Upgrade to SI Premium - Free Trial

Form DEFM14A Sailpoint Technologies

May 31, 2022 5:05 PM
Table of Contents

 

 

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

SAILPOINT TECHNOLOGIES HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check all boxes that apply):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


Table of Contents

 

LOGO

SailPoint Technologies Holdings, Inc.

11120 Four Points Drive, Suite 100

Austin, Texas 78726

(512) 346-2000

Dear SailPoint Stockholder:

You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of holders of common stock, par value $0.0001 per share, of SailPoint Technologies Holdings, Inc. (“SailPoint common stock,” and the holders thereof “SailPoint Stockholders”), a Delaware corporation (“SailPoint” or the “Company”), to be held on June 30, 2022, at 12:30 p.m., Central Time. SailPoint will hold the Special Meeting virtually via the Internet at www.proxydocs.com/SAIL. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting.

At the Special Meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated as of April 10, 2022 (the “Merger Agreement”), by and among SailPoint, Project Hotel California Holdings, LP, a Delaware limited partnership (“Parent”) and Project Hotel California Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to SailPoint’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. Parent and Merger Sub are entities that are affiliated with Thoma Bravo, L.P., a private equity investment firm. All references herein to “Thoma Bravo” include Thoma Bravo, L.P. and the affiliated funds thereof. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into SailPoint and the separate corporate existence of Merger Sub will cease, with SailPoint continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”).

If the Merger is completed, you will be entitled to receive $65.25 in cash, less any applicable withholding taxes, for each share of SailPoint common stock that you own, unless you have properly exercised your appraisal rights.

The Board of Directors of SailPoint (the “Board of Directors” or the “Board”), after considering the factors more fully described in the enclosed proxy statement, and acting by the recommendation of a special committee of the Board of Directors, has unanimously: (i) determined that it is in the best interests of SailPoint and SailPoint Stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby; and (iii) resolved to recommend that SailPoint Stockholders adopt the Merger Agreement. The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

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

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


Table of Contents

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

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

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

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

Innisfree M&A Incorporated,

501 Madison Avenue, 20th Floor,

New York, NY, 10022

Banks and Brokers Call: (212) 750-6833

All Others Call: (877) 750-8332

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

 

Sincerely,

/s/ Mark McClain

Mark McClain

Chief Executive Officer and Director

The accompanying proxy statement is dated May 31, 2022 and, together with the enclosed form of proxy card, is first being mailed on or about May 31, 2022.


Table of Contents

 

LOGO

SailPoint Technologies Holdings, Inc.

11120 Four Points Drive, Suite 100

Austin, Texas 78726

(512) 346-2000

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD VIRTUALLY VIA THE INTERNET ON JUNE 30, 2022

Notice is hereby given that a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of holders of common stock, par value $0.0001 per share, of SailPoint Technologies Holdings, Inc. (“SailPoint common stock,” and the holders thereof “SailPoint Stockholders”), a Delaware corporation (“SailPoint” or the “Company”), will be held on June 30, 2022, at 12:30 p.m., Central Time. SailPoint will hold the Special Meeting virtually via the Internet at www.proxydocs.com/SAIL. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting. The Special Meeting is being held for the following purposes:

 

  1.

To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of April 10, 2022 (the “Merger Agreement”), by and among Project Hotel California Holdings, LP, a Delaware limited partnership (“Parent”) and Project Hotel California Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into SailPoint and the separate corporate existence of Merger Sub will cease, with SailPoint continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”);

 

  2.

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

 

  3.

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

Only SailPoint Stockholders of record as of the close of business on May 25, 2022, are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

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

SailPoint Stockholders who do not vote in favor of adopting the Merger Agreement will have the right to seek appraisal of the “fair value” of their shares of SailPoint common stock, as determined in accordance with Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”), if they deliver a demand for appraisal before the vote is taken on the proposal to adopt the Merger Agreement and comply with all the requirements of Delaware law, including Section 262 of the DGCL, which are summarized in the accompanying proxy statement. Section 262 of the DGCL is reproduced in its entirety in Annex C to the accompanying proxy statement and is incorporated therein by reference.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically


Table of Contents

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

 

By Order of the Board of Directors,

/s/ Mark McClain

Mark McClain

Chief Executive Officer and Director

Dated: May 31, 2022


Table of Contents

YOUR VOTE IS IMPORTANT

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

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

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

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

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

Innisfree M&A Incorporated,

501 Madison Avenue, 20th Floor,

New York, NY, 10022

Banks and Brokers Call: (212) 750-5833

All Others Call: (877) 750-8332


Table of Contents

TABLE OF CONTENTS

 

SUMMARY

     1  

Parties Involved in the Merger

     1  

The Merger

     2  

Merger Consideration

     2  

Treatment of Convertible Securities

     4  

U.S. Federal Income Tax Consequences of the Merger

     5  

Appraisal Rights

     6  

Regulatory Approvals Required for the Merger

     6  

Closing Conditions

     7  

Financing of the Merger

     7  

Required Stockholder Approval

     8  

The Special Meeting

     9  

Recommendation of the SailPoint Board of Directors

     9  

Opinion of Morgan Stanley & Co. LLC

     10  

Interests of Executive Officers and Directors of SailPoint in the Merger

     11  

Alternative Acquisition Proposals

     11  

Termination of the Merger Agreement

     13  

Effect on SailPoint if the Merger Is Not Completed

     13  

QUESTIONS AND ANSWERS

     14  

FORWARD-LOOKING STATEMENTS

     22  

THE SPECIAL MEETING

     24  

Date, Time and Place

     24  

Purpose of the Special Meeting

     24  

Record Date; Shares Entitled to Vote; Quorum

     24  

Vote Required; Abstentions and Broker Non-Votes

     24  

Stock Ownership and Interests of Certain Persons

     25  

Voting of Proxies

     25  

Revocability of Proxies

     26  

Board of Directors’ Recommendation

     26  

Solicitation of Proxies

     26  

Anticipated Date of Completion of the Merger

     27  

Appraisal Rights

     27  

Delisting and Deregistration of SailPoint Common Stock

     27  

Other Matters

     28  

Householding of Special Meeting Materials

     28  

Questions and Additional Information

     28  

THE MERGER

     29  

Parties Involved in the Merger

     29  


Table of Contents

Effect of the Merger

     30  

Effect on SailPoint If the Merger Is Not Completed

     30  

Merger Consideration

     31  

Company Options

     31  

Company RSUs

     32  

Background of the Merger

     32  

Recommendation of the Board of Directors and Reasons for the Merger

     48  

Opinion of Morgan Stanley & Co. LLC

     51  

Capped Call Transactions

     60  

Management Projections

     61  

Interests of Executive Officers and Directors of SailPoint in the Merger

     65  

Financing of the Merger

     70  

Closing and Effective Time

     73  

Appraisal Rights

     73  

Accounting Treatment

     78  

U.S. Federal Income Tax Consequences of the Merger

     78  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     83  

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

     83  

Closing and Effective Time

     84  

Merger Consideration

     84  

Treatment of Convertible Securities

     85  

Exchange and Payment Procedures

     86  

Representations and Warranties

     87  

Conduct of Business Pending the Merger

     90  

The Go-Shop Period—Solicitation of Other Offers

     92  

The No-Shop Period—No Solicitation of Other Offers

     94  

The Board of Directors’ Recommendation; Change of Recommendation

     96  

Employee Benefits

     99  

Efforts to Close the Merger

     99  

Cooperation with Debt Financing

     99  

Indemnification and Insurance

     101  

Other Covenants

     103  

Conditions to the Closing of the Merger

     103  

Termination of the Merger Agreement

     104  

Termination Fee

     106  

Specific Performance

     107  

Limitations of Liability

     108  

Fees and Expenses

     108  


Table of Contents

Amendment

     108  

Governing Law

     108  

PROPOSAL 2: THE SAILPOINT COMPENSATION PROPOSAL

     110  

PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

     111  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     112  

FUTURE STOCKHOLDER PROPOSALS

     115  

WHERE YOU CAN FIND MORE INFORMATION

     116  

MISCELLANEOUS

     118  


Table of Contents

SUMMARY

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

Except as otherwise specifically noted in this proxy statement, “SailPoint,” “we,” “our,” “us,” the “Company” and similar words refer to SailPoint Technologies Holdings, Inc. Throughout this proxy statement, we refer to Project Hotel California Holdings, LP as “Parent” and Project Hotel California Merger Sub, Inc. as “Merger Sub.” In addition, throughout this proxy statement, we refer to the Agreement and Plan of Merger, dated April 10, 2022, by and among Parent, Merger Sub and SailPoint as the “Merger Agreement,” our common stock, par value $0.0001 per share, as “SailPoint common stock,” and the holders of SailPoint common stock as “SailPoint Stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.

Parties Involved in the Merger

SailPoint Technologies Holdings, Inc.

SailPoint is the leader in identity security for the modern enterprise. Harnessing the power of our deep expertise combined with machine learning, SailPoint automates the management and control of access, delivering only the required access to the right identities and technology resources at the right time. Our sophisticated identity platform seamlessly integrates with existing systems and workflows, providing the singular view into all identities and their access. We meet customers where they are with an intelligent identity solution that matches the scale, velocity and environmental needs of the modern enterprise. SailPoint empowers the most complex enterprises worldwide to build a security foundation grounded in identity security. SailPoint common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “SAIL.”

Project Hotel California Holdings, LP

Parent was formed on April 1, 2022, 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 debt financing in connection with the Merger.

Project Hotel California Merger Sub, Inc.

Merger Sub is a wholly owned subsidiary of Parent and was formed on April 1, 2022, 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 debt financing in connection with the Merger.

Parent and Merger Sub are affiliated with Thoma Bravo Fund XV, L.P. (the “Thoma Bravo Fund”), and Parent, Merger Sub and the Thoma Bravo Fund are each affiliated with Thoma Bravo, L.P. (“Thoma Bravo”). Thoma

 

1


Table of Contents

Bravo is a leading private equity firm focused on the software and technology-enabled services sectors. At the Effective Time (as defined in the section of this proxy statement captioned “—The Merger”), the Surviving Corporation (as defined in the section of this proxy statement captioned “—The Merger”), will be indirectly owned by the Thoma Bravo Fund and certain of its affiliates.

In connection with the transactions contemplated by the Merger Agreement, (1) the Thoma Bravo Fund has provided Parent with an equity commitment and (2) Parent has obtained debt financing commitments from Golub Capital Markets LLC, Blackstone Alternative Credit Advisors LP, Owl Rock Capital Advisors LLC, Marfic Investment Pte Ltd., Antares Holdings LP, Antares Capital LP, BlackRock Capital Investment Advisors, LLC, Fortress Credit Corp., Macquarie Capital (USA) Inc., Macquarie PF Inc., Onex Falcon Direct Lending BDC Fund, LLC and Thoma Bravo Credit Fund II, L.P. The amounts committed under the Financing Letters will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments at the closing (including the Required Amounts (as defined in the section of this proxy statement captioned “The Merger—Financing of the Merger”)), subject to the terms and conditions of the Merger Agreement. In addition, the Thoma Bravo Fund has agreed to guarantee the payment of certain liabilities and obligations of Parent or Merger Sub under the Merger Agreement, subject to an aggregate cap equal to $431.1 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by SailPoint, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

The Merger

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

Merger Consideration

SailPoint Common Stock

At the Effective Time, each then outstanding share of SailPoint common stock (other than shares of SailPoint common stock (i) held by SailPoint as treasury stock or otherwise, (ii) owned by Parent or Merger Sub, or (iii) owned by SailPoint Stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of SailPoint common stock in accordance with Section 262 of the DGCL, collectively, the “Excluded Shares”) will be cancelled and extinguished and automatically converted into the right to receive an amount in cash equal to $65.25, without interest thereon (the “Per Share Merger Consideration”), less any applicable withholding taxes.

At or prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate Per Share Merger Consideration with a designated payment agent for payment of each share of

 

2


Table of Contents

SailPoint common stock owned by each SailPoint Stockholder. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”

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

Treatment of Company Equity Awards

Company Options

Each option to purchase shares of SailPoint common stock (each, a “Company Option”) that is vested in accordance with its terms and outstanding as of immediately prior to the Effective Time (each, a “Vested Company Option”) will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Vested Company Option by (y) the total number of shares of SailPoint common stock underlying such Vested Company Option, subject to any required withholding of taxes.

Each Company Option that is outstanding as of immediately prior to the Effective Time and that is not a Vested Company Option (each, an “Unvested Company Option”) will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Unvested Company Option by (y) the total number of shares of SailPoint common stock underlying such Unvested Company Option (the “Unvested Company Option Consideration”). Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company Option Consideration amounts will vest and become payable at the same time as the Unvested Company Option from which such Unvested Company Option Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company Option immediately prior to the Effective Time with respect to the receipt of the Unvested Company Option Consideration.

Company RSUs

Each restricted stock unit award in respect of shares of SailPoint common stock (each, a “Company RSU”) that is outstanding as of immediately prior to the Effective Time and either (x) held by a non-employee member of the Board of Directors or (y) vested in accordance with its terms as of the Effective Time (each, a “Vested Company RSU”) will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Vested Company RSU by (y) the Per Share Merger Consideration, subject to any required withholding of taxes.

Each Company RSU that is outstanding as of immediately prior to the Effective Time and not a Vested Company RSU (each, an “Unvested Company RSU”) will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Company RSU by (y) the Per Share Merger Consideration (the “Unvested Company RSU Consideration”).

 

3


Table of Contents

Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company RSU Consideration amounts will vest and become payable at the same time as the Unvested Company RSU from which such Unvested Company RSU Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company RSU immediately prior to the Effective Time with respect to the receipt of the Unvested Company RSU Consideration.

Treatment of Company ESPP

In accordance with the terms of the Merger Agreement, on April 10, 2022 , the Board of Directors adopted resolutions providing that, with respect to the SailPoint Employee Stock Purchase Plan (the “Company ESPP”), (i) participation in the Company ESPP will be limited to those employees who are participants on the date of the Merger Agreement, (ii) participants may not increase their payroll deduction elections or rate of contributions from those in effect on the date of the Merger Agreement or make any separate non-payroll contributions to the Company ESPP on or following the date of the Merger Agreement, (iii) no offering period will be commenced after the date of the Merger Agreement, (iv) each then outstanding purchase right shall be exercised as of the earlier of (A) the end of the offering period in effect on the date of the Merger Agreement or (B) ten (10) days prior to the date on which the Effective Time occurs, and (v) the Company ESPP will terminate immediately prior to, but contingent upon the occurrence of, the Effective Time, but subsequent to the exercise of purchase rights on such purchase date (in accordance with the terms of the Company ESPP). On such exercise date, SailPoint will apply the funds credited as of such date pursuant to the Company ESPP within each participant’s payroll withholding account to the purchase of whole shares of SailPoint common stock in accordance with the terms of the Company ESPP and each share purchased thereunder immediately prior to the Effective Time will be canceled at the Effective Time and converted into the right to receive the Per Share Merger Consideration, subject to withholding of any applicable withholding taxes. Any accumulated contributions of each participant under the Company ESPP as of immediately prior to the Effective Time will, to the extent not used to purchase shares in accordance with the terms and conditions of the Company ESPP, be refunded to such participant as promptly as practicable following the Effective Time (without interest).

Treatment of Convertible Securities

The Merger Agreement provides that, on the date on which the closing of the Merger occurs (the “Closing Date”), Parent, Merger Sub and SailPoint are required, as and to the extent required by the Convertible Notes Indenture (as defined in the section of this proxy statement captioned “—Financing of the Merger”), to execute, and use reasonable best efforts to cause the trustee to execute, any supplemental indenture(s) required by the Convertible Notes Indenture and deliver any certificates and other documents required by the Convertible Notes Indenture to be delivered by such persons in connection with such supplemental indenture(s). SailPoint is required to use its reasonable best efforts to provide Parent and its counsel reasonable opportunity to review and comment on any notices, certificates, press releases, supplemental indentures, or other documents or instruments deliverable pursuant to the Convertible Notes Indenture prior to the dispatch or making thereof and to incorporate all reasonable comments provided by Parent and its counsel with respect thereto.

Prior to the Effective Time, SailPoint is required to (i) use reasonable best efforts to facilitate the settlement of the Capped Call Transactions (as defined in the section of this proxy statement captioned “The Merger—Capped Call Transactions”) at or promptly following the Effective Time as reasonably requested by Parent and (ii) use reasonable best efforts to cooperate with Parent with respect to Parent’s efforts to negotiate any termination payments or valuations related to the settlement of the Capped Call Transactions that is effective at or after the Effective Time; provided that SailPoint will not (x) agree to amend, modify or waive any terms relating to, or agree to any amount due upon the termination or settlement of, the Capped Call Transactions (except for amounts

 

4


Table of Contents

due upon exercise or termination of the Capped Call Transactions in accordance with their terms in connection with conversions of the Convertible Notes prior to the Effective Time) or (y) initiate or continue discussions or negotiations with the counterparties to the Capped Call Transactions or any of their respective affiliates or any other person regarding termination or settlement of the Capped Call Transactions, in each case, without the prior written consent of Parent, and to the extent any such discussions or negotiations have occurred prior to date hereof, provide Parent with reasonable detail regarding the substance of all such discussions or negotiations and copies of any documentation sent or received in connection therewith (however, limitations in the immediately preceding clauses (x) and (y) will not apply to any modification, adjustment or termination made unilaterally by any of the counterparties to the Capped Call Transactions pursuant to the terms of the applicable Capped Call Confirmations (as defined in the section of this proxy statement captioned “The Merger—Capped Call Transactions”) or conditioned on termination or abandonment of the Merger Agreement); and nothing in the Merger Agreement requires SailPoint to (A) make any payment with respect to the termination or settlement of any Capped Call Transaction as a result of the Merger prior to the occurrence of the Effective Time or (B) enter into any instrument or agreement relating to the termination or settlement of the Capped Call Transactions, or agree to any change or modification to any Capped Call Confirmations, that is effective prior to the Effective Time. SailPoint is required to promptly provide Parent with all written notices or other documents received by it with respect to any determination, cancellation, termination, exercise, settlement, adjustment or computation under, or in connection with any discussions or negotiations related to, the Capped Call Transactions and granted permission to Parent and its counsel and advisors to, at any time, initiate and engage in discussions and negotiations with the counterparties to the Capped Call Transactions regarding the settlement of the Capped Call Transactions at or promptly following the Effective Time and the terms of such settlement; provided that SailPoint and its counsel will, to the extent reasonably practicable, have a reasonable opportunity to participate in such discussions and negotiations.

Prior to the Effective Time, SailPoint is required to take all actions as may be required by the terms of the applicable Capped Call Transactions or applicable law, including the giving of any written notices or communication in connection with the Merger and/or any conversions and/or repurchases of the Convertible Notes or any adjustment under the Convertible Notes Indenture or occurring as a result of or in connection with the transactions contemplated by the Merger Agreement. SailPoint is required to use its reasonable best efforts to provide Parent and its counsel reasonable time and opportunity to review any such written notice or communication prior to the dispatch or making thereof and shall incorporate all reasonable comments provided by Parent and its counsel with respect thereto.

U.S. Federal Income Tax Consequences of the Merger

The receipt of cash by SailPoint Stockholders in exchange for shares of SailPoint common stock in the Merger will be a taxable transaction for U.S. federal income tax purposes. Such receipt of cash by a U.S. Holder (as defined in the section of this proxy statement captioned “The Merger—U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount equal to the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of SailPoint common stock surrendered pursuant to the Merger.

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

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

 

5


Table of Contents

SailPoint Stockholders should consult their tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any state, local or non-U.S. tax jurisdiction.

Appraisal Rights

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

SailPoint 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 Per Share Merger Consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of SailPoint common stock.

To exercise appraisal rights, SailPoint Stockholders must: (i) submit a written demand for appraisal to SailPoint before the vote is taken on the proposal to adopt the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold shares of SailPoint common stock of record through the Effective Time; and (iv) 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 SailPoint unless certain stock ownership conditions are satisfied by SailPoint 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 SailPoint common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

Regulatory Approvals Required for the Merger

HSR Act, U.S. Antitrust Matters and Other Regulatory Approvals

Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated. SailPoint and Thoma Bravo made the filings required under the HSR Act on April 29, 2022. The applicable waiting period under the HSR Act is scheduled to expire at 11:59 p.m., Eastern time on May 31, 2022.

 

6


Table of Contents

Completion of the Merger is further subject to the receipt of approval, clearance or expiration of the applicable review periods under the foreign investment laws of Australia and the United Kingdom.

For more information, please see the section of this proxy statement captioned “The Merger—Regulatory Approvals Required for the Merger.”

Closing Conditions

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

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of SailPoint Stockholders;

 

   

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

 

   

the expiration of the applicable review periods under, or the receipt of approvals or clearances under, the relevant foreign investment laws of Australia and the United Kingdom;

 

   

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

 

   

in the case of Parent and Merger Sub, the absence, since the date of the Merger Agreement, of any continuing change, event, effect or circumstance at SailPoint that is or would reasonably be expected to be materially adverse (with certain limitations) to the business, financial condition or results of operations of SailPoint and its subsidiaries, taken as a whole;

 

   

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

 

   

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

 

   

the receipt by Parent of a certificate of SailPoint, dated as of the Closing Date and signed by their respective president or chief executive officer, certifying that the conditions described in the preceding seven bullets have been satisfied; and

 

   

the receipt by SailPoint of a certificate of Parent and Merger Sub, dated as of the Closing Date and signed by their respective president or chief executive officer, certifying that the conditions described in the preceding eight bullets have been satisfied.

Financing of the Merger

We presently anticipate that the total funds needed to complete the Merger and the related transactions will be approximately $7.5 billion, which will be funded via equity and debt financing described below together with SailPoint’s cash on hand as of the Closing Date.

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. Parent and Merger Sub have represented to SailPoint that they will have available to them, together with SailPoint’s cash on hand, sufficient funds to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement. This includes funds needed to: (1) pay SailPoint Stockholders the amounts due under the Merger Agreement for their SailPoint common stock, (2) make payments in respect of our outstanding Company Options payable at the closing of the Merger pursuant to the Merger Agreement and (3) make payments of all amounts required to be paid in connection with the Merger

 

7


Table of Contents

pursuant to that certain Indenture, dated as of September 24, 2019, between SailPoint and U.S. Bank National Association, as trustee (the “Convertible Notes Indenture”), and the 0.125% Convertible Senior Notes due 2024 issued pursuant thereto (the “Convertible Notes”) (collectively, the “Required Amounts”).

The Thoma Bravo Fund has committed to contribute or cause to be contributed to Parent at the closing of the Merger certain equity financing, subject to the terms and conditions set forth in an equity commitment letter, dated as of April 10, 2022 (the “Equity Commitment Letter”). SailPoint is an intended and express third-party beneficiary of the Equity Commitment Letter solely with respect to enforcing Parent’s right to cause the commitment under the Equity Commitment Letter by the Thoma Bravo Fund to be funded to Parent in accordance with the Equity Commitment Letter, and to cause Parent to enforce its rights against the Thoma Bravo Fund to perform its funding obligations under the Equity Commitment Letter, in each case subject to (i) the limitations and conditions set forth in the Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement.

Pursuant to the limited guaranty delivered by the Thoma Bravo Fund in favor of SailPoint, dated as of April 10, 2022 (the “Guaranty”), the Thoma Bravo Fund has agreed to guarantee the payment of certain liabilities and obligations of Parent or Merger Sub under the Merger Agreement, subject to an aggregate cap equal to $431.1 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by SailPoint, as specified in the Merger Agreement.

In addition, in connection with the Merger Agreement, Merger Sub entered into a debt commitment letter, dated as of April 10, 2022 (as amended, supplemented or otherwise modified, the “Debt Commitment Letter” and, together with the Equity Commitment Letter, the “Financing Letters”) with Golub Capital Markets LLC, Blackstone Alternative Credit Advisors LP, Owl Rock Capital Corporation, Marfic Investment Pte Ltd., Antares Holdings LP, Antares Capital LP, BlackRock Capital Investment Advisors, LLC, Fortress Credit Corp., Macquarie Capital (USA) Inc., Macquarie PF Inc., Onex Falcon Direct Lending BDC Fund, LLC and Thoma Bravo Credit Fund II, L.P. (the “Lenders”), pursuant to which the Lenders have committed to provide, upon certain terms and subject to certain conditions, Parent and Merger Sub with Debt Financing (as defined in the section of this proxy statement captioned “The Merger—Financing of the Merger”). For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

Pursuant to the Merger Agreement, Parent shall use reasonable best efforts to, and shall cause its subsidiaries to use reasonable best efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable to arrange and consummate the financing described in the Financing Letters on the terms (including any market “flex” provisions) set forth in the Financing Letters. For more information, please see the section of this proxy statement captioned “The Merger—Cooperation with Debt Financing.”

SailPoint has agreed to use its reasonable best efforts to provide, and to cause its subsidiaries (and their respective representatives) to use their reasonable best efforts to provide, to Parent and Merger Sub such cooperation as is customary and reasonably requested by Parent in connection with the arrangement of the financing contemplated by the Debt Commitment Letter, subject to the terms set forth in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Cooperation with Debt Financing.”

Required Stockholder Approval

The affirmative vote of the holders of a majority of the outstanding shares of SailPoint common stock is required to adopt the Merger Agreement. At the close of business on May 25, 2022 (the “Record Date”), 47,169,638 votes constitute a majority of the outstanding shares of SailPoint common stock. Approval of the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to SailPoint’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions

 

8


Table of Contents

contemplated by the Merger Agreement (the “Compensation Proposal”) and the proposal to adjourn the Special Meeting (the “adjournment proposal”), if a quorum is present, requires the affirmative vote of the majority of voting power of capital stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. The approval of the Compensation Proposal is advisory (non-binding) and is not a condition to the completion of the Merger.

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 1,285,743 shares of SailPoint common stock, representing approximately 1.36% of the shares of SailPoint common stock outstanding as of the Record Date.

We currently expect that our directors and executive officers will vote all of their respective shares of SailPoint common stock: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment proposal.

The Special Meeting

Date, Time and Place

A special meeting of SailPoint Stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on June 30, 2022, at 12:30 p.m., Central Time (the “Special Meeting”). SailPoint will hold the Special Meeting virtually via the Internet at www.proxydocs.com/SAIL (the “virtual meeting website”). You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting.

Record Date; Shares Entitled to Vote

You are entitled to vote at the Special Meeting if you owned shares of SailPoint common stock at the close of business on the Record Date. Each holder of SailPoint common stock shall be entitled to one (1) vote for each such share owned at the close of business on the Record Date.

Quorum

As of the Record Date, there were 94,339,273 shares of SailPoint common stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the outstanding voting power of all shares of capital stock entitled to vote at the Special Meeting, present in person or represented by proxy, will constitute a quorum at the Special Meeting.

Recommendation of the SailPoint Board of Directors

Upon the recommendation of a special committee of the Board of Directors (the “Special Committee” or “Committee”), the Board of Directors has unanimously: (i) determined that it is in the best interests of SailPoint and SailPoint Stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby; and (iii) resolved to recommend that SailPoint Stockholders adopt the Merger Agreement. The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

9


Table of Contents

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

Prior to the adoption of the Merger Agreement by SailPoint Stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its outside legal and financial advisors) that failure to do so would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to SailPoint Stockholders under applicable law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent and its representatives in good faith over a five (5)-business-day period, after which the Board of Directors shall have determined that the failure of the Board of Directors to make a Change of Recommendation (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation”) would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to SailPoint Stockholders under applicable law. The termination of the Merger Agreement by SailPoint following the Board of Directors’ authorization for SailPoint to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Go-Shop Period—Solicitation of Other Offers”) will result in the payment by SailPoint of a termination fee of either (i) $81,750,000 if the Merger Agreement is terminated before 11:59 p.m. Eastern Time on May 26, 2022 with respect to an Excluded Party (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Go-Shop Period—Solicitation of Other Offers”) or (ii) $212,540,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation.”

Opinion of Morgan Stanley & Co. LLC

In connection with the Merger, Morgan Stanley & Co. LLC ( “Morgan Stanley”) rendered to the Board of Directors its oral opinion, subsequently confirmed in writing, that as of April 10, 2022, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair from a financial point of view to such SailPoint Stockholders, as set forth in such opinion as more fully described in the section of this proxy statement captioned “The Merger—Opinion of Morgan Stanley & Co. LLC.”

The full text of the written opinion of Morgan Stanley, dated as of April 10, 2022, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B and incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Board of Directors, in its capacity as such, and addresses only the fairness from a financial point of view of the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement as of the date of the opinion and does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how SailPoint Stockholders should vote at the Special Meeting.

 

10


Table of Contents

For more information, see the section of this proxy statement captioned “The Merger—Opinion of Morgan Stanley & Co. LLC.”

Interests of Executive Officers and Directors of SailPoint in the Merger

When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, SailPoint Stockholders should be aware that certain of SailPoint’s non-employee directors and executive officers have interests in the Merger that are different from, or in addition to, those of SailPoint Stockholders generally. The Board of Directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement, approving the Merger Agreement and the Merger, and recommending that the Merger Agreement be adopted by SailPoint Stockholders. These interests include:

 

   

at the Effective Time, each Company Option and Company RSU held by an executive officer or director will receive the treatment described in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger—Treatment and Quantification of Company Equity Awards”;

 

   

eligibility of SailPoint’s executive officers to receive severance payments and benefits (including equity award vesting acceleration) under the Severance Pay Plan, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger—Severance Pay Plan”;

 

   

eligibility of certain of SailPoint’s executive officers to receive a cash transaction or retention bonus, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger—Transaction and Retention Bonus Programs”; and

 

   

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

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

Alternative Acquisition Proposals

The Go-Shop Period—Solicitation of Other Alternative Acquisition Proposals

Under the Merger Agreement, from the date of the Merger Agreement until 11:59 p.m., Eastern time on May 16, 2022 (such date, the “No-Shop Period Start Date” and such period, the “Go-Shop Period”), SailPoint, its affiliates and their respective representatives had the right to, among other things: (i) solicit, initiate, propose, induce the making or submission of, encourage or facilitate in any way any offer or proposal that constitutes, or could reasonably be expected to lead to, an Alternative Acquisition Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Go-Shop Period—Solicitation of Other Offers”), including by providing information (including non-public information and data) of or affording access to SailPoint and its subsidiaries to any third person that has entered into an Acceptable Confidentiality Agreement (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Go-Shop Period—Solicitation of Other Offers”); and (ii) continue, enter into, engage in or otherwise participate in any discussions or negotiations with any third person regarding any Alternative Acquisition Proposals, and cooperate with or assist or participate in, or facilitate in any way, any such

 

11


Table of Contents

inquiries, offers, proposals, discussions or negotiations or any effort or attempt to make any Alternative Acquisition Proposals or other proposals that could reasonably be expected to lead to Alternative Acquisition Proposals, including by granting a waiver, amendment or release under any pre-existing “standstill” or other similar provision to the extent necessary to allow for an Alternative Acquisition Proposal or amendment to an Alternative Acquisition Proposal to be made confidentially to SailPoint or to the Board of Directors. SailPoint did not receive any offer or proposal that constituted, or could reasonably be expected to lead to, an Alternative Acquisition Proposal during the Go-Shop Period.

The No-Shop Period—No Solicitation of Other Alternative Acquisition Proposals

Under the Merger Agreement, from the No-Shop Period Start Date until the Effective Time, SailPoint may not: (i) solicit, initiate or knowingly encourage, or knowingly facilitate the making or submission of any offer or proposal that constitutes, or would reasonably be expected to lead to, an Alternative Acquisition Proposal; (ii) participate in discussions or negotiations with, or provide any non-public information to, any person relating to, an Alternative Acquisition Proposal; (iii) approve, endorse or recommend any proposal that constitutes, or would be reasonably expected to lead to, an Alternative Acquisition Proposal; or (iv) enter into any contract relating to an Alternative Acquisition Proposal, other than a confidentiality agreement.

Notwithstanding the foregoing, under certain specified circumstances, from the No-Shop Period Start Date until the adoption of the Merger Agreement by SailPoint Stockholders, SailPoint may, among other things, engage in negotiations or discussions with, and provide information to, a third party (and its representatives and potential debt and equity financing sources) in respect of an Alternative Acquisition Proposal that was not received in response to or as a result of SailPoint’s obligations set forth in the immediately preceding paragraph, if the Board of Directors determines in good faith, after consultation with outside legal and financial advisors, that such Alternative Acquisition Proposal either constitutes a Superior Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Go-Shop Period—Solicitation of Other Offers”) or would reasonably be expected to lead to a Superior Proposal and the Board of Directors (or a committee thereof) has determined in good faith that the failure to take the actions in respect of such Alternative Acquisition Proposal would be inconsistent with its fiduciary duties under applicable law. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The No-Shop Period—No Solicitation of Other Offers.”

Both during the Go-Shop Period and after the No-Shop Period Start Date but prior to the adoption of the Merger Agreement by SailPoint Stockholders, SailPoint is entitled to terminate the Merger Agreement to enter into a definitive agreement in respect of a Superior Proposal only if it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a five (5)-business-day period in an effort to amend the terms and conditions of the Merger Agreement and other agreements so that such Superior Proposal no longer constitutes a Superior Proposal relative to the transactions contemplated by the Merger Agreement, amended pursuant to such negotiations.

The termination of the Merger Agreement by SailPoint following the Board of Directors’ authorization for SailPoint to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by SailPoint of a termination fee of either (i) $81,750,000 if the Merger Agreement is terminated before 11:59 p.m. Eastern Time on May 26, 2022 with respect to an Excluded Party and SailPoint has complied in all material respects with the non-solicitation provisions set forth in the Merger Agreement with respect to such Superior Proposal or (ii) $212,540,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation.”

 

12


Table of Contents

Termination of the Merger Agreement

In addition to the circumstances described above, Parent and SailPoint have certain rights to terminate the Merger Agreement under customary circumstances, including by mutual agreement, the imposition of non-appealable court orders that permanently enjoin or otherwise prohibit the Merger, an uncured breach of the Merger Agreement by the other party, if the Merger has not been consummated on or before October 10, 2022 (the “End Date”) (subject to an automatic extension until January 10, 2023 in the event of the failure to have satisfied certain regulatory conditions (as further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”)), or if SailPoint Stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof). Under some circumstances, (i) SailPoint is required to pay Parent a termination fee equal to either $81,750,000 or $212,540,000; and (ii) Parent is required to pay SailPoint a termination fee equal to $425,090,000. Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Effect on SailPoint if the Merger Is Not Completed

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

 

  i.

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

 

  ii.

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

 

  iii.

under certain specified circumstances, SailPoint will be required to pay Parent a termination fee of either $81,750,000 or $212,540,000, 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.”

 

13


Table of Contents

QUESTIONS AND ANSWERS

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

 

Q:

Why am I receiving these materials?

 

A:

The Board of Directors is furnishing this proxy statement and form of proxy card to SailPoint Stockholders in connection with the solicitation of proxies to be voted at the Special Meeting.

 

Q:

When and where is the Special Meeting?

