, Parent, Merger Sub or the Thoma Bravo Fund under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Instructure to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the Merger, and the other transactions contemplated by the Merger Agreement will be consummated as described in the Merger Agreement and this proxy statement. J.P. Morgan also assumed that the representations and warranties made by Instructure and Parent, Merger Sub or the Thoma Bravo Fund in the Merger Agreement, the Equity Commitment Letter, the Guaranty and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan expressed no view on the Equity Commitment Letter or the Guaranty. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Instructure with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on Instructure or on the contemplated benefits of the Merger.

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the Per Share Merger Consideration to be paid to the Instructure common stockholders in the proposed Merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of Instructure or the underlying decision by Instructure to engage in the Merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed Merger, or any class of such persons relative to the Per Share Merger Consideration to be paid to the Instructure common stockholders in the proposed Merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which Instructure’s common stock will trade at any future time.

The terms of the Merger Agreement were determined through arm’s length negotiations between Instructure and Thoma Bravo, and the decision to enter into the Merger Agreement was solely that of the Board of Directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Board of Directors in its evaluation of the proposed Merger and should not be viewed as determinative of the views of the Board of Directors or Instructure management with respect to the proposed Merger or the Per Share Merger Consideration to be paid to Instructure’s common stockholders in the proposed Merger.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Board of Directors on December 3, 2019 and contained in the presentation delivered to the Board of Directors on such date in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. 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 J.P. Morgan, 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 J.P. Morgan’s analyses.

 

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The projections furnished to J.P. Morgan for Instructure were prepared by Instructure management. For more information regarding these projections, see below under “—Management Projections.” As described more fully therein, Instructure’s management projections assume that Instructure was planning to move forward with separating its Corporate segment on a standalone basis either through a sale to a third party or by shutting down the segment. As such, Instructure management instructed J.P. Morgan to rely on the long-term forecast for the Education segment only. Further, Instructure management determined that any estimate of the expected proceeds from the divestiture of the Bridge segment would be highly speculative given uncertainties regarding the expected timing, costs of separation of Bridge as a standalone business unit and the capital requirements of this business, and accordingly, J.P. Morgan has not included any proceeds or shutdown costs in its projection with respect to the divestiture or shutdown of the Bridge segment.

Public Trading Multiples. Using publicly available information, J.P. Morgan compared selected financial data of Instructure with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to Instructure. The companies selected by J.P. Morgan were (ordered by firm value):

 

   

New Relic, Inc.

 

   

Box, Inc.

 

   

BlackLine, Inc.

 

   

PROS Holdings, Inc.

 

   

Surveymonkey, Inc.

 

   

8x8, Inc.

 

   

Workiva, Inc.

 

   

Yext, Inc.

 

   

Zuora, Inc.

 

   

2U, Inc.

 

   

Talend SA

 

   

Benefitfocus, Inc.

These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Instructure based on business sector participation, operational characteristics and financial metrics. None of the selected companies reviewed is identical to Instructure. Certain of these companies may have characteristics that are materially different from those of Instructure. However, the companies were selected, among other reasons, because they are publicly-traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Instructure. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect Instructure.

 

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Using publicly available information, J.P. Morgan calculated, for each selected company, the multiple of firm value as of December 3, 2019 to published equity research consensus estimates that J.P. Morgan obtained from FactSet Research Systems for revenue for the calendar year 2020 (“CY 2020E FV/Revenue”). This analysis indicated the following CY 2020E FV/Revenue multiples:

 

Selected company

   CY 2020E
FV/Revenue
 

Instructure

     6.8x  

New relic

     5.9x  

Box

     4.1x  

BlackLine

     8.8x  

PROS

     9.3x  

SurveyMonkey

     7.0x  

8x8

     4.3x  

Workiva

     6.1x  

Yext

     4.9x  

Zuora

     5.4x  

2U

     2.1x  

Talend

     4.3x  

Benefitfocus

     2.9x  

Based on the results of this analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan selected multiple reference ranges for CY 2020E FV/Revenue of 4.5x-6.5x. This multiple range was then applied to Instructure’s estimated revenue for calendar year 2020 as provided in the Management Projections, which indicated implied equity value per share ranges for Instructure common stock, rounded to the nearest $0.25, of $33.75 to $47.25.

Selected Transaction Analysis. Using publicly available information, J.P. Morgan examined selected transactions involving software companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to the business of Instructure or aspects thereof. For each of the selected transactions, J.P. Morgan calculated the firm value to be paid for the target company in such transaction as a multiple of published equity research estimates for revenue for the 12-month period following the announcement of the applicable transaction (“FV/NTM Revenue”). The transactions considered are as follows:

 

Month/Year Announced

  

Acquiror

  

Target

   FV/NTM
Revenue
 

February 2019

  

Qlik Technologies, Inc.

  

Attunity Ltd.

     4.9x  

December 2018

  

Vista Equity Partners

  

MINDBODY, Inc.

     6.6x  

November 2018

  

Vista Equity Partners

  

Apptio Inc

     7.0x  

January 2018

  

SAP SE

  

Callidus Software, Inc.

     7.8x  

December 2017

  

Oracle Corporation

  

Aconex Limited

     8.4x  

May 2017

  

Vista Equity Partners

  

Xactly Corp

     4.5x  

June 2016

  

Thoma Bravo

  

Qlik Technologies, Inc.

     3.6x  

June 2016

  

salesforce.com, Inc.

  

Demandware Inc

     8.9x  

May 2016

  

Vista Equity Partners

  

Marketo, Inc.

     5.9x  

April 2016

  

Oracle Corporation

  

Textura Corporation

     5.7x  

April 2016

  

Vista Equity Partners

  

Cvent, Inc.

     6.0x  

December 2013

  

Oracle Corporation

  

Responsys, Inc.

     6.8x  

June 2013

  

salesforce.com, Inc.

  

ExactTarget Inc.

     6.4x  

None of the selected transactions reviewed was identical to the proposed Merger. Certain of these transactions may have characteristics that are materially different from those of the proposed Merger. However, the transactions selected were chosen because the participants in and certain other aspects of the transactions, for

 

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purposes of J.P. Morgan’s analysis, may be considered similar to the participants in and aspects of the proposed Merger. The analyses necessarily involved complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transactions differently than they would affect the proposed Merger.

Based on the results of this analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan selected a multiple reference range for FV/NTM Revenue of 5.0x – 8.0x. The FV/NTM Revenue multiples were then applied to Instructure’s estimated revenue for the 12-month period following September 30, 2019 which indicated an implied equity value per share range for Instructure common stock, rounded to the nearest $0.25, of $35.75 to $55.25.

Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for the Instructure common stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future cash flows generated by the asset and taking into consideration the time value of money with respect to those cash flows by calculating the current value of the cash flows generated by the asset, which we refer to as the present value and which is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital and other appropriate factors. The present value of all future cash flows generated by the asset for periods beyond the projections period is referred to as terminal value.

J.P. Morgan calculated the unlevered free cash flows that Instructure is expected to generate during fiscal years 2020 through 2033 and fourth quarter 2019 based upon financial projections prepared by the management of Instructure. Management provided two separate cases to extrapolate EBITDA margin after fiscal year 2023: one case assumed EBITDA margin increase from 2023 to 2026 up to a 35% EBITDA and steady thereafter, which we refer to as the 35% long-term EBITDA margin case; one case assumed EBITDA margin increase from 2023 to 2026 up to a 40% EBITDA and steady thereafter, which we refer to as the 40% long-term EBITDA margin case (each as described more fully in the section of this proxy statement entitled “The Merger—Management Projections”).

In both the 35% long-term EBITDA margin case and the 40% long-term EBITDA margin case:

 

   

J.P. Morgan treated stock-based compensation as a cash expense in the unlevered free cash flow calculation for purposes of its discounted cash flow analysis, as stock-based compensation is viewed as a true economic expense of the business;

 

   

J.P. Morgan also calculated a range of terminal asset values of Instructure at the end of fiscal year 2033 by applying a perpetual growth rate ranging from 2.5% to 3.5% of the unlevered free cash flow of Instructure during the final year of the 14.25-year period;

 

   

The unlevered free cash flows and the range of terminal asset values were then discounted to present values using a range of discount rates from 9.50% to 11.50%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of Instructure; and

 

   

The present value of the unlevered free cash flows and the range of terminal asset values were then adjusted by adding Instructure’s net cash balance of $127 million as of September 30, 2019.

Based on the management projections and discount rates from 9.50-11.50% the discounted cash flow analysis indicated a range of equity values, rounded to the nearest $0.25, of $30.50 to $44.50 per share of Instructure’s common stock for the 35% long-term EBITDA margin case and $34.25 to $50.75 per share of Instructure’s common stock for the 40% long-term EBITDA margin case.

Other Information

52-Week Historical Trading Range. For reference only and not as a component of its fairness analyses, J.P. Morgan reviewed the trading range for Instructure common stock for the 52-week period ended December 3, 2019. J.P.

 

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Morgan noted that the low and high closing share prices during this period were $35.23 and $53.69 per share of Instructure common stock, respectively.

Equity Research Analyst Price Targets. For reference only and not as a component of its fairness analyses, J.P. Morgan reviewed certain equity research analyst price targets for Instructure common stock obtained from Wall Street Research, and available as of December 3, 2019. J.P. Morgan noted that the range of such price targets, was $42.00 to $56.00 per share of Instructure common stock.

Miscellaneous. The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Instructure. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Instructure, and none of the selected transactions reviewed was identical to the Merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Instructure. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the Merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Instructure and the transactions compared to the Merger.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Instructure with respect to the Merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Instructure and the industries in which it operates.

For services rendered in connection with the Merger and the delivery of the opinion, Instructure has agreed to pay J.P. Morgan a fee of approximately $24 million, of which $3 million became payable upon delivery of the Opinion and the remainder will be payable only upon the completion of the Merger. In addition, Instructure has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, neither J.P. Morgan nor its affiliates have had any other material financial advisory or other material commercial or investment banking relationships with Instructure. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates

 

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have had commercial or investment banking relationships with Thoma Bravo and its portfolio companies, for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included providing debt syndication and equity underwriting services to portfolio companies of Thoma Bravo unrelated to the proposed Merger. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of portfolio companies of Thoma Bravo, for which it receives customary compensation or other financial benefits. In addition, as of the date of J.P Morgan’s opinion, J.P. Morgan and its affiliates held, on a proprietary basis, less than 1% of Instructure’s outstanding common stock. During the two year period preceding the date of its opinion, the aggregate fees received by J.P. Morgan from the Company were $0 and from Thoma Bravo were $19 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of Instructure, Parent, Merger Sub or the Thoma Bravo Fund and its portfolio companies for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.

Management Projections

Instructure does not, as a matter of course, publicly disclose long-term forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying long-term assumptions, estimates and projections. However, Instructure is including a summary of certain previously nonpublic, unaudited prospective financial information prepared by its management for the calendar years 2019-2033 in order to provide Instructure stockholders with access to information that was made available to, and approved by, the Board of Directors in connection with its evaluation of the Merger and the Per Share Merger Consideration. The Management Projections were based on an initial set of projections prepared by management and were presented to the Board of Directors on November 1, 2019 in connection with the Board of Directors’ consideration of a strategic transaction process. Such projections only included calendar years 2019 to 2023 based on the 35% long-term EBITDA margin case. Those projections were subsequently updated to include the 40% long-term EBITDA margin case and further extrapolations through calendar year 2033, and were presented to the Board of Directors with such updated information on November 26, 2019. On December 2 and 3, 2019, the Board of Directors approved certain further adjustments, which were incorporated into the Management Projections. The footnotes to the tables below provide further information about these adjustments. In addition, the Management Projections did not include proceeds or shutdown costs with respect to the operation, divesture, or shutdown of the Bridge segment. A subset of the Management Projections was made available to Parent and Merger Sub at Parent’s request in connection with their due diligence review, and the Management Projections were made available to J.P. Morgan in connection with the rendering of J.P. Morgan’s opinion to the Board of Directors.

The following table presents the Management Projections in the 35% long-term EBITDA margin case.

 

(In millions)   2019E     2020E     2021E     2022E     2023E     2024E     2025E     2026E     2027E     2028E     2029E     2030E     2031E     2032E     2033E  

Revenue

  $ 238     $ 279     $ 320     $ 358     $ 394     $ 434     $ 477     $ 525     $ 577     $ 628     $ 677     $ 720     $ 759     $ 791     $ 814  

Adjusted EBITDA(1)

  $ 19     $ 19     $ 62     $ 81     $ 106     $ 129     $ 154     $ 184     $ 202     $ 220     $ 237     $ 252     $ 266     $ 277     $ 285  

Unlevered Free Cash Flow(2)(3)

  $ (19   $ 2     $ 23     $ 37     $ 60     $ 82     $ 106     $ 135     $ 154     $ 150     $ 156     $ 167     $ 176     $ 184     $ 193  

The following table presents the Management Projections in the 40% long-term EBITDA margin case.

 

(In millions)   2019E     2020E     2021E     2022E     2023E     2024E     2025E     2026E     2027E     2028E     2029E     2030E     2031E     2032E     2033E  

Revenue

  $ 238     $ 279     $ 320     $ 358     $ 394     $ 434     $ 477     $ 525     $ 577     $ 628     $ 677     $ 720     $ 759     $ 791     $ 814  

Adjusted EBITDA(1)

  $ 19     $ 19     $ 62     $ 81     $ 106     $ 136     $ 170     $ 210     $ 231     $ 251     $ 271     $ 288     $ 304     $ 316     $ 326  

Unlevered Free Cash Flow(2)(4)

  $ (19   $ 2     $ 23     $ 37     $ 60     $ 89     $ 122     $ 160     $ 174     $ 169     $ 183     $ 195     $ 206     $ 215     $ 225  

 

(1)

Adjusted EBITDA is a non-GAAP financial measure and is earnings before interest, tax, depreciation and amortization and excludes stock-based compensation expense.

 

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(2)

Free Cash Flow is a non-GAAP financial measure and is calculated as Adjusted EBITDA (as shown in the table above) less (i) estimated tax expense, less (ii) property and equipment capital expenditures, less (iii) internal-use software capital expenditures, plus or minus (iv) change in net working capital and interest income, less the after tax impact of stock-based compensation expense.

(3)

Before the December 2 and December 3 adjustments, the Unlevered Free Cash Flow numbers were ($19), ($0), $21, $34, $58, $79, $103, $122, $143, $149, $149, $161, $172, $182 and $193 for the calendar years 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032 and 2033, respectively.

(4)

Before the December 2 and December 3 adjustments, the Unlevered Free Cash Flow numbers were ($19), ($0), $21, $34, $58, $82, $113, $149, $171, $162, $176, $190, $202, $213 and $225 for the calendar years 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032 and 2033, respectively.

For purposes of this proxy statement, we refer to the Management Projections and the earlier projections upon which the Management Projections were based as the “Projections.” The Projections were developed by Instructure management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement, or any changes to Instructure’s operations or strategy that may be implemented after the consummation of the Merger, including any costs incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement; provided that as discussed above, at the direction of Instructure, J.P. Morgan has not included any proceeds or shutdown costs in its projection with respect to the operation of the Bridge segment or the divestiture or shutdown of the Bridge segment. Furthermore, the Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. In the view of Instructure management, the Management Projections have been reasonably prepared by Instructure management on bases reflecting the best currently available estimates and judgments of Instructure management of the future financial performance of Instructure and other matters covered thereby.

Although the Projections are presented with numerical specificity, they were based on numerous variables and assumptions made by Instructure management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Instructure’s business, all of which are difficult or impossible to predict accurately and many of which are beyond Instructure’s control. The Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Projections, including, but not limited to, Instructure’s performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in Instructure’s reports filed with the SEC. There can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than forecasted. The Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Projections will be affected by Instructure’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Projections should not be regarded as an indication that Instructure, J.P. Morgan, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Projections in this proxy statement should not be regarded as an indication that the Projections will be necessarily predictive of actual future events. No representation is made by Instructure or any other person regarding the Projections or Instructure’s ultimate performance compared to such information. The Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about Instructure contained in Instructure’s public filings with the SEC. For more information, please see the section of this proxy

 

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statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Projections, stockholders are cautioned not to place undue, if any, reliance on the Projections.

The Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. The non-GAAP financial measures used in the Management Projections were relied upon by J.P. Morgan for purposes of its opinion and by the Board of Directors in connection with its evaluation of the Merger. 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 included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by J.P. Morgan for purposes of its opinion or by the Board of Directors in connection with its evaluation of the Merger. Accordingly, Instructure has not provided a reconciliation of the financial measures included in the Projections to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Instructure may not be comparable to similarly titled amounts used by other companies. Neither Instructure’s independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

Adjusted EBITDA and Unlevered Free Cash Flow contained in the Management Projections and Adjusted EBITDA and Free Cash Flow contained in the Projections set forth above, are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. The summary of such information above is included solely to give stockholders access to the information that was made available to the Board of Directors, J.P. Morgan, Parent and Merger Sub, and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares of Instructure common stock.

In addition, the 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, and except as required by applicable securities laws, Instructure does not intend to update or otherwise revise the 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.

Interests of Instructure’s Directors and Executive Officers in the Merger

When considering the recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. The Board of Directors was aware of and considered these interests, among other matters, to the extent that they existed at the time, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders. These interests are described in more detail and, where applicable, are quantified in the narrative below.

 

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Arrangements with Parent

As of the date of this proxy statement, none of our executive officers has entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates or otherwise provide any financing with respect to the Merger. Except as approved by the Board of Directors, from the date of the Merger Agreement, to the earlier of the termination of the Merger Agreement or the Effective Time, pursuant to the terms of the Merger Agreement, Parent and Merger Sub covenant not to, and covenant to not permit any of their subsidiaries or respective controlled affiliates to, authorize, make or enter into, any arrangements or understandings (formal or informal, binding or otherwise) with any executive officer of Instructure (1) regarding any continuing employment or consulting relationship with the Surviving Corporation; (2) pursuant to which any such executive officer would be entitled to receive consideration of a different amount or nature than Instructure stockholders; or (3) pursuant to which any such executive officer (directly or indirectly) would agree to provide equity investment to finance any portion of the Merger.

