Unassociated Document
As
filed with the Securities and Exchange Commission on August 18,
2008
Registration
No. 333-150327
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
TO
FORM
S-4
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
FMG
ACQUISITION CORP.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
6770
|
|
75-3241964
|
(State
or other jurisdiction
of
incorporation or
organization)
|
|
(Primary Standard Industrial Classification Code
Number)
|
|
(I.R.S. Employer
Identification No.)
|
Four
Forest Park, Second Floor
Farmington,
Connecticut 06032
(860)
677-2701
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Chairman,
President and
Chief
Executive Officer
Four
Forest Park, Second Floor
Farmington,
Connecticut 06032
(860)
677-2701
(Name,
address including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
Douglas
S. Ellenoff, Esq.
Adam
S. Mimeles, Esq.
Ellenoff
Grossman & Schole LLP
150
East 42nd Street
New
York, New York 10017
(212)
370-1300
(212)
370-7889—Fax
|
Carolyn
T. Long, Esq.
Steven
W. Vazquez, Esq.
Foley
& Lardner LLP
100
North Tampa Street, Suite 2700
Tampa,
Florida 33602
(813)
229-2300
(813)
221-4210—Fax
|
Approximate
date of commencement of proposed sale to the public:
As soon
as practicable after this Registration Statement becomes effective and all
other
conditions to the merger contemplated by the merger agreement described in
the
enclosed proxy statement/prospectus have been satisfied or
waived.
If
any of
the securities being registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. o
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
:
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer o
Accelerated
filer o
Non-accelerated
filer o
Smaller
reporting company x
CALCULATION
OF REGISTRATION FEE
Title of Each Class of
Security to Be Registered
|
|
|
Amount Being
Registered
|
|
|
Proposed Maximum
Offering Price Per
Security(1)
|
|
|
Proposed Maximum
Aggregate Offering Price
|
|
|
Amount of
Registration Fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock (2)
|
|
|
8,750,000
|
|
$
|
8.00
|
|
$
|
70,000,000
|
|
$
|
2,751
|
|
Warrants
(3)
|
|
|
1,093,750
|
|
|
(4
|
)
|
|
(4
|
)
|
|
(4
|
)
|
Common
Stock underlying the Warrants
|
|
|
1,093,750
|
|
$
|
6.00
|
|
$
|
6,562,500
|
|
$
|
258
|
|
Warrants
(5)
|
|
|
212,877
|
|
|
(4
|
)
|
|
(4
|
)
|
|
(4
|
)
|
Common
Stock underlying the Warrants
|
|
|
212,877
|
|
$
|
6.00
|
|
$
|
1,277,262
|
|
$
|
50
|
|
Common
Stock (6)
|
|
|
212,877
|
|
$
|
8.00
|
|
$
|
1,703,016
|
|
|
67
|
|
Total
Fee
|
|
|
|
|
|
|
|
|
|
|
$
|
3,126
|
(7)
|
(1) |
Based
on the market price of the common stock for the purpose of calculating
the
registration fee pursuant to Rule
457(f)(1).
|
(2) |
Represents
8,750,000 shares of common stock to be issued to members of United
Insurance Holdings, L.C. in exchange for their membership
units.
|
(3) |
Represents
1,093,750 warrants to be issued to members of United Insurance
Holdings,
L.C. in exchange for their membership
units.
|
(4) |
No
fee pursuant to Rule 457(g).
|
(5) |
Represents
up to 212,877 warrants which may be issued to members of United
Insurance
Holdings, L.C. as additional consideration in exchange for their
membership units, as described more particularly
herein.
|
(6) |
Represents
up to 212,877 shares of common stock which may be issued to members
of
United Insurance Holdings, L.C. as additional consideration in
exchange
for their membership units, as described more particularly
herein.
|
(7) |
$2,751
of the filing fee has been previously
paid.
|
The
Registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the Securities and Exchange
Commission declares our registration statement effective. This proxy
statement/prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or
sale
is not permitted.
SUBJECT
TO COMPLETION DATED AUGUST 18, 2008
PROXY
STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
AND
PROSPECTUS FOR UP TO 8,962,877 SHARES OF COMMON STOCK AND UP TO 1,306,627
COMMON STOCK PURCHASE WARRANTS OF
FMG
ACQUISITION CORP.
Proxy
Statement/Prospectus dated [
], 2008
and
first
mailed to stockholders on or about [
], 2008
We
are
pleased to announce the boards of directors of FMG Acquisition Corp. (“FMG” or
the “Company”), United Insurance Holdings, L.C., (“United”) and United
Subsidiary Corp., a newly-incorporated Florida corporation and a wholly-owned
subsidiary of FMG (“United Subsidiary”), have agreed to the purchase of all of
the membership units of United by FMG, and to effect a merger whereby United
Subsidiary will merge with and into United, with United surviving as a
wholly-owned subsidiary of FMG. We are sending you this document to ask for
your
vote for the approval and adoption of this transaction, as well as for the
approval and adoption of several related proposals.
On
April
2, 2008, the Company entered into an Agreement and Plan of Merger, as amended
and restated as of August 15, 2008 (the “Merger Agreement”) pursuant to which
United Subsidiary agreed to merge with and into United, and United agreed,
subject to receipt of the merger consideration from FMG, to become a
wholly-owned subsidiary of FMG (the “Merger”). If the stockholders of the
Company approve the transactions contemplated by the Merger Agreement, FMG,
through United Subsidiary, which was newly incorporated in order to facilitate
the Merger, will merge pursuant to a merger transaction summarized as
follows:
|
·
|
FMG
has formed a transitory merger subsidiary, United Subsidiary Corp.,
and
will merge such subsidiary with and into United, with United surviving;
and
|
|
·
|
United
will, as a result, become wholly-owned by
FMG.
|
United’s
members will receive consideration from FMG for their membership units of
up to
$104,316,270 consisting of:
|
·
|
8,750,000
shares of FMG common stock, par value $.0001 per share (assuming
an $8.00
per share value);
|
|
·
|
up
to $5,000,000 of additional consideration which will be paid to
the
members of United in the event certain net income targets are met
by
United, as set forth more particularly herein;
|
|
·
|
1,093,750
newly issued common stock purchase warrants identical in all respects
to
the warrants issued in the Company’s initial public
offering;
|
|
·
|
up
to an additional 212,877 newly issued common stock purchase warrants
identical in all respects to the warrants issued in the Company’s initial
public offering; and |
|
·
|
up
to an additional 212,877 shares of FMG common
stock. |
Our
units, common stock and warrants are traded on the OTC Bulletin Board under
the
symbols FMGQU, FMGQ and FMGQW, respectively. On August 13, 2008, our units,
common stock and warrants had a closing price of $7.61, $7.35 and $0.26,
respectively. The registration statement of which this proxy
statement/prospectus is a part relates to the offering by FMG of up
to 8,962,877 shares of FMG common stock and up to 1,306,627 warrants, each
exercisable to purchase one share of FMG common stock.
The
Board
of Directors of the Company has fixed the close of business
on ,
2008, as the record date (the “Record Date”) for the determination of
stockholders entitled to notice of and to vote at the Special Meeting and
at any
adjournment thereof.
IF
YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU DESIRE TO VOTE,
YOU
WILL NOT BE ELIGIBLE TO HAVE YOUR STOCK CONVERTED INTO A PRO RATA PORTION OF
THE
TRUST ACCOUNT IN WHICH A SUBSTANTIAL PORTION OF OUR IPO NET PROCEEDS ARE HELD.
YOU MUST AFFIRMATIVELY VOTE AGAINST THE MERGER PROPOSAL AND DEMAND WE CONVERT
YOUR STOCK INTO CASH NO LATER THAN THE VOTE ON THE MERGER PROPOSAL TO EXERCISE
YOUR CONVERSION RIGHTS. IN ORDER TO CONVERT YOUR SHARES OF COMMON STOCK, YOU
MUST ALSO PRESENT OUR STOCK TRANSFER AGENT WITH YOUR PHYSICAL STOCK CERTIFICATE
AT OR PRIOR TO THE SPECIAL MEETING. SEE “SPECIAL MEETING OF
STOCKHOLDERS—CONVERSION RIGHTS” FOR MORE SPECIFIC
INSTRUCTIONS.
THE
TENDER OFFER DESCRIBED IN THIS PROXY STATEMENT WILL COMMENCE AS OF THE DAY
THIS PROXY STATEMENT IS MAILED TO OUR STOCKHOLDERS. THE DESCRIPTION
CONTAINED HEREIN IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER
TO SELL SHARES OF FMG COMMON STOCK. THE SOLICITATION AND THE OFFER TO BUY
SHARES
OF FMG COMMON STOCK WILL ONLY BE MADE PURSUANT TO AN OFFER TO PURCHASE, FORMS
OF
LETTERS OF TRANSMITTAL AND OTHER DOCUMENTS RELATING TO THE TENDER OFFER THAT
FMG
INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”). ONCE
FILED, FMG STOCKHOLDERS SHOULD READ THE TENDER OFFER STATEMENT AND THE OTHER
DOCUMENTS RELATING TO THE TENDER OFFER CAREFULLY AND IN THEIR ENTIRETY PRIOR
TO
MAKING ANY DECISIONS WITH RESPECT TO THE OFFER BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE TENDER OFFER, INCLUDING THE TERMS AND CONDITIONS
OF THE OFFER. ONCE FILED, FMG STOCKHOLDERS WILL BE ABLE TO OBTAIN THE TENDER
OFFER STATEMENT AND THE OTHER DOCUMENTS RELATING TO THE TENDER OFFER FREE
OF
CHARGE AT THE SEC’S WEBSITE AT HTTP://WWW.SEC.GOV, OR FROM THE INFORMATION AGENT
NAMED IN THE TENDER OFFER MATERIALS.
SEE
THE “RISK FACTORS” BEGINNING ON PAGE 24 FOR
A DISCUSSION OF VARIOUS FACTORS YOU SHOULD CONSIDER IN CONNECTION WITH THE
MERGER.
Enclosed
is our Notice of Special Meeting and proxy statement and proxy card. Your
vote
is very important. Whether or not you plan to attend the Special Meeting,
please
take the time to vote by marking your vote on your proxy card, signing and
dating the proxy card, and returning it to us in the enclosed envelope. The
Special Meeting will be held at 10:00 am
on
at .
The
Company’s Board of Directors unanimously recommends Company stockholders vote
FOR approval and adoption of the Merger Agreement, as well as all other
proposals contained herein.
|
Very truly yours,
|
|
|
|
Gordon G. Pratt
Chairman, President and Chief Executive Officer
|
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved
of
these securities or determined if the attached proxy statement/ prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
UNTIL ,
2008, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS
IN ADDITION TO THE DEALERS’ OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
FMG
ACQUISITION CORP.
Four
Forest Park
Farmington,
Connecticut 06032
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
TO
BE HELD
ON ,
2008
TO
THE
STOCKHOLDERS OF FMG ACQUISITION CORP.:
NOTICE
IS
HEREBY GIVEN that a special meeting of stockholders (“Special Meeting”) of FMG
Acquisition Corp., a Delaware corporation (“FMG” or the “Company”), relating to
the proposed acquisition of all of the issued and outstanding membership
units
of United Insurance Holdings, L.C., will be held at 10:00 a.m. Eastern
Time, on __________, 2008, at the offices of
__________.
At
the
Special Meeting, you will be asked to consider and vote upon the
following:
|
·
|
The
Merger Proposal—the proposed acquisition of all of the issued membership
units of United Insurance Holdings, L.C., a Florida limited liability
company, pursuant to the Agreement and Plan of Merger, dated as
of April
2, 2008, as amended and restated on August 15, 2008, by and among
the
Company, United and United Subsidiary, and the transactions contemplated
thereby (“Proposal 1” or the “Merger
Proposal”);
|
|
·
|
The
First Amendment Proposal—the amendment to the Company’s amended and
restated certificate of incorporation (the “First Certificate of
Incorporation Amendment”), to remove certain provisions containing
procedural and approval requirements applicable to the Company
prior to
the consummation of the business combination that will no longer
be
operative following consummation of the Merger (“Proposal 2” or the
“First Amendment Proposal”);
|
|
·
|
The
Second Amendment Proposal—the amendment to the Company's amended and
restated certificate of incorporation (the “Second Certificate of
Incorporation Amendment”), to increase the amount of authorized shares of
common stock from 20,000,000 to 50,000,000 (“Proposal 3” or the
“Second Amendment Proposal”);
|
|
·
|
The
Third Amendment Proposal—the amendment to the Company’s amended and
restated certificate of incorporation (the “Third Certificate of
Incorporation Amendment”), to change the name of the Company to United
Insurance Holdings Corp. (“Proposal 4” or the “Third Amendment
Proposal”);
|
|
·
|
The
Director Proposal—to elect three (3) directors to the Company’s Board
of Directors nominated by United pursuant to the Merger Agreement
to hold
office until their successors are elected and qualified (“Proposal 5”
or the “Director Proposal”);
|
|
·
|
The
Adjournment Proposal—to consider and vote upon a proposal to adjourn the
Special Meeting to a later date or dates, if necessary, to permit
further
solicitation and vote of proxies in the event that, based upon
the
tabulated vote at the time of the Special Meeting, the Company
would not
have been authorized to consummate the Merger (“Proposal 6” or the
“Adjournment Proposal”); and
|
|
·
|
such
other business as may properly come before the meeting or any adjournment
or postponement thereof.
|
These
proposals are described in the attached proxy statement/prospectus which the
Company urges you to read in its entirety before voting. The Board of Directors
of the Company has fixed the close of business
on ,
2008, as the record date (the “Record Date”) for the determination of
stockholders entitled to notice of and to vote at the Special Meeting and at
any
adjournment thereof.
As
described more fully in the attached proxy statement/prospectus, FMG has
entered
into (1) a private placement with various accredited investors for the purchase
of its 11% promissory notes (the “Notes”) and (2) an exchange offer made
available to certain institutional holders of FMG common stock wherein such
holders will be permitted to exchange their shares of common stock for the
Notes. FMG expects to use the cash proceeds from the private placement
(approximately $10,000,000), combined with its cash on hand reserved for
stockholders that may exercise their conversion rights (approximately
$11,200,000), and if necessary, up to $5,500,000 of cash on hand from United
to
commence a tender offer for the purchase of up to 3,320,762 shares of its
common
stock at a price of $8.05 per share. The maximum number of shares FMG may
purchase in the tender offer will be reduced by the number of shares for
which
conversion rights are exercised. The tender offer will begin
on ,
2008 and end 20 business days thereafter. However, if FMG stockholders do
not
approve Proposals 1, 2, 3 and 5, or if either of the Merger or the private
placement do not close, FMG will not close the tender offer. For a
description of the tender offer, please see the section entitled “Tender
Offer.”