 

A:

SailPoint will hold the Special Meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person.

 

Q:

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

 

A:

You are being asked to vote on the following proposals:

 

   

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

 

   

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

 

   

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

 

Q:

Who is entitled to vote at the Special Meeting?

 

A:

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

 

Q:

May I attend the Special Meeting and vote in person?

 

A:

Yes. If you are a SailPoint Stockholder of record, you may attend the Special Meeting virtually via the Internet at the virtual meeting website on June 30, 2022, and complete a virtual ballot, whether or not you sign and return your proxy card. If you are a SailPoint Stockholder of record, you will need your assigned control number to vote shares electronically at the Special Meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices.

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

 

14


Table of Contents

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 hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:

What will I receive in respect of my shares of SailPoint common stock if the Merger is completed?

 

A:

Upon completion of the Merger, you will be entitled to receive the Per Share Merger Consideration of $65.25 in cash, less any applicable withholding taxes, for each share of SailPoint common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of SailPoint common stock, you will receive $6,525.00 in cash in exchange for your shares of SailPoint common stock, less any applicable withholding taxes.

 

Q:

What will the holders of outstanding Company Options and Company RSUs receive if the Merger is completed?

 

A:

Upon completion of the Merger:

Each Vested Company Option will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Vested Company Option, by (y) the total number of shares of SailPoint common stock underlying such Vested Company Option, subject to any required withholding of taxes.

Each Unvested Company Option will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Unvested Company Option, by (y) the total number of shares of SailPoint common stock underlying such Unvested Company Option. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company Option Consideration amounts will vest and become payable at the same time as the Company Option from which such Unvested Company Option Consideration was converted would have vested and been payable pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company Option immediately prior to the Effective Time with respect to the receipt of the Unvested Company Option Consideration.

Each Vested Company RSU will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Company RSU, by (y) the Per Share Merger Consideration, subject to any required withholding of taxes.

Each Unvested Company RSU will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Company RSU, by (y) the Per Share Merger Consideration. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company RSU Consideration amounts will vest and become payable at the same time as the Company RSU from which such Unvested Company RSU Consideration was converted would have vested and been payable pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company

 

15


Table of Contents

RSU immediately prior to the Effective Time with respect to the receipt of the Unvested Company RSU Consideration.

 

Q:

What vote is required to adopt the Merger Agreement?

 

A:

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

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

 

Q:

I understand that a quorum is required in order to conduct business at the Special Meeting. What constitutes a quorum?

 

A:

The holders of a majority of the voting power of the shares of capital stock entitled to vote at the Special Meeting as of the record date must be present at the Special Meeting in order to hold the Special Meeting and conduct business. This presence is called a quorum. Your shares are counted as present at the Special Meeting if you are present and vote in person at the Special Meeting or if you have properly submitted a proxy.

 

Q:

What happens if the Merger is not completed?

 

A:

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

Under specified circumstances, SailPoint will be required to pay Parent a termination fee of either $212,540,000 or $81,750,000, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

 

Q:

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

 

A:

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

 

16


Table of Contents
Q:

What vote is required to approve the Compensation Proposal?

 

A:

If a quorum is present, the affirmative vote of the majority of voting power of capital stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Compensation Proposal.

 

Q:

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

 

A:

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

 

Q:

What do I need to do now?

 

A:

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

 

Q:

May I exercise dissenters’ rights or rights of appraisal in connection with the Merger?

 

A:

Yes. In order to exercise your appraisal rights, you must follow the requirements set forth in Section 262 of the DGCL. Under Delaware law, SailPoint Stockholders of record who do not vote in favor of adopting the Merger Agreement will have the right to seek appraisal of the “fair value” of their shares as determined by the Court of Chancery of the State of Delaware if the merger is completed. Appraisal rights will only be available to SailPoint Stockholders who properly deliver, and do not properly withdraw, a written demand for an appraisal to SailPoint prior to the vote on the proposal to adopt the Merger Agreement at the Special Meeting and who comply with the procedures and requirements set forth in Section 262 of the DGCL, which are summarized in this proxy statement. The appraisal amount could be more than, the same as or less than the amount a SailPoint Stockholder would be entitled to receive under the terms of the Merger Agreement. A copy of Section 262 of the DGCL is included as Annex C to this proxy statement. For additional information, see the section entitled “The Merger—Appraisal Rights.”

 

Q:

Should I surrender my book-entry shares now?

 

A:

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

 

Q:

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

 

A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of SailPoint common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are

 

17


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

 

Q:

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

 

A:

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you are considered, with respect to those shares, to be the “SailPoint Stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by SailPoint.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of SailPoint common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the SailPoint Stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the SailPoint Stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:

How may I vote?

 

A:

If you are a SailPoint Stockholder of record (that is, if your shares of SailPoint common stock are registered in your name with AST, our transfer agent), there are four (4) ways to vote:

 

   

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

 

   

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

 

   

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

 

   

by attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

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

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

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically

 

18


Table of Contents

over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.

 

Q:

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

 

A:

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

 

Q:

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

 

A:

Yes. If you are a SailPoint 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 the Secretary of SailPoint; or

 

   

by attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

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

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person to vote your shares of SailPoint 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 SailPoint common stock is called a “proxy card.” Mark D. McClain, our director and Chief Executive Officer, and Chris Schmitt, our Executive Vice President, General Counsel and Secretary, are the proxy holders for the Special Meeting, with full power of substitution and re-substitution.

 

Q:

If a SailPoint Stockholder gives a proxy, how are the shares voted?

 

A:

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

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

 

19


Table of Contents
Q:

What should I do if I receive more than one (1) 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 (1) 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 (1) brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a SailPoint Stockholder of record and your shares are registered in more than one (1) name, you will receive more than one (1) proxy card.

 

Q:

Who will count the votes?

 

A:

The inspector of elections appointed for the Special Meeting will tabulate votes cast by proxy or by ballot at the Special Meeting. The inspector of elections will also determine whether a quorum is present.

 

Q:

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

 

A:

SailPoint 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 SailPoint 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 SailPoint common stock for cash pursuant to the Merger?

 

A:

The exchange of SailPoint common stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. Holder (as defined in the section of this proxy statement captioned “The Merger—U.S. Federal Income Tax Consequences of the Merger”) who exchanges shares of SailPoint common stock for cash in the Merger will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. Holder’s adjusted tax basis in such shares. If you are a Non-U.S. Holder (as defined in the section of this proxy statement captioned “The Merger—U.S. Federal Income Tax Consequences of the Merger”), the Merger will generally not result in U.S. federal income tax to you unless you have certain connections with the United States, but may be subject to U.S. backup withholding tax unless you comply with certain certification procedures or otherwise establish a valid exemption from U.S. backup withholding tax.

For a more complete description of the U.S. federal income tax consequences of the Merger, see the section of this proxy statement captioned “The Merger—U.S. Federal Income Tax Consequences of the Merger.”

 

Q:

When do you expect the Merger to be completed?

 

A:

We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the second half of 2022. However, the exact timing of completion of the Merger cannot be predicted, because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

The expenses of soliciting proxies will be paid by SailPoint. SailPoint has retained Innisfree M&A Incorporated to assist in soliciting proxies for a fee of up to $75,000, plus costs and expenses. SailPoint

 

20


Table of Contents
  and its agents may solicit proxies by mail, electronic mail, telephone, facsimile, by other similar means, or in person. Our directors, officers, and other employees, without additional compensation, and employees of Innisfree M&A Incorporated may solicit proxies personally or in writing, by telephone, email, or otherwise. SailPoint will request brokers, custodians, nominees and other record holders to forward copies of the soliciting materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, SailPoint, upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials through the internet, you are responsible for any internet access charges you may incur.

 

Q:

What if during the check-in time or during the meeting I have technical difficulties or trouble accessing the virtual meeting website?

 

A:

SailPoint will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the Special Meeting during the check-in time or during the Special Meeting, please call the technical support number that will be posted on the Special Meeting log-in page.

 

Q:

Do any of SailPoint’s directors or officers have interests in the Merger that may be in addition to or differ from those of SailPoint Stockholders generally?

 

A:

Yes. In considering the recommendation of the Board of Directors with respect to the proposal to adopt the Merger Agreement, you should be aware that SailPoint’s directors and executive officers may have interests in the Merger different from, or in addition to, the interests of SailPoint Stockholders generally. The Board of Directors and the Special Committee were aware of and considered these interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, in making their respective recommendations and determinations, including in the case of the Board of Directors, in approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted by SailPoint Stockholders. For a description of the interests of SailPoint’s directors and executive officers in the Merger, see the section entitled “The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger.”

 

Q:

Who can help answer my questions?

 

A:

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

Innisfree M&A Incorporated,

501 Madison Avenue, 20th Floor,

New York, NY, 10022

Banks and Brokers Call: (212) 750-5833

All Others Call: (877) 750-8332

 

21


Table of Contents

FORWARD-LOOKING STATEMENTS

This proxy statement, and any document to which SailPoint refers in this proxy statement, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, which are intended to be covered by the safe harbor created by such sections and other applicable laws. Such forward-looking statements include statements relating to SailPoint’s strategy, goals, future focus areas and the value of the proposed transaction to SailPoint Stockholders. These forward-looking statements are based on SailPoint management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or similar expressions and the negatives of those terms. SailPoint has based the forward-looking statements contained in this proxy statement primarily on its current expectations and projections, in light of currently available information, about future events and trends that it believes may affect SailPoint’s business, financial condition, results of operations and prospects. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements, expressed or implied by the forward-looking statements, including the uncertainty associated with the potential impacts of the COVID-19 pandemic on SailPoint’s business, financial condition, results of operations and prospects. Additional factors that could cause or contribute to such differences include, but are not limited to, the following:

 

  (i)

the completion of the Merger on anticipated terms and timing, including obtaining stockholder and regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of SailPoint’s business and other conditions to the completion of the transaction;

 

  (ii)

the impact of the COVID-19 pandemic on SailPoint’s business and general economic conditions;

 

  (iii)

SailPoint’s ability to implement its business strategy;

 

  (iv)

significant transaction costs associated with the Merger;

 

  (v)

potential litigation relating to the Merger;

 

  (vi)

the risk that disruptions from the Merger will harm SailPoint’s business, including current plans and operations;

 

  (vii)

the ability of SailPoint to retain and hire key personnel;

 

  (viii)

potential adverse reactions or changes to business relationships resulting from the announcement of the Merger;

 

  (ix)

legislative, regulatory and economic developments affecting SailPoint’s business;

 

  (x)

general economic and market developments and conditions;

 

  (xi)

the evolving legal, regulatory and tax regimes under which SailPoint operates;

 

  (xii)

potential business uncertainty, including changes to existing business relationships, during the pendency of the Merger that could affect SailPoint’s financial performance;

 

  (xiii)

restrictions during the pendency of the Merger that may impact SailPoint’s ability to pursue certain business opportunities or strategic transactions;

 

  (xiv)

unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism, cyber-attacks, or outbreak of war or hostilities, as well as SailPoint’s response to any of the aforementioned factors; and

 

22


Table of Contents
  (xv)

such other risks and uncertainties described more fully in documents filed with or furnished to the SEC by SailPoint, including its Annual Report on Form 10-K previously filed with the SEC on February 28, 2022, and its Quarterly Report on Form 10-Q previously filed with the SEC on May 5, 2022.

SailPoint expressly qualifies in their entirety all forward-looking statements attributable to either SailPoint or any person acting on SailPoint’s behalf by the cautionary statements contained or referred to in this proxy statement. All information provided in this proxy statement is as of the date hereof and SailPoint undertakes no duty to update this information except as required by law.

 

23


Table of Contents

THE SPECIAL MEETING

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

Date, Time and Place

The Special Meeting will be held on June 30, 2022, at 12:30 p.m., Central Time. SailPoint will hold the Special Meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person.

Purpose of the Special Meeting

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

Record Date; Shares Entitled to Vote; Quorum

Only SailPoint 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 SailPoint Stockholders entitled to vote at the Special Meeting will be available at the virtual meeting website during the Special Meeting. As of the Record Date, there were 94,339,273 shares of SailPoint common stock outstanding and entitled to vote at the Special Meeting.

The holders of a majority of the outstanding voting power of all shares of capital stock entitled to vote at the Special Meeting, 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, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the holders of a majority of the outstanding shares of SailPoint common stock is required to adopt the Merger Agreement. As of the Record Date, 47,169,638 votes constitute a majority of the outstanding shares of SailPoint common stock. Adoption of the Merger Agreement by SailPoint Stockholders is a condition to the closing of the Merger.

If a quorum is present, the affirmative vote of the majority of voting power of capital stock present in person or represented by proxy at the Special Meeting and entitled to vote thereon is required to approve, on an advisory (non-binding) basis, the Compensation Proposal.

Approval of the proposal to adjourn the Special Meeting, if a quorum is present, requires the affirmative vote of the majority of voting power of capital stock present in person or represented by proxy at the Special Meeting and entitled to vote thereon.

If a SailPoint Stockholder abstains from voting, that abstention will have the same effect as if SailPoint Stockholders voted “AGAINST” the proposal to adopt the Merger Agreement, the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date

 

24


Table of Contents

or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. SailPoint 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 SailPoint 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.

Stock Ownership and Interests of Certain Persons

Shares Held by SailPoint’s Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 1,285,743 shares of SailPoint common stock, representing approximately 1.36% of the shares of SailPoint common stock outstanding on the Record Date.

Voting of Proxies

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

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

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

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

 

25


Table of Contents

Revocability of Proxies

If you are a SailPoint 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 the Secretary of SailPoint; or

 

   

attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

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

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

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

Board of Directors’ Recommendation

Upon the recommendation of the Special Committee, the Board of Directors has unanimously: (i) determined that it is in the best interests of SailPoint and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by SailPoint, the performance by SailPoint of its covenants under the Merger Agreement, and the consummation of the transactions contemplated thereof, including the Merger; and (iii) resolved to recommend that SailPoint Stockholders adopt the Merger Agreement and directed that such matter be submitted for the consideration of SailPoint stockholders at the Special Meeting.

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

Solicitation of Proxies

The expenses of soliciting proxies will be paid by SailPoint. SailPoint has retained Innisfree M&A Incorporated to assist in soliciting proxies for a fee of up to $75,000, plus costs and expenses. SailPoint and its agents may solicit proxies by mail, electronic mail, telephone, facsimile, by other similar means, or in person. Our directors, officers, and other employees, without additional compensation, and employees of Innisfree M&A Incorporated may solicit proxies personally or in writing, by telephone, email, or otherwise. SailPoint will request brokers, custodians, nominees and other record holders to forward copies of the soliciting materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, SailPoint, upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials through the internet, you are responsible for any internet access charges you may incur.

 

26


Table of Contents

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by SailPoint Stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the second half of 2022.

Appraisal Rights

If the Merger is consummated, SailPoint Stockholders who continuously hold shares of SailPoint common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that SailPoint Stockholders 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 SailPoint common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be “fair value,” if any, (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the “fair value” and the amount paid by the Surviving Corporation in the Merger to each SailPoint Stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, SailPoint 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 Per Share Merger 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: (i) submit a written demand for appraisal to SailPoint before the vote is taken on the proposal to adopt the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold your shares of SailPoint common stock of record through the Effective Time; and (iv) strictly comply with all other procedures for exercising appraisal rights under Section 262 of the DGCL. Your failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the Merger unless certain stock ownership conditions are satisfied by SailPoint Stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced and attached as Annex C to this proxy statement and incorporated herein by reference. If you hold your shares of SailPoint 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 SailPoint Common Stock

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

 

27


Table of Contents

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 SailPoint common stock will be voted in accordance with the discretion of the appointed proxy holders.

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 (2) or more SailPoint Stockholders reside if we believe SailPoint Stockholders are members of the same family. Each SailPoint 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, please contact us using the instructions set forth below. Similarly, if you share an address with another SailPoint 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 SailPoint Stockholder of record, you may contact us by writing to SailPoint at 11120 Four Points Drive, Suite 100, Austin, TX 78726, or by calling SailPoint at (512) 664-8916 and requesting to speak with our investor relations department. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

Questions and Additional Information

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

Innisfree M&A Incorporated,

501 Madison Avenue, 20th Floor,

New York, NY, 10022

Banks and Brokers Call: (212) 750-5833

All Others Call: (877) 750-8332

 

28


Table of Contents

THE MERGER

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

Parties Involved in the Merger

SailPoint Technologies Holdings, Inc.

11120 Four Points Drive, Suite 100

Austin, Texas 78726

(512) 346-2000

SailPoint is the leader in identity security for the modern enterprise. Harnessing the power of our deep expertise combined with machine learning, SailPoint automates the management and control of access, delivering only the required access to the right identities and technology resources at the right time. Our sophisticated identity platform seamlessly integrates with existing systems and workflows, providing the singular view into all identities and their access. We meet customers where they are with an intelligent identity solution that matches the scale, velocity and environmental needs of the modern enterprise. SailPoint empowers the most complex enterprises worldwide to build a security foundation grounded in identity security. SailPoint common stock is listed on NYSE under the symbol “SAIL.”

Project Hotel California Holdings, LP

c/o Thoma Bravo, L.P.

600 Montgomery Street, 20th Floor

San Francisco, CA 94111

(415) 263-3600

Parent was formed on April 1, 2022, 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 debt financing in connection with the Merger.

Project Hotel California Merger Sub, Inc.

c/o Thoma Bravo, L.P.

600 Montgomery Street, 20th Floor

San Francisco, CA 94111

(415) 263-3600

Merger Sub is a wholly owned subsidiary of Parent and was formed on April 1, 2022, 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 debt financing in connection with the Merger.

Parent and Merger Sub are each affiliated with the Thoma Bravo Fund, and Parent, Merger Sub and the Thoma Bravo Fund are each affiliated with Thoma Bravo. Thoma Bravo is a leading private equity firm focused on the software and technology-enabled services sectors. At the Effective Time, the Surviving Corporation, will be indirectly owned by the Thoma Bravo Fund and certain of its affiliates.

In connection with the transactions contemplated by the Merger Agreement, (1) the Thoma Bravo Fund has provided Parent with an equity commitment and (2) Parent has obtained debt financing commitments from Golub

 

29


Table of Contents

Capital Markets LLC, Blackstone Alternative Credit Advisors LP, Owl Rock Capital Advisors LLC, Marfic Investment Pte Ltd., Antares Holdings LP, Antares Capital LP, BlackRock Capital Investment Advisors, LLC, Fortress Credit Corp., Macquarie Capital (USA) Inc., Macquarie PF Inc., Onex Falcon Direct Lending BDC Fund, LLC and Thoma Bravo Credit Fund II, L.P. The amounts committed under the Financing Letters will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments at the closing (including the Required Amounts), subject to the terms and conditions of the Merger Agreement. In addition, the Thoma Bravo Fund has agreed to guarantee the payment of certain liabilities and obligations of Parent or Merger Sub under the Merger Agreement, subject to an aggregate cap equal to $431.1 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by SailPoint, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”

Effect of the Merger

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

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

Effect on SailPoint If the Merger Is Not Completed

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

 

  i.

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

 

  ii.

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

 

  iii.

we anticipate that (a) management will operate the business in a manner similar to that in which it is being operated today and (b) SailPoint 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 SailPoint’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which SailPoint operates and economic conditions;

 

  iv.

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

 

  v.

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

 

30


Table of Contents
  vi.

under specified circumstances, SailPoint will be required to pay Parent a termination fee of either $81,750,000 or $212,540,000, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Merger Consideration

SailPoint Common Stock

At the Effective Time, each share of SailPoint common stock (other than Excluded Shares, which include, for example, shares of SailPoint common stock owned by SailPoint Stockholders who have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the Per Share Merger Consideration, less any applicable withholding taxes.

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

Treatment of Company Equity Awards

The Merger Agreement provides that SailPoint’s equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment as of the Effective Time:

Company Options

Each Vested Company Option will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Vested Company Option by (y) the total number of shares of SailPoint common stock underlying such Vested Company Option, subject to any required withholding of taxes.

Each Unvested Company Option will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Unvested Company Option by (y) the total number of shares of SailPoint common stock underlying such Unvested Company Option. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company Option Consideration amounts will vest and become payable at the same time as the Unvested Company Option from which such Unvested Company Option Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company Option immediately prior to the Effective Time with respect to the receipt of the Unvested Company Option Consideration.

 

31


Table of Contents

Company RSUs

Each Vested Company RSU will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Company RSU by (y) the Per Share Merger Consideration, subject to any required withholding of taxes.

Each Unvested Company RSU will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Unvested Company RSU by (y) the Per Share Merger Consideration. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company RSU Consideration amounts will vest and become payable at the same time as the Unvested Company RSU from which such Unvested Company RSU Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company RSU immediately prior to the Effective Time with respect to the receipt of the Unvested Company RSU Consideration.

Treatment of Company ESPP

In accordance with the terms of the Merger Agreement, on April 10, 2022, the Board of Directors adopted resolutions providing that with respect to the Company ESPP, (i) participation in the Company ESPP will be limited to those employees who are participants on the date of the Merger Agreement, (ii) participants may not increase their payroll deduction elections or rate of contributions from those in effect on the date of the Merger Agreement or make any separate non-payroll contributions to the Company ESPP on or following the date of the Merger Agreement, (iii) no offering period will be commenced after the date of the Merger Agreement, (iv) each then outstanding purchase right shall be exercised as of the earlier of (A) the end of the offering period in effect on the date of the Merger Agreement or (B) ten (10) days prior to the date on which the Effective Time occurs, and (v) the Company ESPP will terminate immediately prior to, but contingent upon the occurrence of, the Effective Time, but subsequent to the exercise of purchase rights on such purchase date (in accordance with the terms of the Company ESPP). On such exercise date, SailPoint will apply the funds credited as of such date pursuant to the Company ESPP within each participant’s payroll withholding account to the purchase of whole shares of SailPoint common stock in accordance with the terms of the Company ESPP and each share purchased thereunder immediately prior to the Effective Time will be canceled at the Effective Time and converted into the right to receive the Per Share Merger Consideration, subject to withholding of any applicable withholding taxes. Any accumulated contributions of each participant under the Company ESPP as of immediately prior to the Effective Time will, to the extent not used to purchase shares in accordance with the terms and conditions of the Company ESPP, be refunded to such participant as promptly as practicable following the Effective Time (without interest).

Background of the Merger

As part of SailPoint’s ongoing consideration and evaluation of its long-term strategic goals and plans, the Board and SailPoint’s management periodically review, consider and assess SailPoint’s operations and financial performance, as well as overall industry conditions, as they may affect those strategic goals and plans. This review at times includes, among other things, the consideration of potential opportunities for business combinations, acquisitions and other financial and strategic alternatives.

From SailPoint’s initial public offering in November 2017 until August 2018, Thoma Bravo and/or its affiliates reported holding a controlling stake in SailPoint. By the end of 2018, Thoma Bravo beneficially owned less than 5% of SailPoint’s outstanding common stock.

In April 2020, SailPoint management commenced a review of the Company’s strategic direction for its products and SaaS services to expand beyond traditional identity governance and, in the third quarter of 2020, SailPoint

 

32


Table of Contents

engaged a nationally recognized consulting firm to validate and review its strategic direction to drive growth. As part of the review, the consulting firm assessed target segment opportunities for a possible buyside acquisition strategy by SailPoint. As part of that engagement, the consulting firm identified several priority areas for possible inorganic expansion, including data governance, machine identities, and cloud identity.

In the third quarter of 2021, SailPoint management requested that Morgan Stanley evaluate the Company’s financial capacity to undertake acquisitions, including large-scale acquisitions. In October 2021, Morgan Stanley discussed with the Board the valuation environment and observations for SailPoint to consider with respect to potential large-scale acquisitions, including the challenges associated with executing potential large-scale transactions with data governance (DG) companies as a result of limitations associated with the Company’s financial and leverage capacity at its then-current market capitalization. For a number of reasons, including significant volatility in SailPoint’s trading price during the third and fourth quarters of 2021 as well as the then-prevailing valuations of potential target companies, the Board and Company management believed during the second half of 2021 that it was not viable at that time to pursue a DG company acquisition or other large-scale acquisition.

In early December 2021, in the context of the Company’s continuing review of the strategic direction for its products and SaaS services, management determined that it would be sensible to approach Thoma Bravo for outside input on SailPoint’s Identity Security vision as a longtime former investor in the Company and one that is highly knowledgeable about SailPoint and the infrastructure software and cybersecurity sectors generally. Prior to meeting with Thoma Bravo, management consulted with members of the Board about this determination. On December 7, 2021, members of Company management met with representatives of Thoma Bravo and discussed with them the Company’s Identity Security vision, challenges and market environment and opportunity. Company management did not solicit, intend to solicit or expect any indication of interest from Thoma Bravo to undertake any strategic transaction or partnership with the Company.

On December 10, 2021, Thoma Bravo representatives called Mr. Mark McClain, CEO of SailPoint. On the call, they expressed interest in exploring a potential strategic transaction between SailPoint and Thoma Bravo and requested that Thoma Bravo be permitted to enter into a non-disclosure agreement to commence due diligence in connection with such exploration of a potential transaction. Mr. McClain stated to the Thoma Bravo representatives that he would need to discuss this request with the Board. Mr. McClain did not comment on any such potential transaction with Thoma Bravo and made no commitment to permit Thoma Bravo to enter into a non-disclosure agreement. Following the call, Mr. McClain and other members of Company management gave an update regarding the call to Mr. William Bock, chairperson of the Board, who directed Company management to reach out to outside counsel and schedule a Board meeting to discuss Thoma Bravo’s unsolicited outreach.

On December 13, 2021, a Thoma Bravo representative called Mr. McMartin to inquire whether he could discuss due diligence requests. Mr. McMartin reiterated to the Thoma Bravo representative that he was not authorized to have any such discussion and that he would need to discuss the request with the Board.

On December 14, 2021, a Thoma Bravo representative called Mr. McClain to request an update. Mr. McClain stated that a Board meeting had been scheduled and that he expected that he would have a response to Thoma Bravo’s request following the meeting.

On December 14, 2021, the Board met by videoconference to discuss the unsolicited outreach by Thoma Bravo to Mr. McClain. Members of SailPoint management also attended the meeting. The Board requested a meeting to understand from outside counsel its advice regarding the Board’s fiduciary duties with respect to inbound interest in a potential strategic transaction and related matters before making a decision on whether and how to respond to Thoma Bravo’s unsolicited outreach. The Board also directed Company management to convey to Thoma Bravo that the Board was considering a response to Thoma Bravo’s unsolicited outreach and possible next steps, if any, and to request that Thoma Bravo await the outcome of that evaluation.

 

33


Table of Contents

On December 16, 2021, at the direction of the Board as discussed above, Mr. McClain called a Thoma Bravo representative and conveyed that the Board was considering a response to Thoma Bravo’s unsolicited outreach and possible next steps, if any, and requested that Thoma Bravo await the outcome of that evaluation. The Thoma Bravo representative responded that Thoma Bravo would wait as requested.

On December 17, 2021, the Board met by videoconference. Members of SailPoint management and, at the direction of Mr. Bock as described above, representatives of Goodwin Procter LLP, SailPoint’s outside counsel (“Goodwin”), also attended the meeting. Representatives of Goodwin discussed directors’ fiduciary duties in this context in connection with the evaluation of a potential strategic transaction involving SailPoint, whether with Thoma Bravo or any other counterparty, including that under Delaware law, the Board could “just say no” to offers for a potential transaction, even if compelling. The Board also discussed disclosure of relationships between directors and Thoma Bravo and/or its affiliates to the other directors. The Board discussed potentially establishing a special committee at the appropriate time, should the Board consider engaging with Thoma Bravo on a potential transaction, in light of potential conflicts of interest or potential appearances of conflicts of interest arising from relationships with Thoma Bravo and/or its affiliates. Furthermore, the Board discussed that Company management should not discuss with Thoma Bravo the involvement, compensation or equity participation of Company management in the business from and after the consummation of any potential transaction, and throughout the process leading up to the execution of the Merger Agreement, no such discussion was held between Company management and Thoma Bravo. At the meeting, the Board and its advisors also discussed the importance of understanding the Company’s current long-range plan and projections, the current value of the Company and available strategic opportunities before determining how to respond to Thoma Bravo’s outreach. Accordingly, the Board then authorized SailPoint management to develop a set of long-range plans and projections to fiscal year 2026, expanding on the three-year plan that SailPoint management had been developing at the time on a standalone basis. The Board also requested that, in the meantime, management continue to confidentially consider and evaluate various strategic opportunities, including but not limited to potential acquisitions of DG companies by SailPoint.

In accordance with the direction of the Board, SailPoint management then proceeded to develop a set of long-range plans and projections, including the related methodology, underlying assumptions and related risks and preliminary financial forecasts for fiscal years 2022 through 2026. After management’s completion of this draft, on January 6, 2022, the Board met by videoconference. Members of SailPoint management and representatives of Goodwin also attended the meeting. Members of SailPoint management led a discussion of this draft. Following discussion, the Board requested that Company management incorporate additional cash flow analyses into this draft. At the January 6, 2022 meeting, the Board and management also continued to discuss various strategic opportunities, including potential acquisitions by the Company, execution risks facing the Company and the Company’s go-to-market strategy and account acquisition metrics.

On January 10, 2022, the Board met by videoconference. Members of SailPoint management led a discussion about the draft long-range plans and projections presented at the Board’s January 6, 2022 meeting, as updated to incorporate additional cash flow analyses as requested by the Board at that meeting (as so updated, the “January 2022 Projections”). Following discussion, the Board approved the January 2022 Projections for use by Morgan Stanley to prepare a preliminary financial analysis of the Company and present to the Board strategic alternatives reasonably available to the Company. The Board also discussed the formal engagement of Morgan Stanley as its financial advisor in connection with the potential transaction, noting SailPoint’s longstanding relationship with Morgan Stanley, including Morgan Stanley’s work with SailPoint in connection with SailPoint’s ongoing strategic review, as well as Morgan Stanley’s extensive expertise, knowledge of the industry in which SailPoint operates and experience advising software companies in connection with potential strategic transactions (including but not limited to advising companies that had previously been approached by Thoma Bravo). On the basis of these considerations, and subject in all respects to the Board’s review of a customary relationships disclosure to be produced by Morgan Stanley, the Board authorized SailPoint to engage Morgan Stanley, and, as described below, following negotiations over the terms of the engagement between the Special Committee (as defined below) and Morgan Stanley, Morgan Stanley was formally engaged on March 18, 2022 effective as of January 10, 2022.

 

34


Table of Contents

On January 13, 2022, a Thoma Bravo representative called Mr. McClain seeking an update on whether the Company had a response yet to Thoma Bravo’s request to enter into a non-disclosure agreement and to begin discussions on a potential strategic transaction. Mr. McClain stated to the Thoma Bravo representative that he was not authorized to have any such discussion and that he would need to discuss the request with the Board.

Later on January 13, 2022, the Board met by videoconference. Members of SailPoint management also attended the meeting and representatives of Goodwin and Morgan Stanley attended portions of the meeting. Morgan Stanley gave a comprehensive presentation on (i) market and industry dynamics, (ii) SailPoint’s trading performance since its initial public offering, (iii) M&A activity in the software and technology industries, (iv) Thoma Bravo’s acquisition and bidding history, and (v) Morgan Stanley’s analysis of the universe of other potential strategic and financial sponsor acquirors of the Company. Morgan Stanley then presented its preliminary financial analysis of the Company based on the January 2022 Projections and the Board discussed this financial analysis. Following discussion, the Board instructed Morgan Stanley to respond to Thoma Bravo (i) stating that the Company was not for sale, (ii) stating that, at a minimum, the Board believes that full year 2021 and fourth quarter 2021 financial results must first be released before the Board was prepared to even consider a potential transaction, and (iii) conveying to Thoma Bravo that, in light of the strength of the Company’s business and the fact that Company was not for sale, any premium in any proposal must exceed traditional M&A market premiums prevailing in the industry.

On January 20, 2022, Morgan Stanley called Thoma Bravo and conveyed the Board’s message described in clause (iii) above. On the call, Thoma Bravo conveyed that Thoma Bravo would be prepared to focus on a premium to the intrinsic value of the Company, rather than on a premium to recent trading price, which may result in a significant premium to the then-current trading price. Following this call, a Thoma Bravo representative called Mr. McClain and such representative confirmed that Thoma Bravo would await a determination of the Board on next steps, if any, but reiterated a desire to be able to start due diligence, which Mr. McClain reiterated is a decision reserved for the Board. Later that day, Mr. McClain gave an update to the Board on the exchanges between Thoma Bravo and Morgan Stanley and himself which occurred on that day. The Board reiterated that full year 2021 and fourth quarter 2021 financial results must first be released before the Board was prepared to even consider a potential transaction. As a result, the Board determined (i) not to permit Thoma Bravo to enter into a non-disclosure agreement with the Company, (ii) not to permit Thoma Bravo access to due diligence, (iii) not to otherwise engage further with Thoma Bravo and (iv) for Company management to continue to operate the Company as an independent, publicly traded company, while continuing to consider and evaluate various strategic opportunities, including but not limited to potential acquisitions by SailPoint. Morgan Stanley conveyed this determination to Thoma Bravo on January 20, 2022.

On February 28, 2022, SailPoint issued its fourth quarter and full year 2021 financial results, announcing significant year-over-year increases in total annual recurring revenue, total revenue and subscription revenue, as well as its guidance for 2022. SailPoint’s trading price increased 14% in the subsequent two trading days.

On March 1, 2022, Mr. McClain received a call from a representative of Thoma Bravo. On the call, the Thoma Bravo representative conveyed that it would soon submit a non-binding letter of intent to acquire the Company. On the same day, Morgan Stanley also received a call from a representative of Thoma Bravo who conveyed substantially the same message. On these calls, Mr. McClain and Morgan Stanley each conveyed to Thoma Bravo that it was Thoma Bravo’s prerogative to submit a non-binding letter of intent and therefore the Company would not try to stop Thoma Bravo from doing so.

Later on March 2, 2022, SailPoint received an unsolicited non-binding letter of intent from Thoma Bravo to acquire SailPoint for $60.00 per share in cash (the “March 2 Proposal”). The $60.00 per share offer price implied a premium to SailPoint’s last closing price prior to March 2, 2022 of approximately 34%. The March 2 Proposal also noted that (i) the full consideration would be financed with a combination of equity from Thoma Bravo funds and debt from one or more of Thoma Bravo’s lending partners, (ii) the transaction would not be subject to any financing contingencies, (iii) Thoma Bravo envisioned a “30-day closed go-shop” and (iv) Thoma Bravo was

 

35


Table of Contents

making certain assumptions underlying its offer price, including as to the Company’s cash position and the dilutive effect of the Company’s equity awards and convertible notes, and that the Company’s unvested dilutive securities would be paid out in cash from and after closing in accordance with their existing vesting schedules (clauses (i) through (iv) collectively, the “Specified Non-Binding Terms”). The March 2 Proposal was promptly shared with the Board.