Insurance and Indemnification of Directors and Executive Officers

For a period of six years after the Effective Time, the Surviving Corporation and Parent will indemnify, defend and hold harmless, and advance expenses to current or former directors, officers and employees of Instructure with respect to all acts or omissions by them in their capacities as such at any time prior to the Effective Time (including any matters arising in connection with the Merger Agreement or the transactions contemplated thereby), to the fullest extent that Instructure would be permitted by applicable law and to the fullest extent required by the organizational documents of Instructure as in effect on the date of the Merger Agreement. For a period of six years after the Effective Time, Parent will cause the certificate of incorporation, bylaws or other organizational documents of the Surviving Corporation to contain provisions with respect to indemnification, advancement of expenses and limitation of director, officer and employee liability that are no less favorable to the current or former directors, officers and employees of Instructure than those set forth in Instructure’s organizational documents as of the date of the Merger Agreement. The Surviving Corporation will not, for a period of six years from the Effective Time, amend, repeal or otherwise modify these provisions in the organizational documents in any manner that would adversely affect the rights of the current or former directors, officers and employees of Instructure.

The Merger Agreement also provides that, prior to the Effective Time, Instructure may purchase a six-year prepaid “tail” policy on the same terms and conditions as Parent would be required to cause the Surviving Corporation to purchase as discussed below. Instructure’s ability to purchase a “tail” policy is subject to a cap on the premium equal to 300% of the aggregate annual premiums currently paid by Instructure for its existing directors’ and officers’ liability insurance and fiduciary insurance for its last full fiscal year. If Instructure does not purchase a “tail” policy prior to the Effective Time, for at least six years after the Effective Time, Parent will cause the Surviving Corporation to maintain in full force and effect, on terms and conditions no less advantageous to the current or former directors, officers and employees of Instructure, the existing directors’ and officers’ liability insurance and fiduciary insurance maintained by Instructure as of the date of the Merger Agreement. The “tail” policy will cover claims arising from facts, events, acts or omissions that occurred at or prior to the Effective Time, including the transactions contemplated in the Merger Agreement. The obligation of Parent or the Surviving Corporation, as applicable, is subject to an annual premium cap of 300% of the aggregate annual premiums currently paid by Instructure for such insurance, but if the costs exceed such cap, Parent or the Surviving Corporation will purchase as much of such insurance coverage as possible for such amount. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”

 

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Treatment of Company Options and Company RSU Awards

The Company from time to time has granted awards under Instructure’s 2015 Equity Incentive Plan, including the Portfolium, Inc. 2014 Equity Incentive Plan and the Practice XYZ, Inc. Equity Incentive Plan, (collectively, the “Company Equity Plans”), and options to purchase shares of Instructure common stock (each, a “Company Option”) and restricted stock units covering shares of Instructure common stock (each, a “Company RSU Award”).

At the Effective Time, each Company Option and Company RSU Award that is unexpired, unexercised, outstanding and vested as of immediately before the Effective Time or that vests solely as a result of the consummation of the transactions contemplated by the Merger Agreement (each, a “Vested Award”) (other than vested Company Options with a per share exercise price equal to or greater than $47.60) will be cancelled and automatically converted into the right to receive the Vested Award Cash-out Payment (as described above).

At the Effective Time, each unvested award will be cancelled and automatically converted into the right to receive the applicable Cash Replacement Amount (as described above), subject to the vesting conditions described below. The Cash Replacement Amount will vest and be payable (subject to continued service) at the same time as the corresponding, cancelled unvested award would have vested and will have the same terms (including any vesting acceleration terms) that applied to the cancelled unvested award, except for terms rendered inoperative by reason of the Merger or for any applicable administrative or ministerial changes.

Any Company Option (whether vested or unvested) with a per share exercise price equal to or greater than $47.60 will be cancelled immediately upon the Effective Time without payment or consideration.

At the Effective Time, each Company RSU Award that is outstanding immediately before the Effective Time and unsettled will become vested and nonforfeitable with respect to a number of shares of Instructure common stock subject to such Company RSU Award, and will be cancelled and converted automatically into the right to receive a cash amount equal to the Per Share Merger Consideration in respect of each vested share of Instructure common stock subject to such Company RSU Award, subject to applicable tax withholding.

The Company Equity Plans will terminate as of the Effective Time and the provisions in any other employee plan or contract providing for the issuance or grant of any other interest in respect of the capital stock of Instructure will be cancelled as of the Effective Time.

Potential Payments At or Following Change in Control

Executive Agreements with Named Executive Officers

We have entered into executive agreements with each of our named executive officers, other than Mr. Coates. Each executive agreement provides that if the employment of such officer is terminated for any reason other than “Cause” (as defined in each executive agreement), death or disability or if the officer voluntarily resigns for “Good Reason” (as defined in each executive agreement), he or she would be entitled to receive the following severance payments and benefits:

 

   

for all officers that have entered into executive agreements other than Mr. Goldsmith, a payment equal to six (6) months of such officer’s then-current base salary, paid over the six-month period following such officer’s separation from service; Mr. Goldsmith would receive twelve (12) months of his then-current base salary paid over the twelve-month period following his separation from service;

 

   

for all officers that have entered into executive agreements other than Mr. Goldsmith, reimbursement of COBRA premiums for such officer and his or her eligible dependents, if any, for a period of up to six (6) months; Mr. Goldsmith would receive reimbursement of COBRA premiums for up to twelve (12) months; and

 

   

a lump sum payment equal to 80% of such officer’s annual target bonus, pro-rated based on the number of full months of service in the year in which the separation of service occurs.

 

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In addition, these agreements provide that if the employment of such officer is terminated for any reason other than Cause, death or disability or if the officer voluntarily resigns for Good Reason within three months prior to (and contingent upon the consummation of) a “Change in Control” of the Company (as defined in each executive agreement) or twelve (12) months after a Change in Control of the Company, such officer would be entitled to receive the following severance payments and benefits (the “CIC Benefits”):

 

   

for all officers that have entered into executive agreements other than Mr. Goldsmith, Mr. Maylett, and Ms. DeBellis, a payment equal to nine (9) months of his or her then-current base salary paid over the nine-month period following a separation from service; for Mr. Goldsmith a payment equal to twelve (12) months of his then-current base salary paid over the twelve-month period following Mr. Goldsmith’s separation from service; for Mr. Maylett and Ms. DeBellis, if the separation of service happens during such officer’s first year of service, six (6) months of such officer’s then-current base salary paid over the six-month period following such officer’s separation from service, if the separation of service happens subsequent to such officer’s first year of service, nine (9) months of such officer’s then-current base salary paid over the nine-month period following such officer’s separation from service;

 

   

reimbursement of COBRA premiums for such officer and his or her eligible dependents, if any, for a period of up to nine (9) months, except Mr. Goldsmith, who would receive reimbursement of COBRA premiums for up to twelve (12) months;

 

   

a lump sum payment equal to 80% of such officer’s annual target bonus, pro-rated based on the number of full months of service in the year in which the separation of service occurs, provided that the effective date of termination is on or after March 31 of the year of termination; and

 

   

100% vesting acceleration of all then-unvested equity awards held by such officer, other than Mr. Maylett and Ms. DeBellis who, if the separation of service happens during such officer’s first year of service, receives 25% vesting acceleration of all then-unvested equity awards held by such officer, and if the separation of service happens subsequent to such officer’s first year of service, receives 75% vesting acceleration of all then-unvested equity awards held by such officer.

Further, our Board has interpreted the executive agreement and the duties and responsibilities and authority of the Company’s chief executive officer, chief financial officer and chief legal officer (the “Public-Facing Executives”) such that if a Change in Control occurs that results in the Company, immediately following the closing of such transaction, no longer being publicly traded, each Public-Facing Executive will automatically be eligible to receive the CIC Benefits if such Public-Facing Executive provides the Company notice of intent to resign from the company for “Good Reason” (as defined in each executive agreement), and does so resign.

Waiver Agreements with Daniel T. Goldsmith and Matthew A. Kaminer

We have entered into waiver agreements with each of Mr. Goldsmith and Mr. Kaminer. Each waiver agreement provides that, notwithstanding anything contained in the executive agreements or the Board’s interpretation of the executive agreements to the contrary, if the transactions contemplated by the Merger Agreement are consummated, effective immediately prior to the consummation of such transactions, each of Messrs. Goldsmith and Kaminer shall be provided the following benefits:

 

   

100% acceleration of vesting of all then-unvested equity awards held by such officer that are scheduled to vest prior to or on March 1, 2020;

 

   

50% acceleration of vesting of all then-unvested equity awards held by such officer, other than then-unvested equity awards that are scheduled to vest after March 1, 2020; and

 

   

All remaining then-unvested equity awards held by such officer shall be converted into unvested cash-based awards in accordance with the Merger Agreement and will have the same terms and conditions, including with respect to vesting, as applied to the unvested outstanding stock award for which the cash-based award was replaced.

 

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In addition, pursuant to the waiver agreements, each of Messrs. Goldsmith and Kaminer have agreed that, notwithstanding anything contained in the executive agreements or the Board’s interpretation of the executive agreements to the contrary, the consummation of the transactions contemplated by the Merger Agreement alone and the potential related changes in such officer’s job duties, responsibilities, title, or authority solely as a result of the Company no longer being publicly traded will not constitute “Good Reason” for purposes of the executive agreement.

Quantification of Potential Payments to Instructure Named Executive Officers in Connection with the Merger

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of Instructure’s named executive officers that is based on or otherwise relates to the Merger. This compensation is referred to as “golden parachute compensation” by the applicable SEC disclosure rules. The amounts set forth in the table below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement and in the footnotes to the table. As a result, the actual amounts, if any, that a named executive officer receives may materially differ from the amounts set forth in the table.

The table below assumes that: (i) the Effective Time of the Merger will occur on [February 15], 2020; (ii) the employment of the named executive officer will be terminated immediately following the Effective Time of the Merger in a manner entitling the named executive officer to receive the severance benefits described in the section of this proxy statement captioned “—Payments Upon Termination At or Following Change in Control;” and (iii) no named executive officer becomes entitled to additional compensation or benefits or equity awards prior to the Effective Time of the Merger. Pursuant to applicable proxy disclosure rules, the value of the equity award vesting acceleration below is equal to the number of shares covered by the applicable Company Option or Company RSU Award that are accelerating multiplied by the Per Share Merger Consideration (per share). The amounts shown in the table below do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that would vest pursuant to their terms, on or prior to the Effective Time of the Merger, or the value of payments or benefits that are not based on or otherwise related to the Merger.

In the footnotes to the amounts shown in the table below, we refer to payments that are conditioned on the occurrence of both the Merger, as well as the named executive officer’s qualifying termination of employment as being payable on a “double-trigger” basis, and we refer to payments that are conditioned only upon the occurrence of the Merger as being payable on a “single-trigger” basis. The individuals named below represent the named executive officers for Instructure’s fiscal year ending December 31, 2018.

Golden Parachute Compensation(1)

 

Name

   Cash ($)(2)      Equity ($)(3)      Perquisites/
Benefits ($)(4)
     Total ($)  

Daniel T. Goldsmith

     440,000        22,059,905        18,684        22,518,589  

Joshua L. Coates

     1        —          17,298        17,299  

Steven B. Kaminsky

     363,000        9,130,771        14,013        9,507,784  

Matthew A. Kaminer

     207,000        8,418,391        17,298        8,642,689  

Mitchell E. Macfarlane(5)

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,010,001        39,609,066        67,293        40,686,360

 

Name

   Single Trigger
($)(6)
     Double Trigger
($)(7)
 

Daniel T. Goldsmith

     13,517,362        12,349,697  

Joshua L. Coates

     —          17,299  

Steven B. Kaminsky

     —          18,506,373  

Matthew A. Kaminer

     9,526,162        8,980,211  

Mitchell E. Macfarlane

     —          —    

 

(1)

The conditions under which each of these payments and benefits are to be provided are described in more detail above in the section of this proxy statement captioned “—Potential Payments At or Following Change

 

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in Control.” Under each of the Executive Agreements with our named executive officers, if payments and benefits payable to an executive would be subject to the excise tax imposed by Sections 280G and 4999 of the Code, such amounts may be cut back to the extent necessary to ensure that the executive receives the larges payment possible on an after-tax basis. The effect of this provision and any related cut-backs are not reflected in the values disclosed in this table. When calculations are performed for purposes of calculating the amount of excise tax (and any related cutback), the value of a portion of the equity vesting will be discounted under applicable tax regulations.

(2)

The amounts in this column represent the double trigger cash severance payments each named executive officer may become entitled to receive, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”

(3)

The amounts listed in this column represent the double trigger accelerated vesting that each named executive officer may become entitled to receive with respect to his or her equity awards, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.” Messrs. Goldsmith and Kaminer are entitled to receive single trigger benefits related to accelerated vesting of their respective equity awards, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”

(4)

The amounts listed in this column represent the value of the double trigger COBRA benefits that each named executive officer may become entitled to receive, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”

(5)

Mitchell E. Macfarlane, our former Chief Operating Officer, is no longer employed by Instructure and has not received and is not eligible to receive any payments or benefits that are based on or otherwise related to the Merger.

(6)

The amounts listed in this column represent the single trigger accelerated vesting that each named executive officer may become entitled to receive with respect to his or her equity awards, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”

(7)

The amounts listed in this column represent the double trigger cash severance, accelerated vesting, and COBRA benefits that each named executive officer may become entitled to receive with respect to his or her equity awards, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”

Equity Awards Held by Instructure’s Executive Officers and Non-employee Directors

At the Effective Time of the Merger, each Company Option and Company RSU Award held by our executives and non-employee directors will receive the treatment described in the section of this proxy statement captioned “Treatment of Company Options and Company RSU Awards.”

Each of our executive officers is eligible to receive the applicable vesting acceleration benefits with respect to his or her equity awards described above under the heading “—Payments Upon Termination At or Following Change in Control.”

At the Effective Time each unvested equity award held by Instructure’s non-employee directors will become fully vested and, as applicable, exercisable pursuant to the terms of Instructure’s Non-Employee Director Compensation Policy.

Equity Interests of Instructure’s Executive Officers and Non-employee Directors

The following table sets forth the number of shares of common stock and the number of shares of common stock underlying equity awards held by each of Instructure’s executive officers and non-employee directors that are outstanding as of December 6, 2019. The table also sets forth the values of these shares and equity awards, determined as the number of shares multiplied by the Per Share Merger Consideration (minus the applicable per share exercise price for any Company Options). No additional shares of common stock or equity awards were granted to any executive officer or non-employee director in contemplation of the Merger.

 

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Equity Interests of Instructure’s Executive Officers and Non-employee Directors

 

Name

  Shares
(#)(1)
    Shares ($)     Company
Options
(#)(2)
    Company
Options ($)
    Company
RSUs
(#)(3)
    Company
RSUs ($)
    Total ($)  

Daniel T. Goldsmith

    70,346       3,348,470       97,228       461,833       453,741       21,598,072       25,408,374  

Steven B. Kaminsky

    189,046       8,998,590       47,616       893,400       173,054       8,237,370       18,129,360  

Matthew A. Kaminer

    49,349       2,349,012       117,767       3,582,088       101,603       4,836,303       10,767,403  

Marta DeBellis

    1,338       63,689       —         —         87,745       4,176,662       4,240,351  

Frank Maylett

    587       27,941       —         —         75,854       3,610,650       3,638,592  

Joshua L. Coates

    2,216,041       105,483,552       —         —         8,115       386,274       105,869,826  

Steven A. Collins

    4,161       198,064       42,923       1,833,885       4,162       198,111       2,230,060  

William M. Conroy

    116,801       5,559,728       —         —         8,115       386,274       5,946,002  

Ellen Levy

    21,439       1,020,496       —         —         8,115       386,274       1,406,770  

Kevin Thompson

    13,420       638,792       —         —         4,162       198,111       836,903  

Lloyd G. Waterhouse

    52,436       2,495,954       —         —         8,115       386,274       2,882,228  

 

(1)

This number includes shares of common stock beneficially owned, excluding shares issuable upon exercise of Company Options or settlement of Company RSU Awards.

(2)

The number of shares of common stock subject to Company Options includes both vested and unvested Company Options. The number of shares subject to the vested and unvested portions of the Company Options and the value (determined as the aggregate number of underlying shares multiplied by the Per Share Merger Consideration minus the aggregate exercise price with respect to such shares) of those portions of the Company Options are as follows:

 

Name

   Vested
Company
Options (#)
     Vested
Company
Options ($)
     Unvested
Company
Options (#)
     Unvested
Company
Options ($)
 

Daniel T. Goldsmith

     36,460        173,185        60,768        288,648  

Steven B. Kaminsky

     18,033        321,250        29,583        572,150  

Matthew A. Kaminer

     97,812        3,166,932        19,955        415,156  

Marta DeBellis

     —          —          —          —    

Frank Maylett

     —          —          —          —    

Joshua L. Coates

     —          —          —          —    

Steven A. Collins

     42,923        1,833,885        —          —    

William M. Conroy

     —          —          —          —    

Ellen Levy

     —          —          —          —    

Kevin Thompson

     —          —          —          —    

Lloyd G. Waterhouse

     —          —          —          —    

This number reflects the number of shares of common stock subject to Company RSU Awards that were not vested as of December 6, 2019.

Financing of the Merger

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financial condition.

We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $2 billion. This amount includes the funds needed to: (1) pay stockholders the amounts due under the Merger Agreement and (2) make payments in respect of our outstanding equity-based awards pursuant to the Merger Agreement.

 

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Equity Financing

Pursuant to the Equity Commitment Letter, the Thoma Bravo Fund has agreed to provide Parent with an equity commitment sufficient to fund (i) the aggregate purchase price required to be paid at the closing of the Merger, including (A) the aggregate consideration to which the holders of Instructure common stock become entitled pursuant to the Merger Agreement, (B) the aggregate consideration payable with respect to the Instructure vested restricted stock units pursuant to the Merger Agreement and (C) the aggregate consideration payable with respect to the vested options to purchase Instructure common stock pursuant to the Merger Agreement, and (ii) together with the cash on hand of Instructure, (A) the repayment or refinancing of the indebtedness of the Instructure Group outstanding under the Credit Facility and (B) certain fees and expenses to be paid at the closing of the Merger, contemplated by, and subject to the terms and conditions of, the Merger Agreement.

