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

PLURALSIGHT, INC.

(Name of Registrant as Specified In Its Charter)

N/A

(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)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies: Class A Common Stock of Pluralsight, Inc., par value $0.0001 per share (the “Class A common stock”), Class B Common Stock of Pluralsight, Inc., par value $0.0001 per share (the “Class B common stock”), Class C Common Stock of Pluralsight, Inc., par value $0.0001 per share (the “Class C common stock”), and Common Units of Pluralsight Holdings, LLC (the “Holdings units”).

 

     

  (2)  

Aggregate number of securities to which transaction applies: As of the close of business on December 28, 2020, 121,635,561 shares of Class A common stock were outstanding; 3,638,712 shares of Class A common stock were issuable upon the exercise of outstanding stock options; 9,532,751 shares of Class A common stock were underlying outstanding restricted stock units; 713,417 shares of Class A common stock were underlying outstanding performance restricted stock units (assuming, if applicable, the achievement of all applicable performance goals at 200% maximum levels); 25,081,790 Holdings units and corresponding shares of Class B common stock or Class C common stock were outstanding; 562,500 Holdings units were underlying outstanding restricted stock units of Pluralsight Holdings, LLC; and 482,942 unvested incentive Holdings units and corresponding shares of Class B common stock or Class C common stock were outstanding.

 

     

  (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) 121,635,561 shares of Class A common stock multiplied by $20.26 per share; (B) 12,008,579 shares of Class B common stock multiplied by $0.0001 per share; (C) 13,073,211 shares of Class C common stock multiplied by $0.0001 per share; (D) options to purchase 3,638,712 shares of Class A common stock multiplied by $5.56 per option (the difference between $20.26 and the weighted average exercise price of $14.70 per share); (E) 9,532,751 shares of Class A common stock underlying restricted stock units multiplied by $20.26 per share; (F) 713,417 shares of Class A common stock underlying performance restricted stock units multiplied by $20.26 per share; (G) 25,081,790 Holdings units multiplied by $20.26 per share; (H) 562,500 Holdings units underlying restricted stock units of Pluralsight Holdings, LLC multiplied by $20.26 per share; (I) 482,942 unvested incentive Holdings units multiplied by $20.26 per share; (J) 155,366 shares of Class B common stock corresponding to unvested incentive Holdings units multiplied by $0.0001 per share; and (K) 327,576 shares of Class C common stock corresponding to unvested incentive Holdings units multiplied by $0.0001 per share.

 

     

  (4)  

Proposed maximum aggregate value of transaction: $3,221,495,345.05

 

     

  (5)  

Total fee paid: $351,465.14

 

In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filed fee was determined by multiplying $3,221,495,345.05 by ..0001091.

 

     

  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 JANUARY 7, 2021

 

 

LOGO

PLURALSIGHT, INC.

42 Future Way

Draper, UT 84020

[                ], 2021

Dear Pluralsight Stockholder:

You are cordially invited to attend a special meeting (including any adjournments, postponements or other delays thereof, the “special meeting”) of stockholders of Pluralsight, Inc. (“Pluralsight”) to be held on [                ], 2021, at [                ] Mountain time. The special meeting will be held exclusively online via a live interactive webcast on the internet at [                ]. You will be able to listen to the special meeting live, submit questions during the meeting and vote online. We elected to use a virtual meeting given the current public health implications of the COVID-19 pandemic and our desire to promote the health and welfare of our stockholders.

At the special meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated December 11, 2020 (as it may be amended from time to time, the “merger agreement”), by and among Pluralsight, Lake Holdings, LP (“Parent I”), Lake Guarantor, LLC (“Parent II” and together with Parent I, the “Parent Entities”), Lake Merger Sub I, Inc. (“Merger Sub I”), Lake Merger Sub II, LLC (“Merger Sub II” and together with Merger Sub I, the “Merger Subs” and together with the Parent Entities and Merger Sub I, the “Buyer Parties”) and Pluralsight Holdings, LLC (“Pluralsight Holdings” and together with Pluralsight, the “Pluralsight Parties”). Pursuant to the terms of the merger agreement, Merger Sub II will merge with and into Pluralsight Holdings (the “Holdings merger”), with Pluralsight Holdings continuing as the surviving entity in the Holdings merger, and Merger Sub I will merge with and into Pluralsight (the “Pluralsight merger” and together with the Holdings merger, the “mergers”), with Pluralsight continuing as the surviving corporation in the Pluralsight merger. The Buyer Parties are entities that are affiliated with Vista Equity Partners Management, LLC, a leading private equity firm focused on investments in software, data and technology-enabled companies.

If the mergers are completed, at the effective times of the mergers:

 

   

each share of class A common stock of Pluralsight (the “Class A common stock”) outstanding as of immediately prior to the effective time of the Pluralsight merger (except as otherwise provided in the merger agreement) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest; and

 

   

each common unit of Pluralsight Holdings (the “Holdings units”) outstanding as of immediately prior to the effective time of the Holdings merger (except as otherwise provided in the merger agreement) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest.

In addition, at the effective time of the Pluralsight merger, each share of class B common stock of Pluralsight (the “Class B common stock”) and each share of Class C common stock of Pluralsight (the “Class C common stock” and, together with the Class A common stock and the Class B common stock, the “common stock”), which correspond on a one-for-one basis with the Holdings units, outstanding as of immediately prior to the effective time of the Pluralsight merger (except as otherwise provided in the merger agreement) will be cancelled and automatically converted into the right to receive cash in an amount equal to $0.0001, without interest, as provided in the amended and restated certificate of incorporation of Pluralsight.


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Following the mergers, Pluralsight will no longer have its shares of Class A common stock listed for trading on the Nasdaq.

The enclosed proxy statement provides detailed information about the special meeting, the merger agreement and the mergers. 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 Pluralsight Board of Directors (the “Pluralsight Board”) and the Transaction Committee of the Pluralsight Board (the “Transaction Committee”) in connection with their consideration of the merger agreement and the mergers and related matters. You should carefully read and consider the entire enclosed proxy statement and its annexes, including the merger agreement, as they contain important information about, among other things, the mergers and how they affect Pluralsight stockholders.

The Transaction Committee and the Pluralsight Board, after considering the factors more fully described in the enclosed proxy statement, have each unanimously: (1) determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and its stockholders; and (2) adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement. The Pluralsight Board recommends that Pluralsight stockholders vote: (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

Whether or not you plan to attend the special meeting, 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 and vote at the special meeting, 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 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 mergers unless the proposal to adopt the merger agreement is approved by the affirmative vote of each of (1) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) and (2) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) not held by any party to Pluralsight’s Tax Receivable Agreement, any person that Pluralsight has determined to be an “officer” of Pluralsight within the meaning of Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended, and any other stockholder known by certain executive officers of Pluralsight to be an affiliate or immediate family member of any of the foregoing.

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

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Shareholders may call toll free: (877) 687-1866

Banks and Brokers may call collect: (212) 750-5833


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On behalf of the Pluralsight Board, I thank you for your support and appreciate your consideration of these matters.

 

Sincerely,
 

 

Aaron Skonnard

President and Chief Executive Officer

The accompanying proxy statement is dated [                ], 2021 and, together with the enclosed form of proxy card, is first being mailed on or about [                ], 2021.


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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED JANUARY 7, 2021

 

 

LOGO

PLURALSIGHT, INC.

42 Future Way

Draper, UT 84020

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [                ], 2021

Notice is hereby given that a special meeting of stockholders (including any adjournments, postponements or other delays thereof, the “special meeting”) of Pluralsight, Inc., a Delaware corporation (“Pluralsight”) will be held via a live webcast on [                ], 2021, at [                ] Mountain time, for the following purposes:

1. To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated December 11, 2020, (the “merger agreement”), by and among Pluralsight, Lake Holdings, LP (“Parent I”), Lake Guarantor, LLC (“Parent II” and together with Parent I, the “Parent Entities”), Lake Merger Sub I, Inc. (“Merger Sub I”), Lake Merger Sub II, LLC (“Merger Sub II” and together with Merger Sub I, the “Merger Subs” and together with the Parent Entities and Merger Sub I, the “Buyer Parties”) and Pluralsight Holdings, LLC (“Pluralsight Holdings” and together with Pluralsight, the “Pluralsight Parties”). Pursuant to the terms of the merger agreement, Merger Sub II will merge with and into Pluralsight Holdings (the “Holdings merger”), with Pluralsight Holdings continuing as the surviving entity in the Holdings merger, and Merger Sub I will merge with and into Pluralsight (the “Pluralsight merger” and together with the Holdings merger, the “mergers”), with Pluralsight continuing as the surviving corporation in the Pluralsight merger;

2. 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; and

3. To consider and vote on the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable by Pluralsight to its named executive officers in connection with the mergers.

The special meeting will be held by means of a live interactive webcast on the internet at [                ]. You will be able to listen to the special meeting live, submit questions during the meeting and vote online. The special meeting will begin promptly at [                ], Mountain time. Online check-in will begin at [                ], Mountain time. You will need the control number found on your proxy card or voting instruction form in order to vote at the special meeting.

Only stockholders of record as of the close of business on [                ], 2021, are entitled to notice of the special meeting and to vote at the special meeting.

The Pluralsight Board of Directors (the “Pluralsight Board”) unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

Whether or not you plan to attend the special meeting, 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


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internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend and vote at the special meeting, 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.

 

By Order of the Pluralsight Board,
 

 

Aaron Skonnard

President and Chief Executive Officer

Dated: [                ], 2021


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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, 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 a stockholder of record, voting 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 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 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.

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 mergers and how they affect Pluralsight stockholders. If you have any questions concerning the merger agreement, the mergers, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Shareholders may call toll free: (877) 687-1866

Banks and Brokers may call collect: (212) 750-5833


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TABLE OF CONTENTS

 

Summary

     1  

Parties Involved in the Mergers

     2  

The Mergers

     3  

Merger Consideration

     3  

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

     5  

Appraisal Rights

     5  

Regulatory Approvals Required for the Mergers

     6  

Closing Conditions

     6  

Financing of the Mergers

     7  

The Voting and Support Agreements

     7  

Amendment to the Tax Receivable Agreement

     8  

The Special Meeting

     9  

Requisite Stockholder Approval

     9  

Recommendation of the Pluralsight Board

     10  

Fairness Opinion of Qatalyst

     11  

Interests of Pluralsight’s Directors and Executive Officers in the Mergers

     11  

No Solicitation of Other Acquisition Proposals

     12  

Termination of the Merger Agreement

     13  

Effect on Pluralsight if the Mergers are Not Completed

     13  

Questions and Answers

     15  

Forward-Looking Statements

     26  

The Special Meeting

     28  

Date, Time and Place

     28  

Purpose of the special meeting

     28  

Record Date; Shares Entitled to Vote; Quorum

     28  

Vote Required; Abstentions and Broker Non-Votes

     29  

Shares Held by Pluralsight’s Directors and Executive Officers

     29  

Voting of Proxies

     30  

Revocability of Proxies

     31  

Pluralsight Board’s Recommendation

     31  

Solicitation of Proxies

     32  

Anticipated Date of Completion of the Mergers

     32  

Appraisal Rights

     32  

Delisting and Deregistration of Pluralsight’s Common Stock

     33  

Other Matters

     33  

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [    ], 2021

     33  

Householding of Special Meeting Materials

     33  

Questions and Additional Information

     33  

The Mergers

     34  

Parties Involved in the Mergers

     34  

Effect of the Mergers

     35  

Effect on Pluralsight if the Mergers are Not Completed

     36  

Merger Consideration

     36  

Background of the Mergers

     38  

Recommendation of the Transaction Committee and the Pluralsight Board and Reasons for the Mergers

     56  

Fairness Opinion of Qatalyst

     62  

Certain Unaudited Prospective Financial Information

     68  

Interests of Pluralsight’s Directors and Executive Officers in the Mergers

     71  

 

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Financing of the Mergers

     80  

The Voting and Support Agreements

     82  

Amendment to the Tax Receivable Agreement

     83  

Closing of the Mergers

     84  

Appraisal Rights

     85  

Accounting Treatment

     90  

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

     90  

Regulatory Approvals Required for the Mergers

     94  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     95  

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

     95  

Closing and Effective Time

     96  

Alternative Structure of the Mergers

     96  

Merger Consideration

     97  

Exchange and Payment Procedures

     98  

Representations and Warranties

     99  

Conduct of Business Pending the Mergers

     102  

No Solicitation of Other Acquisition Proposals

     104  

The Pluralsight Board’s Recommendation; Pluralsight Board Recommendation Change

     106  

Employee Benefits

     108  

Efforts to Close the Mergers

     109  

Cooperation with Debt Financing, Convertible Notes and Capped Call Transactions

     109  

Indemnification and Insurance

     112  

Other Covenants

     113  

Conditions to the Closing of the Mergers

     113  

Termination of the Merger Agreement

     114  

Termination Fee

     115  

Specific Performance

     116  

Limitations of Liability

     116  

Fees and Expenses

     116  

Amendment

     116  

Governing Law

     116  

PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

     117  

PROPOSAL 3: ADVISORY NON-BINDING VOTE ON MERGER-RELATED COMPENSATION FOR NAMED EXECUTIVE OFFICERS

     118  

Security Ownership of Certain Beneficial Owners and Management

     119  

Future Stockholder Proposals

     124  

Where You Can Find More Information

     125  

Miscellaneous

     127  

Annexes

  

Annex A—The Merger Agreement

     A-1  

Annex B—Fairness Opinion of Qatalyst

     B-1  

Annex C—Section 262 of the General Corporation Law of Delaware

     C-1  

Annex D—Voting and Support Agreement

     D-1  

 

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SUMMARY

This summary highlights selected information from this proxy statement related to the mergers, and may not contain all of the information that is important to you. To understand the mergers more fully and for a more complete description of the legal terms of the mergers, 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 mergers and how they affect Pluralsight stockholders. 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 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 mergers.

Except as otherwise specifically noted in this proxy statement, the following terms have the following meanings:

 

   

“Pluralsight,” “we,” “our,” “us” and similar words refer to Pluralsight, Inc.

 

   

“Pluralsight Holdings” refers to Pluralsight Holdings, LLC.

 

   

“Pluralsight Parties” refer to Pluralsight and Pluralsight Holdings, collectively.

 

   

“Parent I” refers to Lake Holdings, LP, “Parent II” refers to Lake Guarantor, LLC, and the “Parent Entities” refer to Parent I and Parent II, collectively.

 

   

“Merger Sub I” refers to Lake Merger Sub I, Inc., “Merger Sub II” refers to Lake Merger Sub II, LLC, and the “Merger Subs” refer to Merger Sub I and Merger Sub II, collectively.

 

   

“Buyer Parties” refer to the Parent Entities and the Merger Subs, collectively.

 

   

“Surviving Corporation” refers to the surviving corporation in the Pluralsight merger (as defined below), the “Surviving LLC” refers to the surviving limited liability company in the Holdings merger (as defined below), and the “Surviving Entities” refer to the Surviving Corporation and the Surviving LLC, collectively.

 

   

“Merger agreement” refers to the Agreement and Plan of Merger, dated December 11, 2020, by and among the Pluralsight Parties and the Buyer Parties, as it may be amended from time to time.

 

   

“Class A common stock” refers to our Class A Common Stock, par value $0.0001 per share, “Class B common stock” refers to our Class B Common Stock, par value $0.0001 per share, “Class C common stock” refers to our Class C Common Stock, par value $0.0001 per share, and “common stock” refers to our Class A common stock, Class B common stock and Class C common stock, collectively.

 

   

“Holdings units” refer to common units of Pluralsight Holdings contemplated by the amended and restated limited liability company agreement of Pluralsight Holdings.

 

   

“Stockholders” refer to the holders of common stock and “unitholders” refer to the holders of Holdings units (other than Pluralsight).

 

   

“Pluralsight Board” refers to the Pluralsight Board of Directors.

Certain other terms used in this proxy statement are defined elsewhere in this proxy statement. Unless defined in this proxy statement, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the merger agreement.



 

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Parties Involved in the Mergers

Pluralsight, Inc.

Pluralsight, together with its subsidiaries, is a leading cloud-based technology skills development platform committed to closing the global technology skills gap. Learners on our platform can acquire today’s most valuable technology skills through high-quality learning experiences delivered by subject-matter experts. Real-time measurement and assessment of a learner’s performance on our platform provides technology leaders with visibility into the capabilities of their teams and confidence their teams will deliver on critical objectives. Our platform empowers teams to keep up with the pace of technological change, puts the right people on the right projects, and boosts productivity.

Pluralsight is a holding company and has no material assets other than its ownership of the Holdings units.

For the years ended December 31, 2019, 2018, and 2017 and the nine months ended September 30, 2020, Pluralsight’s consolidated revenue totaled $316.9 million, $232.0 million, $166.8 million and $286.9 million, respectively. Pluralsight’s consolidated net loss for the years ended December 31, 2019, 2018, and 2017 and the nine months ended September 30, 2020, was $163.6 million, $146.8 million, $96.5 million and $121.0 million, respectively.

Pluralsight was incorporated in Delaware in December 2017.

Pluralsight Holdings, LLC

Pluralsight Holdings is a subsidiary of Pluralsight, and owns directly or indirectly all of the material operating and other assets indirectly owned by Pluralsight. As of December 28, 2020, the unitholders (other than Pluralsight) held approximately 17.4% of the outstanding Holdings units.

As the sole managing member and manager of Pluralsight Holdings, Pluralsight has the sole voting interest in Pluralsight Holdings and controls all of the business operations, affairs, and management of Pluralsight Holdings. Accordingly, Pluralsight consolidates the financial results of Pluralsight Holdings and reports the non-controlling interests of the unitholders’ Holdings units on its consolidated financial statements.

Pluralsight Holdings was formed in Delaware in August 2014.

Lake Holdings, LP

Parent I was formed on December 7, 2020, 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 mergers.

Lake Guarantor, LLC

Parent II was formed on December 7, 2020, 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 mergers.

Lake Merger Sub I, Inc.

Merger Sub I is a wholly owned direct subsidiary of Parent I and was formed on December 7, 2020, solely for the purpose of engaging in the transactions contemplated by the merger agreement, and has not engaged in



 

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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 mergers.

Lake Merger Sub II, LLC

Merger Sub II is a wholly owned direct subsidiary of Parent II and was formed on December 7, 2020, 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 mergers.

The Buyer Parties are each affiliated with Vista Equity Partners Fund VII, L.P. (“Vista Fund VII”), and the Buyer Parties and Vista Fund VII are each affiliated with Vista Equity Partners Management, LLC (“Vista”). Vista is a leading private equity firm focused on investments in software, data and technology-enabled companies.

In connection with the transactions contemplated by the merger agreement, Vista Fund VII has provided the Parent Entities with an equity commitment of up to $3.06 billion, which will be available, together with cash on hand at Pluralsight as of the closing of the mergers, to fund the aggregate merger consideration and to pay the fees, expenses and other amounts required to be paid in connection with the closing of the mergers by the Pluralsight Parties and the Buyer Parties. For more information, please see the section of this proxy statement captioned “The Mergers—Financing of the Mergers.”

The Mergers

Upon the terms and subject to the conditions of the merger agreement, at the effective time of the Holdings merger, Merger Sub II will merge with and into Pluralsight Holdings, with Pluralsight Holdings continuing as the surviving entity in the Holdings merger. At the effective time of the Pluralsight merger, which will immediately follow the Holdings merger, Merger Sub I will merge with and into Pluralsight, with Pluralsight continuing as the surviving corporation in the Pluralsight merger. As a result of the mergers, Pluralsight’s Class A common stock will no longer be publicly traded, and will be delisted from the Nasdaq. In addition, Pluralsight’s Class A common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Pluralsight will no longer file periodic reports with the United States Securities and Exchange Commission (the “SEC”). If the mergers are completed, you will not own any shares of the capital stock of Pluralsight following the effective time of the Pluralsight merger. The mergers will become effective upon the filing of the certificates of merger with respect to the mergers with the Secretary of State of the State of Delaware (or at such later time as may be specified in the certificates of merger).

Merger Consideration

Pluralsight Common Stock and Holdings Units

At the effective time of the Pluralsight merger, each share of Class A common stock outstanding as of immediately prior to the effective time of the Pluralsight merger (except as described below) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest (the “Per Share Price”).

At the effective time of the Holdings merger, each Holdings unit outstanding as of immediately prior to the effective time of the Holdings merger (other than the Holdings units held by the Pluralsight Parties) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest (the “Per Unit Price”).



 

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In addition, at the effective time of the Pluralsight merger, each share of Class B common stock and each share of Class C common stock, which correspond on a one-for-one basis with the Holdings units, outstanding as of immediately prior to the effective time of the Pluralsight merger (except as described below) will be cancelled and automatically converted into the right to receive cash in an amount equal to $0.0001, without interest (the “Class B Per Share Price” and “Class C Per Share Price” as applicable), as provided in the amended and restated certificate of incorporation of Pluralsight (the “Pluralsight Charter”).

Each share of common stock that is either (1) held by the Pluralsight Parties and their respective subsidiaries, (2) owned by the Buyer Parties, (3) owned by any direct or indirect wholly owned subsidiary of the Buyer Parties or (4) owned by stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of common stock under Delaware law (collectively, the “Excluded Shares”) will not be converted into the right to receive the consideration described above.

At or immediately prior to the closing, the Parent Entities will deposit sufficient funds to pay the aggregate consideration to stockholders and unitholders with a designated payment agent for payment of each share of common stock (other than the Excluded Shares) owned by each stockholder and each Holdings unit owned by unitholders (other than the Pluralsight Parties). 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 mergers are completed, stockholders and unitholders will have the right to receive the Per Share Price, the Per Unit Price, the Class B Per Share Price or the Class C Per Share Price, as applicable, but stockholders and unitholders will no longer have any rights as a stockholder of Pluralsight or a unitholder of Pluralsight Holdings (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 Mergers—Appraisal Rights.”

Treatment of Pluralsight Options, Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs, and Holdings Incentive Units

The merger agreement generally provides that equity awards granted under equity incentive plans of Pluralsight and Pluralsight Holdings, including options to purchase shares of Class A common stock, restricted stock units covering shares of Class A and Class B common stock or Holdings units, performance-based restricted stock units covering shares of Class A common stock, or Holdings incentive units that are outstanding and vested as of immediately before the closing date of the mergers will be cancelled and converted into cash consideration equal to $20.26 multiplied by the number of vested shares or units 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 mergers. Certain equity awards that are outstanding and unvested as of immediately before the closing date of the mergers will be cancelled and converted into cash consideration (the “cash replacement amount”) equal to $20.26 multiplied by the number of unvested shares or units 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; provided that, with respect to performance-based restricted stock units, the number of unvested shares of our common stock for purposes of determining the cash replacement amount will be based on actual performance of the performance objectives if the applicable performance period specified in the underlying award agreement had been completed as of the closing of the mergers and the determination of the achievement of the applicable performance objectives had not yet been made as of the closing of the mergers, and the applicable cash replacement amount will be paid within 30 days following the end of the original performance period, subject to the holder’s continued service with the Parent Entities and their affiliates through the end of such original performance



 

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period. Any options with a per share exercise price equal to or above $20.26 will be cancelled at the effective time of the Pluralsight merger for no payment or consideration. Equity incentive plans of Pluralsight and Pluralsight Holdings will terminate as of the effective times of the mergers. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Outstanding Pluralsight Options, Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs and Holdings Incentive Units.”

Treatment of Purchase Rights under the 2018 Employee Stock Purchase Plan

The merger agreement generally provides that no new offering periods or purchase periods will begin under Pluralsight’s 2018 Employee Stock Purchase Plan (the “ESPP”) after December 11, 2020, any outstanding offering period will end no later than five days before the effective times of the mergers, and the ESPP will terminate as of the effective times of the mergers. In addition, with respect to any offering periods in effect on December 11, 2020, as of such date, no new participants will be permitted in the ESPP and existing participants will not be allowed to increase payroll contribution rates. 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 2018 Employee Stock Purchase Plan.” In addition, the ESPP equivalent program in which Aaron Skonnard and James Budge participate that allows each of Mr. Skonnard and Mr. Budge to receive Class A common stock on each ESPP exercise date in lieu of their respective participation in the ESPP (the “ESPP equivalent program”) will be terminated no later than the effective times of the mergers.

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

The receipt of cash by stockholders in exchange for shares of common stock in the Pluralsight merger will be a taxable transaction to U.S. Holders (as defined under the caption, “The Mergers—Material U.S. Federal Income Tax Consequences of the Pluralsight Merger”) for U.S. federal income tax purposes. Such receipt of cash by each stockholder that is a U.S. Holder 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 Pluralsight merger per share and such U.S. Holder’s adjusted tax basis in the shares of common stock surrendered in the Pluralsight merger by such stockholder. Backup withholding may also apply to the cash payments made pursuant to the Pluralsight merger, unless the U.S. Holder complies with certification procedures under the backup withholding rules.

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

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

Stockholders should also consult their own tax advisors concerning the U.S. federal income tax consequences relating to the mergers 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.

Appraisal Rights

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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 Pluralsight merger under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”). This means that stockholders may be entitled to have their shares of common stock appraised by the Delaware Court of Chancery, and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the mergers, together with interest to be paid on the amount determined to be the fair value, if any, as determined by the court, as described further below. Due to the complexity of the appraisal process, 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.

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 common stock.

To exercise appraisal rights, stockholders must: (1) submit a written demand for appraisal to Pluralsight 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 common stock of record through the effective time of the Pluralsight merger; 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 Pluralsight 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 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 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 Mergers—Appraisal Rights.”

Regulatory Approvals Required for the Mergers

Under the merger agreement, the mergers 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 Mergers—Regulatory Approvals Required for the Mergers.”

On December 21, 2020, the filings required to be made under the HSR Act were made.

Completion of the mergers is further subject to the receipt of other required regulatory approvals or clearances under the competition laws of Austria and Germany, and under the foreign investment laws of Australia and New Zealand, unless a relevant exemption applies.

Closing Conditions

The obligations of the Pluralsight Parties and the Buyer Parties, as applicable, to consummate the mergers are subject to the satisfaction or waiver of certain conditions, including (among other conditions), the following:

 

   

the absence of any law or order restraining, enjoining or otherwise prohibiting the mergers;



 

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the adoption of the merger agreement by the affirmative vote of each of (1) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) and (2) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) not held by (a) any party to the TRA (as defined below), (b) any person that Pluralsight has determined to be an “officer” of Pluralsight within the meaning of Rule 16a-1(f) of the Exchange Act and (c) any other stockholder known by certain executive officers of Pluralsight to be an affiliate or immediate family member of any of the foregoing (the “Pluralsight excluded parties”);

 

   

the expiration or termination of the applicable waiting period under the HSR Act and the receipt of certain other required regulatory approvals or clearances;

 

   

in the case of the Buyer Parties, the absence of any change, event, violation, inaccuracy, effect or circumstance (each, an “Effect”) that, individually or taken together with all other Effects that have occurred on or prior to the date of determination of the occurrence of the Company Material Adverse Effect, is or would reasonably be expected to have a Company Material Adverse Effect on the business, financial condition or results of operations of the Pluralsight Parties and their subsidiaries, taken as a whole;

 

   

the accuracy of the representations and warranties of the Pluralsight Parties and the Buyer Parties in the merger agreement, subject to materiality qualifiers, as of the closing date of the mergers or the date in respect of which such representation or warranty was specifically made; and

 

   

the performance in all material respects by the Pluralsight Parties and the Buyer Parties of their respective obligations required to be performed by them under the merger agreement at or prior to the closing date of the mergers.

Financing of the Mergers

The obligation of the Buyer Parties to consummate the mergers is not subject to any financing condition. In connection with the financing of the mergers, Vista Fund VII and the Parent Entities have entered into an equity commitment letter, dated as of December 11, 2020 (the “Equity Commitment Letter”), pursuant to which Vista Fund VII has agreed to provide the Parent Entities with an equity commitment of up to $3.06 billion in cash, which will be available, together with cash on hand at Pluralsight as of the closing of the mergers, to fund the aggregate merger consideration (including payments in respect of our outstanding equity-based awards payable in connection with the closing of the mergers pursuant to the merger agreement) and to pay the fees, expenses and other amounts required to be paid in connection with the closing of the mergers by the Pluralsight Parties and the Buyer Parties. Pluralsight has a contractual right to enforce the Equity Commitment Letter against Vista Fund VII and, under the terms of the merger agreement, Pluralsight has the right to specifically enforce the Parent Entities’ obligation to consummate the mergers, subject to the satisfaction of the conditions to the Buyer Parties’ obligations to consummate the mergers set forth in the merger agreement.

Pursuant to the limited guaranty delivered by Vista Fund VII in favor of the Pluralsight Parties, dated as of December 11, 2020 (the “Limited Guaranty”), Vista Fund VII has agreed to guarantee the payment of all of the liabilities and obligations of the Buyer Parties under the merger agreement, subject to an aggregate cap equal to $209.2 million, plus amounts in respect of certain reimbursement and indemnification obligations of the Buyer Parties for certain costs, expenses or losses incurred or sustained by the Pluralsight Parties and their subsidiaries, as specified in the merger agreement. For more information, please see the section of this proxy statement captioned “The Mergers—Financing of the Merger.”

The Voting and Support Agreements

On December 11, 2020, following approval thereof by the Pluralsight Board, each of Aaron Skonnard, Pluralsight’s Chief Executive Officer and chairman of the Pluralsight Board, Frederick Onion, a member of the



 

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Pluralsight Board, and certain stockholder entities affiliated with Messrs. Skonnard and Onion entered into a voting and support agreement with Pluralsight and the Parent Entities (the “voting agreements”). The voting agreements provide that the stockholders party to the voting agreements (the “voting agreement stockholders”) will vote their shares of common stock (i) in favor of the adoption of the merger agreement and the approval of the mergers and other transactions contemplated by the merger agreement, (ii) in favor of any proposal recommended by the Pluralsight Board (or a committee thereof) that is intended to facilitate the consummation of the transactions contemplated by the merger agreement, (iii) in favor of any non-binding advisory vote on “golden parachute” executive compensation arrangements and/or (iv) except as described below, against any Acquisition Proposal or any other action or agreement which would reasonably be expected to result in any of the conditions to the Pluralsight Parties’ obligations to consummate the mergers not being fulfilled. In addition, if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into an Alternative Acquisition Agreement, in one or more iterations) that has been approved and recommended by the Pluralsight Board, the voting agreements also provide that the voting agreement stockholders will vote in favor of the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect. The voting agreements also contain restrictions on transfer of shares of common stock, Holdings units and other equity interests of the Pluralsight Parties held by the voting agreement stockholders, subject to certain exceptions. The voting agreement stockholders have also waived appraisal rights in connection with the mergers, and have agreed not to raise certain legal challenges to the mergers.

As of the record date, the voting agreement stockholders held, in the aggregate, shares of common stock representing approximately [    ]% of the voting power of the total outstanding shares of common stock. For more information, please see the section of this proxy statement captioned “The Mergers—The Voting and Support Agreements.”

Amendment to the Tax Receivable Agreement

Concurrent with the initial public offering of shares of its common stock and related reorganization transactions undertaken in connection with the initial public offering, Pluralsight entered into a tax receivable agreement (the “TRA”) with certain members of Pluralsight Holdings who retained Holdings units after the initial public offering. The TRA provided for payment to such members and their assignees (the “TRA beneficiaries”) of approximately 85% of the amount of the calculated tax savings, if any, Pluralsight will realize due to future exchanges of Holdings units (together with the corresponding shares of Class B or Class C common stock, as applicable) for Class A common stock, and the acceleration of such payments in connection with a change of control of Pluralsight.

On December 11, 2020, in connection with the execution of the merger agreement, Pluralsight and Pluralsight Holdings entered into an amendment to the TRA (the “TRA amendment”) with the representative of the TRA beneficiaries (the “TRA Representative”) and certain other TRA beneficiaries, in accordance with the terms of the TRA. The TRA amendment establishes that the parties to the TRA (other than Pluralsight and Pluralsight Holdings) will be entitled to receive an aggregate amount of $127 million in connection with the closing of the mergers in full satisfaction of the payment obligations to the TRA beneficiaries under the TRA. This represents a reduction of approximately $290 million, which is an approximately 70% reduction of the estimated aggregate amount of approximately $417 million that would have otherwise been payable to the TRA beneficiaries under the TRA in respect of a change of control of Pluralsight at the implied price per share of Class A common stock offered by Vista (such implied price equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA), absent the TRA amendment. In addition, if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in



 

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accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into another Alternative Acquisition Agreement, in one or more iterations), the agreements in the TRA amendment also apply in connection with the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect. Ryan Hinkle, a director of Pluralsight, is a Managing Director of Insight Venture Management, LLC, an affiliate of the TRA Representative. Under the TRA amendment, Pluralsight agreed to indemnify the TRA Representative for losses in connection with its approval of the TRA amendment. For more information, please see the section of this proxy statement captioned “The Mergers—Amendment to the Tax Receivable Agreement.”

The Special Meeting

Date, Time and Place

A special meeting of stockholders to consider and vote on the proposal to adopt the merger agreement will be held on [    ], 2021, at [    ] Mountain time (including any adjournments, postponements or other delays thereof, the “special meeting”). The special meeting will be held exclusively online via a live interactive webcast on the internet at [                ]. We elected to use a virtual meeting given the current public health implications of the COVID-19 pandemic and our desire to promote the health and welfare of our stockholders. You will need the control number found on your proxy card or voting instruction form in order to vote at the special meeting.

Record date; Shares Entitled to Vote

You are entitled to vote at the special meeting if you owned shares of common stock at the close of business on [    ], 2021 (the “record date”). At the special meeting, each stockholder will have one vote for each share of Class A common stock and Class B common stock that it owns as of the close of business on the record date, and ten votes for each share of Class C common stock that it owns as of the close of business on the record date.

As of the record date, there were [        ] shares of Class A common stock outstanding and entitled to vote at the special meeting, [        ] shares of Class B Stock outstanding and entitled to vote at the special meeting and [        ] shares of Class C Stock outstanding and entitled to vote at the special meeting. As of the record date, (1) there were [        ] shares of Class A common stock outstanding and entitled to vote at the special meeting not held of record by the Pluralsight excluded parties and (2) all shares of Class B common stock and Class C common stock were held of record by the Pluralsight excluded parties.

Quorum

As of the record date, there were [    ] shares of Class A common stock outstanding and entitled to vote at the special meeting, [    ] shares of Class B Stock outstanding and entitled to vote at the special meeting and [    ] shares of Class C Stock outstanding and entitled to vote at the special meeting. The holders of a majority of the voting power of Pluralsight’s capital stock issued and outstanding and entitled to vote, present in person or represented by proxy, will constitute a quorum at the special meeting.

Requisite Stockholder Approvals

The consummation of the mergers is subject to (among other conditions) the adoption of the merger agreement by the affirmative vote of each of (1) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) as of the record date and (2) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) as of the record date not held by the Pluralsight excluded parties (the “requisite stockholder approvals”).

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 voting power of the shares present at the special meeting or represented by proxy at the special meeting and entitled to vote on the proposal.



 

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Approval of the advisory non-binding vote on merger-related compensation for named executive officers requires the affirmative vote of a majority of the voting power of the shares present at the special meeting or represented by proxy at the special meeting and entitled to vote on the proposal.

As of the record date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, shares of common stock representing [    ] votes, representing approximately [    ]% of the voting power of the total shares of common stock outstanding as of the record date. The voting agreement stockholders, as required under the voting agreements, will vote their shares of common stock in favor of the proposal to adopt the merger agreement. For more information, please see the section of this proxy statement captioned “The Mergers—The Voting and Support Agreements.”

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of common stock: (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

Recommendation of the Pluralsight Board

In connection with its consideration of the matters described in this proxy statement, the Pluralsight Board established the Transaction Committee of the Pluralsight Board (the “Transaction Committee”), and resolved that Pluralsight will not effectuate any potential business combination or other similar strategic transaction involving Pluralsight, including the mergers, if such combination or transaction has not first been approved or recommended by the Transaction Committee. For more information on the actions and determinations of the Pluralsight Board and the Transaction Committee in connection with their consideration of the merger agreement and the mergers, please see the section of this proxy statement captioned “The Mergers—Background of the Mergers.”

After considering various factors described in this proxy statement under the caption, “The Mergers—Recommendation of the Transaction Committee and the Pluralsight Board and Reasons for the Mergers,” the Transaction Committee and the Pluralsight Board have each unanimously: (1) determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and its stockholders; and (2) adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement. The Transaction Committee also recommended that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

The Pluralsight Board also unanimously recommends that Pluralsight stockholders vote: (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

Prior to the adoption of the merger agreement by stockholders, under certain circumstances, the Pluralsight Board 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 Pluralsight Board’s fiduciary duties under applicable law. However, the Pluralsight Board cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the merger agreement, including, but not limited to, negotiating with the Parent Entities and their representatives in good faith over a four business day period so that a failure to make a Pluralsight Board Recommendation Change (as defined in the



 

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section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Pluralsight Board’s Recommendation; Pluralsight Board Recommendation Change”) would no longer be inconsistent with the Pluralsight Board’s fiduciary duties under applicable law. The termination of the merger agreement by Parent I following the withdrawal by the Pluralsight Board of its recommendation that stockholders adopt the merger agreement will result in the payment by Pluralsight of a termination fee to the Parent Entities in the amount of $104.6 million. The termination of the merger agreement by Pluralsight following the Pluralsight Board’s authorization for Pluralsight to enter into a definitive agreement to consummate an Acquisition Transaction contemplated by a Superior Proposal will result in the payment by Pluralsight of a termination fee to the Parent Entities in the amount of $104.6 million. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Pluralsight Board’s Recommendation; Pluralsight Board Recommendation Change.”

Fairness Opinion of Qatalyst

Pluralsight engaged Qatalyst Partners LP (“Qatalyst”) to act as financial advisor in connection with the matters described in this proxy statement based on Qatalyst’s qualifications, expertise and reputation, and its knowledge of the industry in which Pluralsight operates. At the meeting of the Pluralsight Board on December 11, 2020, Qatalyst rendered to the Pluralsight Board its oral opinion, subsequently confirmed in writing, to the effect that, as of December 11, 2020, and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, was fair, from a financial point of view, to such holders.