On March 7, 2022, the Board met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Goodwin provided an overview of the directors’ fiduciary duties in connection with their evaluation of a potential transaction. Morgan Stanley provided market, trading price and industry updates since the last such presentation on January 13, 2022, noting in particular the impacts of inflation, the interest rate environment, global supply chain challenges, the Russia-Ukraine conflict and higher energy prices, among other macroeconomic and geopolitical dynamics that had newly arisen or been exacerbated since the January 13, 2022 presentation. The Board then discussed the March 2 Proposal. Morgan Stanley presented an updated preliminary financial analysis based on Thoma Bravo’s $60.00 per share offer price and on the January 2022 Projections, Company management confirmed that the January 2022 Projections had not materially changed since their approval. A representative of Goodwin discussed certain process considerations with respect to a possible transaction with Thoma Bravo and/or its affiliates or with other entities, including the potential for actual or perceived conflicts of interest with members of the Board. The Board discussed various potential conflicts of interest or potential appearances of a conflict of interest applicable to each director (if any) in relation to (i) a potential transaction with Thoma Bravo and (ii) Thoma Bravo and its affiliates. Specifically, it was noted that (i) Mr. McClain had investments in various funds affiliated with Thoma Bravo which were not material to his overall net worth and not material to Thoma Bravo and its affiliates; (ii) Mr. Cam McMartin served as the audit committee chair of a Thoma Bravo portfolio company; (iii) Mr. William Bock served as a director of two Thoma Bravo portfolio companies; (iv) Mr. Jim Pflaging served as a director of four Thoma Bravo portfolio companies; (v) Mr. Sudhakar Ramakrishna served as the CEO and director of a Thoma Bravo portfolio company; (vi) Ms. Tracey Newell had no known potential conflicts of interest or potential appearances of a conflict of interest; (vii) Ms. Heidi Melin had no known potential conflicts of interest or potential appearances of a conflict of interest; (viii) Mr. Ron Green had no known potential conflicts of interest or potential appearances of a conflict of interest; and (ix) Mr. Mike Sullivan had been appointed to the Board as an independent director by Thoma Bravo at a time when Thoma Bravo was the controlling stockholder of the Company, but otherwise had no known potential conflicts of interest or potential appearances of a conflict of interest. Following discussion, the Board adopted resolutions forming a special committee of the Board (the “Special Committee” or “Committee”), consisting of directors who are independent and disinterested in relation to (i) a potential transaction with Thoma Bravo and (ii) Thoma Bravo and its affiliates, to consider and evaluate any proposals made for a potential transaction with any counterparty as well as any alternatives to a potential transaction, including, without limitation, the Company continuing to operate as an independent, publicly traded company. The Board appointed Ms. Newell, Mr. Sullivan and Ms. Melin to the Special Committee (with these directors recusing themselves from the vote with respect to certain resolutions concerning their compensation as members of the Committee). Prior to this meeting, Ms. Newell, Mr. Sullivan and Ms. Melin had each answered questions regarding their relationships, which confirmed that each was independent and disinterested in relation to (i) a potential transaction with Thoma Bravo and (ii) Thoma Bravo and its affiliates. The Board determined to revisit the composition of the Special Committee in the event that the Company engaged with any other counterparty with respect to which any of the incumbent members of the Special Committee were not independent or disinterested.

Immediately following the Board meeting on March 7, 2022, the Special Committee held its first meeting by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. The Committee discussed views on valuation of the Company and risks to the Company on a standalone basis. Following the discussion, the Committee instructed Morgan Stanley to prepare potential alternative responses to Thoma Bravo’s $60.00 per share offer price.

 

36


Table of Contents

Also on March 7, 2022, a member of the Special Committee received a call from a representative of a financial sponsor firm (“Financial Sponsor A”) with whom this member of the Special Committee had an ongoing professional relationship. On the call, Financial Sponsor A requested to meet with Mr. McClain and implied that Financial Sponsor A was interested in evaluating a potential transaction. Pending discussion with the full Special Committee, and in light of this member’s professional relationship with Financial Sponsor A, this member of the Special Committee did not respond to Financial Sponsor A’s request on the call.

Also on March 7, 2022, Mr. McClain had a pre-scheduled call with a representative of a financial sponsor firm (“Financial Sponsor B”) which had historically had routine discussions with the Company without discussions regarding any specific potential transaction. This call had been scheduled to discuss matters unrelated to a potential transaction. On the call, the representative of Financial Sponsor B asked Mr. McClain whether SailPoint has considered engaging in a going-private transaction. Mr. McClain did not respond substantively to this question.

On March 8, 2022, Morgan Stanley sent customary relationship disclosures to Goodwin, which information was shared with the Special Committee, disclosing certain relationships between Morgan Stanley and representatives thereof on the one hand and SailPoint and Thoma Bravo, and their respective affiliates, on the other hand. These disclosed relationships included the fact that Morgan Stanley is a counterparty to SailPoint with respect to certain derivative call option transactions entered into in connection with the Company’s issuance of its convertible notes due 2024, and that the public announcement of a potential transaction may result in adjustments to such derivative transactions, which adjustments may be favorable to Morgan Stanley.

Later on March 8, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Morgan Stanley also attended portions of the meeting and representatives of Goodwin attended the meeting. Further to the Committee’s March 7, 2022 meeting, the Committee, Morgan Stanley and Goodwin discussed potential alternative responses to Thoma Bravo. Following this discussion, the Committee instructed Morgan Stanley to respond to Thoma Bravo with a message that (i) some directors on the full Board believed that the deal price should be at least $70.00 per share and others believed that the deal price should at least be in the upper $60s per share, (ii) SailPoint was prepared to enter into a non-disclosure agreement with Thoma Bravo and proceed expeditiously with value-critical due diligence so that Thoma Bravo could submit a revised offer, and (iii) determinations about other procedural and legal matters including post-signing go-shop terms would be deferred pending further Committee review, but that the Committee was not prepared to enter into a potential transaction without a pre-signing market check. Following Morgan Stanley’s departure from the meeting, Goodwin reviewed the Morgan Stanley relationship disclosure with the Committee, and the Committee determined that Morgan Stanley should be engaged as its financial advisor. The Committee directed Goodwin to negotiate formal terms of SailPoint’s engagement with Morgan Stanley, which negotiations continued through to March 18, 2022. The member of the Special Committee who received the call from Financial Sponsor A on March 7, 2022 also informed the Committee about the call and, following this director’s departure from the meeting, the Committee discussed potential engagement with Financial Sponsor A and authorized this director to respond to Financial Sponsor A and approve a meeting between Financial Sponsor A and Mr. McClain. This director conveyed this message to Financial Sponsor A on March 8, 2022.

Later on March 8, 2022, Morgan Stanley called Thoma Bravo and conveyed the message of the Committee described above. On the call, Thoma Bravo conveyed to Morgan Stanley that it accepted the Committee’s determination for Thoma Bravo to enter into a non-disclosure agreement, commence value-critical due diligence and, subject to the outcomes of such due diligence, may potentially submit a revised offer price. Morgan Stanley then shared a draft non-disclosure agreement prepared by Goodwin with Thoma Bravo and Kirkland & Ellis LLP, Thoma Bravo’s outside counsel (“Kirkland”).

On March 9, 2022, Morgan Stanley received from Thoma Bravo an initial markup of the Company’s form of non-disclosure agreement, and promptly shared these markups with Goodwin and the Company. Later on March 9, 2022, SailPoint and Thoma Bravo entered into a non-disclosure agreement that included a standstill provision that prohibited Thoma Bravo, for an agreed-upon period from the date of the agreement, from offering

 

37


Table of Contents

to acquire or acquiring SailPoint, and from taking certain other actions, including soliciting proxies, without the prior consent of SailPoint (but did not include a so-called “don’t ask, don’t waive” provision), subject to the ability of Thoma Bravo to make certain confidential proposals to the Company and to certain customary fall-away provisions to the standstill in the event of the entry, commencement or public announcement of certain change of control transactions involving the Company and any third party.

Also on March 9, 2022, the Company received from Thoma Bravo a list of high-priority due diligence requests.

On March 11, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin also attended the meeting and representatives of Morgan Stanley attended portions of the meeting. Morgan Stanley reported on the March 8, 2022 call between it and Thoma Bravo described above. The Committee also discussed Mr. McClain’s upcoming meeting with Financial Sponsor A on March 15, 2022. Later on March 11, 2022, Morgan Stanley and Goodwin shared with Company management guidance and direction for Mr. McClain’s meeting with Financial Sponsor A.

On March 15, 2022, Mr. McClain met by videoconference with representatives of Financial Sponsor A and discussed potential strategic partnership opportunities or other strategic alternative opportunities between SailPoint and Financial Sponsor A.

Later on March 15 and March 16, 2022, members of SailPoint management met in-person with members of the Thoma Bravo deal team to conduct a management presentation.

On March 17, 2022, SailPoint received a revised non-binding letter of intent from Thoma Bravo to acquire SailPoint for $62.00 per share in cash (the “March 17 Proposal”). The $62.00 per share offer price implied a premium to SailPoint’s last closing price prior to March 17, 2022 of approximately 41%. The Specified Non-Binding Terms remained unchanged in the March 17 Proposal. Thoma Bravo contemporaneously called Morgan Stanley and conveyed that (i) Thoma Bravo was prepared to enter into a definitive agreement within two weeks, (ii) Thoma Bravo expected to be able to secure financing commitments in respect of the full consideration and (iii) Thoma Bravo preferred that the Company expeditiously enter into a definitive agreement with Thoma Bravo containing a “go-shop” and therefore avoid delays associated with a pre-signing market check. Pending discussion with the Special Committee, Morgan Stanley did not respond substantively to these points, including the request to sign expeditiously without a pre-signing market check, other than to note that the $62.00 per share offer price appeared to be inadequate relative to the price guidance previously conveyed to Thoma Bravo by Morgan Stanley on March 8, 2022. The March 17 Proposal was promptly shared with the Special Committee.

On March 18, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin also attended the meeting and representatives of Morgan Stanley attended portions of the meeting. The Committee discussed the March 17 Proposal, as well as Thoma Bravo’s other points conveyed to Morgan Stanley, including that it preferred that the Company sign expeditiously without a pre-signing market check. Following discussion, the Committee instructed Morgan Stanley to respond to Thoma Bravo that (i) the $62.00 per share offer price remained inadequate, (ii) the Committee would consider an offer price in the upper $60s for a potential transaction and (iii) the Company firmly rejected any limitations on the Company’s ability to conduct a pre-signing market check in accordance with the Committee’s sole discretion. The Committee also discussed a plan for a pre-signing market check, and determined that if Thoma Bravo reverted with a meaningfully improved offer price, then the Company would promptly commence a pre-signing market check at that point and would revert to Thoma Bravo with a specific counterproposal of $67.00 per share. The Committee also discussed the timing, scope, sequencing and messaging for a potential pre-signing market check. The Committee members expressed their belief that involving financial sponsor counterparties in the market check was riskier as compared to strategic counterparties, on account of, among other things, their lack of strategic synergies and therefore reduced ability to compete on price and the risks of leaks due to their potentially involving co-investors or other equity investors and debt financing sources. In light of these concerns, the Committee members discussed limiting the involvement of financial sponsors in any pre-signing market check exclusively to those sponsors that had recently and specifically reached out to SailPoint indicating interest in a potential transaction. Mr. McClain

 

38


Table of Contents

also updated the Committee on his meeting with Financial Sponsor A on March 15, 2022 and his impression that Financial Sponsor A was highly interested in a potential transaction.

Later on March 18, 2022, Morgan Stanley called Thoma Bravo and conveyed the message of the Committee that (i) the $62.00 per share offer price remained inadequate, (ii) the Committee would consider an offer price in the upper $60s for a potential transaction and (iii) the Company firmly rejected any limitations on the Company’s ability to conduct a pre-signing market check in accordance with the Committee’s sole discretion.

Later on March 18, 2022, SailPoint received a revised non-binding letter of intent from Thoma Bravo to acquire SailPoint for $63.50 per share in cash (the “March 18 Proposal”). The $63.50 per share offer price implied a premium to SailPoint’s last closing price prior to March 18, 2022 of approximately 43%. The Specified Non-Binding Terms remained unchanged in the March 18 Proposal. The March 18 Proposal was promptly shared with the Special Committee. In response, and in accordance with the direction of the Special Committee, Morgan Stanley responded later on March 18, 2022 with a counterproposal of $67.00 per share.

Following negotiation between Goodwin (on behalf of and at the direction of the Special Committee) and Morgan Stanley, on March 18, 2022, SailPoint also signed a formal engagement letter with Morgan Stanley in connection with a potential transaction, which engagement letter was effective as of January 10, 2022.

On March 19, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. The Committee discussed the March 18 Proposal and the Committee’s counterproposal with a $67.00 per share price target, as well as strategy and potential responses from Thoma Bravo.

Later on March 19, 2022, Morgan Stanley received a call from Thoma Bravo verbally conveying that Thoma Bravo would soon submit a revised non-binding letter of intent to acquire SailPoint for $65.25 per share in cash, which Thoma Bravo expressly characterized on the call as its “best and final” offer (the “March 19 Verbal Proposal”). The $65.25 per share offer price implied a premium to SailPoint’s last closing price prior to (i) March 19, 2022 of approximately 40%, (ii) March 18, 2022 of approximately 47%, (iii) March 17, 2022 of approximately 49% and (iv) March 2, 2022 of approximately 46%. On the call, Thoma Bravo conveyed to Morgan Stanley that, in light of the significant premium represented by the $65.25 per share offer price, which represented a premium to the Company’s all-time high trading price, Thoma Bravo was expecting that, if the Company engaged in a pre-signing market check, that it would be limited in scope.

Promptly following the receipt of the March 19 Verbal Proposal on March 19, 2022, the Special Committee re-convened by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. The Committee discussed the March 19 Verbal Proposal. The Committee reaffirmed that it would reject any limitations on the Company’s ability to conduct a pre-signing market check in accordance with the Committee’s sole discretion. The Committee also noted that, having extensively discussed and taken into account various important considerations pertaining to the involvement of financial sponsors in a market check, including their lack of strategic synergies and reduced ability to compete on price and the risks of leaks due to their potential involvement of co-investors or other equity investors and debt financing sources, the Committee had intended to limit the involvement of financial sponsors in any pre-signing market check exclusively to those sponsors that had recently and specifically reached out to SailPoint indicating interest in a potential transaction. The Committee then discussed the timing, scope and sequencing of the Company’s pre-signing market check, with input from Morgan Stanley, reviewing each potential strategic and financial sponsor counterparty and determining to exclude certain strategic and financial sponsor counterparties from the market check on account of various considerations, including the risk of leaks and competitive sensitivities, as well as each counterparty’s level of execution risk and ability to undertake an all-cash acquisition rather than an all-stock or mixed-consideration acquisition. The Committee determined to commence the market check on March 21, 2022 with respect to strategic counterparties, with financial sponsor counterparties to follow later that week on account of the risks previously addressed.

 

39


Table of Contents

Later on March 19, 2022, following the Special Committee meeting, SailPoint received a revised non-binding letter of intent from Thoma Bravo memorializing the $65.25 Verbal Proposal to acquire SailPoint for $65.25 per share in cash, which was expressly characterized in the letter of intent as Thoma Bravo’s “best and final” offer (such letter, together with the March 19 Verbal Proposal, the “March 19 Final Proposal”). The Specified Non-Binding Terms remained unchanged in the March 19 Final Proposal. This letter of intent was promptly shared with the Special Committee. Later on March 19, 2022, Morgan Stanley called Thoma Bravo and (i) conveyed that the Board would meet on March 20, 2022 to discuss the March 19 Final Proposal, (ii) discussed certain valuation assumptions underlying the March 19 Final Proposal and the letters of intent preceding it and (iii) reiterated the message of the Committee that the Company firmly rejected any limitations on the Company’s ability to conduct a pre-signing market check in accordance with the Committee’s sole discretion.

On March 20, 2022, the Board met by videoconference. Members of SailPoint management and representatives of Goodwin also attended the meeting and representatives of Morgan Stanley attended portions of the meeting. Morgan Stanley provided a detailed overview of the recent developments with Thoma Bravo, including those that occurred on March 19, 2022. The Board discussed the March 19 Final Proposal, including Thoma Bravo’s “best and final” $65.25 per share offer price, Thoma Bravo’s views on any pre-signing market check and the Committee’s view on preserving the Company’s discretion as to any pre-signing market check. Goodwin also discussed the status of negotiations of a definitive agreement with Kirkland, including relating to a post-signing go-shop and the status of Thoma Bravo’s due diligence. Members of the Special Committee gave their preliminary view that, in light of Morgan Stanley’s analysis of the Company’s inherent valuation, the negotiation history with Thoma Bravo thus far and other important considerations, and subject in all respects to the outcomes of the Company’s pre-signing market check, the Committee regarded the $65.25 per share offer price to be a compelling offer price. Members of the Committee then reported on its determinations regarding the timing, scope and sequencing of the Company’s pre-signing market check, and other members of the Board expressed their views on the Committee’s determinations. Members of the Board also inquired of the Committee whether it had considered simply rejecting the $65.25 per share offer price on the basis that Morgan Stanley had made a counterproposal of $67.00 per share to Thoma Bravo. Members of the Committee responded in the affirmative that they had considered rejecting the $65.25 per share offer price, but after discussion, they had regarded it to be a compelling offer price.

Also on March 20, 2022, Thoma Bravo announced its entry into a definitive agreement to acquire Anaplan, Inc. for approximately $11 billion.

On March 21, 2022, the Special Committee met by videoconference. Members of SailPoint management also attended portions of the meeting and representatives of Goodwin and Morgan Stanley attended the meeting. Morgan Stanley reported that Thoma Bravo intended to raise approximately $1 billion in debt financing for the potential transaction. The Special Committee then considered, along with representatives of Goodwin, how Thoma Bravo’s debt financing would impact the Company’s remedies under a definitive agreement. Following discussion, the Committee authorized Morgan Stanley to approve Thoma Bravo’s request to involve two lender partners for its debt financing syndicate. The Committee then discussed Thoma Bravo’s entry into a definitive agreement to acquire Anaplan, Inc. Representatives of Goodwin reviewed ongoing due diligence, including a request by Thoma Bravo that representatives of Thoma Bravo meet in-person with Mr. McClain, and certain terms under negotiation in the draft definitive agreement, including relating to a post-signing go-shop and termination fees.

Also on March 21, 2022, Morgan Stanley commenced the Company’s pre-signing market check with respect to strategic counterparties in accordance with the directions of the Board and the Special Committee, including that the market check with respect to previously interested financial sponsors should follow later on account of the risks pertaining to financial sponsors addressed by the Board and the Committee. Morgan Stanley reached out to six strategic counterparties (referred to herein as “Strategic Party A”, “Strategic Party B”, “Strategic Party C”, “Strategic Party D”, “Strategic Party E” and “Strategic Party F”), in each case with the message that the Company had received a proposal to acquire the Company with low execution risk, and that the Company was

 

40


Table of Contents

prepared to enter into a non-disclosure agreement with the counterparty to enable the counterparty to expeditiously receive access to due diligence and potentially submit a proposal for a potential transaction.

Later on March 23, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Representatives of Goodwin provided an update on the negotiation of go-shop terms with Kirkland. Morgan Stanley then provided a status update on the ongoing market check, noting that no strategic party thus far had requested to enter into a non-disclosure agreement. The Committee then discussed the scope and sequencing of the Company’s market check with respect to financial sponsor counterparties, reviewing each potential financial sponsor counterparty. The Committee also authorized Morgan Stanley to approve Thoma Bravo’s request to involve a third lender partner for its debt financing syndicate, and determined that, subject to the Committee’s review of each particular debt financing source, the Committee would also generally permit other market check participants to involve debt financing sources if so requested.

On March 24, 2022, Morgan Stanley and Thoma Bravo had a call wherein Morgan Stanley, at the direction of the Committee described above, approved Thoma Bravo’s request to involve another lender partner for its debt financing syndicate.

Also on March 24, 2022, Morgan Stanley received an update from Strategic Party A that they would like to learn more about SailPoint, and were continuing to evaluate a potential transaction internally. Strategic Party A did not request to enter into a non-disclosure agreement at this time.

Also on March 24, 2022, Morgan Stanley was notified by Strategic Party B that Strategic Party B was affirmatively declining to further evaluate a potential transaction.

On March 25, 2022, Morgan Stanley received an unsolicited email from a representative of a financial sponsor firm (“Financial Sponsor C”) expressing interest in evaluating a potential transaction.

Also on March 25, 2022, Morgan Stanley commenced the Company’s pre-signing market check with respect to financial sponsor counterparties in accordance with the directions of the Board and the Special Committee. Morgan Stanley reached out to Financial Sponsor A and Financial Sponsor B, each of which had recently and specifically indicated interest to the Company in evaluating a potential transaction, and in each case with the message that the Company had received a proposal to acquire the Company with low execution risk, and that the Company was prepared to enter into a non-disclosure agreement with the counterparty to enable the counterparty to expeditiously receive access to due diligence and potentially submit a proposal for a potential transaction.

Later on March 25, 2022, the Special Committee met by videoconference. Members of SailPoint management also attended portions of the meeting and representatives of Goodwin and Morgan Stanley attended the meeting. Morgan Stanley provided a status update on the ongoing market check. Morgan Stanley also reported on the unsolicited indication of interest received from Financial Sponsor C described above, and following discussion, the Committee authorized Morgan Stanley to include Financial Sponsor C in the market check. Morgan Stanley also reported on Thoma Bravo having expressed a strong desire to enter into a definitive agreement immediately after its investment committee meeting scheduled for April 6, 2022, as described above. The Committee expressed its desire to continue to work expeditiously with Thoma Bravo, but determined not to commit to any specific timetable in light of the ongoing market check.

Also on March 25, 2022, Morgan Stanley received from each of Financial Sponsor A and Financial Sponsor B an initial markup of the Company’s form of non-disclosure agreement, and promptly shared these markups with Goodwin and the Company.

On March 27, 2022, Morgan Stanley spoke to Financial Sponsor C as part of the market check in accordance with the directions of the Special Committee, with the message that the Company had received a proposal to

 

41


Table of Contents

acquire the Company with low execution risk, and that the Company was prepared to enter into a non-disclosure agreement with Financial Sponsor C to enable it to expeditiously receive access to due diligence and potentially submit a proposal for a potential transaction

Also on March 27, 2022, SailPoint and Financial Sponsor A entered into a non-disclosure agreement that included a standstill provision that prohibited Financial Sponsor A, for an agreed-upon period from the date of the agreement, from offering to acquire or acquiring SailPoint, and from taking certain other actions, including soliciting proxies, without the prior consent of SailPoint (but did not include a so-called “don’t ask, don’t waive” provision), subject to the ability of Financial Sponsor A to make certain confidential proposals to the Company and to certain customary fall-away provisions to the standstill in the event of the entry, commencement or public announcement of certain change of control transactions involving the Company and any third party.

Also on March 27, 2022, Morgan Stanley received an unsolicited communication from a financial sponsor firm (“Financial Sponsor D”) regarding SailPoint. Morgan Stanley subsequently spoke with Financial Sponsor D, but Financial Sponsor D did not indicate an interest in a potential transaction with SailPoint.

Also on March 27, 2022, Goodwin received from Kirkland an initial draft of the merger agreement for a potential transaction with Thoma Bravo, which included a go-shop provision.

On March 28, 2022, the Board met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley reported on the unsolicited communication received from Financial Sponsor D described above. Due to upward movements in SailPoint’s trading price in recent days coupled with the unsolicited communications received from Financial Sponsor C and Financial Sponsor D, the Board expressed concerned that the Company’s ongoing sale process had leaked to an unknown extent.

Also on March 28, 2022, Morgan Stanley received confirmation from Financial Sponsor A that it would attend a management presentation with the Company on March 30, 2022.

On March 29, 2022, SailPoint and Financial Sponsor B entered into a non-disclosure agreement that included a standstill provision that prohibited Financial Sponsor B, for an agreed-upon period from the date of the agreement, from offering to acquire or acquiring SailPoint, and from taking certain other actions, including soliciting proxies, without the prior consent of SailPoint (but did not include a so-called “don’t ask, don’t waive” provision), subject to the ability of Financial Sponsor B to make certain confidential proposals to the Company and to certain customary fall-away provisions to the standstill in the event of the entry, commencement or public announcement of certain change of control transactions involving the Company and any third party.

Also on March 29, 2022, Morgan Stanley received from Financial Sponsor C an initial markup of the Company’s form of non-disclosure agreement, and promptly shared this markup with Goodwin and the Company. Later on March 29, 2022, SailPoint and Financial Sponsor C entered into a non-disclosure agreement that included a standstill provision that prohibited Financial Sponsor C, for an agreed-upon period from the date of the agreement, from offering to acquire or acquiring SailPoint, and from taking certain other actions, including soliciting proxies, without the prior consent of SailPoint (but did not include a so-called “don’t ask, don’t waive” provision), subject to the ability of Financial Sponsor C to make certain confidential proposals to the Company and to certain customary fall-away provisions to the standstill in the event of the entry, commencement or public announcement of certain change of control transactions involving the Company and any third party. Morgan Stanley also received confirmation from Financial Sponsor C that it would attend a management presentation with the Company on April 1, 2022.

Also on March 29, 2022, Morgan Stanley had a call with Strategic Party A. Strategic Party A expressed interest in having a management meeting with the Company to learn more about the Company and its business. Strategic

 

42


Table of Contents

Party A shared with Morgan Stanley a draft non-disclosure agreement prepared by Strategic Party A, which did not include a standstill provision. Later on March 29, 2022, following review by Goodwin, Morgan Stanley reverted with a revised draft of this non-disclosure agreement which, among other things, added a standstill provision (but not a so-called “don’t ask, don’t waive” provision), which was made subject to the ability of Strategic Party A to make certain confidential proposals to the Company and to certain customary fall-away provisions to the standstill in the event of the entry, commencement or public announcement of certain change of control transactions involving the Company and any third party.

Also on March 29, 2022, Morgan Stanley was notified by Strategic Party F that Strategic Party F was affirmatively declining to further evaluate a potential transaction.

On March 30, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin also attended the meeting and representatives of Morgan Stanley attended portions of the meeting. Morgan Stanley reported that, in accordance with the direction of the Special Committee, it had conveyed to each of Financial Sponsor A, Financial Sponsor B and Financial Sponsor C that the Company expected to receive their preliminary proposals for a potential transaction by April 4, 2022. The Committee also discussed its continued monitoring of SailPoint’s trading price, which had continued to rise in recent days. Representatives of Goodwin also presented an overview of certain terms in the draft definitive agreement being negotiated with Kirkland with respect to employee and equity award matters. Representatives of Goodwin then presented an overview of other material legal issues in the draft definitive agreement.

Also on March 30, 2022, SailPoint management provided a revised set of the January 2022 Projections to Morgan Stanley, updated to reflect SailPoint’s actual full year and fourth quarter 2021 financial results (as so updated, the “Projections”).

Also on March 30, 2022, members of SailPoint management and representatives of Morgan Stanley conducted a management presentation for Financial Sponsor A. Morgan Stanley also granted access to the Company’s virtual data room to Financial Sponsor A and Financial Sponsor B.

Also on March 30, 2022, Morgan Stanley was notified by Strategic Party D that Strategic Party D was affirmatively declining to further evaluate a potential transaction.

On March 31, 2022, members of SailPoint management and representatives of Morgan Stanley conducted a management presentation for Financial Sponsor B.

Also on March 31, 2022, Morgan Stanley followed up with Strategic Party A regarding the revised non-disclosure agreement that it had sent back to Strategic Party A on March 29, 2022. Strategic Party A pushed back on including a standstill provision, among other things, in the non-disclosure agreement, and cited institutional concerns over the lack of an ability to properly enforce such a standstill provision across Strategic Party A’s numerous business units.

Also on March 31, 2022, Morgan Stanley was notified by Strategic Party C that Strategic Party C will most likely decline to further evaluate a potential transaction, and to assume that Strategic Party C would so decline.

On April 1, 2022, members of SailPoint management and representatives of Morgan Stanley conducted a management presentation for Financial Sponsor C.

Also on April 1, 2022, Morgan Stanley had a call with Financial Sponsor A. On the call, Financial Sponsor A conveyed to Morgan Stanley that, if it were to make a proposal, then the offer price would likely be in the range of $60.00 to $65.00 per share and that the price would likely be at the low end of that range and would not in any circumstances exceed that range. In any event, Financial Sponsor A conveyed that it would likely require further due diligence on the timespan of multiple weeks before making any such proposal.

 

43


Table of Contents

Later on April 1, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley provided a status update on the ongoing market check. The Committee reviewed with the representatives of Goodwin Strategic Party A’s pushback on including a standstill provision in its non-disclosure agreement. The Committee authorized Goodwin to forego a standstill provision for the time being in order to enable Strategic Party A to expeditiously gain access to value-critical due diligence and potentially make a preliminary proposal for a potential transaction, which the Committee viewed to be a worthwhile compromise given the fact that any such standstill would likely be expected to fall away if SailPoint were to publicly announce a potential transaction. After Morgan Stanley conveyed this concession to Strategic Party A, SailPoint and Strategic Party A entered into a non-disclosure agreement on April 4, 2022, which did not include a standstill provision. A management meeting with Strategic Party A was scheduled, to occur on April 7, 2022. At the April 1, 2022 meeting, Morgan Stanley also reported on its call with Financial Sponsor A earlier on April 1, 2022 as described above. In light of Financial Sponsor A’s messaging, the Committee determined to terminate the Company’s engagement with Financial Sponsor A following the preliminary proposal deadline on April 4, 2022, and therefore that the Committee member who had an ongoing professional relationship with Financial Sponsor A could continue to serve on the Committee. Representatives of Goodwin then presented an overview of the material legal terms in the draft definitive agreement with Thoma Bravo. This included Thoma Bravo’s agreement that SailPoint would have a post-signing go-shop lasting 35 days, and would be entitled to terminate the definitive agreement with Thoma Bravo within 45 days after signing to enter into a superior proposal received from an “excluded party” during the go-shop for a reduced termination fee payable by the Company.

On April 2, 2022, Morgan Stanley followed up with each of Financial Sponsor B and Financial Sponsor C, reiterating to each party that if they were interested in submitting a proposal for a potential transaction, they must notify Morgan Stanley of their proposal by mid-day on April 4, 2022. On the call with Morgan Stanley, Financial Sponsor B reported that the same representatives of Financial Sponsor B evaluating a potential transaction with the Company were separately engaged in evaluating a merger and acquisition opportunity involving a different company, that these separate obligations would likely lead to significant delays in Financial Sponsor B’s ability to evaluate a potential transaction with the Company and that Financial Sponsor B was not prepared to estimate on a preliminary basis its ultimate valuation of the Company, if it were to eventually make a proposal at all.

On April 4, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley reported on its calls with Financial Sponsor B and Financial Sponsor C as described above. Morgan Stanley also presented an updated financial and premia analysis on the basis of Thoma Bravo’s $65.25 per share offer price.

Also on April 4, 2022, Morgan Stanley again followed up with Financial Sponsor C. Financial Sponsor C reported that its representatives were simultaneously evaluating another merger and acquisition opportunity involving a different company, that these separate obligations would likely lead to significant delays in Financial Sponsor C’s ability to evaluate a potential transaction with the Company and that Financial Sponsor C was not prepared to estimate on a preliminary basis its ultimate valuation of the Company, if it were to eventually make a proposal at all.

Also on April 4, 2022, Mr. McClain and representatives of Thoma Bravo met in-person and discussed Thoma Bravo’s remaining high-level due diligence items.

On April 5, 2022, Morgan Stanley had a call with Thoma Bravo. Morgan Stanley conveyed that the Special Committee did not believe that the Company would be prepared to enter into a definitive agreement on April 6, 2022, as Thoma Bravo had desired, but that the Company may potentially be prepared to enter into a definitive agreement sometime during the coming weekend on April 9 or 10, 2022.

Later on April 5, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley reported on its call earlier on April 5, 2022 with Thoma Bravo as described above. The Committee resolved to hold a management

 

44


Table of Contents

meeting with Strategic Party A on April 7, 2022 as planned, with the hope of being able to receive a preliminary proposal for a potential transaction from Strategic Party A shortly thereafter and prior to determining whether to proceed with entering into a definitive agreement with Thoma Bravo.

On April 6, 2022, Morgan Stanley was notified by Financial Party B that Financial Party B was affirmatively declining to further evaluate a potential transaction, due to its prioritization of time and resources to a separate transaction.

Also on April 6, 2022, the Special Committee met by videoconference. Members of SailPoint management also attended portions of the meeting and representatives of Goodwin and Morgan Stanley also attended the meeting. Mr. McClain presented a preliminary overview of SailPoint’s actual first quarter 2022 financial results, which in the aggregate were consistent with expectations despite various strengths and weaknesses across different geographic regions. Morgan Stanley also gave an update on the market check, noting that Financial Party B had affirmatively declined to further evaluate a potential transaction.

Also on April 6, 2022, members of SailPoint management met with representatives of Thoma Bravo to provide a preliminary overview of SailPoint’s actual first quarter 2022 financial results, which in the aggregate were consistent with expectations despite various strengths and weaknesses across different geographic regions.

Also on April 6, 2022, Morgan Stanley was notified by Strategic Party E that Strategic Party E was affirmatively declining to further evaluate a potential transaction, due to the fact that the Company’s lines of business were not currently priorities for Strategic Party E.

On April 7, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley presented an updated financial and premia analysis on the basis of Thoma Bravo’s $65.25 per share offer price. Goodwin also presented an overview of material legal terms in the draft definitive agreement with Thoma Bravo.

Also on April 7, 2022, members of SailPoint management and representatives of Morgan Stanley conducted a management presentation for Strategic Party A.

On April 8, 2022, Morgan Stanley was notified by Strategic Party A that Strategic Party A was affirmatively declining to further evaluate a potential transaction.

Over the course of April 8, 9 and 10, Goodwin and Kirkland finalized their work on the terms of the definitive agreement between SailPoint and Thoma Bravo, as well as the disclosure schedules and other ancillary agreements pertaining to the transaction.

On April 10, 2022, the Special Committee met by videoconference to review the final terms of the definitive agreement between SailPoint and Thoma Bravo and related ancillary agreements and vote on whether to recommend entry into such definitive agreement to the Board. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley presented an update on the Company’s market check, noting that the market check had yielded one verbal preliminary price proposal to acquire the Company, which was the verbal indication conveyed by Financial Sponsor A on April 1, 2022. Morgan Stanley also discussed the intended scope and sequencing of the Company’s go-shop process which, assuming that the Company entered into a definitive agreement with Thoma Bravo on April 10, 2022, would commence on April 11, 2022 and run through to May 16, 2022. Morgan Stanley presented a list of 44 potential go-shop counterparties consisting of 20 strategic counterparties and 24 financial sponsor counterparties. Among these, the Committee determined to exclude specifically reaching out to three strategic counterparties as part of the go-shop, on account of various considerations, including these counterparties’ financial capacity, commercial and competitive sensitivity and enterprise size relative to SailPoint. Representatives of Goodwin then presented an overview of the final material legal terms in the definitive agreement with Thoma Bravo, as well as ancillary agreements pertaining to the potential transaction with Thoma Bravo including Thoma Bravo’s equity commitment letter, debt commitment letter and limited guaranty. Morgan Stanley then reported to the Committee

 

45


Table of Contents

that it would be prepared to deliver its oral fairness opinion to the Board at the Board meeting that would immediately follow this Committee meeting, which would subsequently be confirmed in writing, and which would state that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the per share merger consideration to be received by SailPoint’s stockholders (other than holders of certain excluded shares) pursuant to the definitive agreement with Thoma Bravo was fair, from a financial point of view, to such SailPoint stockholders. The Committee then discussed its reasons in favor of recommending the potential transaction with Thoma Bravo to the Board, as well as considerations of risk pertaining to the same. The Committee then unanimously adopted resolutions favorably recommending the potential transaction with Thoma Bravo to the Board.