The Equity Commitment Letter provides, among other things, that: (1) Instructure is an express third party beneficiary thereof with respect to enforcing Parent’s right to cause the equity commitment under the Equity Commitment Letter by the Thoma Bravo Fund to be funded to Parent in order to consummate the Merger, if, and only if, (a) all conditions in Article VII of the Merger Agreement have been satisfied or waived (other than any conditions that by their nature are to be satisfied at the Closing, but subject to the prior or substantially concurrent satisfaction of such conditions), (b) Parent and Merger Sub fail to consummate the Closing by the date on which the Closing would otherwise be required to have occurred pursuant to Section 2.3 of the Merger Agreement and (c) Parent is required pursuant to a final and non-appealable order of a court of competent jurisdiction to specifically perform such obligations; and (2) the Thoma Bravo Fund will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that (x) there is adequate remedy at law or (y) an award of specific performance is not an appropriate remedy for any reason at law or in equity. The Equity Commitment Letter may not be amended or otherwise modified without the prior written consent of Parent, the Thoma Bravo Fund and Instructure.

Guaranty

Pursuant to the Guaranty, the Thoma Bravo Fund has agreed to guarantee the due, punctual and complete payment and performance of all of the liabilities and obligations of Parent under the Merger Agreement, including, but not limited to: (1) the aggregate amount of the Parent Termination Fee (as defined under the caption “The Merger—Termination Fee”) solely if and when any of the Parent Termination Fee is payable pursuant to the Merger Agreement; (2) any amounts due by Parent pursuant to legal proceedings as a result of default under the Merger Agreement; and (3) the reimbursement obligations of Parent pursuant to the indemnification obligations to Instructure and its representatives in connection with any debt financing. We refer to the obligations set forth in the preceding sentence as the “Guaranteed Obligations.” The obligations of the Thoma Bravo Fund under the Guaranty are subject to a cap equal to $136,857,000.

Subject to specified exceptions, the Guaranty will terminate upon the earliest of:

 

   

funding of the commitment under the Equity Commitment Letter;

 

   

the closing of the Merger;

 

   

(1) the payment and full discharge of any reimbursement obligations which Instructure has requested reimbursement for within 90 days following the valid termination of the Merger Agreement and (2) the valid termination of the Merger Agreement in accordance with its terms, other than a termination pursuant to which Instructure would be entitled to a Parent Termination Fee under the Merger Agreement, in which case the Guaranty shall terminate 90 days after such termination unless Instructure shall have delivered a written notice with respect to the Guaranteed Obligations prior to such 90th day; provided that if the Merger Agreement has been so terminated and such notice has been provided, the Thoma Bravo Fund, as the guarantor entity under the Guaranty, shall have no further liability or obligation under the Guaranty from and after the earliest of (x) the Closing of the Merger, including payment of the aggregate merger consideration payable at the Closing in accordance with the

 

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Merger Agreement, (y) a final, non-appealable order of a court of competent jurisdiction determining that the Thoma Bravo Fund, as the guarantor entity under the Guaranty, does not owe any amount under the Guaranty and (z) a written agreement among the Thoma Bravo Fund, as the guarantor entity under the Guaranty, and Instructure terminating the obligations and liabilities of the Thoma Bravo Fund, as the guarantor entity under the Guaranty, pursuant to the Guaranty; and

 

   

payment of the Guaranteed Obligations by the Thoma Bravo Fund, as the guarantor entity under the Guaranty, Parent and/or Merger Sub to Instructure.

Closing and Effective Time

The closing of the Merger will take place no later than the second business day following the satisfaction or waiver in accordance with the Merger Agreement of all of the conditions to closing of the Merger (as described under the caption, “Proposal 1: Adoption of the Merger Agreement—Conditions to the closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing but subject to the satisfaction or waiver of such conditions.

Appraisal Rights

If the Merger is consummated, stockholders who continuously hold shares of Instructure common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw their demands or otherwise lose their rights of appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 the DGCL (“Section 262”). The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in Section 262 and in this summary to a “stockholder” are to the record holder of shares of Instructure common stock unless otherwise expressly noted herein. Only a holder of record of shares of Instructure common stock is entitled to demand appraisal of the shares registered in that holder’s name. A person having a beneficial interest in shares of Instructure common stock held of record in the name of another person, such as a bank, broker, trust or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of Instructure common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Under Section 262, if the Merger is completed, holders of shares of Instructure common stock who: (1) submit a written demand for appraisal of their shares, (2) do not vote in favor of the adoption of the Merger Agreement; (3) continuously are the record holders of such shares through the Effective Time; and (4) otherwise exactly follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Instructure common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. However, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Instructure common stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Per Share Merger Consideration in respect of the shares of Instructure common stock for which appraisal rights have been pursued and perfected exceeds $1 million (conditions (a) and (b) referred to as the “ownership thresholds”). Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time

 

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during such period. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may voluntarily pay to each stockholder entitled to appraisal an amount in cash pursuant to subsection (h) of Section 262, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary cash payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Under Section 262, where a Merger Agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Instructure’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the Merger, any holder of shares of Instructure common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Per Share Merger Consideration described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Instructure common stock, Instructure believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.

Stockholders wishing to exercise the right to seek an appraisal of their shares of Instructure common stock must do ALL of the following:

 

   

the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;

 

   

the stockholder must deliver to Instructure a written demand for appraisal before the vote on the Merger Agreement at the Special Meeting;

 

   

the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and

 

   

the stockholder (or any person who is the beneficial owner of shares of Instructure common stock held either in a voting trust or by a nominee on behalf of such person) or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

In addition, one of the ownership thresholds must be met.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote its shares.

Filing Written Demand

Any holder of shares of Instructure common stock wishing to exercise appraisal rights must deliver to Instructure, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to stockholders, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of Instructure common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of

 

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record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting, or otherwise fail to vote, on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Instructure stockholders will constitute a waiver of appraisal rights.

Only a holder of record of shares of Instructure common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Instructure common stock must be executed by or on behalf of the holder of record, and must reasonably inform Instructure of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

Instructure, Inc.

Attention: Investor Relations

6330 South 3000 East, Suite 700

Salt Lake City, Utah 84121

Any holder of shares of Instructure common stock who has delivered a written demand to Instructure and who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Instructure a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the Per Share Merger Consideration within 60 days after the

 

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Effective Time. If an appraisal proceeding is commenced and Instructure, as the Surviving Corporation, does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s demand in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a stockholder, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the per share merger consideration being offered pursuant to the Merger Agreement.

Notice by the Surviving Corporation

If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of Instructure common stock who has properly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Instructure common stock who has complied with Section 262 and is entitled to seek appraisal under Section 262 (including for this purpose any beneficial owner of the relevant shares) may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder (or beneficial owner), demanding a determination of the fair value of the shares held by all dissenting stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and stockholders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Instructure common stock. Accordingly, any holders of shares of Instructure common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Instructure common stock within the time and in the manner prescribed in Section 262. The failure of a holder of Instructure common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.

Within 120 days after the Effective Time, any holder of shares of Instructure common stock who has complied with the requirements of Section 262 and who is entitled to appraisal rights thereunder will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Instructure has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt by the Surviving Corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of Instructure common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above, however, the demand for appraisal can only be made by a stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of Instructure common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the written statement described above at the addresses stated therein. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the

 

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court. The costs of these notices are borne by the Surviving Corporation. After notice to stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates (if any) to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings and, if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights if neither of the ownership thresholds is met.

Determination of Fair Value

After determining the holders of Instructure common stock entitled to appraisal and that at least one of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Instructure common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary payment, unless paid at such time.

In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the Merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same

 

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as, the Per Share Merger Consideration. Neither Instructure nor Parent anticipates offering more than the Per Share Merger Consideration to any stockholder exercising appraisal rights, and each of Instructure and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Instructure common stock is less than the Per Share Merger Consideration. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and charged upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised. In the absence of such determination or assessment, each party bears its own expenses.

If any stockholder who demands appraisal of his, her or its shares of Instructure common stock under Section 262 fails to perfect, or effectively loses or withdraws, such holder’s right to appraisal, the stockholder’s shares of Instructure common stock will be deemed to have been converted at the Effective Time into the right to receive the Per Share Merger Consideration. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Per Share Merger Consideration in accordance with Section 262.

From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of Instructure common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of Instructure common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds described above has been satisfied as to the stockholders seeking appraisal rights, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder without the approval of the court, and such approval may be conditioned upon such terms as the court deems just; provided, however, that the foregoing shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the Merger within 60 days after the Effective Time.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

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

The following discussion is a summary of material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders (each as defined below) of shares of Instructure common stock whose shares are converted into the right to receive cash pursuant to the Merger. This summary is general in nature and does not discuss all aspects of U.S. federal income taxation that may be relevant to an Instructure

 

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stockholder in light of its particular circumstances. In addition, this summary does not describe any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. This discussion is limited to Instructure stockholders who hold their shares of Instructure common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes).

This discussion is for general information only and does not address all of the tax consequences that may be relevant to Instructure stockholders in light of their particular circumstances. For example, this discussion does not address:

 

   

tax consequences that may be relevant to Instructure stockholders who may be subject to special treatment under U.S. federal income tax laws, such as banks or other financial institutions; tax-exempt organizations; retirement or other tax deferred accounts; S corporations, partnerships or any other entities or arrangements treated as partnerships or pass-through or disregarded entities for U.S. federal income tax purposes (or an investor in a partnership, S corporation or other pass-through or disregarded entity); insurance companies; mutual funds; governmental organizations; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; controlled foreign corporations; passive foreign investment companies; corporations that accumulate earnings to avoid U.S. federal income tax; entities subject to the U.S. anti-inversion rules; certain U.S. expatriates or former citizens or long-term residents of the United States; or, except as noted below, holders that own or have owned (directly, indirectly or constructively) five percent or more of Instructure common stock (by vote or value);

 

   

tax consequences to Instructure stockholders holding their shares of Instructure common stock as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;

 

   

tax consequences to Instructure stockholders whose shares of Instructure common stock constitute qualified small business stock within the meaning of Section 1202 of the Code;

 

   

tax consequences to Instructure stockholders that received their shares of Instructure common stock in a compensatory transaction, through a tax qualified retirement plan or pursuant to the exercise of options or warrants;

 

   

tax consequences to Instructure stockholders who own an equity interest in Parent following the Merger;

 

   

tax consequences to U.S. Holders whose “functional currency” is not the U.S. dollar;

 

   

tax consequences to Instructure stockholders who hold their Instructure common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;

 

   

tax consequences arising from the Medicare tax on net investment income;

 

   

tax consequences to Instructure stockholders subject to special tax accounting rules as a result of any item of gross income with respect to the shares of Instructure common stock being taken into account in an “applicable financial statement” (as defined in Section 451(b) of the Code);

 

   

the U.S. federal estate, gift or alternative minimum tax consequences, if any, as a result of the Merger;

 

   

any state, local or non-U.S. tax consequences as a result of the Merger; or

 

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tax consequences to Instructure stockholders that do not vote in favor of the Merger and that properly demand appraisal of their shares under Section 262 of the DGCL or that entered into a non-tender and support agreement as part of the transaction described in this proxy statement.

If a partnership (including an entity or arrangement, domestic or non-U.S., treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Instructure common stock, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares of Instructure common stock and partners therein should consult their tax advisors regarding the consequences of the Merger.

We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation.

THE FOLLOWING SUMMARY IS FOR GENERAL INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING FEDERAL ESTATE, GIFT AND OTHER NON-INCOME TAX CONSEQUENCES, AND TAX CONSEQUENCES UNDER STATE, LOCAL OR NON-U.S. TAX LAWS.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of Instructure common stock that is for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code; or (2) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

The receipt of cash by a U.S. Holder in exchange for shares of Instructure common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Instructure common stock surrendered pursuant to the Merger. Gain or loss must be determined separately for each block of shares (that is, shares of Instructure common stock acquired at the same cost in a single transaction). A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Instructure common stock. A U.S. Holder’s gain or loss on the disposition of shares of Instructure common stock will generally be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations.

Non-U.S. Holders

The following is a summary of the material U.S. federal income tax consequences that will apply to you if you are a Non-U.S. Holder. The term “Non-U.S. Holder” means a beneficial owner of Instructure common stock that is, for U.S. federal income tax purposes, not a U.S. Holder.

 

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Special rules, not discussed herein, may apply to certain Non-U.S. Holders, such as:

 

   

certain U.S. expatriates or former citizens or long-term residents of the United States;

 

   

controlled foreign corporations;

 

   

passive foreign investment companies;

 

   

corporations that accumulate earnings to avoid U.S. federal income tax; and

 

   

pass-through entities, or investors in such entities.

Any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable income tax treaty);

 

   

such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition of shares of Instructure common stock pursuant to the Merger, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a flat rate of 30% (or a lower rate under an applicable income tax treaty), which gain may be offset by certain U.S. source capital losses of such Non-U.S. Holder, provided that the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses; or

 

   

Instructure is or has been a “United States real property holding corporation” as such term is defined in Section 897(c) of the Code (“USRPHC”), at any time within the shorter of the five-year period preceding the Merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of Instructure common stock (the “Relevant Period”) and, if shares of Instructure common stock are regularly traded on an established securities market (within the meaning of Section 897(c)(3) of the Code), such Non-U.S. Holder owns directly or is deemed to own pursuant to attribution rules more than 5% of Instructure common stock at any time during the Relevant Period, in which case such Non-U.S. Holder’s proceeds received on the disposition of shares will generally be subject to withholding at a rate of 15% and such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Although there can be no assurances in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the Merger.

Information Reporting and Backup Withholding

Information reporting and backup withholding (currently, at a rate of 24%) may apply to the proceeds received by an Instructure stockholder pursuant to the Merger. Backup withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form) or (2) a Non-U.S. Holder that (i) provides a certification of such holder’s foreign status on the appropriate series of IRS Form W-8 (or a substitute or successor form) or (ii) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

The foregoing summary does not discuss all aspects of U.S. federal income taxation that may be relevant to particular holders of Instructure common stock. Instructure stockholders should consult their own tax advisors as

 

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to the particular tax consequences to them of exchanging their Instructure common stock for cash pursuant to the Merger under any federal, state, local or non-U.S. tax laws.

Withholding on Foreign Entities

Sections 1471 through 1474 of the Code (“FATCA”), impose a U.S. federal withholding tax of 30% on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally will impose a U.S. federal withholding tax of 30% on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Subject to the recently released proposed Treasury Regulations described below, FATCA will apply to gross proceeds from sales or other dispositions of Instructure common stock after [●]. The United States Treasury Department recently released proposed regulations which, if finalized in their present form, would eliminate the federal withholding tax of 30% applicable to the gross proceeds of a sale or other disposition Instructure common stock. In its preamble to such proposed regulations, the U.S. Treasury Department stated that taxpayers may generally rely on the proposed regulations until final regulations are issued.

Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on the disposition of Instructure common stock pursuant to the Merger.

Regulatory Approvals Required for the Merger

General

Instructure and Parent have agreed to take all action necessary to comply with all regulatory notification requirements, and, subject to certain limitations, to obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement. These approvals include approval under the HSR Act and any other applicable antitrust laws (whether domestic or foreign).

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, certain acquisitions may not be completed until information has been furnished to the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable HSR Act waiting period has expired or been terminated. The waiting period under the HSR Act is 30 calendar days, unless the waiting period is terminated earlier or extended by a request for additional information and documentary material. The Merger is subject to the provisions of the HSR Act and therefore cannot be completed until Instructure and Parent file a notification and report form with the FTC and the DOJ under the HSR Act and the applicable waiting period has expired or been terminated. Instructure and Thoma Bravo Fund XIII-A, L.P. made the necessary filings with the FTC and the Antitrust Division of the DOJ on December 18, 2019. Instructure and Thoma Bravo Fund XIII-A, L.P. may also file pre-merger or post-merger notification filings, forms and submissions with other Governmental Authorities pursuant to other applicable antitrust laws in connection with the Merger to the extent required in the reasonable judgement of counsel to Parent and Instructure. The Merger Agreement provides that Instructure, Parent and Merger Sub will use reasonable best efforts to obtain regulatory clearance, including, to the extent necessary to obtain clearance of the Merger pursuant to the HSR Act and any other antitrust laws applicable to the Merger; provided, however, that no party is required to (i) offer, commit to and effect, by consent decree, hold separate order or otherwise, (A) the sale, divestiture, license or other disposition of any and all of the capital stock or other

 

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equity or voting interest, assets (whether tangible or intangible), rights, products or businesses of any person, including Parent and Merger Sub (and their respective Affiliates, if applicable), on the one hand, and the Instructure Group, on the other hand; and (B) any other restrictions on the activities of Parent and Merger Sub (and their respective Affiliates, if applicable), on the one hand, and Instructure, on the other hand; or (ii) contest, defend and appeal any Legal Proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the Merger.

At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, any state or foreign jurisdiction could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.

Other Regulatory Approvals

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by stockholders and the completion of the Merger.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Instructure, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk between Instructure, Parent and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Instructure, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Instructure, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Instructure, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Instructure and our business.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time: (1) Merger Sub will be merged with and into Instructure, with Instructure becoming a wholly owned subsidiary of Parent; and (2) the separate corporate existence of Merger Sub will thereupon cease. From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, powers and franchises of Instructure and Merger Sub, and all of the debts, liabilities and duties of Instructure and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

At the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub as of immediately prior to the Effective Time, to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified. At the Effective Time, the officers of Instructure as of immediately prior to the Effective Time will be the officers of the Surviving Corporation, until their successors are duly appointed. At the Effective Time, the certificate of incorporation of Instructure as the Surviving Corporation will be amended to read substantially identically to the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended.

 

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Closing and Effective Time

The closing of the Merger will take place no later than the second business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption, “—Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger) or such other time agreed to in writing by Parent, Instructure and Merger Sub. On the Closing Date, the parties will file a certificate of merger with the Secretary of State for the State of Delaware as provided under the DGCL. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the DGCL (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent, Merger Sub and Instructure and specified in the certificate of merger, being referred to herein as the “Effective Time”).

Merger Consideration

Instructure common stock

At the Effective Time, and without any action required by any stockholder, each share of Instructure common stock (other than Excluded Shares, which include, for example, shares of Instructure common stock owned by stockholders who have properly and validly exercised their statutory rights of appraisal under Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and extinguished, and automatically converted into the right to receive the Per Share Merger Consideration, less any applicable withholding taxes.