The full text of the opinion of Qatalyst, dated as of December 11, 2020, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst in rendering its opinion. You should read the opinion carefully in its entirety.

Qatalyst’s opinion was provided to the Pluralsight Board and addressed only, as of the date of the opinion, the fairness, from a financial point of view, of the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, to such holders. It does not address any other aspect of the mergers. It does not constitute a recommendation to any stockholder of Pluralsight as to how to vote with respect to the mergers or any other matter and does not in any manner address the price at which the shares of Class A common stock will trade at any time.

For a description of the opinion that the Pluralsight Board received from Qatalyst, see the section of this proxy statement captioned “The Mergers—Fairness Opinion of Qatalyst.”

Interests of Pluralsight’s Directors and Executive Officers in the Mergers

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

 

   

the fact that certain directors and members of management and certain of their affiliates, as equityholders prior to Pluralsight’s initial public offering, are parties to the TRA, and the TRA provides



 

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for acceleration of payments to the TRA beneficiaries in connection with a change of control of Pluralsight (including in connection with the mergers), which payments were reduced to $127 million in the aggregate pursuant to the TRA amendment;

 

   

the cash out of certain equity-based awards held by Pluralsight’s executive officers and members of the Pluralsight Board as of the effective times of the mergers;

 

   

with respect to certain equity-based awards held by Mr. Skonnard, acceleration of such awards upon the closing of the mergers;

 

   

the entitlement of Pluralsight’s executive officers to accelerated vesting of an executive officer’s cash replacement amount with respect to certain equity-based awards if, in general, on or within 12 months following the mergers, the executive officer is terminated without Cause or resigns for Good Reason (as such terms are defined in the applicable equity award agreement);

 

   

the entitlement of each of Pluralsight’s executive officers to receive payments and benefits under the executive officer’s applicable employment agreement if, on or within 12 months following the mergers, the executive officer is terminated without Cause or resigns for Good Reason (as such terms are defined in the applicable executive officer’s employment agreement), subject to the executive officer’s timely signing and not revoking a release in our favor and the executive officer’s continuing to comply with the release; and

 

   

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

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

No Solicitation of Other Acquisition Proposals

Under the merger agreement, until the earlier of the valid termination of the merger agreement and the effective time of the Pluralsight merger, Pluralsight may not: (1) solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or inquiry that constitutes, or is reasonably expected to lead to, an Acquisition Proposal, (2) furnish to any person (other than to the Parent Entities or any designees of the Parent Entities) any non-public information relating to the Pluralsight Parties and their subsidiaries or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Pluralsight Parties and their subsidiaries (other than to the Parent Entities or any designees of the Parent Entities), 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, (3) participate or engage in discussions or negotiations with any person with respect to an Acquisition Proposal (other than informing such persons of the restrictions contained in this paragraph and contacting the person making the Acquisition Proposal to the extent necessary to clarify the terms of the Acquisition Proposal), (4) approve, endorse or recommend any proposal that constitutes, or is reasonably expected to lead to, an Acquisition Proposal, or (5) enter into any Alternative Acquisition Agreement.

Notwithstanding the foregoing restrictions, under specified certain circumstances, until Pluralsight’s receipt of the requisite stockholder approvals, Pluralsight may participate or engage in discussions or negotiations with,



 

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furnish any non-public information relating to the Pluralsight Parties and their subsidiaries to, or afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Pluralsight Parties and their subsidiaries pursuant to an Acceptable Confidentiality Agreement to any person or its representatives that has made or delivered to the Pluralsight Parties an Acquisition Proposal after the date of the merger agreement, 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), in each case with respect to an Acquisition Proposal that did not result from any material breach of Pluralsight’s obligations, as described in the immediately preceding paragraph; provided, however, that the Pluralsight Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal, and the Pluralsight Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to take the actions contemplated by this paragraph would be inconsistent with its fiduciary duties pursuant to applicable law. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—No Solicitation of Other Acquisition Proposals.”

Before receiving the requisite stockholder approvals, Pluralsight 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 the Parent Entities and their representatives in good faith over a four 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 Pluralsight terminates the merger agreement for the purpose of entering into an agreement in respect of a Superior Proposal prior to receiving the requisite stockholder approvals, Pluralsight must pay a termination fee of $104.6 million to the Parent Entities. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Pluralsight Board’s Recommendation; Pluralsight Board Recommendation Change.”

Termination of the Merger Agreement

In addition to the circumstances described above, Parent I and Pluralsight 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 mergers illegal or otherwise prohibit the mergers, an uncured breach of the merger agreement by the other party that results in the failure of certain conditions to the consummation of the mergers, if the mergers have not been consummated by 11:59 p.m., Pacific time, on July 12, 2021, and if Pluralsight stockholders fail to adopt the merger agreement at the special meeting (or any adjournment or postponement thereof). Under some circumstances, Pluralsight is required to pay Parent a termination fee equal to $104.6 million. Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Effect on Pluralsight if the Mergers are Not Completed

If the merger agreement is not adopted by the requisite stockholder approvals, or if the mergers are not completed for any other reason:

 

   

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

 

   

Pluralsight will remain an independent public company, (B) our Class A common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and (C) Pluralsight will continue to file periodic reports with the SEC;



 

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the TRA amendment will terminate (unless the merger agreement is terminated to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement); and

 

   

under certain specified circumstances, Pluralsight will be required to pay the Parent Entities a termination fee of $104.6 million 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 mergers, the merger agreement and the special meeting. These questions and answers may not address all questions that are important to you. We encourage you to carefully read the more detailed information contained elsewhere in this proxy statement, including the annexes to this proxy statement and the other documents to which we refer in this proxy statement, as they contain important information about, among other things, the mergers and how they affect stockholders. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find More Information.”

 

Q:

Why am I receiving these materials?

 

A:

On December 13, 2020, we announced the mergers and the execution of the merger agreement. In order to complete the mergers, stockholders representing the requisite stockholder approvals must vote to adopt the merger agreement at the special meeting. This approval is a condition to the consummation of the mergers. See the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Mergers.” The Pluralsight Board is furnishing this proxy statement and form of proxy card to the holders of shares of common stock in connection with the solicitation of proxies to be voted at the special meeting.

This proxy statement, which you should read carefully, contains important information about the mergers, the merger agreement, the special meeting and the matters to be voted on at the special meeting. The enclosed materials allow you to submit a proxy to vote your shares of common stock without attending the special meeting and to ensure that your shares of common stock are represented and voted at the special meeting.

Your vote is very important. Even if you plan to attend the special meeting, we encourage you to submit a proxy as soon as possible.

 

Q:

What are the proposed mergers and what effects will they have on Pluralsight?

 

A:

The proposed mergers are the transactions pursuant to which the Parent Entities will acquire Pluralsight. If the proposal to adopt the merger agreement is approved by stockholders and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub II will merge with and into Pluralsight Holdings, with Pluralsight Holdings continuing as the surviving entity in the Holdings merger, and Merger Sub I will merge with and into Pluralsight, with Pluralsight continuing as the surviving corporation in the Pluralsight merger. As a result of the mergers, our Class A common stock will no longer be publicly traded and will be delisted from the Nasdaq. In addition, our Class A common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC.

 

Q:

What will I receive if the mergers are completed?

 

A:

At the effective time of the Pluralsight merger, each share of Class A common stock outstanding as of immediately prior to the effective time of the Pluralsight merger (other than the Excluded Shares) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest.

At the effective time of the Holdings merger, each Holdings unit outstanding as of immediately prior to the effective time of the Holdings merger (other than Holdings units held by the Pluralsight Parties) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest.

In addition, at the effective time of the Pluralsight merger, each share of Class B common stock and each share of Class C common stock, which correspond on a one-for-one basis with the Holdings units,

 

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outstanding as of immediately prior to the effective time of the Pluralsight merger (other than the Excluded Shares) will be cancelled and automatically converted into the right to receive cash in an amount equal to $0.0001, without interest, as provided in the Pluralsight Charter.

 

Q:

What are the Holdings units?

 

A:

In May 2018, Pluralsight completed its initial public offering and used the net proceeds to purchase newly issued Holdings units from Pluralsight Holdings, and shares of Class B common stock or Class C common stock were issued on a one-for-one basis to the unitholders who retained Holdings units prior to the initial public offering. As of December 28, 2020, Pluralsight held approximately 82.4% of the outstanding Holdings units and the members of Pluralsight Holdings who retained Holdings units prior to the initial public offering held approximately 17.4% of the outstanding Holdings units. Under the Pluralsight Charter and the limited liability company agreement of Pluralsight Holdings (the “Holdings LLC agreement”), Holdings units represent economic interests in Pluralsight Holdings, with limited voting rights, and shares of Class B common stock and Class C common stock have voting rights but no economic rights.

Under the Pluralsight Charter and the Holdings LLC agreement, Pluralsight must at all times maintain a ratio of one Holdings unit owned, directly or indirectly, by Pluralsight for each share of Class A common stock issued, and Pluralsight Holdings must at all times maintain a one-to-one ratio between the number of shares of Class B common stock or Class C common stock owned by the unitholders and the number of Holdings units owned by the unitholders.

Pursuant to the Holdings LLC agreement, unitholders have a right to exchange their Holdings units, together with the corresponding shares of Class B common stock or Class C common stock, as applicable, for cash or shares of Class A common stock, on a one-for-one basis (subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications, and other similar transactions), or, at Pluralsight’s option, have such Holdings unit redeemed by Pluralsight Holdings for cash or Class A common stock contributed to Pluralsight Holdings by Pluralsight.

Under the Pluralsight Charter, unless consented to in writing by the holders of a majority of the voting power of Class B common stock and Class C common stock, Pluralsight may not consummate a merger or similar transaction unless in connection with the transaction, each Holdings unit is entitled to be exchanged for or converted into the same kind and amount of consideration into which or for which each share of Class A common stock is exchanged or converted, to maintain a one-to-one ratio between the consideration with respect to each Holdings unit and each share of Class A common stock.

 

Q:

What will the holders of Pluralsight options and Pluralsight and Pluralsight Holdings equity awards receive in the mergers?

 

A:

At the closing of the mergers, each equity award that is outstanding and vested as of immediately before the closing date of the mergers will be cancelled and converted into cash consideration equal to $20.26 multiplied by the number of vested shares or units 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 mergers.

At the closing of the mergers, each equity award that is outstanding and unvested as of immediately before the closing date of the mergers will be cancelled and converted into cash consideration equal to the cash replacement amount, which is $20.26, multiplied by the number of unvested shares or units 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. With respect to performance-based restricted stock units, the number of unvested shares of our common stock for purposes of determining the cash replacement amount will be based on actual performance of the performance objectives if the applicable performance period specified in the underlying award agreement had been completed as of the closing of the mergers and the determination of the achievement of the applicable

 

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performance objectives had not yet been made as of the closing of the mergers, and the applicable cash replacement amount will be paid within 30 days following the end of the original performance period, subject to the holder’s continued service with the Parent Entities and their affiliates through the end of such original performance period.

Any options with a per share exercise price equal to or above $20.26 will be cancelled at the effective time of the Pluralsight merger for no payment or consideration. Equity incentive plans of Pluralsight and Pluralsight Holdings will terminate as of the effective times of the mergers.

 

Q:

What will happen to the ESPP?

 

A:

The merger agreement generally provides that no new offering periods or purchase periods will begin under the ESPP after December 11, 2020, and no individual will be allowed to begin participating in the ESPP after December 11, 2020. After December 11, 2020, each ESPP participant will not be allowed to increase his or her payroll contribution rate from the rate in effect as of December 11, 2020, 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 times of the mergers will end no later than five days before the effective times of the mergers. All outstanding purchase rights under the ESPP will be exercised no later than one business day before the effective times of the mergers (with such purchase rights subject to any pro rata adjustments that may be necessary if the current purchase period in progress must be shortened), and the ESPP will terminate as of the effective times of the mergers. Each share of common stock purchased under the ESPP that remains outstanding as of immediately before the effective times of the mergers will be cancelled at the effective times of the mergers and converted into the right to receive $20.26, without interest thereon. In addition, the ESPP equivalent program in which Mr. Skonnard and Mr. Budge participate in lieu of their respective participation in the ESPP will be terminated no later than the effective times of the mergers.

 

Q:

What am I being asked to vote on at the special meeting?

 

A:

Stockholders are being asked to vote on the following proposals:

 

   

to adopt the merger agreement pursuant to which (1) Merger Sub II will merge with and into Pluralsight Holdings, with Pluralsight Holdings continuing as the surviving entity in the Holdings merger and (2) Merger Sub I will merge with and into Pluralsight, with Pluralsight continuing as the surviving corporation in the Pluralsight merger;

 

   

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; and

 

   

to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable by Pluralsight to its named executive officers in connection with the mergers.

 

Q:

When and where is the special meeting?

 

A:

The special meeting will take place on [    ], 2021, at [    ] Mountain time. The special meeting will be held exclusively online via a live interactive webcast on the internet at [                ]. Stockholders will be able to listen to the special meeting live, submit questions during the meeting and vote online. Stockholders will need the control number found on their proxy card or voting instruction form in order to vote at the special meeting. We elected to use a virtual meeting given the current public health implications of the COVID-19 pandemic and our desire to promote the health and welfare of our stockholders.

 

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. At the special meeting, each stockholder will have one vote for each share of Class A common

 

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  stock and Class B common stock that it owns as of the close of business on the record date, and ten votes for each share of Class C common stock that it owns as of the close of business on the record date.

Unitholders do not have a right to vote their Holdings units in respect of the mergers. As the sole managing member and manager of Pluralsight Holdings, Pluralsight has the power and authority to approve the Holdings merger on behalf of Pluralsight Holdings without the vote of any other unitholders or any other persons or entities and has approved the Holdings merger as required under applicable law and the Holdings LLC agreement.

 

Q:

What vote is required to adopt the merger agreement?

 

A:

The consummation of the mergers is subject to (among other conditions) the adoption of the merger agreement by the affirmative vote of each of (1) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) and (2) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) not held by the Pluralsight excluded parties.

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 at the special meeting 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, the failure of any stockholder that holds its shares in “street name” to instruct its bank, broker or other nominee how to vote its 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.

 

Q:

What vote is required to approve adjournment proposal and the compensation proposal?

 

A:

Approval of the 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, requires the affirmative vote of a majority of the voting power of the shares present at the special meeting or represented by proxy at the special meeting and entitled to vote on the proposal.

Approval of the advisory non-binding vote on merger-related compensation for named executive officers requires the affirmative vote of a majority of the voting power of the shares present at the special meeting or represented by proxy at the special meeting and entitled to vote on the proposal.

If a stockholder is present or represented by proxy and abstains 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 and “AGAINST” the proposal to approve of the advisory non-binding vote on merger-related compensation for named executive officers. Any shares not present or represented by proxy (including due to the failure of a stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions to such bank, broker or other nominee) will have no effect on the outcome of the adjournment proposal or the compensation proposal.

 

Q:

What do I need to do now?

 

A:

Stockholders 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 mergers and how they affect stockholders. Stockholders should then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant their proxy electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card), so that their shares can

 

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  be voted at the special meeting, unless a stockholder wishes to seek appraisal. Any stockholder that holds its shares in “street name” should refer to the voting instruction forms provided by its bank, broker or other nominee to vote its shares.

 

Q:

How does the Pluralsight Board recommend that I vote?

 

A:

The Pluralsight Board recommends that you vote: (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

 

Q:

What is the Transaction Committee?

 

A:

In connection with its consideration of the matters described in this proxy statement, the Pluralsight Board established the Transaction Committee. The Transaction Committee is composed of Leah Johnson and Bonita Stewart, neither of whom is party to the TRA or affiliated with TRA beneficiaries, and each of whom is independent of management. The Pluralsight Board also approved the delegation to the Transaction Committee, to the fullest extent permitted under Delaware law, of the power and authority of the Pluralsight Board to oversee, supervise and direct the exploration, evaluation and negotiation of a potential business combination or other similar strategic transaction involving Pluralsight and alternatives thereto (including the negotiation of a potential amendment to the TRA), and all agreements and other matters relating to such a transaction. The Pluralsight Board further resolved that Pluralsight would not effectuate any potential business combination or other similar strategic transaction involving Pluralsight, including the mergers, or enter into the TRA amendment, if it has not first been approved or recommended by the Transaction Committee. For more information on the actions and determinations of the Pluralsight Board and the Transaction Committee in connection with their consideration of the merger agreement and the mergers, please see the section of this proxy statement captioned “The Mergers—Background of the Mergers.”

After considering various factors described in this proxy statement under the caption, “The Mergers—Recommendation of the Transaction Committee and the Pluralsight Board and Reasons for the Mergers,” the Transaction Committee and the Pluralsight Board have each unanimously: (1) determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and its stockholders; and (2) adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement. The Transaction Committee also recommended that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

 

Q:

What is the TRA and the TRA amendment?

 

A:

Concurrent with the initial public offering of shares of its Class A common stock and related reorganization transactions undertaken in connection with the initial public offering, Pluralsight entered into the TRA with certain members of Pluralsight Holdings who retained Holdings units after the initial public offering. The TRA provided for payment to such members and their assignees of approximately 85% of the amount of the calculated tax savings, if any, Pluralsight will realize due to future exchanges of Holdings units (together with the corresponding shares of Class B or Class C common stock, as applicable) for Class A common stock, and the acceleration of such payments in connection with a change of control of Pluralsight. On December 11, 2020, in connection with the execution of the merger agreement, Pluralsight and Pluralsight Holdings entered into the TRA amendment with the TRA Representative and certain other TRA beneficiaries, in accordance with the terms of the TRA. The TRA amendment establishes that the parties to the TRA (other than Pluralsight and Pluralsight Holdings) will be entitled to receive an aggregate amount of $127 million in connection with the closing of the mergers in full satisfaction of the payment obligations to the TRA beneficiaries under the TRA. This represents a reduction of approximately $290 million, which is

 

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  an approximately 70% reduction of the estimated aggregate amount of approximately $417 million that would have otherwise been payable to the TRA beneficiaries under the TRA in respect of a change of control of Pluralsight at the implied price per share of Class A common stock offered by Vista (such implied price equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA), absent the TRA amendment. In addition, if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into another Alternative Acquisition Agreement, in one or more iterations), the agreements in the TRA amendment also apply in connection with the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect. For more information, please see the section of this proxy statement captioned “The Mergers—Amendment to the Tax Receivable Agreement.” The Transaction Committee and the Pluralsight Board have each unanimously: (1) determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and its stockholders; and (2) adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement. The Transaction Committee also recommended that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

 

Q:

What happens if the mergers are not completed?

 

A:

If the merger agreement is not adopted by the requisite stockholder approvals or if the mergers are not completed for any other reason, stockholders will not receive any payment for their shares of common stock and unitholders will not receive any payment for their Holdings units pursuant to the merger agreement. Instead, Pluralsight will remain an independent public company, shares of Class A common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and Pluralsight will continue to file periodic reports with the SEC.

Under specified circumstances, Pluralsight will be required to pay the Parent Entities a termination fee of $104.6 million 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:

What is the compensation that may be paid or become payable by Pluralsight to its named executive officers in connection with the mergers?

 

A:

The compensation that may be paid or become payable by Pluralsight to our named executive officers in connection with the mergers pursuant to underlying plans and arrangements that are contractual in nature. For further information, see the section of this proxy statement captioned “Proposal 3: Advisory Non-Binding Vote on Merger-Related Compensation for Named Executive Officers.”

 

Q:

Why am I being asked to cast a vote to approve the compensation that may be paid or become payable by Pluralsight to our named executive officers in connection with the mergers?

 

A:

Pluralsight is required to seek approval, on a non-binding, advisory basis, of compensation that may be paid or become payable by Pluralsight to our named executive officers in connection with the mergers. Approval of the compensation that may be paid or become payable by Pluralsight to our named executive officers in connection with the mergers is not required to consummate the mergers.

 

Q:

What will happen if Pluralsight stockholders do not approve the compensation that may be paid or become payable by Pluralsight to its named executive officers in connection with the mergers?

 

A:

Approval of the compensation that may be paid or become payable by Pluralsight to our named executive officers in connection with the mergers is not a condition to consummation of the mergers. This is an

 

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  advisory vote and will not be binding on Pluralsight or the Parent Entities. The underlying plans and arrangements providing for such compensation are contractual in nature and are not, by their terms, subject to stockholder approval. Accordingly, if the merger agreement is adopted by stockholders and the mergers are consummated, the compensation that may be paid or become payable by Pluralsight to our named executive officers in connection with the mergers may be paid to Pluralsight’s named executive officers even if stockholders do not approve such compensation.

 

Q:

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

 

A:

Shares that are registered directly in a stockholder’s name with Pluralsight’s transfer agent, American Stock Transfer & Trust Company, LLC, are considered to be “held of record,” and the stockholder is considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and the stockholder’s proxy card have been sent directly to the stockholder of record by Pluralsight.

Shares that are held through a bank, broker or other nominee are considered to be held in “street name,” and the stockholder is considered, with respect to those shares, to be the “beneficial owner.” In that case, this proxy statement has been forwarded to the stockholder by its bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, the stockholder has the right to direct its bank, broker or other nominee to vote its shares by following the voting instructions of such bank, broker or other nominee. The stockholder is also invited to attend the special meeting. However, because it is not the stockholder of record, the stockholder may not vote its shares at the special meeting unless it obtains a “legal proxy” from its bank, broker or other 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, which will have the same effect as if you voted against the adoption of the merger agreement, but will have no effect on the adjournment proposal or the compensation proposal.

 

Q:

How may I vote?

 

A:

If you are a stockholder of record (that is, a stockholder whose shares of common stock are registered in its name with American Stock Transfer & Trust Company, LLC, Pluralsight’s transfer agent), you may vote in one of the following four ways:

 

   

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

 

   

by visiting the internet address on the stockholder’s proxy card;

 

   

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

 

   

by attending the special meeting via a live webcast and voting at the special meeting.

A control number, located on each stockholder’s proxy card, is designed to verify the stockholder’s identity and allow it to vote its shares of common stock, and to confirm that its 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 shares, a stockholder voting electronically over the internet or by telephone may incur costs such as internet access and telephone charges for which the stockholder will be responsible.

Stockholders are strongly encouraged to vote their shares of common stock by proxy, even if they plan to attend the special meeting. Stockholders that are record holders or obtain a “legal proxy” to vote

 

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beneficially owned shares may still vote at the special meeting even if they have previously voted by proxy. Any stockholder that is present at and votes at the special meeting will not have its previous vote by proxy 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 other nominee.

 

Q:

May I attend the special meeting and vote at the special meeting?

 

A:

Yes. All stockholders as of the record date may attend the special meeting via a live interactive webcast on the internet at [                ]. Stockholders will be able to listen to the special meeting live, submit questions during the meeting and vote online. The special meeting will begin at [    ] Mountain time. Please access the virtual special meeting prior to the start time. Online check-in will begin at [    ] Mountain time. Stockholders will need the control number found on their proxy card or voting instruction form in order to vote at the special meeting.

Even if you plan to attend the special meeting, to ensure that your shares will be represented at the special meeting we encourage stockholders 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 stockholders attend the special meeting and vote at the special meeting, the vote at the special meeting will revoke any proxy previously submitted.

Any stockholder that holds shares in “street name” should instruct its bank, broker or other nominee how to vote its shares in accordance with the voting instruction form that will be received from its bank, broker or other nominee. Stockholders’ broker or other agent cannot vote on any of the proposals, including the proposal to adopt the merger agreement, without stockholders’ instructions. Any stockholder that holds shares in “street name” may not vote its shares at the special meeting unless it obtains a “legal proxy” from its 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 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 common stock is called a “proxy card.” Matthew Forkner and Mark McReynolds, with full power of substitution and re-substitution, are the proxy holders for the special meeting.

 

Q:

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

 

A:

Yes. Stockholders of record may change their vote or revoke their 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 the Corporate Secretary of Pluralsight; or

 

   

attending the special meeting via a live webcast and voting at the special meeting. Simply attending the special meeting, however, will not change your voting instructions; you must vote by poll at the special meeting to change your vote.

 

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If you hold your shares of 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 at the special meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

 

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 and date 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” 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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

 

Q:

Should I send in my stock certificates now?

 

A:

No. After the mergers are completed, you will receive a letter of transmittal containing instructions for how to send your stock certificates or surrender your book-entry shares to the payment agent in order to receive the appropriate cash payment for the shares of common stock represented by your stock certificates. Unless you are seeking appraisal, you should use the letter of transmittal to exchange your stock certificates or book-entry shares for the cash payment to which you are entitled. Please do not send your stock certificates with your proxy card.

 

Q:

What happens if I sell or otherwise transfer my shares of 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 mergers are expected to be completed. If stockholders sell or transfer their shares of common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between the transferring stockholder and the transferee and each of the transferring stockholder and the transferee notify Pluralsight in writing of such special arrangements, the transferring stockholder will transfer the right to receive the consideration in the mergers, if the mergers are completed, to the transferee, but the transferring stockholder will retain the right to vote those shares at the special meeting. Stockholders who sell or otherwise transfer their shares of common stock after the record date are nonetheless encouraged to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant their proxy electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card).

 

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.

 

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Q:

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

 

A:

If available, Pluralsight may announce preliminary voting results at the conclusion of the special meeting. Pluralsight 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 Pluralsight 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:

Will I be subject to U.S. federal income tax upon the exchange of Class A common stock for cash pursuant to the mergers?

 

A:

If you are a U.S. Holder (as defined under the section of this proxy statement captioned “The Mergers—Material U.S. Federal Income Tax Consequences of the Pluralsight Merger”), the exchange of Class A common stock for cash pursuant to the Pluralsight merger will be a taxable transaction for U.S. federal income tax purposes, which generally will require a U.S. Holder to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash that such U.S. Holder receives in the Pluralsight merger per share and such U.S. Holder’s adjusted tax basis in the shares of Class A common stock surrendered in the Pluralsight merger by such stockholder. Backup withholding may also apply to the cash payments made pursuant to the Pluralsight merger, unless the U.S. Holder complies with certification procedures under the backup withholding rules.

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

Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the U.S. federal income tax consequences relating to the Pluralsight merger in light of your own particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or foreign taxing jurisdiction. This discussion is provided for general information only and does not constitute legal advice to any stockholder. A more detailed description of material U.S. federal income tax consequences of the Pluralsight merger is provided in the section of this proxy statement captioned “The Mergers—Material U.S. Federal Income Tax Consequences of the Pluralsight Merger.”

 

Q:

When do you expect the mergers to be completed?

 

A:

We are working toward completing the mergers as quickly as possible and currently expect to complete the mergers in the first half of 2021. However, the exact timing of completion of the mergers cannot be predicted because the mergers are subject to the closing conditions specified in the merger agreement, many of which are outside of our control.

 

Q:

What governmental and regulatory approvals are required?

 

A:

Under the terms of the merger agreement, the mergers cannot be completed until the waiting period applicable to the mergers under the HSR Act has expired or been terminated. Completion of the mergers is further subject to the receipt of other required regulatory approvals or clearances under the competition laws of Austria and Germany, and under the foreign investment laws of Australia and New Zealand, unless a relevant exemption applies.

The necessary filings under the HSR Act were made on December 21, 2020. The relevant filings in Austria and Germany were made on December 22, 2020, and those in Australia and New Zealand were made on December 24, 2020.

 

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Q:

Am I entitled to appraisal rights under the DGCL?

 

A:

If the Pluralsight merger is completed, holders of shares of common stock who: (1) submit a written demand for appraisal of their shares prior to the vote on the adoption of the merger agreement, (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 of the Pluralsight merger; and (4) otherwise comply with 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 common stock, exclusive of any element of value arising from the accomplishment or expectation of the Pluralsight merger, together with interest on the amount determined by the Delaware Court of Chancery to be fair value from the effective date of the Pluralsight merger through the date of payment of the judgment. 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 of the Pluralsight merger through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period (except that, if at any time before the entry of judgment in the proceeding, the Surviving Corporation makes a voluntary cash payment to each stockholder seeking appraisal, interest will accrue thereafter only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (ii) interest theretofore accrued, unless paid at that time). The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. 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 due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in additional detail in this proxy statement, which description is qualified in its entirety by Section 262 of the DGCL regarding appraisal rights, attached as Annex C to this proxy statement.

 

Q:

Do any of Pluralsight’s directors or officers have interests in the mergers that may differ from those of Pluralsight stockholders generally?

 

A:

Yes. In considering the recommendation of the Pluralsight Board with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the mergers that are different from, or in addition to, the interests of stockholders generally. In evaluating and negotiating the merger agreement and approving the merger agreement and the mergers the Transaction Committee and Pluralsight Board were aware of and considered these interests, among other matters, to the extent that these interests existed at the time. For more information, see the section of this proxy statement captioned “The Merger—Interests of Pluralsight’s Directors and Executive Officers in the Mergers.”

 

Q:

Who can help answer my questions?

 

A:

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

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Shareholders may call toll free: (877) 687-1866

Banks and Brokers may call collect: (212) 750-5833

 

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FORWARD-LOOKING STATEMENTS

This proxy statement, and any documents to which Pluralsight 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 Pluralsight’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 Pluralsight 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” 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 mergers due to the failure to obtain stockholder approval or failure to satisfy the other conditions to the completion of the mergers, 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 the Parent Entities a termination fee of $104.6 million;

 

   

the outcome of any legal proceeding that may be instituted against us and others related to the merger agreement;

 

   

risks that the proposed mergers disrupt our current operations or affect our ability to retain or recruit key employees;

 

   

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

 

   

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

 

   

the fact that under the terms of the merger agreement, Pluralsight is unable to solicit other Acquisition Proposals;

 

   

the effect of the announcement or pendency of the mergers 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 mergers;

 

   

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

 

   

risks that our stock price may fluctuate during the pendency of the mergers and decline significantly if the mergers are not completed; and

 

   

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

 

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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 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 Pluralsight Board for use at the special meeting.

Date, Time and Place

We will hold the special meeting on [    ], 2021, at [    ] Mountain time. The special meeting will be held exclusively online via a live interactive webcast on the internet at [                ]. Stockholders will be able to listen to the special meeting live, submit questions during the meeting and vote online. You will need the control number found on your proxy card or voting instruction form in order to vote at the special meeting. We elected to use a virtual meeting given the current public health implications of the COVID-19 pandemic and our desire to promote the health and welfare of our stockholders.

If you encounter technical difficulties accessing the special meeting or asking questions during the special meeting, a support line will be available on the login page of the virtual meeting website.

Purpose of the Special Meeting

At the special meeting, we will ask stockholders to vote on proposals:

 

   

to adopt the merger agreement pursuant to which (1) Merger Sub II will merge with and into Pluralsight Holdings, with Pluralsight Holdings continuing as the surviving entity in the Holdings merger and (2) Merger Sub I will merge with and into Pluralsight, with Pluralsight continuing as the surviving corporation in the Pluralsight merger;

 

   

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; and

 

   

to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable by Pluralsight to its named executive officers in connection with the mergers.

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 42 Future Way, Draper, UT 84020, during regular business hours for a period of no less than ten days before the special meeting and during the special meeting through the meeting website.

At the special meeting, each stockholder will have one vote for each share of Class A common stock and Class B common stock that it owns as of the close of business on the record date, and ten votes for each share of Class C common stock that it owns as of the close of business on the record date.

As of the record date, there were [                ] shares of Class A common stock outstanding and entitled to vote at the special meeting, [                ] shares of Class B Stock outstanding and entitled to vote at the special meeting and [                ] shares of Class C Stock outstanding and entitled to vote at the special meeting. As of the record date, (1) there were [                ] shares of Class A common stock outstanding and entitled to vote at the special meeting not held of record by the Pluralsight excluded parties and (2) all shares of Class B common stock and Class C common stock were held of record by the Pluralsight excluded parties.

The holders of a majority of the voting power of Pluralsight’s capital stock issued and outstanding and entitled to vote, present in person 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, the chairperson of the special meeting or the

 

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stockholders entitled to vote at the special meeting, present or represented by proxy, may adjourn the special meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. The chairperson may also adjourn the meeting to another date or time, even if a quorum is present. If the special meeting is adjourned or postponed, stockholders who have already submitted their proxies will be able to revoke them at any time before they are voted at the special meeting.

Vote Required; Abstentions and Broker Non-Votes

The consummation of the mergers is subject to (among other conditions) the adoption of the merger agreement by the affirmative vote of each of (1) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) and (2) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) not held by the Pluralsight excluded parties.

Approval of the 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, requires the affirmative vote of a majority of the voting power of the shares present at the special meeting or represented by proxy at the special meeting and entitled to vote on the proposal.

Approval of the advisory non-binding vote on merger-related compensation for named executive officers requires the affirmative vote of a majority of the voting power of the shares present at the special meeting or represented by proxy at the special meeting and entitled to vote on the proposal.

If a stockholder abstains from voting, whether the stockholder is present or represented by proxy at the special meeting or not, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the merger agreement. For stockholders who are present or 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 and “AGAINST” the proposal to approve the advisory non-binding vote on merger-related compensation for named executive officers.

Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the merger agreement, but will have no effect on 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 or the proposal to approve the advisory non-binding vote on merger-related compensation for named executive officers. A “broker non-vote” generally occurs when a bank, broker or other nominee holding shares on a stockholder’s behalf does not vote on a proposal because the bank, broker or other nominee has not received voting instructions from the stockholder and lacks discretionary power to vote the shares. “Broker non-votes,” if any, will be counted for the purpose of determining whether a quorum is present. Pluralsight does not expect any broker non-votes at the 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 special meeting is considered non-routine. As a result, no broker will be permitted to vote your shares of common stock at the 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 Pluralsight’s Directors and Executive Officers

As of the record date, Pluralsight’s directors and executive officers beneficially owned and were entitled to vote, in the aggregate, shares of common stock representing approximately [    ] votes, representing approximately [    ]% of the voting power of the shares of common stock outstanding on the record date.

 

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The voting agreement stockholders have entered into a voting agreement which obligates them to, among other things, vote all of their shares of common stock (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers. As of the record date, the voting agreement stockholders held, in the aggregate, shares of common stock representing approximately [    ]% of the voting power of the total outstanding shares of common stock. For more information, please see the section of this proxy statement captioned “The Mergers—The Voting and Support Agreements.”

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of common stock (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

Voting of Proxies

If your shares of common stock are registered in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, 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 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 at the special meeting, you will need the control number located on the enclosed proxy card. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the special meeting. If you attend the special meeting and vote at the special meeting, 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” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

If your shares of common stock 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 via a live webcast and voting at the special meeting 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, and do not attend the special meeting and vote at the special meeting 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 adjournment proposal or the compensation proposal.

 

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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 via a live webcast and voting at the special meeting.

If you have submitted a proxy, your attendance at the special meeting will not have the effect of revoking your prior proxy. You must vote by ballot at the special meeting or submit an additional proxy or revocation to revoke your proxy.

If you hold your shares of 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 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.

Pluralsight Board’s Recommendation

In connection with its consideration of the matters described in this proxy statement, the Pluralsight Board established the Transaction Committee. The Transaction Committee is composed of Leah Johnson and Bonita Stewart, neither of whom is party to the TRA or affiliated with TRA beneficiaries, and each of whom is independent of management. The Pluralsight Board also approved the delegation to the Transaction Committee, to the fullest extent permitted under Delaware law, of the power and authority of the Pluralsight Board to oversee, supervise and direct the exploration, evaluation and negotiation of a potential business combination or other similar strategic transaction involving Pluralsight and alternatives thereto (including the negotiation of a potential amendment to the TRA), and all agreements and other matters relating to such a transaction. The Pluralsight Board further resolved that Pluralsight would not effectuate any potential business combination or other similar strategic transaction involving Pluralsight, including the mergers, or enter into the TRA amendment, if it has not first been approved or recommended by the Transaction Committee. For more information on the actions and determinations of the Pluralsight Board and the Transaction Committee in connection with their consideration of the merger agreement and the mergers, please see the section of this proxy statement captioned “The Mergers—Background of the Mergers.”

After considering various factors described in this proxy statement under the caption, “The Mergers—Recommendation of the Transaction Committee and the Pluralsight Board and Reasons for the Mergers,” the Transaction Committee and the Pluralsight Board have each unanimously: (1) determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and its stockholders; and (2) adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement. The Transaction Committee also recommended that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

Accordingly, the Pluralsight Board also unanimously recommends that stockholders vote: (1) “FOR” the adoption of the merger agreement; (2) “FOR” the adjournment of the special meeting, if necessary or

 

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appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting; and (3) “FOR” the advisory non-binding vote on merger-related compensation for Pluralsight’s named executive officers.

Solicitation of Proxies

The expense of soliciting proxies will be borne by Pluralsight. We have retained Innisfree M&A Incorporated (“Innisfree”), a proxy solicitation firm, to solicit proxies in connection with the special meeting at a cost of approximately $25,000 plus expenses. We will also indemnify Innisfree 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 Mergers

Assuming timely satisfaction of necessary closing conditions, including the approval by stockholders of the proposal to adopt the merger agreement, we anticipate that the mergers will be consummated in the first half of 2021.

Appraisal Rights

If the mergers are consummated, stockholders who continuously hold shares of common stock through the effective time of the Pluralsight merger, 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 mergers under Section 262 of the DGCL. This means that holders of shares of 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 common stock, exclusive of any elements of value arising from the accomplishment or expectation of the mergers, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be the fair value, if any, (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Mergers—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the mergers 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 Pluralsight 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 common stock of record through the effective time of the Pluralsight merger; 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 mergers unless certain stock ownership conditions are satisfied by the stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are

 

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described in further detail in the section of this proxy statement captioned “The Mergers—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 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.

Delisting and Deregistration of Pluralsight’s Common Stock

If the mergers are completed, the shares of Class A common stock will be delisted from the Nasdaq and deregistered under the Exchange Act, and shares of Class A 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 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 [    ]

The proxy statement is available at https://investors.pluralsight.com/.