Your
vote is important.
Please
sign, date and return your proxy card as soon as possible to make sure your
shares are represented at the Special Meeting. If you are a stockholder of
record of the Company’s common stock, you may also cast your vote in person at
the Special Meeting. If your shares are held in an account at a brokerage firm
or bank, you must instruct your broker or bank on how to vote your shares.
|
By Order of the Board of Directors,
|
|
|
|
Gordon G. Pratt
Chairman of the Board, President and Chief Executive Officer
,
2008
|
|
|
|
Page
|
QUESTIONS
AND ANSWERS ABOUT THE PROPOSALS
|
|
2 |
SUMMARY
OF THE PROXY STATEMENT
|
|
10 |
|
THE
MERGER PROPOSAL
|
|
10 |
|
THE
PARTIES
|
|
10 |
|
THE
MERGER PROPOSAL
|
|
10 |
|
OUR
INSIDER STOCKHOLDERS
|
|
12 |
|
COMPANY
SHARES ENTITLED TO VOTE
|
|
12 |
|
UNITED
MEMBERSHIP UNITS ENTITLED TO VOTE
|
|
12 |
|
TAX
CONSIDERATIONS
|
|
12 |
|
CONDITIONS
TO CLOSING THE MERGER
|
|
12 |
|
DIRECTOR
NOMINEES
|
|
13 |
|
ACCOUNTING
TREATMENT
|
|
13 |
|
RISK
FACTORS
|
|
13 |
|
CONVERSION
RIGHTS
|
|
14 |
|
APPRAISAL
OR DISSENTERS’ RIGHTS
|
|
14 |
|
STOCK
OWNERSHIP
|
|
14 |
|
REASONS
FOR THE MERGER
|
|
16 |
|
THE
COMPANY’S BOARD OF DIRECTORS RECOMMENDATIONS
|
|
16 |
|
INTERESTS
OF FMG DIRECTORS AND OFFICERS IN THE MERGER
|
|
17 |
|
INTERESTS
OF UNITED IN THE MERGER
|
|
17 |
|
INTERESTS
OF PALI CAPITAL IN THE MERGER; FEES
|
|
18 |
|
FAIRNESS
OPINION
|
|
18 |
|
REGULATORY
MATTERS
|
|
18 |
|
OVERVIEW
OF THE MERGER
|
|
18 |
|
DIRECTORS
AND MANAGEMENT
|
|
19 |
|
FIRST
AMENDMENT TO CERTIFICATE OF INCORPORATION PROPOSAL
|
|
19 |
|
SECOND
AMENDMENT TO CERTIFICATE OF INCORPORATION PROPOSAL
|
|
19 |
|
THIRD
AMENDMENT TO CERTIFICATE OF INCORPORATION PROPOSAL
|
|
19 |
|
DIRECTOR
PROPOSAL
|
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19 |
|
ADJOURNMENT
PROPOSAL
|
|
19 |
|
THE
SPECIAL MEETING
|
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20 |
|
DATE,
TIME AND PLACE OF SPECIAL MEETING OF OUR STOCKHOLDERS
|
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20 |
|
RECORD
DATE; WHO IS ENTITLED TO VOTE
|
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20 |
|
VOTING
YOUR SHARES
|
|
20 |
|
QUORUM
AND VOTE REQUIRED
|
|
20 |
FMG
ACQUISITION CORP. SELECTED FINANCIAL DATA
|
|
21 |
MARKET
PRICE INFORMATION AND DIVIDEND DATA FOR COMPANY SECURITIES
|
|
23 |
RISK
FACTORS
|
|
24 |
|
RISKS
PARTICULAR TO THE MERGER
|
|
24 |
|
RISKS
RELATED TO UNITED’ S BUSINESS
|
|
26 |
|
RISKS
RELATING TO THE COMPANY’S CURRENT STATUS AS A BLANK CHECK
COMPANY
|
|
34 |
|
RISKS
PARTICULAR TO THE PRIVATE PLACEMENT AND EXCHANGE OFFER
|
|
36 |
|
RISKS
PARTICULAR TO THE TENDER OFFER
|
|
36 |
FORWARD-LOOKING
STATEMENTS
|
|
37 |
THE
COMPANY SPECIAL MEETING OF STOCKHOLDERS
|
|
38 |
|
THE
COMPANY SPECIAL MEETING
|
|
38 |
|
DATE,
TIME AND PLACE
|
|
38 |
|
PURPOSE
OF THE SPECIAL MEETING
|
|
38 |
|
RECORD
DATE, WHO IS ENTITLED TO VOTE
|
|
39 |
|
VOTING
YOUR SHARES
|
|
39 |
|
WHO
CAN ANSWER YOUR QUESTIONS ABOUT VOTING YOUR SHARES
|
|
39 |
|
NO
ADDITIONAL MATTERS MAY BE PRESENTED AT THE SPECIAL MEETING
|
|
39 |
|
REVOKING
YOUR PROXY
|
|
40 |
|
QUORUM;
VOTE REQUIRED
|
|
40 |
|
ABSTENTIONS
AND BROKER NON-VOTES
|
|
40 |
|
CONVERSION
RIGHTS
|
|
41 |
|
APPRAISAL
OR DISSENTERS RIGHTS
|
|
42 |
|
SOLICITATION
COSTS
|
|
42 |
|
STOCK
OWNERSHIP
|
|
42 |
PROPOSAL 1—THE
MERGER PROPOSAL
|
|
45 |
|
GENERAL
DESCRIPTION OF THE MERGER
|
|
45 |
|
BACKGROUND
OF THE MERGER
|
|
47 |
|
INTERESTS
OF UNITED DIRECTORS AND OFFICERS IN THE MERGER
|
|
56 |
|
INTERESTS
OF FMG DIRECTORS AND OFFICERS IN THE MERGER
|
|
56 |
|
THE
COMPANY’S REASONS FOR THE MERGER AND RECOMMENDATION OF THE COMPANY’ S
BOARD
|
|
56 |
|
UNITED'S
REASONS FOR THE MERGER WITH THE COMPANY
|
|
58 |
|
FAIRNESS
OPINION OF PIPER JAFFRAY & CO.
|
|
58 |
|
THE
MERGER AGREEMENT
|
|
64 |
|
TAX
CONSIDERATIONS
|
|
69 |
|
OTHER
MATTERS
|
|
71 |
|
SATISFACTION
OF THE 80% REQUIREMENT
|
|
71 |
|
REGULATORY
MATTERS
|
|
71 |
|
CONSEQUENCES
IF MERGER PROPOSAL IS NOT APPROVED
|
|
71 |
|
REQUIRED
VOTE
|
|
72 |
|
ABSTENTIONS
AND BROKER NON-VOTES
|
|
72 |
|
DISSENTERS’
RIGHTS
|
|
72 |
|
ACCOUNTING
TREATMENT
|
|
72 |
|
RECOMMENDATION
|
|
73 |
|
THE
PRIVATE PLACEMENT
|
|
74 |
|
THE
EXCHANGE OFFER
|
|
78 |
|
THE
TENDER OFFER
|
|
79 |
PROPOSAL 2
- THE FIRST AMENDMENT PROPOSAL
|
|
|
|
RECOMMENDATION
|
|
82 |
PROPOSAL 3
- THE SECOND AMENDMENT PROPOSAL
|
|
|
|
RECOMMENDATION
|
|
86 |
PROPOSAL
4 - THE THIRD AMENDMENT PROPOSAL
|
|
|
|
RECOMMENDATION
|
|
88 |
PROPOSAL 5
- DIRECTOR PROPOSAL
|
|
89 |
|
INFORMATION
ABOUT THE NOMINEES
|
|
89 |
|
COMPLIANCE
WITH SECTION 16(a)
|
|
91 |
|
BOARD
OF DIRECTORS AND COMMITTEES OF THE BOARD
|
|
92 |
|
CODE
OF CONDUCT AND ETHICS
|
|
92 |
|
COMPENSATION
ARRANGEMENTS FOR DIRECTORS
|
|
92 |
|
EXECUTIVE
COMPENSATION
|
|
92 |
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
93 |
|
DIRECTOR
COMPENSATION
|
|
93 |
|
BENCHMARKS
OF CASH AND EQUITY COMPENSATION
|
|
94 |
|
COMPENSATION
COMPONENTS
|
|
94 |
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF FMG
|
|
95 |
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF UNITED
|
|
96 |
|
RECOMMENDATION
|
|
97 |
PROPOSAL 6
- THE ADJOURNMENT PROPOSAL
|
|
98 |
|
RECOMMENDATION
|
|
98 |
UNITED
MEMBER APPROVAL
|
|
99 |
INFORMATION
ABOUT THE INSURANCE INDUSTRY
|
|
100 |
INFORMATION
ABOUT FMG ACQUISITION CORP.
|
|
103 |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF FMG ACQUISITION CORP.
|
|
105 |
INFORMATION
ABOUT UNITED INSURANCE HOLDINGS, L.C.
|
|
110 |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF UNITED INSURANCE HOLDINGS, L.C.
|
|
118 |
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION AS OF JUNE 30, 2008 AND
DECEMBER 31, 2007
|
|
149 |
DIRECTORS
AND MANAGEMENT OF FMG ACQUISITION CORP. FOLLOWING THE
MERGER
|
|
158 |
CURRENT
DIRECTORS AND MANAGEMENT OF UNITED SUBSIDIARY CORP.
|
|
159 |
BENEFICIAL
OWNERSHIP OF SECURITIES
|
|
160 |
PRICE
RANGE OF SECURITIES AND DIVIDENDS
|
|
165 |
DESCRIPTION
OF FMG ACQUISTION CORP. SECURITIES
|
|
166 |
COMPARISON
OF RIGHTS OF FMG STOCKHOLDERS AND UNITED MEMBERS
|
|
170 |
SHARES
ELIGIBLE FOR FUTURE SALE
|
|
173 |
EXPERTS
|
|
174 |
LEGAL
MATTERS
|
|
174 |
STOCKHOLDER
PROPOSALS AND OTHER MATTERS
|
|
174 |
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
|
|
174 |
INDEX
TO FINANCIAL STATEMENTS
|
|
176 |
ANNEXES
|
|
|
Annex A—Amended
and Restated Agreement and Plan of Merger
|
|
|
Annex B—Second
Amended and Restated Certificate of Incorporation
|
|
|
Annex C—Opinion
of Piper Jaffray & Co.
|
|
|
QUESTIONS
AND ANSWERS ABOUT THE PROPOSALS
Unless
the context requires otherwise, the terms “FMG,” “we,” “us,” “our” and “the
Company” refer to FMG Acquisition Corp.
Why
am I receiving this proxy statement?
You
are
receiving this proxy statement because you are a stockholder of FMG. FMG,
United
and United Subsidiary have agreed to a business transaction under the terms
of
an Agreement and Plan of Merger dated April 2, 2008, as amended and restated
on
August 15, 2008 (the “Merger Agreement”), pursuant to which FMG will purchase
all of the membership units of United. A copy of the Merger Agreement is
attached to this proxy statement/prospectus as Annex A, which we encourage
you
to review in its entirety. The Merger is structured such that United will
become
wholly-owned by FMG in a series of steps as outlined below. FMG and United
will
merge pursuant to a merger transaction summarized as follows:
|
·
|
FMG
will create a transitory merger subsidiary, United Subsidiary Corp.,
and
will merge such subsidiary with and into United, with United surviving;
and
|
|
·
|
United
will, as a result, become wholly-owned by
FMG.
|
United’s
members will receive consideration from FMG for their membership units of
up to
$104,316,270 consisting of:
|
·
|
8,750,000
shares of FMG common stock, par value $.0001 per share (assuming
an $8.00
per share value);
|
|
·
|
up
to $5,000,000 of additional consideration which will be paid to
the
members of United in the event certain net income targets are met
by
United, as set forth more particularly herein;
|
|
·
|
1,093,750
newly issued common stock purchase warrants identical in all respects
to
the warrants issued in the Company’s
IPO;
|
|
·
|
up
to an additional 212,877 newly issued common stock purchase warrants
identical in all respects to the warrants issued in the Company’s IPO;
and |
|
·
|
up
to an additional 212,877 shares of FMG common
stock. |
In
order
to consummate the Merger, a majority of the shares issued in the IPO voting
at
the meeting (whether in person or by proxy) must vote to approve and adopt
the
Merger Agreement and the transactions contemplated thereby. Further, the Merger
may not be consummated if more than 29.99% of such shares vote against the
Merger and elect to convert their shares to cash from the trust account
established with the proceeds of our IPO.
The
Company will hold a Special Meeting of its stockholders to obtain these
approvals. In connection with the Merger, this proxy statement/prospectus
contains important information about the proposed Merger, the proposed First
Certificate of Incorporation Amendment, the proposed Second Certificate of
Incorporation Amendment, the proposed Third Certificate of Incorporation
Amendment and the Director Proposal.
This
proxy statement/prospectus also contains important information about the
proposed Director election and proposed Adjournment. You should read it
carefully; in particular the section entitled “Risk Factors.”
Your
vote
is important. We encourage you to vote as soon as possible after carefully
reviewing this proxy statement.
What
is being voted on?
There
are
six proposals on which you are being asked to vote. The first proposal is to
approve the Merger among FMG, United and United Subsidiary and the transactions
contemplated thereby.
The
second proposal is to approve the First Amendment to our Certificate of
Incorporation to remove certain provisions that are specific to blank check
companies. This proposal is conditioned upon approval of the Merger
Proposal.
The
third
proposal is to approve the Second Amendment to our Certificate of Incorporation
to increase the amount of authorized shares of common stock from 20,000,000
to
50,000,000. This proposal is conditioned upon approval of the Merger
Proposal.
The
fourth proposal is to approve the Third Amendment to our Certificate of
Incorporation to change the name of the Company to United Insurance Holdings
Corp. This proposal is conditioned upon approval of the Merger
Proposal.
The
fifth
proposal is to elect additional members to the Company’s Board of Directors
nominated by United. We have nominated the Class B directors (consisting of
Messrs. Gregory C. Branch, Alec L. Poitevint, II and Kent G. Whittemore)
for
election. Under the Merger Agreement, United has the right to nominate, and
the
Company has agreed to cause the appointment and election of, the foregoing
three
additional members to the Board of Directors of FMG. If the Merger is approved,
then the directors of FMG will be Gregory C. Branch, Alec L. Poitevint, II,
Gordon G. Pratt, Larry G. Swets, Jr., Kent G. Whittemore and James R. Zuhlke.