Outstanding Company Options and Company RSU Awards

At the Effective Time, each Vested Award (other than vested Company Options with a per share exercise price equal to or greater than 47.60) will be cancelled and automatically converted into the right to receive the Vested Award Cash-out Payment (as described in the “Summary” section above).

At the Effective Time, each unvested award will be cancelled and automatically converted into the right to receive the applicable Cash Replacement Amount (as described in the “Summary” section above), subject to the vesting conditions described below. The Cash Replacement Amount will vest and be payable (subject to continued service) at the same time as the corresponding, cancelled unvested award would have vested and will have the same terms (including any vesting acceleration terms) that applied to the cancelled unvested award, except for terms rendered inoperative by reason of the Merger or for any applicable administrative or ministerial changes.

Any Company Option (whether vested or unvested) with a per share exercise price equal to or greater than $47.60 will be cancelled immediately upon the Effective Time without payment or consideration.

At the Effective Time, each Company RSU Award that is outstanding immediately before the Effective Time and unsettled will become vested and nonforfeitable with respect to a number of shares of Instructure common stock subject to such Company RSU Award, and will be cancelled and converted automatically into the right to receive a cash amount equal to the Per Share Merger Consideration in respect of each vested share of Instructure common stock subject to such Company RSU Award, subject to applicable tax withholding.

The Company Equity Plans will terminate as of the Effective Time and the provisions in any other employee plan or contract providing for the issuance or grant of any other interest in respect of the capital stock of Instructure will be cancelled as of the Effective Time.

Treatment of Purchase Rights under the Employee Stock Purchase Plan

The Merger Agreement generally provides that no new offering periods or purchase periods will begin under the ESPP after December 4, 2019, and no individual will be allowed to begin participating in the ESPP after

 

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December 4, 2019. After December 4, 2019, each ESPP participant will not be allowed to increase his or her payroll contribution rate from the rate in effect as of December 4, 2019, or make separate non-payroll contributions to the ESPP, except as required by applicable law. Any offering period that would otherwise be outstanding at the Effective Time will end no later than five days before the Effective Time. All outstanding purchase rights under the ESPP will be exercised no later than one business day before the Effective Time (with such purchase rights subject to any pro rata adjustments that may be necessary if the current offering period in progress is shortened), and the ESPP will terminate as of the Effective Time. Each share of Instructure common stock purchased under the ESPP that remains outstanding as of immediately before the Effective Time will be cancelled at the Effective Time and converted into the right to receive the Per Share Merger Consideration less any applicable withholding taxes.

Exchange and Payment Procedures

Prior to the closing of the Merger, Parent will designate the Company’s transfer agent, Computershare, or such other bank or trust company, reasonably acceptable to Instructure (the “Payment Agent”) to make payments of the Merger consideration to stockholders. At or prior to the Effective Time, Parent will deposit (or cause to be deposited) with the Payment Agent cash sufficient to pay the aggregate Per Share Merger Consideration to stockholders.

Promptly following the Effective Time (and in any event within five business days), the Payment Agent will mail to each holder of record (as of immediately prior to the Effective Time) a letter of transmittal in customary form and instructions for use in effecting the surrender of such holder’s shares of Instructure common stock represented by such holder’s certificate(s) or book-entry shares in exchange for the Per Share Merger Consideration payable in respect of such shares. The amount of any Per Share Merger Consideration paid to stockholders may be reduced by any applicable withholding taxes.

If any cash deposited with the Payment Agent is not claimed within one year following the Effective Time, such cash will be returned to Parent, upon demand, and any holders of Instructure common stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Parent as general creditor for payment of the Per Share Merger Consideration. Any cash deposited with the Payment Agent that remains unclaimed two years following the Effective Time will, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of any claims or interest of any person previously entitled thereto.

Representations and Warranties

The Merger Agreement contains representations and warranties of Instructure, Parent and Merger Sub.

Some of the representations and warranties in the Merger Agreement made by Instructure are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means, with respect to Instructure, any change, event, violation, inaccuracy, effect or circumstance that, individually or in the aggregate have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect (1) is or would reasonably be expected to be materially adverse to the business, financial condition, assets and liabilities or results of operations of the Instructure Group, taken as a whole, or (2) would reasonably be expected to prevent, materially impair or materially delay the consummation by Instructure of the Merger prior to Termination Date, except that, with respect to clause (1) only, no changes, events, violations, inaccuracies, effects or circumstances with respect to the following matters (by itself or when aggregated) will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur:

 

   

general economic conditions in the United States or any other country or region in the world, or changes in conditions in the global economy generally;

 

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conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, including (1) changes in interest rates or credit ratings in the United States or any other country; (2) changes in exchange rates for the currencies of any country; or (3) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world;

 

   

conditions in the industries in which the Instructure Group or its customers generally conducts business, including in the software and mortgage industries;

 

   

regulatory, legislative or political conditions in the United States or any other country or region in the world;

 

   

geopolitical conditions, outbreak of hostilities, acts of war, sabotage, terrorism or military actions (including any escalation or general worsening of any such hostilities, acts of war, sabotage, terrorism or military actions) in the United States or any other country or region in the world;

 

   

earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world;

 

   

resulting from the announcement of the Merger Agreement or the pendency of the Merger, including the impact thereof on the relationships, contractual or otherwise, of the Instructure Group with employees, suppliers, customers, partners, vendors or any other third person (except with respect to any representation or warranty to the extent that such representation or warranty expressly addresses consequences resulting from the execution of the Merger Agreement or the consummation or pendency of the Merger);

 

   

the compliance by Parent, Merger Sub or Instructure with the terms of the Merger Agreement, including any action expressly required to be taken or refrained from being taken pursuant to or in accordance with the Merger Agreement, including the failure of Instructure to take any action that Instructure is specifically prohibited by the terms of the Merger Agreement from taking to the extent Parent fails to give its consent thereto after a written request therefor;

 

   

arising from any action taken or refrained from being taken, in each case to which Parent has expressly approved, consented to or requested in writing following the date of the Merger Agreement;

 

   

changes or proposed changes in GAAP or other accounting standards or in any applicable laws or regulations (or the enforcement or interpretation of any of the foregoing, in each case after the date of the Merger Agreement);

 

   

the price or trading volume of Instructure common stock, in and of itself (it being understood that any cause of such change may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

   

any failure, in and of itself, by the Instructure Group to meet (1) any public estimates or expectations of Instructure’s revenue, earnings or other financial performance or results of operations for any period; or (2) any internal budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that any cause of any such failure may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

   

the availability or cost of equity, debt or other financing to Parent or Merger Sub; and

 

   

any transaction litigation or other legal proceeding threatened, made or brought by any of the current or former stockholders of Instructure (on their own behalf or on behalf of Instructure) against Instructure, any of its executive officers or other employees or any member of the Board of Directors arising out of the Merger or any other transaction contemplated by the Merger Agreement.

 

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In the Merger Agreement, Instructure has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and authority and qualification to conduct business with respect to Instructure;

 

   

Instructure’s corporate power and authority to enter into and perform the Merger Agreement, the enforceability of the Merger Agreement and the absence of conflicts with laws, Instructure’s organizational documents and Instructure’s contracts;

 

   

the organizational documents of Instructure;

 

   

the necessary approval of the Board of Directors;

 

   

the rendering of J.P. Morgan’s opinion to the Board of Directors;

 

   

the inapplicability of anti-takeover statutes to the Merger;

 

   

the necessary vote of stockholders in connection with the Merger Agreement;

 

   

the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws to Instructure or the resulting creation of any lien upon Instructure’s assets due to the performance of the Merger Agreement;

 

   

required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;

 

   

the capital structure of Instructure;

 

   

the absence of any undisclosed exchangeable security, option, warrant or other right convertible into Instructure common stock;

 

   

the absence of any contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any of Instructure’s securities;

 

   

the subsidiaries of Instructure;

 

   

the accuracy and required filings of Instructure’s SEC filings and financial statements;

 

   

Instructure’s disclosure controls and procedures;

 

   

Instructure’s internal accounting controls and procedures;

 

   

certain indebtedness of Instructure;

 

   

the absence of specified undisclosed liabilities;

 

   

the conduct of the business of the Instructure Group in the ordinary course consistent with past practice except specifically as a result of Instructure’s sale process since October 1, 2019 and the absence of any change, event, development or state of circumstances that has had or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect since December 31, 2018;

 

   

the existence and enforceability of specified categories of Instructure’s material contracts, and any notices with respect to termination or intent not to renew those material contracts therefrom;

 

   

certain real property leased or subleased by Instructure;

 

   

environmental matters;

 

   

trademarks, patents, copyrights and other intellectual property matters including data security requirements and privacy;

 

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tax matters;

 

   

employee benefit plans;

 

   

labor matters;

 

   

Instructure’s compliance with laws, standards and requirements and possession of necessary permits;

 

   

litigation matters;

 

   

insurance matters;

 

   

absence of any transactions, relations or understandings between Instructure or any of its subsidiaries, on the one hand, and any affiliate or related person thereof, on the other hand;

 

   

payment of fees to brokers in connection with the Merger Agreement;

 

   

export controls matters and compliance with the Foreign Corrupt Practices Act of 1977; and

 

   

the exclusivity and terms of the representations and warranties made by Parent and Merger Sub.

In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Instructure that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, good standing and authority and qualification to conduct business with respect to Parent and Merger Sub and availability of these documents;

 

   

Parent’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement, the enforceability of the Merger Agreement and the absence of conflicts with laws, Parent’s or Merger Sub’s organizational documents and Parent’s or Merger Sub’s contracts;

 

   

the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws or the resulting creation of any lien upon Parent or Merger Sub’s assets due to the performance of the Merger Agreement;

 

   

required consents and regulatory filings in connection with the Merger Agreement;

 

   

the absence of litigation, orders and investigations;

 

   

ownership of capital stock of Instructure;

 

   

payment of fees to brokers in connection with the Merger Agreement;

 

   

operations of Parent and Merger Sub;

 

   

the absence of any required consent of holders of voting interests in Parent or Merger Sub;

 

   

delivery and enforceability of each of the Equity Commitment Letter and the Guaranty;

 

   

the commitments to provide financing to Parent, the availability of Parent’s financing and sufficiency of funds;

 

   

the absence of agreements between Parent and members of the Board of Directors or Instructure management;

 

   

the absence of any stockholder or management arrangements related to the Merger;

 

   

the solvency of Parent and the Surviving Corporation following the consummation of the Merger and the transactions contemplated by the Merger Agreement; and

 

   

the exclusivity and terms of the representations and warranties made by Instructure.

The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.

 

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Conduct of Business Pending the Merger

The Merger Agreement provides that, except as: (1) expressly contemplated by the Merger Agreement; (2) required by applicable law; (3) approved in writing in advance by Parent (which approval will not be unreasonably withheld, conditioned or delayed); or (4) as disclosed in the confidential disclosure letter to the Merger Agreement, during the period of time between the date of the signing of the Merger Agreement and the first to occur of the Effective Time and the termination of the Merger Agreement (the “Interim Period”), Instructure will and will cause each of its subsidiaries:

 

   

to maintain its existence in good standing pursuant to applicable law;

 

   

subject to the restrictions and exceptions in the Merger Agreement, conduct its business and operations in the ordinary course of business; and

 

   

use its commercially reasonable efforts to preserve intact its current business organization, to keep available the services of its current officers and employees, and to preserve its current relationships with customers, vendors, distributors and other persons with which the Instructure Group has material business relationships.

In addition, Instructure has also agreed that, except as (1) expressly contemplated by the Merger Agreement; (2) approved in writing in advance by Parent (which approval will not be unreasonably withheld, conditioned or delayed); (3) as disclosed in the confidential disclosure letter to the Merger Agreement; (4) to the extent necessary to comply with the express obligations set forth in any Material Contract in effect on the date of the Merger Agreement; or (5) as required by applicable law, during the Interim Period, Instructure will not, among other things:

 

   

amend the organizational documents of any member of the Instructure Group;

 

   

liquidate, dissolve or reorganize;

 

   

issue, sell, deliver or grant any shares of capital stock or any options, warrants, commitments, subscriptions or rights to purchase any similar capital stock or securities of Instructure other than as provided below;

 

   

adjust, split, combine, pledge, encumber or modify the terms of capital stock of Instructure;

 

   

declare, set aside or pay any dividend or other distribution;

 

   

incur, assume or suffer any indebtedness or issue any debt securities;

 

   

(A) enter into, adopt, amend (including accelerating the vesting of), modify or terminate any compensation or benefit plan or arrangement of any director, officer, individual consultant or employee, (B) increase the compensation or benefits payable to or pay any bonus or remuneration or pay any compensation or benefit not required by (or accelerate the time of payment or vesting of any payment becoming due under) any existing employee plan as in effect as of the date of the Merger Agreement to directors, officers, employees or individual consultant or other individual service providers of Instructure (other than, in each case of (A) and (B): (1) as may be required by applicable law or the terms of the applicable employee plan or any change in control, severance or similar agreement or any retention or similar agreement disclosed in the confidential disclosure letter to the Merger Agreement and in effect as of the date of the Merger Agreement; (2) making employee plans available to any new employee hires in the ordinary course of business and consistent with past practice at the vice president level or below; or (3) for increases in compensation for employees at the vice president level or below in the ordinary course of business and consistent with past practice); or (C) enter into any change in control, severance or similar arrangement or any retention, transaction or similar agreement with any officer, employee, director or independent contractor or other individual service provider; provided that in each case of (A) through (C), the Instructure Group may (1) change the title of its employees, provided that such changes do not involve increases in compensation,

 

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acceleration of vesting or acceleration of payment and (2) make bonus or commission payments in the ordinary course of business as required by the terms of any employee plans disclosed in the confidential disclosure letter to the Merger Agreement and payments of continued base salary or wages to employees and set targets and metrics therefor in the ordinary course of business or in accordance with any employee plan;

 

   

settle litigation involving Instructure;

 

   

change accounting practices;

 

   

change tax elections or settle any tax claims;

 

   

incur or commit to incur capital expenditures (excluding internal and external capitalized labor costs) in excess of $1 million in the aggregate, other than to the extent that such capital expenditures are otherwise reflected in Instructure’s capital expenditure budget set forth on the confidential disclosure letter to the Merger Agreement;

 

   

enter into Material Contracts (as defined in the Merger Agreement) except in the ordinary course of business;

 

   

effect certain layoffs without complying with applicable laws;

 

   

make any acquisitions by merger, consolidation or acquisition of stock or assets or enter into any joint ventures or similar arrangements other than investment in equity securities held in the ordinary course of business for cash management purposes, but not including strategic relationships, alliances, reseller agreements and similar commercial relationships;

 

   

enter into any collective bargaining agreement;

 

   

adopt or implement any stockholder rights plan or similar arrangement; or

 

   

enter into agreements to do any of the foregoing.

The “Go Shop” Period—Solicitation of Other Offers

Under the Merger Agreement, from the date of the Merger Agreement until 11:59 p.m., Pacific time on January 8, 2020 (the “No Shop Period Start Date”), Instructure and its representatives have the right to, among other things: (1) solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any inquiries regarding any proposal or inquiry that constitutes, could constitute or is reasonably expected to lead to, an Acquisition Proposal (as defined below), (2) continue, enter into, maintain or engage in discussions or negotiations with respect to an Acquisition Proposal, or (3) subject to entering into and solely in accordance with an Acceptable Confidentiality Agreement (as defined below), furnish to any person (and its representatives, prospective debt and equity financing sources and their respective representatives) any nonpublic information relating to the Instructure Group or afford to any such person (and its representatives, prospective debt and equity financing sources and their respective representatives) access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Instructure Group, in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, any proposal or inquiry that constitutes, or is reasonably expected to lead to, an Acquisition Proposal or any inquiries or the making of any proposal that would reasonably be expected to lead to an Acquisition Proposal, provided that Instructure must, within 24 hours, provide to Parent, or provide Parent access to, any such non-public information that has not been previously provided to Parent or its representatives, and the Instructure Group must not provide any competitively sensitive non-public information except in accordance with “clean room” or other similar procedures; provided, that Instructure may grant a limited waiver under any “standstill provision” or similar obligation to allow such person to submit an Acquisition Proposal on a confidential basis to the Board of Directors.

Instructure is not entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal (as defined below), unless it complies with certain procedures in the Merger

 

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Agreement, including, but not limited to, negotiating with Parent in good faith over a two business day period in an effort to amend the terms and conditions of the Merger Agreement, so that such Superior Proposal no longer constitutes “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.

If Instructure terminates the Merger Agreement for the purpose of entering into an agreement with any Excluded Party prior to the No Shop Period Start Date in respect of a Superior Proposal prior to the No Shop Period Start Date, Instructure would be required to pay a termination fee of $29,326,500 to Parent, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement. For more information, please see the section of this proxy statement captioned “—The Board of Directors’ Recommendation; Company Board Recommendation Change.”

For purposes of this proxy statement and the Merger Agreement:

“Acceptable Confidentiality Agreement” means a confidentiality agreement with Instructure that contains customary provisions requiring the counterparty thereto (and any of its affiliates and representatives named therein) that receive non-public information of or with respect to Instructure to keep such information confidential, provided that with respect to agreements executed and delivered after the Merger Agreement, the provisions contained therein are not materially less favorable, in the aggregate, to Instructure than the terms of the confidentiality agreement entered into between Instructure and Thoma Bravo (except that such agreement need not contain any “standstill” or similar provision or otherwise prohibit the making of any Acquisition Proposal). A joinder to an Acceptable Confidentiality Agreement pursuant to which a third party agrees to be bound by the confidentiality and use provisions of an Acceptable Confidentiality Agreement is an Acceptable Confidentiality Agreement.

“Acquisition Proposal” means any offer, proposal or indication of interest by a Third Person to engage in an Acquisition Transaction.

“Acquisition Transaction” means any transaction or series of related transactions (other than the Merger) involving:

(1) any direct or indirect purchase or other acquisition by any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons, whether from Instructure or any other person(s), of securities representing more than 20% of the total outstanding voting power of Instructure after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any person or “group” of persons that, if consummated in accordance with its terms, would result in such person or “group” of persons beneficially owning more than 20% of the total outstanding voting power of Instructure after giving effect to the consummation of such tender or exchange offer;

(2) any direct or indirect purchase, exclusive license or other acquisition by any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons of assets constituting or accounting for more than 20% of the consolidated assets, revenue or net income of the Instructure Group, taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition); or

(3) any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving Instructure pursuant to which any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons would hold securities representing more than 20% of the total outstanding voting power of Instructure outstanding after giving effect to the consummation of such transaction.