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 Pluralsight’s Investor Relations at 42 Future Way, Draper, UT 84020. 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 mergers, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Shareholders may call toll free: (877) 687-1866

Banks and Brokers may call collect: (212) 750-5833

 

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THE MERGERS

This discussion of the mergers is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement 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 mergers, because this document contains important information about the mergers and how they affect stockholders.

Parties Involved in the Mergers

Pluralsight, Inc.

42 Future Way

Draper, UT 84020

Pluralsight, together with its subsidiaries, is a leading cloud-based technology skills development platform committed to closing the global technology skills gap. Learners on our platform can acquire today’s most valuable technology skills through high-quality learning experiences delivered by subject-matter experts. Real-time measurement and assessment of a learner’s performance on our platform provides technology leaders with visibility into the capabilities of their teams and confidence their teams will deliver on critical objectives. Our platform empowers teams to keep up with the pace of technological change, puts the right people on the right projects, and boosts productivity.

Pluralsight is a holding company and has no material assets other than its ownership of the Holdings units.

For the years ended December 31, 2019, 2018, and 2017 and the nine months ended September 30, 2020, Pluralsight’s consolidated revenue totaled $316.9 million, $232.0 million, $166.8 million and $286.9 million, respectively. Pluralsight’s consolidated net loss for the years ended December 31, 2019, 2018, and 2017 and the nine months ended September 30, 2020, was $163.6 million, $146.8 million, $96.5 million and $121.0 million, respectively.

Pluralsight was incorporated in Delaware in December 2017.

Pluralsight Holdings, LLC

42 Future Way

Draper, UT 84020

Pluralsight Holdings is a subsidiary of Pluralsight, and owns directly or indirectly all of the material operating and other assets indirectly owned of Pluralsight. As of the December 28, 2020, the unitholders (other than Pluralsight) hold approximately 17.4% of the outstanding Holdings units.

As the sole managing member and manager of Pluralsight Holdings, Pluralsight controls all of the business operations, affairs, and management of Pluralsight Holdings. Accordingly, Pluralsight consolidates the financial results of Pluralsight Holdings and reports.

Pluralsight Holdings was formed in Delaware in August 2014.

Lake Holdings, LP

c/o Vista Equity Partners Management, LLC

Four Embarcadero Center, 20th Floor

San Francisco, California 94111

Parent I was formed on December 7, 2020, 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 mergers.

 

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Lake Guarantor, LLC

c/o Vista Equity Partners Management, LLC

Four Embarcadero Center, 20th Floor

San Francisco, California 94111

Parent II was formed on December 7, 2020, 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 mergers.

Lake Merger Sub I, Inc.

c/o Vista Equity Partners Management, LLC

Four Embarcadero Center, 20th Floor

San Francisco, California 94111

Merger Sub I is a wholly owned direct subsidiary of Parent I and was formed on December 7, 2020, 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 mergers.

Lake Merger Sub II, LLC

c/o Vista Equity Partners Management, LLC

Four Embarcadero Center, 20th Floor

San Francisco, California 94111

Merger Sub II is a wholly owned direct subsidiary of Parent II and was formed on December 7, 2020, 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 mergers.

The Buyer Parties are each affiliated with Vista Fund VII, and the Buyer Parties and Vista Fund VII are each affiliated with Vista. Vista is a leading private equity firm focused on investments in software, data and technology-enabled companies.

In connection with the transactions contemplated by the merger agreement, Vista Fund VII has provided the Parent Entities with an equity commitment of up to $3.06 billion, which will be available, together with cash on hand at Pluralsight as of the closing of the mergers, to fund the aggregate merger consideration and to pay the fees, expenses and other amounts required to be paid in connection with the closing of the mergers by the Pluralsight Parties and the Buyer Parties. For more information, please see the section of this proxy statement captioned “The Mergers—Financing of the Mergers.”

Effect of the Mergers

Upon the terms and subject to the conditions of the merger agreement, at the effective time of the Holdings merger, Merger Sub II will merge with and into Pluralsight Holdings, with Pluralsight Holdings continuing as the surviving entity in the Holdings merger. At the effective time of the Pluralsight merger, which will immediately follow the Holdings merger, Merger Sub I will merge with and into Pluralsight, with Pluralsight continuing as the surviving corporation in the Pluralsight merger.

As a result of the mergers, Class A common stock will no longer be publicly traded, and will be delisted from the Nasdaq. In addition, Class A common stock will be deregistered under the Exchange Act, and Pluralsight will no longer file periodic reports with the SEC. If the mergers are completed, you will not own any shares of the capital stock of Pluralsight following the effective time of the Pluralsight merger.

 

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The mergers will become effective upon the filing of the certificates of merger with respect to the mergers with the Secretary of State of the State of Delaware (or at such later time as may be specified in the certificates of merger).

Effect on Pluralsight if the Mergers are Not Completed

If the merger agreement is not adopted by stockholders, or if the mergers are not completed for any other reason:

 

   

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

 

   

(A) Pluralsight will remain an independent public company, (B) our Class A common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and (C) Pluralsight will continue to file periodic reports with the SEC;

 

   

the TRA amendment will terminate (unless the merger agreement is terminated to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement);

 

   

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 Pluralsight’s business, prospects or results of operations, as such may be affected by, among other things, the highly competitive industry in which Pluralsight operates and adverse economic conditions;

 

   

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

 

   

the Pluralsight Board will continue to evaluate and review Pluralsight’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 Pluralsight Board will be offered or that Pluralsight’s business, prospects or results of operations will be adversely impacted); and

 

   

under certain specified conditions, Pluralsight will be required to pay the Parent Entities a termination fee. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Merger Consideration

Pluralsight Common Stock and Holdings Units

At the effective time of the Pluralsight merger, each share of Class A common stock outstanding as of immediately prior to the effective time of the Pluralsight merger (except as described below) will be cancelled and automatically converted into the right to receive cash in an amount equal to the Per Share Price, which is $20.26, without interest.

At the effective time of the Holdings merger, each Holdings unit outstanding as of immediately prior to the effective time of the Holdings merger (other than Holdings units held by the Pluralsight Parties) will be cancelled and automatically converted into the right to receive cash in an amount equal to the Per Unit Price, which is $20.26, without interest.

In addition, at the effective time of the Pluralsight merger, each share of Class B common stock and each share of Class C common stock, which correspond on a one-for-one basis with the Holdings units, outstanding as

 

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of immediately prior to the effective time of the Pluralsight merger (except as described below) will be cancelled and automatically converted into the right to receive cash in an amount equal to $0.0001, without interest, as provided in the Pluralsight Charter.

The Excluded Shares, which are shares of common stock either (1) held by the Pluralsight Parties and their respective subsidiaries, (2) owned by the Buyer Parties, (3) owned by any direct or indirect wholly owned subsidiary of the Buyer Parties as of immediately prior to the Pluralsight merger or (4) owned by stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of common stock under Delaware law, will not be converted into the right to receive the consideration described above.

At or immediately prior to the closing, the Parent Entities will deposit sufficient funds to pay the aggregate consideration to stockholders and unitholders with a designated payment agent for payment of each share of common stock (other than the Excluded Shares) owned by each 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 mergers are completed, stockholders and unitholders will have the right to receive the Per Share Price, the Per Unit Price, the Class B Per Share Price or the Class C Per Share Price, as applicable, but stockholders and unitholders will no longer have any rights as a stockholder of Pluralsight or a unitholder of Pluralsight Holdings (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 Mergers—Appraisal Rights.”

Treatment of Pluralsight Options, Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs, and Holdings Incentive Units

The merger agreement generally provides that equity awards granted under equity incentive plans of Pluralsight and Pluralsight Holdings, including options to purchase shares of Class A common stock, restricted stock units covering shares of Class A and Class B common stock or Holdings units, performance-based restricted stock units covering shares of Class A common stock, or Holdings incentive units that are outstanding and vested as of immediately before the closing date of the mergers will be cancelled and converted into cash consideration equal to $20.26 multiplied by the number of vested shares or units 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 mergers. Certain equity awards that are outstanding and unvested as of immediately before the closing date of the mergers will be cancelled and converted into cash consideration equal to the cash replacement amount, which is $20.26, multiplied by the number of unvested shares or units 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; provided that, with respect to performance-based restricted stock units, the number of unvested shares of our common stock for purposes of determining the cash replacement amount will be based on actual performance of the performance objectives if the applicable performance period specified in the underlying award agreement had been completed as of the closing of the mergers and the determination of the achievement of the applicable performance objectives had not yet been made as of the closing of the mergers, and the applicable cash replacement amount will be paid within 30 days following the end of the original performance period, subject to the holder’s continued service with the Parent Entities and their affiliates through the end of such original performance period. Any options with a per share exercise price equal to or above $20.26 will be cancelled at the effective time of the Pluralsight merger for no payment or consideration. Equity incentive plans of Pluralsight and Pluralsight Holdings will terminate as of the effective times of the mergers. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Outstanding Pluralsight Options, Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs and Holdings Incentive Units.”

 

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Background of the Mergers

From time to time, in connection with Pluralsight’s exploration of strategic and commercial opportunities, the Pluralsight Board evaluates Pluralsight’s long-term business plan prepared by management, including regular updates to the business plan, and considers various strategic alternatives for Pluralsight, including potential product expansion and growth opportunities through acquisitions and strategic partnerships, debt and equity financing alternatives and other potential strategic transactions or the continuation of Pluralsight’s current business plan as an independent enterprise. In connection with these efforts, representatives of Pluralsight also have meetings, attend conferences and have other discussions from time to time with representatives of various strategic and financial sponsor parties, including Vista and other participants in the outreach described below, regarding potential strategic transactions involving Pluralsight. Based on the Pluralsight Board’s evaluation of strategic alternatives and Pluralsight management’s evolving expectation that a meaningful portion of Pluralsight’s future growth was likely to be inorganic, Pluralsight has regularly evaluated and pursued opportunities for potential acquisitions.

Aaron Skonnard, the chief executive officer of Pluralsight, had been introduced to various representatives of Vista since prior to Pluralsight’s initial public offering, and from time to time had meetings and other discussions with representatives of Vista, including with respect to sales of Pluralsight’s products to Vista and its portfolio companies. On August 19, 2020, Mr. Skonnard emailed Monti Saroya, a senior managing director of Vista, to invite Robert F. Smith, Founder, Chairman and CEO of Vista, to speak about the future of technology at Pluralsight’s virtual user conference in October 2020, which Mr. Smith agreed to do. On August 28, 2020, Mr. Skonnard, Mr. Saroya and Adrian Alonso, a managing director of Vista, had a call to further discuss Mr. Smith’s attendance at Pluralsight’s conference, during which the parties discussed the Pluralsight business generally and the overall industry.

On September 17, 2020, Mr. Skonnard attended a meeting with Mr. Saroya, at Mr. Saroya’s invitation. Prior to the meeting, Mr. Skonnard was not aware that Mr. Saroya would be raising a potential acquisition of Pluralsight at the meeting. At the meeting, Mr. Saroya indicated that Vista was potentially interested in acquiring Pluralsight. The terms of a proposed acquisition were not discussed, except that Mr. Saroya indicated to Mr. Skonnard following the meeting that Vista believed it could offer the highest value proposal among potential acquirors. Following the meeting with Mr. Saroya, Mr. Skonnard conveyed Vista’s expression of interest to Gary Crittenden, the lead independent director of the Pluralsight Board, and Mr. Skonnard and Mr. Crittenden agreed that a meeting of the Pluralsight Board would be called to inform the Pluralsight Board and discuss Vista’s expression of interest.

On September 23, 2020, Mr. Saroya and Mr. Alonso had a call with Mr. Skonnard, during which they reaffirmed Vista’s interest in acquiring Pluralsight, but did not discuss any specific terms.

On September 24, 2020, the Pluralsight Board held a meeting with members of management and representatives of Wilson Sonsini Goodrich & Rosati, Pluralsight’s outside counsel (“Wilson Sonsini”), in attendance. Mr. Skonnard updated the Pluralsight Board on his discussion with Mr. Saroya and on Vista’s expression of interest in a potential acquisition of Pluralsight. Representatives of Wilson Sonsini reviewed with the Pluralsight Board certain relevant Delaware law matters, including the directors’ fiduciary duties in connection with Vista’s expression of interest and a potential sale of Pluralsight. The Pluralsight Board discussed Pluralsight’s business as a standalone company and its prospects and challenges, including risks and uncertainties related to pursuing Pluralsight’s growth objectives (including inorganic growth through potential acquisitions), the potential impact of market, customer and competitive trends on Pluralsight and the inherent uncertainty of achieving management forecasts and the potential impact that failing to meet growth expectations could have on the price of the Class A common stock, as well as the perceived need for substantial capital resources to pursue inorganic growth and other growth opportunities, and the challenges and potential adverse impacts to stockholder value of obtaining such additional capital resources (namely, that capital resources might only be available at significant cost to Pluralsight (if available at all) or through one or more equity offerings that would dilute the

 

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holders of Class A common stock). In light of these challenges, risks and uncertainties and Vista’s expression of interest, the Pluralsight Board discussed whether it would be in the best interests of Pluralsight and its stockholders to respond to Vista and explore potential alternative transactions. As a preliminary matter, the Pluralsight Board established the Transaction Committee, an ad hoc committee of the Pluralsight Board independent of management composed of Mr. Crittenden, Scott Dorsey and Bonita Stewart, to explore, evaluate, consider, review, negotiate and, as appropriate, make a recommendation to the Pluralsight Board with respect to a potential business combination transaction or other similar strategic transaction involving Pluralsight and alternatives thereto. The Pluralsight Board also discussed engaging Qatalyst to act as a financial advisor in connection with such review of strategic alternatives, and determined to do so based on Qatalyst’s qualifications, expertise and reputation, and its knowledge of Pluralsight and the industry in which Pluralsight operates. In the spring of 2020, following significant market disruption in the United States resulting from the COVID-19 pandemic, the Pluralsight Board had invited Qatalyst to attend two meetings of the Pluralsight Board to discuss preliminary perspectives on strategic positioning and opportunities, valuation considerations and trading performance for Pluralsight, relevant sectors of the technology industry and the market generally.

On September 26, 2020, Pluralsight entered into an engagement letter with Qatalyst.

On September 27, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation (at this meeting and at portions of other meetings as it deemed appropriate), other members of the Pluralsight Board and members of management were in attendance. Representatives of Qatalyst discussed various alternatives and considerations with respect to a potential outreach process to solicit interest regarding a strategic transaction from other potential counterparties, including whether to engage with potential strategic acquirors and other financial sponsors in light of the expressed interest from Vista. Representatives of Qatalyst discussed with those present various other potential counterparties with which Pluralsight might consider engaging based on those parties’ expected or previously expressed interest in a potential strategic transaction with Pluralsight, ability to finance and consummate a transaction, and potential strategic rationale for a transaction with Pluralsight, including the potential for synergies. Also discussed were the potential risks of an outreach, including potential public disclosure leaks, management and employee disruption and adverse effects on competitive positioning, and the increase in the likelihood of those risks in a wider private or public process relative to a more targeted outreach. The Transaction Committee and other directors in attendance also discussed with management and representatives of Qatalyst potential alternatives to a sale of Pluralsight, including continuing to execute as a standalone business. Representatives of Wilson Sonsini also reviewed the directors’ fiduciary duties in connection with evaluating and potentially pursuing a potential strategic transaction. Based on the considerations discussed at the meeting, pursuant to authority delegated to it by the Pluralsight Board and to gauge interest in a potential strategic transaction, the Transaction Committee authorized Qatalyst and members of management to reach out to six potential strategic acquirors and six potential financial sponsors (including Vista) regarding a potential strategic transaction, and authorized management to present to interested potential counterparties an overview of Pluralsight’s business and other relevant information, including non-public information regarding Pluralsight.

Following the meeting, between September 28, 2020 and September 30, 2020, representatives of Qatalyst and management commenced their outreach to the 11 potential counterparties other than Vista; nine potential counterparties (including Vista) executed a non-disclosure agreement with Pluralsight, one potential strategic acquiror was already subject to a non-disclosure agreement with Pluralsight in connection with prior commercial discussions and two potential strategic acquirors declined to engage in discussions or diligence with respect to a potential strategic transaction involving Pluralsight, citing that Pluralsight’s industry was not an area of focus for strategic transactions and other challenges to consummating a strategic transaction, among other things. Of the ten non-disclosure agreements to which these potential counterparties were subject, the non-disclosure agreements with each of the six potential financial sponsors and one of the potential strategic acquirors included so-called “standstill” provisions restricting parties from making proposals with respect to the acquisition of Pluralsight without Pluralsight’s prior consent, which restrictions would fall away and no longer be in effect, among other things, at the time of the entry into a definitive agreement approved by Pluralsight to acquire more

 

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than 50% of Pluralsight’s outstanding voting securities or assets representing more than 50% of Pluralsight’s consolidated earnings power (and the remaining three non-disclosure agreements did not include such so-called “standstill” provisions).

On September 30, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Representatives of management reviewed an overview of Pluralsight’s business plan, which included the Pluralsight prospective financial information as of September 2020 (as defined below), and the Transaction Committee and other directors in attendance discussed the impact on the business plan of the COVID-19 measures implemented by Pluralsight, the business plan relative to consensus market estimates for Pluralsight, and potential synergies with various counterparties to a potential strategic transaction involving Pluralsight. Representatives of Qatalyst and members of management provided an update on the preliminary discussions regarding a potential strategic transaction with potential counterparties, including those parties’ expressed levels of interest as well as the timing of upcoming presentations by Pluralsight management to interested counterparties. The Transaction Committee and other directors in attendance also discussed with representatives of Qatalyst and Wilson Sonsini certain process considerations, including Wilson Sonsini discussing the directors’ fiduciary duties in connection with evaluating and potentially pursuing a potential strategic transaction involving Pluralsight. The Transaction Committee then met in executive session, without members of management (other than Matthew Forkner, Pluralsight’s Chief Legal Officer) or other members of the Pluralsight Board in attendance, and discussed with representatives of Qatalyst and Wilson Sonsini certain process, strategy and timing considerations with respect to the solicitation of interest from potential counterparties with respect to a potential strategic transaction, including whether to solicit interest from additional potential counterparties. Following discussion, the Transaction Committee approved representatives of Qatalyst and members of management continuing discussions with the ten potentially interested counterparties, including the sharing of management’s overview of Pluralsight’s business, including the Pluralsight prospective financial information as of September 2020 and other relevant non-public information about Pluralsight. The Transaction Committee also began to discuss the TRA and to explore its potential significance in the context of a potential sale of Pluralsight.

Over the next two weeks, members of Pluralsight management together with representatives of Qatalyst provided presentations to the ten potentially interested counterparties (including Vista) regarding Pluralsight’s business, which presentations included the Pluralsight prospective financial information as of September 2020. Throughout the month, members of management and representatives of Qatalyst also engaged in follow-up preliminary due diligence discussions and meetings at the request of potentially interested counterparties regarding Pluralsight’s business, including Pluralsight’s financial condition, pipeline and go-to-market strategy. Following diligence meetings, the four remaining potential strategic acquirors and two of the six financial sponsors who had executed non-disclosure agreements declined to proceed with further discussions regarding a potential strategic transaction involving Pluralsight. In declining to pursue a potential strategic transaction involving Pluralsight, the potential strategic acquirors and financial sponsors indicated concerns about strategic fit, limited overlap in buyer contacts, potential commoditization of content, pricing pressure, the level of investment required for integration, and concerns regarding the financial profile of the sales and marketing structure, among other things. The four remaining potential financial sponsors that continued to express interest in a potential strategic transaction involving Pluralsight (including Vista and the other parties which we refer to as “Party A,” “Party B” and “Party C”) were granted access to an electronic dataroom containing financial and business information with respect to Pluralsight to support their due diligence review of Pluralsight.

On October 7, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Representatives of Qatalyst and members of management provided an update on the preliminary discussions regarding a potential strategic transaction with potential counterparties since the last meeting of the Transaction Committee, as well as additional diligence meetings that were being planned. The Transaction Committee also met in executive session, without members of management (other than

 

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Mr. Forkner), representatives of Qatalyst or other members of Pluralsight Board, other than Leah Johnson, in attendance, and discussed with representatives of Wilson Sonsini the TRA and its potential significance in the context of a potential sale of Pluralsight. Pluralsight entered into the TRA in connection with its initial public offering, and following Pluralsight’s initial public offering and prior to the amendment of the TRA described below, there had been no amendments to the TRA. Certain directors and members of management and certain of their respective affiliates, as equityholders prior to Pluralsight’s initial public offering, were parties to the TRA, and the TRA provided for acceleration of payments to TRA beneficiaries, including certain directors and members of management and certain of their respective affiliates, in connection with a change of control of Pluralsight. Representatives of Wilson Sonsini discussed relevant Delaware law matters, including the directors’ fiduciary duties, process considerations and the Transaction Committee’s composition, authority and responsibilities in evaluating and potentially pursuing a strategic transaction involving Pluralsight. At the meeting, the Transaction Committee resolved to recommend to the Pluralsight Board that it modify the composition of the Transaction Committee to be comprised entirely of members of the Pluralsight Board that were not party to the TRA and were independent of management, namely Ms. Johnson and Ms. Stewart (with Messrs. Crittenden and Dorsey to step down given that they are both parties to the TRA), and that it expand the power and authority of the Transaction Committee.

On October 9, 2020, representatives of Qatalyst received an unsolicited inquiry from an additional potential financial sponsor (which we refer to as “Party D”) expressing interest in receiving a management presentation based on market rumors that Pluralsight may be engaged in a process to consider strategic alternatives, but no specific proposal or terms with respect to a potential strategic transaction were conveyed by representatives of Party D. Pluralsight thereafter executed a non-disclosure agreement with Party D, which included a so-called “standstill” provision with similar terms (including with respect to the fall away of restrictions) as described above, and members of Pluralsight management, with representatives of Qatalyst in attendance, provided a management presentation to Party D. Party D was also granted access to Pluralsight’s electronic dataroom.

On October 13, 2020, based on the Transaction Committee’s recommendation, the Pluralsight Board approved by unanimous written consent the modification of the composition of the Transaction Committee to include only Ms. Johnson and Ms. Stewart, neither of whom was party to the TRA, and Messrs. Crittenden and Dorsey stepped down. The Pluralsight Board also approved the delegation to the Transaction Committee, to the fullest extent permitted under Delaware law, of the power and authority of the Pluralsight Board to oversee, supervise and direct the exploration, evaluation and negotiation of a potential business combination or other similar strategic transaction involving Pluralsight and alternatives thereto, and all agreements and other matters relating to such a transaction, including authorizing and directing legal and financial advisors and other representatives and agents, if any, and engaging such persons as it sees fit with respect to any of the foregoing. The Pluralsight Board also resolved that Pluralsight would not effectuate such a transaction unless it is first approved or recommended by the Transaction Committee and unless it is approved by the holders of a majority of the voting power of Pluralsight capital stock not held by any stockholder who is, or is known by Pluralsight to be affiliated with a party, receiving benefits in connection with the transaction pursuant to the TRA and other unique benefits, if any, as identified by the Transaction Committee, or any officer of Pluralsight, which conditions may not be waived.

On October 14, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Members of management and representatives of Qatalyst provided an update on the meetings and due diligence being conducted by the remaining interested counterparties with whom no economic negotiations had taken place as of such time, including the inquiry from Party D. The Transaction Committee and other directors in attendance discussed with representatives of Qatalyst and Wilson Sonsini certain strategy and process considerations for maximizing the value of any acquisition proposals which could be received by Pluralsight, including in the context of Pluralsight’s upcoming announcement of its third quarter 2020 earnings results. The Transaction Committee and other directors in attendance also discussed whether to reach out to additional potential counterparties, and the likelihood of additional parties’ interest in a

 

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potential strategic transaction involving Pluralsight. The Transaction Committee then met in executive session, without members of management (other than Mr. Forkner) or other members of the Pluralsight Board in attendance. Representatives of Wilson Sonsini reviewed with the Transaction Committee the terms of the TRA, including the fact that the TRA provided for an acceleration of payments to TRA beneficiaries as a result of a change of control of Pluralsight, in lieu of future payments to the TRA beneficiaries provided in the TRA. Representatives of Wilson Sonsini also reviewed with the Transaction Committee relevant Delaware law matters, including the Transaction Committee’s adjusted composition, directors’ fiduciary duties, process considerations and the Transaction Committee’s expanded authority and responsibilities in the context of a potential sale of Pluralsight, including that the Pluralsight Board had resolved that Pluralsight will not effectuate such a transaction if it has not first been approved or recommended by the Transaction Committee and unless it is approved by the holders of a majority of the voting power of Pluralsight capital stock not held by any stockholder who is, or is known by Pluralsight to be affiliated with a party, receiving benefits in connection with the transaction pursuant to the TRA and other unique benefits, if any, as identified by the Transaction Committee, or any officer of Pluralsight, which conditions could not be waived by the Pluralsight Board. The Transaction Committee also discussed the actions taken by the Pluralsight Board and the Transaction Committee prior to that time in connection with the exploration and evaluation of a potential strategic transaction involving Pluralsight. Following discussion, the Transaction Committee ratified the prior actions and determinations in connection with the exploration and evaluation of a potential strategic transaction involving Pluralsight. The Transaction Committee also requested that Wilson Sonsini and Qatalyst provide additional information on the terms of the TRA in the context of a potential sale of Pluralsight. The Transaction Committee further directed representatives of Qatalyst and members of management continue discussions with, and solicit interest from, Vista and Party A, Party B, Party C and Party D with respect to a potential strategic transaction involving Pluralsight.

Also on October 14, 2020, Pluralsight announced the acquisition of DevelopIntelligence, LLC (“DevelopIntelligence”), a provider of strategic skills consulting and virtual instructor-led training. The initial consideration for the acquisition consisted of cash consideration of $38 million paid at the closing of the acquisition, with additional consideration subject to certain revenue-based earn-out performance targets during an earn-out period ending on December 31, 2021.

During the month of October, Pluralsight management updated Pluralsight’s business plan based on Pluralsight’s third quarter 2020 results, Pluralsight’s ordinary course fourth quarter budget planning and review efforts for the 2021 fiscal year and the expected impact of the acquisition of DevelopIntelligence (including increased Pluralsight billings from DevelopIntelligence products and customers in years 2021 through 2025), which updates resulted in the Pluralsight prospective financial information as of October 2020 (as defined below). These updates were discussed in October from time to time by Pluralsight management with Qatalyst and with interested potential counterparties during the course of diligence meetings. A preliminary version of the Pluralsight prospective financial information as of October 2020 was made available in the electronic dataroom starting on October 25, 2020 and the final version of the Pluralsight prospective financial information as of October 2020 was made available in the electronic dataroom starting on October 27, 2020, in each case to the then-interested potential counterparties and including Party E (as defined below) when Party E was granted access to the electronic dataroom. For more information on the Pluralsight prospective financial information as of September 2020 and the Pluralsight prospective financial information as of October 2020, please see the section of this proxy statement captioned “The Mergers—Certain Unaudited Prospective Financial Information.”

On October 16, 2020, Party D declined to participate in further discussions regarding a potential strategic transaction involving Pluralsight. In declining to pursue a transaction, Party D indicated concerns regarding perceived headwinds in Pluralsight’s business including a potential slowdown in growth, net dollar retention and pricing pressure. Furthermore, Party D indicated that given the price at which the Class A common stock was trading, it would be difficult for Party D to pay a premium. On October 16, 2020, the Class A common stock closed at a trading price of $18.76.

On October 18, 2020, representatives of Qatalyst delivered a process letter to Party A, Party B and Party C requesting that such parties submit a proposal with respect to a potential acquisition of Pluralsight on October 26,

 

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2020, including a proposed purchase price for all of the outstanding equity of Pluralsight and relevant assumptions and terms. Vista informed representatives of Qatalyst that Vista would be in a position to submit a proposal with respect to the acquisition of Pluralsight the beginning of the week of October 26, 2020.

On October 23, 2020, Party C declined to participate in further discussions regarding a potential strategic transaction involving Pluralsight, citing perceived issues with Pluralsight’s growth and its competitive position. Party C indicated that given the perceived issues facing Pluralsight’s business, it would not be able to pay a meaningful premium to the price at which the Class A common stock was trading. On October 23, 2020, the Class A common stock closed at a trading price of $18.04.

On October 26, 2020, each of Party A and Party B also declined to participate in further discussions regarding a potential strategic transaction involving Pluralsight, citing perceived challenges to Pluralsight’s business, including the potential commoditization of content, the perceived efforts and costs required to make meaningful changes to the current cost structure given the potential declining growth profile as well as perceived concerns over the long-term margin profile of Pluralsight. Both Party A and Party B indicated difficulty in offering a proposal at an attractive valuation. On October 26, 2020, the Class A common stock closed at a trading price of $17.50.

On October 27, 2020, representatives of Vista contacted Mr. Skonnard and representatives of Qatalyst separately to indicate that Vista would not be submitting a proposal with respect to a potential acquisition of Pluralsight prior to the U.S. federal elections on November 3, 2020 and Pluralsight’s announcement of its third quarter 2020 earnings results on November 5, 2020.

On November 2, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Wilson Sonsini reviewed the directors’ fiduciary duties, certain process considerations and the Transaction Committee’s authority and responsibilities in the context of a potential strategic transaction involving Pluralsight. Representatives of Wilson Sonsini and Qatalyst also discussed a potential amendment of the TRA in connection with such a transaction, because by reducing the amount payable to TRA beneficiaries upon a change of control of Pluralsight, Pluralsight could negotiate for the difference between the amount payable to the TRA beneficiaries upon a change of control of Pluralsight pursuant to the terms of the TRA and such reduced amount to instead be paid to the Pluralsight stockholders in the event of a sale of Pluralsight, thereby delivering higher value to the Pluralsight stockholders. Representatives of Qatalyst presented to the Transaction Committee an overview of the economic terms of the TRA, including the illustrative tax benefits that could be available to Pluralsight over time and the terms of sharing of those benefits with the TRA beneficiaries, including the acceleration of payments in connection with a change of control of Pluralsight. The Transaction Committee also discussed the potential impact of the TRA obligations on potential acquisition proposals. Under the then-current terms of the TRA, the amount of the accelerated change of control payment obligation was variable based on, among other things, the price that would be paid in respect of Class A common stock in the applicable change of control transaction. Using a model to calculate payments under the TRA provided by Pluralsight’s management, Qatalyst presented a calculation of the estimated aggregate amount of the change of control payment obligations under the TRA based on illustrative prices for the Class A common stock, starting with the closing price of Class A common stock on October 30, 2020 of $15.70 and certain other assumptions, which resulted in estimated aggregate accelerated payments of approximately $400 million, with an increase that averaged approximately $6 million of aggregate accelerated payments per $1 increase in the price of Class A common stock. Qatalyst also discussed with the Transaction Committee illustrative estimates of the present value of the portion of the tax benefits that might be payable in the future to the TRA beneficiaries under the TRA absent a change of control, calculated using a model approved by Pluralsight’s management and assuming achievement of the Pluralsight prospective financial information as of October 2020, an illustrative $22.00 per share price for the Class A common stock at which holders of Holdings units would exchange outstanding Holdings units into Class A common stock, a 23.8% tax rate as provided by Pluralsight’s management and discount rates ranging from 9.00 to 11.00 percent, among other assumptions. These illustrative present value estimates ranged from $112 to $144 million. The Transaction Committee authorized Qatalyst and

 

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Wilson Sonsini to initiate preliminary discussions with the TRA Representative, the representative of the TRA beneficiaries under the TRA, to explore potentially amending the TRA.

On November 4, 2020, the Pluralsight Board held a regular meeting with members of management and representatives of Wilson Sonsini in attendance. The Transaction Committee provided an update to the Pluralsight Board with respect to its exploration and evaluation of a potential strategic transaction, including process considerations, scope of outreach to potential counterparties, and the Transaction Committee’s evaluation of the potential impact of the TRA in connection with a potential strategic transaction. The Transaction Committee also instructed, and the members of the Pluralsight Board and management confirmed, that potential conversations, if any, regarding a rollover of equity in connection with a potential acquisition of Pluralsight and other go-forward economic arrangements would not be taking place during the negotiation of any potential transaction, and those present confirmed that no such conversations had taken place. At the meeting, the representatives of management also reviewed Pluralsight’s budget for the 2021 fiscal year and an overview of Pluralsight’s business plan and updates since the version presented on September 30, 2020, which included the Pluralsight prospective financial information as of October 2020, and the Pluralsight Board approved the 2021 budget and business plan presented at the meeting, including the Pluralsight prospective financial information as of October 2020, including for use by Qatalyst in its analyses for the Transaction Committee and the Pluralsight Board.

Also on November 4, 2020, a director of Pluralsight received an unsolicited inquiry from an additional financial sponsor (which we refer to as “Party E”) expressing interest in evaluating a potential acquisition of Pluralsight, but no specific proposal or terms with respect to a potential strategic transaction were conveyed by representatives of Party E. Later that day, following the receipt of Party E’s unsolicited inquiry, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Qatalyst provided the Transaction Committee an update on the discussions regarding a potential strategic transaction with potential counterparties since the last meeting of the Transaction Committee, including the inquiry from Party E. The Transaction Committee authorized representatives of Qatalyst to engage in discussions with Party E with respect to a potential transaction involving Pluralsight. Following the meeting, Pluralsight executed a non-disclosure agreement with Party E, which included a so-called “standstill” provision with similar terms (including with respect to the fall away of restrictions) as described above, and members of Pluralsight management provided a management presentation to Party E, with representatives of Qatalyst in attendance. Party E was also granted access to Pluralsight’s electronic dataroom.

On November 5, 2020, after the close of trading, Pluralsight announced its third quarter 2020 results. The Class A common stock closed at a trading price of $14.74 on November 6, 2020, the first trading day after Pluralsight announced its third quarter 2020 results.

On November 6, 2020, Vista delivered to Pluralsight a written proposal to acquire all of the outstanding equity of Pluralsight for $16.50 per share in cash of Class A common stock and equivalents based on certain assumptions, including the number of shares of Class A common stock and equivalents outstanding on a fully diluted basis and the full acceleration and satisfaction of obligations under the TRA in accordance with its terms, in an amount of approximately $406 million (estimated from the model provided by management of Pluralsight in the electronic dataroom, with a $16.50 per share input). The proposal also indicated that, to the extent a lower amount is ultimately required to satisfy in full Pluralsight’s obligations under the TRA, the difference would be applied to the purchase price being proposed by Vista on a dollar-for-dollar basis.

Also on November 6, 2020, following receipt of the acquisition proposal from Vista, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Representatives of Qatalyst reviewed the terms of Vista’s acquisition proposal, including that at a $16.50 per share price, the TRA would require an accelerated change of control payment of $406 million, based on a model to calculate payments under the TRA provided by Pluralsight’s management. Representatives of

 

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Qatalyst indicated that, for illustration, if the entire amount of the $406 million payment were reduced to zero and applied to increase the consideration payable to Pluralsight’s equityholders on a dollar-for-dollar basis, Vista’s acquisition proposal implied a price of $19.02 per share of Class A common stock and equivalents. (In this proxy statement, we refer to the term “implied ‘no TRA’ adjusted price” to mean the implied price per share of an acquisition proposal assuming that the entire amount of Pluralsight’s accelerated change of control payment obligations under the TRA were reduced to zero (i.e., a hypothetical scenario where “no TRA” payment would be payable in the event of a change of control) and applied to increase the consideration payable to Pluralsight’s equityholders on a dollar-for-dollar basis.) The Transaction Committee and other members of the Pluralsight Board also discussed considerations for increasing the value of Vista’s acquisition proposal and maximizing the per share value of an acquisition proposal, including the possibility of an amendment to the TRA to reduce the amount of Pluralsight’s accelerated change of control payment obligations. Mr. Skonnard expressed his belief, and other directors concurred in his belief, that Pluralsight was more valuable than Vista’s $16.50 per share acquisition proposal, and they did not believe stockholders would be interested in an acquisition transaction at or near that amount, citing recent trading history. In addition, Mr. Skonnard indicated that, in line with the Transaction Committee’s instructions, he had not had any discussions with Vista with respect to a potential rollover of Mr. Skonnard’s equity stake in connection with a potential acquisition of Pluralsight by Vista. The Transaction Committee then met in executive session, without members of management or other members of the Pluralsight Board in attendance, and continued to discuss considerations for maximizing the value of an acquisition proposal. Representatives of Wilson Sonsini also reviewed with the Transaction Committee relevant Delaware law matters. The Transaction Committee requested that Qatalyst present at a subsequent meeting preliminary valuation perspectives with respect to Pluralsight based on the Pluralsight prospective financial information as of October 2020 in connection with the evaluation of Vista’s acquisition proposal and other potential proposals that Pluralsight might receive.

On November 10, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Representatives of Qatalyst reviewed the results of Pluralsight’s solicitation of interest regarding a potential strategic transaction from other potential counterparties, and discussed whether to re-engage with Party A and Party B or other potential counterparties in order to seek additional acquisition proposals. Representatives of Qatalyst also presented preliminary valuation and market perspectives with respect to Pluralsight on a standalone basis based on the Pluralsight prospective financial information as of October 2020, using various valuation methodologies, relative to the price of Vista’s acquisition proposal. The Transaction Committee then met in executive session, without members of management or other members of the Pluralsight Board in attendance, and discussed market perspectives on Pluralsight’s valuation, the impact of the TRA on potential acquisition proposals, and considerations for maximizing the value to Pluralsight’s stockholders. The Transaction Committee directed representatives of Qatalyst to continue negotiating the acquisition proposal with Vista, including by requesting another, higher value proposal from Vista. The Transaction Committee also directed Qatalyst to seek to re-engage with Party A and Party B. The Transaction Committee also directed representatives of Qatalyst and Wilson Sonsini to engage in negotiations with the TRA Representative with respect to an amendment of the TRA to propose a fixed change of control payment obligation at a substantial discount to the estimated amount of Pluralsight’s accelerated payment obligations under the then-current terms of the TRA, in order to maximize the value received by Pluralsight stockholders in the event of a sale of Pluralsight.

