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Item
1.01.
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Entry
into a Material Definitive Agreement.
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On January 14, 2021, ProSight
Global, Inc., a Delaware corporation (the “Company”) entered into an Agreement and Plan of Merger (the “Merger
Agreement”) by and among Pedal Parent Inc., a Delaware corporation (“Parent”), owned by affiliates
of TowerBrook Capital Partners L.P. (“TowerBrook”) and Further Global Capital Management (“Further
Global”), Pedal Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”),
and the Company. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”),
with the Company surviving as a wholly owned subsidiary of Parent.
Upon the unanimous recommendation
of a special committee of the board of directors of the Company, the board of directors of the Company approved, declared advisable
and adopted, and recommended that the Company’s stockholders adopt, the Merger Agreement.
In connection with the Merger,
each outstanding share of the Company common stock, par value $0.01 per share (“Shares”), other than Shares
owned by the Company or any of its subsidiaries, Parent or Merger Sub, and Shares that are owned by stockholders who have perfected
and not withdrawn a demand for appraisal rights, will be converted into the right to receive $12.85 in cash, without interest (the
“Per Share Consideration”).
In addition, subject to the
terms and conditions of the Merger Agreement, at such time when the Merger becomes effective (the “Effective Time”),
(1) each vested and unvested time-vesting restricted stock unit award that is outstanding immediately prior to the Effective Time
will be cancelled in exchange for an amount in cash equal to the product of (A) the total number of Shares subject to such
award multiplied by (B) the Per Share Consideration; (2) each vested and unvested performance-based restricted stock unit award
that is outstanding immediately prior to the Effective Time will be cancelled in exchange for the right to receive an amount in
cash equal to the product of (A) the number of Shares subject to such award that would become vested based on the higher of target
performance and actual performance through the Effective Time, multiplied by (B) the Per Share Consideration; (3) each vested and
unvested award of shares subject to time-based vesting conditions that is outstanding immediately prior to the Effective Time will
be cancelled in exchange for the right to receive an amount in cash equal to the product of (A) the total number of shares subject
to such award multiplied by (B) the Per Share Consideration; and (4) each vested and unvested award of Shares that is outstanding
immediately prior to the Effective Time will be cancelled in exchange for the right to receive an amount in cash equal to the product
of (A) the number of shares subject to such award that would become vested based on the higher of target performance and actual
performance through the Effective Time multiplied by (B) the Per Share Consideration.
Concurrently with the execution
and delivery of the Merger Agreement, certain affiliates of the Goldman Sachs Group, Inc. and TPG Advisors VI, Inc., holding Shares
representing a majority of all votes entitled to be cast with respect to the approval of the Merger and adoption of the Merger
Agreement (collectively, the “Major Stockholders”), have entered into a voting and support agreement with Parent
(the “Stockholder Support Agreement”). Pursuant to the Stockholder Support Agreement, the Major Stockholders
agreed to, among other things, at any meeting of the Company’s stockholders and at every adjournment or postponement thereof, vote
the Shares owned by them (i) in favor of the adoption of the Merger Agreement and approving the transactions contemplated thereby,
and (ii) prior to the termination of the Merger Agreement by the Company pursuant to the Fiduciary Out Termination Right (as defined
below), against the adoption or approval of any alternative transaction.
In accordance with the terms
of the Stockholder Support Agreement, immediately following the execution and delivery of the Merger Agreement, the Major Stockholders
executed and delivered to the Company a joint written consent (the “Joint Stockholder Consent”), adopting the
Merger Agreement and approving the transactions contemplated thereby, including the Merger. As a result, the stockholder approval
required to consummate the Merger has been obtained, and no further action by the Company’s stockholders in connection with
the Merger is required. The Company will file with the SEC and mail to its stockholders, an information statement describing the
Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.