Immediately following the Special Committee meeting, on April 10, 2022, the Board met by videoconference to review the final terms of the definitive agreement between SailPoint and Thoma Bravo and related ancillary agreements and vote on whether to approve entry into the definitive agreement with Thoma Bravo. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley presented an update on the Company’s market check, noting that the market check had yielded one verbal preliminary price proposal to acquire the Company, which was the verbal indication conveyed by Financial Sponsor A on April 1, 2022. Morgan Stanley then presented an updated financial and premia analysis on the basis of Thoma Bravo’s final $65.25 per share offer price. Goodwin then presented an overview of the final material legal terms in the definitive agreement with Thoma Bravo, as well as ancillary agreements pertaining to the potential transaction with Thoma Bravo including Thoma Bravo’s equity commitment letter, debt commitment letter and limited guaranty. These terms included Thoma Bravo’s agreement that SailPoint would have a post-signing go-shop lasting 35 days, and would be entitled to terminate the definitive agreement with Thoma Bravo within 45 days after signing to enter into a superior proposal received from an “excluded party” during the go-shop for a reduced termination fee payable by the Company. Morgan Stanley then summarized the updated Morgan Stanley Relationship Disclosure, which included the fact that Morgan Stanley is a counterparty to SailPoint with respect to certain derivative call option transactions entered into in connection with the Company’s issuance of its convertible notes due 2024, and that the public announcement of a potential transaction may result in adjustments to such derivative transactions, which adjustments may be favorable to Morgan Stanley. A representative of Morgan Stanley then delivered Morgan Stanley’s oral opinion, subsequently confirmed in writing, dated April 10, 2022, to the Board of Directors that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than holders of the Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such SailPoint Stockholders. Members of the Special Committee then reported on the Committee’s reasons in favor of recommending the potential transaction with Thoma Bravo to the Board, as well as considerations of risk pertaining to the same. After extensive discussions of the proposed potential transaction with Thoma Bravo and the matters summarized for the Board at the meeting, the Board then unanimously (i) determined that it was in the best interests of the Company and its stockholders, and declared it advisable, to enter into the merger agreement with Thoma Bravo, (ii) approved the execution, delivery and performance of the merger agreement with Thoma Bravo and the consummation of the transactions contemplated thereby, and (iii) recommended that the Company stockholders adopt the merger agreement with Thoma Bravo and directed that such matter be submitted for consideration of the Company stockholders at a special meeting of Company stockholders.

Later in the evening on April 10, 2022, SailPoint and Thoma Bravo executed and delivered the merger agreement and the limited guaranty, and Thoma Bravo and the other parties thereto executed and delivered the equity commitment letter and the debt commitment letter.

Early in the morning on April 11, 2022, the parties issued a press release publicly announcing the transaction.

 

46


Table of Contents

From April 11, 2022, after the transaction was announced, and throughout the week of April 11, 2022, at the direction of the Board and the Special Committee, Morgan Stanley contacted 17 strategic counterparties and 24 financial sponsor counterparties regarding a potential acquisition of SailPoint in connection with the go-shop provided for in the merger agreement with Thoma Bravo (among these 41 counterparties, six strategic counterparties and three financial sponsor counterparties had been contacted during the pre-signing market check). Over the course of that week, 24 counterparties affirmatively declined to further evaluate a potential transaction.

On April 14, 2022, a financial sponsor firm contacted in connection with the go-shop (“Financial Sponsor E”) expressed interest in evaluating a potential transaction.

Later on April 14, 2022, Morgan Stanley received from Financial Sponsor E an initial markup of the Company’s form of go-shop non-disclosure agreement (which does not include a standstill provision), and promptly shared this markup with Goodwin and the Company. Later on April 14, 2022, SailPoint and Financial Sponsor E entered into a non-disclosure agreement.

Also on April 14, 2022, Morgan Stanley reached out to Strategic Party C in connection with the go-shop and Strategic Party C confirmed its earlier indication on March 31, 2022 that it was affirmatively declining to further evaluate a potential transaction.

On April 15, 2022, a financial sponsor firm contacted in connection with the go-shop (“Financial Sponsor F”) expressed interest in evaluating a potential transaction, and scheduled a meeting with Morgan Stanley for April 20, 2022 to discuss a potential transaction further.

On April 18, 2022, the Special Committee met by videoconference. Members of SailPoint management and representatives of Goodwin and Morgan Stanley also attended the meeting. Morgan Stanley provided an update on the Company’s go-shop process, noting that a total of 41 counterparties were contacted, out of which 24 have affirmatively declined to further evaluate a potential transaction and two have affirmatively expressed interest in further evaluating, one of which (Financial Sponsor E) has entered into a non-disclosure agreement with the Company.

On April 18, 2022, a financial sponsor firm contacted in connection with the go-shop (“Financial Sponsor G”) expressed interest in evaluating a potential transaction.

On April 19, 2022, Morgan Stanley received from Financial Sponsor G an initial markup of the Company’s form of go-shop non-disclosure agreement (which does not include a standstill provision), and promptly shared this markup with Goodwin and the Company.

On April 20, 2022, SailPoint and Financial Sponsor G entered into a non-disclosure agreement.

On April 21, 2022, members of SailPoint management and representatives of Morgan Stanley conducted a management presentation for Financial Sponsor E.

On April 25, 2022, Morgan Stanley received from Financial Sponsor F a markup of the Company’s form of go-shop non-disclosure agreement (which does not include a “standstill” provision) which did not include any substantive changes from such form, and promptly shared this markup with Goodwin and the Company. Later on April 25, 2022, SailPoint and Financial Sponsor F entered into a non-disclosure agreement.

On April 27, 2022, Morgan Stanley was notified by Financial Sponsor E that Financial Sponsor E was affirmatively declining to further evaluate a potential transaction, due to Financial Sponsor E’s lack of confidence that it would be able to match or exceed the $65.25 per share offer price.

On April 28, 2022, members of SailPoint management and representatives of Morgan Stanley conducted a management presentation for each of Financial Sponsor F and Financial Sponsor G.

 

47


Table of Contents

On May 3, 2022, Morgan Stanley was notified by Financial Sponsor G that Financial Sponsor G was affirmatively declining to further evaluate a potential transaction, due to Financial Sponsor G’s lack of confidence that it would be able to match or exceed the $65.25 per share offer price in a timely manner.

On May 6, 2022, Morgan Stanley was notified by Financial Sponsor F that Financial Sponsor F was affirmatively declining to further evaluate a potential transaction. Financial Sponsor F informed Morgan Stanley that they do not see a path to proposing an offer price per share higher than the $65.25 per share in the Thoma Bravo transaction.

On May 16, 2022, at 11:59 p.m. Eastern time, the go-shop period provided for in the Merger Agreement expired. During the go-shop period, no party made an Alternative Acquisition Proposal.

Recommendation of the Board of Directors and Reasons for the Merger

Recommendation of the Board of Directors

The Board and the Special Committee carefully reviewed and considered the proposed Merger in consultation with SailPoint’s management and legal and financial advisors and, upon the recommendation of the Special Committee, the Board has unanimously (i) determined that it is in the best interests of SailPoint and its stockholders, and declared it advisable, to enter into the Merger Agreement, (ii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, and (iii) resolved to recommend that SailPoint Stockholders adopt the Merger Agreement and directed that such matter be submitted for the consideration of SailPoint Stockholders at the Special Meeting.

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

Reasons for the Merger

The Board and the Special Committee carefully reviewed and considered the proposed Merger in consultation with SailPoint’s management and legal and financial advisors and, upon the unanimous recommendation of the Special Committee, the Board has unanimously (i) determined that it is in the best interests of SailPoint and its stockholders, and declared it advisable, to enter into the Merger Agreement, (ii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, and (iii) recommended that SailPoint stockholders adopt the Merger Agreement and directed that such matter be submitted for the consideration of SailPoint stockholders at a special meeting of SailPoint stockholders.

In reaching these decisions, the Board and the Special Committee considered the following positive reasons to support the Merger Agreement and the transactions contemplated thereby:

 

   

the fact that the price of $65.25 per share in cash payable in the Merger provides certainty, immediate value and liquidity to SailPoint stockholders;

 

   

the historical market prices, volatility and trading information with respect to shares of SailPoint common stock, including the fact that $65.25 per share to be received by SailPoint stockholders in the Merger represents a premium of approximately 32% over the closing price of SailPoint common stock as of April 8, 2022, the last trading day before the public announcement of the Merger, a premium of approximately 48% over the 90-day volume-weighted average price of SailPoint common stock as of April 8, 2022, a premium of approximately 36% over the 30-day average of SailPoint common stock as of April 8, 2022, and a premium of approximately 3% over the all-time high price of SailPoint common stock as of April 8, 2022;

 

   

the current and prospective business environment in which SailPoint operates, including international, national and local economic conditions, the competitive environment, and the likely effect of these factors on SailPoint and the execution of SailPoint’s plans as a standalone company;

 

   

the belief that the $65.25 per share in cash payable in the Merger was more favorable to SailPoint stockholders on a risk-adjusted basis than the potential value that might result from other alternatives

 

48


Table of Contents
 

reasonably available to SailPoint, based upon the directors’ extensive knowledge of SailPoint’s business, assets, financial condition and results of operations, the execution challenges that SailPoint potentially faces, SailPoint’s historical and projected financial performance, and market dynamics, and the belief that the Merger represented an attractive and comparatively certain value for SailPoint stockholders relative to the risk-adjusted prospects for SailPoint on a standalone basis;

 

   

the sale process conducted by SailPoint, with the assistance of Morgan Stanley and Goodwin, to review other potential strategic alternatives and, in connection therewith, the engagement with multiple counterparties, including both strategic parties and financial sponsors, regarding their interest in a potential acquisition of SailPoint;

 

   

the potential risk of losing the favorable opportunity with Thoma Bravo in the event SailPoint sought to pursue discussions with all third parties who may be interested in pursuing a strategic transaction with SailPoint prior to entry into the Merger Agreement and the potential negative effect that such a process might have on SailPoint’s business, especially in light of the go-shop provision Thoma Bravo was willing to provide that would allow for SailPoint to solicit Alternative Acquisition Proposals following announcement of the Merger;

 

   

the right of SailPoint, pursuant to a go-shop period ending May 16, 2022, to solicit Alternative Acquisition Proposals from, and participate in discussions and negotiations with, third parties regarding Alternative Acquisition Proposals;

 

   

the belief that, after multiple rounds of negotiations with Thoma Bravo and its representatives (as described in more detail under the section of this proxy statement captioned “—Background of the Merger”), $65.25 per share was the highest price that Thoma Bravo was willing to pay as of the date of execution of the Merger Agreement and that the terms of the Merger Agreement include the most favorable terms to SailPoint, in the aggregate, to which Thoma Bravo was willing to agree;

 

   

the oral opinion of Morgan Stanley rendered to the Board of Directors, subsequently confirmed in writing, that, as of April 10, 2022, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth therein, the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such SailPoint Stockholders, as more fully described below under the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC,” which full text of the written opinion is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety;

 

   

the fact that SailPoint has sufficient operating flexibility to conduct its business in the ordinary course prior to the consummation of the Merger;

 

   

the high degree of confidence that the Merger would close in a timely manner in light of the conditions and other terms set forth in the Merger Agreement;

 

   

the conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of SailPoint’s representations and warranties, is generally subject to a Company Material Adverse Effect (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”) qualification;

 

   

the ability of the Special Committee and the Board to furnish information to, and conduct negotiations with, third parties in certain circumstances, to terminate the Merger Agreement to accept a Superior Proposal upon payment of a termination fee of $212,540,000 (which the Special Committee and the Board believed was reasonable under the circumstances) and to terminate the Merger Agreement to accept a Superior Proposal received prior to 11:59 p.m. Eastern Time on May 26, 2022 to enter into a definitive agreement with respect to a Superior Proposal received from certain parties upon payment of a reduced termination fee equal to $81,750,000;

 

   

the End Date of October 10, 2022 (subject to extension under certain circumstances), which is expected to allow for sufficient time to complete the Merger;

 

49


Table of Contents
   

the availability of statutory appraisal rights to SailPoint stockholders who do not vote in favor of the adoption of the Merger Agreement and otherwise comply with all required procedures under the DGCL;

 

   

the absence of a financing condition in the Merger Agreement, the obligations of Parent under the Merger Agreement to arrange and consummate the financing, and the limited number and nature of the conditions in the Financing Letters;

 

   

SailPoint’s ability, under circumstances specified in the Merger Agreement and the Equity Commitment Letter, to specifically enforce Parent’s obligation to cause the equity financing to be funded as contemplated by the Merger Agreement and the Equity Commitment Letter;

 

   

the requirement that, in the event of a failure of the Merger to be consummated under certain circumstances, Parent will pay SailPoint a termination fee of $425,090,000, and the obligations of the Thoma Bravo Fund under the Guaranty to fund such amount;

 

   

representations by Parent in the Merger Agreement that it will have adequate resources to pay the merger consideration and other amounts required to consummate the Merger, taking into account the proceeds from the Financing Letters and the projected cash balance of SailPoint;

 

   

SailPoint’s rights to specific performance under the terms and subject to the conditions set forth in the Merger Agreement; and

 

   

the likelihood that the Merger would be consummated, in light of the experience, reputation and financial capabilities of Thoma Bravo and its debt financing sources.

In the course of its deliberations, the Board and the Special Committee also considered, among other things, the following negative factors:

 

   

the fact that SailPoint stockholders will not participate in any future growth potential or benefit from any future increase in the value of SailPoint as a private company;

 

   

the possibility that the Merger will not be consummated and the potential negative effects on SailPoint’s business, operations, financial results and stock price;

 

   

the potential negative effects of the public announcement of the Merger on SailPoint’s sales, operating results and stock price, its ability to retain key management, sales, engineering and other personnel, and its relationships with customers, suppliers and partners;

 

   

the restrictions on the conduct of SailPoint’s business prior to the completion of the Merger, requiring SailPoint to conduct its business in the ordinary course and preventing SailPoint from taking certain specified actions, subject to specific limitations and exceptions, all of which may delay or prevent SailPoint from undertaking business opportunities pending completion of the Merger;

 

   

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

 

   

the conditions to the obligations of Parent to complete the Merger and the right of Parent to terminate the Merger Agreement under certain circumstances;

 

   

the fact that the Merger Agreement precludes SailPoint from actively soliciting Alternative Acquisition Proposals after the Go-Shop Period, and the possibility that SailPoint may be obligated to pay Parent a termination fee of $212,540,000 or $81,750,000 in the event that SailPoint terminates the Merger Agreement under certain circumstances;

 

   

if Parent fails to complete the Merger as a result of the failure to obtain the financing under the Debt Commitment Letter or a breach of the Merger Agreement in certain circumstances, remedies are generally limited to the Parent termination fee payable by Parent as described above, which may be inadequate to compensate SailPoint for the damage caused, and if available, other rights and remedies may be expensive and difficult to enforce, and the success of any such action may be uncertain;

 

50


Table of Contents
   

the fact that Parent requires significant third-party debt financing for the Merger and in the event that the Lenders do not provide the financing under the Debt Commitment Letter, SailPoint will not be able to specifically enforce Parent’s obligations to complete the Merger and may only be entitled to receive the Parent termination fee as provided under the Merger Agreement;

 

   

the fact that completion of the Merger requires certain regulatory clearances and consents, including under applicable antitrust laws and certain foreign investment laws;

 

   

the possible loss of key management or other personnel of SailPoint during the pendency of the Merger;

 

   

the risk of litigation;

 

   

the fact that the consideration consists of cash and will therefore be taxable to SailPoint stockholders who are subject to taxation for U.S. federal income tax purposes; and

 

   

the interests that certain SailPoint directors and executive officers may have with respect to the Merger, in addition to their interests as SailPoint stockholders generally, as described in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger.”

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

Opinion of Morgan Stanley & Co. LLC

The Board of Directors retained Morgan Stanley to provide it with financial advisory services and a financial opinion in connection with the possible sale of SailPoint. The Board of Directors selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its extensive expertise and experience advising software companies in connection with potential strategic transactions (including but not limited to numerous transactions with Thoma Bravo), its knowledge of SailPoint’s business and affairs based on its longstanding relationship with SailPoint. At the meeting of the Board of Directors on April 10, 2022, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of April 10, 2022, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair from a financial point of view to such SailPoint Stockholders.

The full text of the written opinion of Morgan Stanley, dated as of April 10, 2022, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B and incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Board of Directors, in its capacity as

 

51


Table of Contents

such, and addresses only the fairness from a financial point of view of the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement as of the date of the opinion and does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how SailPoint Stockholders should vote at the Special Meeting. The summary of the opinion of Morgan Stanley set forth below is qualified in its entirety by reference to the full text of the opinion.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

   

reviewed certain publicly available financial statements and other business and financial information of SailPoint;

 

   

reviewed certain internal financial statements and other financial and operating data concerning SailPoint;

 

   

reviewed certain financial projections prepared by the management of SailPoint and certain extrapolations prepared with guidance from the management of SailPoint (which were reviewed and approved for Morgan Stanley’s use by the management of SailPoint);

 

   

discussed the past and current operations and financial condition and the prospects of SailPoint with senior executives of SailPoint;

 

   

reviewed the reported prices and trading activity for SailPoint common stock;

 

   

compared the financial performance of SailPoint and the prices and trading activity of SailPoint common stock with that of certain other publicly traded companies comparable with SailPoint, and their securities;

 

   

reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

   

participated in certain discussions and negotiations among representatives of SailPoint, Parent and their respective financial and legal advisors;

 

   

reviewed a draft of the Merger Agreement dated as of April 10, 2022, drafts of each of the Financing Letters, each dated as of April 10, 2022 and certain related documents; and

 

   

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley 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 Morgan Stanley by SailPoint, and formed a substantial basis for its opinion. With respect to the Projections, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of SailPoint’s management of the future financial performance of SailPoint. Morgan Stanley expressed no view as to such Projections or the assumptions on which they were based. In addition, Morgan Stanley assumed that the Merger would be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including among other things, that Parent will obtain financing in accordance with the terms set forth in the Commitment Letters, and that the definitive merger agreement would not differ in any material respect from the draft thereof furnished to Morgan Stanley. Morgan Stanley assumed that, in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification,

 

52


Table of Contents

the assessment of SailPoint and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley’s opinion does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of SailPoint’s officers, directors or employees, or any class of such persons, relative to the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) in the Merger. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of SailPoint, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, April 10, 2022. Events occurring after April 10, 2022 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley has not assumed any obligation to update, revise or reaffirm its opinion.

Summary of Financial Analyses

The following is a brief summary of the material analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated as of April 10, 2022, to the Board of Directors. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion.

In performing the financial analyses summarized below and in arriving at its opinion, Morgan Stanley utilized and was directed by the Board of Directors to rely upon, among other matters, (i) the Projections and (ii) certain estimates of equity research analysts (the “Street Consensus”). The Projections are more fully described below in the section of this proxy statement captioned “—Projections.” In accordance with direction from the Board of Directors, Morgan Stanley utilized the Street Consensus and the Projections in its financial analyses described below.

Public Trading Comparables Analysis

Morgan Stanley performed a public trading comparables analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial estimates for SailPoint with comparable publicly available consensus equity analyst research estimates for companies, selected based on Morgan Stanley’s professional judgment and experience, that share similar business characteristics and have certain comparable operating characteristics including, among other things, similarly sized revenue and/or revenue growth rates, market capitalizations, profitability, scale and/or other similar operating characteristics (these companies are referred to as the “comparable companies”).

For purposes of this analysis, Morgan Stanley analyzed the ratio of aggregate value to estimated revenue, which, for purposes of this analysis, (1) for SailPoint, (a) was provided to Morgan Stanley, and approved for Morgan Stanley’s use, by SailPoint management for calendar years 2022 and 2023 for the Projections, and (b) was based on available consensus equity analyst research estimates for calendar years 2022 and 2023 for the Street Consensus; and (2) for each of the comparable companies, was based on publicly available consensus equity analyst research estimates for comparison purposes. For purposes of its analyses, Morgan Stanley defined “aggregate value” as a company’s fully diluted equity value plus total debt, less cash and cash equivalents.

 

53


Table of Contents

For calendar year 2022, the range of observed multiples of the ratio of aggregate value to estimated revenue for the comparable companies was 7.3x to 13.4x, with a median observed multiple of 10.5x. For calendar year 2023, the range of observed multiples of the ratio of aggregate value to estimated revenue for the comparable companies was 6.0x to 10.0x, with a median observed multiple of 8.7x. The following is a list of the selected comparable companies reviewed, together with the applicable multiples:

 

Selected Comparable Company

   CY2022E
AV/Estimated
Revenue
Multiple
     CY2023E
AV/Estimated
Revenue
Multiple
 

CyberArk Software Ltd.

     10.8x        9.0x  

ForgeRock, Inc.

     7.6x        6.0x  

KnowBe4, Inc.

     12.1x        9.6x  

Okta, Inc.

     13.4x        10.0x  

Palo Alto Networks

     11.1x        9.1x  

Ping Identity Holding Corp.

     7.3x        6.1x  

Qualys Inc

     10.6x        9.2x  

Rapid7, Inc.

     10.4x        8.5x  

Tenable, Inc.

     10.0x        8.3x  

Varonis Systems, Inc.

     9.4x        7.7x  

Based on its analysis of the relevant metrics for each of the comparable companies and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of aggregate value to estimated revenue multiples for use with each of the Projections and the Street Consensus, respectively. Morgan Stanley then applied these ranges of multiples to the estimated relevant revenue metric for SailPoint. For purposes of this analysis, Morgan Stanley utilized publicly available financial information, available as of April 8, 2022 (the last full trading day prior to the meeting of the Board of Directors to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger).

Based on the outstanding shares of SailPoint common stock on a fully diluted basis and latest cash and debt balance as provided by SailPoint management, Morgan Stanley calculated the estimated implied value per share of SailPoint common stock as follows:

 

Public Trading Multiples

  Selected Comparable
Company AV/
Estimated Revenue
Multiple Ranges
    Implied Value Per
Share of

SailPoint Common
Stock ($)
 

CY 2022E AV / Revenue

   

Street Consensus

    8.5x – 11.0x       44.00 – 55.27  

Projections

    9.0x – 11.5x       46.99 – 58.47  

CY 2023E AV / Revenue

   

Street Consensus

    7.0x – 9.0x       43.86 – 54.77  

Projections

    7.5x – 9.5x       52.20 – 64.61  

No company utilized in the public trading comparables analysis is identical to SailPoint. In evaluating the comparable companies, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond SailPoint’s control. These include, among other things, the impact of competition on SailPoint’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of SailPoint and the industry, and in the financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.

 

54


Table of Contents

Discounted Equity Value Analysis

Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into the potential future equity value of a company as a function of such company’s estimated future revenue. The resulting equity value is subsequently discounted to arrive at an estimate of the implied present value. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per share of the SailPoint common stock on a standalone basis for each of the Street Consensus and Projections.

To calculate these discounted fully diluted equity values, Morgan Stanley utilized calendar year 2024 revenue estimates under each of the Street Consensus and Projections, respectively. Based upon the application of its professional judgment and experience, Morgan Stanley applied a forward range of aggregate value to estimated revenue multiples (based on the range of aggregate value to revenue multiples for the comparable companies) to these revenue estimates, respectively, in order to reach a future-implied fully diluted aggregate value. For each of the Street Consensus and Projections, Morgan Stanley applied an aggregate value to estimated revenue multiple of 8.0x to 10.0x to generate an undiscounted, implied future fully diluted equity value.

In each case, Morgan Stanley then discounted the resulting implied future fully diluted equity value to April 8, 2022, at a discount rate of 9.8%, which rate was selected by Morgan Stanley based on SailPoint’s estimated cost of equity, estimated using the capital asset pricing model method and utilizing a 6% market risk premium, a risk-free rate of 2.7% based on the 10-year U.S. Treasury yield as of April 8, 2022, and a 1.2 predicted beta per Barra. The result of these analyses are listed below:

 

Based on Calendar Year 2024

   Selected AV /
Estimated
Revenue

Multiple
Ranges
     Implied, Discounted
Value Per Share of

SailPoint Common
Stock ($)
 

Estimated Revenue

     

Street Consensus

     8.0x – 10.0x        49.43 – 60.56  

Projections

     8.0x – 10.0x        57.56 – 70.88  

Discounted Cash Flow Analysis

Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. Morgan Stanley calculated a range of fully diluted equity values per share for the SailPoint common stock based on a discounted cash flow analysis to value SailPoint as a standalone entity. Morgan Stanley utilized estimates from the Projections for purposes of its discounted cash flow analysis, as more fully described below.

Morgan Stanley first calculated the estimated unlevered free cash flow, which is defined as non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (burdened by stock based compensation), less taxes and capital expenditures, and adjusted for changes in net working capital. The Projections included extrapolations through calendar year 2036 prepared by Morgan Stanley with the guidance of SailPoint management (which extrapolations were reviewed and approved for Morgan Stanley’s use by SailPoint management). The free cash flows and terminal values were discounted to present values as of April 8, 2022, at a discount rate ranging from 8.6% to 10.5%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect an estimate of SailPoint’s weighted average cost of capital estimated using the capital asset pricing model method and utilizing a 6% market risk premium, a risk-free rate of 2.7% based on the 10-year U.S. Treasury yield as of April 8, 2022, and a 1.2 predicted beta per Barra. To calculate terminal values, Morgan Stanley utilized perpetual growth rates of 2.5 percent to 3.5 percent as part of its analyses, with such rates selected upon the application of Morgan Stanley’s professional judgment and experience. The resulting aggregate value was then adjusted for net debt and further adjusted to add the net present value of net operating losses.

 

55


Table of Contents

Based on the outstanding shares of SailPoint common stock on a fully diluted basis as provided by SailPoint’s management, Morgan Stanley calculated the estimated implied value per share of SailPoint common stock as follows:

 

     Implied, Discounted Value Per
Share of SailPoint Common
Stock ($)
 

Projections

     35.74 – 58.93  

Precedent Transactions Multiples Analysis

Morgan Stanley performed a precedent transactions multiples analysis, which is designed to imply a value of a company based on publicly available financial terms. Morgan Stanley compared publicly available statistics for selected software transactions. Morgan Stanley selected such comparable transactions based on its professional judgment and experience, including because they shared certain characteristics with the Merger, most notably because they were similar software transactions since 2018. For such transactions, Morgan Stanley noted the multiple of aggregate value of the transaction to the estimated next 12 months’ (referred to as “NTM”) revenue based on publicly available information at the time of announcement or at the unaffected date of each such transaction.

The following is a list of the selected software transactions reviewed, together with the applicable multiples:

 

Selected Software Transactions (Target/Acquiror)

   AV/NTM
Revenue
Multiple
 

Strategic Acquirors

  

Adaptive Insights Inc. / Workday, Inc.

     11.0x  

Auth0, Inc. / Okta, Inc.

     ~39x  

Avast Plc / NortonLifeLock Inc.

     9.6x  

Callidus Software Inc. / SAP America, Inc.

     8.3x  

Carbon Black, Inc. / VMware, Inc.

     8.0x  

Livongo Health, Inc. / Teladoc Health, Inc.

     44.9x  

Mulesoft, Inc. / Salesforce.com, Inc.

     15.7x  

Qualtrics International Inc. / SAP America, Inc.

     16.5x  

SendGrid, Inc. / Twilio Inc.

     15.7x  

Slack Technologies, Inc. / Salesforce.com, Inc.

     24.9x  

Tableau Software Inc. / Salesforce.com, Inc.

     11.0x  

Financial Sponsor Acquirors

  

Anaplan, Inc. / Thoma Bravo, LLC

     13.9x  

Apptio Inc. / Vista Equity Partners Management, LLC

     7.0x  

Cambium Learning Group, Inc. / Veritas Capital Fund Management, L.L.C.

     4.2x  

Cloudera, Inc. / Clayton Dubilier & Rice, LLC; Kohlberg Kravis Roberts & Co. L.P.

     5.3x  

Ellie Mae Inc. / Thoma Bravo LP

     6.8x  

Forescout Technologies, Inc. / Advent International Corporation; Crosspoint Capital Partners

     4.9x  

Imperva Inc. / Thoma Bravo LP

     4.7x  

Instructure Inc. / Thoma Bravo LP

     6.6x  

LogMeIn, Inc. / Francisco Partners; Evergreen Coast Capital Corp.

     3.4x  

Medallia / Thoma Bravo, LLC

     10.8x  

McAfee Corp. / Advent International Corporation; Permira Advisers LLC; Crosspoint Capital Partners LP

     7.3x  

MINDBODY, Inc. / Vista Equity Partners Management, LLC

     6.8x  

Pluralsight, Inc. / Vista Equity Partners Management, LLC

     7.8x  

Proofpoint, Inc. / Thoma Bravo LP

     9.3x  

 

56


Table of Contents

Selected Software Transactions (Target/Acquiror)

   AV/NTM
Revenue
Multiple
 

QAD Inc. / Thoma Bravo LP

     5.3x  

RealPage, Inc. / Thoma Bravo LP

     8.2x  

Sophos Ltd. / Thoma Bravo LP

     5.1x  

Talend S.A. / Thoma Bravo LP

     7.3x  

Ultimate Software / Hellman & Friedman LLC

     8.2x  

Based on its analysis of the relevant metrics and time frame for each of the transactions listed above and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of the aggregate value to the estimated NTM revenue multiples of the transactions, and applied these ranges of multiples to the estimated calendar year 2022 revenue, based on the Street Consensus and Projections. The following table summarizes Morgan Stanley’s analysis:

 

Precedent Multiples

   Representative
Ranges
   Implied Value Per
Share of

SailPoint Common
Stock ($)

Street Consensus

   8.0x – 13.0x    41.75 –64.29

Projections

   8.0x – 13.0x    42.40 –65.35

No company or transaction utilized in the precedent transactions analysis is identical to SailPoint or the Merger. In evaluating the precedent transactions, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond SailPoint’s control. These include, among other things, the impact of competition on SailPoint’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of SailPoint and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and fully diluted equity value of the transactions to which they are being compared. The fact that points in the range of implied present value per share of SailPoint derived from the valuation of precedent transactions were less than or greater than the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) is not necessarily dispositive in connection with Morgan Stanley’s analysis of the consideration for the Merger, but is one of many factors Morgan Stanley considered.

Other Information

Morgan Stanley observed additional factors that were not considered part of Morgan Stanley’s financial analysis with respect to its opinion, but which were noted as reference data for the Board of Directors, including the following information described under the sections of this proxy statement captioned “The Merger—Opinion of Morgan Stanley & Co. LLC—Illustrative Precedent Premiums,” “The Merger—Opinion of Morgan Stanley & Co. LLC—Historical Trading Ranges” and “The Merger—Opinion of Morgan Stanley & Co. LLC—Equity Research Analysts’ Future Price Targets.”

Illustrative Precedent Premiums

Morgan Stanley performed an illustrative precedent transaction premiums analysis by reviewing software company transactions larger than $1 billion in aggregate value since 2014. For these transactions, Morgan Stanley noted the distributions of the following financial statistics, where available: (1) the implied premium to the acquired company’s closing share price on the last trading day prior to announcement (or the last full trading day prior to the share price being affected by acquisition rumors or similar merger-related news); and (2) the implied premium to the acquired company’s 52-week high closing share price prior to announcement.

Based on its analysis of the premia for such transactions and based upon the application of its professional judgment and experience, Morgan Stanley selected (1) a representative range of premia and applied such range to

 

57


Table of Contents

SailPoint’s closing share price on April 8, 2022 (the last full trading day prior to the meeting of the Board of Directors to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger) and (2) a representative range of premia and applied such range to SailPoint’s 52-week high closing share price:

 

Premia

   Representative
Ranges
     Implied Value per
Share of
SailPoint
Common Stock
($)
 

Premia to 1-Day Unaffected Share Price

     15% – 45%        57.98 – 73.11  

Premia to 52-Week High Share Price

     (20%) – 15%        50.69 – 72.86  

Historical Trading Ranges

Morgan Stanley noted certain trading ranges with respect to the historical share prices of SailPoint common stock. Morgan Stanley reviewed a range of prices of the SailPoint common stock for various periods ending on April 8, 2022 (the last full trading day prior to the meeting of the Board of Directors to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger). Morgan Stanley observed the following:

 

Trading Periods

   Range of Trading Prices Per Share of
SailPoint Common Stock ($)

Last 30 Days ending on April 8, 2022

   41.16 – 52.46

Last 90 Days ending on April 8, 2022

   35.71 – 52.46

Last 365 Days ending on April 8, 2022

   34.98 – 63.36

Equity Research Analysts’ Future Price Targets

Morgan Stanley noted certain future public market trading price targets for SailPoint common stock prepared and published by equity research analysts prior to April 8, 2022 (the last full trading day prior to the meeting of the Board of Directors to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger). These targets reflected each analyst’s estimate of the future public market trading price of SailPoint common stock. The range of undiscounted analyst price targets for the SailPoint common stock was $45 to $70 per share as of various dates ranging from November 10, 2021 to April 4, 2022. Morgan Stanley then took the 25th – 75th percentile which was $60—$63 per share and discounted the range of analyst price targets per share for the SailPoint common stock by one year at a rate of 9.8%, which was the discount rate selected by Morgan Stanley, upon the application of its professional judgment and experience, to reflect SailPoint’s cost of equity, estimated using the CAPM method and utilizing a 6% market risk premium, a risk-free rate of 2.7% based on the 10-year U.S. Treasury yield as of April 8, 2022, and a 1.2 predicted beta per Barra. This analysis indicated an implied range of fully diluted equity values for SailPoint common stock of $54.63 to $57.36 per share.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for SailPoint common stock, and these estimates are subject to uncertainties, including the future financial performance of SailPoint and future financial market conditions.

General

In connection with the review of the Merger by the Board of Directors, Morgan Stanley 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 susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any

 

58


Table of Contents

particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley 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 Morgan Stanley’s view of the actual value of SailPoint. In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond SailPoint’s control. These include, among other things, the impact of competition on SailPoint’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of SailPoint and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’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.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness from a financial point of view of the $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement and in connection with the delivery of its opinion dated as of April 10, 2022 to the Board of Directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of SailPoint common stock might actually trade.