Also on November 10, 2020, the Class A common stock closed at a trading price of $15.83. Prior to the close of trading on that day, Betaville Intelligence, an online publication focusing on M&A activity and rumors, published an article indicating that Pluralsight may be in discussions regarding a potential acquisition by Vista.

On November 11, 2020, representatives of Qatalyst held telephonic conferences with representatives of Party A and Party B to solicit additional acquisition proposals for Pluralsight. Representatives of Party A indicated that Party A could potentially, subject to completion of diligence, submit an acquisition proposal with an “implied ‘no TRA’ adjusted price” of up to $20.00 per share of Pluralsight Class A common stock (equating

 

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to a proposed price per share of Class A common stock of less than $20.00, which reduction would be based on the aggregate amount of the accelerated change of control payment obligations under the TRA). Representatives of Party A made it clear that Party A did not foresee any circumstance that would cause it to pay more than an “implied ‘no TRA’ adjusted price” of $20.00 per share of Pluralsight Class A common stock. Party B declined to submit any expression of interest or acquisition proposal. Representatives of Party E communicated to representatives of Qatalyst that Party E was continuing to evaluate a potential strategic transaction with Pluralsight.

Also on November 11, 2020, representatives of Qatalyst held a telephonic conference with representatives of Vista to negotiate the terms of Vista’s acquisition proposal. Representatives of Qatalyst indicated that Pluralsight would seek to amend the TRA to reduce the amount of Pluralsight’s change of control obligation and requested from Vista a revised proposal. Following that discussion, representatives of Vista verbally provided a revised acquisition proposal of $17.75 per share of Class A common stock and equivalents, assuming no reduction in the amount of the change of control payment obligation owed by Pluralsight under the TRA, which represented an estimated “implied ‘no TRA’ adjusted price” of $20.32 per share of Class A common stock.

Also on November 11, 2020, representatives of Qatalyst and Wilson Sonsini held a telephonic conference with representatives of the TRA Representative to discuss the possibility of amending the TRA in connection with a potential change of control transaction involving Pluralsight, and proposed a fixed payment of $100 million in the aggregate to the TRA beneficiaries in full satisfaction of Pluralsight’s change of control payment obligations.

On November 12, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Mr. Hinkle confirmed that he had been “walled off” from discussions among representatives of Insight Venture Partners and its affiliates, including the TRA Representative, regarding the TRA, and would not share confidential information that he receives in his capacity as a director of Pluralsight with such persons. Mr. Hinkle also offered to recuse himself from substantive discussions among the members of the Pluralsight Board regarding the negotiation of the TRA with the TRA Representative (and did not attend or recused himself from portions of this meeting and subsequent meetings of the Transaction Committee and the Pluralsight Board where appropriate). Representatives of Qatalyst provided an update on their discussions and negotiations with Vista, Party A, Party B and Party E, including Vista’s updated proposal which represented an estimated “implied ‘no TRA’ adjusted price” of $20.32 per share of Class A common stock, equating to $17.75 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA. The directors also discussed considerations for increasing the value of Vista’s and Party A’s acquisition proposals, and the ability of Party E to submit an attractive acquisition proposal relative to the existing proposals. The Transaction Committee then met in executive session, without members of management or other members of the Pluralsight Board in attendance, and representatives of Qatalyst and Wilson Sonsini updated the Transaction Committee on their discussions with the TRA Representative. The Transaction Committee discussed further negotiation strategies and Pluralsight’s valuation on a standalone basis. The Transaction Committee directed Qatalyst and Wilson Sonsini to continue negotiations with Vista, Party A, Party E and the TRA Representative, and for Qatalyst to provide Vista with a counter-proposal for an acquisition transaction with an “implied ‘no TRA’ adjusted price” between $22.50 and $23.00 per share of Class A common stock and equivalents.

On November 13, 2020, representatives of Qatalyst held a telephonic conference with representatives of Vista to negotiate the terms of Vista’s acquisition proposal, and provided Vista with a counter-proposal with an “implied ‘no TRA’ adjusted price” of $23.00 per share.

Also on November 13, 2020, representatives of Qatalyst and Wilson Sonsini held a telephonic conference with representatives of the TRA Representative to discuss the TRA in connection with a potential change of control. The representatives of the TRA Representative proposed an amendment to the TRA to reduce Pluralsight’s change of control payment obligations to 75% of the amount that would have otherwise been

 

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payable as a result of a potential acquisition of Pluralsight based on the then-current terms of the TRA (i.e., a reduction of 25%). The representatives of the TRA Representative also requested that Pluralsight indemnify the TRA Representative for any losses or liabilities resulting from an amendment of the TRA and the contemplated transactions.

Over the subsequent days, representatives of Qatalyst continued to engage with Party A and Party E to solicit acquisition proposals from each of them.

On November 14, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Representatives of Qatalyst provided an update on their discussions and negotiations with the TRA Representative, including the TRA Representative’s proposal to reduce Pluralsight’s change of control payment obligations to 75% of the amount that would have otherwise been payable under the then-current terms of the TRA. The Transaction Committee then met in executive session, without members of management or other members of the Pluralsight Board in attendance, and continued their discussion of negotiation strategies, among other things. In light of the fact that both the price of Vista’s acquisition proposal, and also a reduction in the amount of Pluralsight’s change of control payment obligations under the TRA, would affect the ultimate price per share to be paid to Pluralsight stockholders in a potential transaction with Vista, the Transaction Committee directed Qatalyst to solicit from Vista its best and final proposal with respect to an acquisition of Pluralsight.

On November 16, 2020, following continued discussions, representatives of Party E communicated to representatives of Qatalyst that Party E would not be in a position to further evaluate a potential strategic transaction involving Pluralsight at that time.

On November 17, 2020, representatives of Vista verbally provided to Qatalyst an updated acquisition proposal with an “implied ‘no TRA’ adjusted price” of $21.04 per share of Class A common stock and equivalents. Following continued negotiations and discussions with representatives of Qatalyst, Vista further increased its acquisition proposal to a best and final proposal with an “implied ‘no TRA’ adjusted price” of $21.05 per share of Class A common stock and equivalents, equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA. Representatives of Qatalyst and Wilson Sonsini also discussed certain other key terms of Vista’s acquisition proposal, including Vista’s sources of financing, specific performance rights for Pluralsight to enforce Vista’s equity financing commitments and obligation to consummate the acquisition and other certainty of closing matters. Representatives of Vista also stated that it would not be willing to proceed with further discussions unless Pluralsight agreed to negotiate exclusively with Vista for a short period to be agreed.

Also on November 17, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini and, at the Transaction Committee’s invitation, other members of the Pluralsight Board and members of management were in attendance. Representatives of Qatalyst and Wilson Sonsini provided an update on their discussions and negotiations with Vista, Party A, Party E and the TRA Representative. The Transaction Committee then met in executive session, without members of management or other members of the Pluralsight Board in attendance, and discussed negotiation strategies. In light of the receipt of Vista’s best and final acquisition proposal for an “implied ‘no TRA’ adjusted price” of $21.05 per share, the Transaction Committee directed representatives of Qatalyst to share with the TRA Representative Vista’s best and final price and indicate that the Transaction Committee would not be prepared to move forward with Vista unless the TRA Representative agreed to a reduction in the aggregate amount of Pluralsight’s change of control payment obligations under the TRA to $127 million (representing a reduction of approximately $290 million, which is an approximately 70% reduction of the estimated aggregate amount of approximately $417 million that would have otherwise been payable to the TRA beneficiaries under the then-existing terms of the TRA in respect of a change of control of Pluralsight at an “implied ‘no TRA’ adjusted price” of $21.05 per share of Class A common stock

 

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and equivalents, equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA), which was in line with the illustrative estimates of the present value of the aggregate amounts that might be payable in the future to the TRA beneficiaries under the TRA absent a change of control, based on the Pluralsight prospective financial information as of October 2020, which was presented to the Transaction Committee on November 2, 2020.

On November 18, 2020, following continued discussions, representatives of Party A indicated to representatives of Qatalyst that Party A was not in a position to make a formal acquisition proposal at such time and, assuming Party A could in the future be in a position to make an acquisition proposal, did not envision any circumstances that would cause Party A to offer more than the “implied ‘no TRA’ adjusted price” of $20.00 per share previously indicated.

Also on November 18, 2020, representatives of Qatalyst and Wilson Sonsini held a telephonic conference with representatives of the TRA Representative to negotiate an amendment of the TRA. Representatives of Qatalyst and Wilson Sonsini stated to representatives of the TRA Representative that, in light of Vista’s best and final acquisition proposal for an “implied ‘no TRA’ adjusted price” of $21.05 per share and the absence of any other acquisition proposals for a superior value, Pluralsight would not move forward with Vista unless the TRA Representative agreed to an amendment to the TRA to reduce the amount of Pluralsight’s change of control payment obligations to $127 million. After this discussion, representatives of the TRA Representative called representatives of Wilson Sonsini to communicate that the TRA Representative would agree to an amendment to the TRA to reduce the amount of Pluralsight’s change of control payment obligations from approximately $417 million (at the current Vista proposal equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA) to $127 million.

Later on November 18, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Qatalyst and Wilson Sonsini updated the Transaction Committee on their discussions with Party A and the TRA Representative, and reviewed with the Transaction Committee an illustrative allocation of the proposed $127 million change of control payment obligations under an amended TRA in connection with a potential sale of Pluralsight, including the payments that would be made to certain directors and officers of Pluralsight and their affiliates. Following discussion, the Transaction Committee determined that it would be in the best interests of Pluralsight and its stockholders to, and resolved to recommend that the Pluralsight Board, move forward to negotiate definitive agreements with respect to Vista’s acquisition proposal for an “implied ‘no TRA’ adjusted price” of $21.05 per share, representing an acquisition price of $20.26 per share of Class A common stock and equivalents assuming a $127 million change of control payment obligation under an amended TRA, and also agree to negotiate exclusively with Vista with respect to an acquisition transaction.

Also on November 18, 2020, following the meeting of the Transaction Committee, the Pluralsight Board held a meeting with members of management and representatives of Qatalyst and Wilson Sonsini in attendance. During that meeting the Transaction Committee updated the Pluralsight Board on its determination that it would be in the best interests of Pluralsight and its stockholders to, and recommendation that the Pluralsight Board, move forward to negotiate definitive agreements with respect to Vista’s acquisition proposal. Representatives of Qatalyst and Wilson Sonsini reviewed the terms of Vista’s acquisition proposal, including the exclusivity request, as well as the TRA Representative’s agreement to reduce the amount of Pluralsight’s change of control payment obligations under the TRA to $127 million. Representatives of Qatalyst and Wilson Sonsini also reviewed the terms of an acquisition transaction expected to be negotiated with Vista, including Vista’s sources of financing, certainty of closing matters and the ability of the Pluralsight Board to evaluate and accept superior acquisition proposals if it was to execute definitive agreements with Vista with respect to an acquisition transaction. The Transaction Committee discussed with the Pluralsight Board and members of management and representatives of Qatalyst and Wilson Sonsini certain process considerations, including the low likelihood of

 

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obtaining a more attractive proposal from Party A and Party E and other potential counterparties with which representatives of Qatalyst and Pluralsight had engaged, the possibility that Vista could lower the value of its acquisition proposal or that Pluralsight and Vista could fail to reach agreement on the terms of an acquisition transaction, and the advisability of agreeing to negotiate exclusively with Vista with respect to an acquisition transaction. Mr. Skonnard confirmed to the Pluralsight Board that he had not had any discussions with Vista with respect to a potential rollover of his equity stake in connection with a potential acquisition of Pluralsight by Vista. Following discussion and the recommendation of the Transaction Committee, the Pluralsight Board unanimously agreed to enter into an exclusivity agreement with Vista.

On November 19, 2020, Vista delivered to Pluralsight an updated written proposal to acquire all of the outstanding equity of Pluralsight for $20.26 per share of Class A common stock and equivalents in cash based on certain assumptions, including the number of shares of Class A common stock and equivalents outstanding at such time and the payment of $127 million by Pluralsight in satisfaction of its change of control payment obligations under the TRA following the acquisition. Vista also delivered a draft exclusivity agreement and, following negotiation of the terms, including the circumstances in which the exclusivity obligations would fall away, Pluralsight and Vista executed on November 19, 2020 an exclusivity agreement in which Pluralsight agreed to negotiate exclusively with Vista with respect to an acquisition transaction until December 11, 2020 or, if earlier, such time as Vista indicates that it intends to reduce the per share price at which it is willing to proceed with the acquisition transaction. Following Vista’s request, Pluralsight consented to Vista confidentially approaching certain potential sources of equity and debt financing in connection with a potential acquisition. The Class A common stock closed at a trading price of $15.94 on November 19, 2020.

Beginning on November 20, 2020, representatives of Vista, potential institutional co-investors and potential lenders and their respective advisors, including Kirkland & Ellis LLP, Vista’s outside counsel (“Kirkland”), were granted access to additional due diligence documents and information in Pluralsight’s electronic dataroom to support their continued due diligence review of Pluralsight. Over the following three weeks, Vista, potential institutional co-investors and potential lenders and their respective advisors conducted operational, legal, financial and other due diligence on Pluralsight, including reviews of Pluralsight’s commercial relationships, intellectual property, capitalization, equity awards and employee benefit plans and compliance and regulatory matters, and from time to time had discussions with representatives of Pluralsight and Qatalyst to discuss process, due diligence and related items with respect to an acquisition transaction.

Also on November 20, 2020, representatives of Kirkland sent a draft of the merger agreement to representatives of Wilson Sonsini, which draft contemplated (among other things) a full equity financing commitment of the acquisition by funds affiliated with Vista, specific performance rights for Pluralsight to enforce the equity financing commitments and the Buyer Parties’ obligation to consummate the acquisition, a termination fee and Pluralsight liability limitation equal to 3.5% of Pluralsight’s equity value in the acquisition and a Buyer liability limitation equal to 6% of Pluralsight’s equity value.

On November 24, 2020, representatives of Wilson Sonsini sent a draft of the TRA amendment to representatives of the TRA Representative’s outside legal advisor.

Also on November 24, 2020, following Vista’s request, Pluralsight consented to Vista confidentially approaching certain additional potential sources of equity and debt financing in connection with a potential acquisition. The Class A common stock closed at a trading price of $15.25 on November 24, 2020.

On November 27, 2020, representatives of Wilson Sonsini sent to representatives of Kirkland a revised draft of the merger agreement, which draft contemplated (among other things) a termination fee and Pluralsight liability limitation equal to 2.75% of Pluralsight’s equity value in the acquisition and a Buyer liability limitation equal to 8% of Pluralsight’s equity value. Over the following two weeks, representatives of Pluralsight and Vista and their respective legal advisors exchanged revised drafts of the merger agreement and negotiated the terms of the merger agreement. Key terms of the merger agreement negotiated between the parties included the amounts

 

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of the termination fee, Pluralsight liability limitation and Buyer liability limitation, circumstances in which the termination fee would be payable by Pluralsight, circumstances in which the Pluralsight Board could negotiate alternative acquisition proposals, change its recommendation to stockholders in favor of the mergers and terminate the merger agreement to enter into definitive agreements for an alternative acquisition proposal, the definition of “Material Adverse Effect,” Buyer Parties’ commitments in connection with obtaining required regulatory approvals and other certainty of closing matters, the structure of the mergers and circumstances in which the Buyer Parties could modify the structure of the acquisition transactions, the treatment of unvested Pluralsight equity awards in connection with the consummation of the mergers and the interim operating covenants applicable to Pluralsight and exceptions thereto for matters such as commercial and strategic transactions, capital expenditures and employee hiring, termination and retention.

On November 30, 2020, representatives of Kirkland sent a draft of the voting agreement to representatives of Wilson Sonsini and representatives of outside counsel for the stockholders requested to be party to the voting agreement. The draft voting agreement did not contemplate that Pluralsight would be a party to the voting agreement and, while it did provide that the stockholders requested to be party to the voting agreement would vote in favor of the proposed transaction with Vista, it did not contemplate that such stockholders would also agree to vote their shares in favor of an alternative acquisition transaction approved by the Pluralsight Board (should one materialize). Over the following 10 days, representatives of Pluralsight, Vista, the stockholders requested to be party to the voting agreement and their legal advisors exchanged revised drafts of the voting agreement and negotiated the terms of the voting agreement. Key terms of the voting agreement negotiated between the parties included the terms of transfer restrictions applicable to the securities of Pluralsight held by such stockholders and provisions requiring the stockholders requested to be party to the voting agreement to vote their shares in favor of an alternative Acquisition Transaction approved by the Pluralsight Board (should one materialize), which the Transaction Committee believed was important so that a third party seeking to make an alternative Acquisition Proposal would also have the benefit of the voting agreement stockholders committing to vote in favor of the applicable alternative Acquisition Transaction.

Also on November 30, 2020, the Pluralsight Board held a meeting with members of management and representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Qatalyst provided the Pluralsight Board an update on Vista’s due diligence review of Pluralsight. Representatives of Wilson Sonsini provided an update on the negotiation of the merger agreement, and discussed with the Pluralsight Board the key terms of the merger agreement being negotiated between the parties. Mr. Skonnard confirmed to the Pluralsight Board that he had not had any discussions with Vista with respect to a potential rollover of Mr. Skonnard’s equity stake in connection with a potential acquisition of Pluralsight by Vista.

Also on November 30, 2020, following the meeting of the Pluralsight Board, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Wilson Sonsini provided an update on the negotiation of the voting agreement and the TRA amendment, and discussed with the Transaction Committee the terms of the voting agreement and the TRA amendment being negotiated among the parties. At the conclusion of the meeting, the Transaction Committee directed representatives of Qatalyst and Wilson Sonsini to continue negotiating the terms of merger agreement, voting agreement and the TRA amendment, with assistance from members of management where appropriate and required.

On December 3, 2020, representatives of the TRA Representative’s outside legal advisor sent a revised draft of the TRA amendment to representatives of Wilson Sonsini. Over the following week, representatives of Pluralsight, the TRA Representative, Vista and their respective legal advisors exchanged revised drafts of the TRA amendment and negotiated the terms of the TRA amendment. Key terms of the TRA amendment negotiated between the parties included that the fixed $127 million change of control payment obligation would not increase if Pluralsight were to enter into a definitive agreement with respect to an alternative acquisition transaction (should one materialize), which the Transaction Committee believed was important so that a third party seeking to make an alternative Acquisition Proposal would also have the benefit of the reduced change of control payment obligation under the TRA, which reduction could be applied to a commensurate increase in the per

 

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share value of a potential alternative Acquisition Proposal, as well as the terms of Pluralsight’s indemnification of the TRA Representative for losses in connection with its approval of the TRA amendment and restrictions on the ability of the TRA beneficiaries to redeem their Holdings units after executing the TRA amendment. Pluralsight management also calculated the allocation of the aggregate $127 million change of control payment among the TRA beneficiaries following the consummation of the mergers under the TRA amendment, based on the estimated payment that each TRA beneficiary would have received upon a change of control of Pluralsight under the then-current terms of the TRA relative to the aggregate amount of all such payments, which allocation was agreed to by the TRA Representative.

On December 4, 2020, representatives of Kirkland sent to representatives of Wilson Sonsini drafts of the equity commitment letter and limited guarantee, which drafts contemplated a full equity financing commitment of the acquisition by funds affiliated with Vista and specific performance rights for Pluralsight to enforce the equity financing commitments on the terms and conditions set forth in the equity commitment letter. Over the following week, representatives of Pluralsight and Vista and their respective legal advisors exchanged revised drafts of the equity commitment letter and the limited guarantee and negotiated the terms of the equity commitment letter and the limited guarantee, including the amount of the equity investment such funds affiliated with Vista agreed to deliver to the Buyer Parties to fund the mergers and the related transactions.

On December 7, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Wilson Sonsini provided an update on the negotiation of the merger agreement, and discussed with the Transaction Committee the key terms of the merger agreement being negotiated between the parties, including the amounts of the termination fee, Pluralsight liability limitation and Buyer liability limitation. The Transaction Committee directed representatives of Qatalyst and Wilson Sonsini to continue negotiating the terms of the merger agreement, voting agreement and the TRA amendment, with assistance from members of management where appropriate and required, including in connection with the proposed treatment of unvested Pluralsight equity awards in connection with the consummation of the mergers and the exceptions to the interim operating covenants for employee hiring, termination and retention matters in light of the need for Pluralsight to continue to attract and retain employees following the execution of the merger agreement.

On December 9, 2020, the Class A common stock closed at a trading price of $18.12. Prior to the close of trading on that day, Betaville Intelligence published a follow-up to its article indicating that Pluralsight may be in discussions regarding a potential acquisition by Vista.

On December 10, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Wilson Sonsini provided an update on the negotiation of the merger agreement, voting agreement and TRA amendment and other relevant transaction documents. Representatives of Wilson Sonsini also reviewed with the Transaction Committee the process implemented for evaluating and negotiating the merger agreement to date and certain process considerations and potential next steps, including that the Pluralsight Board had resolved that Pluralsight would not effectuate such a transaction unless it is first approved or recommended by the Transaction Committee and unless it is approved by the holders of a majority of the voting power of Pluralsight capital stock not held by any stockholder who is, or is known by Pluralsight to be affiliated with a party, receiving benefits in connection with the transaction pursuant to the TRA and other unique benefits, if any, as identified by the Transaction Committee, or any officer of Pluralsight, which conditions may not be waived. Representatives of Qatalyst reviewed with the Transaction Committee Pluralsight’s solicitation of interest to date. Representatives of Wilson Sonsini also noted the conflict disclosure letter with respect to the potential conflicts of Qatalyst and its representatives with respect to the mergers prepared by Qatalyst and previously made available to the Transaction Committee and the Pluralsight Board. Representatives of Qatalyst also presented to the Transaction Committee its valuation analysis of Pluralsight on a standalone basis based on the Pluralsight prospective financial information as of October 2020. The Transaction Committee directed representatives of Qatalyst and Wilson Sonsini to finalize the terms of the merger agreement, voting agreement and the TRA amendment and other relevant transaction documents.

 

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Also on December 10, 2020, the Pluralsight Board held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. The Transaction Committee provided the Pluralsight Board with an update on its evaluation and negotiation of the mergers and related transactions. Representatives of Qatalyst reviewed with the Pluralsight Board Pluralsight’s solicitation of interest to date, including that 14 potential acquirers of Pluralsight (consisting of six strategic acquirers and eight financial sponsors (including Vista)) were included in the outreach process and that, of these, only Vista made a proposal that was capable of being accepted and the only other indication of value of a potential acquisition proposal (that did not materialize) was for an “implied ‘no TRA’ adjusted price” of no more than $20.00 per share of Pluralsight Class A common stock. Representatives of Qatalyst then presented to the Pluralsight Board its valuation analysis of Pluralsight on a standalone basis based on the Pluralsight prospective financial information as of October 2020 and various valuation methodologies, and reviewed the Per Share Price relative to the trading price of the Class A common stock over various trading periods, including periods prior to the potential impact of market rumors with respect to a pending acquisition of Pluralsight on the trading price of Class A common stock. In addition, the Pluralsight Board reviewed illustrative estimates of the present value of the portion of the tax benefits that might be payable in the future to the TRA beneficiaries under the TRA absent a change of control, calculated using a model approved by Pluralsight’s management and assuming achievement of the Pluralsight prospective financial information as of October 2020, a per share price for the Class A common stock at which holders of Holdings units would exchange outstanding Holdings units into Class A common stock equal to the Per Share Price of $20.26, a 23.8% tax rate as provided by Pluralsight’s management and discount rates ranging from 9.50 to 11.00 percent (which was the range of discount rates used by Qatalyst to calculate the implied net present value of the estimated future unlevered free cash flows of Pluralsight in connection with its financial analyses in connection with delivering its fairness opinion to the Pluralsight Board, which was rendered the following day), among other assumptions. These illustrative present value estimates ranged from $112 to $135 million. The Pluralsight Board also discussed risks and uncertainties related to achieving the Pluralsight prospective financial information as of October 2020, including the potential impact of market, customer and competitive trends on Pluralsight and the inherent uncertainty of achieving management forecasts. Representatives of Wilson Sonsini also reviewed with the Pluralsight Board certain relevant Delaware law matters, including the directors’ fiduciary duties in connection with a potential sale of Pluralsight, and that the Pluralsight Board had resolved that Pluralsight would not effectuate such a transaction unless it is first approved or recommended by the Transaction Committee and unless it is approved by the holders of a majority of the voting power of Pluralsight capital stock not held by any stockholder who is, or is known by Pluralsight to be affiliated with a party, receiving benefits in connection with the transaction pursuant to the TRA and other unique benefits, if any, as identified by the Transaction Committee, or any officer of Pluralsight, which conditions may not be waived. Representatives of Wilson Sonsini also noted the conflict disclosure letter with respect to the potential conflicts of Qatalyst and its representatives with respect to the mergers prepared by Qatalyst and previously made available to the Pluralsight Board. Representatives of Wilson Sonsini also provided an overview of the terms of the merger agreement, voting agreement and TRA amendment and other relevant transaction documents. The Pluralsight Board also discussed with members of management their communications and announcement strategies if the merger agreement were to be approved and executed. The Pluralsight Board then met in executive session, without members of management in attendance, and continued to discuss the terms of the merger agreement, voting agreement and TRA amendment and other relevant transaction documents.

On December 10, 2020, the Class A common stock closed at a trading price of $18.91, a cumulative increase of approximately 17% since the closing price of the Class A common stock on November 9, 2020 (the last trading day before Betaville Intelligence published an article that Pluralsight may be in discussions regarding a potential acquisition by Vista).

On December 11, 2020, representatives of Wilson Sonsini, Kirkland and legal counsel to the TRA Representative and the stockholders requested to be party to the voting agreement finalized the forms of the merger agreement, voting agreements, TRA amendment and other relevant transaction documents.

 

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Also on December 11, 2020, the Transaction Committee held a meeting with representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Wilson Sonsini provided an update on the negotiation of the merger agreement, voting agreement and TRA amendment and other relevant transaction documents, including updates to the final terms of the merger agreement, voting agreement and TRA amendment since the last meeting of the Pluralsight Board. Representatives of Qatalyst confirmed that it was prepared to deliver its opinion to the Pluralsight Board that the Per Share Price was fair, from a financial point of view, to the holders of Class A common stock (other than the Parent Parties and their affiliates). At the conclusion of the meeting, the Transaction Committee unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and the holders of Pluralsight capital stock, and that the Holdings merger is fair to, and in the best interests of, Holdings and the holders of Holdings units, and resolved to adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement and to recommend that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement, including in Pluralsight’s capacity as the sole manager of Holdings. The Transaction Committee also determined that it was advisable to enter into the TRA amendment, and resolved to recommend that the Pluralsight Board approve the TRA amendment. In evaluating and approving the foregoing matters, the Transaction Committee was aware that the TRA amendment provided for payments to certain directors and members of management and certain of their respective affiliates, as TRA beneficiaries, as described herein.

Also on December 11, 2020, the Pluralsight Board held a meeting with members of management and representatives of Qatalyst and Wilson Sonsini in attendance. Representatives of Wilson Sonsini provided an update on the negotiation of the merger agreement, voting agreement and TRA amendment and other relevant transaction documents, including updates to the final terms of the merger agreement, voting agreement and TRA amendment since the last meeting of the Pluralsight Board. The Transaction Committee informed the Pluralsight Board that it had unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and the holders of Pluralsight capital stock, and that the Holdings merger is fair to, and in the best interests of, Holdings and the holders of Holdings units, had resolved to adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement, and had determined that it was advisable to enter into the TRA amendment. The Transaction Committee also delivered their recommendation that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement, and approve the TRA amendment. Representatives of Qatalyst also delivered its oral opinion to the Pluralsight Board, to be confirmed in writing in connection with the execution of the merger agreement, to the effect that, as of the date of such opinion, based on and subject to the assumptions, qualifications, limitations and other matters set forth therein, the Per Share Price was fair, from a financial point of view, to the holders of Class A common stock (other than the Parent Parties and their affiliates). At the conclusion of the meeting, the Pluralsight Board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and the holders of Pluralsight capital stock, and that the Holdings merger is fair to, and in the best interests of, Holdings and the holders of Holdings units, and resolved to adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement, including in Pluralsight’s capacity as the sole manager of Holdings, and further resolved to recommend that the Pluralsight stockholders adopt the merger agreement. The Pluralsight Board also determined that it was advisable to enter into the TRA amendment and voting agreements, and approved the TRA amendment and voting agreements. In evaluating and approving the foregoing matters, the Pluralsight Board was aware that the TRA amendment provided for payments to certain directors and members of management and certain of their respective affiliates, as TRA beneficiaries, as described herein. No members of Pluralsight’s senior management had engaged in discussions or negotiations with Vista at this time regarding the potential terms of their individual employment arrangements following the consummation of a potential acquisition of Pluralsight by Vista.

In the evening of December 11, 2020, following the meeting of the Pluralsight Board, Pluralsight, Holdings and the Buyer Parties executed the merger agreement, and the parties to the TRA amendment, the voting agreement and the relevant transaction agreements executed such agreements.

 

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On December 13, 2020, Pluralsight and Vista publicly announced the mergers and the execution of the merger agreement and relevant transaction agreements. In connection with the announcement of the mergers, Pluralsight and Vista issued a joint press release, which Pluralsight distributed to certain investors and analysts by email with a cover note, the text of each of which is reproduced below.

December 13, 2020 Press Release

Pluralsight Enters into Definitive Agreement to be Acquired by Vista Equity Partners for $3.5 Billion

Vista to acquire all outstanding shares of Pluralsight for $20.26 per share in cash

Silicon Slopes, Utah – December 13, 2020 - Pluralsight, Inc. (NASDAQ: PS), the technology workforce development company, today announced that it has entered into a definitive agreement to be acquired by Vista Equity Partners (“Vista”), a leading global investment firm focused on enterprise software, data and technology-enabled businesses.

Under the terms of the agreement, Vista, in partnership with its institutional co-investors including Partners Group, will acquire all outstanding shares of Pluralsight common stock for $20.26 per share in an all-cash transaction valued at approximately $3.5 billion. The purchase price represents a premium of approximately 25% to the company’s volume weighted average closing stock price for the 30 trading days prior to today’s announcement.

Pluralsight, which is headquartered in Utah and has over 1,700 employees, provides technology workforce development solutions, including skills intelligence, skills development and engineering management capabilities. These solutions help develop world-class technologists and technology teams and empower them to drive the next wave of innovation for their organizations. The company’s two products, Pluralsight Skills and Pluralsight Flow, are used by more than 17,000 customers, including 70% of Fortune 500 companies.

“We are pleased to have reached this agreement with Vista, which delivers significant immediate cash value to our shareholders, and positions Pluralsight to continue meeting and exceeding the expectations of our customers,” said Gary Crittenden, Pluralsight’s lead independent director. “This transaction, which is the result of a robust process overseen and directed by an independent Transaction Committee of the Board of Directors, is a testament to the value Pluralsight has created and the reputation our team has built. Enterprises all over the world rely on Pluralsight’s solutions to strengthen technology skills, innovate faster and meet their core objectives. With Vista’s support, we are confident that Pluralsight will be even better positioned to deliver value to our customers. We are confident that this transaction is the best path forward for Pluralsight and our stakeholders.”

“Today’s announcement is an exciting milestone for Pluralsight as we begin the next phase of our evolution,” said Aaron Skonnard, co-founder and CEO of Pluralsight. “Through this partnership with Vista, we will be able to move faster and be more agile, accelerate our strategic vision and, ultimately, deliver deeper, more powerful solutions that help companies adapt and thrive in the digital age. We are relentlessly focused on helping enterprises improve and optimize their technology workforce and providing the most effective path to skills transformation for their technology teams. The global Vista ecosystem of leading enterprise software companies provides significant resources and institutional knowledge that will open doors and help fuel our growth. We’re thrilled that we will be able to leverage Vista’s expertise to further strengthen our market leading position.”

“We have seen firsthand that the demand for skilled software engineers continues to outstrip supply, and we expect this trend to persist as we move into a hybrid online-offline world across all industries and interactions, with business leaders recognizing that technological innovation is critical to business success,” said Monti Saroya, co-head of the Vista Flagship Fund and senior managing director at Vista. “Through its platform, Pluralsight enables these leaders to improve productivity and provide career pathing opportunities across their IT workforces.”

 

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“Pluralsight and Vista share the belief that software is key to unlocking opportunity and progress,” said Adrian Alonso, managing director at Vista. “We are impressed by the outstanding business that Pluralsight has already built and look forward to partnering with the management team to enable the company’s next phase of growth and further their mission to democratize technology skills.”

Transaction Details

Under the terms of the agreement, which was unanimously approved and recommended by an independent Transaction Committee and then unanimously approved by the Pluralsight Board of Directors, Pluralsight shareholders will receive $20.26 in cash for each share of common stock they own.

Pluralsight has also entered into a voting agreement with certain of its shareholders, under which such shareholders have agreed to vote all of their Pluralsight shares in favor of the transaction, subject to certain terms and conditions contained therein. The Pluralsight shares subject to the voting agreement represent a majority of the current outstanding voting power of Pluralsight shares. The transaction is also subject to approval by a majority of shareholders of Pluralsight that are not party to the company’s Tax Receivable Agreement.

In response to receipt of unsolicited acquisition interest, Pluralsight engaged in a robust process, including evaluating transaction alternatives against Pluralsight’s standalone plan and other strategic alternatives. Following this process, the Transaction Committee and the Board each unanimously determined that the transaction with Vista is in the best interests of Pluralsight and its shareholders.

The transaction is expected to close in the first half of 2021, subject to customary closing conditions, including approval by Pluralsight shareholders and receipt of regulatory approvals. Upon completion of the transaction, Pluralsight will become a privately held company and shares of Pluralsight common stock will no longer be listed on any public market. Pluralsight will continue to be headquartered in Silicon Slopes, Utah.

Advisors

Qatalyst Partners is serving as financial advisor to Pluralsight and Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal counsel. For Vista, Morgan Stanley & Co. LLC is serving as financial advisor, and Kirkland & Ellis LLP is serving as legal counsel.

Cover Note Accompanying December 13, 2020 Press Release

Subject: PS—Definitive Agreement to be Acquired by Vista Equity Partners for $3.5 Billion

Hello Investors,

James [Budge, Chief Financial Officer of Pluralsight] and I [Mark McReynolds, Director of Investor Relations of Pluralsight] wanted to quickly shoot out a note highlighting a few items in the press release that just hit the wire. I’ve attached the release for you in this message, in case you missed it (related 8-K to be filed in the AM).

A few key points from the deal that we’d like to highlight:

Why sell now?

We have big plans for growth and want to be in a position that allows us to take a longer term approach—longer than quarter by quarter. We feel that as a private company, we will be able to better focus on our products, our customer segments, and how we go to market without the worry of short term expectations. Supported by Vista, we will move faster and be more agile, and accelerate our strategic vision which will cement our leading market position.

What are the financial details of the deal?

Vista will acquire Pluralsight for approximately $3.5 billion enterprise value, or $20.26 per share in cash. This represents a premium of 25% using the VWAP for the last 30 days. Enterprise value consists of over $3.2B for all outstanding shares of Pluralsight, $111M for the assumption of our net debt, and $127M for payment of the obligation related to the tax receivable (TRA) obligations to pre-IPO LLC shareholders.

 

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What is the timeframe?

The transaction is expected to close in the first half of 2021, subject to customary closing conditions, including approval by Pluralsight’s shareholders and receipt of regulatory approvals.

Were there any other parties involved in the process?

There were 14 parties, including potential strategic and private equity buyers involved. After running a thorough process, Vista won the deal with the best package for our shareholders. We are confident this is the best path forward.

What will happen with the TRA holders?

TRA holders will receive the NPV of their expected future tax benefits. The aggregate amount of TRA that will be paid is $127M. This is an approximate 75% discount to what the full value of the TRA could have been and the meaningful discount allowed for a corresponding higher price per share for our shareholders.

When do you expect to file the proxy statement?

We plan to file the prelim proxy by the end of the year and file the definitive proxy in January

We expect to operate the business as usual up until the close. Thank you for all your support these last two and a half years. We are excited for the next leg of our journey with Vista.

Recommendation of the Transaction Committee and the Pluralsight Board and Reasons for the Mergers

Recommendation of the Transaction Committee and the Pluralsight Board

The Transaction Committee and the Pluralsight Board each unanimously: (1) determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of Pluralsight and its stockholders; and (2) adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

The Pluralsight Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement; (2) “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; and (3) “FOR” the advisory non-binding vote on merger-related compensation for named executive officers.

Reasons for the Mergers

In evaluating the merger agreement, the mergers and the other transactions contemplated by the merger agreement, the Transaction Committee and the Pluralsight Board each consulted with members of management and representatives of each of Wilson Sonsini and Qatalyst. In evaluating the merger agreement, the mergers and the other transactions contemplated by the merger agreement, the Transaction Committee and the Pluralsight Board considered a number of factors, including the following (which factors are not necessarily presented in order of relative importance).

The Transaction Committee and the Pluralsight Board each believed that the following factors and benefits supported its determination and recommendation:

 

   

Financial Condition, Results of Operations and Prospects of Pluralsight. The current, historical and projected financial condition, results of operations and business of Pluralsight, as well as Pluralsight’s prospects and risks if it were to remain an independent company. The Transaction Committee and the Pluralsight Board each considered Pluralsight’s business plan and the estimates of Pluralsight’s future

 

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performance reflected in the Pluralsight prospective financial information as of October 2020 (as defined below). The Transaction Committee and the Pluralsight Board each weighed the business plan and the potential opportunities that it presented against, among other things: (1) the risks and uncertainties associated with achieving and executing on the business plan in the short and long term; (2) the impact of market, customer and competitive trends on Pluralsight; and (3) the general risks related to market conditions that could reduce the price of the Class A common stock. Among the potential risks identified by the Transaction Committee and the Pluralsight Board were:

 

   

Pluralsight’s competitive positioning and prospects as an independent publicly traded company. Included in this was the consideration of (1) Pluralsight’s size, as well as its strategic and financial resources, relative to those of its competitors; and (2) new and evolving competitive threats. In this regard, the Transaction Committee and the Pluralsight Board were each aware that the market for professional skill development is highly competitive, rapidly evolving, and fragmented, and that Pluralsight faces competition from in-person instructor-led-training vendors, legacy enterprise Software-as-a-Service solutions, consumer-centric Software-as-a-Service solutions and free solutions, which competition the Transaction Committee and the Pluralsight Board each expects to continue increasing in the future.