“Excluded Party” means any Third Person (i) who did not submit an Acquisition Proposal in writing to the Instructure Group or its representatives prior to the date of the Merger Agreement, (ii) who submits a written bona fide Acquisition Proposal to Instructure or any of its representatives after the date of the Merger Agreement

 

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and prior to the No-Shop Period Start Date and (iii) whose Acquisition Proposal is determined by the Board of Directors, in good faith, prior to the start of the No-Shop Period Start Date (after consultation with its outside counsel and its financial advisor) to be, or would reasonably be expected to lead to, a Superior Proposal; provided, however, that a Third Person shall immediately cease to be an Excluded Party (and the provisions of the Merger Agreement applicable to Excluded Parties shall cease to apply with respect to such Person) if (1) such Acquisition Proposal is withdrawn by such Third Person or (2) such Acquisition Proposal, in the good faith determination of the Board of Directors (after consultation with its outside counsel and its financial advisor), no longer is or would no longer be reasonably expected to lead to a Superior Proposal.

“Superior Proposal” means any bona fide written Acquisition Proposal for an Acquisition Transaction that (1) is not solicited in violation of the non-solicitation obligations pursuant to the Merger Agreement in any material respect and (2) is on terms that the Board of Directors (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) is reasonably likely to be consummated in accordance with its terms, taking into account all legal, regulatory and financing aspects of the proposal (including certainty of closing) and the identity of the person making the proposal and other aspects of the Acquisition Proposal that the Board of Directors (or a committee thereof) deems relevant, and if consummated, would be more favorable, from a financial point of view, to Instructure stockholders (in their capacity as such) than the Merger (taking into account (i) any revisions to the Merger Agreement made or proposed in writing by Parent prior to the time of such determination and (ii) all legal, regulatory, financial (including any termination fee amounts and conditions), timing financing and other aspects of such proposal) which such Acquisition Proposal is not subject to a due diligence condition. For purposes of the reference to an “Acquisition Proposal” in this definition, all references to “20%” in the definition of “Acquisition Transaction” will be deemed to be references to “80%.”

“Third Person” means any person or “group” (within the meaning of Section 13(d) of the Exchange Act), other than (i) Instructure or any of its controlled affiliates or (ii) Parent, Merger Sub, the Thoma Bravo Fund or any their respective affiliates or any “group” including Parent, Merger Sub, Guarantor or any their respective affiliates.

The “No Shop” Period—No Solicitation of Other Offers

From the date of the No Shop Period Start Date until the earlier to occur of the termination of the Merger Agreement and the Effective Time, Instructure has agreed not to, and to cause its subsidiaries and its and their respective representatives not to:

 

   

solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any Inquiry (as defined below) or proposal that constitutes or could reasonably be expected to lead to an Acquisition Proposal;

 

   

participate or engage in discussions, communications or negotiations with any Third Person regarding, regarding an Acquisition Proposal or Inquiry;

 

   

other than with respect to any Excluded Party which has reaffirmed its Acquisition Proposal to the Board of Directors within 24 hours of the No-Shop Period Start Date (and in the case of an Excluded Party, only for so long as the applicable Person remains an Excluded Party), furnish to any person (other than to Parent, Merger Sub or any designees of Parent or Merger Sub) any non-public information relating to the Instructure Group or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Instructure Group (other than Parent, Merger Sub or any designees of Parent or Merger Sub), in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist an Acquisition Proposal or any Inquiries or the making of any proposal or offer that would reasonably be expected to lead to an Acquisition Proposal;

 

   

approve, endorse or recommend any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal; or

 

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enter into any letter of intent, agreement in principle, memorandum of understanding, Merger Agreement, acquisition agreement or other contract relating to an Acquisition Transaction (as defined below), other than certain permitted confidentiality agreements.

In addition, Instructure has agreed to, other than with respect to any Excluded Party which has reaffirmed its Acquisition Proposal to the Board of Directors within 24 hours of the No Shop Period Start Date, cease and cause to be terminated any discussions or negotiations with any person and its representatives, request the prompt return or destruction of all non-public information concerning the Instructure Group furnished to any person with whom a confidentiality agreement was entered into at any time within the twelve month period immediately preceding the No Shop Period Start Date was executed and will cease providing any further information with respect to Instructure or any Acquisition Proposal to any such persons or their respective representatives and will terminate all access granted to any such persons or their respective representatives to any physical or electronic data room (or any other diligence access). Instructure has also agreed to enforce, and not to waive, terminate or modify any provision of any standstill or confidentiality agreement that prohibits or purports to prohibit a proposal being made to the Board of Directors, unless the Board of Directors has determined in good faith, after consultation with outside counsel, that failure to take such action (i) would prohibit the counterparty from making an unsolicited Acquisition Proposal to the Board of Directors and (ii) would be inconsistent with its fiduciary duties under applicable law.

Notwithstanding these restrictions, under certain circumstances, prior to the adoption of the Merger Agreement by Instructure stockholders, Instructure may, among other things, provide information to, and engage or participate in negotiations or substantive discussions with, a person in respect of a bona fide Acquisition Proposal, and otherwise facilitate such Acquisition Proposal or assist such person (and its representatives, prospective debt and equity financing sources and/or their respective representatives) with such Acquisition Proposal (in each case, if requested by such person) and such Acquisition Proposal was not the result from of material breach of Instructure’s obligations, as described in the immediately preceding paragraph (provided that Instructure and its representatives may contact any Third Person in writing to clarify any ambiguous terms and conditions of an Acquisition Proposal which are necessary to determine whether the Acquisition Proposal constitutes a Superior Proposal) if (and only if), subject to complying with certain procedures described in the subsequent paragraph, the Board of Directors (or a committee thereof) determines in good faith (after consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal, and, in each case, the failure to act in respect of such Acquisition Proposal would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law.

Instructure is not entitled to terminate the Merger Agreement after the No Shop Period Start Date for the purpose of entering into an agreement in respect of a Superior Proposal, unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a two business day period in an effort to amend the terms and conditions of the Merger Agreement, so that such Superior Proposal no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.

If Instructure terminates the Merger Agreement prior to the adoption of the Merger Agreement by Instructure stockholders for the purpose of entering into an agreement in respect of a Superior Proposal, other than entering into an agreement in respect of a Superior Proposal with an Excluded Party prior to the No-Shop Period, Instructure must pay a $29,326,500 termination fee to Parent, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement.

 

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For purposes of this proxy statement and the Merger Agreement:

“Inquiry” means an inquiry, request for discussions or negotiations or request to review non-public information that would reasonably be expected to indicate an interest in making or effecting an Acquisition Proposal or an Acquisition Transaction.

The Board of Directors’ Recommendation; Company Board Recommendation Change

As described above, and subject to the provisions described below, the Board of Directors has made the recommendation that the holders of shares of Instructure common stock vote “FOR” the proposal to adopt the Merger Agreement. The Merger Agreement provides that the Board of Directors will not effect a Company Board Recommendation Change except as described below.

Prior to the adoption of the Merger Agreement by stockholders, the Board of Directors may not take any action described in the following (any such action, a “Company Board Recommendation Change”):

 

   

withhold, withdraw, amend, qualify or modify, or publicly propose to withhold, withdraw, amend, qualify or modify, the recommendation of the Board of Directors to approve the Merger, in each case, in a manner adverse to Parent in any material respect (it being understood that it will be considered a modification adverse to Parent that is material if (1) any Acquisition Proposal structured as a tender or exchange offer is commenced and the Board of Directors fails to publicly recommend against acceptance of such tender or exchange offer by stockholders within ten business days of commencement thereof pursuant to Rule 14d-2 of the Exchange Act or (2) any Acquisition Proposal is publicly announced (other than by the commencement of a tender or exchange offer) and the Board of Directors fails to issue a public press release within ten business days of such public announcement providing that the Board of Directors reaffirms the Instructure recommendation);

 

   

adopt, approve, endorse, recommend or otherwise declare advisable (or propose to adopt, approve, endorse, recommend or otherwise declare advisable) an Acquisition Proposal;

 

   

fail to publicly reaffirm the recommendation of the Board of Directors to approve the Merger within ten business days after Parent so requests in writing (it being understood that Instructure will have no obligation to make such reaffirmation on more than three separate occasions); or

 

   

fail to include the recommendation of the Board of Directors to approve the Merger in this proxy statement.

For the avoidance of doubt, none of the following, among other things, will constitute a Company Board Recommendation Change: (1) a “stop, look and listen” communication by the Board of Directors (or a committee thereof) to Instructure stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication), (2) the factually accurate public disclosure by Instructure of the receipt of an Acquisition Proposal, (3) the determination by the Board of Directors (or a committee thereof) that an Acquisition Proposal constitutes a Superior Proposal, or (4) delivery by the Company to Parent of any notice related to an Intervening Event or Superior Proposal as set forth below.

Notwithstanding the restrictions described above, prior to the adoption of the Merger Agreement by stockholders, the Board of Directors may effect a Company Board Recommendation Change if (1) there has been an Intervening Event (as defined below); or (2) Instructure has received a bona fide Acquisition Proposal, whether before or after the No Shop Period Start Date, that the Board of Directors has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal, in each case, to the extent a failure to effect a Company Board Recommendation Change would be inconsistent with the Board of Directors’ fiduciary obligations under applicable law.

 

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The Board of Directors may only effect a Board of Directors Recommendation Change for an Intervening Event if:

 

   

Instructure has provided prior written notice to Parent at least four business days in advance to the effect that the Board of Directors (or a committee thereof) intends to effect a Company Board Recommendation Change pursuant to the Merger Agreement, which notice must specify the basis for such Company Board Recommendation Change, including a description of the Intervening Event in reasonable detail;

 

   

prior to effecting such Company Board Recommendation Change, Instructure and its representatives, during such four business day period, must have (1) negotiated with Parent and its representatives in good faith (to the extent that Parent desires to so negotiate) to allow Parent to offer such adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the documentation related to any debt financing proposed to be entered into by Parent (the “Debt Documents”) to obviate the need to effect a Company Board Recommendation Change in response to such Intervening Event; and (2) taken into account any adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents proposed by Parent and other information provided by Parent in response to the notice described in the foregoing clause (1), in each case that are offered in writing by Parent no later than 11:59 p.m. (Pacific time) on the last day of the four business day period, in a manner that would constitute a binding agreement between the parties if accepted by Instructure; and

 

   

following the four business day notice period described above, the Board of Directors (or a committee thereof) (after consultation with its financial advisor and outside legal counsel and taking into account Parent’s proposed revisions to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents and any other information provided by Parent) shall have determined that the failure of the Board of Directors (or a committee thereof) to make such a Company Board Recommendation Change to terminate the Merger Agreement would be inconsistent with its fiduciary duties pursuant to applicable law; provided, however, that each time material modifications to the Intervening Event occur, Instructure must notify Parent of such modification and the four business day period described above will recommence and be extended for two business days from the day of such notification.

In addition, the Board of Directors may only effect a Company Board Recommendation Change or authorize Instructure to terminate the Merger Agreement to enter into an agreement with respect to a Superior Proposal substantially concurrently with the termination of the Merger Agreement in response to a bona fide Acquisition Proposal that the Board of Directors has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal, in each case if and only if:

 

   

the Board of Directors (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would be inconsistent with its fiduciary duties pursuant to applicable law;

 

   

Instructure and its representatives have complied in all material respects with its obligations under the Merger Agreement with respect to such Acquisition Proposal;

 

   

Instructure has provided prior written notice to Parent at least two business days in advance to the effect that the Board of Directors (or a committee thereof) has (1) received a bona fide Acquisition Proposal that has not been withdrawn; (2) concluded in good faith that such Acquisition Proposal constitutes a Superior Proposal; and (3) resolved to effect a Company Board Recommendation Change or to terminate the Merger Agreement absent any revision to the terms and conditions of the Merger Agreement, which notice will specify the basis for such Company Board Recommendation Change or termination, including the identity of the person of “group” of persons making such Acquisition Proposal (unless such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person or “group” of persons that was in effect on the date of the Merger Agreement), the material terms thereof and copies of all relevant documents relating to such Acquisition Proposal;

 

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prior to effecting such Company Board Recommendation Change or termination, Instructure and its Representatives, during the two business day notice period described above, has: (1) negotiated with Parent and its Representatives in good faith (to the extent that Parent desires to so negotiate) to offer such adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents so that such Acquisition Proposal would cease to constitute a Superior Proposal; and (2) taken into account any adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents that are offered in writing by Parent, no later than 11:59 p.m. (Pacific time) on the last day of the two day notice period described above, in a manner that would constitute a binding agreement between the parties if accepted by Instructure, provided, however, that in the event of any material modifications to such Acquisition Proposal (it being understood that any change to the financial terms of such proposal shall be deemed a material modification), Instructure will be required to deliver a new written notice to Parent and to comply with the requirements of the foregoing clause (1) (it being understood that the “notice period” in respect of such new written notice will be one business day);

 

   

following the two business day notice period described above including any subsequent notice period as provided above, the Board of Directors (or a committee thereof) (after consultation with its financial advisor and outside legal counsel and taking into account Parent’s proposed revisions to the terms and conditions of the Merger Agreement and any other information provided by Parent) shall have determined that the failure of the Board of Directors (or a committee thereof) to make such a Company Board Recommendation Change to terminate the Merger Agreement would be inconsistent with its fiduciary duties pursuant to applicable law;

 

   

in the event of any termination of the Merger Agreement in order to cause or permit the Instructure Group to enter into an acquisition agreement with respect to such Acquisition Proposal, Instructure will have validly terminated the Merger Agreement in accordance with the terms of the Merger Agreement, including paying to Parent a termination fee of either (1) $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date for the purposes of entering into a definitive agreement in respect of a Superior Proposal with an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (2) $63,540,750, in the case of any other such termination; and

 

   

The Instructure Group has otherwise complied in all material respects with its obligations pursuant to the Merger Agreement with respect to such Acquisition Proposal.

For purposes of this proxy statement and the Merger Agreement, an “Intervening Event” means any material event or development or material change in circumstances that has materially improved or materially improves, or would be reasonably likely to materially improve the business, financial condition, assets and liabilities or results of operations of the Instructure Group, taken as a whole, in each case that was (1) not known to, or reasonably foreseeable by, the Board of Directors as of the date on which the Merger Agreement was executed; and (2) does not relate to (a) any Acquisition Proposal; or (b) the mere fact, in and of itself, that Instructure meets or exceeds any internal or published projections, forecasts, estimates or predictions of revenue, earnings or other financial or operating metrics for any period ending on or after the date of the Merger Agreement, or changes after the date of the Merger Agreement in the market price or trading volume of Instructure common stock or credit rating of Instructure, it being understood that the underlying cause of any of the foregoing in clause (b)  may be considered and taken into account.

Employee Benefits

The Merger Agreement provides that Parent will cause the Surviving Corporation to honor all of the terms of Instructure’s benefit plans set forth in the disclosure letter to the Merger Agreement following the Merger in accordance with their terms as in effect on December 4, 2019, unless otherwise required pursuant to applicable

 

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law. In addition, from and after the Effective Time until December 31, 2020, each employee who continues employment following the Merger (a “Continuing Employee”) will be provided with employee benefit plans or other compensation and severance arrangements (other than equity-based benefits and individual employment agreements, except as provided in the first sentence of this paragraph) at benefit levels that are substantially comparable in the aggregate to those provided to the Continuing Employee immediately before the Effective Time, in each case, either through (1) Instructure’s benefit plans and arrangements in existence immediately before the Effective Time, (2) comparable plans, or some combination of (1) and (2). In each case, base compensation and target cash incentive compensation opportunity will not be decreased from and after the Effective Time until December 31, 2020 for any Continuing Employee employed during that period. From and after the Effective Time until December 31, 2020, eligible employees will receive severance benefits according to Instructure’s severance plans, guidelines, practices and/or Instructure’s benefits plans and arrangements as in effect on December 4, 2019 that are described in the disclosure letter to the Merger Agreement.

The Surviving Corporation will grant any Continuing Employee credit for all service with the Instructure Group before the Effective Time for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant (including for purposes of vacation accrual and severance pay entitlement), but not including for any purpose under equity or equity-based benefit or compensation arrangements to the same extent and for the same purpose as such service was credited to such person under the corresponding employee benefit plan as of the Effective Time, except where the service credit would result in duplication of coverage or benefits. Each Continuing Employee will be immediately eligible to participate, without any waiting period, in any and all employee benefit plans sponsored by the Surviving Corporation (other than Instructure’s benefit plans and arrangements in existence immediately before the Effective Time) to the extent that coverage under any of the employee benefit plans sponsored by the Surviving Corporation replaces at the Effective Time coverage under a comparable Instructure benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time. For purposes of each employee benefit plan sponsored by the Surviving Corporation that provides medical, dental, pharmaceutical, vision or disability benefits to any Continuing Employee, the Surviving Corporation will use commercially reasonable efforts to cause all waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements of the plan to be waived for the Continuing Employee and his or her covered dependents to the same extent waived under the corresponding comparable Instructure benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time, and the Surviving Corporation will use commercially reasonable efforts to cause full credit to be given for any eligible expenses incurred by the Continuing Employee and his or her covered dependents during the portion of the plan year of the comparable Instructure benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time that ends on the date that the Continuing Employee’s participation in the corresponding employee benefit plan sponsored by the Surviving Corporation begins for purposes of satisfying the applicable deductible, coinsurance, co-pay, offsets and maximum out-of-pocket requirements applicable to the Continuing Employee and his or her covered dependents for the applicable plan year as if the amounts had been paid according to the employee benefit plan of the Surviving Corporation to the same extent as such amounts were credited for the same purpose under the corresponding comparable Instructure benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time. The account of each Continuing Employee under any flexible spending plan sponsored will be credited by the Surviving Corporation with any unused balance in the account of the Continuing Employee. Any vacation or paid time off accrued but unused by a Continuing Employee as of immediately before the Effective Time will be credited to the Continuing Employee following the Effective Time, and will not be subject to accrual limits or other forfeiture and will not limit future accruals (except to the extent that the limits or forfeitures applied under Instructure’s benefit plans and arrangements in effect as of December 4, 2019).