The $65.25 per share in cash to be received by holders of shares of SailPoint common stock (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was determined through arm’s-length negotiations between SailPoint and Parent and was approved by the Board of Directors. Morgan Stanley provided advice to the Board of Directors during these negotiations but did not, however, recommend any specific consideration to SailPoint or the Board of Directors, nor did Morgan Stanley opine that any specific consideration constituted the only appropriate consideration for the Merger. Morgan Stanley’s opinion did not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley’s opinion was not intended to, and does not, constitute an opinion or a recommendation as to how SailPoint Stockholders should vote at the Special Meeting.

Morgan Stanley’s opinion and its presentation to the Board of Directors was one of many factors taken into consideration by the Board of Directors to approve and adopt the Merger Agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Board of Directors with respect to the consideration pursuant to the Merger Agreement or of whether the Board of Directors would have been willing to agree to a different consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.

The Board of Directors retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of their customers, in debt or equity securities or loans of SailPoint, Parent, Thoma Bravo and their respective affiliates, or any other company, or any currency or commodity, that may be involved in the Merger, or any related derivative instrument. In addition, Morgan Stanley, its affiliates directors or officers, including individuals working with SailPoint in connection with the Merger, may have committed and may commit in the future to invest in private equity funds managed by Thoma Bravo or its affiliates and their affiliated funds’ respective portfolio companies (which we refer to collectively as the “Thoma Bravo Related Entities”).

 

59


Table of Contents

Under the terms of its engagement letter, Morgan Stanley provided SailPoint financial advisory services and an opinion, described in this section and attached to this proxy statement as Annex B, in connection with the Merger, and SailPoint has agreed to pay Morgan Stanley a fee of approximately $62 million for its services, $3 million of which was earned following delivery of the opinion described in this section and attached to this proxy statement as Annex B and the remainder of which is contingent upon the consummation of the Merger. In addition, upon the closing of the Merger, Morgan Stanley may receive additional value resulting from adjustments to the Capped Call Transactions between Morgan Stanley and SailPoint entered into in connection with SailPoint’s issuance of convertible notes due in 2024. SailPoint has also agreed to reimburse Morgan Stanley for its expenses, including fees of outside counsel and other professional advisors, incurred in connection with its engagement. In addition, SailPoint has agreed to indemnify Morgan Stanley and its affiliates, its and their respective officers, directors, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses related to, arising out of or in connection with Morgan Stanley’s engagement, including certain liabilities under the federal securities laws.

In the thirty months prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have provided financial advisory and financing services for SailPoint and received aggregate fees of approximately $2 to $5 million in connection with such services. In the two years prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have provided financing services for Thoma Bravo and the Thoma Bravo Related Entities, and have received aggregate fees of approximately $10 to $25 million in connection with such services. Morgan Stanley may also seek to provide financial advisory and financing services to SailPoint, Thoma Bravo, Thoma Bravo Related Entities and their respective affiliates in the future and would expect to receive fees for the rendering of these services.

Capped Call Transactions

On September 19, 2019, in connection with the pricing of the Convertible Notes, SailPoint entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with each of Morgan Stanley & Co. LLC, Bank of America, N.A., Citibank, N.A., RBC Capital Markets, LLC and Jefferies International Limited or their respective affiliates (the “Capped Call Counterparties”). On September 20, 2019, in connection with the initial purchasers’ exercise of their option to purchase additional Convertible Notes, SailPoint entered into additional capped call transactions with the Capped Call Counterparties (the “Additional Capped Call Transactions” and, together with the Base Capped Call Transactions the “Capped Call Transactions”). The Capped Call Transactions initially covered, subject to customary anti-dilution adjustments, the number of shares of SailPoint common stock that initially underlie the Convertible Notes. The strike price of the Capped Call Transactions is $28.42 per share of SailPoint common stock, and the cap price of the Capped Call Transactions is $41.34 per share of SailPoint common stock, and is subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions are expected generally to reduce potential dilution to SailPoint Stockholders upon conversion of the Convertible Notes and/or offset the potential cash payments that SailPoint could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap based on the cap price.

If the Merger is consummated, holders of the Convertible Notes may convert their Convertible Notes, which would result in termination of the Capped Call Transactions. Under the terms of the documents governing the Capped Call Transactions, each Capped Call Counterparty would be obligated to pay SailPoint the “fair value” of the transaction, determined pursuant to the terms of the relevant Capped Call Transaction. Such termination value will be determined by each Capped Call Counterparty, in its capacity as the calculation agent under its Capped Call Transaction, acting in good faith and in a commercially reasonable manner. The amount of such early termination cash payment would depend on a variety of factors, including the remaining term of its Capped Call Transaction as of the date on which the Merger is consummated, the Per Share Merger Consideration, the volatility of SailPoint common stock prior to the announcement of the Merger, hedge unwind costs and applicable interest rates.

 

60


Table of Contents

In addition, following the announcement of the Merger, the Capped Call Counterparties may adjust the terms of the Capped Call Transactions, regardless of whether the Merger is consummated. Each Capped Call Counterparty may determine, in good faith and in a commercially reasonable manner, in its capacity as calculation agent with respect to its Capped Call Transaction, the economic effect of such an announcement on the value of its Capped Call Transaction and may take into account a number of factors, including, the date of the announcement (and the remaining term of its Capped Call Transaction at that time), the stock price of SailPoint common stock and changes in volatility, stock loan rate, liquidity and expected dividends of SailPoint common stock, in determining whether an adjustment to its Capped Call Transaction is appropriate. Each Capped Call Counterparty may make additional adjustments to its Capped Call Transaction following the announcement of a change to the Merger, including a withdrawal from, or the abandonment or discontinuation of, the Merger.

The indenture governing the Convertible Notes and the forms of confirmations containing the terms of the Capped Call Transactions were included as exhibits to SailPoint’s Current Report on Form 8-K filed by SailPoint with the SEC on September 25, 2019. All references in this section captioned “Capped Call Transactions” to share counts, conversion prices and strike prices may change from time to time in accordance with the terms of the relevant confirmations (the “Capped Call Confirmations”).

Management Projections

Summary of Projections

Except for financial outlooks with respect to the current fiscal quarter and year issued in connection with its ordinary course earnings announcements, SailPoint does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying assumptions, estimates and projections, especially over the longer term periods. In connection with the evaluation of the Merger, however, SailPoint’s management in January 2022 prepared certain unaudited, preliminary financial forecasts for SailPoint for fiscal years 2022 through 2026; these forecasts are defined elsewhere in this proxy statement as the “January 2022 Projections”. In March 2022, SailPoint’s management updated the January 2022 Projections to reflect SailPoint’s actual full year 2021 and fourth quarter 2021 financial results, which are referred to in this section as the “March 2022 Projections.” The January 2022 Projections and the March 2022 Projections were made available to Morgan Stanley and the March 2022 Projections were extrapolated through calendar year 2036 by Morgan Stanley with the guidance of SailPoint management (which extrapolations were reviewed and approved for Morgan Stanley’s use by SailPoint management) (such extrapolations and the March 2022 Projections, collectively, the “March 2022 Case”), in each case, in connection with the rendering of its opinion to the Board of Directors as described in the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC.” The March 2022 Case is referred to elsewhere in this proxy statement as the “Projections.” The January 2022 Projections and the March 2022 Case are referred to in this section collectively as the “Management Projections.” SailPoint is including a summary of both the January 2022 Projections and the March 2022 Case in order to provide SailPoint Stockholders with access to information that was made available to the Board of Directors and the Special Committee in connection with their evaluation of the Merger and the Per Share Merger Consideration. The January 2022 Projections and the March 2022 Projections were also made available to Parent and Merger Sub at Parent’s request in connection with their due diligence review, except that the Unlevered Free Cash Flow, Adjusted EBITDA and Stock-Based Compensation numbers were not made available to Parent or Merger Sub.

 

61


Table of Contents

The following tables present a summary of the January 2022 Projections and the March 2022 Case.

March 2022 Case

 

    CY2022E     CY2023E     CY2024E     CY2025E     CY2026E     CY2027E     CY2028E     CY2029E     CY2030E     CY2031E     CY2032E     CY2033E     CY2034E     CY2035E     CY2036E     Terminal  

Revenue

  $ 527     $ 713     $ 955     $ 1,284     $ 1,640     $ 2,055     $ 2,524     $ 3,038     $ 3,581     $ 4,132     $ 4,665     $ 5,152     $ 5,562     $ 5,866     $ 6,042     $ 6,224  

Non-GAAP EBIT (1)

  ($ 42   ($ 20   $ 25     $ 132     $ 255     $ 337     $ 435     $ 549     $ 678     $ 817     $ 962     $ 1,106     $ 1,241     $ 1,358     $ 1,450     $ 1,494  

Depreciation & Amortization (2)

  $ 9     $ 11     $ 14     $ 18     $ 21     $ 21     $ 25     $ 30     $ 36     $ 41     $ 47     $ 52     $ 56     $ 59     $ 60     $ 62  

Stock-Based Compensation

  ($ 96   ($ 123   ($ 156   ($ 194   ($ 233   ($ 275   ($ 320   ($ 366   ($ 412   ($ 455   ($ 495   ($ 528   ($ 553   ($ 570   ($ 575   ($ 581

Adjusted EBITDA (SBC Burdened) (3)

  ($ 130   ($ 131   ($ 117   ($ 44   $ 43     $ 82     $ 140     $ 213     $ 302     $ 403     $ 514     $ 629     $ 743     $ 847     $ 935     $ 975  

Taxes

  ($ 4   ($ 5   ($ 6   ($ 7   ($ 9   ($ 24   ($ 43   ($ 64   ($ 88   ($ 112   ($ 136   ($ 156   ($ 172   ($ 181   ($ 184   ($ 192

Capital Expenditure

  ($ 8   ($ 11   ($ 14   ($ 17   ($ 20   ($ 25   ($ 30   ($ 35   ($ 41   ($ 46   ($ 51   ($ 55   ($ 58   ($ 60   ($ 60   ($ 62

Change in Net Working
Capital

  ($ 1   ($ 17   $ 41     $ 42     $ 51     $ 64     $ 81     $ 96     $ 110     $ 121     $ 125     $ 122     $ 110     $ 85     $ 52     $ 54  

Unlevered Free Cash Flow (SBC Burdened) (4)

  ($ 143   ($ 130   ($ 96   ($ 26   $ 64     $ 97     $ 148     $ 210     $ 283     $ 365     $ 452     $ 540     $ 622     $ 692     $ 743     $ 775  

 

62


Table of Contents

January 2022 Projections

 

     CY2022E     CY2023E     CY2024E     CY2025E     CY2026E  

Revenue

   $ 522     $ 706     $ 951     $ 1,270     $ 1,628  

Non-GAAP EBIT (1)

   ($ 42   ($ 20   $ 30     $ 129     $ 253  

Depreciation & Amortization (2)

   $ 7     $ 7     $ 8     $ 11     $ 14  

Stock-Based Compensation

   ($ 96   ($ 123   ($ 156   ($ 194   ($ 233

Adjusted EBITDA (SBC Burdened) (3)

   ($ 132   ($ 135   ($ 118   ($ 55   $ 34  

Taxes

   ($ 5   ($ 6   ($ 8   ($ 10   ($ 13

Capital Expenditure

   ($ 8   ($ 11   ($ 14   ($ 17   ($ 20

Change in Net Working Capital

   ($ 88   ($ 118   ($ 160   ($ 186   ($ 198

Unlevered Free Cash Flow (SBC Burdened) (4)

   ($ 155   ($ 149   ($ 112   ($ 39   $ 58  

 

(1)

Non-GAAP EBIT is a non-GAAP financial measure defined as revenue less total operating expenses, where such expenses are adjusted for certain GAAP expenses, including one-time charges and certain non-cash charges, most notably stock-based compensation.

(2)

Figures also include estimates of provisions for credit losses.

(3)

Adjusted EBITDA (SBC burdened) is a non-GAAP financial measure defined as Non-GAAP EBIT plus depreciation and amortization and less stock-based compensation.

(4)

Unlevered Free Cash Flow is a non-GAAP financial measure defined as Adjusted EBITDA (SBC burdened) less taxes and capital expenditure, and adjusted for changes in net working capital.

 

63


Table of Contents

Important Information Regarding the Management Projections

The Management Projections were developed by SailPoint management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. Although the Management Projections are presented with numerical specificity, they were based on numerous variables and assumptions made by SailPoint management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to SailPoint’s business, all of which are difficult or impossible to predict accurately and many of which are beyond SailPoint’s control. The Management Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Projections, including, but not limited to, SailPoint’s performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, the ability to successfully pursue and complete acquisitions, and the various risks set forth in SailPoint’s reports filed with the SEC. There can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than the Management Projections. The Management Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Management Projections will be affected by SailPoint’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Management Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Management Projections should not be regarded as an indication that SailPoint, Morgan Stanley, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that the Management Projections will be necessarily predictive of actual future events. No representation is made by SailPoint or any other person regarding the Management Projections or SailPoint’s ultimate performance compared to such information. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about SailPoint contained in SailPoint’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 Management Projections, SailPoint Stockholders are cautioned not to place undue, if any, reliance on the Management Projections.

The Management Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to the preparation or presentation of prospective financial information. The Management Projections included in this proxy statement have been prepared by, and are the responsibility of, the Company’s management. Grant Thornton LLP has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying Management Projections and, accordingly, Grant Thornton LLP does not express an opinion or any other form of assurance with respect thereto. The Grant Thornton LLP report incorporated by reference into this proxy statement relates to the Company’s previously issued financial statements. It does not extend to the Management Projections and should not be read to do so.

Non-GAAP EBIT, Adjusted EBITDA (SBC burdened) and Unlevered Free Cash Flow contained in the Management Projections summarized above are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with GAAP. The non-GAAP financial measures used in the Management Projections were relied upon by Morgan Stanley for purposes of its opinion and by the Board of Directors and the Special Committee in connection with their evaluation of the Merger. The SEC rules which

 

64


Table of Contents

would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by Morgan Stanley for purposes of its opinion or by the Board of Directors or the Special Committee in connection with their evaluation of the Merger. Accordingly, SailPoint has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by SailPoint may not be comparable to similarly titled amounts 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 SailPoint Stockholders access to the information that was made available to the Board of Directors, the Special Committee, Morgan Stanley, Parent and Merger Sub, and is not included in this proxy statement in order to influence any SailPoint Stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares of SailPoint common stock. In addition, the Management Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws, SailPoint does not intend to update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.

Interests of Executive Officers and Directors of SailPoint in the Merger

In considering the recommendation of the Board of Directors that SailPoint Stockholders vote to adopt the Merger Agreement, SailPoint Stockholders should be aware that certain of SailPoint’s non-employee directors and executive officers have interests in the Merger that are different from, or in addition to, those of SailPoint Stockholders generally. The Board of Directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement, approving the Merger Agreement and the Merger, and recommending that the Merger Agreement be adopted by SailPoint Stockholders.

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

 

   

The Effective Time is May 16, 2022, which is the assumed date of the closing of the Merger solely for purposes of the disclosure in this section (the “Change in Control Date”);

 

   

The employment of each executive officer of SailPoint will have been terminated by SailPoint without “cause” or due to the executive officer’s resignation for “good reason” (as such terms are defined in the Severance Pay Plan), in either case, immediately following the Change in Control Date; and

 

   

The potential payments and benefits described in this section are not at a level subject to a “cutback” to avoid the “golden parachute” excise tax that may be imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”).

For purposes of this disclosure, (1) SailPoint’s executive officers are: (i) Mark McClain, Chief Executive Officer; (ii) Colleen Healy, Chief Financial Officer; (iii) Matt Mills, President, Worldwide Field Operations; (iv) Chris

 

65


Table of Contents

Schmitt, Executive Vice President, General Counsel and Secretary; and (v) Grady Summers, Executive Vice President, Product and (2) SailPoint’s named executive officers are: (i) Mark McClain, Chief Executive Officer; (ii) Colleen Healy, Chief Financial Officer; (iii) Cam McMartin, former Interim Chief Financial Officer; (iv) Matt Mills, President, Worldwide Field Operations; (v) Jason Ream, former Chief Financial Officer; (vi) Chris Schmitt, Executive Vice President, General Counsel and Secretary; and (vii) Grady Summers, Executive Vice President, Product.

Although Jason Ream, SailPoint’s former Chief Financial Officer, is a named executive officer for purposes of this disclosure, Mr. Ream does not hold any unvested SailPoint equity awards and does not have any interests in the Merger except insofar as he may hold vested stock options or shares of SailPoint common stock.

As the amounts provided below are estimates based on multiple assumptions that may or may not actually occur or be accurate as of the date referenced, the actual amounts, if any, that may be paid or become payable may materially differ from the amounts set forth below.

Treatment and Quantification of Company Equity Awards

Company Options

At the Effective Time, each Vested Company Option will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Vested Company Option by (y) the total number of shares of SailPoint common stock underlying such Vested Company Option, subject to applicable withholding taxes.

At the Effective Time, each Unvested Company Option will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per-share exercise price for such Unvested Company Option by (y) the total number of shares of SailPoint common stock underlying such Unvested Company Option. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company Option Consideration amounts will vest and become payable at the same time as the Unvested Company Option from which such Unvested Company Option Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company Option immediately prior to the Effective Time with respect to the receipt of the Unvested Company Option Consideration.

Company RSUs

At the Effective Time, each Vested Company RSU will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Vested Company RSU by (y) the Per Share Merger Consideration, subject to applicable withholding taxes.

At the Effective Time, each Unvested Company RSU will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest,

 

66


Table of Contents

equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Unvested Company RSU by (y) the Per Share Merger Consideration. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company RSU Consideration amounts will vest and become payable at the same time as the Unvested Company RSU from which such Unvested Company RSU Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company RSU immediately prior to the Effective Time with respect to the receipt of the Unvested Company RSU Consideration.

Quantification of Company Equity Awards

At the Effective Time, each Vested Company RSU held by a non-employee member (the only equity award held by the non-employee members of the Board of Directors) of the Board of Directors will convert into Merger Consideration in the manner described above. Based on the assumptions described above under the section of this proxy statement captioned “—Interests of Executive Officers and Directors of SailPoint in the Merger—Certain Assumptions,” the estimated aggregate amounts that would become payable to SailPoint’s eight (8) non-employee directors in respect of their Vested Company RSUs is $1,470,735, which excludes any grants of Company RSUs that may be made by SailPoint to the non-employee directors following the date of this proxy statement.

At the Effective Time, each Unvested Company RSU and Unvested Company Option held by the executive officers will convert into cash awards of Unvested Company RSU Consideration and Unvested Company Option Consideration in the manner described above and will generally remain subject to the same time-based vesting conditions and other terms and conditions as were applicable immediately prior to the Effective Time. Each award of Unvested Company RSU Consideration and Unvested Company Option Consideration will vest in the event that an executive officer experiences a termination of employment by SailPoint without “cause” or by the executive officer for “good reason,” in either case, within three (3) months prior to the Change in Control Date or within the one (1) year following the Change in Control Date.

See the section of this proxy statement captioned “—Interests of Executive Officers and Directors of SailPoint in the Merger—Golden Parachute Compensation” for an estimate of the amounts that would become payable to each SailPoint named executive officer (including each SailPoint executive officer) in respect of his or her Unvested Company Options and Unvested Company RSUs.

Severance Pay Plan

SailPoint adopted a Severance Pay Plan under which each of the executive officers is eligible to receive certain severance payments benefits upon a qualifying termination of employment. The Severance Pay Plan generally provides that if the executive officer’s employment is terminated by SailPoint without “cause” or the executive officer terminates his or her employment with “good reason,” in either case, within three (3) months prior to the Change in Control Date or within one (1) year following the Change in Control Date, then the executive officer will be eligible to receive:

 

   

a lump-sum cash severance amount equal to 100% of the executive officer’s annual base salary (or 150% of the annual base salary for the Chief Executive Officer);

 

   

continuation coverage for the executive officer and his or her spouse and eligible dependents under SailPoint’s group health plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, for twelve (12) months (or eighteen (18) months for the Chief Executive Officer) at active employee rates, unless such coverage is earlier terminated in accordance with the terms of the Severance Pay Plan; and

 

67


Table of Contents
   

accelerated vesting of all outstanding equity compensation awards held by the executive officer immediately prior to such termination of employment, with performance-based equity awards vesting at the greater of actual performance as of such termination of employment or target performance.

The provision of payments and benefits described above is conditioned upon the executive officer’s execution of a release of claims. The Severance Pay Plan further provides that if an executive officer receives any amount that is subject to the “golden parachute” excise tax imposed pursuant to Section 280G and 4999 of the Code, the amount of the payments to be made to the executive officer will be reduced to the extent necessary to avoid imposition of the excise tax.

Transaction and Retention Bonus Programs

Under the Merger Agreement, SailPoint may establish a transaction program (the “Transaction Bonus Program”) and a retention program (the “Retention Program”) providing for cash bonuses in the aggregate amount not to exceed $5.0 million. Awards under the Transaction Bonus Program shall be allocated by SailPoint’s Chief Executive Officer and shall be paid as soon as administratively practicable after, but no later than thirty (30) days following, the Effective Time, subject to the participant’s continued service through the Effective Time. Awards under the Retention Program shall also be allocated by SailPoint’s Chief Executive Officer and shall be paid as soon as administratively practicable after, but no later than thirty (30) days following, the date that is six months following the Effective Time, subject to the participant’s continued service through the end of such six(6)-month period. As of the date of this proxy statement, none of the executive officers has received an award under the Transaction Bonus Program or the Retention Program.

Compensation Arrangements with Parent

As of the date of this proxy statement, none of SailPoint’s executive officers has discussed or entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or one or more of its affiliates. Prior to or following the closing of the Merger, however, some or all of SailPoint’s executive officers may discuss or enter into agreements with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or one or more of its affiliates.

Indemnification and Insurance

Pursuant to the terms of the Merger Agreement, SailPoint’s directors and executive officers will be entitled to certain ongoing indemnification and coverage for a period of six (6) years following the Effective Time under directors’ and officers’ liability insurance policies from the surviving corporation. This indemnification and insurance coverage is further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”

Golden Parachute Compensation

In accordance with Item 402(t) of Regulation S-K under the Securities Act, the table below sets forth the compensation that is based on, or otherwise relates to, the Merger that will or may become payable to each named executive officer of SailPoint in connection with the Merger. Although Jason Ream, SailPoint’s former Chief Financial Officer, is a named executive officer for purposes of this disclosure, Mr. Ream terminated employment with SailPoint on February 28, 2022 and does not hold any unvested SailPoint equity awards and does not have any interests in the Merger except insofar as he may hold vested stock options or shares of SailPoint common stock. Accordingly, Mr. Ream has been omitted from the table below. For additional details regarding the terms of the payments and benefits described below, see the section of this proxy statement captioned “—Interests of Executive Officers and Directors of SailPoint in the Merger.”

 

68


Table of Contents

The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table, and do not reflect certain compensation actions that may occur prior to completion of the Merger, including any equity award grants that may be made after the assumed effective time of May 16, 2022 . For purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

 

   

The Effective Time is May 16, 2022, which is the assumed date of the closing of the Merger solely for purposes of the disclosure in this section;

 

   

The employment of each executive officer of SailPoint will have been terminated by SailPoint without “cause” or due to the executive officer’s resignation for “good reason” (as such terms are defined in the Severance Pay Plan), in either case, immediately following the Change in Control Date; and

 

   

The potential payments and benefits described in this section are not at a level subject to a “cutback” to avoid the “golden parachute” excise tax that may be imposed under Section 4999 of the Code.

 

Named Executive Officer

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

Mark McClain

     750,000        21,410,071        20,123        22,180,194  

Colleen Healy

     425,000        8,280,421        6,165        8,711,586  

Cam McMartin(4)

     450,000        —          20,203        470,203  

Matt Mills

     450,000        14,877,036        20,339        15,347,375  

Chris Schmitt

     350,000        4,996,518        29,086        5,375,604  

Grady Summers

     425,000        14,009,159        26,958        14,461,117  

 

(1)

Cash. Represents severance payable to each named executive officer in the form of lump-sum cash payments upon a termination of employment by SailPoint without “cause” or by the named executive officer for “good reason,” in each case, pursuant to the Severance Pay Plan. The severance amounts payable under the Severance Pay Plan to each named executive officer constitute “double-trigger” payments, which means that the amounts will become payable only on a qualifying termination of employment within three (3) months prior to the Change in Control Date or within one (1) year following the Change in Control Date. For further details regarding the severance amounts that may become payable to SailPoint’s named executive officers, see the section of this proxy statement captioned “—Interests of Executive Officers and Directors of SailPoint in the Merger—Severance Pay Plan.”

(2)

Equity. Represents the value of the Unvested Company Options and Unvested Company RSUs held by each named executive officer. Mr. McMartin does not hold any unvested equity awards. The amounts payable in respect of those Unvested Company Options and Unvested Company RSUs that convert into cash awards of Unvested Company Option Consideration and Unvested Company RSU Consideration at the Effective Time and in accordance with the terms of the Merger Agreement are “double-trigger” payments, which means that the amounts will become payable on the original vesting dates, subject to the named executive officer’s continued employment with SailPoint through the applicable vesting dates.

Pursuant to the Severance Pay Plan, each named executive officer’s Unvested Company Options and Unvested Company RSUs will become vested upon a termination of employment by SailPoint without “cause” or by the named executive officer for “good reason” within three (3) months prior to the Change in Control Date or within the twelve (12) months following the Change in Control Date. The amounts payable in respect of those Unvested Company Options and Unvested Company RSUs that become Vested Company Options and Vested Company RSUs and as a result of a qualifying termination of employment within three (3) months prior to the Change in Control Date or within the twelve (12) months following the Change in Control Date are “double-trigger” payments. For further details regarding the treatment of the Vested Company Options and Vested Company RSUs held by the named executive officers, see the section of this proxy statement captioned “—Interests of Executive Officers and Directors of SailPoint in the

 

69


Table of Contents

Merger—Treatment and Quantification of Company Equity Awards.” The estimated amount of each such payment is shown in the following table:

 

Named Executive Officer

   Unvested Company
Options
     Unvested Company
RSUs
     Total
($)
 
   Shares
(#)
     Value
($)
     Shares
(#)
     Value
($)
 

Mark McClain

     246,226        6,196,642        233,156        15,213,429        21,410,071  

Colleen Healy

     —          —          126,903        8,280,421        8,280,421  

Cam McMartin

     —          —          —          —          —    

Matt Mills

     169,469        4,891,698        153,032        9,985,338        14,877,036  

Chris Schmitt

     58,097        1,414,554        54,896        3,581,964        4,996,518  

Grady Summers

     67,977        1,283,582        195,028        12,725,577        14,009,159  

 

(3)

Perquisites/Benefits. Represents the value of continued health and welfare benefits coverage under the Severance Pay Plan. The continued health and welfare benefits coverage is a “double-trigger” payment, which means that the amounts will become payable only on a qualifying termination of employment within three (3) months prior to the Change in Control Date or within one (1) year following the Change in Control Date. For further details regarding the benefits amounts that may be provided to SailPoint’s named executive officers, see the section of this proxy statement captioned “—Interests of Executive Officers and Directors of SailPoint in the Merger—Severance Pay Plan.”

(4)

Mr. McMartin was our Interim Chief Financial Officer until Ms. Healy’s appointment as Chief Financial Officer on March 16, 2022 and he is still employed by the Company in a special advisory capacity. Accordingly, he is still entitled to severance benefits under the Severance Pay Plan.

Special Committee Compensation

In consideration of the expected time and effort that would be required of the members of the Special Committee in evaluating a potential transaction, the Board of Directors determined that each other member of the Special Committee would receive additional compensation of $1,500 per meeting of the Special Committee. Such fees were payable whether or not a potential transaction was entered into or consummated by the Company. No other meeting fees or other compensation (other than reimbursement for reasonable expenses in connection with the discharge of their duties or their engagement of advisors) will be paid to the members of the Special Committee in connection with their service on the Special Committee.

Financing of the Merger

We presently anticipate that the total funds needed to complete the Merger and the related transactions will be approximately $7.5 billion, which will be funded via equity and debt financing described below together with SailPoint’s cash on hand as of the Closing Date.

Parent and Merger Sub have represented to SailPoint that they will have available to them, together with SailPoint’s cash on hand, sufficient funds to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement. This includes funds needed to: (1) pay SailPoint Stockholders the amounts due under the Merger Agreement for their SailPoint common stock, (2) make payments in respect of our outstanding Company Options payable at the closing of the Merger pursuant to the Merger Agreement and (3) make payments of all amounts required to be paid in connection with the Merger pursuant to the Convertible Notes Indenture and the Convertible Notes.

Parent and Merger Sub have obtained committed financing consisting of (i) equity to be provided by the Thoma Bravo Fund pursuant to the terms of the Equity Commitment Letter and (ii) debt financing to be provided pursuant to the Debt Commitment Letter by the Lenders. In connection with the Merger Agreement, Parent and Merger Sub have delivered to SailPoint copies of the Financing Letters. Notwithstanding anything in the Merger

 

70


Table of Contents

Agreement to the contrary, in no event shall the receipt or availability of any funds or financing (including the financing contemplated by the Financing Letters) by or to Parent or any of its affiliates or any other financing transaction be a condition to any of the obligations of Parent or Merger Sub under the Merger Agreement.

Equity Financing

Pursuant to the Equity Commitment Letter, the Thoma Bravo Fund has committed to contribute or cause to be contributed to Parent at the closing of the Merger certain equity financing for the purpose of funding the Required Amounts. The obligations of the Thoma Bravo Fund to provide the equity financing under the Equity Commitment Letter is subject to a number of conditions, including, but not limited to: (i) the execution and delivery of the Merger Agreement, (ii) satisfaction or written waiver by SailPoint, Parent and Merger Sub, as applicable, of each the conditions to the obligations of SailPoint, Parent and Merger Sub to consummate the Merger set forth in Section 2.2 of the Merger Agreement (other than any conditions that by their nature are to be satisfied at the Closing, but subject to the prior or substantially concurrent satisfaction of such conditions), (iii) the substantially concurrent consummation of the Merger in accordance with the terms of the Merger Agreement and (iv) the receipt of the debt financing contemplated by the Debt Commitment Letter or, if applicable, alternative debt financing or written confirmation that the debt financing contemplated by the Debt Commitment Letter or, if applicable, alternative debt financing, will be funded at the closing of the Merger if the equity financing under the Equity Commitment Letter is consummated at the closing of the Merger. We refer to the equity financing described in the preceding sentence as the “Equity Financing.”

The obligation of the Thoma Bravo Fund to fund the equity commitment will automatically and immediately terminate upon the earliest to occur of: (i) the consummation of the closing of the Merger and the payment of the aggregate merger consideration, (ii) thirty (30) days following the termination of the Merger Agreement in accordance with its terms, and (iii) the occurrence of any event which, by the terms of the Guaranty, is an event which terminates the Thoma Bravo Fund’s obligations or liabilities under the Guaranty.

SailPoint is an intended and express third-party beneficiary of the Equity Commitment Letter solely with respect to enforcing Parent’s right to cause the commitment under the Equity Commitment Letter by the Thoma Bravo Fund to be funded to Parent in accordance with the Equity Commitment Letter, and to cause Parent to enforce its rights against the Thoma Bravo Fund to perform its funding obligations under the Equity Commitment Letter, in each case subject to (i) the limitations and conditions set forth in the Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement.

Debt Financing

The Debt Commitment Letter provides that the Lenders will provide, upon the terms and subject to the conditions set forth in the Debt Commitment Letter, debt financing (the “Debt Financing”).

The proceeds of the Debt Financing will be used (i) to effect the Merger and related transactions on the Closing Date, (ii) to refinance the Credit Agreement among SailPoint, SailPoint Technologies, Inc., other loan parties thereto, lenders party thereto, Citibank, N.A., Royal Bank of Canada and Bank of America, N.A. dated as of March 11, 2019, as amended or supplemented from time to time (the “Existing Credit Agreement”), (iii) for working capital, capital expenditures and other general corporate purposes and (iv) to pay fees and expenses related to the Merger and related transactions.

The obligations of the Lenders to provide the Debt Financing under the Debt Commitment Letter are subject to a number of customary conditions, including, but not limited to (as applicable):

 

   

the consummation in all material respects of the Merger in accordance with the Merger Agreement (without any amendment, modification or waiver of any of the provisions thereof that would be materially adverse to the Lenders in their capacity as such without the consent of the lead arrangers);

 

71


Table of Contents
   

subject to certain limitations and exceptions, the accuracy in all material respects as of the closing of the Merger of certain specified representations and warranties in the Merger Agreement and certain specified representations and warranties in the loan documents;

 

   

the Equity Financing shall have occurred or, substantially concurrently with the initial funding of the Debt Financing, shall occur;

 

   

the refinancing of the Existing Credit Agreement shall have occurred or, substantially concurrently with the initial funding of the Debt Financing, shall occur; and

 

   

the absence of a Company Material Adverse Effect (as defined herein) since April 10, 2022.

As of the date hereof, the documentation governing the Debt Financing contemplated by the Debt Commitment Letter has not been finalized and, accordingly, the actual terms of the Debt Financing may differ from those described in this proxy statement.

Guaranty

Pursuant to the Guaranty, the Thoma Bravo Fund has agreed to guarantee the due, punctual and complete payment and performance of: (1) the aggregate amount of the Parent Termination Fee (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”) solely if and when any of the Parent Termination Fee is payable pursuant to the Merger Agreement; (2) any enforcement expenses due by Parent pursuant to legal proceedings as a result of certain defaults under the Merger Agreement; (3) the reimbursement obligations of Parent pursuant to the indemnification obligations to SailPoint and its representatives in connection with debt financing; and (4) any and all damages, losses, costs and expenses resulting from Parent or Merger Sub’s willful and material breach of the Merger Agreement, subject to certain limitations. We refer to the obligations set forth in the preceding sentence as the “Guaranteed Obligations.” The obligations of the Thoma Bravo Fund under the Guaranty are subject to an aggregate cap equal to $431.1 million.

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

 

   

funding of the commitment as set forth in the Equity Commitment Letter;

 

   

the Effective Time;

 

   

(1) the payment and discharge of any reimbursement obligations which SailPoint has requested reimbursement for within ninety (90) days following the valid termination of the Merger Agreement and (2) the date that is thirty (30) days following the valid termination of the Merger Agreement in accordance with its terms, other than a termination pursuant to which SailPoint would be entitled to the Parent Termination Fee under the Merger Agreement, in which case the Guaranty shall terminate ninety (90) days after such termination unless SailPoint shall have delivered a written notice with respect to the Guaranteed Obligations prior to such ninetieth (90th) day; provided that if the Merger Agreement has been so terminated and such notice has been provided, the Thoma Bravo Fund, as the guarantor entities under the Guaranty, shall have no further liability or obligation under the Guaranty from and after the earliest of (x) the closing of the Merger, including payment of the Aggregate Merger Consideration payable at the closing of the Merger in accordance with the Merger Agreement, (y) a final, non-appealable order of a court of competent jurisdiction determining that the Thoma Bravo Fund, as the guarantor entity under the Guaranty, does not owe any amount under the Guaranty and (z) a written agreement between the Thoma Bravo Fund, as the guarantor entity under the Guaranty, and SailPoint terminating the obligations and liabilities of the Thoma Bravo Fund, as the guarantor entity under the Guaranty, pursuant to the Guaranty; and

 

   

payment of the portion of the Guaranteed Obligations validly claimed as payable by SailPoint by or on behalf the Thoma Bravo Fund, as the guarantor entity under the Guaranty, Parent and/or Merger Sub.