 

   

Pluralsight’s continuing efforts to evolve and strengthen its business model, including its investments in support of its platform and developer initiatives. Although the Pluralsight Board believes that these actions are the right strategic decisions for Pluralsight, there is no assurance that they will be successful or result in a more valuable company. In this regard, the Transaction Committee and the Pluralsight Board were each aware of the challenges that Pluralsight had been experiencing in its dollar-based net retention rate.

 

   

Pluralsight management’s evolving expectation that a meaningful portion of Pluralsight’s future growth was likely to be inorganic and occur through the purchase of other companies and product offerings. In the opinion of each of the Transaction Committee and the Pluralsight Board, the pursuit of these growth opportunities was likely to require substantial capital resources. Such capital resources might only be available at significant cost to Pluralsight (if available at all) or through one or more equity offerings that would dilute (potentially significantly) the holders of Class A common stock. The Transaction Committee and the Pluralsight Board each believed that Pluralsight, in pursuing its strategy as an independent publicly traded company, may not have sufficient access to necessary capital resources on acceptable terms, which would impede Pluralsight’s ability to execute its growth initiatives and add to the risk to stockholders already inherent in pursuing these growth opportunities.

 

   

The challenges of making investments to achieve long-term growth prospects while a publicly traded company that is subject to scrutiny based on its quarter-over-quarter performance. The Transaction Committee and the Pluralsight Board each noted that the price of the Class A common stock could be impacted significantly if Pluralsight failed to meet investor expectations, including if Pluralsight failed to meet its growth objectives, as had happened in the recent past.

 

   

The continued business and economic uncertainty related to the COVID-19 pandemic and the possibility that business conditions—for Pluralsight and the larger economy—will not improve and could get worse. In this regard, the Transaction Committee and the Pluralsight Board were each aware of the increased variability in discretionary use of Pluralsight’s products during the COVID-19 pandemic.

 

   

The inherent uncertainty of achieving the results reflected in the prospective financial information.

 

   

The historical execution of Pluralsight’s business plan by Pluralsight management and their ability to continue to drive Pluralsight’s business. In this regard, the Transaction Committee and the Pluralsight Board were each aware of instances in which Pluralsight failed to achieve certain expectations of Pluralsight’s financial and operational performance, and of the impact that these failures had on the price of the Class A common stock.

 

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Pluralsight’s recent third quarter financial results, which were below certain analyst expectations of Pluralsight’s financial performance.

 

   

Potential Strategic Alternatives. The (1) possible alternatives to the mergers, including the possibility of continuing to operate Pluralsight as an independent entity or pursuing another transaction, and the desirability and perceived risks of those alternatives; (2) potential benefits and risks to stockholders of these alternatives and the timing and likelihood of effecting such alternatives and the risks inherent in them; and (3) assessment of each of the Transaction Committee and the Pluralsight Board that none of these alternatives was reasonably likely to present superior opportunities for Pluralsight to create greater value for stockholders, taking into account the risks of execution as well as business, competitive, financial, industry, market and regulatory risks.

 

   

Results of Strategic Review Process. The execution of the merger agreement was the result of an extensive strategic review process overseen by the Transaction Committee, which was composed of the members of the Pluralsight Board who were not party to the TRA and were independent of management. The Transaction Committee and the Pluralsight Board each considered that 14 potential acquirers of Pluralsight (consisting of six strategic acquirers and eight financial sponsors (including Vista)) were included in the process; of these, only Vista made a proposal that was capable of being accepted, and the only other indication of value of a potential acquisition proposal (that did not materialize) was for an “implied ‘no TRA’ adjusted price” of no more than $20.00 per share of Pluralsight Class A common stock. The Transaction Committee and the Pluralsight Board were also each aware of market rumors that Pluralsight was pursuing a potential sale, which prompted unsolicited expressions of interest in pursuing a potential acquisition of Pluralsight but did not result in any acquisition proposals.

 

   

Certainty of Value. The consideration to be received by Pluralsight stockholders in the mergers consists entirely of cash, which provides liquidity and certainty of value. The Transaction Committee and the Pluralsight Board each considered that (1) the mergers are not subject to any financing condition; and (2) the terms of the Equity Commitment Letter (along with Pluralsight’s right to specific performance of the Buyer Parties’ obligations in the merger agreement) provided substantial assurance of a successful closing in the event of approval of the mergers by Pluralsight stockholders and the satisfaction of other conditions to closing. In addition, each of the Transaction Committee and the Pluralsight Board considered Pluralsight’s growth opportunities and other strategic initiatives and the costs and risks inherent in pursuing those opportunities. The receipt of cash consideration eliminates significant uncertainty and risk for stockholders related to the continued execution of Pluralsight’s business and the pursuit of growth opportunities.

 

   

Best Value Reasonably Obtainable. The belief of each of the Transaction Committee and the Pluralsight Board that the Per Share Price represents the best value reasonably obtainable for the shares of Pluralsight Class A common stock, taking into account the familiarity of each of the Transaction Committee and the Pluralsight Board with (1) the business, operations, prospects, business strategy, assets, liabilities and general financial condition of Pluralsight on a historical and prospective basis; (2) the strategic review process overseen by the Transaction Committee; and (3) the terms of the merger agreement and the TRA amendment. The Transaction Committee and the Pluralsight Board each considered that the Per Share Price constituted a premium of approximately (1) 25% to the 30-day volume-weighted average price of the Class A common stock; (2) 26% to the undisturbed closing price of the Class A common stock on November 9, 2020 (the last trading day before Betaville Intelligence published an article that Pluralsight may be in discussions regarding a potential acquisition by Vista); and (3) 37% to the closing price on November 6, 2020, the first trading day after Pluralsight’s announcement of its third quarter 2020 results. The Transaction Committee and the Pluralsight Board also considered that the Per Share Price represented the highest price that Vista said that it was willing to pay.

 

   

Fairness Opinion of Qatalyst. The oral opinion of Qatalyst, subsequently confirmed in writing, rendered to the Pluralsight Board, that as of December 11, 2020, and based upon and subject to the

 

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various assumptions, qualifications, limitations and other matters set forth therein, that the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, was fair, from a financial point of view, to such holders, as set forth in such opinion and as more fully described in the section of this proxy statement captioned “—Opinion of Qatalyst.”

 

   

Negotiations with Vista and Terms of the Merger Agreement and Voting Agreements. The terms of the merger agreement and the voting agreements, which were each the product of arms’-length negotiations, and the belief of each of the Transaction Committee and the Pluralsight Board that such agreements contained customary terms. The factors considered include:

 

   

Pluralsight’s ability, under certain circumstances, to furnish information to, and conduct negotiations with, third parties regarding Acquisition Proposals.

 

   

The view of each of the Transaction Committee and the Pluralsight Board that the terms of the merger agreement would be unlikely to deter third parties from making a Superior Proposal.

 

   

The Pluralsight Board’s ability, under certain circumstances, to withdraw or modify its recommendation that stockholders vote in favor of the adoption of the merger agreement.

 

   

The requirement under the merger agreement that the mergers be approved by the holders of a majority of the voting power of the outstanding shares of Class A common stock (voting together as a single class) not held by any party to the TRA, any person that Pluralsight has determined to be an “officer” of Pluralsight within the meaning of Rule 16a-1(f) of the Exchange Act and any other stockholder known by certain executive officers of Pluralsight to be an affiliate or immediate family member of any of the foregoing.

 

   

The Pluralsight Board’s ability, under certain circumstances, to terminate the merger agreement to enter into an Alternative Acquisition Agreement. In that regard, the Transaction Committee and the Pluralsight Board each believed that the termination fee of $104.6 million payable by Pluralsight in such instance was reasonable, consistent with similar fees payable in comparable transactions, and not preclusive of other offers.

 

   

The limited conditions to the Buyer Parties’ obligation to consummate the mergers and other terms favorable to Pluralsight, making the mergers reasonably likely to be consummated.

 

   

The consummation of the mergers not being subject to a financing condition.

 

   

The Equity Commitment Letter covering the total amount of funds necessary to fund the aggregate merger consideration payable to the stockholders and unitholders in the mergers, along with Pluralsight’s right to specific performance to cause the equity financing contemplated by the Equity Commitment Letter to be funded.

 

   

Pluralsight’s ability to obtain specific performance of the Buyer Parties’ obligations under the merger agreement and the Equity Commitment Letter, thereby ensuring that Pluralsight has an appropriate remedy if the Buyer Parties were to decline to comply with their obligations under the merger agreement.

 

   

The terms of the voting agreements, including the requirement that if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement, then the voting agreement stockholders are obligated to vote in favor of the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement, which the Transaction Committee and Pluralsight Board believed was important so that a third party seeking to make an alternative Acquisition Proposal would also have the benefit of the voting agreement stockholders committing to vote in favor of the applicable alternative Acquisition Transaction.

 

   

Negotiations with the TRA Representative and Terms of the TRA Amendment. The terms of the TRA amendment, which were the product of arms’-length negotiations with the TRA Representative, and the

 

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belief of each of the Transaction Committee and the Pluralsight Board that the amendment of the TRA was advisable (including to facilitate the mergers). The Transaction Committee and the Pluralsight Board were each aware that (1) the payments under the TRA amendment constituted a substantial reduction from what the change of control obligation would have been in the mergers under the TRA absent the TRA amendment (which reduction was approximately $290 million, constituting an approximately 70% reduction of the estimated aggregate amount of approximately $417 million that would have otherwise been payable to the TRA beneficiaries under the then-existing terms of the TRA); (2) the reduction of the change of control obligation pursuant to the TRA amendment resulted in an increase in the consideration available to be paid to the stockholders in the mergers; (3) the obligations under the TRA constituted liabilities of Pluralsight that had to be satisfied in connection with any change of control of Pluralsight; (4) if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into another Alternative Acquisition Agreement, in one or more iterations), the terms of the TRA amendment also apply in connection with the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect; and (5) the TRA represented a continuing obligation of Pluralsight, with the TRA beneficiaries entitled to ongoing payments under the TRA even without a change of control of Pluralsight.

 

   

Appraisal Rights. The availability in the Pluralsight merger of statutory appraisal rights to the stockholders who timely and properly exercise such appraisal rights under the DGCL.

The Pluralsight Board also considered (1) the determination of the Transaction Committee, which was composed of the members of the Pluralsight Board that were not party to the TRA and were independent of management, that the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interests of, Pluralsight and the stockholders, and that the Holdings merger is fair to, and in the best interests of, Holdings and the unitholders; and (2) the recommendation of the Transaction Committee that the Pluralsight Board adopt and approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement, including in Pluralsight’s capacity as the sole manager of Holdings.

The Transaction Committee and the Pluralsight Board each also considered a number of uncertainties and risks and other potentially negative factors, including the following (which factors are not necessarily presented in order of relative importance):

 

   

No Stockholder Participation in Future Growth or Earnings. The nature of the mergers as cash transactions means that stockholders will not participate in the future earnings or growth of Pluralsight and will not benefit from any appreciation in value of the surviving corporation. The Transaction Committee and the Pluralsight Board also considered other potential alternative strategies available to Pluralsight, which, despite significant risk and uncertainty, had the potential to result in a more successful and valuable company.

 

   

No-Shop Restrictions. The restrictions in the merger agreement on Pluralsight’s ability to solicit competing proposals (subject to certain exceptions to allow the Pluralsight Board to exercise its fiduciary duties and to accept a superior proposal).

 

   

Risks Associated with Failure to Consummate the Merger. The possibility that the mergers might not be consummated, and if they are not consummated, (1) Pluralsight’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transaction; (2) Pluralsight will have incurred significant transaction costs; (3) Pluralsight’s continuing business relationships with customers, business partners and employees may be adversely affected; (4) the trading price of the Class A common stock could be adversely affected; (5) that the other contractual and legal remedies available to Pluralsight in the event of termination of the merger agreement may be insufficient, costly to pursue or both; (6) the potential adverse market perception on Pluralsight’s prospects; (7) the termination fee of $104.6 million may become payable by Pluralsight to the Parent Entities upon termination of the

 

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merger agreement under specified circumstances; and (8) the termination of the TRA amendment upon termination of the merger agreement (unless the merger agreement is terminated to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement).

 

   

Interim Restrictions on Pluralsight’s Business Pending the Completion of the Merger. The restrictions on the conduct of Pluralsight’s business prior to the consummation of the mergers, including the requirement that Pluralsight conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Pluralsight from undertaking strategic initiatives before the completion of the mergers that, absent the merger agreement, Pluralsight might have pursued.

 

   

Effects of the Merger Announcement. The potential effect of the public announcement of the merger agreement, including (1) effects on Pluralsight’s sales, employees, customers, operating results and stock price; (2) the impact of the public announcement of the mergers on Pluralsight’s ability to attract and retain key management, sales and marketing and technical personnel; and (3) the potential for litigation in connection with the mergers.

 

   

Termination Fee Payable by Pluralsight. The requirement that Pluralsight pay the Parent Entities a termination fee of $104.6 million under certain circumstances following termination of the merger agreement, including if the Pluralsight Board terminates the merger agreement to accept a Superior Proposal. The Transaction Committee and the Pluralsight Board each considered the potentially discouraging impact that this termination fee could have on another entity’s interest in making a competing proposal to acquire Pluralsight.

 

   

The Buyer Parties’ Maximum Aggregate Liability. The merger agreement providing that the maximum aggregate liability of the Buyer Parties or any of their affiliates for breaches under the merger agreement, the Limited Guaranty or the Equity Commitment Letters will not exceed, in the aggregate for all such breaches, an amount equal to $209.2 million plus certain indemnification and reimbursement obligations.

 

   

Taxable Consideration. The receipt of cash in exchange for shares of Pluralsight capital stock pursuant to the mergers will be a taxable transaction for U.S. federal income tax purposes for many stockholders.

 

   

Interests of Pluralsight’s Directors and Executive Officers. The interests that Pluralsight’s directors and executive officers may have in the mergers that are different from, or in addition to, those of Pluralsight’s other stockholders. Such interests are more fully described in the section of this proxy statement captioned “—Interests of Pluralsight’s Directors and Executive Officers in the Mergers.”

This discussion is not meant to be exhaustive. That is, it summarizes the material factors considered by each of the Transaction Committee and the Pluralsight Board in its consideration of the merger agreement and the mergers and related matters. After considering these and other factors, the Transaction Committee and the Pluralsight Board each concluded that the potential benefits of the mergers outweighed the uncertainties and risks. In light of the variety of factors considered by the Transaction Committee and the Pluralsight Board and the complexity of these factors, neither Transaction Committee and the Pluralsight Board found it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its respective determination and recommendations. Moreover, each member of the Transaction Committee and the Pluralsight Board applied his or her own personal business judgment to the process and may have assigned different relative weights to the different factors. The Transaction Committee and the Pluralsight Board adopted and approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement based upon the totality of the information presented to, and considered by, each of the Transaction Committee and the Pluralsight Board.

 

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Fairness Opinion of Qatalyst

Pluralsight retained Qatalyst to act as financial advisor in connection with a potential transaction such as the mergers and to evaluate whether the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, was fair, from a financial point of view, to such holders. Pluralsight selected Qatalyst to act as Pluralsight’s financial advisor based on Qatalyst’s qualifications, expertise, reputation, its knowledge of Pluralsight’s business and the industry in which Pluralsight operates. Qatalyst has provided its written consent to the reproduction of its opinion in this proxy statement. At the meeting of the Pluralsight Board on December 11, 2020, Qatalyst rendered to the Pluralsight Board its oral opinion, subsequently confirmed in writing, to the effect that, as of December 11, 2020 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, was fair, from a financial point of view, to such holders. Following the meeting, Qatalyst delivered its written opinion, dated December 11, 2020, to the Pluralsight Board.

The full text of the opinion of Qatalyst, dated as of December 11, 2020, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst in rendering its opinion. You should read the opinion carefully in its entirety. Qatalyst’s opinion was provided to the Pluralsight Board and addresses only, as of the date of the opinion, the fairness, from a financial point of view, of the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, to such holders, and it does not address any other aspect of the mergers. It does not constitute a recommendation to any stockholder as to how to vote with respect to the mergers or any other matter and does not in any manner address the price at which the shares of Pluralsight common stock will trade at any time. The summary of Qatalyst’s opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached to this proxy statement as Annex B.

For purposes of the opinion set forth therein, Qatalyst reviewed the merger agreement, certain related documents and certain publicly available financial statements and other business and financial information of Pluralsight. Qatalyst also reviewed certain forward-looking information relating to Pluralsight prepared by the senior management of Pluralsight, including the Pluralsight prospective financial information as of October 2020, described more fully below. Additionally, Qatalyst discussed the past and current operations and financial condition and the prospects of Pluralsight with senior management of Pluralsight. Qatalyst also reviewed the historical market prices and trading activity for Class A common stock and compared the financial performance of Pluralsight and the prices and trading activity of Class A common stock with that of certain other selected publicly-traded companies and their securities. In addition, Qatalyst reviewed the financial terms, to the extent publicly available, of selected acquisition transactions and performed such other analyses, reviewed such other information and considered such other factors as it deemed appropriate.

In arriving at its opinion, Qatalyst assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to, or discussed with, Qatalyst by Pluralsight. With respect to the Pluralsight prospective financial information as of October 2020, Qatalyst was advised by Pluralsight’s management, and Qatalyst assumed, that the Pluralsight prospective financial information as of October 2020 had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Pluralsight of the future financial performance of Pluralsight and other matters covered thereby. Qatalyst assumed that the mergers will be consummated in accordance with the terms set forth in the merger agreement, without any modification, waiver or delay. In addition, Qatalyst assumed that in connection with the receipt of all the necessary approvals of the proposed

 

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mergers, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on Pluralsight or the contemplated benefits expected to be derived in the proposed mergers. Qatalyst did not make any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Pluralsight or its affiliates, nor was Qatalyst furnished with any such evaluation or appraisal. In addition, Qatalyst relied, without independent verification, upon the assessment of the management of Pluralsight as to the existing and future technology and products of Pluralsight and the risks associated with such technology and products. Qatalyst’s opinion has been approved by Qatalyst’s opinion committee in accordance with its customary practice. Qatalyst’s opinion does not constitute a recommendation as to how to vote with respect to the mergers or any other matter and does not in any manner address the price at which the shares of Class A common stock will trade at any time.

Qatalyst’s opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the date of the opinion may affect Qatalyst’s opinion and the assumptions used in preparing it, and Qatalyst did not assume any obligation to update, revise or reaffirm its opinion. Qatalyst’s opinion did not address the underlying business decision of Pluralsight to engage in the mergers, or the relative merits of the mergers as compared to any strategic alternatives that may be available to Pluralsight. Qatalyst’s opinion is limited to the fairness, from a financial point of view, of the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock, other than the Parent Entities or any affiliates of the Parent Entities, and Qatalyst expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of the officers, directors or employees of Pluralsight or any of its affiliates, or any class of such persons, relative to such consideration at any time. Further, Qatalyst expressed no opinion with respect to the fairness of the amount or nature of the consideration to be received by any person or entity pursuant to or in relation to the TRA, nor did Qatalyst express any opinion regarding the consideration to be received under the merger agreement by any holder of Class A common stock other than in such holder’s capacity as a holder of Class A common stock.

The following is a summary of the material analyses performed by Qatalyst in connection with its opinion dated December 11, 2020. The analyses and factors described below must be considered as a whole; considering any portion of such analyses or factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Qatalyst’s opinion. For purposes of its analyses, Qatalyst utilized both the consensus of third-party research analysts’ projections (the “Street Case”) and the Pluralsight prospective financial information as of October 2020. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Qatalyst, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Qatalyst’s financial analyses.

Discounted Cash Flow Analysis

Qatalyst performed a discounted cash flow analysis, which is designed to imply a range of potential per-share present values for Class A common stock as of December 31, 2020, by:

 

   

adding:

 

  (a)

the implied net present value of the estimated future Unlevered Free Cash Flows (the “UFCF”) of Pluralsight, based on the Pluralsight prospective financial information as of October 2020 for calendar year 2021 through calendar year 2024 (which implied present value was calculated using a range of discount rates of 9.5% to 11.0%, based on an estimated weighted average cost of capital for Pluralsight); and

 

  (b)

the implied net present value of a corresponding terminal value of Pluralsight, calculated by multiplying Pluralsight’s estimated UFCF of approximately $202 million in calendar year 2025, based on the Pluralsight prospective financial information as of October 2020

 

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  (assuming an effective tax rate of 23.8%, as provided by Pluralsight management), by a range of fully diluted enterprise value to next-twelve-months estimated UFCF multiples of 20.0x to 35.0x, and discounted to present value using the same range of discount rates used in item (a) above;

 

   

subtracting the estimated net debt outstanding of Pluralsight as of December 31, 2020, as provided by Pluralsight’s management;

 

   

adding:

 

  (a)

the present value of net operating losses, adjusted for dilution, as of December 31, 2020, as provided by Pluralsight’s management; and

 

  (b)

the present value of net Tax Receivables Agreement tax benefit to Pluralsight, calculated based on a model to calculate payments under the TRA provided by Pluralsights’s management, adjusted for dilution; and

 

   

dividing the resulting amount by the number of fully diluted shares of common stock outstanding (calculated utilizing the treasury stock method), which takes into account outstanding stock options, performance stock units, incentive units and restricted stock units of Pluralsight and Pluralsight Holdings as of December 9, 2020, as provided by Pluralsight’s management, with each of the above-referenced estimated future UFCFs and terminal value having also been adjusted for the degree of estimated dilution to current stockholders through each respective applicable period (which totaled between approximately 4% and 5% annually throughout the period covered by the Pluralsight prospective financial information as of October 2020) due to the estimated net effects of equity issuances and cancellations related to future equity compensation, based on estimates of future dilution provided by Pluralsight’s management.

Based on the calculations set forth above, this analysis implied a range of values for Class A common stock of approximately $15.00 to $26.96 per share.

Selected Companies Analysis

Qatalyst compared selected financial information and public market multiples for Pluralsight with publicly available financial information and public market multiples for selected companies. The companies used in this comparison included those companies listed below, which were selected by Qatalyst based on factors including that they are publicly traded companies in similar lines of business to Pluralsight, have a similar business model, have similar financial performance or have other relevant or similar characteristics.

 

 

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Based upon research analyst consensus estimates as of December 10, 2020 and using the closing prices as of December 10, 2020 for shares of the selected companies, Qatalyst calculated, among other things, the fully-diluted enterprise value divided by the consensus estimated revenue for the calendar year 2021 (the “CY2021E Revenue Multiples”), for each of the selected companies, as shown below:

 

Selected Companies

   CY2021E
Revenue

Multiple
 

AppFolio

     17.9x  

Paylocity

     15.3x  

PagerDuty

     14.8x  

Medallia

     11.0x  

Qualys

     8.2x  

Tenable Holdings

     7.9x  

Domo

     6.8x  

Model N

     6.6x  

Proofpoint

     6.1x  

RealPage

     5.8x  

New Relic

     5.5x  

Cornerstone OnDemand

     5.0x  

Dropbox

     4.1x  

Box

     3.8x  

Based on an analysis of the CY2021E Revenue Multiples for the selected companies, Qatalyst selected a representative multiple range of 5.0x to 8.0x. Qatalyst noted that the CY2021E Revenue Multiple for Pluralsight was 7.0x based on Pluralsight’s closing price as of December 10, 2020.

Qatalyst then applied this range to Pluralsight’s estimated revenue for calendar year 2021, based on the Pluralsight prospective financial information as of October 2020 and based on the Street Case. Based on the calculations set forth above, and based on the fully diluted shares of Pluralsight common stock outstanding as of December 9, 2020, with in-the-money convertible debt treated on a net share settlement basis (excluding any make-whole shares or other change of control adjustments), this analysis implied a range of values for Class A common stock of approximately $14.04 to $22.70 per share based on the Pluralsight prospective financial information as of October 2020 for calendar year 2021 and $13.41 to $21.73 per share based on the Street Case for calendar year 2021.

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

Selected Transactions Analysis

Qatalyst compared transaction multiples and selected financial information for thirty selected transactions. The transactions used in this comparison were selected by Qatalyst based on factors including that they are acquisitions of publicly traded companies in similar lines of business to Pluralsight or that have a similar business model, similar financial performance or other relevant or similar characteristics.

For each of the selected transactions listed below, Qatalyst reviewed, among other things, (a) the implied fully diluted enterprise value of the target company as a multiple of the last-twelve-months revenue of the target

 

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company (the “LTM Revenue Multiples”) and (b) the implied fully diluted enterprise value of the target company as a multiple of third-party research analyst consensus estimates of the next-twelve-months revenue of the target company (the “NTM Revenue Multiples”).

 

Announcement Date

 

Target

 

Acquiror

 

LTM

Revenue

Multiple

 

NTM

Revenue

Multiple

10/15/18

  SendGrid   Twilio   14.3x   11.5x

06/10/19

  Tableau   Salesforce   13.2x   10.9x

09/18/14

  Concur   SAP   12.6x   10.2x

07/28/16

  NetSuite   Oracle   11.8x   9.1x

06/01/16

  Demandware   Salesforce   11.2x   8.9x

12/03/11

  SuccessFactors (1)   SAP   10.9x   8.7x

02/04/19

  Ultimate Software   Investor Group   10.0x   8.4x

01/29/18

  Callidus Software   SAP   9.8x   8.3x

12/17/17

  Aconex (2)   Oracle   9.4x   8.1x

05/22/12

  Ariba   SAP   8.8x   7.8x

06/12/19

  Medidata   Dassault Systèmes   8.8x   7.5x

11/11/18

  Apptio   Vista Equity Partners   8.1x   7.0x

12/20/13

  Responsys   Oracle   8.1x   6.9x

02/12/19

  Ellie Mae   Thoma Bravo   7.0x   6.8x

12/24/18

  MINDBODY   Vista Equity Partners   7.8x   6.7x

04/18/16

  Cvent   Vista Equity Partners   8.0x   6.5x

06/04/13

  ExactTarget   Salesforce   7.9x   6.5x

12/04/19

  Instructure   Thoma Bravo   7.7x   6.5x

08/01/16

  Fleetmatics   Verizon   7.6x   6.3x

10/24/11

  RightNow   Oracle   7.4x   6.2x

05/31/16

  Marketo   Vista Equity Partners   7.5x   5.9x

02/09/12

  Taleo   Oracle   6.3x   5.3x

06/15/15

  DealerTrack   Cox Automotive   4.9x   4.1x

11/11/18

  athenahealth   Veritas Capital & Elliott   4.3x   3.9x

05/18/16

  inContact   NICE   4.2x   3.6x

12/17/19

  LogMeIn   Francisco Partners   3.5x   3.4x

08/27/12

  Kenexa   IBM   4.0x   3.3x

07/01/11

  Blackboard   Providence Equity   3.7x   3.2x

08/31/16

  Interactive Intelligence   Genesys (Permira)   3.4x   3.2x

11/02/15

  Constant Contact   Endurance International   2.6x   2.3x

 

(1) LTM revenue pro forma for acquisition of Plateau.

(2) Represents an estimated LTM multiple, for the twelve-month period ended September 30, 2017 (based on an average of the LTM revenue, for the period ended June 30, 2017 and the CY17E revenue) and an estimated NTM multiple, for the twelve-month period ended September 30, 2018 (based on an average of the NTM revenue, for the period ended June 30, 2018 and the CY18E revenue). Balance sheet metrics as of June 30, 2017.

Based on the analysis of the LTM Revenue Multiples for the selected transactions, Qatalyst selected a representative multiple range of 6.0x to 11.0x. Qatalyst applied this range to Pluralsight’s revenue (calculated for

 

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the twelve-month period ended on September 30, 2020) based on Pluralsight’s historical financials, adjusted for cash and cash equivalents, the principal amount outstanding under Pluralsight’s debt as of September 30, 2020, cash settlement of capped call options assuming a closing of the mergers date of December 31, 2020, and funds to be paid at the closing of the mergers pursuant to the draft TRA amendment provided by Pluralsight’s management, and on the number of fully diluted shares of common stock outstanding as of December 9, 2020. This analysis implied a range of values for Pluralsight common stock of approximately $12.77 to $24.44 per share.

Based on the analysis of the NTM Revenue Multiples for the selected transactions, Qatalyst selected a representative multiple range of 5.0x to 9.0x. Qatalyst applied these ranges to Pluralsight’s revenue (calculated for the twelve-month period ending on September 30, 2021) based on the Street Case, adjusted for cash and cash equivalents, the principal amount outstanding under Pluralsight’s debt as of September 30, 2020, cash settlement of capped call options assuming a closing of the mergers date of December 31, 2020, and funds to be paid at the closing of the mergers pursuant to the draft TRA amendment provided by Pluralsight’s management, and on the number of fully diluted shares of common stock outstanding as of December 9, 2020. This analysis implied a range of values for common stock of approximately $12.05 to $22.71 per share. Individual multiples or mathematical analyses, such as determining the arithmetic mean, median, or the high or low, are not in themselves a meaningful method of using selected transactional data.

No company or transaction utilized in the selected transactions analysis is identical to Pluralsight or the mergers. In evaluating the selected transactions, Qatalyst made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Pluralsight’s control, such as the impact of competition on Pluralsight’s business or the industry generally, industry growth and the absence of any material adverse change in Pluralsight’s financial condition and prospects or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared. Because of the unique circumstances of each of these transactions and the mergers, Qatalyst cautions against placing undue reliance on this information.

Miscellaneous

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

Qatalyst conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock (other than the Parent Entities or any affiliate of the Parent Entities), to such holders. This analysis does not purport to be an appraisal or to reflect the price at which shares of Class A common stock might actually trade at any time.

 

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Qatalyst’s opinion and its presentation to the Pluralsight Board were among many factors considered by the Pluralsight Board in deciding to approve the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Pluralsight Board with respect to the Per Share Price to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Class A common stock (other than the Parent Entities or any affiliate of the Parent Entities). The Per Share Price was determined through arm’s-length negotiations between Pluralsight and the Parent Entities and was unanimously approved by the members of the Pluralsight Board in attendance and voting at the December 11, 2020 meeting. Qatalyst provided advice to Pluralsight during these negotiations. Qatalyst did not, however, recommend any specific consideration to Pluralsight or that any specific consideration constituted the only appropriate consideration for the mergers.

Qatalyst provides investment banking and other services to a wide range of entities and individuals, domestically and offshore, from which conflicting interests or duties may arise. In the ordinary course of these activities, affiliates of Qatalyst may at any time hold long or short positions, and may trade or otherwise effect transactions in debt or equity securities or loans of Pluralsight, the Parent Entities or certain of their respective affiliates. During the two-year period prior to the date of Qatalyst’s opinion, no material relationship existed between Qatalyst or any of its affiliates and Pluralsight or the Parent Entities pursuant to which compensation was received by Qatalyst or its affiliates, other than a fee of approximately $5 million received by an affiliate of Qatalyst Partners in connection with acting as financial advisor to Delta Topco, Inc., an affiliate of a portfolio company of the Parent Entities, Infoblox Inc., in connection with an investment from Warburg Pincus LLC. Qatalyst and/or its affiliates may in the future provide investment banking and other financial services to Pluralsight or the Parent Entities and their respective affiliates for which Qatalyst would expect to receive compensation.

Under the terms of its engagement, Qatalyst provided Pluralsight with financial advisory services, including in connection with the mergers, for which it will be paid approximately $45,000,000, $5,000,000 of which was payable upon the delivery of its opinion (regardless of the conclusion reached therein) and has been paid, and the remaining portion of which will be paid upon, and subject to, the consummation of the mergers. Pluralsight has also agreed to reimburse Qatalyst for its expenses incurred in performing its services. Pluralsight has also agreed to indemnify Qatalyst and its affiliates, their respective members, directors, officers, partners, agents and employees and any person controlling Qatalyst or any of its affiliates against certain liabilities, including liabilities under the federal securities laws, and expenses related to or arising out of Qatalyst’s engagement.

Certain Unaudited Prospective Financial Information

Pluralsight does not, as a matter of course, publicly disclose forecasts or internal projections as to its future performance, earnings or other results due to, among other reasons, the inherent uncertainty and subjectivity of the underlying assumptions and estimates, other than, from time to time, estimated ranges of certain expected financial results and operational metrics for the current year and certain future years in its regular earnings press releases and other investor materials. However, Pluralsight management regularly prepares and updates, and the Pluralsight Board regularly evaluates, prospective financial information as to Pluralsight’s future performance as part of its budget planning and long-term business plan.

Pluralsight is including in this proxy statement certain unaudited prospective financial information prepared by Pluralsight management and set forth below because it formed an important part of Pluralsight’s business plan and was presented to the Transaction Committee and the Pluralsight Board in connection with their consideration of the mergers, other strategic alternatives available to Pluralsight and the other matters described in this proxy statement, was referred to by Qatalyst in its advice to the Transaction Committee and the Pluralsight Board in connection with such matters, and was provided to Vista and other potential counterparties to a potential strategic transaction involving Pluralsight to assist in their due diligence review during Pluralsight’s outreach process to solicit interest regarding a strategic transaction. We refer to this prospective financial information as the “Pluralsight prospective financial information as of September 2020” and the “Pluralsight prospective financial

 

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information as of October 2020” and, collectively, as the “Pluralsight prospective financial information.” For more information on the preparation and use of the Pluralsight prospective financial information, please see the section of this proxy statement captioned “The Mergers—Background of the Mergers.”

The following table presents the Pluralsight prospective financial information as of September 2020.

 

(Dollars in millions)    CY2020E      CY2021E      CY2022E  

Revenue

   $ 386      $ 448      $ 534  

Non-GAAP Operating (Loss) Income (1)

   $ (33    $ (29    $ (17

Free Cash Flow (2)

   $ (36    $ 5      $ 57  

 

  (1)

Non-GAAP operating (loss) income is calculated as loss from operations plus equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions and, as applicable, other special items such as acquisition-related costs and purchase accounting adjustments.

  (2)

Free cash flow is calculated as cash (used in) provided by operating activities less purchases of property and equipment and purchases of our content library.

The following table presents the Pluralsight prospective financial information as of October 2020, which reflects updates to Pluralsight’s business plan based on Pluralsight’s third quarter 2020 results, Pluralsight’s ordinary course fourth quarter budget planning and review efforts for 2021, and the expected impact of the acquisition of DevelopIntelligence announced by Pluralsight on October 14, 2020 (including increased Pluralsight billings from DevelopIntelligence products and customers in years 2021 through 2025):

 

(Dollars in millions)    CY2021E     CY2022E      CY2023E      CY2024E      CY2025E  

Revenue

   $ 466     $ 571      $ 707      $ 858      $ 1,005  

Non-GAAP Operating (Loss) Income (1)

   $ (20   $ 15      $ 71      $ 136      $ 186  

Free Cash Flow (2)

   $ 0.4     $ 48      $ 94      $ 161      $ 227  

Unlevered Free Cash Flow (3)

   $ 1.4     $ 25      $ 95      $ 161      $ 202  

 

  (1)

Non-GAAP operating (loss) income is calculated as loss from operations plus equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions and, as applicable, other special items such as acquisition-related costs and purchase accounting adjustments.

  (2)

Free cash flow is calculated as cash (used in) provided by operating activities less purchases of property and equipment and purchases of our content library. A preliminary version of the Pluralsight prospective financial information as of October was made available to Vista, Party A and Party B (the remaining interested potential counterparties at the time) in the electronic dataroom on October 25, 2020; such preliminary version included estimated Free Cash Flow for calendar year 2021 of $(2.6) million, and was otherwise consistent with the final version of the Pluralsight prospective financial information as of October set forth in this table.

  (3)

Unlevered free cash flow is calculated as non-GAAP operating (loss) income less (1) cash taxes, less (2) capital expenditures, including purchases of property and equipment and purchases of our content library, plus (3) depreciation expense, plus (4) the change in working capital, and less (5) acquisition-related payments.

The Pluralsight prospective financial information as of October 2020 was used by Qatalyst in connection with its financial analyses in connection with delivering its fairness opinion to the Pluralsight Board, with the Pluralsight Board’s approval. The unlevered free cash flow for calendar years 2021 through 2025 included in the Pluralsight prospective financial information as of October 2020 was calculated for use by Qatalyst in connection with its financial analyses based on prospective financial information provided by Pluralsight management, and was not provided to Vista or other potential counterparties to a potential strategic transaction involving Pluralsight.

The Pluralsight prospective financial information was developed by Pluralsight management without giving effect to the mergers and the other transactions contemplated by the merger agreement or undertaken in connection with the mergers, including any costs incurred in connection with the mergers and the other transactions contemplated by the merger agreement.

The Pluralsight prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or generally

 

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accepted accounting principles in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to Pluralsight prospective financial information. In the view of Pluralsight’s management, the Pluralsight prospective financial information has been reasonably prepared by Pluralsight management on bases reflecting the best available estimates and judgments of Pluralsight management of the future financial performance of Pluralsight and other matters covered thereby as of the date it was prepared. However, the information contained in the Pluralsight prospective financial information is not fact and should not be relied upon as being necessarily indicative of future results. Furthermore, the Pluralsight prospective financial information does 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.