 

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Efforts to Close the Merger

Under the Merger Agreement, Parent, Merger Sub and Instructure agreed to use reasonable best efforts to take all actions and assist and cooperate with the other parties, in each case as necessary, proper and advisable pursuant to applicable law or otherwise to consummate the Merger.

Cooperation with Debt Financing

Although the obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition (including, without limitation, consummation of any debt financing), Instructure has agreed that during the Interim Period, Instructure will use its commercially reasonable best efforts to, and will use its reasonable best efforts to cause each of its subsidiaries and its and their respective representatives to, among other things:

 

   

provide Parent and Merger Sub with such reasonable cooperation as may be reasonably requested by Parent or Merger Sub to assist them in arranging the debt financing (if any) to be obtained by Parent, Merger Sub or their respective affiliates in connection with the Merger (the “Debt Financing”);

 

   

participate (and cause senior management of Instructure and its representatives with appropriate seniority and expertise to participate) in a reasonable number of meetings and presentations with actual or prospective lenders, road shows and due diligence sessions, drafting sessions and sessions with rating agencies, and otherwise cooperate with the marketing and due diligence efforts for any of the Debt Financing;

 

   

assist Parent and Parent’s financing sources with the timely preparation of customary (A) rating agency presentations, bank information memoranda, confidential information memoranda, lender presentations and similar documents required in connection with the Debt Financing; and (B) pro forma financial statements and forecasts of financial statements of the Surviving Corporation for one or more periods following the Effective Time, except that no member of the Instructure Group will be required to provide any information or assistance with respect to the preparation of pro forma financial statements and forecasts of financing statements relating to (i) the determination of the proposed aggregate amount of the Debt Financing, the interest rates thereunder or the fees and expenses relating thereto; (ii) the determination of any post-Closing or pro forma cost savings, synergies, capitalization, ownership or other pro forma adjustments desired to be incorporated into any information used in connection with the Debt Financing; or (iii) any financial information related to Parent or any of its Subsidiaries or any adjustments that are not directly related to the acquisition of Instructure;

 

   

assist Parent in connection with the preparation, registration, execution and delivery of definitive financing documents and related documentation as may be reasonably requested by Parent or its financing sources and otherwise facilitate the pledging of collateral and the granting of security interests in respect of the Debt Financing;

 

   

cooperate with Parent to obtain customary and reasonable corporate and facilities ratings, consents, landlord waivers and estoppels, non-disturbance agreements, non-invasive environmental assessments, non-imputation affidavits, legal opinions, surveys and title insurance as reasonably requested by Parent;

 

   

facilitate the granting of security interests (and perfection thereof) in collateral or the reaffirmation of the pledge of collateral on or after the Effective Time; facilitate the payoff, discharge and termination in full at the closing of all indebtedness required to be repaid, and the release of all liens required to be released, at the closing;

 

   

deliver notices of prepayment within the time periods required by the relevant agreements governing indebtedness and obtain customary payoff letters, lien terminations and instruments of discharge to be delivered at the Effective Time, give any other necessary notices to allow for the payoff, discharge and termination in full of all indebtedness required to be repaid at the Effective Time and release all liens in connection therewith, and cooperate in the replacement, backstop, or cash collateralization of any outstanding letters of credit;

 

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provide customary authorization letters, confirmations and undertakings to Parent’s financing sources in connection with the distribution of information to prospective lenders;

 

   

facilitate and assist in the preparation, execution, and delivery of credit agreements, guarantees, certificates, and other definitive financing documents;

 

   

ensure that the Debt Financing benefits from Instructure’s existing lending relationships;

 

   

take all corporate and other organizational actions, subject to the occurrence of the closing, reasonably requested by Parent or Merger Sub to (A) permit the consummation of the Debt Financing; and (B) cause the direct borrowing or incurrence of all of the proceeds of the Debt Financing by the Surviving Corporation concurrently with or immediately following the Effective Time, in each of case (A) and (B), including, facilitating the execution and delivery of documents reasonably related to the debt financing on the terms contemplated by any debt commitment letters, in connection with the authorization of the debt financing and debt documents and execution and delivery of the debt documents in anticipation of the closing;

 

   

promptly furnish Parent, Merger Sub and Parent’s financing sources with all documentation and other information about Instructure as is reasonably requested by Parent, Merger Sub or Parent’s financing sources relating to applicable “know your customer” and anti-money laundering rules and regulations; and

 

   

cooperate in satisfying the conditions precedent set forth in the definitive agreements relating to the Debt Financing to the extent satisfaction thereof requires the cooperation, or is within the control, of Instructure, or its representatives;

Additionally, Instructure has agreed that it will use commercially reasonable efforts to, and will use its reasonable best efforts to cause each of its subsidiaries and its and their respective representatives to furnish Parent, Merger Sub and their financing sources, as promptly as practicable, with (1) financial and other pertinent and customary regarding the Instructure Group as may be reasonably requested by Parent or Parent’s financing sources to the extent that such information is of the type and form customarily included in a bank confidential information memorandum in connection with the arrangement of financing similar to the Debt Financing or in rating agency presentations, lender presentations or other customary marketing materials, and (2) financial statements regarding Instructure described in the debt commitment letter related to the debt financing as in effect on December 4, 2019, and such other information customarily delivered and reasonably necessary for the preparation of a bank information memorandum, including the required financials in the debt comment letter related to the debt financing, it being understood that Parent will be responsible for the preparation of any pro forma financial statements and marketing materials for the Debt Financing.

Notwithstanding the foregoing, neither Instructure nor any of its subsidiaries is required to (1) waive or amend any terms of the Merger Agreement or agree to pay any fees or reimburse any expenses prior to the Effective Time for which they have not received prior reimbursement or are not otherwise indemnified by or on behalf of Parent; (2) enter into any definitive agreement or distribute any cash (except to the extent subject to concurrent reimbursement by Parent) that will be effective prior to the Effective Time; (3) give any indemnities in connection with the cooperation requirements described herein that are, in each case, effective prior to the Effective Time; (4) take any action that, in their good faith determination would unreasonably interfere with the conduct of their business or create an unreasonable risk of damage or destruction to any of their property or assets; or (5) take any action that will conflict with or violate their respective organizational documents or any applicable laws or would result in a material violation or breach of, or default under, any material agreement to which Instructure is a party. In addition, (1) no action, liability or obligation of the Instructure Group or any of their respective representatives pursuant to any certificate, agreement, arrangement, document or instrument relating to the Debt Financing or any of the actions required to be taken by the Instructure Group pursuant to the cooperation requirements described herein (other than customary representation letters, authorization letters and undertakings) will be effective until the Effective Time, and the Instructure Group will not be required to take

 

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any action pursuant to any certificate, agreement, arrangement, document or instrument (other than customary representation letters, authorization letters and undertakings) that is not contingent on the occurrence of the closing or that must be effective prior to the Effective Time; and (2) any bank information memoranda required in relation to the Debt Financing will contain disclosure reflecting the Surviving Corporation as the obligor. No officer or representative of the Instructure Group shall be required to deliver any certificate or opinion or take any other action pursuant to the cooperation requirements described herein that could reasonably be expected to result in personal liability to such officer or representative and the Board of Directors shall not be required to approve any financing or agreements related thereto, that are, in each case, effective prior to the Effective Time.

In addition, Parent shall (1) reimburse the Instructure Group for any documented and reasonable out-of-pocket costs and expenses (including attorneys’ fees) incurred by Instructure in connection with the cooperation requirements described herein and (2) indemnify the Instructure Group and its respective representatives from and against any and all liabilities, losses, damages, claims, costs, expenses (including attorneys’ fees), interest, awards, judgments, penalties and amounts paid in settlement suffered or incurred by them in connection with any cooperation described herein, except to the extent resulting from Instructure’s and its subsidiaries’ or any of their respective representatives’ bad faith or willful and material misconduct.

Indemnification and Insurance

The Merger Agreement provides that all existing rights to exculpation, indemnification and the advancement of expenses for acts or omissions occurring at or prior to the Effective Time existing as of the signing of the Merger Agreement in favor of the current or former directors, officers or employees of Instructure (in each case, as provided in the respective organizational documents of Instructure) or in any indemnification agreement listed in the disclosure letter to the Merger Agreement between Instructure and the current or former directors, officers or employees of Instructure on the date on which the Merger Agreement was signed, will survive the Merger and will continue in full force and effect for a period of six years from the Effective Time, in each case, except as otherwise required by applicable law.

In addition, the Merger Agreement provides that, during the six-year period commencing at the Effective Time, the Surviving Corporation will (and Parent must cause the Surviving Corporation to) indemnify and hold harmless each current or former director, officer or employee of Instructure, to the fullest extent permitted by law, from and against all costs, fees and expenses (including attorneys’ fees and investigation expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding arising, directly or indirectly, out of or pertaining, directly or indirectly, to (1) any action or omission, or alleged action or omission, in such indemnified person’s capacity as a director, officer, employee or agent of the Instructure Group or other affiliates to the extent that such action or omission, or alleged action or omission, occurred prior to or at the Effective Time; and (2) the Merger, as well as any actions taken by Instructure, Parent or Merger Sub with respect thereto. The Merger Agreement also provides that the Surviving Corporation will (and Parent must cause the Surviving Corporation to) advance all fees and expenses (including fees and expenses of any counsel) as incurred by any such indemnified person in the defense of such legal proceeding.

In addition, without limiting the foregoing, unless Instructure has purchased a “tail” policy prior to the Effective Time (which Instructure may purchase, provided that the premium for such insurance does not exceed 300% of the aggregate annual premiums currently paid), the Merger Agreement requires Parent to cause the Surviving Corporation to maintain, on terms no less advantageous to the indemnified parties, the directors’ and officers’ insurance policies of the Instructure Group for a period of at least six years commencing at the Effective Time. Neither Parent nor the Surviving Corporation will be required to pay premiums for such policy to the extent such premiums exceed, on an annual basis, 300% of the aggregate annual premiums currently paid by the Instructure Group, and if the premium for such insurance coverage would exceed such amount, Parent shall be obligated to cause the Surviving Corporation to obtain the greatest coverage available for a cost equal to such amount.

 

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For more information, please refer to the section of this proxy statement captioned “The Merger—Interests of Instructure’s Directors and Executive Officers in the Merger.”

Other Covenants

Stockholders Meeting

Instructure has agreed to take all necessary action (in accordance with applicable law and Instructure’s organizational documents) to establish a record date for, duly call, give notice of, convene and hold a special meeting of the stockholders as promptly as reasonably practicable following the mailing of this proxy statement for the purpose of voting upon the adoption of the Merger Agreement, and approval of the Merger. The special meeting of the stockholders cannot be held later than 45 days after the date upon which Instructure receives confirmation from the SEC that it will not review, or that it has completed its review of this proxy statement (which confirmation will be deemed to occur if the SEC has not affirmatively notified Instructure prior to the tenth calendar day after filing this proxy statement that the SEC will or will not be reviewing this proxy statement).

Stockholder Litigation

Instructure will: (1) provide Parent with prompt notice of all stockholder litigation relating to the Merger Agreement; (2) keep Parent reasonably informed with respect to status thereof; (3) give Parent the opportunity to participate in the defense, settlement or prosecution of any such litigation; and (4) will consult with Parent with respect to the defense, settlement or prosecution of such litigation. Instructure may not settle any such litigation without Parent’s prior written consent (such consent not to be unreasonably withheld, delayed or conditioned).

Conditions to the Closing of the Merger

The obligations of Parent and Merger Sub, on the one hand, and Instructure, on the other hand, to consummate the Merger is subject to the satisfaction or waiver (where permitted by applicable law) of each of the following conditions:

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;

 

   

the expiration or termination of the applicable waiting period under the HSR Act; and

 

   

the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority.

In addition, the obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permitted by applicable law) of each of the following additional conditions:

 

   

the representations and warranties of Instructure relating to organization, good standing, corporate power, enforceability, board approval, the fairness opinion, anti-takeover laws, required stockholder approval, non-contravention with Charter or Bylaws, certain aspects of Instructure’s capitalization, no voting agreement, subsidiaries and brokers being generally true and correct in all material respects as of the date on which the closing occurs as if made at and as of such time;

 

   

the representations and warranties of Instructure relating to the absence of any Company Material Adverse Effect since December 31, 2018 being true and correct in all respects as of the date on which the closing occurs;

 

   

the representations and warranties of Instructure relating to certain aspects of Instructure’s capitalization being generally true and correct in all respects as of the date on which the closing occurs, except where the failure to be so true and correct in all respects would not reasonably be expected to result in additional cost, expense or liability to Instructure, Parent and their affiliates, individually or in the aggregate, that is more than $5 million;

 

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the other representations and warranties of Instructure set forth elsewhere in the Merger Agreement being true and correct as of the date on which the closing occurs as if made at and as of such time, except for such failures to be true and correct that would not have a Company Material Adverse Effect;

 

   

Instructure having performed and complied in all material respects with all covenants, obligations and conditions of the Merger Agreement and complied with by Instructure;

 

   

the receipt by Parent and Merger Sub of a certificate of Instructure, validly executed for and on behalf of Instructure and in its name by a duly authorized executive officer thereof, certifying that the conditions described in the preceding five bullets have been satisfied; and

 

   

the absence of any Company Material Adverse Effect having occurred after the date of Merger Agreement that is continuing as of the Effective Time.

In addition, the obligation of Instructure to consummate the Merger is subject to the satisfaction or waiver (where permitted by applicable law) of each of the following additional conditions:

 

   

the representations and warranties of Parent and Merger Sub set forth in the Merger Agreement being true and correct on and as of the date on which the closing occurs with the same force and effect as if made on and as of such date, except for any failure to be so true and correct that would not, individually or in the aggregate, prevent or materially impair the consummation of the Merger or the ability of Parent and Merger Sub to fully perform their respective covenants and obligations pursuant to the Merger Agreement;

 

   

Parent and Merger Sub having performed and complied in all material respects with all covenants, obligations and conditions of the Merger Agreement required to be performed and complied with by Parent or Merger Sub at or prior to the Effective Time; and

 

   

the receipt by Instructure of a certificate of Parent and Merger Sub, validly executed for and on behalf of Parent and Merger Sub and in their respective names by a duly authorized executive officer thereof, certifying that the conditions described in the preceding two bullets have been satisfied.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the adoption of the Merger Agreement by stockholders, in the following ways:

 

   

by mutual written agreement of Instructure and Parent;

 

   

by either Instructure or Parent if:

 

   

prior to the Effective Time, (1) any permanent injunction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger is in effect, that, prohibits, makes illegal or enjoins the consummation of the Merger and has become final and non-appealable; or (2) any statute, rule, regulation or order is enacted, entered, enforced or deemed applicable to the Merger that prohibits, makes illegal or enjoins the consummation of the Merger;

 

   

the Merger has not been consummated by 11:59 p.m., Pacific time, on April 2, 2020 (the “Termination Date”); or

 

   

stockholders fail to adopt the Merger Agreement at the Special Meeting or any adjournment or postponement thereof;

 

   

by Instructure if:

 

   

Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of

 

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being cured, or is not cured, before the earlier of the Termination Date or the date that is 30 calendar days following Instructure’s delivery of written notice of such breach (or such shorter period of time as remains prior to the Termination Date);

 

   

prior to the adoption of the Merger Agreement by stockholders and so long as Instructure is not then in material breach of its obligations related to Acquisition Proposals, in order to enter into a definitive agreement with respect to a Superior Proposal in accordance with the terms of the Merger Agreement, subject to Instructure paying to Parent a termination fee of either (1) $ $29,326,500 if the Merger Agreement is terminated before the No Shop Period Start Date for the purposes of entering into a definitive agreement in respect of a Superior Proposal with respect to an Excluded Party, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement or (2) $63,540,750, in the case of any other such termination; or

 

   

prior to the Effective Time the closing obligations of Instructure have been satisfied, Parent has failed to consummate the Merger under the timing restrictions, Instructure has notified the Parent in writing that it is ready and able to consummate the Merger by satisfying its obligations under the Merger Agreement and those pursuant to the Equity Commitment Letter and has provided at least three business days written notice that it intends to terminate the Merger Agreement, and the Merger is not consummated by the end of such three business day period.

 

   

by Parent if:

 

   

Instructure has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied and such breach is not capable of being cured, or is not cured, before the earlier of the Termination Date or the date that is 30 calendar days following Parent’s delivery of written notice of such breach (or such shorter period of time as remains prior to the Termination Date); or

 

   

prior to the adoption of the Merger Agreement by stockholders, the Board of Directors effects a Company Board Recommendation Change (except that such right to terminate will expire at 5:00 p.m., Pacific time, on the 10th business day following the date on which Parent becomes aware of such Company Board Recommendation Change).

In the event that the Merger Agreement is terminated pursuant to the termination rights above, the Merger Agreement will be of no further force or effect without liability of any party to the other parties, as applicable, except certain sections of the Merger Agreement will survive the termination of the Merger Agreement in accordance with their respective terms, including terms relating to reimbursement of expenses and indemnification. Notwithstanding the foregoing, nothing in the Merger Agreement will relieve any party from any liability for any willful and material breach of the Merger Agreement prior to its termination. In addition, no termination of the Merger Agreement will affect the rights or obligations of any party pursuant to the confidentiality agreement between Thoma Bravo and Instructure or the Guaranty, which rights, obligations and agreements will survive the termination of the Merger Agreement in accordance with their respective terms.

Termination Fee

If Instructure terminates the Merger Agreement for the purposes of entering into a definitive agreement with any Excluded Party prior to the No Shop Period Start Date in respect of a Superior Proposal, Instructure would be required to pay a $29,326,500 termination fee to Parent, so long as such Superior Proposal did not result from or arise in connection with an intentional and material breach of the non-solicitation provisions set forth in the Merger Agreement. If the Merger Agreement is terminated under specified circumstances including the instances described below, Instructure must pay a $63,540,750 termination fee to Parent.