 

72


Table of Contents

Closing and Effective Time

The closing of the Merger will take place at 5:00 a.m., Pacific time, on the second (2nd) business day following the satisfaction or waiver of all conditions to closing of the Merger (as described in the section of this proxy statement captioned, “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing but subject to the satisfaction or waiver of such conditions.

Appraisal Rights

If the Merger is consummated, SailPoint Stockholders who continuously hold shares of SailPoint common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw their demands or otherwise lose their rights of appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 the DGCL (“Section 262”). The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that SailPoint 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 SailPoint common stock unless otherwise expressly noted herein. Only a holder of record of shares of SailPoint 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 SailPoint 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 SailPoint common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Under Section 262, if the Merger is completed, SailPoint Stockholders who: (i) submit a written demand for appraisal of their shares; (ii) do not vote in favor of the adoption of the Merger Agreement; (iii) continuously are the record holders of such shares through the Effective Time; and (iv) otherwise exactly follow the procedures set forth in Section 262, may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of SailPoint common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be “fair value,” if any, as determined by the court. However, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all SailPoint 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 SailPoint common stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Per Share Merger Consideration in respect of the shares of SailPoint 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 compound quarterly and accrue at 5% over the Federal Reserve System (the “Federal Reserve”) discount rate (including any surcharge) as established from time to time during the period from the Effective Time through the date the judgment is paid. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may voluntarily pay to each stockholder entitled to appraisal an amount in cash pursuant to subsection (h) of Section 262, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary cash payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than twenty (20) days prior to the meeting, must notify each of its stockholders who was

 

73


Table of Contents

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 SailPoint’s notice to SailPoint Stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the Merger, any SailPoint Stockholder who wishes to exercise appraisal rights, or who wishes to preserve his, her or its 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 SailPoint Stockholder who loses his, her or its appraisal rights will be entitled to receive the Per Share Merger Consideration described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of SailPoint common stock, SailPoint believes that if a SailPoint Stockholder considers exercising such rights, that SailPoint Stockholder should seek the advice of legal counsel.

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

 

   

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

 

   

the SailPoint Stockholder must deliver to SailPoint a written demand for appraisal before the vote is taken on the proposal to adopt the Merger Agreement at the Special Meeting;

 

   

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

 

   

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

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

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a SailPoint 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 his, her or its shares.

Filing Written Demand

Any SailPoint Stockholder wishing to exercise appraisal rights must deliver to SailPoint, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to SailPoint Stockholders, a written demand for the appraisal of the SailPoint Stockholder’s shares, and that SailPoint Stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of SailPoint common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the SailPoint Stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a SailPoint Stockholder who submits a proxy and who wishes to exercise appraisal rights must ensure that the proxy submitted contains instructions to vote against the adoption of the Merger Agreement or abstain from voting. Neither voting against the adoption of the Merger Agreement nor abstaining from voting on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A SailPoint 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 SailPoint Stockholders will constitute a waiver of appraisal rights.

 

74


Table of Contents

Only a SailPoint Stockholder of record is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of SailPoint common stock must be executed by or on behalf of the holder of record, and must reasonably inform SailPoint of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one (1) 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 (2) 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.

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

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

SailPoint Technologies Holdings, Inc.

Attention: General Counsel

11120 Four Points Drive, Suite 100

Austin, Texas 78726

Any SailPoint Stockholder who has delivered a written demand to SailPoint and who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the Per Share Merger Consideration offered pursuant to the Merger Agreement by delivering to SailPoint a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than sixty (60) days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any SailPoint 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 SailPoint Stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such SailPoint Stockholder’s demand for appraisal and to accept the Per Share Merger Consideration within sixty (60) days after the Effective Time. If an appraisal proceeding is commenced and SailPoint, 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 SailPoint Stockholder who withdraws such SailPoint 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 SailPoint Stockholder, the SailPoint Stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the Per Share Merger Consideration being offered pursuant to the Merger Agreement.

Notice by the Surviving Corporation

If the Merger is completed, within ten (10) days after the Effective Time, the Surviving Corporation will notify each holder of shares of SailPoint common stock who has properly made a written demand for appraisal pursuant

 

75


Table of Contents

to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within one hundred twenty (120) days after the Effective Time, but not thereafter, the Surviving Corporation or any SailPoint Stockholder 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 SailPoint Stockholder (or beneficial owner), demanding a determination of the “fair value” of the shares held by all dissenting SailPoint Stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and SailPoint 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 SailPoint common stock. Accordingly, any SailPoint Stockholder who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of SailPoint common stock within the time and in the manner prescribed in Section 262. The failure of a holder of SailPoint common stock to file such a petition within the period specified in Section 262 could nullify the SailPoint Stockholder’s previous written demand for appraisal.

Within one hundred twenty (120) days after the Effective Time, any holder of shares of SailPoint 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 SailPoint has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting SailPoint Stockholder within ten (10) days after receipt by the Surviving Corporation of the written request for such a statement or within ten (10) days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of SailPoint 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 SailPoint Stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of SailPoint common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within twenty (20) days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all SailPoint Stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of SailPoint Stockholders shown on the written statement described above at the addresses stated therein. Such notice will also be published at least one (1) week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the court. The costs of these notices are borne by the Surviving Corporation. After notice to SailPoint Stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those SailPoint Stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require SailPoint Stockholders who demanded payment for their shares to submit their stock certificates (if any) to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings and, if any SailPoint Stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that SailPoint Stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all SailPoint Stockholders who have asserted appraisal rights if neither of the ownership thresholds is met.

 

76


Table of Contents

Determination of “Fair Value”

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

In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining “fair value” in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Supreme Court of Delaware 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 Supreme Court of Delaware stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting SailPoint Stockholder’s exclusive remedy.

SailPoint 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 Per Share Merger Consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the Per Share Merger Consideration payable in a Merger is not an opinion as to, and does not in any manner address, “fair value” under Section 262. No representation is made as to the outcome of the appraisal of “fair value” as determined by the Delaware Court of Chancery, and SailPoint 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 Merger Consideration. Neither SailPoint nor Parent anticipates offering more than the Per Share Merger Consideration to any SailPoint Stockholder exercising appraisal rights, and each of SailPoint and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of SailPoint common stock is less than the Per Share Merger Consideration. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to SailPoint 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

 

77


Table of Contents

upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a SailPoint Stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a SailPoint 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 SailPoint Stockholder who demands appraisal of his, her or its shares of SailPoint common stock under Section 262 fails to perfect, or effectively loses or withdraws, such holder’s right to appraisal, the stockholder’s shares of SailPoint common stock will be deemed to have been converted at the Effective Time into the right to receive the Per Share Merger Consideration. A SailPoint Stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within one hundred twenty (120) days after the Effective Time, if neither of the ownership thresholds described above has been satisfied as to SailPoint Stockholders seeking appraisal rights or if the SailPoint Stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Per Share Merger Consideration in accordance with Section 262.

From and after the Effective Time, no SailPoint Stockholder who has demanded appraisal rights will be entitled to vote such shares of SailPoint 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 SailPoint common stock, if any, payable to SailPoint Stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds described above has been satisfied as to SailPoint Stockholders seeking appraisal rights, or if the SailPoint Stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within sixty (60) days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such SailPoint 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 SailPoint 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 SailPoint Stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such SailPoint Stockholder’s demand for appraisal and to accept the terms offered upon the Merger within sixty (60) days after the Effective Time.

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

Accounting Treatment

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

U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of certain U.S. federal income tax consequences of the Merger that may be relevant to SailPoint Stockholders whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of SailPoint common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes). For purposes of this discussion, a “holder” means either a U.S. Holder (as defined below) or a Non-U.S. Holder (as defined below) or both, as the context may require.

 

78


Table of Contents

This discussion is for general information purposes only and does not address all of the tax consequences that may be relevant to holders in light of their particular facts and circumstances, nor does it address any consequences to holders subject to special rules under the U.S. federal income tax laws, such as:

 

   

banks and other financial institutions;

 

   

insurance companies;

 

   

dealers in securities;

 

   

traders in securities who elect to apply a mark-to-market method of accounting;

 

   

regulated investment companies;

 

   

real estate investment trusts;

 

   

tax-exempt entities;

 

   

holders who hold their shares of SailPoint common stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions;

 

   

holders whose functional currency is not the U.S. dollar;

 

   

partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);

 

   

persons subject to the alternative minimum tax;

 

   

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

 

   

holders that own or have owned (directly, indirectly or constructively) 5% or more of SailPoint common stock (by vote or value); and

 

   

holders that received their shares of SailPoint common stock pursuant to the exercise of employee stock options or otherwise as compensation.

This discussion does not address any U.S. federal tax consequences other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or non-U.S. income or non-income tax consequences, or the consequences of the Medicare tax on net investment income. If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of SailPoint common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding shares of SailPoint common stock and partners therein should consult their own tax advisors regarding the consequences of the Merger to their particular circumstances.

No ruling has been or will be sought from the IRS regarding the U.S. federal income tax consequences of the Merger described herein. This summary is not binding on the IRS or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR OTHER TAX LAWS.

 

79


Table of Contents

U.S. Holders

This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of SailPoint 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 for U.S. federal income tax purposes, 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 (i) 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 (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person as defined in section 7701(a)(30) of the Code.

The receipt of cash by a U.S. Holder in exchange for shares of SailPoint common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of SailPoint common stock surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of SailPoint common stock. 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 Merger. A reduced tax rate on capital gain will generally apply to long-term capital gain of a non-corporate U.S. Holder. The deductibility of capital losses is subject to limitations.

Non-U.S. Holders

This section applies to “Non-U.S. Holders.” For purposes of this discussion, a “Non-U.S. Holder” means a beneficial owner of shares of SailPoint common stock that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

Special rules not discussed below may apply to certain Non-U.S. Holders subject to special tax treatment, such as “controlled foreign corporations” or “passive foreign investment companies.” Non-U.S. Holders should consult their tax advisors to determine the U.S. federal, state, local and non-U.S. tax consequences that may be relevant to them in light of their particular circumstances.

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

 

   

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

 

   

such Non-U.S. Holder is an individual who is present in the United States for one hundred eighty-three (183) days or more in the taxable year of the Merger, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable tax treaty).

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 Merger. Backup withholding generally will not apply to (i) a U.S. Holder that

 

80


Table of Contents

furnishes a correct taxpayer identification number and certifies that such U.S. Holder is not subject to backup withholding on IRS Form W-9 (or a substitute successor form) or (ii) a Non-U.S. Holder that provides a certification of such Non-U.S. Holder’s foreign status on the appropriate series of IRS Form W-8 (or a substitute or successor form) or otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability; provided that the required information is timely furnished to the IRS.

HOLDERS OF SAILPOINT COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAX LAWS.

Regulatory Approvals Required for the Merger

General

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

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, the Merger may not be completed until SailPoint and Thoma Bravo Fund XV-a, L.P. each files a Notification and Report Form with the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification and report forms. If the FTC or DOJ issues a request for additional information and documents (which we refer to as a “Second Request”) prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the Second Request.

SailPoint and Thoma Bravo Fund XV-a, L.P. each filed a Notification and Report Form under the HSR Act with respect to the Merger with the FTC and DOJ on April 29, 2022. The HSR waiting period is expected to expire at 11:59 p.m., Eastern time on May 31, 2022.

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

Other Regulatory Approvals

The Merger is subject to the expiration of the applicable review periods under, or the receipt of approvals or clearances under, the relevant foreign investment laws of Australia and the United Kingdom, in each case unless a relevant exemption applies. In addition, relevant regulatory bodies could take action under other applicable regulatory laws as they deem necessary or desirable in the public interest, including, without limitation, seeking

 

81


Table of Contents

to enjoin or otherwise prevent the completion of the Merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under regulatory laws under some circumstances. There can be no assurance that a challenge to the Merger on regulatory grounds will not be made or, if such a challenge is made, that it would not be successful.

 

82


Table of Contents

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

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

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

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

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time (as defined in the section of this proxy statement captioned “—Closing and Effective Time”): (i) Merger Sub will be merged with and into SailPoint, with SailPoint becoming a wholly owned subsidiary of Parent; (ii) the separate corporate existence of Merger Sub will thereupon cease; and (iii) SailPoint will continue as the Surviving Corporation. From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, powers and franchises of SailPoint and Merger Sub, and all of the debts, liabilities and duties of SailPoint and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

At the Effective Time, the initial directors of the Surviving Corporation will be the directors of Merger Sub as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified. At the Effective Time, the initial officers of the Surviving Corporation will be the officers of SailPoint as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly appointed. At the Effective Time, the certificate of incorporation of SailPoint as the Surviving Corporation will be amended and restated in its entirety to read substantially identically to the certificate of incorporation of Merger Sub as in

 

83


Table of Contents

effect immediately prior to the Effective Time, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended.

Closing and Effective Time

The closing of the Merger (the “Closing”) will take place at 5:00 a.m., Pacific time, on the second (2nd) business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption, “—Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger) or such other time agreed to in writing by Parent, SailPoint and Merger Sub.

On the Closing Date, the parties will file a certificate of merger with the Secretary of State for the State of Delaware as provided under the DGCL. The Effective Time will be the time at which the Merger will become effective.

Merger Consideration

SailPoint Common Stock

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

Treatment of Company Equity Awards

The Merger Agreement provides that SailPoint’s equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment as of the Effective Time:

Company Options

Each Vested Company Option will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Vested Company Option by (y) the total number of shares of SailPoint common stock underlying such Vested Company Option, subject to any required withholding of taxes.

Each Unvested Company Option will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the per share exercise price for such Unvested Company Option by (y) the total number of shares of SailPoint common stock underlying such Unvested Company Option. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company Option Consideration amounts will vest and become payable at the same time as the Unvested Company Option from which such Unvested Company Option Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company Option immediately prior to the Effective Time with respect to the receipt of the Unvested Company Option Consideration.

Company RSUs

Each Vested Company RSU will, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product

 

84


Table of Contents

obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Company RSU by (y) the Per Share Merger Consideration, subject to any required withholding of taxes.

Each Unvested Company RSU will, automatically and without any required action on the part of the holder thereof, be converted into the contingent right to receive an amount in cash, without interest, equal to the product obtained by multiplying (x) the total number of shares of SailPoint common stock underlying such Unvested Company RSU by (y) the Per Share Merger Consideration. Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, such Unvested Company RSU Consideration amounts will vest and become payable at the same time as the Unvested Company RSU from which such Unvested Company RSU Consideration was converted would have vested pursuant to its terms and, subject to certain exceptions, will otherwise remain subject to the same terms and conditions as were applicable to the underlying Unvested Company RSU immediately prior to the Effective Time with respect to the receipt of the Unvested Company RSU Consideration.

Treatment of Company ESPP

In accordance with the terms of the Merger Agreement, on April 10, 2022 , the Board of Directors adopted resolutions providing that with respect to the Company ESPP, (i) participation in the Company ESPP will be limited to those employees who are participants on the date of the Merger Agreement, (ii) participants may not increase their payroll deduction elections or rate of contributions from those in effect on the date of the Merger Agreement or make any separate non-payroll contributions to the Company ESPP on or following the date of the Merger Agreement, (iii) no offering period will be commenced after the date of the Merger Agreement, (iv) each then outstanding purchase right shall be exercised as of the earlier of (A) the end of the offering period in effect on the date of the Merger Agreement or (B) ten (10) days prior to the date on which the Effective Time occurs, and (v) the Company ESPP will terminate immediately prior to, but contingent upon the occurrence of, the Effective Time, but subsequent to the exercise of purchase rights on such purchase date (in accordance with the terms of the Company ESPP). On such exercise date, SailPoint will apply the funds credited as of such date pursuant to the Company ESPP within each participant’s payroll withholding account to the purchase of whole shares of SailPoint common stock in accordance with the terms of the Company ESPP and each share purchased thereunder immediately prior to the Effective Time will be canceled at the Effective Time and converted into the right to receive the Per Share Merger Consideration, subject to withholding of any applicable withholding taxes. Any accumulated contributions of each participant under the Company ESPP as of immediately prior to the Effective Time will, to the extent not used to purchase shares in accordance with the terms and conditions of the Company ESPP, be refunded to such participant as promptly as practicable following the Effective Time (without interest).

Treatment of Convertible Securities

The Merger Agreement provides that, on the Closing Date, Parent, Merger Sub and SailPoint are required, as and to the extent required by the Convertible Notes Indenture (as defined in the section of this proxy statement captioned “—Financing of the Merger”), execute, and use reasonable best efforts to cause the trustee to execute, any supplemental indenture(s) required by the Convertible Notes Indenture and deliver any certificates and other documents required by the Convertible Notes Indenture to be delivered by such persons in connection with such supplemental indenture(s). SailPoint is required to use its reasonable best efforts to provide Parent and its counsel reasonable opportunity to review and comment on any notices, certificates, press releases, supplemental indentures, or other documents or instruments deliverable pursuant to the Convertible Notes Indenture prior to the dispatch or making thereof and to incorporate all reasonable comments provided by Parent and its counsel with respect thereto.

Prior to the Effective Time, SailPoint is required to (i) use reasonable best efforts to facilitate the settlement of the Capped Call Transactions (as defined in the section of this proxy statement captioned “The Merger—Capped Call Transactions”) at or promptly following the Effective Time as reasonably requested by Parent and (ii) use

 

85


Table of Contents

reasonable best efforts to cooperate with Parent with respect to Parent’s efforts to negotiate any termination payments or valuations related to the settlement of the Capped Call Transactions that is effective at or after the Effective Time; provided that SailPoint will not (x) agree to amend, modify or waive any terms relating to, or agree to any amount due upon the termination or settlement of, the Capped Call Transactions (except for amounts due upon exercise or termination of the Capped Call Transactions in accordance with their terms in connection with conversions of the Convertible Notes prior to the Effective Time) or (y) initiate or continue discussions or negotiations with the counterparties to the Capped Call Transactions or any of their respective affiliates or any other person regarding termination or settlement of the Capped Call Transactions, in each case, without the prior written consent of Parent, and to the extent any such discussions or negotiations have occurred prior to date hereof, provide Parent with reasonable detail regarding the substance of all such discussions or negotiations and copies of any documentation sent or received in connection therewith (however, limitations in the immediately preceding clauses (x) and (y) will not apply to any modification, adjustment or termination made unilaterally by any of the counterparties to the Capped Call Transactions pursuant to the terms of the applicable Capped Call Confirmations (as defined in the section of this proxy statement captioned “The Merger—Capped Call Transactions”) or conditioned on termination or abandonment of the Merger Agreement); and nothing in the Merger Agreement requires SailPoint to (A) make any payment with respect to the termination or settlement of any Capped Call Transaction as a result of the Merger prior to the occurrence of the Effective Time or (B) enter into any instrument or agreement relating to the termination or settlement of the Capped Call Transactions, or agree to any change or modification to any Capped Call Confirmations, that is effective prior to the Effective Time. SailPoint is required to promptly provide Parent with all written notices or other documents received by it with respect to any determination, cancellation, termination, exercise, settlement, adjustment or computation under, or in connection with any discussions or negotiations related to, the Capped Call Transactions and granted permission to Parent and its counsel and advisors to, at any time, initiate and engage in discussions and negotiations with the counterparties to the Capped Call Transactions regarding the settlement of the Capped Call Transactions at or promptly following the Effective Time and the terms of such settlement; provided that SailPoint and its counsel will, to the extent reasonably practicable, have a reasonable opportunity to participate in such discussions and negotiations.

Prior to the Effective Time, SailPoint is required to take all actions as may be required by the terms of the applicable Capped Call Transactions or applicable law, including the giving of any written notices or communication in connection with the Merger and/or any conversions and/or repurchases of the Convertible Notes or any adjustment under the Convertible Notes Indenture or occurring as a result of or in connection with the transactions contemplated by the Merger Agreement. SailPoint is required to use its reasonable best efforts to provide Parent and its counsel reasonable time and opportunity to review any such written notice or communication prior to the dispatch or making thereof and shall incorporate all reasonable comments provided by Parent and its counsel with respect thereto.

Exchange and Payment Procedures

Prior to the closing of the Merger, Parent will designate a U.S. bank or trust company, approved in advance by SailPoint (the “Paying Agent”) to make payments of the Per Share Merger Consideration to SailPoint Stockholders. At or prior to the Effective Time, Parent will deposit (or cause to be deposited) with the Paying Agent cash sufficient to pay the aggregate Per Share Merger Consideration to SailPoint Stockholders.

As soon as reasonably practicable following the Effective Time (and in any event within five (5) business days), the Parent shall cause the Paying Agent to mail to each holder of record (as of immediately prior to the Effective Time) a letter of transmittal in customary form and instructions for use in effecting the surrender of such holder’s shares of SailPoint common stock represented by such holder’s certificate(s) or book-entry shares in exchange for the Per Share Merger Consideration payable in respect of such shares. The amount of any Per Share Merger Consideration paid to SailPoint Stockholders may be reduced by any applicable withholding taxes.

 

86


Table of Contents

Representations and Warranties

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

Some of the representations and warranties in the Merger Agreement made by SailPoint are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means, with respect to SailPoint, any event, change, occurrence, effect or development that, individually or taken together with all other events, changes, occurrences, effects or developments that occurred prior to the date of the occurrence of such an effect, is or would reasonably be expected to have a material adverse effect on the business, operations or financial condition of SailPoint and its subsidiaries as a whole, or would reasonably be expected to prevent, materially impair or materially delay the consummation by SailPoint of the Merger prior to the End Date, except that no events, changes, occurrences, effects or developments relating to or resulting from the following matters (by itself or when aggregated) will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur:

 

   

changes in general economic or political conditions or the securities, equity, credit or financial markets in general, or changes in or affecting domestic or foreign interest or exchange rates;

 

   

any decline in the market price or trading volume of the SailPoint common stock or the SailPoint preferred stock or any change in the credit rating of SailPoint or any of its securities (except that the facts and circumstances underlying any such decline or change may be taken into account in determining whether a Company Material Adverse Effect has occurred to the extent not otherwise excluded by the definition thereof);

 

   

changes or developments in the industries in which SailPoint or its subsidiaries operate;

 

   

(i) changes or proposed changes in laws or the interpretation or enforcement thereof or (ii) any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any similar law, decree, judgment, injunction or other order, directive, guidelines or recommendations by any governmental entity or industry group in connection with or in response to COVID-19, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (“COVID-19 Measures”);

 

   

the execution, delivery or performance of the Merger Agreement or the public announcement or pendency or consummation of the Merger or other transactions contemplated thereby, including the impact thereof on the relationships, contractual or otherwise, of SailPoint or any of its subsidiaries with employees, partnerships, customers or suppliers or governmental entities (except with respect to any representation or warranty to the extent that such representation or warranty expressly addresses consequences resulting from the execution of the Merger Agreement or the consummation or pendency of the transactions contemplated thereby);

 

   

the identity of Parent or any of its affiliates as the acquiror of SailPoint;

 

   

compliance with the terms of, or the taking or omission of any action expressly required by, the Merger Agreement or consented to or requested by Parent or any of its representatives (except with respect to any representation or warranty to the extent that such representation or warranty expressly addresses consequences resulting from the execution of the Merger Agreement or the consummation or pendency of the transactions contemplated thereby or with respect to any covenants relating to conduct of SailPoint during pendency of the Merger);

 

   

any act of civil unrest, civil disobedience, war, terrorism, cyberterrorism, military activity, sabotage or cybercrime, including an outbreak or escalation of hostilities involving the United States or any other governmental entity or the declaration by the United States or any other governmental entity of a national emergency or war, or any worsening or escalation of any such conditions threatened or existing on the date of Merger Agreement;

 

87


Table of Contents
   

any hurricane, tornado, flood, earthquake, natural disasters, acts of God or other comparable events;

 

   

any pandemic, epidemic or disease outbreak (including COVID-19) or other comparable events;

 

   

changes in generally accepted accounting principles or the interpretation or enforcement thereof;

 

   

any stockholder litigation relating to or resulting from the Merger Agreement or the transactions contemplated thereby;

 

   

any failure to meet internal or published projections, forecasts, guidance or revenue or earning predictions (except that the facts and circumstances underlying any such failure may be taken into account in determining whether a Company Material Adverse Effect has occurred to the extent not otherwise excluded by the definition thereof);

 

   

any matter set forth in the confidential disclosure letter to the Merger Agreement; or

 

   

the availability of equity, debt or other financing to Parent or Merger Sub (except, that the facts and circumstances underlying any such failure may be taken into account in determining whether a Company Material Adverse Effect has occurred to the extent not otherwise excluded by the definition thereof);

except, with respect to bullets 1, 3-4, and 8-11 above (other than, in the case of bullets 4 or 10, any change, event, effect or circumstance with respect to COVID-19 or the COVID-19 Measures or any escalation or worsening thereof (including any subsequent wave(s))) to the extent that such change, event, effect or circumstance has had a materially disproportionate adverse effect on SailPoint and its subsidiaries, taken as a whole, relative to other companies operating in the industries in which SailPoint and its subsidiaries operate, in which case only the incremental material and disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect.

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

 

   

due organization, valid existence and good standing of SailPoint and its subsidiaries;

 

   

the subsidiaries of SailPoint;

 

   

the organizational documents of SailPoint and its subsidiaries;

 

   

the capital structure of SailPoint;

 

   

the absence of any undisclosed 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 SailPoint’s securities (other than the Convertible Notes);

 

   

SailPoint’s corporate power and authority to enter into and perform the Merger Agreement, the approval of the Board of Directors, the necessary vote of SailPoint Stockholders in connection with the Merger Agreement, the enforceability of the Merger Agreement;

 

   

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

 

   

the absence of any conflict, violation or material alteration of any organizational documents, existing material contracts, applicable laws to SailPoint or the resulting creation of any lien upon SailPoint’s assets (except in limited circumstances) due to the performance of the Merger Agreement;

 

   

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

 

   

SailPoint’s disclosure controls and procedures;

 

   

SailPoint’s internal accounting controls and procedures;

 

88


Table of Contents
   

the absence of specified undisclosed liabilities;

 

   

since December 31, 2021, the absence of certain changes;

 

   

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

 

   

export controls matters and compliance with applicable anti-corruption and anti-money laundering laws;

 

   

litigation and regulatory matters;

 

   

employee benefit plans;

 

   

the absence of any undisclosed exchangeable security, option, warrant or other right convertible into SailPoint common stock (other than the Convertible Notes);

 

   

labor matters;

 

   

tax matters;

 

   

certain real property leased by SailPoint and its subsidiaries;

 

   

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

 

   

the existence and enforceability of specified categories of SailPoint’s material contracts, and certain limitations with respect thereto, such as restrictions on operations, and any notices with respect to termination or intent not to renew those material contracts therefrom;

 

   

insurance matters;

 

   

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

 

   

this proxy statement;

 

   

the rendering of Morgan Stanley’s opinion to the Board of Directors;

 

   

payment of fees to Morgan Stanley in connection with the Merger Agreement and the absence of any other brokers used;

 

   

the inapplicability of anti-takeover statutes to the Merger;

 

   

compliance with government contracts;

 

   

existence of internal controls and procedures with regards to government contracts;

 

   

environmental matters;

 

   

healthcare and healthcare regulatory matters;

 

   

certain indebtedness of SailPoint; and

 

   

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

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

 

   

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

 

   

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

 

89


Table of Contents
   

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

 

   

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

 

   

the capital structure of Merger Sub;

 

   

the absence of litigation, orders and investigations;

 

   

accuracy of information to be provided in the proxy statement;

 

   

ownership of capital stock of SailPoint;

 

   

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

 

   

Parent and Merger Sub not being a “foreign person” within the meaning of title 31 of the Code of Federal Regulations part 800 section 800.224;

 

   

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

 

   

delivery and enforceability of each of the Guaranty, Equity Commitment Letter, Debt Commitment Letter and certain redacted fee letters dated as of April 10, 2022;

 

   

the commitments to provide financing to Parent, the availability of Parent’s financing and sufficiency of funds, including to settle conversions or effect redemptions of the Convertible Notes pursuant to the terms of Convertible Note Indenture;

 

   

the absence of any SailPoint Stockholder or management arrangements related to the Merger;

 

   

the solvency of Parent and its subsidiaries following the consummation of the Merger and the transactions contemplated by the Merger Agreement; and

 

   

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

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

Conduct of Business Pending the Merger

During the period of time between the date of signing of the Merger Agreement and the first to occur of the Effective Time and the termination of the Merger Agreement (the “interim period”), except (i) as required by applicable law, (ii) as agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned); provided that Parent shall be deemed to have approved in writing if it provides no response within five (5) business days after written request by SailPoint for such approval, (iii) as expressly required or permitted by the Merger Agreement or (iv) as disclosed in the confidential disclosure schedules to the Merger Agreement, SailPoint shall, and shall cause its subsidiaries to:

 

   

conduct its business in all material respects in the ordinary course consistent with past practices; and

 

   

use its commercially reasonable efforts to preserve intact in all material respects its business organization and business relationships.

During the interim period, except (i) as required by applicable law, (ii) as agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned); provided that Parent shall be deemed to have approved in writing if it provides no response within five (5) business days after written request by SailPoint for such approval, (iii) as contemplated, required or permitted by the Merger Agreement, (iv) to the extent necessary to comply with the express obligations set forth in any material contract in effect on the date of

 

90


Table of Contents

the Merger Agreement, or (v) as disclosed in the confidential disclosure schedules to the Merger Agreement, SailPoint will not, and will not allow its subsidiaries, as applicable to, among other things (and subject to certain exceptions):

 

   

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

 

   

adjust, split, subdivide, combine, or reclassify any of its capital stock;

 

   

increase the compensation or other benefits payable or provided to any director, officer, employee or other service provider of SailPoint or its subsidiaries;

 

   

enter into any employment, consulting, change of control, severance or retention agreement or other compensation or benefit agreement with any current or former independent contractor, director or employee of SailPoint or its subsidiaries;

 

   

grant new change of control, severance, retention, pension or other cash, equity or equity-based compensation or benefits in respect of or accelerate the funding, vesting or payment of any compensation or benefit for, any such current or former independent contractor, director or employee;

 

   

hire or engage any person with an annual base cash compensation in excess of $300,000 or terminate (without cause) any employee or independent contractor with an annual base cash compensation in excess of $300,000;

 

   

materially change accounting practices;

 

   

amend the organizational documents of SailPoint or its subsidiaries;

 

   

issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of its capital stock or other ownership or equity or equity-based interests in SailPoint or its subsidiaries;

 

   

purchase, repurchase, redeem or otherwise acquire any securities of SailPoint, except for transactions solely among SailPoint and its subsidiaries or solely among SailPoint’s subsidiaries;

 

   

incur, assume or guarantee any indebtedness for borrowed money;

 

   

sell, lease, license, transfer, exchange, swap, or subject to any lien (except with regards to certain liens), or otherwise dispose of, any portion of its material properties or assets, in each case, in excess of $10,000,000 individually or $30,000,000 in the aggregate, other than in the ordinary course of business;

 

   

enter into or amend material contracts except in the ordinary course of business;

 

   

settle, pay discharge or satisfy any action, other than any action that involves only the payment of monetary damages not in excess of $4,000,000 individually or $10,000,000 in the aggregate;

 

   

make or authorize any capital expenditures other than those (i) not in excess of $2,000,000 individually or $5,000,000 in the aggregate in any 12-month period or (ii) as otherwise reflected in SailPoint’s capital expenditure budget set forth on the confidential disclosure schedules to the Merger Agreement;

 

   

adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of SailPoint or its subsidiaries;

 

   

undertake certain tax-related actions;

 

   

apply for or receive relief under (i) the CARES Act or any similar government program designed to provide relief related to COVID-19 or (ii) any payroll tax executive order;

 

   

make any acquisition of or make any investment in any interest in, any corporation, partnership or other business organization or material assets or division thereof, except for (i) purchases of inventory and supplies in the ordinary course of business consistent with past practice or pursuant to an existing contract in effect as of the date of the Merger Agreement or (ii) acquisitions or investments not to exceed $35,000,000 in the aggregate;

 

91


Table of Contents
   

negotiate, enter into, adopt, extend, amend or terminate or agree to any collective bargaining agreement;

 

   

recognize or certify any labor union, labor organization, works council, or group of employees as the bargaining representative for any employees of SailPoint or its subsidiaries;

 

   

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;

 

   

enter into a transaction with an affiliate of SailPoint or other person covered by Item 404 of Regulation S-K under the Securities Act that would be required to be disclosed pursuant to Item 404;

 

   

make any loans or advances to any other person or entity;

 

   

sell, assign, transfer, license, abandon, permit to lapse or otherwise dispose of or subject to any lien any intellectual property that is material to the business of SailPoint and its subsidiaries;

 

   

disclose any trade secrets that are material to the business of SailPoint and its subsidiaries or disclose, make available, deliver, license or place into escrow any source code owned by SailPoint or any of its subsidiaries with respect to software that is material to the business of SailPoint and its subsidiaries;

 

   

make any material adverse change to the operation or security of certain IT assets or products or any of SailPoint’s or its subsidiaries’ policies or procedures with respect to personal data; or

 

   

enter into agreements to do any of the foregoing.

Notwithstanding the restrictions set out above, nothing shall prevent SailPoint or its subsidiaries from taking any action that would otherwise be prohibited reasonably in response to COVID-19 or any COVID-19 Measures or in response to sanctions imposed in connection with the current conflict between the Russian Federation and Ukraine, so long as, in each case, SailPoint consults in good faith with Parent prior to taking such action.

In addition, from the date of the Merger Agreement until the earlier of the date the Merger Agreement is terminated and the expiration or termination of the waiting period under the HSR Act applicable to the Merger and the receipt of the required governmental consents, Parent and Merger Sub have agreed not to, and to cause their subsidiaries and affiliates not to, acquire or agree to acquire by merger or consolidation with, or by purchasing a material portion of the assets of or equity in, any person (a “Specified Acquisition”), if the entering into a definitive agreement with respect to or the consummation of a Specified Acquisition would reasonably be expected to (i) prevent, materially delay or materially impede the obtaining of the expiration or termination of the waiting period under the HSR Act applicable to the Merger and the receipt of governmental authority consents (or expiration of applicable waiting periods), or (ii) materially increase the risk of any governmental entity seeking or entering an order, ruling, judgment or injunction prohibiting the consummation of the transactions contemplated under the Merger Agreement.