In
the event the fifth proposal is approved by the stockholders, two of the
Company’s current directors, Thomas D. Sargent and David E. Sturgess, will
immediately resign from the Board of Directors upon consummation of the Merger.
This proposal is conditioned upon approval of the Merger
Proposal.
The
sixth
proposal is to approve the adjournment of the Special Meeting to a later date
or
dates, if necessary, to permit further solicitation and vote of proxies in
the
event that, based upon the tabulated vote at the time of the Special Meeting,
the Company would not have been authorized to consummate the
Merger.
It
is
important for you to note that in the event the Merger Proposal does not receive
the necessary vote to approve such proposal, then the Company will not
consummate the Merger or be permitted to implement the First, Second or Third
Amendment or director proposals.
Are
the proposals conditioned on one another?
Yes.
Proposals 2, 3 and 5 are all conditioned upon approval of Proposal 1, The
Merger Proposal, and consummation of the Merger is conditioned on Proposals
1,
2, 3 and 5 being approved in accordance herewith.
What
happens if I vote against the Merger?
Each
Company stockholder as of the Record Date has the right to vote against the
Merger Proposal and, at the same time, demand the Company convert such
stockholder’s shares into cash equal to a pro rata portion of the trust account.
These shares will be converted into cash only if a stockholder votes against
the
Merger Proposal, affirmatively elects to have its shares of common stock
converted and such Merger is consummated. Based upon the amount of cash held
in
the trust account as of June 30, 2008, without taking into account any interest
or income taxes accrued after such date, stockholders who vote against the
Merger Proposal and elect to convert such stockholder’s shares as described
above will be entitled to convert each share of common stock it holds into
approximately $7.91 per share (after a provision for payment of working capital
costs and taxes). However, if the holders of 1,419,615 or more shares of
common
stock issued in the Company’s IPO (an amount equal to 29.99% of the total number
of shares issued in the IPO) vote against the Merger and demand conversion
of
their shares into a pro rata portion of the trust account, then the Company
will
not be able to consummate the Merger and, assuming the Company is not able
to
consummate another business combination by October 4, 2009, stockholders
will only receive cash upon the liquidation of the Company. Furthermore,
if more
than 29.99% of the total number of shares issued in the IPO vote against
the
Merger Proposal, the Merger will not occur.
Why
is FMG proposing to enter into the private
placement?
Pursuant
to the terms of a note purchase agreement between FMG and various accredited
investors, FMG will issue promissory notes having a face value of $18,279,570
(the “Notes”), as soon as practicable following the Special Meeting (assuming
Proposals 1, 2, 3 and 5 are approved). The Company will pay interest on the
Notes at 11% per annum and the maturity date of the Notes will be three years
from the date of issuance. This transaction is referred to herein as the
private
placement. FMG intends to use the proceeds from the private placement to
commence a tender offer for the purchase of its common stock, which such
tender
offer will commence on the date of the mailing of this proxy statement to
our
stockholders and end 20 business days thereafter, at a price of $8.05 per
share. If FMG stockholders do not approve Proposals 1, 2, 3 and 5, FMG will
not close the private placement and will withdraw the tender offer.
For a description of the tender offer, please see the section entitled “Tender
Offer.”
When
do you expect the private placement to be completed?
It
is
currently anticipated that the transactions and actions contemplated by the
note
purchase agreement will be completed as soon as practicable following the
Special Meeting.
Why
is FMG proposing to enter into the exchange offer?
An
exchange offer was made available to certain institutional holders of FMG
common
stock wherein such holders agreed to exchange their shares of common stock
for
the Notes. FMG will exchange 869,565 shares of FMG common stock owned by
these
stockholders (equal to 18.4% of FMG’s common stock issued in the IPO) into Notes
having a face value of $7,526,882, as soon as practicable following the Special
Meeting (assuming Proposals 1, 2, 3 and 5 are approved). This transaction
is
referred to herein as the exchange offer. FMG’s management believes that the
exchange offer will enhance the likelihood of stockholder approval of Proposals
1, 2, 3 and 5. If FMG stockholders do not approve Proposals 1, 2, 3 and 5,
or
the private placement or the tender offer does not close, the exchange offer
will not close.
Who
can participate in the exchange offer?
The
securities that the Company will issue in the exchange offer will not be
registered under the Securities Act. Accordingly, the exchange offer was
limited
to sophisticated investors defined as “accredited investors” or “qualified
institutional buyers” under U.S. securities laws.
When
do you expect the exchange offer to be completed?
It
is
currently anticipated that the transactions and actions contemplated by the
exchange offer will be completed as soon as practicable following the Special
Meeting.
What
effect will the private placement and exchange offer have on the capital
structure and control of FMG?
The
Notes
FMG intends to issue in the private placement and exchange offer will not
be
convertible into shares of FMG common stock. Accordingly, holders of the
Notes
will not be permitted to vote on matters brought before FMG stockholders.
However, the note purchase agreement will include negative covenants, which
will
restrict the Company from engaging in certain activities, as more particularly
described herein.
What
is the tender offer?
On the
date of the mailing of this proxy statement to our stockholders, FMG will
commence a tender offer to purchase up to 3,320,762 shares of its common
stock
(reduced by the number of shares for which conversion is elected), representing
approximately 70.2% of FMG’s common stock issued in the IPO, at $8.05 per
share, payable in cash. The tender offer will offer liquidity to FMG’s
stockholders at $8.05 per share, regardless of the then-current market price
per
share, subject to proration if the tender offer is oversubscribed. Assuming
the
maximum number of shares are tendered, the aggregate purchase price for the
shares of common stock of FMG purchased in the tender offer will be
approximately $26,732,134. If FMG stockholders do not approve Proposals 1,
2, 3
and 5, or if either of the private placement or the Merger does not close,
FMG
will not consummate the tender offer. For a more detailed discussion of the
tender offer, see the section entitled “The Tender Offer.”
What
is the source of funds for the tender offer?
FMG
expects to use the cash proceeds from the private placement (approximately
$10,000,000) combined with its cash on hand reserved for stockholders that
may
exercise their conversion rights (approximately $11,200,000) and if necessary,
up to $5,500,000 of cash on hand from United to commence a tender offer for
the
purchase of up to 3,320,762 shares of its common stock at a price of $8.05
per
share. The maximum number of shares we may purchase in the tender offer shall
be
reduced by the number of shares for which conversion rights are exercised.
The
tender offer will begin on the date of the mailing of this proxy statement
to our stockholders and end 20 business days thereafter. However, if FMG
stockholders does not approve Proposals 1, 2, 3 and 5, or if either of the
private placement or the Merger do not close, FMG will not consummate the
tender offer.
Why
is FMG’s management proposing the tender offer?
FMG’s
management is proposing the tender offer to provide a liquidity opportunity
for
at least part of the FMG shares held by those stockholders who desire liquidity
for their shares. FMG’s management believes the tender offer will enhance the
likelihood of stockholder approval of Proposals 1, 2, 3 and
5.
Who
can participate in the tender offer?
Any
stockholder of FMG at the time of the tender offer may participate in the
tender
offer. However, FMG’s founding stockholders, its officers, directors and its
sponsor have agreed not to tender any of their respective shares in the tender
offer.
When
does FMG expect to commence and close the tender
offer?
FMG
expects to commence the tender offer on the date of the mailing of this
proxy statement to our stockholders and to close the tender offer 20 business
days thereafter. If FMG stockholders do not approve Proposals 1, 2, 3 and
5, and if either the private placement or the Merger do not close, FMG will
not consummate the tender offer.
What
effect will the tender offer have on the capital structure and control of
FMG?
Assuming
the consummation of the private placement and exchange offer, the tender
offer
will be for 3,320,762 shares of common stock (reduced by the number of shares
for which conversion is elected) or approximately 70.2% of stock issued in
the IPO. If the maximum number of shares are tendered, the Company will
have 10,476,704 shares outstanding following the tender offer. In such an
event, our officers, directors and affiliates will own approximately 11.1%
of our common stock (before taking into account any forfeiture for United).
These percentages are based on FMG’s outstanding shares as of June 30, 2008 and
assumes no exercise of any of our outstanding warrants.
Why
is the Company proposing the First Amendment to its Certificate of
Incorporation?
Currently,
the Company’s certificate of incorporation contains provisions specific to blank
check companies. Specifically, the Third, Fifth and Sixth Articles of the
Company’s amended and restated certificate of incorporation contain provisions
that will not apply to the Company following consummation of the Merger. Article
Third limits the powers and privileges conferred upon the Company to dissolving
and liquidating in the event a business combination is not consummated prior
to
October 4, 2009. Article Fifth provides that the Company’s corporate
existence will terminate on October 4, 2009 and mandates that an amendment
to this Article allowing continued corporate existence be submitted to
stockholders along with the Merger Proposal. Article Sixth provides the
procedural steps required for the approval of a business combination and the
exercise of conversion rights. Assuming the Merger is consummated, the
provisions of Articles Third and Sixth will no longer apply to the Company,
and
the Company will be obligated to amend Article Fifth in order to extend the
corporate life of the Company beyond October 4, 2009.
Why
is the Company proposing the Second Amendment to its Certificate of
Incorporation and are there any other issuances of common stock contemplated
by
the Company other than in connection with the Merger
Proposal?
Currently,
the Company is authorized to issue up to 20,000,000 shares of common stock.
There are 5,917,031 shares of common stock currently outstanding and 6,883,625
shares of common stock issuable upon the exercise of our outstanding warrants
and the underwriters purchase option. In order to have sufficient authorized
shares of common stock to cover the common stock issuable pursuant to the Merger
Agreement and for general corporate purposes, the Company will need to increase
its authorized common stock if the Merger is approved. Other than in connection
with the Merger, there are no plans to issue any other shares of common stock
or
other securities convertible into common stock.
Why
is the Company proposing the Third Amendment to its Certificate of
Incorporation?
In
the
judgment of our Board of Directors, the change of our corporate name to United
Insurance Holdings Corp. is desirable to maintain the branding of the insurance
operations and to reflect our merger with United.
If
I am not going to attend the Special Meeting in person, should I return my
proxy
card instead?
Yes.
Whether or not you plan to attend the Special Meeting, after carefully reading
and considering the information contained in this proxy statement, please
complete and sign your proxy card. Then return the enclosed proxy card in the
return envelope provided herewith as soon as possible, so your shares may be
represented at the Special Meeting.
What
will happen if I abstain from voting or fail to vote at the Special
Meeting?
The
Company will count a properly executed proxy marked ABSTAIN with respect to
a
particular proposal as present for purposes of determining whether a quorum
is
present. For purposes of approval, an abstention or failure to vote on the
Merger will have no effect on the proposal, provided a quorum is present, and
will not have the effect of converting your shares into a pro rata portion
of
the trust account in which a substantial portion of the net proceeds of the
Company’s IPO are held. In order for a stockholder to convert his or her shares,
he or she must cast a vote against the Merger Proposal and make an affirmative
election on the proxy card to convert such shares of common stock. An abstention
from voting on any of the First Amendment Proposal, Second Amendment Proposal
or
Third Amendment Proposal, or the Adjournment Proposal, will have the same effect
as a vote against these proposals. An abstention from the Director Proposal
will
not have the effect of voting against such proposals.
What
will happen if I sign and return my proxy card without indicating how I wish
to
vote?
Stockholders
will not be entitled to exercise their conversion rights if such stockholders
return proxy cards to the Company without an indication of how they desire
to
vote with respect to the Merger Proposal or, for stockholders holding their
shares in street name, if such stockholders fail to provide voting instructions
to their brokers. Proxies received by the Company without an indication of
how
the stockholders intend to vote on a proposal will be voted in favor of such
proposal.
If
my shares are held in “street name” by my broker, will my broker vote my shares
for me?
If
you
hold your shares in “street name,” your bank or broker cannot vote your shares
with respect to the Merger Proposal, the First Amendment Proposal, the Second
Amendment Proposal, the Third Amendment Proposal or the Adjournment Proposal
without specific instructions from you, which are sometimes referred to in
this
proxy statement as the broker “non-vote” rules. If you do not provide
instructions with your proxy, your bank or broker may deliver a proxy card
expressly indicating that it is NOT voting your shares; this indication that
a
bank or broker is not voting your shares is referred to as a “broker non-vote.”
Broker non-votes will be counted for the purpose of determining the existence
of
a quorum, but will not count for purposes of determining the number of votes
cast at the Special Meeting. Your broker can vote your shares only if you
provide instructions on how to vote. You should instruct your broker to vote
your shares in accordance with directions you provide to your
broker.
What
do I do if I want to change my vote?
If
you
desire to change your vote, please send a later-dated, signed proxy card to
our
corporate Secretary, Larry G. Swets, Jr. at FMG Acquisition Corp. prior to
the
date of the Special Meeting or attend the Special Meeting and vote in person.
You also may revoke your proxy by sending a notice of revocation to Larry G.
Swets, Jr. at the address of the Company’s corporate headquarters, provided such
revocation is received prior to the Special Meeting.
Will
I receive anything in the Merger?
If
the
Merger is consummated and you vote your shares against the Merger Proposal
but
do not affirmatively elect conversion or you abstain, you will not receive
a
cash conversion of your shares upon the completion of the Merger. If the
Merger
is consummated but you have voted your shares against the Merger Proposal
and
have elected a cash conversion, your shares of Company common stock will
be
cancelled and you will be entitled to receive cash equal to a pro rata portion
of the trust account, which, as of June 30, 2008, was equal to approximately
$7.91 per share (after a provision for payment of working capital costs and
taxes); provided, however, you must deliver your physical certificates to
the
Company’s stock transfer agent prior to the date of the Special
Meeting.
How
is the Company paying for the Merger?
The
$104,316,270 cost of the Merger will be funded with (1) $25,000,000 of cash
drawn from the cash currently in the Company’s trust account, (2) the Company
issuing 8,750,000 shares of common stock, valued at $70,000,000, based on
a
price of $8.00 per share; (3) the Company issuing 1,093,750 common stock
purchase warrants, based on an exercise price of $6.00 per warrant share,
(4)
the Company issuing up to an additional 212,877 shares of common stock,
valued at up to $1,703,016 based on a price of $8.00 per share, (5) the
Company issuing up to an additional 212,877 common stock purchase warrants,
based on an exercise price of $6.00 per warrant share and
(6)
up to $5,000,000 of additional consideration which will be paid to the members
of United in the event certain net income targets are met by United, as set
forth more particularly herein.
Will
I experience dilution as a result of the Merger?