Although the Pluralsight prospective financial information is presented with numerical specificity, it reflects numerous estimates and assumptions made by Pluralsight management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Pluralsight’s business in each case as of the date it was prepared, all of which are difficult or impossible to predict accurately and many of which are beyond Pluralsight’s control. The Pluralsight prospective financial information reflects subjective judgment in many respects and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Pluralsight prospective financial information constitutes forward-looking information and is subject to many risks and uncertainties that could cause actual results to differ materially from the results estimated in the Pluralsight prospective financial information, including, but not limited to, Pluralsight’s performance, industry performance, general business and economic conditions, customer and competitive trends, adverse changes in applicable laws, regulations or rules, and the various risks set forth in Pluralsight’s reports filed with the SEC. There can be no assurance that the Pluralsight prospective financial information will be realized or that actual results will not be significantly higher or lower than estimated. The Pluralsight prospective financial information covers several years and such information by its nature becomes less reliable with each successive year. In addition, the Pluralsight prospective financial information will be affected by Pluralsight’s ability to achieve its strategic goals, objectives and targets over the applicable periods. The Pluralsight prospective financial information reflects assumptions as to certain business decisions as of the date it was prepared that are subject to change. The Pluralsight prospective financial information cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Pluralsight prospective financial information should not be regarded as an indication that Pluralsight, Qatalyst, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, it a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Pluralsight prospective financial information should not be deemed an admission or representation by Pluralsight that Pluralsight views such Pluralsight prospective financial information as material information; in fact, Pluralsight views the Pluralsight prospective financial information as non-material because of the inherent risks and uncertainties associated with such long-range estimates. The inclusion of the Pluralsight prospective financial information in this proxy statement should not be regarded as an indication that the Pluralsight prospective financial information will be necessarily predictive of actual future events. No representation has been or is made by Pluralsight or any other person regarding the Pluralsight prospective financial information or Pluralsight’s ultimate performance compared to such information. The Pluralsight prospective financial information should be evaluated, if at all, in conjunction with the historical financial statements and other information about Pluralsight contained in Pluralsight’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Pluralsight prospective financial information, stockholders are cautioned not to place undue, if any, reliance on the Pluralsight prospective financial information.

Neither Pluralsight’s independent auditor nor any other independent accountant has compiled, examined, or performed any procedures with respect to the Pluralsight prospective financial information, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

 

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Non-GAAP Operating (Loss) Income, Free Cash Flow and Unlevered Free Cash Flow contained in the Pluralsight prospective financial information 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 Qatalyst, the Transaction Committee, the Pluralsight Board, Vista and other potential counterparties, and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the mergers, including whether or not to seek appraisal rights with respect to their shares of common stock.

Financial measures included in forecasts provided to a financial advisor and a board of directors in connection with a business combination transaction, such as the Pluralsight prospective financial information, are excluded from the definition of “non-GAAP financial measures” under applicable SEC rules and regulations. As a result, the Pluralsight prospective financial information is not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not provided to or relied upon by the Pluralsight Board, Qatalyst, Vista or any other potential counterparties to a potential strategic transaction involving Pluralsight. Accordingly, no reconciliation of the financial measures included in the Pluralsight prospective financial information is provided in this proxy statement.

In addition, the Pluralsight prospective financial information has not been updated or revised to reflect information or results after the date it was prepared or as of the date of this proxy statement, and except as required by applicable securities laws, Pluralsight does not intend to update or otherwise revise the Pluralsight prospective financial information 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 Pluralsight’s Directors and Executive Officers in the Mergers

When considering the recommendation of the Pluralsight Board 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 mergers that are different from, or in addition to, the interests of stockholders generally, as more fully described below. The Transaction Committee and the Pluralsight Board were each 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 mergers and, in the case of the Pluralsight Board, 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.

Arrangements with Parent Entities

As of the date of this proxy statement, none of our executive officers has had any discussions or negotiations, or entered into any agreement, with the Parent Entities or any of their affiliates regarding the potential terms of their individual employment arrangements following the consummation of the mergers, or the right to purchase or participate in the equity of the Surviving Corporation or one or more of its affiliates. Notably, prior to the execution of the merger agreement, Mr. Skonnard and Vista did not discuss the terms of Mr. Skonnard’s employment or role with Pluralsight following a potential acquisition by Vista or rollover of equity in connection with a potential acquisition of Pluralsight by Vista, if any. The merger agreement provides that from the date of the merger agreement to the earlier of the termination of the merger agreement and the effective times of the mergers, the Parent Entities covenant that they will not, and will cause Vista Fund VII and its controlled affiliates not to, except

 

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as approved by the Pluralsight Board, make or enter into, or commit or agree to enter into, any formal or informal arrangements or other understandings (whether or not binding) with any executive officer of Pluralsight (1) regarding any continuing employment or consulting relationship with the Pluralsight Parties or their affiliates from and after the effective time of the Pluralsight merger; (2) pursuant to which any such executive officer would be entitled to receive consideration of a different amount or nature than stockholders or unitholders; or (3) pursuant to which any such executive officer would agree to provide (directly or indirectly) an equity investment to the Buyer Parties or the Pluralsight Parties or their respective affiliates in connection with the mergers. Prior to or following the closing of the mergers, certain of our executive officers may have discussions and may enter into agreements with the Buyer Parties, their subsidiaries or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Entities or one or more of their affiliates.

Insurance and Indemnification of Directors and Executive Officers

The merger agreement provides that the Surviving Entities and their subsidiaries will (and the Parent Entities will cause the Surviving Entities and their subsidiaries to) honor and fulfill, in all respects, the obligations of the Pluralsight Parties and their subsidiaries pursuant to any indemnification agreements with any of their current or former directors or officers (and any person who becomes a director or officer of the Pluralsight Parties or their subsidiaries prior to the effective times of the mergers) (collectively, the “indemnified persons”) or employees for any acts or omissions by such indemnified persons or employees occurring prior to the effective times of the mergers. In addition, during the period commencing at the effective times of the mergers and ending on the sixth anniversary of the effective times of the mergers, the Surviving Entities and their subsidiaries will (and the Parent Entities will cause the Surviving Entities and their subsidiaries to) cause the certificates of incorporation, bylaws, and other similar organizational documents of the Pluralsight Parties and their subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the Pluralsight Charter, Pluralsight’s bylaws, the Holdings LLC agreement and other similar organizational documents of the subsidiaries of Pluralsight, as applicable, as of the date hereof. During such six-year period, such provisions may not be repealed, amended or otherwise modified in any adverse manner except as required by applicable law.

The merger agreement also provides that Pluralsight may purchase a prepaid “tail” policy from an insurance carrier with the same or better credit rating as Pluralsight’s directors’ and officers’ liability insurance carrier on the date of the merger agreement, subject to certain limits on the aggregate cost for such “tail” policy. The “tail” policy will cover claims arising from facts, events, acts or omissions that occurred at or prior to the effective times of the mergers, including the transactions contemplated in the merger agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”

The TRA and the TRA Amendment

Concurrent with the initial public offering of shares of Class A common stock and related reorganization transactions undertaken in connection with the initial public offering, Pluralsight entered into a tax receivable agreement with certain members of Pluralsight Holdings who retained Holdings units after the initial public offering. The TRA provided for payment to the TRA beneficiaries of approximately 85% of the amount of the calculated tax savings, if any, that Pluralsight will realize due to future exchanges of Holdings units (together with the corresponding shares of Class B common stock or Class C common stock, as applicable) for Class A common stock, and the acceleration of such payments in connection with a change of control of Pluralsight. On December 11, 2020, in connection with the execution of the merger agreement, Pluralsight and Pluralsight Holdings entered into the TRA amendment with the TRA Representative, in accordance with the terms of the TRA. The TRA amendment establishes that the parties to the TRA (other than Pluralsight and Pluralsight Holdings) will be entitled to receive an aggregate amount of $127 million in connection with the closing of the mergers in full satisfaction of Pluralsight’s payment obligation under the TRA in connection with a change of

 

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control of Pluralsight. This represents a reduction of approximately $290 million, which is an approximately 70% reduction of the estimated aggregate amount of approximately $417 million that would have otherwise been payable to the TRA beneficiaries under the TRA in respect of a change of control of Pluralsight at the implied price per share of Class A common stock offered by Vista (such implied price equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA), absent the TRA amendment. In addition, if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into another Alternative Acquisition Agreement, in one or more iterations), the agreements in the TRA amendment also apply in connection with the acquisition transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect.

Certain directors and members of management of Pluralsight and other persons known by certain executive officers of Pluralsight to be an affiliate or immediate family member of any of the foregoing and affiliates, as equityholders prior to Pluralsight’s initial public offering, are parties to the TRA, and are entitled to receive accelerated change of control payments pursuant to the TRA and the TRA amendment in connection with the closing of the mergers (or an Alternative Acquisition Transaction, on the terms and subject to the conditions set forth in the TRA amendment) in the amounts set forth below. For more information, please see the section of this proxy statement captioned “The Mergers—Amendment to the Tax Receivable Agreement.”

 

TRA Beneficiary

   TRA Payments  

Aaron Skonnard(1)

   $ 20,696,211  

James Budge(2)

   $ 1,872,514  

Nate Walkingshaw

   $ 739,998  

Fritz Onion(3)

   $ 15,364,348  

Tim Maudlin(4)

   $ 469,873  

Gary Crittenden(5)

   $ 264,226  

Arne Duncan

   $ 552,403  

Brad Rencher(6)

   $ 471,071  

Scott Dorsey(7)

   $ 426,357  

Karenann Terrell(8)

   $ 326,653  

 

(1)

Consists of (i) $1,649,415 payable to Aaron Skonnard; (ii) $16,246,742 payable to Skonnard Consulting, Inc., of which Mr. Skonnard is an owner; (iii) $1,237,423 payable to The Skonnard Family GRAT 2021, of which Mr. Skonnard is a trustee; and (iv) $1,562,631 payable to The True Nord Trust, of which Mr. Skonnard may be deemed to have voting and dispositive power.

 

(2)

Consists of (i) $1,804,449 payable to James Budge and (ii) $68,065 payable to Budge Family Trust, of which Mr. Budge is a co-trustee.

 

(3)

Consists of (i) $15,301,414 payable to Onion Consulting, Inc., of which Mr. Onion is an owner and (ii) $62,935 payable to Frederick A. Onion Revocable Trust, of which Mr. Onion is a co-trustee.

 

(4)

Consists of (i) $218,428 payable to Tim Maudlin; (ii) $130,215 payable to Timothy I. Maudlin Revocable Trust, of which Mr. Maudlin is a trustee; and (iii) $121,230 payable to Janice K. Maudlin Revocable Trust, of which Mr. Maudlin’s wife is a trustee.

 

(5)

Consists of (i) $210,282 payable to Gary Crittenden and (ii) $53,944 payable to Bear Mountain Ranch Asset Management, LLC, of which Mr. Crittenden is a managing member.

 

(6)

Consists of (i) $233,156 payable to Brad Rencher and (ii) $237,915 payable to Centerpine LLC, of which Mr. Rencher is a manager.

 

(7)

Consists of (i) $177,188 payable to Scott Dorsey and (ii) $249,170 payable to AREO Ventures, LLC, of which Mr. Dorsey is a manager.

 

(8)

Consists of (i) $150,589 payable to Karenann Terrell and (ii) $176,064 payable to Karen A Terrell Living Trust of which Ms. Terrell is a trustee.

Ryan Hinkle, a director of Pluralsight, is a Managing Director of Insight Venture Management, LLC, an affiliate of the TRA Representative. The TRA Representative is also a TRA beneficiary and is entitled to receive

 

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$60,061,091 pursuant to the TRA amendment following the mergers. Under the TRA amendment, Pluralsight agreed to indemnify the TRA Representative for losses in connection with its approval of the TRA amendment.

Treatment of Holdings Units, Class B Common Stock and Class C Common Stock

As of the record date, Pluralsight’s directors and executive officers and other persons known by certain executive officers of Pluralsight to be an affiliate or immediate family member of any of the foregoing, as a group, hold [    ] vested Holdings units and [    ] vested shares of Class B common stock and Class C common stock that correspond to such Holdings units on a one-to-one basis.

At the effective time of the Holdings merger, each Holdings unit outstanding as of immediately prior to the effective time of the Holdings merger (other than Holdings units held by the Pluralsight Parties) will be cancelled and automatically converted into the right to receive cash in an amount equal to $20.26, without interest.

In addition, at the effective time of the Pluralsight merger, each share of Class B common stock and each share of Class C common stock outstanding as of immediately prior to the effective time of the Pluralsight merger (except for Excluded Shares) will be cancelled and automatically converted into the right to receive cash in an amount equal to $0.0001, without interest, as provided in the Pluralsight Charter.

Treatment of Pluralsight Options, Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs, and Holdings Incentive Units

Pluralsight and Pluralsight Holdings from time to time have, as applicable, granted awards under the Pluralsight Amended and Restated 2018 Equity Incentive Plan, Pluralsight Holdings Amended and Restated 2017 Equity Incentive Plan, the Pluralsight, LLC Incentive Unit Plan, and the Third Amended and Restated Restricted Share Unit Agreement between Pluralsight Holdings and Aaron Skonnard dated April 3, 2019 (the “Equity Plans”), consisting of options to purchase shares of Class A common stock (a “Pluralsight Option”), restricted stock units covering shares of Class A common stock (a “Pluralsight RSU”), performance-based restricted stock units covering shares of Class A common stock (a “Pluralsight PSU”), restricted stock units covering Holdings units and corresponding shares of Class C common stock (a “Holdings RSU”), and Holdings incentive units and corresponding shares of Class B common stock or Class C common stock, as applicable (“Holdings Incentive Units”).

As of the record date, there were [    ] shares of Pluralsight common stock subject to outstanding Pluralsight Options, [    ] shares of Pluralsight common stock subject to outstanding Pluralsight RSUs (excluding [    ] shares subject to the Pluralsight RSUs that vested on that date), [    ] shares of Pluralsight common stock subject to outstanding Pluralsight PSUs (at maximum), [    ] Holdings units subject to Holdings RSUs, and [    ] incentive Holdings units subject to Holdings Incentive Units, in each case, held by our directors and executive officers, as a group.

At the closing of the mergers, each Pluralsight Option, Pluralsight RSU, Pluralsight PSU, Holdings RSU, and Holdings Incentive Unit that is unexpired, unexercised, outstanding and vested as of immediately before the closing of the mergers or that vests solely as a result of the consummation of the transactions contemplated by the merger agreement (each, a “Vested Award”) will be cancelled and automatically converted into the right to receive a cash amount equal to the product of: (1) the total number of shares of Pluralsight common stock or Holdings units subject to the Vested Award, multiplied by (2) $20.26 (or, for each Pluralsight Option, the excess, if any, of $20.26 over the Pluralsight Option’s per share exercise price), subject to any required tax withholdings (the “Vested Award Cash-out Payment”).

At the closing of the mergers, each Pluralsight Option, Pluralsight RSU, Pluralsight PSU, Holdings RSU and Holdings Incentive Unit that is unexpired, unexercised, and outstanding as of immediately before the effective time of the Holdings merger that is not a Vested Award (each, an “Unvested Award”) will be cancelled

 

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and automatically converted into the right to receive the cash replacement amount, subject to the vesting conditions described below. The cash replacement amount will be equal to the product of: (1) the total number of shares of Pluralsight common stock or Holdings units subject to the Unvested Award, multiplied by (2) $20.26 (or, for each Pluralsight Option, the excess, if any, of $20.26 over the Pluralsight Option’s per share exercise price), subject to any required tax withholdings. For these purposes, the total number of shares of common stock subject to each Pluralsight PSU will be 100% of the number of shares subject to the Pluralsight PSU that becomes eligible to vest upon measurement, by the Pluralsight Board or its Compensation Committee, of actual performance achieved as of the date of the closing of the mergers against the relevant performance criteria under the applicable Pluralsight PSU agreement, and the applicable cash replacement amount with respect to such Pluralsight PSU will, subject to the holder’s continued service with the Parent Entities and their affiliates through the end of the original performance period specified in the Pluralsight PSU agreement, vest and be payable within 30 days following the end of such original performance period. The cash replacement amount will be subject to the same vesting conditions (including continued service requirements and any accelerated vesting on specific terminations of employment) that applied to the cancelled Unvested Award in effect immediately before the closing of the mergers, except for terms rendered inoperative by reason of the mergers or for any applicable administrative or ministerial changes. If the vesting conditions are satisfied, the cash replacement amount will be paid at the same time(s) as the cancelled Unvested Award would have vested according to its terms, subject to the treatment of unvested Pluralsight PSUs described above.

Any Pluralsight Options (whether vested or unvested) with a per share exercise price equal to or greater than $20.26 will be cancelled immediately upon the effective time of the Pluralsight merger without payment or consideration.

The Equity Plans will terminate as of the effective time of the Pluralsight merger.

Payments Upon Termination At or Following Change in Control

Executive Employment Agreements

We have entered into an executive employment agreement with each of our executive officers pursuant to which if the executive officer’s employment is terminated by us or any Parent Entity (or any parent or subsidiaries of ours or Parent) for any reason other than Cause (as defined in the applicable employment agreement), or by the executive officer for Good Reason (as defined in the applicable employment agreement), the executive officer will receive the following severance benefits, subject to signing and not revoking a release of claims in our favor and continuing to comply with the release (which generally includes a requirement for continued compliance with confidentiality obligations, as well as a non-solicitation of employees, customers and suppliers and non-competition obligation for a period of 12 months following employment termination):

 

   

severance pay in an amount equal to $200,000 with respect to Mr. Skonnard, $175,000 with respect to Mr. Budge, and equal to six months of then-current base salary with respect to our other executive officers (Mr. Meyercord and Mr. Forkner), in each instance, payable less applicable withholdings in equal periodic installments over six months, and,

 

   

if the executive officer properly elects continuation coverage under our group medical insurance plan under applicable law, the percentage of the premium for such medical plan coverage which we bear for similarly situated active employees of ours and their enrolled family members immediately before the termination date for up to six months.

For purposes of the executive employment agreements, “cause” generally means (1) the executive’s willful conduct that is materially injurious to Pluralsight or any of its affiliates or the commission of any other material act or omission involving dishonesty with respect to Pluralsight, (2) the executive’s conviction of a felony or of a misdemeanor involving a crime of moral turpitude; (3) the executive’s fraud, embezzlement, or misappropriation of any money, assets, or other property of the Pluralsight Board; (4) the executive’s insubordination or other

 

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willful refusal to comply with any lawful request of Pluralsight Board; (5) the executive’s material breach of any of his or her obligations, duties, or agreements to Pluralsight; or (6) the executive’s death or disability.

For purposes of the executive employment agreements, “good reason” generally means, subject to certain notice and cure period, (1) a material adverse change in executive’s job duties or authorities, including demotion or change in line of reporting, without executive’s advance written consent; (2) a reduction in the executive’s salary without executive’s advance written consent; and/or (3) Pluralsight’s material breach of the executive’s employment agreement.

Golden Parachute Compensation

In accordance with Item 402(t) of Regulation S-K, the table below sets forth the compensation that is based on or otherwise relates to the mergers that may be paid or become payable to each of our named executive officers in connection with the mergers. Please see the previous portions of this section for further information regarding this compensation.

The amounts indicated in the table below are estimates of the amounts that would be payable assuming, solely for purposes of this table, that the mergers were consummated on December 28, 2020, and in the case of each named executive officer, that the named executive officer’s employment is terminated by Pluralsight without cause or by the named executive officer for good reason, in each case, on that date. Pluralsight’s named executive officers will not receive pension, non-qualified deferred compensation, tax reimbursement or other benefits in connection with the mergers.

Some of the amounts set forth in the table would be payable solely by virtue of the consummation of the mergers. In addition to the assumptions regarding the consummation date of the mergers and the termination of employment, these estimates are based on certain other assumptions that are described in the footnotes accompanying the table below. Accordingly, the ultimate values to be received by a named executive officer in connection with the mergers may differ from the amounts set forth below.

Golden Parachute Compensation

 

Name    Cash ($) (1)      Equity ($) (2)      Perquisites/
Benefits ($) (3)
     Total ($)  

Aaron Skonnard

     200,000        27,568,998        8,743        27,777,741  

James Budge

     175,000        7,644,969        8,743        7,828,712  

Ross Meyercord

     182,000        4,909,525        8,743        5,100,268  

Nate Walkingshaw (4)

               

 

(1)

The cash amount represents the total potential severance payments to each named executive officer that may be payable in connection with the mergers pursuant to each such executive officer’s employment agreement if the named executive officer’s employment is terminated by Pluralsight without Cause or by the named executive officer for Good Reason (as both terms are defined in the applicable employment agreement) and the executive officer timely executes and does not revoke a separation agreement and release in favor of Pluralsight. All such “double trigger” severance payments are payable, less applicable withholdings, over six months in equal periodic installments. For more information, please see the section of this proxy statement captioned “The Mergers—Interests of Pluralsight’s Directors and Executive Officers in the Mergers—Payments Upon Termination At or Following Change in Control—Executive Employment Agreements.”

(2)

Represents Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs, and Holdings Incentive Units (collectively, “Executive Awards”) that will receive consideration in the mergers, assuming, solely for purposes of this table, continued employment of each named executive officer through the consummation of the mergers and that the named executive officer’s employment is terminated by Pluralsight without Cause or by the named executive officer for Good Reason (as both terms are defined in the applicable award agreement) on such date, except that for Mr. Skonnard, $6,636,690 of the value in the table above represents single-trigger acceleration that is payable to him with respect to his 327,576 Holding Incentive Units upon the consummation of the mergers in accordance with the award agreement governing such units, regardless of whether his employment terminates upon the consummation of the mergers. For more information on the vesting acceleration protections applicable to named executive officers, please see the section of this proxy statement captioned “The

 

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  Mergers—Interests of Pluralsight’s Directors and Executive Officers in the Mergers—Equity Awards Held by Pluralsight’s Executive Officers and Non-employee Directors.”

The values for each award in the table below represent the product of $20.26, multiplied by the number of shares of Class A common stock or Holdings units subject to the awards, as applicable, and, with respect to awards of Pluralsight PSUs, calculated assuming 200% achievement of the target number of shares underlying such awards. Other than Mr. Skonnard’s single-trigger acceleration award described in the previous paragraph, the acceleration benefits for the named executive are double trigger acceleration benefits. The amounts in the table below do not reflect the value of any payments under the TRA and the TRA amendment, which values are described in the section of this proxy statement captioned “The Mergers—Interests of Pluralsight’s Directors and Executive Officers in the Mergers—The TRA and the TRA Amendment” above. The aggregate value of each named executive officer’s single-trigger and double-trigger acceleration awards is set forth in the table below:

 

Name

   Number of
Shares/Units
Subject to
Executive
Awards
Accelerating
(#)
     Per Share
Value of
Executive
Awards
Accelerating
($)
     Total ($)  

Aaron Skonnard

     1,360,760        20.26        27,568,998  

James Budge

     377,343        20.26        7,644,969  

Ross Meyercord

     242,326        20.26        4,909,525  

 

(3)

Represents the estimated value of the percentage of the premiums Pluralsight will pay to continue the named executive officer’s continued health coverage under COBRA for a period of six months in the event the named executive officer’s employment is terminated by Pluralsight without Cause or by the named executive officer for Good Reason (as both terms are defined in the applicable employment agreement) and the executive officer timely executes and does not revoke a separation agreement and release in favor of Pluralsight. The COBRA reimbursements are a “double trigger” benefit.

(4)

Mr. Walkingshaw voluntarily resigned effective July 13, 2020, and is not receiving any compensation in connection with the transactions contemplated by the merger agreement (other than in his capacity as a TRA beneficiary or as a stockholder of Pluralsight).

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

As discussed above, at the closing of the mergers, each Vested Award (including those held by our executive officers and non-employee directors) will be cancelled and automatically converted into the right to receive the Vested Award Cash-out Payment, and each Unvested Award (including those held by our executive officers) will be cancelled and automatically converted into the right to receive the cash replacement amount, subject to the vesting conditions (including any accelerated vesting on specific terminations of employment) and payable terms described above.

Pursuant to the terms of our 2018 Equity Incentive Plan (the “2018 Plan”), awards granted under the 2018 Plan to non-employee directors will fully vest in the event of a Change in Control (as defined in the 2018 Plan and which includes the mergers).

Under the terms of the Class B Incentive Unit Offer Letter between Pluralsight Holdings and Aaron Skonnard dated September 29, 2017, all of the unvested Holdings Incentive Units subject to the award will fully vest upon a Sale of the Company (as defined in the Class B Incentive Unit Offer Letter and which includes the Holdings merger).

Pursuant to each executive officer’s equity award agreement (other than with respect to equity awards granted to the executive officer in 2021), if the executive officer’s service is terminated by Pluralsight or its successor without Cause or by the executive officer for Good Reason (as such terms are defined in the applicable award agreement) upon or within twelve months following a Change in Control (which would include the closing of the mergers), then their cash replacement awards will fully accelerate and vest; provided that Aaron Skonnard’s Third Amended and Restated Restricted Share Unit Agreement with Pluralsight Holdings does not limit such acceleration benefits to the twelve month period following a Change in Control. Equity awards granted

 

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to executive officers in 2021 will not provide for acceleration upon the closing of the mergers or qualifying termination following the closing of the mergers.

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

The following table sets forth the number of shares of Pluralsight common stock and Holdings units and the number of shares of Pluralsight common stock and Holdings units underlying equity awards held by each of Pluralsight’s executive officers and non-employee directors, that are outstanding as of December 28, 2020. The table also sets forth the values of these shares and equity awards, determined as the number of shares multiplied by the Per Share Price (minus the applicable per share exercise price for any Pluralsight Options). No additional shares of common stock or equity awards were granted to any executive officer or non-employee director in contemplation of the mergers.

 

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

The following table sets forth the number of shares of Pluralsight common stock and Holdings units and the number of shares of Pluralsight common stock and Holdings units underlying equity awards held by each of Pluralsight’s executive officers and non-employee directors, that are outstanding as of December 28, 2020. The table also sets forth the values of these shares, Holding units and equity awards, determined as the number of applicable shares or Holding units multiplied by the Per Share Price, Class B Share Price, Class C Per Share Price or Per Unit Price, as applicable (minus the applicable per share exercise price for any Pluralsight Options). No additional shares of common stock, Holdings units or equity awards were granted to any executive officer or non-employee director in contemplation of the mergers.

 

Name

  Class A
Stock
(#)(1)
    Class A Stock
($)
    Class B
Stock
(#)(2)
    Class B
Stock
($)
    Class C
Stock
(#)(3)
    Class C
Stock ($)
    Holdings
units (#)(4)
    Holdings
units ($)
    Pluralsight
Options
(#)(5)
    Pluralsight
Options ($)
    Pluralsight
RSUs
(#)(6)
    Pluralsight
RSUs ($)
    Pluralsight
PSUs
(#)(7)
    Pluralsight
PSUs ($)
    Holdings
RSUs
(#)(8)
    Holdings
RSUs ($)
    Holdings
Incentive
Units
(#)(9)
    Holdings
Incentive
Units ($)
    Total ($)  

Aaron Skonnard(10)

    336,243     $ 6,812,283.18       0       —         13,073,211     $ 1,307.32       13,073,211     $ 264,863,254.786       1,566,166     $ 8,238,033.16       152,044     $ 3,080,411.44       318,640     $ 6,455,646.40       562,500     $ 11,396,250.00       327,576     $ 6,636,689.76     $ 307,483,876.12  

James Budge(11)

    8,149     $ 165,098.74       129,846     $ 12.98       0       —         129,846     $ 2,630,679.96       737,503     $ 3,879,265.78       98,388       1,993,340.88       146,109     $ 2,960,168.34       0       —         13,846     $ 2,691,459.96     $ 14,320,026.64  

Matthew Forkner(12)

    10,008     $ 202,762.08       0       —         0       —         0       —         0       —         145,345     $ 2,944,689.70       84,970     $ 1,721,492.20       0       —         0       —       $ 4,868,943.98  

Ross Meyercord(13)

    27,708     $ 561,364.08       0       —         0       —         0       —         0       —         242,326     $ 4,909,524.76       0       —         0       —         0       —       $ 5,470,888.84  

Nate Walkingshaw(14)

    0       —         0       —         0       —         0       —         0       —         0       —         0       —         0       —         0       —         —    

Gary Crittenden(15)

    39,840     $ 807,158.40       179,758     $ 17.98       0       —         179,758     $ 3,641,897.08       80,721     $ 424,592.46       15,040     $ 304,710.40       0       —         0       —         0       —       $ 5,178,376.32  

Scott Dorsey(16)

    25,240     $ 511,362.40       171,712     $ 17.17       0       —         171,712     $ 3,478,885.12       109,110     $ 573,918.60       11,632     $ 235,664.32       0       —         0       —         0       —       $ 4,799,847.61  

Arne Duncan(17)

    25,240     $ 511,362.40       333,008     $ 33.30       0       —         333,008     $ 6,746,742.08       153,179     $ 805,721.54       11,632     $ 235,664.32       0       —         0       —         0       —       $ 8,299,523.64  

Ryan Hinkle(18)

    49,412     $ 1,001,087.12       0       —         0       —         0       —         0       —         0       —         0       —         0       —         0       —       $ 1,001,087.12  

Leah Johnson(19)

    3,620     $ 73,341.20       0       —         0       —         0       —         0       —         11,632     $ 235,664.32       0       —         0       —         0       —       $ 309,005.52  

Timothy Maudlin(20)

    0       —         272,588     $ 27.26       0       —         272,588     $ 5,522,632.88       80,721     $ 424,592.46       11,632     $ 235,664.32       0       —         0       —         0       —       $ 6,182,916.92  

Frederick Onion(21)

    312,400     $ 6,329,224.00       9,961,071     $ 996.11       0       —         9,961,071     $ 201,811,298.46       0       —         0       —         0       —         0       —         0       —       $ 208,141,518.57  

Bradley Rencher(22)

    25,240     $ 511,362.40       208,170     $ 20.82       0       —         208,170     $ 4,217,524.20       80,721        424,592.46       11,632     $ 235,664.32       0       —         0       —         0       —       $ 5,389,164.20  

Bonita Stewart(23)

    26,240     $ 531,622.40       0       —         0       —         0       —         0       —         13,821     $ 280,013.46       0       —         0       —         0       —       $ 811,635.86  

Karenann Terrell(24)

    25,240     $ 511,362.40       103,459     $ 10.35       0       —         103,459     $ 2,096,079.34       131,926     $ 693,930.76       11,632     $ 235,664.32       0       —         0       —         0       —       $ 3,537,047.17  

(1) This number includes shares of Class A common stock beneficially owned, excluding shares of Class A common stock issuable upon exercise of Pluralsight Options or settlement of Pluralsight RSUs or Pluralsight PSUs.

(2) This number includes shares of Class B common stock beneficially owned, excluding shares of Class B common stock issued pursuant to unvested incentive Holdings units and subject to a right of repurchase in favor of Pluralsight as of December 28, 2020.

(3) This number includes shares of Class C common stock beneficially owned, excluding shares of Class C common stock issuable upon settlement of Holdings RSUs or issued pursuant to unvested incentive Holdings units and subject to a right of repurchase in favor of Pluralsight as of December 28, 2020.

(4) This number includes Holdings units beneficially owned, excluding Holdings units issuable upon settlement of Holdings RSUs or Holdings units issued pursuant to unvested incentive Holdings units and subject to a right of repurchase in favor of Pluralsight as of December 28, 2020.

(5) All vesting conditions related to Pluralsight Options held by Pluralsight’s executive officers and non-employee directors have been satisfied as of December 28, 2020, and all such Pluralsight Options are exercisable.

(6) This number reflects the shares of Class A common stock subject to Pluralsight RSUs that were not vested as of December 28, 2020.

(7) This number reflects the shares of Class A common stock subject to Pluralsight PSUs (at maximum) that were not vested as of December 28, 2020.

(8) This number reflects the Holdings units subject to Holdings RSUs that were not vested as of December 28, 2020.

(9) This number reflects the Holdings units issued pursuant to unvested incentive Holdings units and subject to a right of repurchase in favor of Pluralsight.

(10) Consists of (i) 329,827 shares of Class A common stock and 9,732,644 Holdings units and corresponding shares of Class C common stock held by Skonnard Consulting, Inc., of which Mr. Skonnard is an owner; (ii) 440,477 Holdings units and corresponding shares of Class C common stock held by Skonnard Family GRAT 2021, of which Mr. Skonnard is a trustee; (iii) 988,408 Holdings units and corresponding shares of Class C common stock held by True Nord Trust, of which Mr. Skonnard may be deemed to have voting and dispositive power; (iv) 365,317 Holdings units and corresponding shares of Class C common stock held by Aaron & Monica Skonnard Revocable Trust, of which Mr. Skonnard is co-trustee; (v) 6,416 shares of Class A common stock and 1,873,941 Holdings units and corresponding shares of Class C common stock (of which 327,576 Holdings units and corresponding shares of Class C common stock

 

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are issued pursuant to unvested incentive Holdings units and subject to a right of repurchase in favor of the Company) held by Mr. Skonnard; (vi) 1,566,166 shares of Class A common stock subject to options held by Mr. Skonnard that are immediately exercisable; (vii) 152,044 shares of Class A common stock held by Mr. Skonnard underlying RSUs; (viii) 318,640 shares of Class A common stock held by Mr. Skonnard underlying PSUs; and (ix) 562,500 Holdings units and corresponding shares of Class C common stock held by Mr. Skonnard underlying Holdings RSUs.

(11) Consists of (i) 8,149 shares of Class A common stock held by Mr. Budge; (ii) 737,503 shares of Class A common stock subject to options held by Mr. Budge that are immediately exercisable; (iii) 98,388 shares of Class A common stock held by Mr. Budge underlying RSUs; (iv) 146,109 shares of Class A common stock held by Mr. Budge underlying PSUs; and (v) 262,692 Holdings units and corresponding shares of Class B common stock held by Mr. Budge, of which 132,846 Holdings units and corresponding shares of Class B common stock are issued pursuant to unvested incentive Holdings units and subject to a right of repurchase in favor of the Company.

(12) Consists of (i) 10,008 shares of Class A common stock held by Mr. Forkner; (ii) 145,345 shares of Class A common stock held by Mr. Forkner underlying RSUs; and (iii) 84,970 shares of Class A common stock held by Mr. Forkner underlying PSUs.

(13) Consists of (i) 27,708 shares of Class A common stock held by Mr. Meyercord; and (ii) 242,326 shares of Class A common stock held by Mr. Meyercord underlying RSUs.

(14) Mr. Walkingshaw terminated his employment with the Company in July 2020 and did not beneficially own shares of common stock or Holdings units as of December 28, 2020.

(15) Consists of (i) 25,240 shares of Class A common stock and 144,423 Holdings units and corresponding shares of Class B common stock held by Mr. Crittenden; (ii) 14,600 shares of Class A common stock and 35,335 Holdings units and corresponding shares of Class B common stock held by Bear Mountain Ranch Asset Management, LLC, of which Mr. Crittenden is a managing member; (iii) 80,721 shares of Class A common stock subject to options held by Mr. Crittenden that are immediately exercisable; and (iv) 15,040 shares of Class A common stock held by Mr. Crittenden underlying RSUs.

(16) Consists of (i) 25,240 shares of Class A common stock held by Mr. Dorsey; (ii) 109,110 shares of Class A Common stock subject to options held by Mr. Dorsey that are immediately exercisable; (iii) 121,712 Holdings units and corresponding shares of Class B common stock held by Mr. Dorsey; (iv) 50,000 Holdings units and corresponding shares of Class B common stock held by AREO Ventures, LLC, of which Mr. Dorsey is a manager; and (v) 11,632 shares of Class A common stock held by Mr. Dorsey underlying RSUs.

(17) Consists of (i) 25,240 shares of Class A common stock held by Mr. Duncan; (ii) 153,179 shares of Class A Common stock subject to options held by Mr. Duncan that are immediately exercisable; (iii) 333,008 Holdings units and corresponding shares of Class B common stock held by Mr. Duncan; and (iv) 11,632 shares of Class A common stock held by Mr. Duncan underlying RSUs.

(18) Consists of 49,412 shares of Class A common stock held by Mr. Hinkle. Mr. Hinkle is a Managing Director of Insight Venture Management, LLC, (“Insight Venture Management”). Certain affiliates of Insight Venture Management hold 5,212,692 shares of Class A common stock in the aggregate, representing a value of $105,609,139.92 in the aggregate, determined as the number of such shares multiplied by the Per Share Price. Mr. Hinkle does not hold voting or dispositive power over such shares.

(19) Consists of (i) 3,620 shares of Class A common stock held by Ms. Johnson; and (ii) 11,632 shares of Class A common stock held by Ms. Johnson underlying RSUs.

(20) Consists of (i) 94,255 Holdings units and corresponding shares of Class B common stock held by Mr. Maudlin; (ii) 80,721 shares of Class A Common stock subject to options held by Mr. Maudlin that are immediately exercisable; (iii) 79,583 Holdings units and corresponding shares of Class B common stock held by Janice K. Maudlin Revocable Trust, of which Mr. Maudlin’s wife is a trustee; (iv) 59,582 Holdings units and corresponding shares of Class B common stock held by Timothy I. Maudlin Revocable Trust, of which Mr. Maudlin is a trustee; (v) 19,168 Holdings units and corresponding shares of Class B common stock held by Timothy I. Maudlin 2019 Trust, of which Mr. Maudlin is a trustee; (vi) 20,000 Holdings units and corresponding shares of Class B common stock held by Timothy I. Maudlin 2020 Trust, of which Mr. Maudlin is a trustee; and (vii) 11,632 shares of Class A common stock held by Mr. Maudlin underlying RSUs.

(21) Consists of (i) 282,400 shares of Class A common stock and 9,919,847 Holdings units and corresponding shares of Class B common stock held by Onion Consulting, Inc., of which Mr. Onion is an owner; and (ii) 30,000 shares of Class A common stock and 41,224 Holdings units and corresponding shares of Class B common stock held by Frederick A. Onion Revocable Trust, of which Mr. Onion is a co-trustee.

(22) Consists of (i) 25,240 shares of Class A common stock and 51,923 Holdings units and corresponding shares of Class B common stock held by Mr. Rencher; (ii) 80,721 shares of Class A Common stock subject to options held by Mr. Rencher that are immediately exercisable; (iii) 156,247 Holdings units and corresponding shares of Class B common stock held by Centerpine LLC, of which Mr. Rencher is a manager; and (iv) 11,632 shares of Class A common stock held by Mr. Rencher underlying RSUs.