The Go-Shop Period—Solicitation of Other Offers

Under the Merger Agreement, from the date of the Merger Agreement until 11:59 p.m. Eastern Time on the No-Shop Period Start Date, SailPoint, its affiliates and their respective representatives have the right to: (i) solicit, initiate, propose, induce the making or submission of, encourage or facilitate in any way any offer or proposal that constitutes, or could reasonably be expected to lead to, an Alternative Acquisition Proposal (as defined in this section of this proxy statement below), including by providing information (including non-public information and data) relating to SailPoint and any of its subsidiaries and affording access to the businesses, properties, assets, books, records or other non-public information, or to any personnel, of SailPoint and its subsidiaries to any third person (and its representatives, including potential financing sources of the third person) that has entered into an Acceptable Confidentiality Agreement; provided that SailPoint must provide Parent and

 

92


Table of Contents

Merger Sub (and their representatives, including financing sources) with access to any information or data that is provided to any third person given such access that was not previously made available (whether prior to or after the execution of the Merger Agreement) to Parent or Merger Sub substantially concurrently with the time it is provided to the third person (and in any event within 24 hours thereof) and (ii) continue, enter into, engage in or otherwise participate in any discussions or negotiations with any third person (and their respective representatives, including potential financing sources of the third person) regarding any Alternative Acquisition Proposals (or inquiries, offers or proposals or any other effort or attempt that could reasonably be expected to lead to an Alternative Acquisition Proposal), and cooperate with or assist or participate in, or facilitate in any way, any such inquiries, offers, proposals, discussions or negotiations or any effort or attempt to make any Alternative Acquisition Proposals or other proposals that could reasonably be expected to lead to Alternative Acquisition Proposals, including by granting a waiver, amendment or release under any pre-existing “standstill” or other similar provision to the extent necessary to allow for an Alternative Acquisition Proposal or amendment to an Alternative Acquisition Proposal to be made confidentially to SailPoint or to the Board of Directors. SailPoint must also notify Parent within 24 hours of entering into any Acceptable Confidentiality Agreement.

If SailPoint terminates the Merger Agreement prior to 11:59 p.m. Eastern Time on May 26, 2022 to enter into a definitive agreement with respect to a Superior Proposal received from an Excluded Party, then SailPoint would be required to pay a termination fee of $81,750,000 to Parent. For more information, please see the section of this proxy statement captioned “—The Board of Directors’ Recommendation; Change of Recommendation.”

For purposes of this proxy statement and the Merger Agreement:

“Acceptable Confidentiality Agreement” means an agreement with SailPoint that is either (i) in effect as of the date the Merger Agreement was entered into, or (ii) executed, delivered and effective after the date the Merger Agreement was entered into, in either case containing provisions that require any counterparty thereto (and any of its affiliates and representatives named therein) that receive non-public information of or with respect to SailPoint and/or its subsidiaries to keep such information confidential; provided, however, that, with respect to such agreements executed and delivered following the execution and delivery of the Merger Agreement, the provisions contained therein relating to the confidential treatment of information and the use thereof are not materially less restrictive in the aggregate to such counterparty (and any of its affiliates and representatives named therein) than the terms of the confidentiality agreement entered into between SailPoint and Thoma Bravo (it being understood that such agreement need not contain any “standstill” or similar provisions or otherwise prohibit the making of any Alternative Acquisition Proposal) and that such agreement does not contain provisions which prohibit SailPoint from providing any information to Parent in accordance with the Merger Agreement.

“Alternative Acquisition Proposal” means any offer, proposal or indication of interest by a third person relating to or concerning (i) a merger, reorganization, share exchange, consolidation, tender offer, business combination, recapitalization, liquidation, dissolution or similar transaction involving SailPoint, in each case, as a result of which SailPoint Stockholders immediately prior to such transaction would cease to own at least 75% of the total voting power of SailPoint or the surviving entity (or any direct or indirect parent company thereof), as applicable, immediately following such transaction, (ii) the direct or indirect acquisition by any third person of assets constituting or accounting for more than 25% of the consolidated assets, revenue or net income of SailPoint and its subsidiaries, on a consolidated basis (including equity interests in any subsidiaries), or (iii) the direct or indirect acquisition by any third person of more than 25% of the outstanding shares of SailPoint common stock or securities representing more than 25% of the total voting power of SailPoint.

“Excluded Party” means any third person (i) from whom SailPoint received a written Alternative Acquisition Proposal after the date of the Merger Agreement and prior to the No-Shop Period Start Date and (ii) whose Alternative Acquisition Proposal the Board of Directors determines in good faith prior to the start of the No-Shop Period Start Date, after consultation with its outside financial advisor and legal counsel, either to be a Superior Proposal or an Alternative Acquisition Proposal that would reasonably be expected to lead to a Superior

 

93


Table of Contents

Proposal; provided, however, that a third person will immediately cease to be an Excluded Party (and the provisions of the Merger Agreement applicable to Excluded Parties will cease to apply with respect to such third person) if (1) the Alternative Acquisition Proposal is withdrawn by the third person or (2) the Alternative Acquisition Proposal, in the good faith determination of the Board of Directors, after consultation with its outside financial advisor and legal counsel, no longer is or would no longer be reasonably expected to lead to a Superior Proposal.

“Superior Proposal” means a written Alternative Acquisition Proposal substituting in the definition thereof “80%” for “25%” and for “75%” in each place each such phrase appears, that (i) was not solicited in violation of the non-solicitation obligations pursuant to the Merger Agreement and (ii) the Board of Directors determines in good faith, after consultation with SailPoint’s outside legal and financial advisors, and considering such factors as the Board of Directors considers to be appropriate (including (a) all legal, regulatory and financial aspects of the proposal (including certainty of closing) and the identity of the third person making the Alternative Acquisition Proposal and (b) any revisions to the Merger Agreement made or proposed in writing by Parent prior to the time of such determination in accordance with the change of recommendation provisions of the Merger Agreement), to be more favorable to SailPoint and SailPoint Stockholders than the transactions contemplated by the Merger Agreement.

The No-Shop Period—No Solicitation of Other Offers

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

 

   

solicit, initiate or knowingly encourage, or knowingly facilitate the making or submission of any offer or proposal that constitutes, or would reasonably be expected to lead to, an Alternative Acquisition Proposal;

 

   

participate in any discussions or negotiations regarding an Alternative Acquisition Proposal with, or furnish any non-public information relating to SailPoint or its subsidiaries for the purpose of facilitating an Alternative Acquisition Proposal to, any third person that has made or, to SailPoint’s knowledge, is considering making an Alternative Acquisition Proposal, or afford any third person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of SailPoint or its subsidiaries for the purpose of encouraging, inducing or facilitating an Alternative Acquisition Proposal;

 

   

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

 

   

enter into any letter of intent, agreement in principle, memorandum of understanding, or other acquisition agreement, merger agreement or similar agreement with respect to an Alternative Acquisition Proposal, other than an Acceptable Confidentiality Agreement.

In addition, SailPoint has agreed to (i) cease and cause to be terminated any discussions or negotiations with any third person and its representatives, (ii) request the prompt return or destruction of all non-public information concerning SailPoint and its subsidiaries furnished to any person with whom a confidentiality agreement with respect to an Alternative Acquisition Proposal was entered into at any time within twelve (12) months immediately preceding the No-Shop Period Start Date, (iii) cease providing any further information with respect to SailPoint or any Alternative Acquisition Proposal to any such third person or its representatives and (iv) terminate all access granted to any such third person or its representatives to any physical or electronic data room (or any other diligence access).

Notwithstanding these restrictions, SailPoint may continue to engage in the activities delineated in the previous two paragraphs with respect to any Excluded Party (but only for so long as such person is and remains an

 

94


Table of Contents

Excluded Party), including with respect to any amended or modified Alternative Acquisition Proposal received from any Excluded Party following the No-Shop Period Start Date.

Additionally, under certain specified circumstances, at any time prior to the adoption of the Merger Agreement by SailPoint Stockholders, if SailPoint receives an Alternative Acquisition Proposal from a third party that was not received in response to, or as a result of, any material breach of SailPoint’s non-solicitation obligations pursuant to the Merger Agreement, (i) SailPoint and its representatives may contact the third party making such Alternative Acquisition Proposal solely to clarify the terms and conditions thereof, and (ii) if the Board of Directors determines in good faith, after consultation with outside legal and financial advisors, that such Alternative Acquisition Proposal either constitutes a Superior Proposal or would reasonably be expected to lead to a Superior Proposal and the Board of Directors (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to take the actions in respect of such Alternative Acquisition Proposal would be inconsistent with its fiduciary duties under applicable law, then SailPoint may: (A) engage in discussions or negotiations with the third party (including its representatives and potential equity and debt financing sources) with respect to such Alternative Acquisition Proposal, and (B) furnish nonpublic information to the third party making such Alternative Acquisition Proposal (and its representatives and potential equity and debt financing sources) if, prior to so furnishing such information, the third party has executed an Acceptable Confidentiality Agreement with SailPoint; provided that SailPoint provides to Parent and Merger Sub (and their respective representatives) any information or data that is provided to such third party that was not previously made available to Parent or Merger Sub prior to or substantially concurrently with the time it is provided to such third party (and in any event within 24 hours thereof). SailPoint will notify Parent that it has entered into an Acceptable Confidentiality Agreement within 24 hours after the execution thereof.

Both during the Go-Shop Period and after the No-Shop Period Start Date but prior to the adoption of the Merger Agreement by SailPoint Stockholders, SailPoint is not entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a five (5)-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 SailPoint terminates the Merger Agreement prior to the adoption of the Merger Agreement by SailPoint Stockholders for the purpose of entering into an agreement in respect of a Superior Proposal, other than entering into a definitive agreement with respect to a Superior Proposal received from an Excluded Party prior to 11:59 p.m. Eastern Time on May 26, 2022, then SailPoint must pay a $212,540,000 termination fee to Parent.

As promptly as reasonably practicable, and in any event within 24 hours following the expiration of the Go-Shop Period, SailPoint shall deliver to Parent a written notice setting forth: (i) the identity of each Excluded Party from which SailPoint has received during the Go-Shop Period an Alternative Acquisition Proposal that remains pending and (ii) the material terms and conditions of any such pending Alternative Acquisition Proposal made by each such Excluded Party. SailPoint shall (whether during or after the Go-Shop Period) promptly (and in any event within 24 hours) notify Parent of (A) the entry by SailPoint or any of its subsidiaries into an Acceptable Confidentiality Agreement with a third party who has made or could make an Alternative Acquisition Proposal (or, if such third party was already party to a confidentiality agreement with SailPoint or any of its subsidiaries, then SailPoint shall instead notify Parent within 24 hours of granting data room access to such third party or its representatives, it being understood that such notification need only be made one time with respect to such third party and its representatives) and (B) any Alternative Acquisition Proposal received by SailPoint or any of its subsidiaries or representatives, which notice shall be provided orally and in writing, and which shall identify the material terms and conditions thereof (and, thereafter, any material change to the terms thereof) and (unless expressly prohibited pursuant to a confidentiality agreement in effect as of the date of the Merger Agreement) the person or group making such Alternative Acquisition Proposal and include copies of all documents and other

 

95


Table of Contents

written materials (including any letter of intent, term sheet or draft of definitive agreement) submitted with such Alternative Acquisition Proposal. From and after the expiration of the Go-Shop Period, SailPoint shall keep Parent reasonably informed on a reasonably current basis of the status and any material developments (including all amendments or proposed amendments, whether or not in writing) regarding any Alternative Acquisition Proposals or any material change to the terms of any such Alternative Acquisition Proposal, and promptly (and in any event within 24 hours) provide Parent with copies of all documents and other written materials (including any letter of intent, term sheet or draft or definitive agreement) relating to any Alternative Acquisition Proposal (including the financing thereof).

“Acceptable Confidentiality Agreement” means an agreement with SailPoint that is either (i) in effect as of the date of the Merger Agreement, or (ii) executed, delivered and effective after the date of the Merger Agreement, in either case containing provisions that require any counterparty thereto (and any of its affiliates and representatives named therein) that receive non-public information of or with respect to SailPoint and/or its subsidiaries to keep such information confidential; provided, however, that, with respect to such agreements executed and delivered following the execution and delivery of the Merger Agreement, the provisions contained therein relating to the confidential treatment of information and the use thereof are not materially less restrictive in the aggregate to such counterparty (and any of its affiliates and representatives named therein) than the terms of the nondisclosure agreement, dated as of March 9, 2022, by and between SailPoint Technologies Holdings, Inc. and Thoma Bravo, L.P. (it being understood that such agreement need not contain any “standstill” or similar provisions or otherwise prohibit the making of any Alternative Acquisition Proposal) and that such agreement does not contain provisions which prohibit SailPoint from providing any information to Parent in accordance with the applicable section of the Merger Agreement or that otherwise prohibits SailPoint from complying with the applicable section of the Merger Agreement.

The Board of Directors’ Recommendation; Change of Recommendation

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

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

 

   

withdraw (or qualify or modify in any manner adverse to Parent), or propose publicly to withdraw (or qualify or modify in any manner adverse to Parent), the recommendation of the Board of Directors (it being understood that it shall be considered a modification adverse to Parent if (1) any Alternative Acquisition Proposal structured as a tender or exchange offer is commenced and the Board of Directors fails to publicly recommend against acceptance of such tender or exchange offer by SailPoint Stockholders within ten (10) business days of commencement thereof pursuant to Rule 14d-2 of the Exchange Act or (2) any Alternative Acquisition Proposal is publicly announced (other than by the commencement of a tender or exchange offer) and the Board of Directors fails to issue a public press release within five (5) business days of such public announcement providing that the Board of Directors reaffirms the recommendation of the Board of Directors);

 

   

approve, recommend or declare advisable any Alternative Acquisition Proposal (or propose to approve, recommend or declare advisable any Alternative Acquisition Proposal);

 

   

fail to publicly reaffirm the recommendation of the Board of Directors within five (5) business days after Parent so requests in writing (it being understood that SailPoint will have no obligation to make such reaffirmation on more than three (3) separate occasions (provided that, in the event Parent has not previously requested the Board of Directors to make such a reaffirmation, there shall be no limit on the number of reaffirmations that Parent may request in response to any Alternative Acquisition Proposal)); or

 

96


Table of Contents
   

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

Nothing contained in the Merger Agreement prohibits SailPoint or the Board of Directors from (i) complying with its disclosure obligations under applicable law or rules and policies of the NYSE, including taking and disclosing to SailPoint Stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act (or any similar communication to SailPoint Stockholders) or from issuing a “stop, look and listen” statement pending disclosure of its position thereunder or (ii) making any disclosure to SailPoint Stockholders if the Board of Directors determines in good faith, after consultation with the Company’s outside legal counsel, that the failure of the Board of Directors to make such disclosure would reasonably be expected to be inconsistent with the exercise of its fiduciary duties under applicable law; provided that (1) any such statement or disclosure must be subject to the terms and conditions of the Merger Agreement and will not limit or otherwise affect the obligations of SailPoint or the Board of Directors and the rights of Parent under the applicable section of the Merger Agreement, and (2) nothing in the foregoing will be deemed to permit SailPoint or the Board of Directors to effect a Change of Recommendation other than in accordance with the applicable section of the Merger Agreement.

Notwithstanding the restrictions described above, prior to the adoption of the Merger Agreement by SailPoint Stockholders, the Board of Directors may effect a Change of Recommendation if (i) SailPoint has received a Superior Proposal or (ii) there has been an Intervening Event (as defined herein), in each case, that the Board of Directors has determined in good faith (after consultation with its outside legal and financial advisors) that the failure to effect a Change of Recommendation would reasonably be expected to be inconsistent with its fiduciary duties under applicable law.

The Board of Directors may only effect a Change of Recommendation or authorize SailPoint to terminate the Merger Agreement to enter into an agreement with respect to a Superior Proposal substantially concurrently with the termination of the Merger Agreement if:

 

   

the Board of Directors has determined in good faith (after consultation with its outside legal and financial advisors) that the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties under applicable law;

 

   

SailPoint has provided prior written notice to Parent at least five (5) business days in advance of the Company’s intention to effect a Change of Recommendation or terminate the Merger Agreement in response to such Superior Proposal, which shall include a description of the terms and conditions of the Superior Proposal, the identity of the person or entity making the Superior Proposal and a copy of any proposed definitive agreement(s) relating to such Superior Proposal, including any related financing commitments, if any;

 

   

SailPoint has complied in all material respects with its obligations pursuant to the Merger Agreement with respect to such Superior Proposal;

 

   

SailPoint has negotiated in good faith with Parent and its representatives (to the extent Parent desires to negotiate) with respect to the terms and conditions of this Agreement and/or the commitment letters so that such Alternative Acquisition Proposal would cease to constitute a Superior Proposal;

 

   

following such five (5)-business-day period, the Board of Directors (after consultation with its financial advisor and outside legal counsel and taking into account Parent’s proposed revisions to the terms and conditions of the Merger Agreement that are binding on Parent and Merger Sub and irrevocable by Parent and Merger Sub until the expiration of the foregoing five (5)-business-day period (assuming the execution and delivery by SailPoint of the applicable definitive agreement) and any other information provided by Parent) has determined that the failure of the Board of Directors to make such a Change of Recommendation or to terminate the Merger Agreement would reasonably be expected to be inconsistent with its fiduciary duties under applicable law; and

 

97


Table of Contents
   

in the event of a termination of the Merger Agreement in order to cause SailPoint to enter into a definitive agreement with respect to such Superior Proposal, SailPoint will have validly terminated the Merger Agreement in accordance with the terms of the Merger Agreement, including paying to Parent a termination fee of either (i) $81,750,000 if the Merger Agreement is terminated prior to 11:59 p.m. Eastern Time on May 26, 2022 for the purposes of entering into a definitive agreement with respect to a Superior Proposal received from any Excluded Party, or (ii) $212,540,000, in the case of any other such termination.

In the event of any material amendments or modifications to such Alternative Acquisition Proposal, SailPoint is required to deliver a new written notice to Parent and to comply with the requirements of the Merger Agreement with respect to such new written notice (it being understood that the five (5)-business-day period shall be three (3) business days with respect to such new written notice, but in no event shorter than five (5) business days following the original written notice).

In addition, the Board of Directors may only effect a Change of Recommendation for an Intervening Event if:

 

   

the Board of Directors has provided prior written notice to Parent at least five (5) business days in advance of SailPoint’s intention to effect a Change of Recommendation in response to such Intervening Event, which notice must specify the basis for such Change of Recommendation, which shall include a description in reasonable detail of the applicable Intervening Event;

 

   

prior to effecting such Change of Recommendation, the Board of Directors have given Parent an opportunity to meet and negotiate with SailPoint and its advisors during the foregoing five (5)-business-day period (to the extent that Parent desires to so meet and negotiate) to discuss the foregoing Intervening Event and any adjustments or revisions to the terms of the Merger Agreement proposed by Parent in response thereto to obviate the need to effect a Change of Recommendation; and

 

   

following such five (5)-business-day period, the Board of Directors, after consultation with the Company’s outside legal counsel and taking into account Parent’s proposed revisions to the terms and conditions of the Merger Agreement, shall have determined that the failure of the Board of Directors to make such a Change of Recommendation in response to such Intervening Event would reasonably be expected to be inconsistent with its fiduciary duties under applicable law; provided that each time any material amendment or modification to the Intervening Event occurs, SailPoint shall notify Parent of such amendment or modification in writing and the time period set forth in the preceding second (2nd) bullet shall recommence and be extended for two (2) business days from the day of such notification (provided that the time period shall in no event be shorter than five (5) business days following the original written notice).

For purposes of this proxy statement and the Merger Agreement, an “Intervening Event” means any event, change, occurrence or development that is unknown and not reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement, or if known or reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement, the material consequences of which were not known or reasonably foreseeable to the Board of Directors as of the date of Merger Agreement; provided that (a) the receipt, existence or terms of an Alternative Acquisition Proposal or Superior Proposal, or (b) the mere fact, in and of itself, that SailPoint 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 SailPoint’s common stock or the credit rating of SailPoint (it being understood that the underlying cause of any of the foregoing in this clause (b) may be considered and taken into account), in each case, shall not be deemed to be an Intervening Event under the Merger Agreement.

 

98


Table of Contents

Employee Benefits

The Merger Agreement provides that from and after the Effective Time, SailPoint will, and Parent will cause SailPoint to, honor all SailPoint employee plans in accordance with their terms. Parent acknowledges that a “change in control” (or similar phrase) will occur at the Effective Time for purposes of the employee plans.

For a period commencing at the Effective Time and ending on the earlier of (A) the first (1st) anniversary of the Effective Time and (B) the date of termination of the Company Employee, Parent will cause the Surviving Corporation or its affiliates to provide to each current employee of SailPoint and its subsidiaries as of the Effective Time who remains so employed immediately after the Effective Time (“Company Employees”) (i) base compensation and target annual or short-term cash incentive opportunities (including target short-term commission-based cash incentive opportunities) that, in each case, are no less favorable than were provided to the Company Employee immediately before the Effective Time, and (ii) employee benefits (excluding equity and equity-based compensation) that are substantially comparable in the aggregate to those that were provided to the Company Employee immediately before the Effective Time.

For all purposes of vesting, eligibility to participate and level of benefits under the corresponding employee benefit plans of Parent and its subsidiaries providing benefits to any Company Employees after the Effective Time (the “New Plans”), each Company Employee will be credited with his or her years of service with SailPoint and its subsidiaries and their respective predecessors before the Effective Time, to the same extent and for the same purpose as such Company Employee was entitled, before the Effective Time, to credit for such service under any similar Company Benefit Plan in which such Company Employee participated or was eligible to participate immediately prior to the Effective Time. However, the foregoing will not apply with respect to any defined benefit pension benefits or to the extent that its application would result in a duplication of benefits. In addition, and without limiting the generality of the foregoing, (i) each Company Employee will be immediately eligible to participate, without any waiting time, in any New Plans to the extent coverage under such New Plan is comparable to and replaces a Company Benefit Plan in which such Company Employee participated immediately before the Effective Time (such plans, collectively, the “Old Plans”), and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical, and vision insurance benefits to any Company Employee, Parent will use commercially reasonable efforts to cause all preexisting condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or her covered dependents, unless such conditions would not have been waived or satisfied under the comparable plans of SailPoint or its subsidiaries in which such employee participated immediately prior to the Effective Time, and Parent will cause any eligible expenses incurred by such employee and his or her covered dependents during the portion of the plan year of the Old Plans ending on the date such employee’s participation in the corresponding New Plan begins to be taken into account under such New Plan for purposes of satisfying the corresponding deductible, coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan to the extent such amounts were credited to such person for the same purpose under the Old Plan.

Efforts to Close the Merger

Under the Merger Agreement, and subject to certain exceptions set forth therein, Parent, Merger Sub and SailPoint agreed to promptly take (or cause to be taken) all actions, and promptly do (or cause to be done) and assist and cooperate with the other party or parties in doing (or causing to be done) all things, in each case that are necessary, proper or advisable under applicable laws or otherwise to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement in the most expeditious manner possible after the date of the Merger Agreement (subject to the terms of the Merger Agreement) and in any event prior to the End Date.

Cooperation with Debt Financing

Pursuant to the Merger Agreement, Parent shall use reasonable best efforts to, and shall cause its subsidiaries to use reasonable best efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things

 

99


Table of Contents

necessary, proper or advisable to arrange and consummate the financing on the terms (including any market “flex” provisions) set forth in the Financing Letters.

If any portion of the Debt Financing becomes unavailable on the terms and conditions (including any applicable market “flex” provisions) contemplated by the Debt Commitment Letter and such portion is necessary to fund the Required Amount, Parent shall promptly notify SailPoint and Parent shall use its reasonable best efforts to obtain alternative financing from the same or alternative sources in an amount sufficient to fund the Required Amount and with terms (taken as a whole) not less favorable to Parent (or its affiliates) than those set forth in the Debt Commitment Letter and which do not include any conditions to the consummation of such alternative financing that are more onerous than the conditions set forth in the Debt Commitment Letter.

In connection with the efforts of Parent and Merger Sub to arrange the financing, prior to the Closing Date, SailPoint shall use its reasonable best efforts to provide, and to cause its subsidiaries to use their reasonable best efforts to provide, to Parent and Merger Sub, in each case at Parent’s sole cost and expense, such cooperation as is customary for financings of the type contemplated in the Debt Commitment Letter and reasonably requested by Parent in connection with the arrangement of the Debt Financing, including using its reasonable best efforts to, upon Parent’s written request and subject to certain exceptions set forth in the Merger Agreement: (i) furnish Parent any Required Financial Information; (ii) assist in preparation for and participate in a reasonable number of investor and lender meetings (including a reasonable and limited number of one-on-one meetings and calls that are requested in advance with or by the parties acting as lead arrangers or agents for, and prospective lenders of, the Debt Financing), presentations, road shows, due diligence sessions and sessions with rating agencies and accountants, at reasonable times and with reasonable advance notice (which meetings, presentations, road shows and sessions shall be virtual) and to assist with the marketing or syndication efforts of Parent in connection with the Debt Financing; (iii) facilitate the pledging of collateral of SailPoint and its subsidiaries effective no earlier than the Closing; (iv) provide a customary payoff letter and lien terminations and instruments of discharge (to the extent applicable) for certain indebtedness and, to the extent requested by Parent no later than ten (10) days prior to Closing, any bank credit facility incurred after April 10, 2022 by SailPoint or any of its subsidiaries, in each case to be delivered at Closing to allow for the payoff, discharge and termination in full on the Closing Date of all such indebtedness and liens (if any), subject to the occurrence of the Closing; (v) provide reasonable and customary assistance to Parent and the Debt Financing Sources in the preparation of customary offering documents, lender presentations, private placement memoranda, bank information memoranda, syndication memoranda, ratings agency presentations (including providing customary authorization and representation letters authorizing the distribution of information relating to SailPoint and its subsidiaries to prospective lenders or investors and containing representations with respect to the presence of or absence of material non-public information relating to SailPoint and its subsidiaries and the accuracy of the information relating to SailPoint and its subsidiaries contained therein) and other customary marketing material for the Debt Financing; (vi) (x) so long as requested by Parent at least ten (10) days prior to the Closing Date, provide at least three (3) days prior to the Closing Date, all documentation and other information relating to SailPoint or any of its subsidiaries required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the Patriot Act, and (y) if SailPoint is a “legal entity” customer under 31 C.F.R. § 1010.230, so long as requested by Parent at least ten (10) business days prior to the Closing Date, provide at least three (3) business days prior to the Closing Date, a certification regarding the beneficial ownership required by 31 C.F.R. § 1010.230 in relation to SailPoint; (vii) subject to certain exceptions, provide reasonable and customary assistance to assist Parent in producing any pro forma financial statements regarding SailPoint and its subsidiaries to the extent described in the Debt Commitment Letter; (viii) cooperate with Parent to obtain reasonable and customary corporate and facilities credit rating; (ix) cooperate with the Debt Financing Sources’ due diligence, to the extent customary and reasonable, (x) assist in the preparation of, and executing and delivering at Closing, the definitive agreements, including guarantee and collateral documents and instruments as may be reasonably requested by Parent, customary closing certificates, a solvency certificate, perfection certificates and other customary documents and instruments as may be reasonably requested by Parent in writing and, in each case, necessary and customary as may be required by the Debt Commitment Letter, and (xi) taking reasonable corporate actions, subject to and only effective upon the occurrence of the Closing (and subject to the

 

100


Table of Contents

Debt Commitment Letter with respect to subsidiary guarantors), reasonably necessary to permit the consummation of the Debt Financing.

Notwithstanding the foregoing, none of SailPoint nor any of its affiliates shall be required to take or permit the taking of any action that would (i) require SailPoint or its subsidiaries or any of their respective affiliates or any persons who are officers or directors of such entities to pass resolutions or consents to approve or authorize the execution of the Debt Financing, except those which are subject to the occurrence of the Closing passed by directors or officers continuing in their positions following the Closing, (ii) require SailPoint or its subsidiaries or any of their respective affiliates or any persons who are officers or directors of such entities to enter into, execute or deliver any certificate, document, instrument or agreement or agree to any change or modification of any existing certificate, document, instrument or agreement, in each case, that is not contingent upon the Closing or that would be effective prior to the Closing (other than the execution of customary authorization letters and representation letters referenced above), (iii) cause any representation or warranty in the Merger Agreement to be breached by SailPoint or any of its affiliates, (iv) require SailPoint or any of its affiliates to pay any commitment or other similar fee or incur any other expense, liability or obligation in connection with the Debt Financing prior to the Closing or have any obligation of SailPoint or any of its affiliates under any agreement, certificate, document or instrument be effective prior to the Closing, (v) cause any director, officer, employee of SailPoint or SailPoint Stockholder or any of SailPoint’s affiliates to incur any personal liability, (vi) conflict with the organizational documents of SailPoint or any of its affiliates or any laws, (vii) reasonably be expected to result in a violation or breach of, or a default (with or without notice, lapse of time, or both) under, any material contract to which SailPoint or any of its affiliates is a party, (viii) provide access to or disclose information that SailPoint or any of its affiliates reasonably determines would jeopardize any attorney-client privilege, or (ix) require SailPoint to prepare any financial statements or information that are not available to it and prepared in the ordinary course of its financial reporting practice. Neither SailPoint nor any affiliate of SailPoint shall be required to be an issuer or other obligor with respect to the Debt Financing prior to the Closing.

Parent will (x) promptly, upon request by SailPoint, reimburse SailPoint or any of its affiliates for all reasonable and documented out-of-pocket costs incurred by them or their respective representatives in connection with the cooperation of SailPoint and its representatives contemplated by the financing cooperation covenant in the Merger Agreement (it being understood that such reimbursement will not apply to any fees, costs and expenses incurred by, or on behalf of, SailPoint in connection with its ordinary course financial reporting requirements); and (y) indemnify and hold harmless SailPoint, its affiliates and their respective representatives from and against any and all losses, suffered or incurred by any of them in connection with the arrangement of the Debt Financing and any action taken by them at the request of Parent or its representatives and any information used in connection therewith, in each case other than to the extent any of the foregoing was suffered or incurred as a result of the bad faith, gross negligence or willful misconduct of SailPoint, its affiliates and their respective representatives.

“Required Financial Information” means the historical financial statements regarding SailPoint and its subsidiaries to the extent described in the Debt Commitment Letter as in effect on April 10, 2022.

“Debt Financing Sources” means the agents, arrangers and lenders that will provide or arrange the Debt Financing, including the agents, arrangers and lenders party to the Debt Commitment Letter, any joinder agreements, credit agreements or the other definitive documentations relating thereto entered into in connection therewith, together with their respective affiliates and their respective affiliates’ officers, directors, general or limited partners, stockholders, members, employees, controlling persons, agents and representatives and their respective permitted successors and assigns.

Indemnification and Insurance

Parent, Merger Sub and SailPoint have agreed that all indemnification or other similar agreements between any current or former directors, officers or employees, on the one hand, and SailPoint or any of its subsidiaries, on

 

101


Table of Contents

the other hand, as in effect on the date of the Merger Agreement, will survive the Merger and remain in full force and effect in accordance with their respective terms. For a period of six (6) years after the Effective Time, Parent and the Surviving Corporation will maintain in effect the exculpation, indemnification and advancement of expenses provisions of the certificates of incorporation and bylaws or similar organizational documents of SailPoint and of any subsidiaries as in effect immediately prior to the Effective Time, and will not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who at the Effective Time were current or former directors, officers or employees of SailPoint or any of its subsidiaries; provided, however, that all rights to indemnification in respect of any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (a “Proceeding”), pending or asserted or any claim made within such period will continue until the final disposition of the Proceeding or resolution of such claim, even if beyond such six (6)-year period. From and after the Effective Time, Parent will assume, be jointly and severally liable for, and honor, guarantee and stand surety for, and will cause the Surviving Corporation and its subsidiaries to honor, in accordance with their respective terms, the indemnification provisions of the Merger Agreement.

From and after the Effective Time, Parent and the Surviving Corporation will, to the fullest extent provided in the governing and organizational documents of SailPoint and its subsidiaries and all indemnification or other similar agreements between any current or former directors, officers or employees, indemnify and hold harmless each present and former director, officer or employee of SailPoint or any of its subsidiaries and any person who served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise at the request of or for the benefit of SailPoint or its subsidiaries (each, an “Indemnified Party”) against any costs or expenses (including advancing reasonable attorneys’ fees and expenses), judgments, fines, losses, claims, damages, obligations, costs, liabilities and amounts paid in settlement in connection with a Proceeding, arising out of, relating to or in connection with any action or omission occurring or alleged to have occurred at or prior to the Effective Time (including acts or omissions in connection with such persons serving as an officer, director, employee or other fiduciary of any entity if such service was at the request or for the benefit of SailPoint or its subsidiaries), whether asserted or claimed prior to, at or after the Effective Time, in all cases solely to the extent provided in the governing and organizational documents of SailPoint and its subsidiaries. In the event of any such Proceeding, Parent and the Surviving Corporation will cooperate with the Indemnified Party in the defense of any such Proceeding.

In addition, prior to the Effective Time, SailPoint will purchase a six (6)-year “tail” insurance policy on SailPoint’s current policies of directors’ and officers’ liability insurance on terms and conditions providing substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by SailPoint and its subsidiaries with respect to matters arising on or before the Effective Time, including covering without limitation the transactions contemplated by the Merger Agreement; provided that the aggregate cost of such “tail” policy will not exceed 400% of the last annual premium paid by SailPoint, and if the annual premium of such insurance coverage exceeds the maximum amount, SailPoint, Parent, or the Surviving Corporation will only be required to obtain as much coverage as reasonably practicable for such amount. Parent and the Surviving Corporation will cause such policy to be maintained in full force and effect, for its full term, and cause all obligations thereunder to be honored by the Surviving Corporation, and no other party shall have any further obligation to purchase or pay for insurance under the indemnification provisions of the Merger Agreement.

Parent has also agreed to pay all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any Indemnified Party in enforcing the indemnity and other indemnification obligations provided in the Merger Agreement in the event Parent is found to have been in breach.

 

102


Table of Contents

Other Covenants

Stockholders Meeting

SailPoint has agreed to take all necessary action (in accordance with applicable law and SailPoint’s organizational documents) to establish a record date for, duly give notice of, convene and hold the Special Meeting as soon as reasonably practicable following the date upon which SailPoint receives confirmation from the SEC that it will not review, or that it has completed its review of this proxy statement (which confirmation will be deemed to occur if the SEC has not affirmatively notified SailPoint prior to the tenth (10th) calendar day after filing this proxy statement that the SEC will or will not be reviewing this proxy statement).

Stockholder Litigation

Each of SailPoint and Parent will keep the other reasonably informed of (including by providing copies of all pleadings), and cooperate with the other party in connection with, any stockholder litigation or claim against such party and/or its directors or officers relating to the Merger or the other transactions contemplated by the Merger Agreement. SailPoint will: (i) give Parent a reasonable opportunity to participate in the defense or settlement of any such litigation or claim, (ii) consult in good faith with Parent with respect to the defense, settlement and prosecution of any such litigation or claim and (iii) not compromise or settle, or agree to compromise or settle, any stockholder litigation or claim arising or resulting from the transactions contemplated by the Merger Agreement without the prior written consent of Parent (such consent not to be unreasonably withheld, delayed or conditioned).