Prior
to
the Merger, those stockholders who hold shares issued in the Company’s IPO owned
approximately 80.0% of our issued and outstanding common stock. After giving
effect to the Merger and to the shares of common stock to be issued to United
in
connection with the Merger, and assuming no exercise of the warrants then
outstanding, the Company’s current public stockholders will own approximately
32.3% of the Company post-Merger.
Do
I have conversion rights in connection with the Merger?
If
you
hold shares of common stock issued in the Company’s IPO, then you have the right
to vote against the Merger Proposal and demand the Company convert your shares
of Company common stock into a pro rata portion of the cash in the trust
account. The right to vote against the Merger and demand conversion of your
shares into a pro rata portion of the trust account is sometimes referred to
herein as conversion rights.
If
I have conversion rights, how do I exercise them?
If
you
desire to exercise your conversion rights, you must vote against the Merger
Proposal and, at the same time, demand the Company convert your shares into
cash
by marking the appropriate space on the proxy card. If, notwithstanding your
vote, the Merger is consummated, then you will be entitled to receive a pro
rata
share of the trust account in which a substantial portion of the net proceeds
of
the Company’s IPO are held, including any pro rated interest earned thereon
through the date of the Special Meeting. Based on the amount of cash held
in the
trust account as of June 30, 2008, without taking into account any interest
or
income taxes accrued after such date, you would be entitled to convert each
share of Company common stock that you hold into approximately $7.91 per
share
(after a provision for payment of working capital costs and taxes). If you
exercise your conversion rights, then you will be exchanging your shares
of
Company common stock for cash and will no longer own these shares of common
stock. You will only be entitled to receive cash for these shares if you
tender
your stock certificates to the Company’s stock transfer agent at any time at or
prior to the vote at the Special Meeting. If you convert your shares of common
stock but you remain in possession of the warrants and have not sold or
transferred them, you will still have the right to exercise the warrants
received as part of the units purchased in the IPO in accordance with the
terms
thereof. If the Merger is not consummated: (i) then your shares will not be
converted into cash at this time, even if you so elected, and (ii) assuming
we are unable to consummate another business combination by October 4, 2009,
we
will commence the liquidation process and you will be entitled to distribution
upon liquidation. See “Conversion Rights” at page 41.
You
will
be required, whether you are a record holder or hold your shares in “street
name”, either to tender your certificates to our transfer agent or to deliver
your shares to the Company’s transfer agent electronically using the Depository
Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at your option,
at any time at or prior to the vote at the Special Meeting. There is typically
a
$35 cost associated with this tendering process and the act of certificating
the
shares or delivering them through the DWAC system. The transfer agent will
typically charge the tendering broker this $35, and the broker may or may not
pass this cost on to you.
As
the
delivery process can be accomplished by you, whether or not you are a record
holder or your shares are held in “street name”, within a business day, by
simply contacting the transfer agent or your broker and requesting delivery
of
your shares through the DWAC System, we believe you will have sufficient time
from the time we send out this proxy statement through the date of the Special
Meeting to deliver your shares if you wish to exercise your conversion
rights.
Any
request for conversion, once made, may be withdrawn at any time up to
immediately prior to the vote on the Merger Proposal at the Special Meeting
(or
any adjournment or postponement thereof). Furthermore, if you delivered a
certificate for conversion and subsequently decided prior to the meeting not
to
elect conversion, you may simply request that the transfer agent return the
certificate (physically or electronically) to you. The transfer agent will
typically charge an additional $35 for the return of the shares through the
DWAC
system.
Please
note, however, that once the vote on the Merger Proposal is held at the Special
Meeting, you may not withdraw your request for conversion and request the return
of your stock certificate (either physically or electronically). If the Merger
is not completed, your stock certificate will be automatically returned to
you.
How
much time do I have to decide whether to exercise my conversion
rights?
You
will
have approximately twenty days from the date of this proxy
statement/prospectus to determine whether to exercise your conversion rights,
at
which time you must vote on the Merger Proposal and, if voting against the
Merger Proposal, also vote to exercise your conversion rights. You may not
exercise your conversion rights following the stockholder vote on the Merger
Proposal at the Special Meeting.
What
happens to the funds deposited in the trust account after completion of the
Merger?
If
the
Merger is not consummated, the Company may seek another suitable business
combination and none of the private placement, the exchange offer or the
tender
offer will be consummated. Depending upon the timing and success of such
efforts, the Company may be forced to liquidate if it cannot consummate another
business combination by October 4, 2009. If a liquidation were to occur by
approximately October 4, 2009 (the last day on which the Company would be
permitted to consummate an acquisition under its amended and restated
certificate of incorporation), the Company estimates approximately $850,000
in
interest, less applicable federal, state and Delaware franchise taxes, would
accrue on the amounts that are held in trust through such date, which would
yield a trust balance of approximately $37.5 million or approximately $7.91
per
share (after taking into account disbursements for working capital purposes).
This estimate includes the $2,764,760 proceeds from the sale of the Company’s
sponsor warrants and deferred underwriter fees owed to the underwriters from
IPO. This amount, less any liabilities not indemnified by certain officers
and
members of the Company’s Board and not waived by the Company’s creditors, would
be distributed to the holders of the 4,733,625 shares of common stock purchased
in the Company’s IPO.
Separately,
the Company estimates the liquidation process would cost approximately $50,000.
FMG Investors LLC, our sponsor, has acknowledged and agreed that such costs
are
covered by its existing indemnification agreement. We do not believe there
would
be any claims or liabilities in excess of the funds out of the trust against
which would be required to indemnify the trust account in the event of such
liquidation. In the event our sponsor is unable to satisfy its indemnification
obligation or in the event there are subsequent claims such as subsequent
non-vendor claims for which our sponsor has no indemnification obligation,
the
amount ultimately distributed to stockholders may be reduced even further.
However, the Company currently has no basis to believe there will be any such
liabilities or to provide an estimate of any such liabilities since to date
the
Company has only entered into a limited number of agreements and has obtained
waivers whenever possible. The only cost of dissolution the Company is aware
of
that would not be indemnified against by such officers and directors of the
Company is the cost of any associated litigation for which officers and
directors obtained a valid and enforceable waiver. Should the Merger Agreement
be terminated due to a breach of such agreement by any of the Company, United
Subsidiary, or United or due to the Company’s failure to obtain the Company
stockholder approval, then each party would be responsible for its own expenses;
provided, however, if the Merger Agreement is not consummated as a result of
the
failure to obtain the consent of United’s members, United shall be obligated to
pay the Company for all costs, expenses and fees incurred in connection with
the
Merger, up to a maximum of $500,000.
When
do you expect the Merger to be completed?
Assuming
the approval of the Merger Proposal, it is currently anticipated the Merger
and
other proposals will be completed as promptly as practicable following the
Special Meeting of to be held
on ,
2008.
What
do I need to do now?
The
Company urges you to read carefully and consider the information contained
in
this proxy statement/prospectus, including the annexes, and to consider how
the
Merger will affect you as a stockholder of the Company. You should then vote
as
soon as possible in accordance with the instructions provided in this proxy
statement/prospectus and on the enclosed proxy card.
How
can I obtain a list of stockholders entitled to vote?
A
list of
the stockholders entitled to vote as of the Record Date at the Special Meeting
will be open to examination by any stockholder for any purpose germane to the
meeting, during ordinary business hours for a period of ten calendar days before
the Special Meeting at the offices of FMG Acquisition Corp., Four Forest Park,
Second Floor, Farmington, Connecticut 06032, telephone number of
(860) 677-2701; Secretary Larry G. Swets, Jr., and at the time and place of
the Special Meeting during the duration of the Special Meeting.
Do
I need to send in my stock certificates?
The
Company stockholders who vote against adoption of the Merger Proposal and elect
to have their shares converted into a pro rata share of the funds in the trust
account must send their physical stock certificates to our stock transfer agent
prior to the Special Meeting. The Company stockholders who vote in favor of
the
adoption of the Merger Proposal, or who otherwise do not elect to have their
shares converted, should retain their stock certificates.
What
should I do if I receive more than one set of voting
materials?
You
may
receive more than one set of voting materials, including multiple copies of
this
proxy statement/prospectus and multiple proxy cards or voting instruction cards,
if your shares are registered in more than one name or are registered in
different accounts. For example, if you hold your shares in more than one
brokerage account, you will receive a separate voting instruction card for
each
brokerage account in which you hold shares. Please complete, sign, date and
return each proxy card and voting instruction card that you receive in order
to
cast a vote with respect to all of your Company shares.
How
can I communicate with FMG’s Board of Directors?
Stockholders
may communicate with our Board of Directors by sending a letter addressed to
the
Board of Directors, all independent directors or specified individual directors
to: FMG Acquisition Corp., Four Forest Park, Second Floor, Farmington,
Connecticut 06032; Attention: Larry G. Swets, Jr., Secretary. All communications
will be compiled by the Corporate Secretary and submitted to the Board or the
specified directors on a periodic basis.
This
summary highlights certain information from this proxy statement/prospectus
including information with respect to each of the proposals, although the
Merger
is the primary reason for the calling of the Special Meeting. This summary
does
not contain all of the information that is important to you. All of the
proposals are described in detail elsewhere in this proxy
statement/prospectus and this summary discusses the material items of each
of the proposals. You should carefully read this entire proxy
statement/prospectus and the other documents to which this proxy
statement/prospectus refers you. See “Where You Can Find Additional
Information.” on page 174.
THE
MERGER PROPOSAL
The
Parties
FMG
Acquisition Corp.
FMG
Acquisition Corp. is a blank check company formed specifically as a vehicle
to
effect a merger, acquisition or similar business combination with one or more
operating businesses without limitation to a particular industry or to any
geographic location, although our efforts have been focused on seeking a
business combination within the insurance industry and selected small business
insurance. The principal executive offices of FMG are located at Four Forest
Park, Second Floor, Farmington, Connecticut 06032, and its telephone number
is
(860) 677-2701, Larry G. Swets, Jr., Secretary.
United
Insurance Holdings, L.C. (“United”)
United
is
a Florida limited liability company and is the parent company of United Property
& Casualty Insurance Company (“United Insurance”), a licensed insurer which
provides homeowners insurance and selected small business insurance in the
State
of Florida. Since 2000, United Insurance has received a Financial Stability
Rating of “A” for Exceptional Financial Stability by Demotech, Inc. This is the
third highest Financial Stability Rating of the six Financial Stability Ratings
(A’’ – Unsurpassed; A’ – Unsurpassed; A – Exceptional; S – Substantial; M –
Moderate; L – Licensed) utilized by Demotech, Inc. These Financial Stability
Ratings provide an objective baseline for assessing solvency and should not
be
interpreted as (and are not intended to serve as) an assessment of an insurance
company’s securities or a recommendation to buy, sell, or hold an insurance
company’s securities. Our Demotech Financial Stability Rating is recognized by
federal mortgage backed loan programs such as HUD, Fannie Mae and FHA. If the
Merger is consummated, United Subsidiary will merge with and into United,
whereupon United will be the surviving entity and a wholly-owned subsidiary
of
FMG. United’s principal executive offices are located at 700 Central Avenue,
Suite 302, Saint Petersburg, Florida 33701, and its phone number is (727)
895-7737.
United
Subsidiary Corp.
United
Subsidiary Corp. is a Florida corporation recently incorporated solely for
the
purpose of effectuating the Merger. United Subsidiary is a wholly-owned
subsidiary of FMG. As part of the Merger, United Subsidiary will be merged
with
and into United, with United remaining as the surviving entity and a
wholly-owned subsidiary of FMG.
Following
the effective date of the Merger, United and its members are expected to own
approximately 60% of the issued and outstanding shares of common stock of FMG,
depending upon the shares of the Company’s common stock redeemed for cash. See
“Description of FMG Acquisition Corp. Securities—Common Stock.”
The
Merger Proposal (Page 45)
On
April
2, 2008, the Company entered into the Merger Agreement pursuant to which
United
Subsidiary has agreed to merge with and into United, and United has agreed,
subject to receipt of the Merger consideration from FMG, to become a
wholly-owned subsidiary of FMG. The Merger Agreement was amended and restated
on
August 15, 2008. If the stockholders of the Company and the members of United
approve the transactions contemplated by the Merger Agreement, FMG, through
United Subsidiary, will purchase all of the membership units of United in
a
series of steps as outlined below.
FMG
and
United will merge pursuant to a merger transaction summarized as
follows:
|
·
|
FMG
will create a transitory merger subsidiary, United Subsidiary Corp.,
and
will merge such subsidiary with and into United, with United surviving;
and
|
|
·
|
United
will, as a result, become wholly-owned by
FMG.
|
United’s
members will receive consideration from FMG for their membership units of
up to
$104,316,270 consisting of:
|
·
|
8,750,000
shares of FMG common stock, par value $.0001 per share (assuming
an $8.00
per share value);
|
|
·
|
up
to $5,000,000 of additional consideration which will be paid to
the
members of United in the event certain net income targets are met
by
United, as set forth more particularly herein;
|
|
·
|
1,093,750
newly issued common stock purchase warrants identical in all respects
to
the warrants issued in the Company’s
IPO;
|
|
·
|
up
to an additional 212,877 newly issued common stock purchase
warrants
identical in all respects to the warrants issued in the Company’s IPO;
and |
|
·
|
up
to an additional 212,877 shares of FMG common
stock. |
|
·
|
the
Company’s stockholders have approved the Merger Agreement and the
transactions contemplated
thereby;
|
|
·
|
not
less than 66% of all membership units of United approve the Merger
Agreement and the transactions contemplated
thereby;
|
|
·
|
holders
of not more than 29.99% of the shares of common stock issued in
the
Company’s IPO vote against the Merger and demand conversion of their stock
into cash;
|
|
·
|
the
private placement, including the exchange offer, and tender offer
shall
have taken place;
|
|
·
|
the
Securities and Exchange Commission has declared effective the registration
statement and prospectus which form a part of this proxy statement;
and
|
|
·
|
the
other conditions specified in the Merger Agreement have been satisfied
or
waived.
|
See
the
description of the Merger Agreement in the section entitled “The Merger
Agreement” beginning on page 64. The Merger Agreement is included as
Annex A to this proxy statement/prospectus. We encourage you to read the
Merger Agreement in its entirety.
Under
the
terms of the Company’s amended and restated certificate of incorporation, the
Company may proceed with the Merger provided that not more than
29.99% of the Company’s public stockholders elect to convert their shares
of common stock to cash. The shares converted, if any, will reduce the shares
of
our common stock outstanding after the Merger and will reduce the amount
available to us from the trust account.