In connection with the Merger
Agreement, the Company has entered into a binder agreement with Cavello Bay Reinsurance Limited, a Bermuda reinsurer owned and
controlled by Enstar Group Limited (the “Reinsurer”), in connection with an adverse development cover and loss
portfolio transfer transaction with respect to the Company’s current excess workers’ compensation, primary workers’
compensation, commercial automobile liability, commercial general liability (claims made and occurrence), employers’ liability,
marine (property and liability), umbrella and other short-tail lines reserves relating to 2019 and prior years (the “Loss
Portfolio Binder” and such related transactions as contemplated by the Loss Portfolio Binder and the Merger Agreement,
the “Legacy Transfer Transaction”). The Loss Portfolio Binder contemplates that the Company’s insurance
subsidiaries and the Reinsurer will execute and deliver certain definitive documentation with respect to the Legacy Transfer Transaction
upon the satisfaction of certain conditions, including the receipt of applicable regulatory approvals therefor (the “LPT
Approvals”), the absence of (i) a material adverse change in the applicable businesses to be ceded to the Reinsurer as
a result of conditions or requirements imposed in connection with the LPT Approvals or certain insurance regulatory approvals required
in connection with the Merger Agreement and (ii) certain material and adverse regulatory conditions imposed on the Reinsurer
in connection with the LPT Approvals or certain insurance regulatory approvals required in connection with the Merger Agreement
and the satisfaction of applicable closing conditions under the Merger Agreement. The Legacy Transfer Transaction contemplated
by the Loss Portfolio Binder will be consummated immediately after the Effective Time.
The
completion of the Merger is subject to certain closing conditions, including, among others, (i) the adoption of the Merger
Agreement by a majority of the outstanding Shares (which condition has been satisfied as described above), (ii) expiration
of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, (iii) the conclusion of a
review by the Committee on Foreign Investment in the United States pursuant to Section 721 of Title VII of the Defense Production
Act of 1950, as amended by the Foreign Investment and National Security Act of 2007, (iv) the receipt of certain approvals
from insurance regulators in the jurisdictions of domicile of the Company’s insurance subsidiaries, (v) the absence
of any court or government order or other legal restraint enjoining or otherwise prohibiting the consummation of the Merger, (vi)
the completion of all actions necessary to consummate the Legacy Transfer Transaction, the obtaining of all LPT Approvals, and
the parties’ receipt of written confirmation from the Reinsurer that it is ready, willing and able to execute the definitive
documentation with respect to the Legacy Transfer Transaction immediately following the closing of the Merger, (vii) the making
of certain payments to be made by the Company with respect to transaction expenses and the Company’s existing credit facility
balances and the satisfaction of the Company’s and its subsidiaries’ outstanding debt obligations, subject to certain
exceptions, (viii) the accuracy of each party’s representations and warranties (subject to customary materiality qualifiers),
(ix) the absence of a Company material adverse effect and (x) each party’s compliance with its obligations and covenants
contained in the Merger Agreement. Completion of the Merger is expected to occur in the third quarter of 2021. The Merger is not
subject to a financing condition, and Parent has procured financing commitments for the debt and equity components of the purchase
price and related costs.
Each of the Company, Parent
and Merger Sub also has agreed to use reasonable best efforts to take all actions to consummate the Merger in the most expeditious
manner reasonably practicable, including to obtain any required regulatory approvals, except that Parent is not required, in connection
with its efforts to obtain such approvals, to agree to any Burdensome Condition (as defined below).
“Burdensome Condition”
is defined in the Merger Agreement as any condition or restriction imposed in connection with the regulatory approval process that
would individually or in the aggregate, and together with all other such conditions or restrictions (i) require the contribution
of capital or the provision of any guarantee, pledge of assets or similar arrangement by Parent or its investors (other than any
capital requirements set forth in that certain Parent summary business plan (the “Summary Business Plan”));
(ii) restrict the payment or declaration of ordinary dividends or distributions by any of the Company’s insurance subsidiaries
for a period of greater than two years from the closing date; (iii) be adverse to a material extent to Parent and its subsidiaries’
business, assets, liabilities (including the Company), results of operations or condition taken as a whole, after the closing;
(iv) materially increase the amount of capital required to implement the Summary Business Plan as compared to the capital set forth
in the Summary Business Plan; (v) require any modification, amendment or termination of the Loss Portfolio Binder, the definitive
loss portfolio contract and other agreements related thereto that would have a non-de minimis adverse impact on Parent and its
subsidiaries; (vi) require any modification or amendment of, or any adverse deviation, in each case, in any material respect from
the Summary Business Plan; or (vii)(A) restrict the operations of business or use of properties of Parent or any of its investors
after the closing date, other than restrictions on the businesses or assets of the Company, Parent, or their respective subsidiaries,
(B) prohibit any investors in Parent from engaging in, investing in or acquiring any type or line of business or (C) require
any of Parent’s investors to divest or dispose of any business or assets.