(23) Consists of (i) 15,240 shares of Class A common stock held by Ms. Stewart; (ii) 11,000 shares of Class A common stock held by Bonita K. Coleman Trust, of which Ms. Stewart is trustee; and (iii) 13,821 shares of Class A common stock held by Ms. Stewart underlying RSUs.

(24) Consists of (i) 25,240 shares of Class A common stock held by Ms. Terrell; (ii) 131,926 shares of Class A Common stock subject to options held by Ms. Terrell that are immediately exercisable; (iii) 103,459 Holdings units and corresponding shares of Class B common stock held by Ms. Terrell; and (iii) 11,632 shares of Class A common stock held by Ms. Terrell underlying RSUs.

Financing of the Mergers

The obligation of the Buyer Parties to consummate the mergers is not subject to any financing condition.

 

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We anticipate that the total amount of funds necessary to pay the aggregate merger consideration payable to the stockholders and unitholders in the mergers is approximately $3.06 billion in cash.

In connection with the financing of the mergers, Vista Fund VII and the Parent Entities have entered into an Equity Commitment Letter, pursuant to which Vista Fund VII has agreed to provide the Parent Entities with an equity commitment of up to $3.06 billion in cash, which will be available, together with cash on hand at Pluralsight as of the closing of the mergers, to fund the aggregate merger consideration payable to the stockholders and unitholders (including payments in respect of our outstanding equity-based awards payable in connection with the closing of the mergers pursuant to the merger agreement) and to pay the fees, expenses and other amounts required to be paid in connection with the closing of the mergers by the Pluralsight Parties and the Buyer Parties.

The Equity Commitment Letter provides, among other things, that: (1) the Pluralsight Parties are express third party beneficiaries thereof in connection with the Pluralsight Parties’ exercise of their rights related to specific performance under the merger agreement; and (2) Vista Fund VII will not oppose the granting of an injunction, specific performance or other equitable relief in connection with the exercise of such third party beneficiary rights. The Equity Commitment Letter may not be waived, amended or modified except by a written instrument signed by the Parent Entities, Vista Fund VII and Pluralsight.

Limited Guaranty

Pursuant to the Limited Guaranty, Vista Fund VII has agreed to guarantee the due, punctual and complete payment of all of the liabilities and obligations of the Buyer Parties under the merger agreement (the “Guaranteed Obligations”), including, but not limited to: (1) the indemnification obligations of the Buyer Parties in connection with any costs, expenses or losses incurred or sustained by the Pluralsight Parties in connection with their cooperation with the arrangement of any potential debt financing; and (2) the documented and reasonable out-of-pocket costs and expenses incurred by the Pluralsight Parties and their subsidiaries in connection with the cooperation of the Pluralsight Parties and their subsidiaries with the potential arrangement of any potential debt financing (the obligations set forth in clauses (1) and (2), the “Reimbursement Obligations”).

The obligations of Vista Fund VII under the Limited Guaranty are subject to an aggregate cap equal to $209.2 million, plus the Reimbursement Obligations.

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

 

   

immediately following the effective time of the Pluralsight merger and the deposit of the merger consideration payable to the stockholders and the unitholders with the designated payment agent;

 

   

the valid termination of the merger agreement by mutual written consent of Parent I and Pluralsight;

 

   

the valid termination of the merger agreement by Pluralsight in certain circumstances in connection with a Superior Proposal;

 

   

the indefeasible payment by Vista Fund VII or the Buyer Entities of an amount of the Guaranteed Obligations equal to the aggregate cap;

 

   

one year after the valid termination of the merger agreement in accordance with its terms, other than a termination in the scenarios described in the second and third bullet above, unless prior to the expiration of such one-year period (i) Pluralsight shall have delivered a written notice with respect to any of the Guaranteed Obligations asserting that Vista Fund VII or any Buyer Party alleging that any Buyer Party is liable, in whole or in part, for any portion of the Guaranteed Obligations and (ii) the Pluralsight Parties shall have commenced a legal proceeding against Vista Fund VII or any Buyer Party alleging that any Buyer Party is liable for any payment obligations under the merger agreement or against Vista Fund VII alleging that amounts are due and owing from Vista Fund VII pursuant to the Limited Guaranty, in which case the Limited Guaranty will survive solely with respect to amounts so alleged to be owing, subject to certain restrictions contained in the Limited Guaranty; and

 

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any Pluralsight Party or any of its affiliates acting on its behalf seeks to impose liability upon Vista Fund VII in excess of the aggregate cap, or otherwise challenges any limit on the liability of Vista Fund VII under the Limited Guaranty or under the Equity Commitment Letter, or makes any claim arising under or in connection with the merger agreement, the Limited Guaranty or the Equity Commitment Letter, or the transactions contemplated thereby, or other certain claims permitted by the Limited Guaranty.

The Voting and Support Agreements

The following summary describes the material provisions of the voting agreements. The description of the voting agreements in this summary and elsewhere in this proxy statement is not complete and is qualified in its entirety by reference to the voting agreements, the form of which is attached to this proxy statement as Annex D and incorporated into this proxy statement by reference. We encourage you to read the form of voting agreement carefully and in its entirety because this summary may not contain all the information about the voting agreements that is important to you. The rights and obligations of the parties are governed by the express terms of the voting agreements and not by this summary or any other information contained in this proxy statement.

Concurrently with the execution of the merger agreement, Pluralsight and the Parent Entities have entered into the voting agreements with the voting agreement stockholders. As of the record date, the voting agreement stockholders held, in the aggregate, shares of common stock representing approximately [    ]% of the voting power of the total outstanding shares of common stock.

Under the voting agreements, the voting agreement stockholders have agreed, subject to the terms and conditions in the voting agreements, to vote all of their shares of common stock (i) in favor of the adoption of the merger agreement and the approval of the mergers and other transactions contemplated by the merger agreement, (ii) in favor of any proposal recommended by the Pluralsight Board (or a committee thereof) that is intended to facilitate the consummation of the transactions contemplated by the merger agreement, (iii) in favor of any non-binding advisory vote on “golden parachute” executive compensation arrangements and/or (iv) except as described below, against any Acquisition Proposal or any other action or agreement which would reasonably be expected to result in any of the conditions to the Pluralsight Parties’ obligations to consummate the mergers not being fulfilled. The voting agreement stockholders have also waived appraisal rights in connection with the mergers, and have agreed not to raise certain legal challenges to the mergers. In addition, if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into an Alternative Acquisition Agreement, in one or more iterations) that has been approved and recommended by the Pluralsight Board, the voting agreements also provide that the voting agreement stockholders will vote in favor of the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect.

Pursuant to the voting agreements, the voting agreement stockholders have agreed not to, until the termination of the voting agreements and subject to certain exceptions in the voting agreements, directly or indirectly: (a) transfer, redeem, surrender, assign, sell, gift-over, hedge, pledge or otherwise dispose (whether by liquidation, dissolution, dividend, distribution or otherwise) of, enter into any derivative arrangement with respect to, create any lien or encumbrance on or take any other action that would be deemed a Transfer (as such term is defined in the Pluralsight Charter) with respect to any of their shares of common stock (any of the items set forth in this clause (a), a “Transfer”); (b) enter into any contract, option or other agreement, arrangement or understanding with respect to any Transfer; (c) grant any proxy, power-of-attorney or other authorization or consent with respect to their shares of common stock with respect to any matter that is in contravention of the applicable voting agreement; (d) deposit any of their shares of common stock into a voting trust or enter into a voting agreement or arrangement with respect to their shares of common stock that is in contravention of the applicable voting agreement; (e) initiate or exercise a redemption of such stockholders’ Holdings units, or

 

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otherwise voluntarily convert or exchange any or all of such stockholders’ shares of common stock as of the date of the voting agreements into a different class of common stock (including by way of a Transfer as such term is defined in the Pluralsight Charter); or (f) knowingly take or cause the taking of any other action that would materially restrict or prevent the performance of such stockholders’ obligations under the voting agreements, excluding any involuntary bankruptcy filing.

The voting agreement stockholders’ obligations to vote in favor of the adoption of the merger agreement and the approval of the mergers and other transactions contemplated by the merger agreement terminate automatically upon the earliest to occur of: (1) the valid termination of the merger agreement in accordance with its terms; (2) the effective time of the Pluralsight merger; and (3) any change to the terms of the mergers without the prior written consent of the voting agreement stockholders that results in a decrease to the merger consideration, a change in the form of the merger consideration or a disproportionately adverse effect on the voting agreement stockholders relative to other stockholders.

In addition, concurrently with the execution of the merger agreement, Pluralsight and the Parent Entities have entered into a support agreement (the “support agreement”) with certain affiliates of Insight Venture Management, LLC, that hold shares of common stock (the “Insight Shareholders”). Under the support agreement, the Insight Shareholders waived appraisal rights in connection with the mergers, and have agreed not to raise certain legal challenges to the mergers, and have also agreed not to Transfer their shares of common stock unless the transferee agrees to be bound by the support agreement. As of December 11, 2020, the Insight Shareholders held 5,212,692 shares of Class A common stock in the aggregate.

Amendment to the Tax Receivable Agreement

The following summary describes certain relevant provisions of the TRA and the material provisions of the TRA amendment. The descriptions of the TRA and the TRA amendment in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the TRA and the TRA amendment, each of which is incorporated into this proxy statement by reference. We encourage you to read the TRA and the TRA amendment carefully and in their entirety because this summary may not contain all the information about the TRA and the TRA amendment that is important to you. The rights and obligations of the parties are governed by the express terms of the TRA and the TRA amendment and not by this summary or any other information contained in this proxy statement.

Concurrent with the initial public offering of shares of its Class A common stock and related reorganization transactions undertaken in connection with the initial public offering, Pluralsight entered into a tax receivable agreement with certain members of Pluralsight Holdings who retained Holdings units after the initial public offering. Exchanges or redemptions of Holding units for cash or shares of Class A common stock are expected to produce favorable tax attributes for Pluralsight. When Pluralsight acquires Holdings units from such members through these exchanges or redemptions, anticipated tax basis adjustments are likely to increase (for tax purposes) Pluralsight’s depreciation and amortization deductions, thereby reducing the amount of income tax that Pluralsight would be required to pay in the future in the absence of this increased basis. This increased tax basis may also decrease the gain (or increase the loss) on future dispositions of certain assets to the extent that the tax basis is allocated to those assets. Under the terms of the TRA, absent a change of control of Pluralsight, Pluralsight would generally be required to pay to the TRA beneficiaries 85% of the applicable savings, if any, in income tax that Pluralsight realizes, or that Pluralsight is deemed to realize, as a result of (1) these tax attributes that are created as a result of the exchanges or redemptions of the TRA beneficiaries’ Holdings units (calculated under certain assumptions), (2) tax benefits related to imputed interest, and (3) payments under the TRA.

In addition, the TRA provides that if certain mergers, asset sales, other forms of business combination or other changes of control were to occur, then the TRA would terminate and Pluralsight’s obligations, or Pluralsight’s successor’s obligations, under the TRA would accelerate and become due and payable. Absent the TRA amendment, the amount of such accelerated change of control payment obligations would have been

 

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calculated as aggregate payment obligations under the TRA absent a change of control based on certain assumptions set forth in the TRA, including the assumption that Pluralsight would have sufficient taxable income in each taxable year ending on or after the change of control to fully utilize all potential future tax benefits that are subject to the TRA and that any unexchanged Holdings units would be exchanged for cash at the market value of the Class A common stock as of the closing of the change of control, and applying a discount rate to those payments equal to the lesser of (1) 6.00% per annum, compounded annually, and (2) LIBOR plus 100 basis points. The mergers, upon closing, constitute a change of control under the TRA that would cause the payment obligations to accelerate and become due and payable.

For more information with respect to the TRA, please see our other filings with the SEC, including the section in our 2020 Proxy Statement captioned “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.” A copy of the TRA is included as Exhibit 10.2 to Pluralsight’s Annual Report for the year ended December 31, 2019 on Form 10-K/A filed with the SEC.

On December 11, 2020, in connection with the execution of the merger agreement, Pluralsight and Pluralsight Holdings entered into the TRA amendment with the TRA Representative, in accordance with the terms of the TRA. The TRA amendment establishes that the parties to the TRA (other than Pluralsight and Pluralsight Holdings) will be entitled to receive an aggregate amount of $127 million in connection with the closing of the mergers in full satisfaction of Pluralsight’s payment obligation under the TRA. This represents a reduction of approximately $290 million, which is an approximately 70% reduction of the estimated aggregate amount of approximately $417 million that would have otherwise been payable to the TRA beneficiaries under the TRA in respect of a change of control of Pluralsight at the implied price per share of Class A common stock offered by Vista (such implied price equating to $18.46 per share of Class A common stock if there were no reduction in the amount of aggregate accelerated change of control payments required to be made under the then-current terms of the TRA), absent the TRA amendment. In addition, if Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into another Alternative Acquisition Agreement, in one or more iterations), the agreements in the TRA amendment also apply in connection with the Acquisition Transaction to be effected pursuant to such Alternative Acquisition Agreement then in effect.

Under the TRA amendment, Pluralsight also agreed to indemnify the TRA Representative for its expenses and losses if it is, or threatened to be made, a party to any litigation or other proceedings arising out of or relating to the TRA Representative’s negotiation, execution and delivery of the TRA amendment and the transactions contemplated thereby.

Pursuant to the TRA amendment, the TRA Representative, in its own capacity, and the TRA beneficiaries that signed the TRA amendment, have agreed not to, until the termination of the merger agreement and subject to certain exceptions in the voting agreements, transfer or exchange their interests in the TRA.

The TRA amendment terminates upon the termination of the merger agreement (or any Alternative Acquisition Agreement) pursuant to its terms, unless Pluralsight terminates the merger agreement to enter into an Alternative Acquisition Agreement pursuant to and in accordance with the “fiduciary out” provisions of the merger agreement (or terminates such Alternative Acquisition Agreement to enter into another Alternative Acquisition Agreement, in one or more iterations), in which case the TRA amendment will continue unless or until the termination of any such Alternative Acquisition Agreement.

Closing of the Mergers

The closing of the mergers 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 mergers (as described under the caption “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Mergers”),

 

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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 mergers are consummated, stockholders who continuously hold shares of common stock through the effective time of the Pluralsight merger, who do not vote in favor of the adoption of the merger agreement, 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 Pluralsight 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 into this proxy statement 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 common stock unless otherwise expressly noted herein. Only a holder of record of shares of 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 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 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 Pluralsight merger is completed, holders of shares of common stock who: (1) submit a written demand for appraisal of their shares prior to the vote on the adoption of the merger agreement, (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 of the Pluralsight merger; and (4) otherwise comply with 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 common stock, exclusive of any element of value arising from the accomplishment or expectation of the Pluralsight merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be fair value from the effective date of the Pluralsight merger through the date of payment of the judgment. However, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine stockholders entitled to appraisal rights, 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 Pluralsight common stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Per Share Price, Class B Per Share Price and Class C Per Share Price in respect of the shares of Pluralsight 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 of the Pluralsight merger through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period (except that, if at any time before the entry of judgment in the proceeding, the Surviving Corporation makes a voluntary cash payment to each stockholder seeking appraisal, interest will accrue thereafter only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (ii) interest theretofore accrued, unless paid at that 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

 

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Pluralsight’s notice to stockholders that appraisal rights are available in connection with the Pluralsight merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the Pluralsight merger, any holder of shares of 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 consideration described in the merger agreement without interest and less any applicable withholding taxes. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, Pluralsight believes that if a stockholder is considering 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 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 Pluralsight 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 of the Pluralsight merger (a stockholder will lose appraisal rights if the stockholder transfers the shares before the effective time of the Pluralsight merger); and

 

   

a stockholder (or any person who is the beneficial owner of shares of 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 value of the stock of all such stockholders within 120 days after the effective time of the Pluralsight merger. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

In addition, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine stockholders entitled to appraisal rights, will dismiss appraisal proceedings as to all stockholders who asserted appraisal rights unless one of the ownership thresholds is 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 common stock wishing to exercise appraisal rights must deliver to Pluralsight, before the vote on the adoption of the merger agreement at the special meeting, 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 vote in favor of the adoption of the merger agreement, at the special meeting or by proxy (whether by mail or via the internet or telephone), will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. A stockholder 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 record through the effective time of the Pluralsight merger. 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

 

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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 stockholders will constitute a waiver of appraisal rights.

Only a holder of record of shares of 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 common stock should be executed by or on behalf of the holder of record, and must reasonably inform Pluralsight 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 Pluralsight 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 “STREET NAME” BY A BANK, BROKER, TRUST OR OTHER NOMINEE AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER, TRUST OR OTHER NOMINEE, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER, TRUST 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, TRUST 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:

Pluralsight, Inc.

42 Future Way

Draper, UT 84020

Attention: Corporate Secretary

At any time within 60 days after the effective date of the Pluralsight merger, any holder of shares of common stock may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the merger agreement, without interest and less any applicable withholding taxes, by delivering to Pluralsight, as the Surviving Corporation, 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 of the Pluralsight merger will require written approval of the Surviving Corporation. Notwithstanding the foregoing, 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 Price, Class B Per Share Price or Class C Per Share Price, as applicable, within 60 days after the effective time of the Pluralsight merger. If Pluralsight, 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.

 

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Notice by the Surviving Corporation

If the Pluralsight merger is completed, within 10 days after the effective time of the Pluralsight merger, the Surviving Corporation will notify each holder of shares of 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 Pluralsight merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within 120 days after the effective time of the Pluralsight merger, but not thereafter, the Surviving Corporation or any holder of shares of 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 common stock. Accordingly, any holders of shares of 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 common stock within the time and in the manner prescribed in Section 262. The failure of a holder of 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 of the Pluralsight merger, any holder of shares of 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 Pluralsight 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 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 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. The Delaware Court of Chancery may order that notice of the time and place fixed for the hearing of such petition be given to the Surviving Corporation and all of the stockholders shown on the verified list at the addresses stated therein. Any such notice shall also be given by one or more publications at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware or any other publication which the Delaware Court of Chancery deems advisable. The costs of any such notice are borne by the Surviving Corporation. After notice to dissenting 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 appraisal 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.

 

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Determination of Fair Value

After determining the holders of 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 common stock, exclusive of any element of value arising from the accomplishment or expectation of the Pluralsight 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 of the Pluralsight merger 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 of the Pluralsight merger and the date of payment of the judgment. However, the Surviving Corporation has the right, at any time prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder seeking appraisal. If the Surviving Corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (1) the difference, if any, between the amount paid by the Surviving Corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery; and (2) interest accrued before such voluntary cash payment, unless paid at that 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.”

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 Pluralsight 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 Pluralsight merger is not an opinion as to, and does not in any manner address, fair value under Section 262. Although Pluralsight believes that the Per Share Price, the Class B Per Share Price and the Class C Per Share Price are fair, 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 as, the Per Share Price, the Class B Per Share Price or the Class C Per Share Price, as applicable. Neither Pluralsight nor the Parent Entities anticipate offering more than the Per Share Price, Class B Per Share Price or Class C Per Share Price, as applicable, to any stockholder exercising appraisal rights, and each of Pluralsight and the Parent Entities reserve 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 common stock is less than the Per Share Price, Class B Per Share Price or Class C Per Share Price, as applicable. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to

 

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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 common stock under Section 262 fails to perfect, or effectively loses or withdraws, such holder’s right to appraisal, the stockholder’s shares of common stock will be deemed to have been converted at the effective time of the Pluralsight merger into the right to receive the Per Share Price, Class B Per Share Price or Class C Per Share Price, as applicable, without interest. 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 of the Pluralsight merger, 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 Price, Class B Per Share Price or Class C Per Share Price, as applicable, in accordance with Section 262.

From and after the effective time of the Pluralsight merger, no stockholder who has demanded appraisal rights will be entitled to vote such shares of 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 common stock, if any, payable to stockholders as of a time prior to the effective time of the Pluralsight merger. 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 Pluralsight merger, either within 60 days after the effective time of the Pluralsight merger 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 Pluralsight merger within 60 days after the effective time of the Pluralsight merger.

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. In that event, you will be entitled to receive the consideration for your dissenting shares in accordance with the merger agreement, without interest and less any applicable withholding taxes. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

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

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

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

 

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relevant to a stockholder in light of the stockholder’s 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 to differing interpretations at any time, possibly with retroactive effect. This discussion is limited to holders who hold their shares of Class A 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 holders in light of their particular circumstances. For example, this discussion does not address:

 

   

tax consequences that may be relevant to holders 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 entities for U.S. federal income tax purposes (or an investor in a partnership, S corporation or other pass-through entity); insurance companies; mutual funds; 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; entities subject to the U.S. anti-inversion rules; certain 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 Pluralsight’s common stock (by vote or value);

 

   

tax consequences to holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;

 

   

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

 

   

tax consequences to holders that received their shares of Class A common stock in a compensatory transaction, through a tax qualified retirement plan, pursuant to the exercise of options or warrants or in exchange for or upon the redemption of Holdings units;

 

   

tax consequences to holders who own an equity interest, actually or constructively, in the Parent Entities or the Surviving Corporation following the Pluralsight merger;

 

   

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

 

   

tax consequences to holders who hold their Class A 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 surtax on net investment income;

 

   

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

 

   

the U.S. federal estate, gift or alternative minimum tax consequences, if any;

 

   

any state, local or non-U.S. tax consequences;

 

   

tax consequences to holders of shares of common stock other than Class A common stock or to unitholders;

 

   

tax consequences from any transactions being undertaken in connection with or at the time of the mergers; or

 

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tax consequences to holders that do not vote in favor of the mergers and properly demand appraisal of their shares under Section 262 or that entered into a voting agreement as part of the transactions 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 Class A 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 Class A common stock and partners therein should consult their tax advisors regarding the consequences of the mergers.

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 MERGERS 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 Class A 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 Class A common stock pursuant to the Pluralsight 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 surrendered pursuant to the Pluralsight merger. Gain or loss must be determined separately for each block of shares (that is, shares 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. Such gain or loss will be capital gain or loss and 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 Pluralsight 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 Class A common stock that is, for U.S. federal income tax purposes:

 

   

a nonresident alien individual;

 

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a foreign corporation; or

 

   

a foreign estate or trust.

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

 

   

certain former citizens or 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 Pluralsight 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 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 that disposition, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a 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; or

 

   

Pluralsight 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 Pluralsight merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of Class A common stock (the “Relevant Period”) and, if shares of Class A 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 Class A common stock at any time during the Relevant Period, in which case 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 Pluralsight merger.

Information Reporting and Backup Withholding

Information reporting and backup withholding (currently, at a rate of 24%) may apply to the proceeds received by a holder pursuant to the Pluralsight merger. Backup withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number (which, in the case of an individual, is the individual’s social security 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 an applicable 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 may 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 common stock. Stockholders should consult their own tax advisors as to the particular tax

 

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

Regulatory Approvals Required for the Mergers

General

The Pluralsight Parties and the Buyer Parties have agreed to take all actions necessary to comply with all regulatory notification requirements, and, subject to certain limitations, to obtain all regulatory approvals required to consummate the mergers and the other transactions contemplated by the merger agreement. These approvals include, for example, approval under, or notifications pursuant to, 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, the mergers cannot be completed until Mr. Skonnard and Vista Fund VII file a notification and report form with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ”) under the HSR Act and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30 calendar day waiting period following the parties’ filing of their respective HSR Act notification forms or the early termination of that waiting period. Mr. Skonnard and Vista Fund VII made the necessary filings with the FTC and the Antitrust Division of the DOJ on December 21, 2020.

At any time before or after the consummation of the mergers, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the Antitrust Division of 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 mergers, 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 mergers, and notwithstanding the termination of the waiting period under the HSR Act, any state 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 mergers 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.

Other Regulatory Approvals

Completion of the mergers is also subject to the receipt of other required regulatory approvals or clearances under the competition laws of Austria and Germany, and under the foreign investment laws of Australia and New Zealand, unless a relevant exemption applies. Vista made relevant filings in Austria and Germany on December 22, 2020. Vista Fund VII further made relevant filings in Australia and New Zealand on December 24, 2020.

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. Given the relevant governmental authorities’ ability to extend the applicable review periods, it is difficult at this stage to estimate with precision how long it will take to obtain all necessary clearances.

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 mergers, 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 mergers not being satisfied.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

We are asking stockholders to approve the 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 mergers, 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. More information about the merger agreement, the mergers and the other transactions contemplated thereby are also included throughout this proxy statement.

The Pluralsight Board unanimously recommends that you vote “FOR” this proposal.

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 the Pluralsight Parties and the Buyer Parties in connection with negotiating the terms of the merger agreement. In addition, the representations and warranties may have been included in the merger agreement for the purpose of allocating contractual risk between the Pluralsight Parties and the Buyer Parties 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 the Pluralsight Parties or the Buyer Parties 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 the Pluralsight Parties and the Buyer Parties, 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 the Pluralsight Parties and the Buyer Parties 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 Pluralsight and our business.

Effects of the Mergers; 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 applicable law: (1) at the effective time of the Holdings merger, Merger Sub II will merge with and into Pluralsight Holdings, with Pluralsight Holdings continuing as the Surviving LLC in the Holdings merger, and the separate corporate existence of Merger Sub II will thereupon cease and (2) at the effective time of the Pluralsight merger, which will immediately follow the Holdings merger, Merger Sub I will merge with and into Pluralsight, with Pluralsight continuing as the Surviving Corporation in the Pluralsight merger, and the separate corporate existence of Merger Sub I will thereupon cease. From and after the effective time of the Holdings merger, Pluralsight Holdings, as the Surviving LLC in the Holdings merger, will possess all properties, rights, privileges, powers and franchises of Pluralsight Holdings and Merger Sub II, and all of the debts, liabilities and duties of Pluralsight Holdings and Merger Sub II will become the debts, liabilities and duties of the Surviving LLC. From and after the effective time of the Pluralsight merger, Pluralsight, as the Surviving Corporation in the Pluralsight merger, will possess all properties, rights, privileges, powers and franchises of

 

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Pluralsight and Merger Sub I, and all of the debts, liabilities and duties of Pluralsight and Merger Sub I will become the debts, liabilities and duties of the Surviving Corporation.

At the effective time of the Holdings merger, the officers of the Surviving LLC will consist of the officers of Merger Sub II as of immediately prior to the effective time of the Holdings merger until their successors are duly appointed. At the effective time of the Holdings merger, the certificate of formation of Pluralsight Holdings will be unchanged and remain the certificate of formation of the Surviving LLC, and the limited liability company agreement of Merger Sub II, as in effect immediately prior to the effective time of the Holdings merger, will become the limited liability company agreement of the Surviving LLC, until thereafter amended.

At the effective time of the Pluralsight merger, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub I as of immediately prior to the effective time of the Pluralsight merger, 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, and the officers of Merger Sub I as of immediately prior to the effective time of the Pluralsight merger will be the officers of the Surviving Corporation, until their successors are duly appointed. At the effective time of the Pluralsight merger, the certificate of incorporation of Pluralsight as the Surviving Corporation will be amended to read substantially identically to the certificate of incorporation of Merger Sub I as in effect immediately prior to the effective time of the Pluralsight merger, and the bylaws of Merger Sub I, as in effect immediately prior to the effective time of the Pluralsight merger, will become the bylaws of the Surviving Corporation, until thereafter amended.

Closing and Effective Time

The closing of the mergers will take place no later than the second business day following the satisfaction or waiver of all conditions to the closing of the mergers (described below under the caption, “—Conditions to the Closing of the Mergers”) (other than those conditions to be satisfied at the closing of the mergers) or such other time agreed to in writing by Parent I and Pluralsight. On the date of the closing of the mergers, the parties will file a certificate of merger with the Secretary of State for the State of Delaware in accordance with the Delaware Limited Liability Company Act (the “Holdings certificate of merger”). The Holdings merger will become effective upon the filing of the Holdings certificate of merger, or such later time as may be agreed by the parties and specified in the Holdings certificate of merger. Immediately after the Holdings certificate of merger has been filed, the parties will file a certificate of merger with the Secretary of State for the State of Delaware as provided under the DGCL (the “Pluralsight certificate of merger”). The Pluralsight merger will become effective upon the filing of the Pluralsight certificate of merger, or such later time as may be agreed by the parties and specified in the Pluralsight certificate of merger, which in any case will be immediately after the effective time of the Holdings merger.

Alternative Structure of the Mergers

Prior to the effective time of the Holdings merger, Parent I may specify that the structure of the transactions contemplated by the merger agreement be revised and the parties will enter into such alternative transactions as Parent I may reasonably determine to effect the purposes of the merger agreement. However, no such revision will be required if, in the reasonable determination of Pluralsight, such revision would reasonably be expected to (1) alter or change the amount or kind of the consideration payable to the stockholders or the unitholders, or otherwise change the economic benefits that are intended to accrue to the stockholders or the unitholders under the merger agreement and the transactions contemplated by the merger agreement, (2) prevent, materially impede or materially delay the consummation of the transactions contemplated by the merger agreement, including the equity financing of the Parent Entities by Vista Fund VII and the closing of the mergers, (3) fail to comply with the terms of the convertible notes indenture or capped call transaction, or (4) result in any adverse tax consequences for any of the stockholders or the unitholders. In addition, no such revision will be required on or after the date that this proxy statement becomes definitive if in the reasonable determination of Pluralsight, such revision would require an update or revision to this proxy statement or a resubmission of the merger agreement

 

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or the transactions contemplated by the merger agreement to the stockholders for the purpose of obtaining the requisite stockholder approvals.

Merger Consideration

Common Stock

At the effective time of the Pluralsight merger, and without any action required by any stockholder, each share of Class A common stock outstanding as of immediately prior to the effective time of the Pluralsight merger (other than Excluded Shares) will be cancelled and automatically converted into the right to receive cash in an amount equal to the Per Share Price, which is $20.26, without interest.

At the effective time of the Holdings merger, and without any action required by any unitholder, each Holdings unit outstanding as of immediately prior to the effective time of the Holdings merger (other than Holdings units held by the Pluralsight Parties) will be cancelled and automatically converted into the right to receive cash in an amount equal to the Per Unit Price, which is $20.26, without interest.

In addition, at the effective time of the Pluralsight merger, and without any action required by any stockholder, each share of Class B common stock and each share of Class C common stock, which correspond on a one-for-one basis with the Holdings units, outstanding as of immediately prior to the effective time of the Pluralsight merger (other than Excluded Shares) will be cancelled and automatically converted into the right to receive cash in an amount equal to the Class B Per Share Price and Class C Per Share Price, as applicable, which is each $0.0001, without interest, as provided in the Pluralsight Charter. Such amount payable upon each share of Class B common stock and each share of Class C common stock will, pursuant to the merger agreement, be rounded up to the nearest whole cent (after giving effect to all cash proceeds that the holder is entitled to receive with respect to all such shares of Class B common stock and Class C common stock, respectively).

The Excluded Shares, which are shares of common stock either (1) held by the Pluralsight Parties and their respective subsidiaries, (2) owned by the Buyer Parties, (3) owned by any direct or indirect wholly owned subsidiary of the Buyer Parties as of immediately prior to the Pluralsight merger or (4) owned by stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of common stock under Delaware law, will not be converted into the right to receive the consideration described above.

Outstanding Pluralsight Options, Pluralsight RSUs, Pluralsight PSUs, Holdings RSUs, and Holdings Incentive Units

At the closing of the mergers, each Vested Award will be cancelled and automatically converted into the right to receive the Vested Award Cash-out Payment.

At the closing of the mergers, each Unvested Award will be cancelled and automatically converted into the right to receive the cash replacement amount, subject to the vesting conditions described below. The cash replacement amount will be equal to the product of: (1) the total number of shares of Pluralsight common stock or Holdings units subject to the Unvested Award, multiplied by (2) $20.26 (or, for each Pluralsight Option, the excess, if any, of $20.26 over the Pluralsight Option’s per share exercise price), subject to any required tax withholdings. For these purposes, the total number of shares of common stock subject to each Pluralsight PSU will be 100% of the number of shares subject to the Pluralsight PSU that becomes eligible to vest upon measurement, by the Pluralsight Board or its Compensation Committee, of actual performance achieved as of the date of the closing of the mergers against the relevant performance criteria under the applicable Pluralsight PSU agreement, and the applicable cash replacement amount with respect to such Pluralsight PSU will, subject to the holder’s continued service with the Parent Entities and their affiliates through the end of the original performance period specified in the applicable Pluralsight PSU agreement, vest and be payable within 30 days following the end of such original performance period. The cash replacement amount will be subject to the same vesting

 

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conditions (including continued service requirements and any accelerated vesting on specific terminations of employment) that applied to the cancelled Unvested Award in effect immediately before the closing of the mergers, except for terms rendered inoperative by reason of the mergers or for any applicable administrative or ministerial changes. If the vesting conditions are satisfied, the cash replacement amount will be paid at the same time(s) as the cancelled Unvested Award would have vested according to its terms, subject to the treatment of unvested Pluralsight PSUs described above.

Any Pluralsight Options (whether vested or unvested) with a per share exercise price equal to or greater than $20.26 will be cancelled immediately upon the closing of the mergers without payment or consideration.

The Equity Plans will terminate as of the closing of the mergers.

Treatment of Purchase Rights under the 2018 Employee Stock Purchase Plan

The merger agreement generally provides that no new offering periods or purchase periods will begin under the ESPP after December 11, 2020, and no individual will be allowed to begin participating in the ESPP after December 11, 2020. After December 11, 2020, each ESPP participant will not be allowed to increase his or her payroll contribution rate from the rate in effect as of December 11, 2020, 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 times of the mergers will end no later than five days before the effective times of the mergers. All outstanding purchase rights under the ESPP will be exercised no later than one business day before the effective times of the mergers (with such purchase rights subject to any pro rata adjustments that may be necessary if the current purchase period in progress must be shortened), and the ESPP will terminate as of the effective times of the mergers. Each share of common stock purchased under the ESPP that remains outstanding as of immediately before the effective times of the mergers will be cancelled at the effective times of the mergers and converted into the right to receive $20.26, without interest thereon. In addition, the ESPP equivalent program in which Aaron Skonnard and James Budge participate that allows each of Mr. Skonnard and Mr. Budge to receive Class A common stock on each ESPP exercise date in lieu of their respective participation in the ESPP will be terminated no later than the effective times of the mergers.

Exchange and Payment Procedures

Prior to the closing of the mergers, Parent I will designate a bank or trust company reasonably satisfactory to Pluralsight (the “Payment Agent”) to make payments of the merger consideration to stockholders and unitholders. At or prior to the closing of the mergers, the Parent Entities will deposit or cause to be deposited with the Payment Agent cash sufficient to pay the aggregate amount of the Per Share Price, Per Unit Price, Class B Per Share Price and Class C Per Share Price to stockholders and unitholders.

Promptly following the closing of the mergers (and in any event within three business days), the Payment Agent will send to each holder of record of shares of common stock (A) a letter of transmittal in customary form (which will specify that delivery will be effected, and risk of loss and title to the certificates representing such shares (the “Certificates”) will pass, only upon delivery of the Certificates to the Payment Agent); and (B) instructions for use in effecting the surrender of the shares of common stock represented by the Certificates and book-entry shares, as applicable, in exchange for the Per Share Price, Class B Per Share Price or Class C Per Share Price, as applicable. The amount of any Per Share Price, Class B Per Share Price or Class C Per Share Price 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 times of the mergers, such cash will be returned to the Parent Entities, upon demand, and any holders of common stock who have not complied with the exchange procedures in the merger agreement will thereafter look only to the Parent Entities as general creditor for payment of the Per Share Price, Class B Per Share Price and Class C Per Share Price. Any cash deposited with the Payment Agent that remains unclaimed two years following the

 

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effective times of the mergers will, to the extent permitted by applicable law, become the property of the Surviving Entities 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 the Pluralsight Parties and the Buyer Parties.

Some of the representations and warranties in the merger agreement made by Pluralsight are qualified as to materiality or Company Material Adverse Effect. For purposes of the merger agreement, “Company Material Adverse Effect” means, with respect to Pluralsight, any Effect, which is any change, event, violation, inaccuracy, effect or circumstance that, individually or taken together with all other Effects that have occurred on or prior to the date of determination of the occurrence of the Company Material Adverse Effect, that is or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of the Pluralsight Parties and their subsidiaries, taken as a whole; provided, however, that none of the following (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 may, would or could occur (subject to the limitations set forth below):

 

   

changes in 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;

 

   

changes in 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;

 

   

changes in conditions in the industries in which the Pluralsight Parties and their subsidiaries generally conduct business, including changes in conditions in the cloud computing industry;

 

   

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

 

   

any 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, epidemics, pandemics or disease outbreaks (including COVID-19) and other force majeure events in the United States or any other country or region in the world;

 

   

any COVID-19 Measures (as defined in the merger agreement), including any Effect with respect to COVID-19 Measures;

 

   

any Effect resulting from the announcement of the merger agreement or the pendency of the mergers and the transactions contemplated thereby, including the impact thereof on the relationships, contractual or otherwise, of the Pluralsight Parties and their subsidiaries with employees, suppliers, customers, partners, vendors or any other third person (other than for purposes of any representation or warranty contained in Section 3.5 of the merger agreement);

 

   

the compliance by any Party with the terms of the merger agreement, including any action taken or refrained from being taken pursuant to or in accordance with the merger agreement;

 

   

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

 

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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);

 

   

changes in the price or trading volume of Class A 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 Pluralsight Parties and their subsidiaries to meet (A) any public estimates or expectations of Pluralsight’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);

 

   

the availability or cost of equity, debt or other financing to the Buyer Parties;

 

   

any transaction litigation or other legal proceeding threatened, made or brought by any of the current or former stockholders of Pluralsight (on their own behalf or on behalf of Pluralsight) against Pluralsight, any of its executive officers or other employees or any member of the Pluralsight Board arising out of the mergers or any other transaction contemplated by the merger agreement; and

 

   

any matters expressly disclosed in the confidential disclosure letter to the merger agreement.