Other Investors

Prior to the Effective Time, without the prior written consent of SailPoint, Parent will not permit or agree to permit any third person, other than the Thoma Bravo Fund and its affiliates, to obtain any equity interests (or rights to obtain any equity interests) in Parent or Merger Sub if such acquisition of equity interests or rights to obtain such equity interests would reasonably be expected to (i) delay in any material respect the obtaining of, or increase in any material respect the risk of not obtaining, any governmental consents necessary to consummate the transactions contemplated by the Merger Agreement or the expiration or termination of any applicable waiting period, (ii) increase in any material respect the risk of any governmental entity seeking or entering an order prohibiting the consummation of the transactions contemplated by Merger Agreement, or (iii) increase in any material respect the risk of not being able to remove any such order on appeal or otherwise.

Conditions to the Closing of the Merger

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

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of SailPoint Stockholders;

 

   

the approval or notification of non-objection to the Merger, notification of no further action, or the expiration or termination of the waiting period as applicable under each of the HSR Act, the Australian Foreign Acquisitions and Takeovers Act 1975 (Cth) and the UK National Security and Investment Act 2021; and

 

   

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

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

 

   

SailPoint having performed and complied in all material respects with all covenants required by the Merger Agreement prior to Closing;

 

103


Table of Contents
   

the representations and warranties of SailPoint relating to organization, good standing, corporate power, enforceability, board approval, anti-takeover laws, required SailPoint Stockholder approval, non-contravention with charter or bylaws, certain aspects of SailPoint’s capitalization, subsidiaries and brokers being generally true and correct in all material respects as of the Closing Date as if made at and as of such time;

 

   

the representations and warranties of SailPoint relating to certain aspects of SailPoint’s capitalization being generally true and correct as of the Closing Date, except where the failure to be so true and correct would not reasonably be expected to result in additional cost, expense or liability to SailPoint, Parent and their affiliates, individually or in the aggregate, that is more than $35,000,000;

 

   

the representations and warranties of SailPoint relating to the absence of any Company Material Adverse Effect since April 10, 2022, being true and correct in all respects as of the Closing Date;

 

   

the other representations and warranties of SailPoint 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 receipt by Parent of a certificate of SailPoint, dated as of the Closing Date and signed by their respective president or chief executive officer, certifying that the conditions described in the preceding five (5) bullets have been satisfied; and

 

   

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

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

 

   

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

 

   

the representations and warranties of Parent and Merger Sub set forth in the Merger Agreement relating to organization, good standing, corporate power, enforceability, board approval, governmental consents, the Guaranty, voting agreements, ownership of SailPoint common stock and solvency of Parent and Merger Sub being generally true and correct in all material respects as of the Closing Date as if made at and as of such time;

 

   

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

 

   

the receipt by SailPoint of a certificate of Parent and Merger Sub, dated as of the Closing Date and signed by their respective president or chief executive officer, certifying that the conditions described in the preceding three (3) bullets have been satisfied.

Termination of the Merger Agreement

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

 

   

by mutual written agreement of SailPoint and Parent;

 

   

by either SailPoint or Parent if:

 

   

the Merger has not been consummated by the October 10, 2022 (which shall be automatically extended until January 10, 2023 if certain regulatory conditions, including the approval or notification of non-objection to the Merger, notification of no further action, or the expiration or

 

104


Table of Contents
 

termination of the waiting period as applicable under each of the HSR Act, the Australian Foreign Acquisitions and Takeovers Act 1975 (Cth), and the UK National Security and Investment Act 2021, have not been satisfied, or there are any laws or court orders making the Merger illegal or otherwise prohibiting the Merger, as of the close of business on the business day immediately prior to October 10, 2022);

 

   

any governmental entity has issued or entered an injunction or similar order permanently enjoining or prohibiting the consummation of the Merger and has become final and non-appealable; or

 

   

SailPoint Stockholders fail to adopt the Merger Agreement at the Special Meeting or any adjournment or postponement thereof;

 

   

by SailPoint:

 

   

Parent or Merger Sub has breached or failed to perform any of their covenants or other agreements under the Merger Agreement or any of the representations and warranties of Parent and Merger Sub in the Merger Agreement have become inaccurate, in any such case where such breach, failure to perform or inaccuracy (i) would result in a failure of a condition set forth in the Merger Agreement and (ii) cannot be cured by the End Date or, if curable, is not cured within forty-five (45) business days following SailPoint’s delivery of written notice that SailPoint is intending to terminate the Merger Agreement because of such breach, failure to perform or inaccuracy;

 

   

prior to the Effective Time, (i) the closing obligations of SailPoint have been and continue to be satisfied or waived; (ii) Parent has failed to consummate the Merger under the timing restrictions set forth in the Merger Agreement; (iii) SailPoint has, at least three (3) business days prior to seeking to terminate the Merger Agreement, irrevocably confirmed in a written notice delivered to Parent that SailPoint is ready, willing and able to consummate the Merger, and Parent and Merger Sub have not consummated the Merger by the end of such three-(3)-business-day period; or

 

   

at any time prior to the adoption of the Merger Agreement by SailPoint Stockholders if (i) SailPoint has received a Superior Proposal after the date of the Merger Agreement, (ii) the Board of Directors has authorized SailPoint to enter into a definitive agreement with respect to that Superior Proposal in accordance with the terms of the Merger Agreement, (iii) SailPoint has complied in all material respects with the non-solicitation provisions set forth in the Merger Agreement with respect to such Superior Proposal, and (iv) concurrently with such termination, SailPoint paying to Parent a termination fee of either (i) $81,750,000 if the Merger Agreement is terminated prior to 11:59 p.m. Eastern Time on May 26, 2022 for the purposes of entering into a definitive agreement with respect to a Superior Proposal received from an Excluded Party, so long as SailPoint has complied in all material respects with the non-solicitation provisions set forth in the Merger Agreement with respect to such Superior Proposal or (ii) $212,540,000, in the case of any other such termination;

 

   

by Parent if:

 

   

SailPoint has breached or failed to perform any of its covenants or other agreements under the Merger Agreement or any of the representations and warranties of SailPoint under the Merger Agreement have become inaccurate, in any such case where such breach, failure to perform or inaccuracy (i) would result in a failure of a condition set forth in the Merger Agreement and (ii) cannot be cured by the End Date or, if curable, is not cured within forty-five (45) business days following Parent’s delivery of written notice to SailPoint stating Parent’s intention to terminate the Merger Agreement because of such breach, failure to perform or inaccuracy; or

 

   

prior to the adoption of the Merger Agreement by SailPoint Stockholders, the Board of Directors effects a Change of Recommendation (except that such right to terminate will expire at 11:59 p.m., Eastern time, on the tenth (10th) business day following the date on which Parent is notified in writing that SailPoint has effected a Change of Recommendation).

 

105


Table of Contents

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. Notwithstanding the foregoing, nothing in the Merger Agreement will relieve any party from any liability for any fraud or willful and material breach of the Merger Agreement prior to its termination. In addition, no termination of the Merger Agreement will affect the rights or obligations of any party pursuant to the confidentiality agreement between Thoma Bravo and SailPoint or the Guaranty, which rights, obligations and agreements will survive the termination of the Merger Agreement in accordance with their respective terms.

Termination Fee

If SailPoint terminates the Merger Agreement at any time prior to receipt of the approval of SailPoint Stockholders for the purposes of entering into a definitive agreement with any Excluded Party prior to 11:59 p.m. Eastern Time on May 26, 2022 with respect to a Superior Proposal, SailPoint would be required to pay a $81,750,000 termination fee to Parent. If the Merger Agreement is terminated under specified circumstances including the instances described below, SailPoint must pay a $212,540,000 termination fee to Parent.

Parent will also be entitled to receive a termination fee of $212,540,000 from SailPoint if the Merger Agreement is terminated:

 

   

by Parent, because the Board of Directors has effected a Change of Recommendation (which termination must occur by 11:59 p.m., Eastern time, on the tenth (10th) business day following the date on which Parent is notified in writing that the Board of Directors has effected a Change of Recommendation);

 

   

(i) after the date of the Merger Agreement, an Alternative Acquisition Proposal (substituting for purposes of the termination in the definition of “Alternative Acquisition Proposal” “50%” for “25%” and for “75%” in each place each such phrase appears) is publicly proposed or publicly disclosed prior to, and not publicly withdrawn, (ii) the Merger Agreement is terminated because (A) SailPoint Stockholders fail to adopt the Merger Agreement at the Special Meeting or any adjournment or postponement thereof or (B) SailPoint has breached or failed to perform any of its covenants or other agreements under the Merger Agreement or any of the representations and warranties of SailPoint under the Merger Agreement have become inaccurate, in any such case where such breach, failure to perform or inaccuracy (i) would result in a failure of a condition set forth in the Merger Agreement and (ii) cannot be cured by the End Date or, if curable, is not cured within forty-five (45) business days following Parent’s delivery of written notice that Parent is intending to terminate the Merger Agreement because of such breach, failure to perform or inaccuracy, and (iii) concurrently with or within twelve (12) months after such termination, SailPoint has (A) consummated any Alternative Acquisition Proposal or (B) entered into a definitive agreement providing for (and later consummated) any Alternative Acquisition Proposal.

SailPoint will be entitled to receive a termination fee of $425,090,000 from Parent (the “Parent Termination Fee”) if the Merger Agreement is terminated:

 

   

by SailPoint, if Parent or Merger Sub has breached or failed to perform any of their covenants or other agreements under the Merger Agreement or any of the representations and warranties of Parent and Merger Sub in the Merger Agreement have become inaccurate, in any such case where such breach, failure to perform or inaccuracy (i) would result in a failure of a condition set forth in the Merger Agreement and (ii) cannot be cured by the End Date or, if curable, is not cured within forty-five (45) business days following SailPoint’s delivery of written notice that SailPoint is intending to terminate the Merger Agreement because of such breach, failure to perform or inaccuracy;

 

   

by SailPoint prior to the Effective Time, (i) the closing obligations of SailPoint have been and continue to be satisfied or waived ; (ii) Parent has failed to consummate the Merger under the timing restrictions

 

106


Table of Contents
 

set forth in the Merger Agreement; (iii) SailPoint has, at least three (3) business days prior to seeking to terminate the Merger Agreement, irrevocably confirmed in a written notice delivered to Parent that SailPoint is ready, willing and able to consummate the Merger, and Parent and Merger Sub have not consummated the Merger by the end of such three-(3)-business-day period; or

 

   

by Parent because the Merger has not been consummated by the End Date, and at such time, SailPoint could have terminated pursuant to either of the prior two (2) bullets above.

Specific Performance

Parent, Merger Sub and SailPoint agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not timely perform the provisions of the Merger Agreement (including any party failing to take such actions as are required of it in order to consummate the Merger Agreement). Parent, Merger Sub and SailPoint acknowledge and agree that, in the event of any breach or threatened breach by any other party of any covenant or obligation contained in the Merger Agreement: (i) the non-breaching party will be entitled (in addition to any other remedy to which they are entitled at law or in equity, including monetary damages), to obtain (A) a decree or order of specific performance to enforce the observance and performance of such covenant or obligation and (B) an injunction restraining such breach or threatened breach and (ii) the fees and expenses provisions of the Merger Agreement are not intended to and would not adequately compensate SailPoint, on the one hand, or Parent and Merger Sub, on the other hand, for the harm that would result from a breach of the Merger Agreement, and will not be construed to diminish or otherwise impair in any respect any party’s right to an injunction, specific performance and other equitable relief; and (iii) the right of specific enforcement is an integral part of the Merger and without that right, neither SailPoint nor Parent would have entered into the Merger Agreement.

It is explicitly agreed that, subject to the limitations of the next two sentences, SailPoint will have the right to specific performance in connection with enforcing Parent’s and Merger Sub’s obligations to consummate the Merger and cause the financing to be funded (including to cause Parent to enforce the obligations of the Thoma Bravo Fund under the Equity Commitment Letter in order to cause the Equity Financing to be timely completed in accordance with and subject to the terms and conditions set forth in the Equity Commitment Letter) subject to the terms and conditions set forth therein and in the Merger Agreement. Notwithstanding anything to the contrary in the Merger Agreement, it is explicitly agreed that the right of SailPoint to seek an injunction, specific performance or other equitable remedies in connection with enforcing Parent’s obligation to cause the Equity Financing to be funded to fund a portion of the amount required to consummate the Merger and to make all payments required to be made in connection therewith (but not the right of SailPoint to seek such injunctions, specific performance or other equitable remedies for any other reason) shall be subject to the requirements that (i) all of the (x) joint conditions to Parent, Merger Sub and SailPoint’s obligations to consummate the Merger and (y) conditions to Parent and Merger Sub’s obligations to consummate the Merger, in each case, have been satisfied (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions), (ii) the Debt Financing has been funded in accordance with the terms and conditions thereof or will be funded in accordance with the terms and conditions thereof if the Equity Financing is funded, (iii) SailPoint has irrevocably confirmed in writing that if the Equity Financing and Debt Financing are funded, then SailPoint shall take such actions that are required of it by the Merger Agreement to arrange and consummate the closing of the Merger pursuant to the terms of the Merger Agreement and (iv) Parent and Merger Sub will have failed to consummate the Merger by the time Closing was to occur under the Merger Agreement. Notwithstanding the foregoing and subject to the rights of the parties to the definitive agreements for any financing under the terms thereof, SailPoint is not entitled to directly seek the remedy of specific performance of the Merger Agreement against any debt financing source. Additionally, the election to pursue an injunction, specific performance or other equitable relief will not restrict, impair or otherwise limit SailPoint from, in the alternative, seeking to terminate the Merger Agreement and collect the Parent Termination Fee; provided that in no event will SailPoint be permitted to pursue an injunction, specific performance or other equitable relief or any other remedy under the Merger Agreement or available at

 

107


Table of Contents

law or equity following the payment of the Parent Termination Fee in accordance with the terms of the Merger Agreement.

Parent, Merger Sub and SailPoint agree not to raise any objections to (i) the granting of an injunction, specific performance or other equitable relief to prevent or restrain breaches or threatened breaches of the Merger Agreement by SailPoint, on the one hand, or Parent and Merger Sub, on the other hand; and (ii) the specific performance of the terms and provisions of the Merger Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants, obligations and agreements of Parent and Merger Sub pursuant to the Merger Agreement. Any party seeking an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement will not be required to provide any bond or other security in connection with such injunction or enforcement, and each party irrevocably waives any right that it may have to require the obtaining, furnishing or posting of any such bond or other security.

Limitations of Liability

The collective monetary damages of Parent, Merger Sub or any of their affiliates for breaches (including any willful breach) under the Merger Agreement (taking into account the payment of the Parent Termination Fee pursuant to the Merger Agreement), the Guaranty or the Equity Commitment Letter will not exceed, in the aggregate for all such breaches, an amount equal to $425,090,000 plus certain reimbursement obligations. The maximum aggregate monetary damages of SailPoint for breaches under the Merger Agreement (taking into account the payment of the termination fee, if applicable) will not exceed an amount equal to $212,540,000 in the aggregate for all such breaches. Notwithstanding such limitations on liability for monetary damages, Parent, Merger Sub and SailPoint may be entitled to an injunction, specific performance or other equitable relief as provided in the Merger Agreement.

Fees and Expenses

Except in specified circumstances, whether or not the Merger is completed, all costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement will be paid by the party incurring or required to incur such expenses, except that all filing fees paid by any party in respect of any and all filings under the antitrust and foreign investment laws shall be borne by Parent and that generally Parent will pay or cause to be paid all transfer, documentary, sales, use, stamp, registration, real property transfer and other similar taxes and fees imposed with respect to, or as a result of, entering into the Merger Agreement and completing the Merger and that such taxes and fees expressly will not be a liability of SailPoint Stockholders or holders of SailPoint equity awards.

Amendment

The Merger Agreement may be amended by the parties in an executed written instrument at any time before or after adoption of the Merger Agreement by SailPoint Stockholders. However, after adoption of the Merger Agreement by SailPoint Stockholders, no amendment that requires further approval by such SailPoint Stockholders pursuant to applicable law or in accordance with the rules and regulations of the NYSE may be made without such approval.

Governing Law

The Merger Agreement is governed by Delaware law.

Vote Required and Board of Directors Recommendation

Approval of the Adoption of the Merger Agreement Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of SailPoint common stock. With respect to such proposal, (i) a failure to vote

 

108


Table of Contents

in person or by proxy at the Special Meeting will have no effect on the outcome of the Adoption of the Merger Agreement Proposal, (ii) abstentions will be counted as votes “AGAINST” on the outcome of the Adoption of the Merger Agreement Proposal and (iii) broker “non-votes” (if any) will be counted as votes “AGAINST” on the outcome of the Adoption of the Merger Agreement Proposal. Shares of SailPoint common stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a SailPoint Stockholder returns a signed proxy card without indicating voting preferences on such proxy card, the shares of SailPoint common stock represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Board of Directors.

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

 

109


Table of Contents

PROPOSAL 2: THE SAILPOINT COMPENSATION PROPOSAL

Under Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, SailPoint is required to submit a proposal to SailPoint Stockholders to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to SailPoint’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement. This compensation is summarized in the section captioned “The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger.” The Board of Directors encourages you to review carefully the named executive officer merger-related compensation information disclosed in this proxy statement.

Accordingly, SailPoint is asking you to approve the following resolution:

“RESOLVED, that the stockholders of SailPoint approve, on a non-binding, advisory basis the compensation that will or may become payable to SailPoint’s named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section captioned ‘The Merger—Interests of Executive Officers and Directors of SailPoint in the Merger.”’

The vote on this Compensation Proposal is a vote separate and apart from the vote on the proposal to adopt the Merger Agreement. Accordingly, you may vote to approve the proposal to adopt the Merger Agreement and vote not to approve this Compensation Proposal and vice versa. Because the vote on the Compensation Proposal is advisory only, it will not be binding on SailPoint. Accordingly, if the Merger Agreement is adopted and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the vote on this Compensation Proposal.

Vote Required and Board of Directors Recommendation

Approval, on an advisory (non-binding) basis, of the Compensation Proposal requires the affirmative vote of the majority of voting power of capital stock present in person or represented by proxy at the Special Meeting and entitled to vote thereon, provided a quorum is present. Assuming a quorum is present, (i) a failure to vote in person or by proxy at the Special Meeting will have no effect on the outcome of the Compensation Proposal, (ii) abstentions will be counted as votes “AGAINST” on the outcome of the Compensation Proposal and (iii) broker “non-votes” (if any) will have no effect on the outcome of the Compensation Proposal. Shares of SailPoint common stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a SailPoint Stockholder returns a signed proxy card without indicating voting preferences on such proxy card, the shares of SailPoint common stock represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Board of Directors.

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

 

110


Table of Contents

PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

We are asking you to approve a proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If SailPoint Stockholders approve the adjournment proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including soliciting proxies from SailPoint Stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not present or otherwise at the discretion of the chairman of the Special Meeting.

Vote Required and Board of Directors Recommendation

Approval of the Adjournment of the Special Meeting Proposal requires the affirmative vote of the majority of voting power of capital stock present in person or represented by proxy at the Special Meeting and entitled to vote thereon, provided a quorum is present. Assuming a quorum is present, (i) a failure to vote in person or by proxy at the Special Meeting will have no effect on the outcome of the Adjournment of the Special Meeting Proposal, (ii) abstentions will be counted as votes “AGAINST” on the outcome of the Adjournment of the Special Meeting Proposal and (iii) broker “non-votes” (if any) will have no effect on the outcome of the Adjournment of the Special Meeting Proposal. Shares of SailPoint common stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a SailPoint Stockholder returns a signed proxy card without indicating voting preferences on such proxy card, the shares of SailPoint common stock represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Board of Directors.

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

 

111


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents the beneficial ownership of our common stock by holders of more than 5% of our common stock, each of our directors; each of our named executive officers; and all of our directors and executive officers as a group. Except for the information about the greater than 5% stockholders, the following table sets forth certain information with respect to the beneficial ownership of our common stock as of May 16, 2022, by each of our directors; each of our named executive officers; and all of our directors and executive officers as a group.

Percentage ownership of our common stock is based on 94,318,713 shares of our common stock outstanding on May 16, 2022. We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to options that are currently exercisable or exercisable within sixty (60) days of May 16, 2022, and the shares subject to restricted stock unit awards that will be released within sixty (60) days of May 16, 2022, to be outstanding and to be beneficially owned by the person holding the option and the restricted stock unit award for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each of the individuals and entities named below that owns 5% or more of our common stock is c/o SailPoint Technologies Holdings, Inc., 11120 Four Points Drive, Suite 100, Austin, Texas 78726.

 

Name of Beneficial Owner

   Number of Shares
Beneficially Owned
    Percent
Owned
 

Directors and Named Executive Officers

    

Mark McClain

     1,302,585 (1)      1.4

Cam McMartin

     48,506 (2)      *  

Matt Mills

     159,518 (3)      *  

Colleen Healy

     —         *  

Chris Schmitt

     79,327 (4)      *  

Grady Summers

     69,363 (5)      *  

William G. Bock

     77,861 (6)      *  

Ronald J. Green

     2,694 (7)      *  

Heidi M. Melin

     12,925 (8)      *  

Tracey E. Newell

     16,272 (9)      *  

James M. Pflaging

     168,513 (10)      *  

Sudhakar Ramakrishna

     3,297 (11)      *  

Michael J. Sullivan

     14,514 (12)      *  

All officers and directors as a group (13 persons)

     1,955,375       2.1

Greater than 5% Beneficial Owner

    

Blackrock, Inc.

     11,698,122 (13)      12.4

HMI Capital Management, L.P.

     9,157,172 (14)      9.7

The Vanguard Group

     9,098,318 (15)      9.7

SoMa Equity Partners, LP

     5,248,987 (16)      5.6

 

*

Represents beneficial ownership of less than 1% of our outstanding shares of common stock.

(1)

Consists of 487,036 shares of common stock, 18,383 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 397,172 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. McClain, 255,994 shares of common stock held by the McClain Charitable Remainder Unitrust, 48,000 shares of

 

112


Table of Contents
  common stock held by the McClain RHD 2015 Trust, 48,000 shares of common stock held by the McClain ADM 2015 Trust and 48,000 shares of common stock held by the McClain GMM 2015 Trust. Mr. McClain is a co-trustee for each of the McClain Charitable Remainder Unitrust, McClain RHD 2015 Trust, McClain ADM 2015 Trust and McClain GMM 2015 Trust. As such, Mr. McClain may be deemed to have shared voting and investment power with respect to all of the shares of common stock held by such trusts.
(2)

Consists of 48,506 shares of common stock and 0 shares of common stock issuable pursuant to RSUs that vest or subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. McMartin.

(3)

Consists of 9,102 shares of common stock, 9,303 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 141,113 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Mills.

(4)

Consists of 4,713 shares of common stock, 4,230 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 70,384 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Schmitt.

(5)

Consists of 40,316 shares of common stock, 18,981 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 10,066 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Summers.

(6)

Consists of 77,861 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022, and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Bock.

(7)

Consists of 2,694 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Green.

(8)

Consists of 12,925 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Ms. Melin.

(9)

Consists of 16,272 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Ms. Newell.

(10)

Consists of 24,065 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Pflaging and 144,448 shares of common stock held by the MMJ Living Trust. Mr. Pflaging is a co-trustee of the MMJ Living Trust. As such, Mr. Pflaging may be deemed to have shared voting and investment power with respect to all of the shares of common stock and shared voting power but no investment power with respect to all of the shares of restricted stock held by the MMJ Living Trust.

(11)

Consists of 3,297 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Ramakrishna.

(12)

Consists of 14,514 shares of common stock, 0 shares of common stock issuable pursuant to RSUs that vest within 60 days of May 16, 2022 and 0 shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of May 16, 2022 held directly by Mr. Sullivan.

(13)

Pursuant to a Schedule 13G/A filed on January 27, 2022, by BlackRock, Inc. (“BlackRock”), BlackRock has sole voting power with respect to 11,532,213 shares, sole dispositive power with respect to 11,698,122 shares, shared voting power with respect to 0 shares and shared dispositive power with respect to 0 shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055.

(14)

Pursuant to a Schedule 13G/A filed on February 14, 2022 by HMI Capital Management, L.P. (“HMI Capital”), HMI Capital, HMI Capital Fund GP, LLC, Members GP, LLC, Marco W. Hellman, Justin C. Nyweide, Sean M. Barrett, and Radhakrishnan Raman Mahendran each has sole voting power with respect to 0 shares, sole dispositive power with respect to 0 shares, shared voting power with respect to 9,157,172 shares and shared dispositive power with respect to 9,157,172 shares. HMI Capital’s Schedule 13G/A also reported that HMI Capital Partners, L.P. (together with HMI Capital, “HMI”) has sole voting power with

 

113


Table of Contents
  respect to 0 shares, sole dispositive power with respect to 0 shares, shared voting power with respect to 8,610,977 shares and shared dispositive power with respect to 8,610,977 shares. The address for HMI is 555 California Street, Suite 4900, San Francisco, California 94104.
(15)

Pursuant to a Schedule 13G/A filed on February 10, 2022, by The Vanguard Group (“Vanguard”), Vanguard has sole voting power with respect to 0 shares, sole dispositive power with respect to 8,841,134 shares, shared voting power with respect to 173,319 shares and shared dispositive power with respect to 257,184 shares. The address for Vanguard is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.

(16)

Pursuant to a Schedule 13G/A filed on February 11, 2022, by SoMa Equity Partners, LP (“SoMa”), SoMa has sole voting power with respect to 5,248,987 shares, sole dispositive power with respect to 5,248,987 shares, shared voting power with respect to 0 shares and shared dispositive power with respect to 0 shares. The address for SoMa is 44 Montgomery Street, Suite 3710, San Francisco, California 94104.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Exchange Act requires SailPoint’s directors, executive officers and any persons who own more than 10% of SailPoint’s common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish SailPoint with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of such forms furnished to SailPoint and written representations from the directors and executive officers, SailPoint believes that all Section 16(a) filing requirements were timely met in 2021, except, due to administrative errors, a late Form 4 reporting equity awards granted in April 2021, was filed for Mr. Domagalski, who is no longer with SailPoint.

 

114


Table of Contents

FUTURE STOCKHOLDER PROPOSALS

The Company held its annual meeting of SailPoint Stockholders (the “2022 annual meeting”) on April 28, 2022. In light of the Special Meeting, the Company will hold an annual meeting of SailPoint Stockholders in the year 2023 only if the Merger is not completed and SailPoint Stockholders will continue to be entitled to attend and participate in such meeting.

Generally, SailPoint Stockholders have the opportunity to submit proper proposals for inclusion in our proxy statement and for consideration at the annual meeting of SailPoint Stockholders by submitting their proposals in writing to our Secretary at least 120 days before the date of our proxy statement for the previous year’s annual meeting, and otherwise complying with the requirements of Rule 14a-8 of the Exchange Act. As described in our annual proxy statement for the 2022 annual meeting filed on March 18, 2022, SailPoint Stockholders have the opportunity to submit proper proposals for inclusion in our proxy statement and for consideration at the annual meeting of SailPoint Stockholders to be held in 2023 (if such meeting is held) by submitting their proposals in writing to our Company Secretary at the Company’s principal executive offices no later than the close of business on November 18, 2022 and otherwise complying with the requirements of Rule 14a-8 of the Exchange Act.

A copy of the full text of the bylaw provisions governing the notice requirements set forth above may be obtained by writing to our Secretary. All notices of proposals and director nominations by SailPoint Stockholders should be sent to SailPoint Technologies Holdings, Inc., 11120 Four Points Drive, Suite 100, Austin, Texas 78726, Attention: Corporate Secretary.

 

115


Table of Contents

WHERE YOU CAN FIND MORE INFORMATION

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates herein by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated herein by reference.

The following SailPoint filings with the SEC are incorporated herein by reference:

 

   

SailPoint’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 28, 2022;

 

   

SailPoint’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022, filed on May 5, 2022;

 

   

SailPoint’s  Definitive Proxy Statement on Schedule 14A filed with the SEC on March 18, 2022; and

 

   

SailPoint’s Current Reports on Form 8-K, filed on May 17, 2022; May  4, 2022; April  11, 2022; February 23, 2022; February 23, 2022; February 23, 2022; and January 6, 2022.

We also incorporate by reference into this proxy statement additional documents that we may file with the SEC between the date of this proxy statement and the earlier of the date of the Special Meeting or the termination of the Merger Agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as Current Reports on Form 8-K and proxy soliciting materials. The information provided on our website is not part of this proxy statement, and therefore is not incorporated herein by reference.

Information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated herein by reference.

You may obtain any of the documents we file with the SEC through the SEC’s website at www.sec.gov, or from our website at https://investors.sailpoint.com/. The information included on our website is not incorporated herein by reference.

You may also request copies of any of the documents we file with the SEC by requesting in writing or by telephone from us at the following address:

SailPoint Technologies Holdings, Inc.

Attn: Investor Relations

11120 Four Points Drive, Suite 100

Austin, Texas 78726

(512) 664-8916

If you would like to request documents from us, please do so as soon as possible, to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt method, within one (1) business day after we receive your request.

 

116


Table of Contents

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

Innisfree M&A Incorporated,

501 Madison Avenue, 20th Floor,

New York, NY 10022

Banks and Brokers Call: (212) 750-5833

All Others Call: (877) 750-8332

 

117


Table of Contents

MISCELLANEOUS

SailPoint has supplied all information relating to SailPoint, and Parent has supplied, and SailPoint has not independently verified, all of the information relating to Parent and Merger Sub contained in this proxy statement.

You should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents that we incorporate by reference in this proxy statement in voting on the Merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated May 31, 2022. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement), and the mailing of this proxy statement to SailPoint Stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

118


Table of Contents

Annex A

EXECUTION VERSION

 

 

 

AGREEMENT AND PLAN OF MERGER

by and among

PROJECT HOTEL CALIFORNIA HOLDINGS, LP

PROJECT HOTEL CALIFORNIA MERGER SUB, INC.

and

SAILPOINT TECHNOLOGIES HOLDINGS, INC.

Dated as of April 10, 2022

 

 

 

 


Table of Contents

TABLE OF CONTENTS

 

         Page  
Article 1

 

THE MERGER

 

Section 1.1

  The Merger      A-1  

Section 1.2

  Effective Time of Merger      A-2  

Section 1.3

  General Effects of Merger      A-2  

Section 1.4

  Effect of Merger on Capital Stock      A-2  

Section 1.5

  Effect of Merger on Company Equity Awards      A-3  

Section 1.6

  The Surviving Corporation      A-5  

Section 1.7

  No Dividends or Distributions      A-5  
Article 2

 

THE CLOSING

 

Section 2.1

  The Closing      A-5  

Section 2.2

  Conditions to Closing      A-6  

Section 2.3

  Payment of Merger Consideration      A-7  

Section 2.4

  Payment of Equity Award Consideration      A-9  

Section 2.5

  Withholding      A-9  
Article 3

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Section 3.1

  Qualification, Organization, Subsidiaries      A-10  

Section 3.2

  Capitalization      A-10  

Section 3.3

  Authority; Enforceability      A-11  

Section 3.4

  Consents and Approvals; No Violation      A-12  

Section 3.5

  Reports and Financial Statements      A-12  

Section 3.6

  Internal Controls and Procedures      A-13  

Section 3.7

  No Undisclosed Liabilities      A-13  

Section 3.8

  Absence of Certain Changes      A-14  

Section 3.9

  Compliance with Laws      A-14  

Section 3.10

  Investigations; Litigation      A-15  

Section 3.11

  Employee Benefit Plans      A-16  

Section 3.12

  Labor Matters      A-17  

Section 3.13

  Tax Matters      A-17  

Section 3.14

  Real Property      A-18  

Section 3.15

  Intellectual Property      A-19  

Section 3.16

  Information Technology      A-20  

Section 3.17

  Privacy      A-20  

Section 3.18

  Material Contracts      A-21  

Section 3.19

  Insurance Policies      A-23  
Section 3.20   Affiliate Party Transactions      A-23  
Section 3.21   Proxy Statement      A-23  
Section 3.22   Opinion of Financial Advisor      A-23  
Section 3.23   Finders or Brokers      A-23  
Section 3.24   Takeover Laws      A-23  
Section 3.25   Government Contracts      A-24  
Section 3.26   Environmental Matters      A-24  


Table of Contents
         Page  
Section 3.27   Healthcare Matters      A-24  
Section 3.28   Indebtedness      A-25  
Section 3.29   No Other Representations or Warranties; No Reliance      A-25  
Article 4

 

REPRESENTATIONS AND WARRANTIES

OF PARENT AND MERGER SUB

 

 

Section 4.1   Qualification, Organization, Subsidiaries      A-26  
Section 4.2   Authority; Enforceability      A-26  
Section 4.3   Consents and Approvals; No Violation      A-27  
Section 4.4   Financing      A-27  
Section 4.5   Guarantee      A-29  
Section 4.6   Capitalization of Merger Sub      A-29  
Section 4.7   Investigations; Litigation      A-29  
Section 4.8   Proxy Statement; Other Information      A-29  
Section 4.9   Finders or Brokers      A-29  
Section 4.10   Certain Arrangements      A-29  
Section 4.11   Foreign Person      A-29  
Section 4.12   Ownership of Common Stock      A-29  
Section 4.13   Solvency      A-30  
Section 4.14   No Other Representations or Warranties; No Reliance      A-30  
Article 5

 

INTERIM OPERATION OF BUSINESS

 

Section 5.1

  Conduct of Company Business During Pendency of Merger      A-31  
Section 5.2   Conduct of Business of Parent and Merger Sub      A-35  
Section 5.3   No Actions Causing Delays      A-35  
Article 6

 

GO-SHOP PERIOD & NO-SHOP RESTRICTIONS

 

Section 6.1

  Go-Shop Period      A-35  
Section 6.2   No-Shop Period      A-36  
Section 6.3   Notices      A-37  
Article 7

 

COVENANTS AND AGREEMENTS

 

Section 7.1

  General Efforts to Complete Merger      A-38  

Section 7.2

  Governmental Approvals      A-38  

Section 7.3

  Company Stockholder Approval      A-40  

Section 7.4

  Parent Financing      A-43  

Section 7.5

  Convertible Notes; Capped Call Transactions      A-46  

Section 7.6

  Interim Access to Company      A-48  

Section 7.7

  Employee Matters      A-49  

Section 7.8

  Indemnification and Insurance      A-50  

Section 7.9

  Takeover Statute      A-51  

Section 7.10

  Public Announcements      A-51  

Section 7.11

  Other Investors      A-52  

Section 7.12

  Management      A-52  

Section 7.13

  Counterparties      A-52  

 

ii


Table of Contents
         Page  

Section 7.14

  Stock Exchange De-listing; Exchange Act Deregistration      A-52  

Section 7.15

  Rule 16b-3      A-52