Our
“Insider” Stockholders
As
of the
Record Date, the Company’s initial stockholders, including all of its directors,
officers and a special advisor, who purchased or received shares of common
stock
prior to the Company’s IPO, presently, together with their affiliates, own an
aggregate of approximately 20% of the outstanding shares of the Company common
stock (an aggregate of 1,183,406 shares). All of these persons have agreed
to
vote all of the shares acquired prior to the IPO in accordance with the vote
of
the majority of all other voting Company stockholders on the Merger Proposal.
Moreover, all of these persons have agreed to vote all of their shares which
were acquired in or following the IPO in favor of the Merger Proposal. As of
the
date hereof, no members of management purchased any shares in or following
the
IPO. Management will also vote “FOR” Proposal 2, the First Amendment
Proposal; “FOR” Proposal 3, the Second Amendment Proposal; “FOR”
Proposal 4, the Third Amendment Proposal; “FOR” Proposal 5, the
Director Proposal; and “FOR” Proposal 6, the Adjournment
Proposal.
Company
Shares Entitled to Vote
Holders
of all issued and outstanding shares of Company common stock are entitled to
vote on all matters at the Special Meeting. Approval of the Merger Proposal
will
require the affirmative vote of a majority of the shares of common stock
purchased in the IPO which vote at the Special Meeting. Approval of the Merger
Proposal requires that no more than 1,419,614 shares of common stock purchased
in the IPO vote against the Merger and elect to convert their common stock
into
their pro rata portion of the cash from the trust account.
United
Membership Units Entitled to Vote
As
of
June 30, 2008, there were 100,000 United membership units issued and
outstanding. The holders of these membership units are entitled to one vote
per
unit on all matters to be voted upon by the members. In accordance with Florida
law, the affirmative vote of a majority of the units represented and voting
at a
duly held meeting at which a quorum is present (which units voting affirmatively
also constitute at least a majority of the required quorum) shall be the
act of
the members, except that approval of certain business transactions, including
the Merger, requires the affirmative vote of 66% of the units issued and
outstanding.
The
managers and officers of United, presently, together with their affiliates,
own
an aggregate of approximately 59% of United’s outstanding membership units, all
of which are entitled to vote on the Merger. Approval of the Merger Proposal
will require the affirmative vote of not less than 66% of all membership units
outstanding, which means United needs only an additional 7% of the aggregate
outstanding membership units in order to approve the Merger, provided that
the
current managers and officers of United approve the Merger
Proposal.
United
is
not soliciting proxies for approval of the Merger at this time, however, in
accordance with Florida law, United does intend to solicit written consents
from
its members in favor of the Merger and the Merger Agreement. When United
solicits written consents from its members, it will also send notice pursuant
to
Florida Statute 608.4354 to its members who are entitled to appraisal
rights.
Tax
Considerations (Page 69)
There
will be no tax consequences to our stockholders resulting from the Merger,
except to the extent they exercise their conversion rights. A stockholder who
exercises conversion rights will generally be required to recognize capital
gain
or loss upon the conversion, if such shares were held as a capital asset on
the
date of the conversion. This gain or loss will be measured by the difference
between the amount of cash received and the stockholder’s tax basis in the
converted shares. If you purchased shares in our IPO, the gain or loss will
be
short-term gain or loss if the Merger closes as scheduled. If you purchased
shares in the aftermarket and have held such shares for less than a year, the
gain or loss will be short term gain or loss.
Conditions
to Closing the Merger (Page 65)
The
obligations of the Company, United and United Subsidiary to consummate the
Merger are subject to the satisfaction or waiver of the following specified
conditions set forth in the Merger Agreement before completion of the
Merger:
(i)
the accuracy in all material respects on the date of the Merger Agreement and
the Closing Date of all of United’s representations and warranties;
(ii)
United’s
performance in all material respects of all covenants and obligations required
to be performed by the Closing Date (as more fully described below in “Covenants
of the Parties”);
(iii)
a
majority of the Company’s stockholders must vote in favor of approving the
Merger;
(iv)
not more than 29.99% of the shares of the common stock issued in the Company’s
IPO vote against the Merger and demand conversion of their stock into
cash;
(v)
stockholder approval of the First and Second Amendment
Proposals;
(vi)
the
Securities and Exchange Commission has declared effective the registration
statement and prospectus which form a part of this proxy statement;
(vii)
no
governmental authority has enacted, issued, promulgated, enforced or entered
any
law or order that is in effect and has the effect of making the Merger illegal
or otherwise preventing or prohibiting consummation of the Merger;
(viii)
the
private placement, including the exchange offer, and the tender offer shall
have
taken place;
(ix)
the
officers are, and the Board of Directors of FMG following the Merger is
constituted, as set forth as the Board of Directors recommends, as fully
described herein; and
Conditions
(i), (ii) and (ix), as well as the Third Amendment Proposal, are waivable
by the
Company or United, as applicable.
United’s
obligation to close on the Merger is further contingent upon:
|
·
|
the
accuracy in all material respects on the date of the Merger Agreement
and
the Closing Date of all of FMG’s representations and warranties;
|
|
·
|
the
private placement, including the exchange offer, and the tender
offer
shall have taken place; and
|
|
·
|
FMG’s
performance in all material respects of all covenants and obligations
required to be performed by the Closing Date (as more fully described
below in “Covenants of the
Parties”).
|
On
August
15, 2008, FMG entered into a note purchase agreement with certain accredited
investors for the issuance and sale in a private placement of 11% promissory
notes in the aggregate principal amount of $18,279,570 (the “Notes”). The net
cash proceeds from the private placement are estimated to be approximately
$10,000,000. The private placement will provide additional financing to the
Company, substantially all of which will be used to consummate the tender
offer
or, to the extent not used for that purpose, such proceeds will be used for
general corporate purposes. If the Company utilizes all of the net proceeds
of
the private placement to consummate the tender offer, it will not have these
funds available for general corporate purposes. The Company will consummate
the
private placement only in the event that Proposals 1, 2, 3 and 5 are approved.
If FMG stockholders do not approve Proposals 1, 2, 3 and 5, the private
placement will not be completed.
On
August
15, 2008, FMG entered into an agreement with certain institutional holders
of
FMG common stock wherein such holders agreed to exchange their shares of
FMG common stock for promissory notes issued by the Company. The promissory
notes issued in the exchange offer will be identical to the Notes issued
in the
private placement. FMG will not receive any proceeds from the exchange offer,
other than the shares of FMG common stock exchanged. Accordingly, the Company
will issue Notes with an aggregate principal amount of $7,526,882 in exchange
for 869,565 shares of FMG common stock. FMG’s management believes the exchange
offer will enhance the likelihood of stockholder approval of the proposals
included in this proxy statement. The
Company will close the exchange offer only in the event that Proposals 1,
2, 3
and 5 are approved. If FMG stockholders do not approve Proposals 1, 2, 3
and 5,
or if either the private placement or the Merger does not close, the exchange
offer will not be completed.
Director
Nominees (Page 66)
Under
the
Merger Agreement, United or its designated affiliate has the right to nominate,
and the Company has agreed to cause the appointment and election of, three
additional members of the Board of Directors of the Company.
Accounting
Treatment (Page 72)
The
Merger will be accounted for as a reverse merger and recapitalization since
United and its members will control FMG immediately following the completion
of
the Merger. United will be deemed to be the accounting acquirer in the Merger
and, consequently, the Merger is treated as a recapitalization of United.
Accordingly, the assets and liabilities and the historical operations that
are
reflected in the financial statements will be those of United and will be
recorded at the historical cost basis of United. FMG’s assets, liabilities and
results of operations will be consolidated with the assets, liabilities and
results of operations of United after consummation of the Merger.
Risk
Factors (Page 24)
Before
you grant your proxy or vote or instruct the vote with respect to the Merger,
you should be aware that the occurrence of the events described in the “Risk
Factors” section and elsewhere in this proxy statement could have a material
adverse effect on the Company, United and United Subsidiary. Principal risks
include dilution which our stockholders will suffer as a consequence of the
Merger, the concentration of ownership of FMG common stock following the Merger,
the fact one or more conditions to the Merger may be waived by FMG without
resoliciting stockholder approval, risks inherent to providers of homeowners
insurance in the southeast United States, our failure following the Merger
to
collect all amounts due from reinsurers and the potential lack of availability
of reinsurance coverage, heavy regulation of the insurance industry by various
federal and state governments and disruptions to United’s relationships with its
independent agents and brokers.
Conversion
Rights (Page 41)
Pursuant
to the Company’s existing amended and restated certificate of incorporation, a
holder of shares of the Company’s common stock issued in its IPO may, if the
stockholder votes against the Merger Proposal, demand the Company convert
such
shares into a pro rata portion of the trust account. This demand must be
made on
the proxy card at the same time the stockholder votes against the Merger
Proposal. We issued a total of 4,733,625 shares in our IPO and, other than
the
1,183,406 shares issued to our management, we have no other shares of common
stock issued and outstanding. If properly demanded in connection with a vote
against the Merger Proposal, the Company will convert each share of common
stock
as to which such demand has been made into a pro rata portion of the trust
account in which a substantial portion of the net proceeds of the Company’s IPO
are held, plus all pro rata interest earned thereon. If you exercise your
conversion rights, then you will be exchanging your shares of the Company
common
stock for cash and will no longer own these shares. Based on the amount of
cash
held in the trust account as of June 30, 2008, without taking into account
any
interest or income taxes accrued after such date, you would be entitled to
convert each share of common stock that you hold into approximately $7.91
(after
a provision for payment of working capital costs and taxes) per share. You
will
only be entitled to receive cash for these shares if you tender your stock
certificate to the Company’s stock transfer agent at or prior to the vote at the
Special Meeting on the Merger Proposal. If the Merger is not consummated,
then
these shares will not be converted into cash immediately. If you convert
your
shares of common stock, you will still have the right to exercise the warrants
received as part of the units purchased in our IPO in accordance with the
terms
thereof. If the Merger is not consummated, then your shares will not be
converted to cash after the Special Meeting, even if you so elected, and
your
shares will be converted into cash upon liquidation of the trust in the event
we
do not propose a subsequent business combination.
The
Merger will not be consummated if the holders of 1,419,615 or more shares of
common stock issued in the Company’s IPO, an amount equal to more than
29.99% of such shares, vote against the Merger Proposal and exercise their
conversion rights.
No
dissenter’s or appraisal rights are available under the Delaware General
Corporation Law for the stockholders of the Company in connection with the
proposals. Under Florida law, the members of United will be entitled to dissent
from the Merger and obtain cash payment for the fair value of their membership
units instead of the consideration provided for in the Merger Proposal. For
a
more complete description of the rights of United’s members, see “United Member
Approval.”
Stock
Ownership (Page 42)
The
following table sets forth information as of August 14, 2008, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of the Company’s common stock by: (i) each
person known by us to be the owner of more than 5% of our outstanding shares
of
the Company’s common stock, (ii) each officer and director, and
(iii) all officers and directors as a group. The table does not reflect the
additional shares of FMG common stock and warrants FMG Investors LLC will
forfeit and which will be re-issued to United’s members as additional
consideration for the Merger. See “The Merger
Proposal” for
additional information regarding this consideration.
Except
as
indicated in the footnotes to the table, the persons named in the table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them.
|
|
Common Stock
|
|
Name and Address of Beneficial Owners(1)
|
|
Number of Shares (2)
|
|
Percentage of Common
Stock
|
|
|
|
|
|
|
|
FMG
Investors LLC(3)
|
|
|
1,099,266
|
|
|
18.57
|
%
|
Gordon
G. Pratt, Chairman, Chief Executive Officer and President
|
|
|
1,099,266
|
(3)
|
|
18.57
|
%
|
Larry
G. Swets, Jr., Chief Financial Officer, Secretary, Treasurer,
Executive
Vice President
|
|
|
1,099,266
|
(3)
|
|
18.57
|
%
|
Thomas
D. Sargent, Director
|
|
|
21,035
|
|
|
0.36
|
%
|
David
E. Sturgess, Director(4)
|
|
|
21,035
|
|
|
0.36
|
%
|
James
R. Zuhlke, Director
|
|
|
21,035
|
|
|
0.36
|
%
|
HBK
Investments L.P.(5)
|
|
|
547,250
|
|
|
9.2
|
%
|
Brian
Taylor (6)
|
|
|
437,500
|
|
|
7.4
|
%
|
Bulldog
Investors(7)
|
|
|
1,282,167
|
|
|
21.67
|
%
|
Millenco
LLC(8)
|
|
|
189,375
|
|
|
3.2
|
%
|
D.B.
Zwirn Special
Opportunities
Fund, L.P.(9)
|
|
|
178,500
|
|
|
3.02
|
%
|
D.B.
Zwirn Special
Opportunities
Fund, Ltd. (9)
|
|
|
246,500
|
|
|
4.17
|
%
|
D.B.
Zwirn & Co., L.P. (9)
|
|
|
425,000
|
|
|
7.18
|
%
|
DBZ
GP, LLC(9)
|
|
|
425,000
|
|
|
7.18
|
%
|
Zwirn
Holdings, LLC(9)
|
|
|
350,000
|
|
|
5.92
|
%
|
Daniel
B. Zwirn(9)
|
|
|
350,000
|
|
|
5.92
|
%
|
Weiss
Asset Management, LLC(10)
|
|
|
180,642
|
|
|
3.1
|
%
|
Weiss
Capital, LLC(10)
|
|
|
90,395
|
|
|
1.5
|
%
|
Andrew
M. Weiss, Ph.D.(10)
|
|
|
271,037
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
All
Directors and Officers as a Group (5 persons)
|
|
|
1,162,371
|
|
|
19.64
|
%
|
(1)
|
Unless
otherwise indicated, the business address of each of the stockholders
is
Four Forest Park, Second Floor, Farmington, Connecticut
06032.
|
|
|
(2)
|
Unless
otherwise indicated, all ownership is direct beneficial
ownership.
|
(3)
|
Each
of Messrs. Pratt and Swets are the managing members of our sponsor,
FMG Investors LLC, and may be deemed to each beneficially own the
1,099,266 shares owned by FMG Investors LLC. The table does not
reflect
the additional shares of FMG common stock and warrants FMG Investors
LLC
will forfeit and which will be re-issued to United’s members as additional
consideration for the Merger. See “The Merger Proposal” for additional
information regarding this
consideration.
|
(4)
|
The
business address of David E. Sturgess is c/o Updike, Kelly & Spellacy,
P.C., One State Street, Hartford, Connecticut
06103.
|
(5)
|
Based
on information contained in a Statement on Schedule 13G filed by
HBK
Investments L.P., HBK Services LLC, HBK Partners II L.P., HBK Management
LLC and HBK Master Fund L.P. on February 12, 2008. The address of
all such
reporting parties is 300 Crescent Court, Suite 700, Dallas, Texas
75201.