Parent has procured equity
financing commitments to finance the transactions contemplated by the Merger Agreement. Affiliated funds of TowerBrook and Further
Global have (i) committed to provide capital to Parent with an aggregate equity contribution of up to approximately $600,000,000,
subject to the terms and conditions set forth in an equity commitment letter dated January 14, 2021 and (ii) provided the Company
with limited guarantees in favor of the Company, dated January 14, 2021, guaranteeing the payment of certain monetary obligations
that may be owed by Parent pursuant to the Merger Agreement, including any reverse termination fee that may become payable by Parent.
The Company has agreed to
customary “no-shop” restrictions on its ability to solicit alternative acquisition proposals from third parties and
engage in discussions or negotiations with third parties regarding alternative acquisition proposals, subject to certain limited
exceptions. In certain circumstances and after complying with certain procedures fully set forth in the Merger Agreement, the board
of directors of the Company may terminate the Merger Agreement in response to an unsolicited acquisition proposal (the “Fiduciary
Out Termination Right”).
The Merger Agreement contains
certain other customary termination rights, including the right for each of the Company and Parent to terminate the Merger Agreement
if the Merger is not consummated by two business days prior to January 14, 2022 (the “End Date”), or in the
event of an uncured material breach of any representation, warranty, covenant or agreement such that the conditions to closing
would not be satisfied.
In connection with the
termination of the Merger Agreement, the Company may be required to pay Parent a termination fee of $23,435,669 plus enforcement
costs and up to $5,000,000 of transaction expenses, (i) if the Merger Agreement is terminated on account of having reached the
End Date and within six months of termination the Company enters into or consummates an acquisition proposal for 50% or more of
the Company’s assets or equity that was publicly known before the termination, (ii) the Company has breached or failed to
perform any of its representations, warranties, covenants or other conditions to the Merger or (iii) either the Company or Parent
has terminated the Merger Agreement pursuant to the Fiduciary Out Termination Right. Parent may be required to pay the Company
a reverse termination fee of $41,512,421 in cash plus enforcement costs if the Company terminates the Merger Agreement (i) for
a failure by Parent to close when required and Parent has already secured debt financing, or (ii) for Parent’s willful breach.
In addition, Parent may be required to pay the Company a parent termination fee of $29,794,586 in cash plus enforcement costs if
the Company terminates the Merger Agreement (i) for Parent’s breach of conditions in the Merger Agreement resulting in failure
to receive necessary insurance regulatory approvals or (ii) for Parent’s failure to close by the date required by the Merger
Agreement.
The foregoing description
of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement does not purport to be complete and
is subject to, and qualified in its entirety by, the full text of the Merger Agreement attached hereto as Exhibit 2.1, which is
incorporated herein by reference.
The representations, warranties
and covenants of the Company contained in the Merger Agreement have been made solely for the benefit of Parent and Merger Sub.
In addition, such representations, warranties and covenants (i) have been made only for purposes of the Merger Agreement, (ii)
have been qualified by confidential disclosures made to Parent and Merger Sub in connection with the Merger Agreement, (iii) are
subject to materiality qualifications contained in the Merger Agreement that may differ from what may be viewed as material by
investors and (iv) have been included in the Merger Agreement for the purpose of allocating risk among the contracting parties
rather than establishing matters as facts. Accordingly, the Merger Agreement is included with this filing only to provide investors
with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding
the Company or its business. Moreover, information concerning the subject matter of the representations and warranties may change
after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public
disclosures. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information
regarding the Company that is or will be contained in, or incorporated by reference into, the Form 10-K, Forms 10-Q and other documents
that the Company files with the SEC.