 

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Parent will be entitled to receive a termination fee of $63,540,750 from Instructure if the Merger Agreement is terminated:

 

   

(1) (a) by either Parent or Instructure because (i) the closing of the Merger has not occurred by the Termination Date; or (ii) the stockholders fail to adopt the Merger Agreement; or (b) by Parent because Instructure has materially breached its representations, warranties, covenants or agreements in the Merger Agreement; (2) a person has made (since the date of the Merger Agreement and prior to its termination) an Acquisition Proposal that is not withdrawn or otherwise abandoned; and (3) Instructure enters into an agreement relating to, or consummates, an Acquisition Transaction within 12 months of such termination (provided that, for purposes of the termination fee, all references to “20%” in the definition of “Acquisition Transaction” are deemed to be references to “50%”);

 

   

by Parent, because the Board of Directors has effected a Company Board Recommendation Change (which termination must occur by 5:00 p.m., Pacific time, on the 10th business day following the date on which Parent becomes aware of such Company Board Recommendation Change); or

 

   

by Instructure, to enter into a definitive agreement in respect of a Superior Proposal other than with an Excluded Party prior to the No Shop Period Start Date.

Instructure will be entitled to receive a termination fee of $136,857,000 from Parent (the “Parent Termination Fee”) if the Merger Agreement is terminated:

 

   

by Instructure if prior to the Effective Time, (1) the closing obligations of Instructure have been satisfied, (2) Parent has failed to consummate the Merger under the timing restrictions, (3) Instructure has notified the Parent in writing that it is ready and able to consummate the Merger by satisfying its obligations under the Merger Agreement and those pursuant to the Equity Commitment Letter and has provided at least three business days written notice that it intends to terminate the Merger Agreement, and (4) the Merger is not consummated by the end of such three business day period; or

 

   

by Instructure if Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the Termination Date or the date that is 30 calendar days following Instructure’s delivery of written notice of such breach (or such shorter period of time as remains prior to the Termination Date).

Specific Performance

Parent, Merger Sub and Instructure agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not perform the provisions of the Merger Agreement (including any party failing to take such actions as are required of it in order to consummate the Merger Agreement). Parent, Merger Sub and Instructure acknowledge and agree that: (1) the parties will be entitled, in addition to any other remedy to which they are entitled at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches) of the Merger Agreement and to enforce specifically the terms and provisions thereof; (2) the fees and expenses provisions of the Merger Agreement are not intended to and would not adequately compensate Instructure, on the one hand, or Parent and Merger Sub, on the other hand, for the harm that would result from a breach of the Merger Agreement, and will not be construed to diminish or otherwise impair in any respect any party’s right to an injunction, specific performance and other equitable relief; and (3) the right of specific enforcement is an integral part of the Merger and without that right, neither Instructure nor Parent would have entered into the Merger Agreement. It is explicitly agreed that Instructure will have the right to an injunction, specific performance or other equitable remedies in connection with enforcing Parent’s and Merger Sub’s obligations to consummate the Merger and cause the equity financing to be funded to fund the Merger (including to cause Parent to enforce the obligations of the Thoma Bravo Fund under the Equity Commitment Letter in order to cause the equity financing to be

 

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timely completed in accordance with and subject to the terms and conditions set forth in the Equity Commitment Letter) subject to the terms and conditions set forth therein and in the Merger Agreement. Notwithstanding the foregoing and subject to the rights of the parties to the definitive agreements for any debt financing under the terms thereof, none of Instructure and its Affiliates and their direct and indirect equityholders will have any rights or claims (whether in contract or in tort or otherwise) against any financing source, solely in their respective capacities as lenders or arrangers in connection with the debt financing, and in no event shall Instructure, any of its Affiliates or its or their direct or indirect equityholders be entitled to directly seek the remedy of specific performance of the Merger Agreement against any financing source.

Parent, Merger Sub and Instructure agree not to raise any objections to (1) the granting of an injunction, specific performance or other equitable relief to prevent or restrain breaches or threatened breaches of the Merger Agreement by Instructure, on the one hand, or Parent and Merger Sub, on the other hand; and (2) the specific performance of the terms and provisions of the merger Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants, obligations and agreements of Parent and Merger Sub pursuant to the Merger Agreement. Any party seeking an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement will not be required to provide any bond or other security in connection with such injunction or enforcement, and each party irrevocably waives any right that it will have to require the obtaining, furnishing or posting of any such bond or other security.

Limitations of Liability

The maximum aggregate monetary damages of Parent and Merger Sub for breaches (including any willful breach) under the Merger Agreement (taking into account the payment of the Parent Termination Fee pursuant to the Merger Agreement), the Guaranty or the Equity Commitment Letter will not exceed, in the aggregate for all such breaches, an amount equal to $136,857,000. The maximum aggregate monetary damages of Instructure for breaches under the Merger Agreement (taking into account the payment of the termination fee, if applicable) will not exceed an amount equal to $63,540,750 in the aggregate for all such breaches. Notwithstanding such limitations on liability for monetary damages, Parent, Merger Sub and Instructure may be entitled to an injunction, specific performance or other equitable relief as provided in the Merger Agreement.

Fees and Expenses

Except in specified circumstances, whether or not the Merger is completed, Instructure, on the one hand, and Parent and Merger Sub, on the other hand, are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement.

Amendment

The Merger Agreement may be amended by the parties in an executed written instrument at any time before or after adoption of the Merger Agreement by stockholders. However, after adoption of the Merger Agreement by stockholders, no amendment that requires further approval by such stockholders pursuant to the DGCL may be made without such approval.

Governing Law

The Merger Agreement is governed by Delaware law.

The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 2: THE INSTRUCTURE COMPENSATION PROPOSAL

Under Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, Instructure is required to submit a proposal to our stockholders to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Instructure’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement. This compensation is summarized in the section captioned “The Merger—Interests of Instructure’s Directors and Executive Officers in the Merger”. The Board of Directors encourages you to review carefully the named executive officer merger-related compensation information disclosed in this proxy statement. Accordingly, Instructure is asking you to approve the following resolution:

“RESOLVED, that the stockholders of Instructure approve, on a non-binding, advisory basis the compensation that will or may become payable to Instructure’s named executive officers that is based on or otherwise relates to the merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled “The Merger—Interest of Instructure’s Directors and Executive Officers in the Merger.”

The vote on this Compensation Proposal is a vote separate and apart from the vote on the proposal to adopt the Merger Agreement. Accordingly, you may vote to approve the proposal to adopt the Merger Agreement and vote not to approve this Compensation Proposal and vice versa. Because the vote on the Compensation Proposal is advisory only, it will not be binding on Instructure. Accordingly, if the Merger Agreement is adopted and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the vote on this Compensation Proposal.

Vote Required and Board of Directors Recommendation

Approval, on an advisory (non-binding) basis, of the Compensation Proposal requires the affirmative vote of the outstanding shares of Instructure common stock representing a majority of the outstanding shares present at the Special Meeting in person or by proxy, provided a quorum is present. Assuming a quorum is present, (1) a failure to vote in person or by proxy at the Special Meeting will have no effect on the outcome of the Compensation Proposal, (2) abstentions will be treated as votes cast and, therefore, will have the same effect as a vote against the Compensation Proposal and (3) broker “non-votes” (if any) will have no effect on the outcome of the Compensation Proposal. Shares of Instructure common stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a Instructure stockholder returns a signed proxy card without indicating voting preferences on such proxy card, the shares of Instructure common stock represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Board of Directors.

The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

We are asking you to approve a proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If stockholders approve the adjournment proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including soliciting proxies from stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not present or otherwise at the discretion of the chairman of the Special Meeting.

The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

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MARKET PRICES AND DIVIDEND DATA

Instructure common stock is listed on NYSE under the symbol “INST.” As of [●], 2019, there were [●] shares of Instructure common stock outstanding held by approximately [●] stockholders of record. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

On [●], 2020, the latest practicable trading day before the mailing of this proxy statement, the closing price for Instructure common stock on NYSE was $[●] per share. You are encouraged to obtain current market quotations for Instructure common stock.

Following the Merger, there will be no further market for Instructure common stock and it will be delisted from NYSE and deregistered under the Exchange Act. As a result, following the Merger we will no longer file periodic reports with the SEC.

Instructure does not pay dividends and the Merger Agreement prohibits the declaration or payment of any dividend or other distribution with respect to Instructure common stock.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock as of December 6, 2019 by:

 

   

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

 

   

each of our named executive officers;

 

   

each of our directors; and

 

   

all of our executive officers and directors as a group.

We have based our calculation of beneficial ownership on 38,190,191 shares of common stock outstanding on December 6, 2019. This table is based upon information supplied by officers, directors and principal stockholders, filings filed with the SEC pursuant to Section 16 of the Exchange Act and Schedules 13D and 13G filed with the SEC. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Shares of common stock issuable under options or warrants that are exercisable within 60 days after December 6, 2019 are deemed beneficially owned and such shares are used in computing the percentage ownership of the person holding the options or warrants, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The information contained in the following table is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares in the table does not constitute an admission of beneficial ownership of those shares.

Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and dispositive power with respect to their shares of common stock, except to the extent authority is shared by spouses under community property laws. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Instructure, Inc., 6330 South 3000 East, Suite 700, Salt Lake City, UT 84121.

 

Name and Address of Beneficial Owner

   Number
of Shares
Beneficially
Owned
     Percentage
of Shares
Beneficially
Owned
 

Greater than 5% stockholders

     

Nine Ten Partners L.P.(1)

     3,219,920        8.4

Praesidium Investment Management Company, LLC(2)

     2,865,524        7.5  

BlackRock, Inc.(3)

     2,198,719        5.8  

William E. Oberndorf

     2,133,653        5.6  

Foxhaven Asset Management, LP(4)

     2,001,428        5.2  

Rivulet Capital, LLC(5)

     1,964,935        5.1  

Directors and Named Executive Officers

     

Daniel T. Goldsmith(6)

     106,806        *  

Joshua L. Coates(7)

     2,216,041        5.8  

Steven B. Kaminsky(8)

     207,079        *  

Matthew A. Kaminer(9)

     147,161        *  

Mitchell E. Macfarlane

     —          *  

Steven A. Collins(10)

     47,084        *  

William M. Conroy(11)

     116,801        *  

Ellen Levy

     21,439        *  

Kevin Thompson

     13,420        *  

Lloyd G. Waterhouse

     52,436        *  
  

 

 

    

 

 

 

All current executive officers and directors as a group (10 persons)(12)

     2,928,267        7.6

 

*

Represents beneficial ownership of less than one percent

 

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(1)

Includes 3,219,920 shares held by Nine Ten Partners L.P. (“NTP LP”). Nine Ten Capital Management LLC is the investment adviser of NTP LP and may be deemed to have sole voting and investment power with respect to the shares held by NTP LP. Brian Bares, James Bradshaw and Russell Mollen are the control persons of Nine Ten GP L.P., the general partner of NTP LP, and may be deemed to have sole voting and investment power with respect to the shares held by NTP LP. The address for each of these entities is 12600 Hill Country Blvd, Suite R-230, Austin, TX 78738.

(2)

Includes 2,865,524 shares held for the accounts of Praesidium Investment Management Company, LLC. (“Praesidium”), Kevin Oram and Peter Uddo (collectively, the “Accounts”), of which Praesidium holds sole power to vote 2,703,725 shares and the power to dispose of 2,865,524 shares. As the managing members of Praesidium, each of Kevin Oram and Peter Uddo may be deemed to beneficially own the shares held in the Accounts. The address for Praesidium Investment Management Company LLC is 1411 Broadway, 29th Floor, New York, NY 10018.

(3)

Includes 2,198,719 shares held by Blackrock, Inc., with respect to which Blackrock, Inc. holds sole power to vote 2,129,090 shares and the sole power to dispose of 2,198,719 shares. The address for Blackrock, Inc. is 55 East 52nd Street, New York, NY 1005.

(4)

Includes 2,001,428 shares held for the accounts of Foxhaven Master, Foxway LP (“Foxway”), and Foxlane, LP (“Foxlane”) (collectively, the “Foxhaven Funds”). Foxhaven Asset Management, LP (“Foxhaven”) is a registered investment adviser that directs the voting and disposition of the shares of common stock directly owned by the Foxhaven Funds. Foxhaven Capital GP, LLC (“Foxhaven GP”) is the general partner of the Foxhaven Funds. As a result, Foxhaven and Foxhaven GP may be deemed to have voting and dispositive power over the shares of Common Stock held for the accounts of the Foxhaven Funds. Michael Pausic and Nicholas Lawler are managing members of the general partner of Foxhaven and Foxhaven GP and may be deemed to have voting and dispositive power with respect to the shares of common stock directly owned by the Foxhaven Funds. The address for each of the Foxhaven Funds is 550 E Water Street, Suite 888, Charlottesville, VA 22902.

(5)

Includes 1,954,935 shares held by Rivulet Capital, LLC. Each of Rivulet Capital, LLC, Joshua Kuntz and Barry Lebovits has the sole power to vote or direct the vote of 0 shares and the shared power to vote or direct the vote of 1,964,935 shares. Each of Rivulet Capital, LLC, Joshua Kuntz and Barry Lebovits has the sole power to dispose or direct the disposition of 0 shares of Common Stock and the shared power to dispose or direct the disposition of 1,964,935 shares of Common Stock.

(6)

Includes 36,460 shares of stock issuable pursuant to restricted stock units that vest within 60 days of December 6, 2019.

(7)

Includes (a) 5,500 shares held by Mr. Coates, with respect to which Mr. Coates holds sole voting and investment power, (b) 2,664,474 shares held by Grizzly Peak, LLC (635,000 of which shares are pledged as security for a loan), with respect to which Mr. Coates holds sole voting and investment power, (c) 115,250 shares held by The Joshua L. and CeliAnne C. Coates Trust (105,250 of which shares are pledged as security for a loan), with respect to which Mr. Coates holds shared voting and investment power and (d) 43,750 shares held by The Coates Equity Trust (35,424 of which shares are pledged as security for a loan), with respect to which Mr. Coates holds shared voting and investment power.

(8)

Includes (a) 189,046 shares held by Mr. Kaminsky, with respect to which Mr. Kaminsky holds sole voting and investment power, (b) 18,033 shares issuable pursuant to stock options exercisable within 60 days of December 6, 2019.

(9)

Includes (a) 48,398 shares held by Mr. Kaminer, with respect to which Mr. Kaminer holds sole voting and investment power, (b) 751 shares held by Mr. Kaminer’s spouse, with respect to which Mr. Kaminer’s spouse holds sole voting and investment power, (c) 100 shares held by Mr. Kaminer’s son, with respect to which Mr. Kaminer holds sole voting and investment power, (d) 100 shares held by Mr. Kaminer’s son, with respect to which Mr. Kaminer holds sole voting and investment power, (e) 97,812 shares issuable pursuant to stock options exercisable within 60 days of December 6, 2019.

(10)

Represents 42,923 shares issuable pursuant to stock options exercisable within 60 days of December 6, 2019.

(11)

Includes 116,801 shares held by Conroy Investments, LLC, with respect to which Mr. Conroy holds sole voting and investment power.

 

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(12)

Includes (a) 2,734,404 shares held by our directors, executive officers and affiliated entities, (b) 195,228 shares issuable pursuant to stock options exercisable by our directors and executive officers within 60 days of December 6, 2019.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the year ended December 31, 2018, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.

 

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FUTURE STOCKHOLDER PROPOSALS

If the Merger is completed, we will have no public stockholders and there will be no public participation in any future meetings of stockholders of Instructure. However, if the Merger is not completed, stockholders will continue to be entitled to attend and participate in stockholder meetings.

Instructure will hold the regular annual meeting of its stockholders in 2020 only if the Merger is not completed.

Proposals of stockholders that are intended to be considered for inclusion in our proxy statement relating to our regular annual stockholders meeting in 2020 (if held), must have been received by us at our principal executive offices at 6330 South 3000 East, Suite 700, Salt Lake City, Utah 84121, Attention: Secretary, by [●], 2020, and must have satisfied the conditions established by the SEC, including, but not limited to, Rule 14a-8 promulgated under the Exchange Act, and in our bylaws for stockholder proposals in order to be included in our proxy statement for that meeting. Please note that if we hold our regular annual stockholders meeting in 2020, and we do so more than 30 days before or after May 24, 2020 (the one-year anniversary date of the 2019 Annual Meeting of Stockholders), we will disclose the new deadline by which stockholder proposals must be received under Item 5 of Part II of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders.

Alternatively, under our bylaws, if a stockholder would like to propose a matter for presentation at our regular annual stockholders meeting in 2020 (if held), rather than for inclusion in the proxy materials, the stockholder must follow certain procedures contained in our bylaws.

Under our bylaws, in order for a matter to be deemed properly presented by a stockholder, timely notice must be received by our Secretary at our principal executive offices not later than the close of business on the 90th day nor earlier than the close of business on the 120th day before the one-year anniversary of the date of the preceding year’s annual meeting of stockholders. Please note, however, that in the event that if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 30 days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice by the stockholder to be timely, it must be so received by the Secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the tenth day on which public announcement of the date of such annual meeting is first made.

In no event shall any adjournment or postponement of an annual meeting for which notice has been given or the announcement thereof commence a new time period for the giving of a stockholder’s notice under our bylaws. A copy of our amended and restated bylaws may be obtained by accessing our filings on the SEC’s website at www.sec.gov. You may also contact our Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

 

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WHERE YOU CAN FIND MORE INFORMATION

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated by reference into this proxy statement.

The following Instructure filings with the SEC are incorporated by reference:

 

   

Instructure’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 20, 2019, including the information specifically incorporated by reference into the Annual Report on Form 10-K from Instructure’s definitive proxy statement on Schedule 14A filed on April 8, 2019 and additional materials filed on April 8, 2019;

 

   

Instructure’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019, filed on October 30, 2019; Instructure’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019, filed on July 31, 2019; Instructure’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, filed on May 1, 2019; and

 

   

Instructure’s Current Report on Form 8-K, filed on December 6, 2019; Instructure’s Current Report on Form 8-Ks, filed on December 4, 2019; Instructure’s Current Report on Form 8-K, filed on October 28, 2019; Instructure’s Current Report on Form 8-K, filed on May 30, 2019; and Instructure’s Current Report on Form 8-K, filed on April 8, 2019.

We also incorporate by reference into this proxy statement additional documents that we may file with the SEC between the date of this proxy statement and the earlier of the date of the Special Meeting or the termination of the Merger Agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as Current Reports on Form 8-K and proxy soliciting materials. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference herein.

Information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated by reference into this proxy statement.