HBK Investments L.P. has delegated discretion to vote and dispose
of the
Securities to HBK Services LLC (“Services”). Services may, from time to
time, delegate discretion to vote and dispose of certain of the Securities
to HBK New York LLC, a Delaware limited liability company, HBK Virginia
LLC, a Delaware limited liability company, HBK Europe Management
LLP, a
limited liability partnership organized under the laws of the United
Kingdom, and/or HBK Hong Kong Ltd., a corporation organized under
the laws
of Hong Kong (collectively, the “Subadvisors”). Each of Services and the
Subadvisors is under common control with HBK Investments L.P. The
Subadvisors expressly declare that the filing of the statement on
Schedule
13G shall not be construed as an admission that they are, for the
purpose
of Section 13(d) or 13(g), beneficial owners of the Securities. Jamiel
A.
Akhtar, Richard L. Booth, David C. Haley, Lawrence H. Lebowitz, and
William E. Rose are each managing members (collectively, the "Members")
of
HBK Management LLC. The Members expressly declare that the filing
of the
statement on Schedule 13G shall not be construed as an admission
that they
are, for the purpose of Section 13(d) or 13(g), beneficial owners
of the
Securities.
|
(6)
|
Based
on information contained in a Statement on Schedule 13D filed by
Brian
Taylor, Pine River Capital Management L.P. and Nisswa Master Fund
Ltd. on
October 12, 2007. All reporting parties have shared voting and dispositive
power over such securities. The address of all such reporting parties
is
800 Nicollet Mall, Suite 2850, Minneapolis, MN 55402.
|
|
|
(7)
|
Based
on information contained in a Statement on Schedule 13D filed by
Bulldog
Investors, Phillip Goldstein and Andrew Dakos on February 13, 2008.
All
reporting parties have shared voting and dispositive power over such
securities. The address of all such reporting parties is Park 80
West,
Plaza Two, Saddle Brook, NJ 07663.
|
|
|
(8)
|
Based
on information contained in a Statement on Schedule 13G filed by
Millenco
LLC, Millenium Management LLC and Israel A. Englander on December
11,
2007. All reporting parties have shared voting and dispositive power
over
such securities. The address of all such reporting parties is 666
Fifth
Avenue, New York, NY 10103.
|
|
|
(9)
|
Based
on information contained in a Statement on Schedule 13G/A filed by
D.B.
Zwirn & Co., L.P., DBZ GP, LLC, D.B. Zwirn Special Opportunities Fund,
L.P. and D.B. Zwirn Special Opportunities Fund, Ltd. on January 25,
2008.
D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings, LLC, and Daniel
B. Zwirn may each be deemed the beneficial owner of (i) 178,500 shares
of
common stock owned by D.B. Zwirn Opportunities Fund, L.P. and (ii)
246,500
shares of common stock owned by D.B. Zwirn Special Opportunities
Fund,
Ltd. (each entity referred to in (i) through (ii) is herein referred
to as
a "Fund" and, collectively, as the "Funds"). D.B. Zwirn & Co., L.P. is
the manager of the Funds, and consequently has voting control and
investment discretion over the shares of common stock held by the
Fund.
Daniel B. Zwirn is the managing member of and thereby controls Zwirn
Holdings, LLC, which in turn is the managing member of and thereby
controls DBZ GP, LLC, which in turn is the general partner of and
thereby
controls D.B. Zwirn & Co., L.P. The foregoing should not be construed
in and of itself as an admission by any Reporting Person as to beneficial
ownership of shares of common stock owned by another Reporting Person.
In
addition, each of D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings,
LLC and Daniel B. Zwirn disclaims beneficial ownership of the shares
of
common stock held by the Funds.
|
(10)
|
Based
on information contained in a Statement on Schedule 13G filed by
Weiss
Asset Management, LLC, Weiss Capital, LLC and Andrew M. Weiss, Ph.D.
on
July 18, 2008. Shares reported for Weiss Asset Management, LLC include
shares beneficially owned by a private investment partnership of
which
Weiss Asset Management, LLC is the sole general partner. Shares reported
for Weiss Capital, LLC include shares beneficially owned by a private
investment corporation of which Weiss Capital is the sole investment
manager. Shares reported for Andrew Weiss include shares beneficially
owned by a private investment partnership of which Weiss Asset Management
is the sole general partner and which may be deemed to be controlled
by
Mr. Weiss, who is the Managing Member of Weiss Asset Management,
and also
includes shares held by a private investment corporation which may
be
deemed to be controlled by Dr. Weiss, who is the managing member
of Weiss
Capital, the Investment Manager of such private investment corporation.
Dr. Weiss disclaims beneficial ownership of the shares reported herein
as
beneficially owned by him except to the extent of his pecuniary interest
therein. Weiss Asset Management, Weiss Capital, and Dr. Weiss have
a
business address of 29 Commonwealth Avenue, 10th Floor, Boston,
Massachusetts 02116.
|
Reasons
for the Merger (Page 56)
The
Company is a blank check company formed specifically as a vehicle to effect
a
merger, acquisition or similar business combination with one or more operating
businesses in the insurance industry. In the course of the Company’s search for
a business combination partner, the Company investigated the potential
acquisition of numerous candidates in the insurance industry, along with United,
and considered United to be an attractive merger candidate because of, among
other things, the market in which United operates, growth prospects and the
ability to leverage the expertise and contacts of the Company’s and United’s
management. The value attributed to United derives from both the extensive
analysis the Company’s Board of Directors undertook in connection with its own
evaluation of United and the prior acquisition experience of each of the
Company’s board members. As a result, the Company believes the Merger will
provide Company stockholders with an opportunity to participate in a business
and industry with growth potential. Our Board of Directors has obtained a
fairness opinion from Piper Jaffray & Co., which states that the
consideration to be paid by FMG for all the issued membership units of United
is
fair, from a financial point of view, to holders of FMG common
stock.
In
reaching its decision with respect to the Merger and the transactions
contemplated thereby, the Company’s Board of Directors reviewed various
materials. Also, in reaching its decision to approve the Merger, the Board
of
Directors considered a number of factors and believes such factors support
its
determination and recommendation to approve the Merger.
The
Company’s Board of Directors’ Recommendations (Pages 73, 82, 85, 86, 87,
88, 97 and 98)
After
careful consideration of the terms and conditions of the Merger Agreement,
the
Company’s Board of Directors has determined unanimously that the Merger
Agreement and the transactions contemplated thereby including the Merger, is
in
the best interests of the Company and its stockholders. Accordingly, the
Company’s Board has unanimously approved and declared advisable the Merger and
unanimously recommends that you vote or instruct your vote to be cast “FOR” the
Merger Proposal.
The
Company’s Board of Directors has also determined unanimously that the First
Amendment Proposal is in the best interest of the Company and its stockholders.
Accordingly, the Company’s Board of Directors has unanimously approved and
declared advisable the First Amendment Proposal and unanimously recommends
you
vote or instruct your vote to be cast “FOR” the approval of the First Amendment
Proposal.
The
Company’s Board of Directors has also determined unanimously that the Second
Amendment Proposal is in the best interest of the Company and its stockholders.
Accordingly, the Company’s Board of Directors has unanimously approved and
declared advisable the Second Amendment Proposal and unanimously recommends
you
vote or instruct your vote to be cast “FOR” the approval of the Second Amendment
Proposal.
The
Company’s Board of Directors has also determined unanimously that the Third
Amendment Proposal is in the best interest of the Company and its stockholders.
Accordingly, the Company’s Board of Directors has unanimously approved and
declared advisable the Third Amendment Proposal and unanimously recommends
you
vote or instruct your vote to be cast “FOR” the approval of the Third Amendment
Proposal.
The
Company’s Board of Directors has also determined unanimously that the Director
Proposal is in the best interest of the Company and its stockholders.
Accordingly, the Company’s Board of Directors has unanimously approved and
declared advisable the Director Proposal and unanimously recommends that you
vote or instruct your vote to be cast “FOR” the approval of the Director
Proposal.
The
Company’s Board of Directors has also determined unanimously that the
Adjournment Proposal is in the best interest of the Company and its
stockholders. Accordingly, the Company’s Board of Directors has unanimously
approved and declared advisable the Adjournment Proposal and unanimously
recommends that you vote or instruct your vote to be cast “FOR” the approval of
the Adjournment Proposal.
Interests
of FMG Directors and Officers in the Merger (Page
56)
When
you
consider the recommendation of the Company’s Board of Directors that you vote in
favor of the Merger Proposal, you should keep in mind that certain of the
Company’s Directors and officers have interests in the Merger that are different
from, or in addition to, your interests as a stockholder. If the Merger is
not
approved, the Company may be required to liquidate, and the warrants owned
by
certain of the Company’s officers and directors and the shares of common stock
issued at an effective price per share of $0.021 prior to the Company’s IPO and
held by the Company’s executives and directors may be worthless because the
Company’s executives and directors are not entitled to receive any of the net
proceeds of the Company’s IPO that are held in trust and will be distributed
upon liquidation of the Company. Additionally, the Company’s officers and
directors who acquired shares of Company common stock prior to the Company’s IPO
at a price per share of $0.021, after giving effect to the forward stock split
and the forfeiture of shares of common stock following the IPO, will benefit
if
the Merger is approved because they will continue to hold their
shares.
The
table
below sets forth the value of the shares and warrants owned by the officers
and
directors of the Company immediately following the consummation of the Merger
and the unrealized profit from such securities based on the market price
of the
common stock and the warrants of the Company, as of August 13, 2008, of $7.35
and $0.26, respectively.
|
|
Common Stock(a)
|
|
Warrants(b)
|
|
|
|
Owned
|
|
Amount
Paid ($)
|
|
Current
Market
Value ($)
|
|
Unrealized
Profit ($)
|
|
Owned
|
|
Amount
Paid ($)
|
|
Current
Market
Value ($)
|
|
Unrealized
Profit
(Loss) ($)
|
|
Gordon
G. Pratt, Chairman, Chief Executive Officer and President
(1)
|
|
|
1,099,266
|
|
$
|
0.021
|
|
$
|
8,079,605
|
|
$
|
8,056,521
|
|
|
1,300,000
|
|
$
|
1,268,950
|
|
$
|
338,000
|
|
$
|
(930,950
|
)
|
Larry
G. Swets, Jr., Chief Financial Officer, Secretary, Treasurer,
Executive
Vice President (1)
|
|
|
1,099,266
|
|
$
|
0.021
|
|
$
|
8,079,605
|
|
$
|
8,056,521
|
|
|
1,250,000
|
|
$
|
1,250,000
|
|
$
|
325,000
|
|
$
|
(925,000
|
)
|
Thomas
D. Sargent, Director
|
|
|
21,035
|
|
$
|
0.021
|
|
$
|
154,607
|
|
$
|
154,166
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
David
E. Sturgess, Director
|
|
|
21,035
|
|
$
|
0.021
|
|
$
|
154,607
|
|
$
|
154,166
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
James
R. Zuhlke, Director
|
|
|
21,035
|
|
$
|
0.021
|
|
$
|
154,607
|
|
$
|
154,166
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
(1)
Reflects the beneficial ownership of 1,099,266 shares of FMG common stock
by FMG
Investors LLC.
(a)
The
weighted average purchase price per share for this common stock was $0.021
per
share. Pursuant to escrow agreements signed by these stockholders, these shares
may not be sold or pledged until one year after the consummation of a business
combination. Additionally, these shares are currently not registered, although
after the release from escrow, these stockholders may demand the Company use
its
best efforts to register the resale of such shares.
(b)
These
warrants were purchased in a private placement that closed concurrently with
the
Company IPO. The exercise price of the warrants is $6.00. These warrants may
not
be sold or transferred until 90 days after the consummation of a business
combination
All
of
the shares of the Company common stock and the warrants acquired by our
officers, directors and special advisor prior to the Company’s IPO were placed
in escrow with Continental Stock Transfer & Trust Company, as escrow
agent. During the escrow period, the holders of these shares are not able to
sell or transfer their securities except to their spouses and children or trusts
established for their benefit, but will retain all other rights as our
stockholders, including, without limitation, the right to vote their shares
of
common stock and the right to receive cash dividends, if declared. If dividends
are declared and payable in shares of common stock, such dividends will also
be
placed in escrow. If we are unable to effect a business combination and
liquidate, none of these stockholders will receive any portion of the
liquidation proceeds with respect to common stock owned by them prior to the
Company’s IPO.
Interests
of United in the Merger
Upon
completion of the Merger, the members of United will beneficially own, in the
aggregate, approximately 60% of the issued shares of FMG.
In
addition, certain of United’s directors will be directors of the surviving
company after the Merger.
Interests
of Pali Capital in the Merger; Fees
Pali
Capital, Inc. served as the representative of the underwriters in our IPO
and
agreed to defer $1,514,760 of the underwriting discounts and commissions
until
after the consummation of a business combination. The deferred amount payable
in
connection with the IPO will be paid out of the trust account established
for
the proceeds of the IPO only if we consummate the Merger. Pali Capital, Inc.,
therefore, has an interest in our consummating the Merger, which will result
in
the payment of its deferred compensation. Further, the
underwriters of FMG’s IPO and certain of its employees own an option to purchase
450,000 units (comprised of one share of common stock and one warrant) at
an
exercise price of $10.00 per unit, received as consideration as the
representative of the underwriters in our IPO. As a part of the negotiation
with
United, the underwriters and certain of its employees have agreed to forfeit
100,000 of such units upon closing of the business combination. As a result,
350,000 of such units will remain outstanding following the closing of the
business combination. Additionally,
upon consummation of the Merger, Pali Capital, Inc. shall be entitled to
a
$200,000 investment banking fee.
Fairness
Opinion (Page 58)
Pursuant
to an engagement letter dated March 4, 2008, we engaged Piper Jaffray to render
an opinion that the consideration to be paid for the Merger on the terms and
conditions set forth in the Merger Agreement is fair, from a financial point
of
view, to the holders of the common stock of the Company. Our Board of Directors
decided to use the services of Piper Jaffray because it is an investment banking
firm that regularly evaluates businesses and their securities in connection
with
acquisitions, corporate restructurings, private placements and for other
purposes.