In the merger agreement, the Pluralsight Parties have made customary representations and warranties to the Buyer Parties 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 the Pluralsight Parties and their subsidiaries;

 

   

the Pluralsight Parties’ 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, the Pluralsight Parties’ organizational documents and the Pluralsight Parties’ contracts;

 

   

the necessary approval of the Pluralsight Board;

 

   

the rendering of Qatalyst’s fairness opinion to the Pluralsight Board;

 

   

the inapplicability of anti-takeover statutes to the mergers;

 

   

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 the Pluralsight Parties or their subsidiaries or the resulting creation of any lien upon the Pluralsight Parties’ 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 the Pluralsight Parties as well as the ownership and capital structure of their subsidiaries;

 

   

the absence of any undisclosed exchangeable security, option, warrant or other right convertible into shares of capital stock, or other equity or voting interest in the Pluralsight Parties or any of the Pluralsight Parties’ subsidiaries;

 

   

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 the Pluralsight Parties’ securities;

 

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the accuracy and completeness of Pluralsight’s SEC filings and financial statements;

 

   

Pluralsight’s disclosure controls and procedures;

 

   

Pluralsight’s internal accounting controls and procedures;

 

   

the Pluralsight Parties’ and their subsidiaries’ indebtedness;

 

   

the absence of specified undisclosed liabilities;

 

   

the conduct of the business of the Pluralsight Parties and their subsidiaries in the ordinary course consistent with past practice 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, in each case since January 1, 2020;

 

   

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

 

   

real property leased or subleased by the Pluralsight Parties and their subsidiaries;

 

   

environmental matters;

 

   

trademarks, patents, copyrights and other intellectual property matters;

 

   

tax matters;

 

   

employee benefit plans;

 

   

labor matters;

 

   

the Pluralsight Parties’ and their subsidiaries’ compliance with laws and possession of necessary permits;

 

   

litigation matters;

 

   

insurance matters;

 

   

absence of any transactions, relations or understandings between the Pluralsight Parties or any of their subsidiaries and any affiliate or related person;

 

   

payment of fees to brokers in connection with the merger agreement; and

 

   

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

In the merger agreement, the Buyer Parties have made customary representations and warranties to Pluralsight 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 the Buyer Parties and availability of these documents;

 

   

the Buyer Parties’ corporate authority to enter into and perform the merger agreement, the enforceability of the merger agreement and the absence of conflicts with laws, the Buyer Parties’ organizational documents and the Buyer Parties’ 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 the Buyer Parties’ 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;

 

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ownership of capital stock of Pluralsight;

 

   

payment of fees to brokers in connection with the merger agreement;

 

   

operations of the Buyer Parties;

 

   

the absence of any required consent of holders of voting interests in the Buyer Parties;

 

   

delivery and enforceability of the Limited Guaranty;

 

   

matters with respect to the Parent Entities’ financing and sufficiency of funds;

 

   

the absence of agreements between the Parent Entities and members of the Pluralsight Board or the Pluralsight Parties and their subsidiaries’ management;

 

   

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

 

   

the solvency of the Surviving Entities following the consummation of the mergers and the transactions contemplated by the merger agreement; and

 

   

the exclusivity and terms of the representations and warranties made by the Pluralsight Parties.

The representations and warranties contained in the merger agreement will not survive the consummation of the mergers.

Conduct of Business Pending the Mergers

The merger agreement provides that, except as: (1) expressly contemplated by the merger agreement; (2) constitute any actions taken reasonably and in good faith to respond to COVID-19 or any COVID-19 Measures (as defined in the merger agreement); (3) approved by Parent I (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 effective times of the mergers, the Pluralsight Parties will, and will cause each of their subsidiaries to:

 

   

use its respective commercially reasonable efforts to maintain its existence in good standing pursuant to applicable law;

 

   

subject to the restrictions and exceptions in the merger agreement, use its respective commercially reasonable efforts to conduct its business and operations in the ordinary course of business; and

 

   

use its commercially reasonable efforts to (A) preserve intact its material assets, properties, contracts or other legally binding understandings, licenses and business organizations; (B) keep available the services of its current officers and key employees; and (C) preserve the current relationships with customers, vendors, distributors, partners (including resellers, platform partners, referral partners, consulting and implementation partners), lessors, licensors, licensees, creditors, contractors and other persons with which the Pluralsight Parties and their subsidiaries have business relations.

In addition, the Pluralsight Parties have also agreed that, except as (1) expressly contemplated by the merger agreement; (2) approved by Parent I (which approval will not be unreasonably withheld, conditioned or delayed); or (3) 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 effective times of the mergers, the Pluralsight Parties will not, and will cause each of their subsidiaries not to, among other things:

 

   

amend the organizational documents of the Pluralsight Parties;

 

   

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 Pluralsight or any of its

 

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subsidiaries, except for the issuance or sale of shares of Pluralsight common stock or Holdings units in connection with the exercise or settlement (as applicable) of convertible notes, Pluralsight Options, Pluralsight PSUs, Pluralsight RSUs, Holdings RSUs, or Holdings Incentive Units outstanding as of December 9, 2020 at 5:00 p.m. Pacific Time, in accordance with their terms and pursuant to the ESPP in accordance with its terms, in connection with agreements in effect on November 26, 2020 and in connection with any redemption of Holdings units;

 

   

directly or indirectly acquire any securities, except for repurchases, withholdings or cancellations pursuant to the terms and conditions of the transactions contemplated by the merger agreement, transactions between Pluralsight and its subsidiaries and in connection with the redemption of Holdings units;

 

   

adjust, split, combine, pledge, encumber or modify the terms of capital stock of the Pluralsight Parties or any of their subsidiaries;

 

   

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

 

   

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

 

   

mortgage, pledge or incur any lien upon any assets other than in connection with financing transactions permitted by the merger agreement or consented to by Parent I;

 

   

make any loans, advances or capital contributions to, or investments in, any other person except for (1) extensions of credit to customers in the ordinary course of business; (2) advances to directors, officers and other employees for travel and other business-related expenses, in each case in the ordinary course of business and in compliance in all material respects with the Pluralsight Parties and their subsidiaries’ policies related thereto; and (3) loans, advances or capital contributions to, or investments in, Pluralsight Holdings or any direct or indirect wholly-owned subsidiaries of Pluralsight Holdings;

 

   

purchase or sell any asset in excess of $250,000 other than (1) the sale, lease or licensing of products or services of the Pluralsight Parties and their subsidiaries or other materials embodying intellectual property of the Pluralsight Parties and their subsidiaries in the ordinary course of business; (2) the acquisition, assignment or abandonment of immaterial intellectual property of the Pluralsight Parties and their subsidiaries in connection with the exercise of the reasonable business judgment of the Pluralsight Parties and their subsidiaries in the ordinary course of business; (3) the abandonment of trade secrets in the ordinary course of business and to the extent not economically desirable to maintain for the conduct of the business of the Pluralsight Parties and their subsidiaries; and (4) any capital expenditures permitted by (or consented to by Parent I under) the confidential disclosure letter to the merger agreement;

 

   

(A) enter into, adopt, amend (including accelerating the vesting, payment or funding), modify or terminate any compensation or benefit plan or arrangement of any director, officer or employee (other than at-will offer letters (or, for jurisdictions outside of the United States, employment agreements that provide for employment periods or rights no greater than required by applicable law) entered into with new hires of employees in the ordinary course of business and consistent with past practice whose annual salary is less than $200,000); (B) increase or decrease the compensation payable or to become payable or benefits or other similar arrangements provided, or pay any special bonus or special remuneration or pay any benefit not required by (or accelerate the time of payment or vesting of any payment becoming due under) any employee plan as in effect as of the merger agreement to directors, officers or employees of Pluralsight or its subsidiaries (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 in effect; (2) for increases in compensation for employees below the level of vice president and whose annual salary is less than $200,000 in the ordinary course of business and consistent with past practice); (C) enter into any change in control, severance or similar arrangement or any retention or similar agreement with any officer, employee, director or independent contractor or other individual service provider; or (D) hire,

 

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terminate (other than for “cause”), furlough or temporarily lay off any director, officer, employee, or individual independent contractor with an annual salary or equivalent compensation of $200,000 or more;

 

   

settle litigation involving the Pluralsight Parties and their subsidiaries;

 

   

change accounting practices;

 

   

change tax elections or settle any tax claims;

 

   

make capital expenditures in excess of $1 million individually or $5 million in the aggregate, other than to the extent that such capital expenditures are otherwise reflected in Pluralsight’s capital expenditure budget, as previously disclosed to the Buyer Parties;

 

   

enter into Material Contracts (as defined in the merger agreement);

 

   

fail to maintain insurance at current levels;

 

   

engage in any transaction with, or enter into any agreement, arrangement or understanding with, any affiliate of Pluralsight or other person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404;

 

   

effect certain layoffs without complying with applicable laws;

 

   

grant any material refunds, credits, rebates or other allowances to any end user, customer, reseller or distributor, in each case other than in the ordinary course of business;

 

   

make any acquisitions by merger, consolidation or acquisition of stock or assets or enter into any joint ventures or similar arrangements, but not including strategic relationships, alliances, reseller agreements and similar commercial relationships);

 

   

enter into any collective bargaining agreement;

 

   

waive or release any noncompetition, nonsolicitation, nondisclosure, noninterference, nondisparagement, or other restrictive covenant obligation of any current or former employee or independent contractor;

 

   

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

 

   

enter into agreements to do any of the foregoing.

No Solicitation of Other Acquisition Proposals

For purposes of this proxy statement and the merger agreement:

“Acceptable Confidentiality Agreement” means an agreement with Pluralsight that contains customary provisions requiring the counterparty thereto (and any of its affiliates and representatives named therein) that receive material non-public information of or with respect to the Pluralsight Parties and their subsidiaries to keep such information confidential, provided that the provisions contained therein are no less restrictive in any material respect to such counterparty (and any of its affiliates and representatives named therein) than the terms of the confidentiality agreement entered into between Pluralsight and Vista (except that such agreement need not contain any “standstill” or similar provision or otherwise prohibit the making of any Acquisition Proposal).

“Acquisition Proposal” means any offer or proposal (other than an offer or proposal by the Buyer Parties) to engage in an Acquisition Transaction.

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

(1) any direct or indirect purchase or other acquisition by any person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons (in each case, other than the Buyer Parties, their affiliates or

 

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any group that includes the Buyer Parties or their affiliates, whether from the Pluralsight Parties or any other person(s), of securities representing more than 15% of the total outstanding equity securities of Pluralsight or Pluralsight Holdings (by vote or economic interests) 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 15% of the total outstanding equity securities of Pluralsight or Pluralsight Holdings (by vote or economic interests) after giving effect to the consummation of such tender or exchange offer;

(2) any direct or indirect purchase, license or other acquisition by any person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons of assets constituting or accounting for more than 15% of the consolidated assets, revenue or net income of Pluralsight and its subsidiaries 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 the Pluralsight Parties pursuant to which any person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons would hold securities representing more than 15% of the total outstanding equity securities of Pluralsight or Pluralsight Holdings (by vote or economic interest) outstanding after giving effect to the consummation of such transaction.

“Alternative Acquisition Agreement” means any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an Acquisition Transaction, other than an Acceptable Confidentiality Agreement.

“Superior Proposal” means any bona fide written Acquisition Proposal for an Acquisition Transaction on terms that the Pluralsight Board (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 Pluralsight Board (or a committee thereof) deems relevant, and if consummated, would be more favorable, from a financial point of view, to stockholders (in their capacity as such) than the mergers (taking into account any revisions to the merger agreement made or proposed in writing by the Parent Entities prior to the time of such determination). For purposes of the reference to an “Acquisition Proposal” in this definition, all references to (i) “15%” in the definition of “Acquisition Transaction” will be deemed to be references to “50%” and (ii) “Pluralsight or Pluralsight Holdings (by vote or economic interests)” will be deemed to be references to “the aggregate voting power of Pluralsight or the economic ownership of Pluralsight and Pluralsight Holdings taken as a whole.”

From the date of the merger agreement until the earlier to occur of the valid termination of the merger agreement and the effective time of the Pluralsight merger, the Pluralsight Parties have 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 inquiries regarding any proposal or offer that constitutes or would reasonably be expected to lead to an Acquisition Proposal;

 

   

furnish to any person (other than to the Parent Entities or any designees of the Parent Entities) any non-public information relating to the Pluralsight Parties and their subsidiaries or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Pluralsight Parties and their subsidiaries (other than to the Parent Entities or any designees of the Parent Entities), 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;

 

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participate or engage in discussions or negotiations with any person with respect to an Acquisition Proposal (other than informing such persons of the restrictions contained in this paragraph and contacting the person making the Acquisition Proposal to the extent necessary to clarify the terms of the Acquisition Proposal);

 

   

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

 

   

enter into any Alternative Acquisition Agreement.

In addition, Pluralsight has agreed to request the prompt return or destruction of all non-public information concerning the Pluralsight Parties and their subsidiaries furnished to any person with whom a confidentiality agreement was entered into at any time within the six-month period immediately preceding the execution of the merger agreement and will cease providing any further information with respect to the Pluralsight Parties 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.

Notwithstanding these restrictions, under certain circumstances, after the date of the merger agreement and prior to the adoption of the merger agreement by stockholders, the Pluralsight Parties and the Pluralsight Board (or a committee thereof) may, among other things, provide information to, and engage or participate in negotiations or substantive discussions with, a person in respect of an 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 Pluralsight’s obligations, as described in the immediately two preceding paragraphs) if (and only if), subject to complying with certain procedures described in the subsequent paragraph, the Pluralsight Board (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 Pluralsight Board’s fiduciary duties under applicable law.

Pluralsight is not entitled to terminate the merger agreement for the purpose of entering into an Alternative Acquisition Agreement, unless it complies with certain procedures in the merger agreement, including, but not limited to, negotiating with the Parent Entities and their representatives in good faith over a four business day period in an effort to amend the terms and conditions of the merger agreement, so that such Superior Proposal contemplated by such Alternative Acquisition Agreement no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the merger agreement, as amended pursuant to such negotiations.

If Pluralsight terminates the merger agreement prior to the adoption of the merger agreement by stockholders for the purpose of entering into an Alternative Acquisition Agreement, Pluralsight must pay a $104.6 million termination fee to the Parent Entities.

A breach of these “no-solicitation” provisions of the merger agreement by any director, officer or other representative of the Pluralsight Parties (other than a consultant or an employee of the Pluralsight Parties who is not an officer of Pluralsight) will be deemed to be a breach of such provisions by the Pluralsight Parties. The Pluralsight Parties may not authorize, direct or knowingly permit any consultant or employee of a Pluralsight Party to breach these “no-solicitation” provisions of the merger agreement, and upon becoming aware of any breach or threatened breach of these provisions by a consultant or employee of a Pluralsight Party, will use their reasonable best efforts to stop such breach or threatened breach.

The Pluralsight Board’s Recommendation; Pluralsight Board Recommendation Change

As described above, and subject to the provisions described below, the Pluralsight Board has made the recommendation that the stockholders vote “FOR” the proposal to adopt the merger agreement. The merger

 

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agreement provides that the Pluralsight Board will not effect a Pluralsight Board Recommendation Change (as defined below) except as described below.

Prior to the adoption of the merger agreement by stockholders, the Pluralsight Board (or a committee thereof) may not take any action described in the following (any such action, a “Pluralsight Board Recommendation Change”):

 

   

withhold, withdraw, amend, qualify or modify, or publicly propose to withhold, withdraw, amend, qualify or modify, the Pluralsight Board’s recommendation in a manner adverse to any Parent Entity in any material respect;

 

   

adopt, approve, endorse, recommend or otherwise declare advisable an Acquisition Proposal;

 

   

fail to publicly reaffirm the Pluralsight Board’s recommendation within ten business days after Parent I so requests in writing (it being understood that Pluralsight will have no obligation to make such reaffirmation on more than three separate occasions);

 

   

take or fail to take any formal action or make or fail to make any recommendation or public statement in connection with a tender or exchange offer, other than a recommendation against such offer or a “stop, look and listen” communication by the Pluralsight Board (or a committee thereof) to stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication) (it being understood that the Pluralsight Board (or a committee thereof) may refrain from taking a position with respect to an Acquisition Proposal until the close of business on the tenth business day after the commencement of a tender or exchange offer in connection with such Acquisition Proposal without such action being considered a violation of the merger agreement); or

 

   

fail to include the Pluralsight Board’s recommendation in this proxy statement.

Notwithstanding the restrictions described above, prior to the adoption of the merger agreement by stockholders, the Pluralsight Board may effect a Pluralsight Board Recommendation Change if (1) there has been an Intervening Event (as defined below); or (2) the Pluralsight Board (or a committee thereof) determines that an Acquisition Proposal constitutes a Superior Proposal.

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

 

   

Pluralsight has provided prior written notice to the Parent Entities at least four business days in advance to the effect that the Pluralsight Board (or a committee thereof) has (1) so determined; and (2) resolved to effect a Pluralsight Board Recommendation Change pursuant to the merger agreement, which notice must specify the applicable Intervening Event in reasonable detail; and

 

   

prior to effecting such Pluralsight Board Recommendation Change, Pluralsight and its representatives, during such four business day period, must have (1) negotiated with the Parent Entities and their representatives in good faith (to the extent that the Parent Entities desire to so negotiate) to make such adjustments to the terms and conditions of the merger agreement so that the Pluralsight Board (or a committee thereof) no longer determines that the failure to make a Pluralsight Board Recommendation Change in response to such Intervening Event would be inconsistent with its fiduciary duties pursuant to applicable law; and (2) permitted the Parent Entities and their representatives to make a presentation to the Pluralsight Board regarding the merger agreement and any adjustments with respect thereto (to the extent the Parent Entities request to make such a presentation).

In addition, the Pluralsight Board may only effect a Pluralsight Board Recommendation Change in response to a bona fide Acquisition Proposal that the Pluralsight Board has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal if:

 

   

the Pluralsight Board (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;

 

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Pluralsight has provided prior written notice to the Parent Entities at least four business days in advance to the effect that the Pluralsight Board (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 Pluralsight 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 Pluralsight Board Recommendation Change or termination, including the identity of the person or “group” of persons making such Acquisition Proposal, the material terms thereof and copies of all relevant documents relating to such Acquisition Proposal;

 

   

prior to effecting such Pluralsight Board Recommendation Change or termination, Pluralsight and its representatives, during the four business day notice period describe above, has: (1) negotiated with the Parent Entities and their representatives in good faith (to the extent that the Parent Entities desire to so negotiate) to make such adjustments to the terms and conditions of the merger agreement so that such Acquisition Proposal would cease to constitute a Superior Proposal; and (2) permitted the Parent Entities and their representatives to make a presentation to the Pluralsight Board regarding the merger agreement and any adjustments with respect thereto (to the extent that the Parent Entities request to make such a presentation);

 

   

in the event of any termination of the merger agreement in order to cause or permit the Pluralsight Parties and their subsidiaries to enter into Alternative Acquisition Agreement, Pluralsight has validly terminated the merger agreement in accordance with the terms of the merger agreement, including paying to the Parent Entities a termination fee of $104.6 million; and

 

   

the Pluralsight Parties and their subsidiaries and their representatives have 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 positive material event or development or material change in circumstances with respect to Pluralsight (other than in connection with a bona fide Acquisition Proposal that constitutes a Superior Proposal) that (1) was not actually known to, or reasonably expected by, the Pluralsight Board as of the date on which the merger agreement was executed; or (2) does not relate to (a) any Acquisition Proposal; or (b) the mere fact, in and of itself, that Pluralsight 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 Pluralsight’s common stock or credit rating, 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 the Parent Entities will cause the Surviving Entities to honor all of the terms of the Pluralsight Parties and their subsidiaries’ benefit plans and compensation and severance arrangements following the effective times of the mergers in accordance with their terms as in effect immediately before the effective times of the mergers. In addition, following the effective times of the mergers through December 31, 2021, each employee who continues employment following the mergers (a “Continuing Employee”) will be provided with employee benefit plans or other compensation and severance arrangements (other than defined pension, nonqualified deferred compensation, post-termination or retiree health or welfare, or 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 times of the mergers, in each case, either through (i) Pluralsight’s benefit plans and arrangements in existence immediately before the effective times of the mergers, (ii) comparable plans, or some combination of (i) and (ii). In each case, base compensation and target incentive

 

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compensation opportunity will not be decreased for a period of one year following the effective times of the mergers for any Continuing Employee employed during that period. Following the effective times of the mergers through December 31, 2021, eligible employees will receive severance benefits according to Pluralsight’s severance plans, guidelines and practices as in effect on December 11, 2020.

The Surviving Entities will grant any Continuing Employee credit for all service with the Pluralsight Parties and their subsidiaries before the effective times of the mergers for purposes of eligibility to participate, vesting and for purposes of vacation accrual and severance pay entitlement where length of service is relevant, entitlement to benefits, except (i) no service credit shall result in duplication of coverage or benefits; and (ii) no service credit shall be required under any plan providing equity or equity-based, defined benefit pension, deferred compensation or post-termination or retiree welfare benefits. The Surviving Entities shall use commercially reasonable efforts to provide that (i) each Continuing Employee will be immediately eligible to participate, without any waiting period, in any and all employee benefit plans sponsored by the Surviving Entities and their subsidiaries (other than Pluralsight’s benefit plans and arrangements in existence immediately before the effective times of the mergers) to the extent that coverage under any of the employee benefit plans sponsored by the Surviving Entities and their subsidiaries replaces coverage under a comparable Pluralsight benefit plan or arrangement in which the Continuing Employee participates immediately before the effective times of the mergers; (ii) during the plan year in which the closing of the mergers occurs, for purposes of each employee benefit plan sponsored by the Surviving Entities or any of their subsidiaries that provides medical, dental, pharmaceutical, vision or disability benefits to any Continuing Employee, all waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements of the plan will be waived for the Continuing Employee and his or her covered dependents, and full credit will 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 Pluralsight benefit plan or arrangement in which the Continuing Employee participates immediately before the effective times of the mergers that ends on the date that the Continuing Employee’s participation in the corresponding employee benefit plan sponsored by the Surviving Entities or their subsidiary begins for purposes of satisfying all 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 Entities or their subsidiary; and (iii) the account of each Continuing Employee under any flexible spending plan sponsored will be credited by the Surviving Entities or any of their subsidiaries 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 times of the mergers will be credited to the Continuing Employee following the effective times of the mergers, 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 Pluralsight’s benefit plans and arrangements in effect as of December  11, 2020).

Efforts to Close the Mergers

Under the merger agreement, the Buyer Parties and the Pluralsight Parties 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 mergers.

Cooperation with Debt Financing, Convertible Notes and Capped Call Transactions

Although the obligation of the Buyer Parties to consummate the mergers is not subject to any financing condition (including, without limitation, consummation of any debt financing), the Pluralsight Parties have agreed that they will, and will cause their subsidiaries to, and will use their reasonable best efforts to cause their and their subsidiaries’ respective representatives to, among other things:

 

   

provide the Parent Entities with such reasonable cooperation as may be reasonably requested by any Parent Entity to assist the Buyer Parties in arranging the debt financing (if any) to be obtained by the Buyer Parties or their respective affiliates in connection with the mergers (the “debt financing”);

 

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participate (and cause senior management and representatives, with appropriate seniority and expertise, of the Pluralsight Parties 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 reasonably cooperate with the marketing and due diligence efforts for any of the debt financing;

 

   

provide reasonable assistance to the Parent Entities and the 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 or customarily used to arrange transactions similar to the debt financing by companies of a comparable size in a comparable industry as Pluralsight; and (B) pro forma financial statements and forecasts of financial statements of the Surviving Entities for one or more periods following the date of the closing of the mergers;

 

   

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

 

   

furnish the Parent Entities and the financing sources, as promptly as practicable, with (A) to the extent customarily provided by companies of comparable size and comparable industry in transactions similar to the debt financing for a financing of the type being incurred, financial and other pertinent and customary information regarding the Pluralsight Parties and their subsidiaries as may be reasonably requested by any Parent Entity or the 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 (B)(1) audited consolidated balance sheets and related statements of income and cash flows of Pluralsight and its subsidiaries on a consolidated basis for the fiscal years ended December 31, 2017, 2018 and 2019 and, if such fiscal year ends at least 90 days prior to the date of the closing of the mergers, 2020 and (2) in respect of any subsequent fiscal quarter ending after January 1, 2020 and at least 45 days prior to the date of the closing of the mergers, unaudited consolidated balance sheets and related statements of income and cash flows of Pluralsight and its subsidiaries for such fiscal quarter, in each case prepared in accordance with GAAP (subject to the absence of footnotes and year-end adjustments, in the case of unaudited financial statements);

 

   

cooperate with the Parent Entities to obtain 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 any Parent Entity;

 

   

reasonably facilitate the granting of security interests (and perfection thereof) in collateral or the reaffirmation of the pledge of collateral on or after the date of the closing of the mergers, and obtain and deliver any payoff letters and other cooperation in connection with the repayment or other retirement of existing indebtedness required to be repaid at the closing and the release and termination of any and all related liens on or prior to the date of the closing of the mergers;

 

   

deliver notices of prepayment within the time periods required by the relevant agreements governing indebtedness and obtaining customary payoff letters, lien terminations and instruments of discharge to be delivered at the closing, giving any other necessary notices, to allow for the payoff, discharge and termination in full at the closing of all indebtedness required to be repaid at the closing; and cooperating in the replacement, backstop or cash collateralization of any outstanding letters of credit issued for the account of Pluralsight or any of its subsidiaries;

 

   

provide customary authorization letters, confirmations and undertakings to the financing sources;

 

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facilitate and assist in the preparation, execution and delivery of one or more credit agreements, guarantees, certificates and other definitive financing documents as may be reasonably requested by any Parent Entity;

 

   

ensure that the debt financing benefits from existing lending relationships of Pluralsight and its Subsidiaries to the extent reasonably requested by any Parent Entity;

 

   

take all corporate and other actions, subject to the occurrence of the closing, reasonably requested by any Parent Entity 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 Entities or any of their subsidiaries concurrently with or immediately following the effective times of the mergers;

 

   

promptly furnish the Parent Entities and the financing sources with all documentation and other information about the Pluralsight Parties and their subsidiaries as is reasonably requested by any Parent Entity or the financing sources relating to applicable “know your customer” and anti-money laundering rules and regulations;

 

   

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 Pluralsight, its subsidiaries or their respective representatives;

 

   

use its reasonable best efforts to give all notices and take all other actions that may be required under or in connection with Pluralsight’s 0.375% Convertible Senior Notes due 2024 (the “Convertible Notes”) or the capped call transactions entered into in connection therewith (the “Capped Call Transactions”) or under applicable law;

 

   

take all actions required to facilitate the settlement of the Capped Call Transactions in connection with the closing; and

 

   

not amend, modify or terminate the documentation governing the Capped Call Transactions without the prior written consent of Parent I (other than any modification or adjustment made by counterparties to such documentation without the need for consent of or agreement by Pluralsight pursuant to the terms of such documentation).

Notwithstanding the foregoing, the Pluralsight Parties and their subsidiaries are not required to (i) waive or amend any terms of the merger agreement or agree to pay any fees or reimburse any expenses prior to the effectives times of the mergers for which they have not received prior reimbursement or are not otherwise indemnified by or on behalf of the Parent Entities; (ii) enter into any definitive agreement or distribute any cash (except to the extent subject to concurrent reimbursement by the Parent Entities) that will be effective prior to the date of the closing of the mergers; (iii) give any indemnities in connection with the cooperation requirements described herein that are, in each case, effective prior to the effective times of the mergers; (iv) 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 (v) 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 any member of the Pluralsight Parties or their subsidiaries is a party. In addition, (A) no action, liability or obligation of the Pluralsight Parties and their subsidiaries 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 Pluralsight Parties and their subsidiaries pursuant to the cooperation requirements described herein (other than customary representation letters, authorization letters and undertakings) will be effective until the effective times of the mergers, and the Pluralsight Parties and their subsidiaries will not be required to take 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 times of the mergers; and (B) any bank information memoranda required in relation to the debt financing will contain disclosure reflecting the Surviving Corporation

 

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or its subsidiaries as the obligor. No officer or representative of the Pluralsight Parties and their subsidiaries 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 Pluralsight Board shall not be required to approve any financing or agreements related thereto, that are, in each case, effective prior to the date of the closing of the mergers.

In addition, the Parent Entities shall (1) reimburse Pluralsight for any documented and reasonable out-of-pocket costs and expenses (including attorneys’ fees) incurred by the Pluralsight Parties and their subsidiaries in connection with the cooperation requirements described herein and (2) indemnify the Pluralsight Parties and their subsidiaries and their 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.

Obtaining the debt financing is not a condition to the closing of the mergers. Except in the case of a willful and material breach that has not been cured by the Pluralsight Parties within a reasonable period of time after a Parent Entity has provided written notice to Pluralsight of the specific breach, the Pluralsight Parties’ breach of its obligations to cooperate in obtaining the debt financing will not be asserted as the basis for (1) any conditions to consummate the mergers having not been satisfied or (B) the termination of the merger agreement.

Indemnification and Insurance

The merger agreement provides that the Surviving Entities and their subsidiaries will (and the Parent Entities will cause the Surviving Entities and their subsidiaries to) honor and fulfill, in all respects, the obligations of the Pluralsight Parties and their subsidiaries pursuant to any indemnification agreements with employees and indemnified persons, which are any of their current or former directors or officers (and any person who becomes a director or officer of a member of Pluralsight Parties and their subsidiaries prior to the effective times of the mergers), for any acts or omissions by such indemnified persons or employees occurring prior to the effective times of the mergers. In addition, during the period commencing at the effective times of the mergers and ending on the sixth anniversary of the effective times of the mergers, the Surviving Entities and their subsidiaries will (and the Parent Entities will cause the Surviving Entities and their subsidiaries to) cause the certificates of incorporation, bylaws, and other similar organizational documents of the Pluralsight Parties and their subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the Pluralsight Charter, Pluralsight’s bylaws, the Holdings LLC agreement and other similar organizational documents of the subsidiaries of Pluralsight, as applicable, as of the date hereof. During such six-year period, such provisions may not be repealed, amended or otherwise modified in any adverse manner except as required by applicable law.

In addition, the merger agreement provides that, during the six-year period commencing at the effective times of the mergers, the Surviving Entities will (and the Parent Entities must cause the Surviving Entities to) indemnify and hold harmless each current or former director or officer of the Pluralsight Parties and their subsidiaries, to the fullest extent permitted by law or pursuant to any indemnification agreements with Pluralsight Parties and their subsidiaries in effect on the date of the merger agreement, 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 an affiliate, director, officer, employee or agent of the Pluralsight Parties and their subsidiaries or their affiliates to the extent that such action or omission, or alleged action or omission, occurred prior to or at the effective times of the mergers; and (2) the mergers, as well as any actions taken by the Pluralsight Parties or the Buyer Parties with respect thereto. The merger agreement also provides that the Pluralsight Parties and their subsidiaries will 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.

 

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The merger agreement also provides that Pluralsight may purchase a prepaid “tail” policy from an insurance carrier with the same or better credit rating as Pluralsight’s directors’ and officers’ liability insurance carrier on the date of the merger agreement, subject to certain limits on the aggregate cost for such “tail” policy. The “tail” policy will cover claims arising from facts, events, acts or omissions that occurred at or prior to the effective times of the merger, including the transactions contemplated in the merger agreement.

In addition, without limiting the foregoing, unless Pluralsight has purchased a “tail” policy, the merger agreement requires the Parent Entities to cause the Surviving Corporation to maintain, on terms no less advantageous to the indemnified parties, Pluralsight’s directors’ and officers’ insurance policies for a period of at least six years commencing at the effective times of the mergers. Neither the Parent Entities 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 Pluralsight, and if the premium for such insurance coverage would exceed such amount the Parent Entities shall be obligated to cause the Surviving Corporation to obtain the greatest coverage available for a cost not exceeding such amount.

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

Other Covenants

Stockholders Meeting

Pluralsight has agreed to take all necessary action (in accordance with applicable law and Pluralsight’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 after the date of the merger agreement for the purpose of voting upon the adoption of the merger agreement and the approval of the mergers.

Stockholder Litigation

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

Conditions to the Closing of the Mergers

The obligations of the Buyer Parties, on the one hand, and the Pluralsight Parties, on the other hand, to consummate the mergers are subject to the satisfaction or waiver (where permitted by applicable law) of each of the following conditions:

 

   

the absence of any law or order restraining, enjoining or otherwise prohibiting the mergers;

 

   

the adoption of the merger agreement by the affirmative vote of each of (1) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) and (2) the holders of a majority of the voting power of the outstanding shares of common stock (voting together as a single class) not held by the Pluralsight excluded parties;

 

   

the expiration or termination of the applicable waiting period under the HSR Act, and the receipt of other required regulatory approvals or clearances under the competition laws of Austria and Germany, and under the foreign investment laws of Australia and New Zealand, unless a relevant exemption applies; and

 

   

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

 

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In addition, the obligations of the Buyer Parties to consummate the mergers are subject to the satisfaction or waiver (where permitted by applicable law) of each of the following additional conditions:

 

   

the representations and warranties of the Pluralsight Parties relating to organization, good standing, corporate power, enforceability, anti-takeover laws, certain aspects of the Pluralsight Parties’ capitalization, brokers and the absence of any Company Material Adverse Effect 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 the Pluralsight Parties relating to certain aspects of the Pluralsight Parties’ 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 Pluralsight, the Parent Entities and their affiliates, individually or in the aggregate, that is more than $10 million;

 

   

the other representations and warranties of the Pluralsight Parties 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;

 

   

the Pluralsight Parties’ having performed and complied in all material respects with all covenants, obligations and conditions of the merger agreement required to be complied with by the Pluralsight Parties;

 

   

the absence of any Company Material Adverse Effect having occurred after the date of merger agreement that is continuing as of the Closing Date; and

 

   

the receipt by the Buyer Parties of a certificate of the Pluralsight Parties, validly executed for and on behalf of the Pluralsight Parties and in their respective names by a duly authorized executive officer thereof, certifying that the conditions described in the preceding five bullets have been satisfied.

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

 

   

the representations and warranties of the Buyer Parties 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 delay the consummation of the mergers or the ability of the Buyer Parties to fully perform their respective covenants and obligations pursuant to the merger agreement;

 

   

the Buyer Parties’ 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 the Buyer Parties at or prior to the date of the closing of the mergers; and

 

   

the receipt by the Pluralsight Parties of a certificate of the Buyer Parties, validly executed for and on behalf of the Buyer Parties 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 of the Holdings merger, whether before or after the adoption of the merger agreement by stockholders, in the following ways:

 

   

by mutual written agreement of Pluralsight and Parent I;

 

   

by either Pluralsight or Parent I if:

 

   

prior to the effective time of the Holdings merger, (1) any permanent injunction or other legal or regulatory restraint or prohibition preventing the consummation of the mergers is in effect, that

 

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prohibits, makes illegal or enjoins the consummation of the mergers and has become final and non-appealable; or (2) any statute, rule, regulation or order is enacted, entered, enforced or deemed applicable to the mergers that prohibits, makes illegal or enjoins the consummation of the mergers;

 

   

the mergers have not been consummated by 11:59 p.m., Pacific time, on July 12, 2021 (the “Termination Date”); or

 

   

stockholders fail to adopt the merger agreement at the special meeting or any adjournment or postponement thereof;

 

   

by Pluralsight if:

 

   

the Buyer Parties have breached or failed to perform any of their 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 or failure to perform is not capable of being cured, or is not cured, before the earlier of the Termination Date or the date that is 45 calendar days following Pluralsight’s delivery of written notice of such breach; or

 

   

prior to the adoption of the merger agreement by stockholders and so long as the Pluralsight Parties are not then in material breach of its obligations related to Acquisition Proposals and Superior 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 Pluralsight’s payment to the Parent Entities of a termination fee of $104.6 million; and

 

   

by Parent I if:

 

   

the Pluralsight Parties have breached or failed to perform any of their 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 or failure to perform is not capable of being cured, or is not cured, before the earlier of the Termination Date or the date that is 45 calendar days following Parent I’s delivery of written notice of such breach; or

 

   

prior to the adoption of the merger agreement by stockholders, the Pluralsight Board effects a Pluralsight Board Recommendation Change (except that such right to terminate will expire at 5:00 p.m., Pacific time, on the 10th business day following that Pluralsight 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. In addition, no termination of the merger agreement will affect the rights or obligations of any party pursuant to the confidentiality agreement between Vista and Pluralsight or the Limited Guaranty, which rights, obligations and agreements will survive the termination of the merger agreement in accordance with their respective terms.

Termination Fee

If the Pluralsight Parties terminate the merger agreement prior to the adoption of the merger agreement by stockholders for the purposes of entering into a definitive Alternative Acquisition Agreement to consummate a Superior Proposal or under specified circumstances including those described below, the Pluralsight Parties must pay a $104.6 million termination fee to the Parent Entities.

 

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The Parent Entities will be entitled to receive a $104.6 million termination fee from the Pluralsight Parties if the merger agreement is terminated:

 

   

(1) (a) by either Parent I or Pluralsight because (i) the closing has not occurred by the Termination Date and the closing conditions to the merger agreement have been satisfied; or (ii) the stockholders fail to adopt the merger agreement and there is no legal or regulatory restraint on consummating the mergers; or (b) by Parent I because the Pluralsight Parties have materially breached or failed to perform their representations, warranties, covenants or agreements in the merger agreement and there is no legal or regulatory restraint on consummating the mergers; (2) since the date of the merger agreement and prior to its termination, an Acquisition Proposal has been publicly announced or publicly disclosed and not withdrawn or otherwise abandoned; and (3) a Pluralsight Party 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 (i) “15%” in the definition of “Acquisition Transaction” are deemed to be references to “50%” and (ii) “Pluralsight or Pluralsight Holdings (by vote or economic interest)” are deemed to be references to “the aggregate voting power of Pluralsight or the economic ownership of Pluralsight and Pluralsight Holdings taken as a whole”);

 

   

by Parent I, because the Pluralsight Board has effected a Company Board Recommendation Change (which termination must occur by 5:00 p.m., Pacific time, on the 10th business day follo