You may read and copy any reports, statements or other information that we file with the SEC at the SEC’s public reference room at the following location: 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of those documents at prescribed rates by writing to the Public Reference Section of the SEC at that address. Please call the SEC at (800) SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at www.sec.gov.

You may obtain any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:

Instructure, Inc.

Attention: Investor Relations

6330 South 300, Suite 700

Salt Lake City, Utah 84121

If you would like to request documents from us, please do so as soon as possible, to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt method, within one business day after we receive your request. Please note that all of our documents that we

 

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file with the SEC are also promptly available through our website at https://ir.instructure.com/overview/default.aspx and clicking on the link titled “SEC Filings”. The information included on our website is not incorporated by reference into this proxy statement.

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Instructure common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

(212) 929-5500 (Call Collect)

Call Toll-free: (800) 322-2885

proxy@mackenziepartners.com.

 

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MISCELLANEOUS

Instructure has supplied all information relating to Instructure, and Parent has supplied, and Instructure has not independently verified, all of the information relating to Parent and Merger Sub contained in this proxy statement.

You should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents that we incorporate by reference in this proxy statement in voting on the Merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated [●], 2020. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement), and the mailing of this proxy statement to stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

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Annex A—The Merger Agreement

AGREEMENT AND PLAN OF MERGER

by and among

PIV PURCHASER, LLC,

PIV MERGER SUB, INC.

and

INSTRUCTURE, INC.

Dated as of December 4, 2019

 


Table of Contents

Table of Contents

 

         Page  

Article I DEFINITIONS & INTERPRETATIONS

     A-6  

1.1

 

Certain Definitions

     A-6  

1.2

 

Additional Definitions

     A-17  

1.3

 

Certain Interpretations

     A-19  

Article II THE MERGER

     A-20  

2.1

 

The Merger

     A-20  

2.2

 

The Effective Time

     A-20  

2.3

 

The Closing

     A-20  

2.4

 

Effect of the Merger

     A-21  

2.5

 

Certificate of Incorporation and Bylaws

     A-21  

2.6

 

Directors and Officers

     A-21  

2.7

 

Effect on Capital Stock

     A-21  

2.8

 

Equity Awards

     A-22  

2.9

 

Exchange of Certificates

     A-25  

2.10

 

No Further Ownership Rights in Company Common Stock

     A-26  

2.11

 

Lost, Stolen or Destroyed Certificates

     A-27  

2.12

 

Required Withholding

     A-27  

2.13

 

No Dividends or Distributions

     A-27  

2.14

 

Necessary Further Actions

     A-27  

Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     A-27  

3.1

 

Organization; Good Standing

     A-28  

3.2

 

Corporate Power; Enforceability

     A-28  

3.3

 

Company Board Approval; Fairness Opinion; Anti-Takeover Laws

     A-28  

3.4

 

Requisite Stockholder Approval

     A-29  

3.5

 

Non-Contravention

     A-29  

3.6

 

Requisite Governmental Approvals

     A-29  

3.7

 

Company Capitalization

     A-29  

3.8

 

Subsidiaries

     A-30  

3.9

 

Company SEC Reports

     A-31  

3.10

 

Company Financial Statements; Internal Controls

     A-31  

3.11

 

No Undisclosed Liabilities

     A-32  

3.12

 

Absence of Certain Changes

     A-32  

3.13

 

Material Contracts

     A-33  

3.14

 

Real Property

     A-33  

3.15

 

Environmental Matters

     A-34  

3.16

 

Intellectual Property

     A-34  

3.17

 

Tax Matters

     A-36  

3.18

 

Employee Plans

     A-37  

3.19

 

Labor Matters

     A-39  

3.20

 

Permits

     A-40  

3.21

 

Compliance with Laws

     A-40  

3.22

 

Legal Proceedings; Orders

     A-40  

3.23

 

Insurance

     A-40  

3.24

 

Related Person Transactions

     A-40  

3.25

 

Brokers

     A-41  

3.26

 

Trade Controls; Anti-Corruption

     A-41  

3.27

 

Exclusivity of Representations and Warranties

     A-42  

 

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TABLE OF CONTENTS

(Continued)

 

         Page  

Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     A-42  

4.1

 

Organization; Good Standing

     A-42  

4.2

 

Power; Enforceability

     A-43  

4.3

 

Non-Contravention

     A-43  

4.4

 

Requisite Governmental Approvals

     A-43  

4.5

 

Legal Proceedings; Orders

     A-43  

4.6

 

Ownership of Company Capital Stock

     A-44  

4.7

 

Brokers

     A-44  

4.8

 

Operations of Parent and Merger Sub

     A-44  

4.9

 

No Parent Vote or Approval Required

     A-44  

4.10

 

Guaranty

     A-44  

4.11

 

Financing

     A-44  

4.12

 

Stockholder and Management Arrangements

     A-45  

4.13

 

Solvency

     A-46  

4.14

 

Exclusivity of Representations and Warranties

     A-46  

Article V INTERIM OPERATIONS OF THE COMPANY

     A-47  

5.1

 

Affirmative Obligations

     A-47  

5.2

 

Forbearance Covenants

     A-47  

5.3

 

No Solicitation

     A-50  

Article VI ADDITIONAL COVENANTS

     A-56  

6.1

 

Required Action and Forbearance; Efforts

     A-56  

6.2

 

Antitrust Filings

     A-56  

6.3

 

Proxy Statement and Other Required SEC Filings

     A-58  

6.4

 

Company Stockholder Meeting

     A-59  

6.5

 

Equity Financing

     A-60  

6.6

 

Cooperation With Debt Financing

     A-61  

6.7

 

Anti-Takeover Laws

     A-64  

6.8

 

Access

     A-64  

6.9

 

Section 16(b) Exemption

     A-65  

6.10

 

Directors’ and Officers’ Exculpation, Indemnification and Insurance

     A-65  

6.11

 

Employee Matters

     A-67  

6.12

 

Obligations of Merger Sub

     A-68  

6.13

 

Notification of Certain Matters

     A-69  

6.14

 

Public Statements and Disclosure

     A-69  

6.15

 

Transaction Litigation

     A-69  

6.16

 

Stock Exchange Delisting; Deregistration

     A-70  

6.17

 

Additional Agreements

     A-70  

6.18

 

Parent Vote

     A-70  

6.19

 

No Control of the Other Party’s Business

     A-70  

6.20

 

No Employment Discussions

     A-70  

Article VII CONDITIONS TO THE MERGER

     A-70  

7.1

 

Conditions to Each Party’s Obligations to Effect the Merger

     A-70  

7.2

 

Conditions to the Obligations of Parent and Merger Sub

     A-71  

7.3

 

Conditions to the Company’s Obligations to Effect the Merger

     A-72  

 

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TABLE OF CONTENTS

(Continued)

 

         Page  

Article VIII TERMINATION, AMENDMENT AND WAIVER

     A-72  

8.1

 

Termination

     A-72  

8.2

 

Manner and Notice of Termination; Effect of Termination

     A-74  

8.3

 

Fees and Expenses

     A-74  

8.4

 

Amendment

     A-78  

8.5

 

Extension; Waiver

     A-78  

8.6

 

No Liability of Financing Sources

     A-78  

Article IX GENERAL PROVISIONS

     A-78  

9.1

 

Survival of Representations, Warranties and Covenants

     A-78  

9.2

 

Notices

     A-79  

9.3

 

Assignment

     A-80  

9.4

 

Confidentiality

     A-80  

9.5

 

Entire Agreement

     A-80  

9.6

 

Third Party Beneficiaries

     A-80  

9.7

 

Severability

     A-80  

9.8

 

Remedies

     A-81  

9.9

 

Governing Law

     A-81  

9.10

 

Consent to Jurisdiction

     A-82  

9.11

 

WAIVER OF JURY TRIAL

     A-82  

9.12

 

Company Disclosure Letter References

     A-83  

9.13

 

Counterparts

     A-83  

9.14

 

No Limitation

     A-83  

9.15

 

Disclaimer

     A-83  

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of December 4, 2019 (the “Agreement Date”), by and among PIV Purchaser, LLC, a Delaware limited liability company (“Parent”), PIV Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Instructure, Inc., a Delaware corporation (the “Company”). Each of Parent, Merger Sub and the Company are sometimes referred to as a “Party.” All capitalized terms that are used in this Agreement have the respective meanings given to them in Article I.

RECITALS

A.    The Company Board has unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement providing for the merger of Merger Sub with and into the Company (collectively with the other transactions contemplated by this Agreement, the “Merger”) in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) upon the terms and subject to the conditions set forth herein; (ii) approved the execution and delivery of this Agreement by the Company, the performance by the Company of its covenants and other obligations hereunder, and the consummation of the Merger upon the terms and subject to the conditions set forth herein; and (iii) resolved to recommend that the stockholders of the Company adopt this Agreement and approve the Merger in accordance with the DGCL.

B.    Each of the board of managers of Parent and the board of directors of Merger Sub have (i) declared it advisable to enter into this Agreement; and (ii) approved the execution and delivery of this Agreement, the performance of their respective covenants and other obligations hereunder, and the consummation of the Merger upon the terms and subject to the conditions set forth herein.

C.    Concurrently with the execution of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, Parent and Merger Sub have delivered (i) a limited guaranty (the “Guaranty”) from Thoma Bravo Fund XIII, L.P., a Delaware limited partnership (the “Guarantor”), in favor of the Company and pursuant to which, subject to the terms and conditions contained therein, the Guarantor is guaranteeing certain obligations of Parent and Merger Sub in connection with this Agreement and (ii) a commitment letter between Parent and the Guarantor, pursuant to which the Guarantor has committed, subject to the terms and conditions thereof, to invest in Parent, directly or indirectly, the cash amounts set forth therein (the “Equity Commitment Letter”).

D.    Parent, Merger Sub and the Company desire to (i) make certain representations, warranties, covenants and agreements in connection with this Agreement and the Merger; and (ii) prescribe certain conditions with respect to the consummation of the Merger.

 

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AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, and intending to be legally bound hereby, Parent, Merger Sub and the Company agree as follows:

ARTICLE I

DEFINITIONS & INTERPRETATIONS

1.1    Certain Definitions. For all purposes of and pursuant to this Agreement, the following capitalized terms have the following respective meanings:

(a) “Acceptable Confidentiality Agreement” means an agreement with the Company that is either (i) in effect as of the Agreement Date; or (ii) executed, delivered and effective after the Agreement Date, in either case containing provisions that require any counterparty thereto (and any of its Affiliates and representatives named therein) that receive non-public information of or with respect to the Company to keep such information confidential; provided, however, that, with respect to such agreements executed and delivered following the execution and delivery of this Agreement, the provisions contained therein are not materially less favorable, in the aggregate, to the Company than the terms of the Confidentiality Agreement (it being understood that such agreement need not contain any “standstill” or similar provisions or otherwise prohibit the making of any Acquisition Proposal). For the avoidance of doubt, a joinder to an Acceptable Confidentiality Agreement pursuant to which a third party agrees to be bound by the confidentiality and use provisions of an Acceptable Confidentiality Agreement shall be an Acceptable Confidentiality Agreement.

(b)    “Acquisition Proposal” means any offer, proposal or indication of interest by a Third Person to engage in an Acquisition Transaction.

(c)    “Acquisition Transaction” means any transaction or series of related transactions (other than the Merger) involving:

(i)    any direct or indirect purchase or other acquisition by any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of Persons, whether from the Company or any other Person(s), of securities representing more than 20% of the total outstanding voting power of the Company after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any Person or “group” of Persons that, if consummated in accordance with its terms, would result in such Person or “group” of Persons beneficially owning more than 20% of the total outstanding voting power of the Company after giving effect to the consummation of such tender or exchange offer;

(ii)    any direct or indirect purchase, exclusive license or other acquisition by any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of Persons of assets constituting or accounting for more than 20% of the consolidated assets, revenue or net income of the Company Group, taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition); or

(iii)    any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving the Company pursuant to which any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of Persons would hold securities representing more than 20% of the total outstanding voting power of the Company outstanding after giving effect to the consummation of such transaction.

(d)    “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, the term

 

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“control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by Contract or otherwise.

(e)    “Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated, unitary or similar group under state, local or non-U.S. law).

(f)    “Anti-Corruption Laws” means any laws, regulations, rules, statutes or orders in any part of the world relating to combatting bribery and corruption, including the Organization for Economic Cooperation and Development Convention on Combatting Bribery of Foreign Officials in International Business Transactions and the UN Convention Against Corruption, the Foreign Corrupt Practices Act of 1997, as amended, and the UK Bribery Act 2010.

(g)    “Antitrust Law” means the Sherman Antitrust Act, the Clayton Antitrust Act, the HSR Act, the Federal Trade Commission Act and all other federal, state and foreign statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws, that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or the creation or strengthening of a dominant position through merger or acquisition.

(h)    “Audited Company Balance Sheet” means the consolidated balance sheet (and the notes thereto) of the Company and its Subsidiaries as of December 31, 2018 set forth in the Company’s Annual Report on Form 10-K filed by the Company with the SEC for the fiscal year ended December 31, 2018.

(i)    “Business Day” means each day that is not a Saturday, Sunday or other day on which the Company is closed for business or the Federal Reserve Bank of San Francisco is closed.

(j)    “Business IP” means all (i) Intellectual Property used in, held for use in, or necessary for the operation of the Company Group’s business as currently conducted and (ii) Company Intellectual Property.

(k)    “Code” means the Internal Revenue Code of 1986, as amended.

(l)    “Company Board” means the Board of Directors of the Company.

(m)    “Company Capital Stock” means the Company Common Stock and the Company Preferred Stock.

(n)    “Company Common Stock” means the common stock, par value $0.0001, of the Company.

(o)    “Company Equity Plans” means (i) the equity plans set forth in Section 1.1(o) of the Company Disclosure Letter and (ii) any other plans that provide for the issuance of any Company Options or Company RSU Awards (such awards, the “Company Equity Awards”), including any related sub-plans, addenda and agreements entered into and awards issued under such plan.

(p)    “Company Group” means the Company and its Subsidiaries.

(q)    “Company Group Member” means the Company or any of its Subsidiaries.

(r)    “Company Intellectual Property” means any Intellectual Property that is owned by any Company Group Member.

(s)    “Company Material Adverse Effect” means any change, event, violation, effect or circumstance (each, an “Effect”) that, individually or taken together with all other Effects that have occurred prior to the date

 

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of determination of the occurrence of the Company Material Adverse Effect, (A) is or would reasonably be expected to be materially adverse to the business, financial condition, assets and liabilities or results of operations of the Company Group, taken as a whole; or (B) would reasonably be expected to prevent, materially impair or materially delay the consummation by the Company of the Merger prior to the Termination Date; provided, however, that, with respect to clause (A) only, none of the following Effects with respect to the following matters (by itself or when aggregated) will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur (subject to the limitations set forth below):

(i)    general economic conditions in the United States or any other country or region in the world, or changes in conditions in the global economy generally;

(ii)    conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, including (1) changes in interest rates or credit ratings in the United States or any other country; (2) changes in exchange rates for the currencies of any country; or (3) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world;

(iii)    conditions in the industries in which the Company Group or its customers generally conducts business, including in the software and education industries;

(iv)    regulatory, legislative or political conditions in the United States or any other country or region in the world;

(v)    geopolitical conditions, outbreak of hostilities, acts of war, sabotage, terrorism or military actions (including any escalation or general worsening of any such hostilities, acts of war, sabotage, terrorism or military actions) in the United States or any other country or region in the world;

(vi)    earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world;

(vii)    resulting from the announcement of this Agreement or the pendency of the Merger, including the impact thereof on the relationships, contractual or otherwise, of the Company Group with employees, suppliers, customers, partners, vendors or any other third Person; provided however, that this clause (vii) shall not apply to any representation or warranty contained in this Agreement to the extent that such representation or warranty expressly addresses consequences resulting from the execution of this Agreement or the consummation or pendency of the Merger;

(viii)    the compliance by any Party with the terms of this Agreement, including any action expressly required to be taken or refrained from being taken pursuant to or in accordance with this Agreement, including the failure of the Company to take any action that the Company is specifically prohibited by the terms of this Agreement from taking to the extent Parent fails to give its consent thereto after a written request therefor pursuant to Section 5.2;

(ix)    arising from any action taken or refrained from being taken, in each case to which Parent has expressly approved, consented to or requested in writing following the Agreement Date;

(x)    changes or proposed changes in GAAP or other accounting standards or in any applicable laws or regulations (or the enforcement or interpretation of any of the foregoing, in each case after the date hereof);

 

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(xi)    price or trading volume of the Company Common Stock, in and of itself (it being understood that any cause of such change may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

(xii)    any failure, in and of itself, by the Company Group to meet (A) any public estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period; or (B) any internal budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that any cause of any such failure may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

(xiii)    the availability or cost of equity, debt or other financing to Parent or Merger Sub; and

(xiv)    any Transaction Litigation or other Legal Proceeding threatened, made or brought by any of the current or former Company Stockholders (on their own behalf or on behalf of the Company) against the Company, any of its executive officers or other employees or any member of the Company Board arising out of the Merger or any other transaction contemplated by this Agreement;

except, with respect to clauses (i), (ii), (iii), (iv), (v), (vi), and (x) to the extent that such Effect has had a materially disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company conducts business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect.

(t)    “Company Options” means any options to purchase shares of Company Common Stock granted under any of the Company Equity Plans.

(u)    “Company Preferred Stock” means the Preferred Stock, par value $0.0001 per share, of the Company.

(v)    “Company Registered Intellectual Property” means all of the Registered Intellectual Property owned or purported to be owned by, or filed in the name of, any Company Group Member.

(w)    “Company RSU Awards” means any restricted stock units granted under any of the Company Equity Plans.

(x)    “Company Stockholders” means the holders of shares of Company Capital Stock.

(y)    “Continuing Employees” means each individual who is an employee of the Company immediately prior to the Effective Time and continues to be an employee of Parent or one of its Subsidiaries (including the Surviving Corporation) immediately following the Effective Time.

(z)    “Contract” means any contract, subcontract, note, bond, mortgage, indenture, lease, license, sublicense or other binding agreement.

(aa)    “Credit Facility” means the Second Amended and Restated Loan And Security Agreement, dated as of June 22, 2017, by and among the Company, Silicon Valley Bank and the other parties thereto, as the same may from