Piper
Jaffray delivered its oral opinion to our Board of Directors on March 20,
2008,
which stated that, as of March 20, 2008 and based upon and subject to the
assumptions made, matters considered and limitations on its review as set
forth
in the opinion that the consideration to be paid for United is fair, from
a
financial point of view, to the holders of Company common stock. After
discussion and due consideration, the Board concluded that the net
economic effect of the additional merger consideration paid by the
Company, namely the 1,093,750 additional warrants, is appropriate primarily
as a
result of: (i) United’s financial performance through June 30, 2008; (ii)
additional value expected from United’s earnings in the third quarter 2008 that
will be retained in United; and (iii) the benefit of reduced potential
dilution for our stockholders due to our repurchase of 100,000 units of the
underwriter’s purchase option. Our Board considered seeking a new fairness
opinion from Piper Jaffray concerning the transaction but ultimately declined
to
do so for the reasons cited in (i) through (iii) above and because there
have
been no material changes in United’s performance or in the projections or
assumptions on which Piper Jaffray based its opinion. The amount of
consideration to be paid for United was determined pursuant to negotiations
between us and United and its members and not pursuant to recommendations
of
Piper Jaffray. The Piper Jaffray opinion is not a recommendation as to how
any
stockholder should vote or act with respect to any matters relating to the
Merger (including, without limitation, with respect to the exercise of rights
to
convert the Company common stock into cash). Further, the Piper Jaffray opinion
does not in any manner address the underlying business decision of the Company
to engage in the Merger or the relative merits of the Merger as compared
to any
alternative business transaction or strategy (including, without limitation,
liquidation of the Company after not completing a business combination
transaction within the allotted time). The decision as to whether to approve
the
Merger or any related transaction may depend on an assessment of factors
unrelated to the financial analysis on which the Piper Jaffray opinion is
based.
The full text of the Piper Jaffray written opinion, attached hereto as
Annex C, is incorporated by reference into this proxy statement/prospectus.
You are encouraged to read the Piper Jaffray opinion carefully and in its
entirety for a description of the assumptions made, matters considered,
procedures followed and limitations on the review undertaken by Piper Jaffray
in
rendering its opinion. The summary of the Piper Jaffray opinion set forth
in
this proxy statement is qualified in its entirety by reference to the full
text
of the opinion.
Regulatory
Matters (Page 71)
The
Company does not expect that the Merger will be subject to any state or federal
regulatory requirements other than approval of the Florida Office of Insurance
Regulation, filings under applicable securities laws and the effectiveness
of
the registration statement of the Company of which this proxy
statement/prospectus is part. The Company intends to comply with all such
requirements. We do not believe that, in connection with the completion of
the
Merger, any further consent, approval, authorization or permit of, or filing
with, any acquisition control authority will be required in any
jurisdiction.
Overview
of the Merger (Page 64)
As
part
of the Merger, and pursuant to the Merger Agreement, United and United
Subsidiary will engage in a reverse merger as outlined below pursuant to which
United Subsidiary will merge with and into United, and United will become a
wholly-owned subsidiary of the Company and the current members of United will
become stockholders of FMG. As part of the Merger, FMG will be renamed United
Insurance Holdings Corp. (“UIH”).
After
giving effect to the Merger (but before exchange and tender offer), the members
of United will own approximately 60% of the outstanding shares of UIH, and
the
current stockholders of FMG will own the remaining 40% without regard to
exercise of any outstanding warrants and before giving effect to the tender
offer.
Directors
and Management (Page 158)
Upon
completion of the Merger, the Board of Directors of the Company and its
wholly-owned subsidiary will consist of six members. Assuming the consummation
of the Merger, three of the Company’s current directors: Messrs. Gordon G.
Pratt, Larry G. Swets, Jr. and James R. Zuhlke will serve as directors of the
Company and United. Additionally, assuming the consummation of the Merger,
Messrs. Gregory C. Branch, Alec L. Poitevint, II and Kent G. Whittemore
will also serve as directors of the Company and United. Upon completion of
the
Merger, Donald J. Cronin will serve as President and Chief Executive Officer
and
Nicholas W. Griffin will serve as Chief Financial Officer of the Company. Melvin
A. Russell, Jr. will serve as Chief Underwriting Officer of United.
FIRST
AMENDMENT TO CERTIFICATE OF INCORPORATION PROPOSAL
(PAGE 82)
We
are
seeking your approval to authorize the Board of Directors to amend and restate
our Certificate of Incorporation to delete provisions in the certificate of
incorporation that are specific to blank check companies. This proposal to
approve the amendment to our Certificate of Incorporation is conditioned upon
and subject to the approval of the Merger Proposal. See the section entitled
“The
First Amendment Proposal.”
SECOND
AMENDMENT TO CERTIFICATE OF INCORPORATION PROPOSAL
(PAGE 86)
We
are
seeking your approval to authorize the Board of Directors to amend and restate
our Certificate of Incorporation to increase the amount of authorized shares
of
common stock from 20,000,000 to 50,000,000. This proposal to approve the
amendment to our Certificate of Incorporation is conditioned upon and subject
to
the approval of the Merger Proposal. See the section entitled “The
Second Amendment Proposal.”
THIRD
AMENDMENT TO CERTIFICATE OF INCORPORATION PROPOSAL
(PAGE 88)
We
are
seeking your approval to authorize the Board of Directors to amend and restate
our Certificate of Incorporation to change the name of the Company to United
Insurance Holdings Corp. This proposal to approve the amendment to our
Certificate of Incorporation is conditioned upon and subject to the approval
of
the Merger Proposal. See the section entitled “The
Third Amendment Proposal.”
DIRECTOR
PROPOSAL (PAGE 89)
Director
Proposal—to elect three (3) directors to the Company’s Board of Directors
to hold office until the next annual meeting of stockholders and until their
successors are elected and qualified. This proposal to elect three directors
to
our Board of Directors is conditioned upon and subject to the approval of the
Merger Proposal. See the section entitled “The
Director Proposal.”
ADJOURNMENT
PROPOSAL (PAGE 98)
If,
based
on the tabulated vote, there are not sufficient votes at the time of the Special
Meeting authorizing the Company to consummate the Merger, the Company’s Board of
Directors may submit a proposal to adjourn the Special Meeting to a later date
or dates, if necessary, to permit further solicitation of proxies. See the
section entitled “ The
Adjournment Proposal.”
Prior
to
the record date for this Special Meeting, the officers, directors or affiliates
of the Company may purchase outstanding securities of the Company in open market
transactions and the shares so acquired would be voted in favor of the Merger.
In the event an adjournment proposal is presented at the Special Meeting and
approved by the stockholders, the officers, directors or affiliates of the
Company may, during such adjournment period, make investor presentations
telephonically and/or in person to investors who have indicated their intent
to
vote against the Merger Proposal. Such investor presentations would be
informational only, and would be filed publicly on Current Report on
Form 8-K prior to or concurrently with presentation to any third party. The
Company will not conduct any such activities in violation of applicable federal
securities laws, rules or regulations.
THE
SPECIAL MEETING
Date,
Time and Place of Special Meeting of our Stockholders
(Page 38)
The
Special Meeting of our stockholders will be held at 10:00 a.m. Eastern
Time,
on ,
2008, at the offices
of .
Record
Date; Who is Entitled to Vote (Page 39)
You
will
be entitled to vote or direct votes to be cast at the Special Meeting if you
owned shares of our common stock at the close of business on
,
2008, which is the record date for the Special Meeting. You will have one vote
for each share of our common stock you owned at the close of business on the
record date. On the record date, there were 5,917,031 shares of our common
stock
outstanding, of which 4,733,625 shares were IPO shares. The remaining 1,183,406
shares were issued to our founders prior to our IPO.
Voting
Your Shares (Page 39)
You
can
vote by signing and returning the enclosed proxy card. If you vote by proxy
card, your “proxy,” whose name is listed on the proxy card, will vote your
shares as you instruct on the proxy card. If you sign and return the proxy
card,
but do not give instructions on how to vote your shares, your shares will be
voted, as recommended by the FMG Board of Directors, “FOR” Proposal 1, the
Merger Proposal, “FOR” Proposal 2, the First Amendment Proposal; “FOR”
Proposal 3, the Second Amendment Proposal; “FOR” Proposal 4, the Third
Amendment Proposal; “FOR” Proposal 5, the Director Proposal; and “FOR”
Proposal 6, the Adjournment Proposal.
Proxies
may be solicited by mail, telephone or in person.
If
you
grant a proxy, you may still vote your shares in person if you revoke your
proxy
at or before the Special Meeting. If you hold your shares in street name you
can
obtain physical delivery of your shares into your name, and then vote the shares
yourself. In order to obtain shares directly into your name, you must contact
your brokerage firm representative. Brokerage firms may assess a fee for your
conversion; the amount of such fee varies.
Quorum
and Vote Required (Page 40)
A
quorum
of our stockholders is necessary to hold a valid stockholders meeting. A quorum
will be present at the Special Meeting if a majority of the shares of our common
stock outstanding as of the record date are presented in person or by proxy.
Abstentions and broker non-votes will count as present for the purposes of
establishing a quorum.
For
purposes of Proposal 1, under our amended and restated certificate of
incorporation, approval of the Merger Proposal will require: (i) the
affirmative vote of a majority of the shares of the Company’s common stock
issued in the IPO who vote on this proposal at the Special Meeting, and
(ii) not more than 29.99% of the shares of the Company’s common stock
issued in the IPO vote against the Merger Proposal and elect a cash conversion
of their shares. For the purposes of Proposal 2, the affirmative vote of
the majority of the Company’s issued and outstanding common stock as of the
Record Date is required to approve the First Amendment Proposal. For the
purposes of Proposal 3, the affirmative vote of the majority of the
Company’s issued and outstanding common stock as of the Record Date is required
to approve the Second Amendment Proposal. For the purposes of Proposal 4,
the affirmative vote of the majority of the Company’s issued and outstanding
common stock as of the Record Date is required to approve the Third Amendment
Proposal. For purposes of Proposal 5, the affirmative vote of the holders
of a plurality of the shares of common stock cast in the election of directors
is required. Proposals 2, 3, 4 and 5, are contingent upon our stockholders’
approval of the Merger. For purposes of Proposal 6 the affirmative vote of
a majority of the shares of the Company’s common stock that are present in
person or by proxy and entitled to vote is required to approve the
adjournment.
As
long
as a quorum is established at the Special Meeting, if you return your proxy
card
without an indication of how you desire to vote, it: (i) will have the same
effect as a vote in favor of the Merger Proposal and will not have the effect
of
converting your shares into a pro rata portion of the trust account (in order
for a stockholder to convert his or her shares, he or she must cast an
affirmative vote against the Merger Proposal and make an affirmative election
on
the proxy card to convert such shares of common stock); (ii) will have the
same effect as a vote in favor of the First Amendment Proposal; (iii) will
have the same effect as a vote in favor of the Second Amendment Proposal; (iv)
will have the same effect as a vote in favor of the Third Amendment Proposal;
(v) will have no effect on the Director Proposal; and (vi) will have the same
effect as a vote in favor of the Adjournment Proposal.
FMG
ACQUISITION CORP. SELECTED FINANCIAL DATA
The
Company is providing the following selected financial information to assist
you
in your analysis of the financial aspects of the Merger. The following selected
financial and other operating data should be read in conjunction with FMG
Acquisition Corp.’s Management’s Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and the related notes
to
those statements included elsewhere in this proxy statement. The balance
sheet
data as of December 31, 2007 has been derived from the Company’s audited
financial statements included elsewhere in this proxy statement prospectus.
The
statements of operations data for the six months ended June 30, 2008
and for the period from May 22, 2007 (inception) through June, 30 2008, and
the
balance sheet data as of ,June 30, 2008 have been derived from the
Company’s unaudited financial statements included elsewhere in this proxy
statement/prospectus. Interim results are not necessarily indicative of results
for the full fiscal year and historical results are not necessarily indicative
of results to be expected in any future period.
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
For the three
months ended
June 30, 2008
|
|
For the six
months ended
June 30, 2008
|
|
May 22, 2007
(inception) to
June 30, 2008
|
|
May 22, 2007
(inception) to
June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
113,723
|
|
$
|
280,209
|
|
$
|
548,437
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
73,298
|
|
|
430,144
|
|
|
544,410
|
|
|
600
|
|
Provision
(benefit) for income taxes
|
|
|
(87,666
|
)
|
|
(24,668
|
)
|
|
46,837
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
128,091
|
|
$
|
(125,267
|
)
|
$
|
(42,810
|
)
|
$
|
(560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
number of shares subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
1,419,614
|
|
|
1,419,614
|
|
|
1,419,614
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share,
for shares subject to redemption
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
weighted average number of common shares outstanding (not subject
to
possible redemption)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,497,417
|
|
|
4,497,417
|
|
|
3,317,902
|
|
|
1,293,750
|
|
Diluted
|
|
|
5,563,568
|
|
|
4,497,417
|
|
|
3,317,902
|
|
|
1,293,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share not subject to possible
redemption,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.028
|
|
$
|
(0.028
|
)
|
$
|
(0.013
|
)
|
$
|
-
|
|
Diluted
|
|
$
|
0.023
|
|
$
|
(0.028
|
)
|
$
|
(0.013
|
)
|
$
|
-
|
|
CONDENSED
BALANCE SHEETS
|
|
June 30, 2008
|
|
December 31, 2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
45,626
|
|
$
|
71,274
|
|
Prepaid
expenses
|
|
|
64,904
|
|
|
54,075
|
|
Deferred
acquisition costs
|
|
|
107,363
|
|
|
|
|
|
|
|
217,893
|
|
|
125,349
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents held in Trust Account
|
|
|
37,498,748
|
|
|
37,720,479
|
|
Deferred
tax asset
|
|
|
172,169
|
|
|
32,210
|
|
|
|
|
37,670,917
|
|
|
37,752,689
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
37,888,810
|
|
$
|
37,878,038
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities, accounts
payable and accrued expenses
|
|
$
|
310,383
|
|
$
|
174,344
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities, deferred
underwriters' fee
|
|
|
1,514,760
|
|
|
1,514,760
|
|
|
|
|
|
|
|
|
|
Common
stock, subject to possible redemption, 1,419,614 shares, at redemption
value
|
|
|
11,232,133
|
|
|
11,232,133
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Preferred
stock, $.0001 par value; 1,000,000 shares authorized; none
issued
|
|
|
-
|
|
|
-
|
|
Common
stock, $.0001 par value, authorized 20,000,000 shares; 5,917,031
shares
issued and outstanding, (including 1,419,614 shares subject to
possible
redemption)
|
|
|
602
|
|
|
602
|
|
Additional
paid-in capital
|
|
|
24,873,742
|
|
|
24,873,742
|
|
Earnings
(deficit) accumulated during the development stage
|
|
|
(42,810
|
)
|
|
82,457
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
24,831,534
|
|
|
24,956,801
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
37,888,810
|
|
$
|
37,878,038
|
|
The
Company consummated its IPO on October 4, 2007. In the IPO, the Company sold
4,733,625 units, each consisting of one share of the Company’s common stock and
one warrant to purchase common stock. The units were quoted on the OTC Bulletin
Board from the consummation of the IPO under the symbol FMGQU. On November
7,
2007, the common stock and warrants included in the units began trading
separately and the trading in the units continued. The shares of the Company’s
common stock and warrants are currently quoted on the OTC Bulletin Board under
the symbols “FMGQ” and “FMGQW”, respectively. The closing prices per unit, per
share of common stock and per warrant of the Company on April 1, 2008, the
last
trading day before the announcement of the execution of the Merger Agreement,
were $7.62, $7.24 and $0.36, respectively. Each warrant entitles the holder
to
purchase from the Company one share of common stock at an exercise price of
$6.00 commencing on the later of the consummation of a business combination
(if
consummated) or October 4, 2008. The Company warrants will expire at
5:00 p.m., New York City time, on October 4, 2011, or earlier upon
redemption. Prior to October 4, 2007, there was no established public trading
market for the Company’s securities.
The
following table sets forth, for the calendar quarter indicated, the quarterly
high and low sales prices of the Company’s common stock, warrants and units as
reported on the OTC Bulletin Board. The over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission
and
may not necessarily represent actual transactions.
|
|
Common
Stock
|
|
Warrants
|
|
Units
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2008
|
|
$
|
7.40
|
|
$
|
7.23
|
|
$
|
0.50
|
|
$
|
0.27
|
|
$
|
7.65
|
|
$
|
7.52
|
|
March
31, 2008
|
|
$
|
7.25
|
|
$
|
7.12
|
|
$
|
0.70
|
|
$
|
0.35
|
|
$
|
7.93
|
|
$
|
7.62
|
|
December
31, 2007
|
|
$
|
7.30
|
|
$
|
7.15
|
|
$
|
0.70
|
|
$
|
0.70
|
|
$
|
8.00
|
|
$
|
7.90
|
|
On August
13, 2008, the closing prices of our units, common stock and warrants were
$7.61,
$7.35 and $0.26, respectively.
Holders
As
of ,
2008, the Record Date of the Special Meeting, there were
[ ] holders of record of
units, [ ] holders of record of the common
stock and [ ] holders of record of the
warrants. We estimate there are [ ] beneficial
owners of our units, [ ] beneficial owners of our
common stock and [ ] beneficial owners of our
warrants. Upon consummation of the Merger, FMG will be obligated to issue
8,750,000 shares of common stock and 1,093,750 warrants to the members of
United
as partial consideration for the membership units of United. For more
information on the shares and warrants to be issued to United, see the section
entitled “The Merger Proposal—Consideration”. For more information on the effect
of the issuance of the 8,750,000 shares of common stock on the amount and
percentage of present holdings of the Company’s common equity owned beneficially
by (i) each person known by us to be the owner of more than 5% of our
outstanding shares of the Company’s common stock, (ii) each officer and director
and (iii) all officers and directors as a group see the section entitled
“Beneficial Ownership following the Merger” on page 162.
Dividends
The
Company has not paid any cash dividends on its common stock and does not intend
to pay dividends prior to consummation of the Merger.
RISK
FACTORS
You
should consider carefully all of the material risks described below, together
with the other information contained elsewhere in this proxy statement, before
you decide whether to vote or instruct your vote to be cast to adopt the Merger.
Additional risks and uncertainties that we are unaware of, or that we currently
deem immaterial, also may become important factors that affect us. If any of
the
following risks occur, our business, financial conditions or results of
operating may be materially and adversely affected.
RISKS
PARTICULAR TO THE MERGER
FMG’s
and United Subsidiary’s businesses are difficult to evaluate due to a lack of
operational history.
FMG
was
formed on May 22, 2007 for the purpose of effecting a merger, capital stock
exchange, asset or stock acquisition, exchangeable share transaction, joint
venture or other similar business combination with one or more domestic or
international operating businesses. On October 4, 2007, the Company consummated
its IPO. Accordingly, we have limited operational history which consists of
the
founding of the Company and the evaluation of potential acquisitions. United
Subsidiary was formed solely for the purpose of the Merger and has no operating
history. FMG’s, and United Subsidiary’s operating history, to date, is not
indicative of future operating or financial performance.
Our
stockholders will experience immediate dilution as a consequence of the issuance
of common stock and warrants as consideration in the Merger. Having a minority
share position may reduce the influence our current stockholders have on
the
management of the combined company.
Following
the consummation of the Merger, the influence of our public stockholders,
in
their capacity as stockholders of FMG following the Merger, will be
significantly reduced. Our current stockholders will hold, in the
aggregate, approximately 40% of the issued and outstanding common stock of
FMG
(before considering the exchange and tender offer and excluding as
outstanding for purposes of the calculation securities issuable upon the
exercise of our outstanding warrants and upon the exercise of the purchase
option issued to underwriters in our IPO).
Concentration
of ownership of our common stock after the Merger could delay or prevent a
change of control.
Our
directors, executive officers and principal stockholders will beneficially
own a
significant percentage of our common stock after the Merger. They also have,
through the exercise of warrants, the right to acquire additional shares
of
common stock. As a result, these stockholders, if acting together, have the
ability to significantly influence the outcome of corporate actions requiring
stockholder approval. Additionally, under the terms of the Merger Agreement,
United and its members shall have the right to appoint up to three designees
to
serve on the Company’s Board of Directors after the Merger is consummated. The
concentration of ownership among management may have the effect of delaying
or
preventing a change in control of the post-acquisition company even if such
a
change in control would be in your interest. As of August 15, 2008, our
directors, officers and principal stockholders beneficially owned approximately
20% of FMG’s common stock. Following the Merger, the former members of
United joining our board of directors will beneficially own approximately
15% of the common stock of FMG, and our reconstituted Board of Directors,
management and principal stockholders will beneficially own approximately
23% of
the common stock of FMG.
We
may waive one or more conditions to the Merger without resoliciting stockholder
approval for the Merger.
One
or
more conditions to our obligation to complete the Merger may be waived in whole
or in part to the extent legally allowable either unilaterally or by agreement
of FMG, United and United Subsidiary. Waivable conditions include the accuracy
of the representations and warranties contained in the Merger Agreement,
performance of all covenants and obligations required to be performed prior
to
consummation of the Merger (other than approval of the required number of our
stockholders and United’s members and conversion of not more than 29.99% of our
shares issued in the Company's IPO). These conditions may be waived unilaterally
by any of the parties to the Merger Agreement. Depending upon the condition,
our
Board of Directors will evaluate the materiality of any such waiver to determine
whether amendment to this proxy statement and re-solicitation of proxies is
necessary. FMG will act in compliance with relevant state laws and U.S.
securities laws with respect to determining whether an amendment to the proxy
statement and re-solicitation of the proxies is necessary. In the event our
Board of Directors determines any such waivers are not significant enough to
require re-solicitation of stockholders, we would have the discretion to
complete the Merger without seeking further stockholder approval.
There
may be a conflict of interest between our management and our stockholders,
which
may have influenced management’s decision to enter into the Merger Agreement,
the private placement, the tender offer and the exchange offer as well as
recommending our stockholders to vote in favor of the
Merger.
Our
officers and directors will not receive reimbursement for any out-of-pocket
expenses incurred by them to the extent such expenses exceed the amount of
proceeds available to the Company for working capital, unless a business
combination is completed. In addition, if we do not complete the Merger or
another business combination and are forced to liquidate, the trust account
proceeds may be subject to claims that could take priority over the claims
of
our public stockholders. Gordon G. Pratt, our current President and Chief
Executive Officer, and Larry G. Swets, Jr., our current Chief Financial Officer
and Secretary, have each entered into separate indemnity agreements under
which
they will be personally liable under certain circumstances to ensure that
the
proceeds of the trust account are not reduced by the claims of various vendors
that are owed money by us for services rendered or contracted for, or claims
of
other parties with which we have contracted. Further, all of our directors
own
common stock and warrants purchased in private placements consummated prior
to
our IPO, but have waived their right to proceeds from the liquidation of
the
trust account if we are unable to complete a business combination. The shares
of
common stock and warrants owned by our officers and directors and their
affiliates will be worthless if we do not consummate a business combination.
The
financial interests of all of our officers and directors may have influenced
their motivation in causing us to enter into the Merger Agreement, the private
placement, the exchange offer and the tender offer as well as recommending
our
stockholders to vote in favor of the Merger.
Completion
of the Merger is subject to a number of conditions.
The
obligations of FMG, United and United Subsidiary to consummate the Merger
are
subject to the satisfaction or waiver of specified conditions set forth in
the
Merger Agreement. Such conditions include, but are not limited to, satisfaction
by all parties of covenants and obligations contained in the Merger
Agreement, the private placement, including the exchange offer, and the
tender offer, all shall have taken place, the accuracy in all material respects
on the date of the Merger Agreement and the Closing Date of all of FMG’s and
United’s representations and warranties, non-existence of legal action against
FMG, United and United Subsidiary, effectiveness of the registration statement
of which this proxy statement/prospectus is part, obtaining material consents,
approval of the required number of our stockholders and United’s members and
conversion of not more than 29.99% of our shares issued in the Company's
IPO,
stockholder approval of the First and Second Amendment Proposals, and
execution of ancillary agreements. It is possible some or all of these
conditions will not be satisfied or waived by any of FMG, United or United
Subsidiary, and therefore, the Merger may not be consummated. See “Conditions to
the Consummation of the Merger.” In the event the Merger is not consummated, we
will seek to effectuate a different business combination.
The
sale or even the possibility of sale of the common stock and warrants to
be
issued to United and its members could have an adverse effect on the price
of
FMG’s securities and make it more difficult to obtain financing in the
future.
In
connection with the Merger, we agreed to grant to United and their members,
8,750,000 shares of common stock and 1,093,750 warrants as part of the
consideration. The sale or even the possibility of sale of these shares and
the
shares underlying the warrants could have an adverse effect on the price
of our
securities on the equity market and on our ability to obtain financing in
the
future, in the event such financing is required. We do not expect to seek
debt
or equity financing for at least the first twelve months following consummation
of the Merger. At the time any financing is required, we will make a
determination of the preferred form of such financing and the type of financing
source to approach (e.g. debt or equity or bank line of
credit).
Management
of the Company following the Merger will have broad discretion with respect
to
the specific application of the net proceeds of the trust
account.
In
the
event the Merger is consummated, the amounts then-remaining in the trust account
will be released to the Company, which will have unlimited discretion as to
the
use of such proceeds. Management may use these proceeds in a manner with which
you may not agree.
We are
restricted from paying cash dividends on our common
stock.
We
have
not paid or declared any dividends on our common stock and do not currently
intend to do so. Accordingly, you should not expect to receive any dividends
for
your shares of FMG common stock. In addition, the note purchase agreement
includes a negative covenant, restricting us from making any dividends or
distributions, if after giving effect to such payment, the consolidated net
worth (as defined in the note purchase agreement) of the Company and its
subsidiaries would be less than $45,000,000. Accordingly, you should not
expect
to receive any dividends for your shares of FMG common stock
RISKS
RELATED TO UNITED’S BUSINESS
Exposure
to natural and man-made catastrophes could materially and adversely affect
United’s results of operations, financial condition and
liquidity.
United’s
property and casualty insurance operations expose it to claims arising out
of
catastrophes. Catastrophes can be caused by various natural events, including
hurricanes, windstorms, earthquakes, hail, severe winter weather and fires.
Catastrophes can also be man-made, such as terrorist attacks (including those
involving nuclear, biological, chemical or radiological events) or consequences
of war or political instability. The incidence and severity of catastrophes
are
inherently unpredictable. It is possible that both the frequency and severity
of
natural and man-made catastrophic events will increase. Although the trend
of
increased severity and frequency of storms was not evident in the United States
in 2007 and 2006, it is possible the overall trend of increased severity and
frequency of storms experienced in the United States in 2005 and 2004, and
in
the Caribbean during 2007, may continue in the foreseeable future.
Catastrophes
can result in losses in United’s property insurance lines and may generally
result in both an increase in the number of claims incurred and an increase
in
the dollar amount of each claim asserted. The occurrence of such claims from
natural and man-made catastrophes could therefore materially and adversely
affect United’s results of operations for any year and may materially harm its
financial position, which in turn could adversely affect its financial strength
and impair its ability to raise capital on acceptable terms or at all. In
addition, catastrophic events could cause United to exhaust its available
reinsurance limits and could adversely impact the cost and availability of
reinsurance. Such events can also impact the credit of its reinsurers.
Catastrophic events could also adversely impact the credit of the issuers of
securities, such as states or municipalities, in whom United has invested,
which
could materially and adversely affect United’s results of
operations.
In
addition to catastrophes, the accumulation of losses from smaller
weather-related events in a fiscal quarter or year could materially and
adversely impact United’s results of operations in those periods.
United’s
ability to manage its exposure to catastrophic events may be limited by new
legislation and regulations.
States
have from time to time passed legislation, and regulators have taken action,
that has the effect of limiting the ability of insurers to manage catastrophe
risk, such as legislation prohibiting insurers from reducing exposures or
withdrawing from catastrophe-prone areas or mandating that insurers participate
in residual markets. In addition, following catastrophes, there are sometimes
legislative initiatives and court decisions which seek to expand insurance
coverage for catastrophe claims beyond the original intent of the policies.
Further, United’s ability to increase pricing to the extent necessary to offset
rising costs of catastrophes requires approval of regulatory authorities.
United’s ability or willingness to manage its catastrophe exposure by raising
prices, modifying underwriting terms or reducing exposure to certain geographies
may be limited due to considerations of public policy, the evolving political
environment and United’s ability to penetrate other geographic markets. United
cannot predict whether and to what extent new legislation and regulations that
would affect its ability to manage its exposure to catastrophic events will
be
adopted, the timing of adoption or the effects, if any, they would have on
United’s ability to manage its exposure to catastrophic events.
Because
United currently conducts business in only one state, its financial results
may
be disproportionately affected by catastrophes and other conditions in that
state.
United’s
business is currently concentrated in only one state – the State of
Florida. Therefore, its revenues and profitability are subject to prevailing
regulatory, legal, economic, political, demographic, competitive, weather and
other conditions in the State of Florida. Changes in any of these conditions
could make it less attractive for United to do business in Florida and would
have a more pronounced effect on United than it would on other insurance
companies that are geographically diversified. In addition, the fact United’s
business is concentrated only in the State of Florida subjects it to increased
exposure to certain catastrophic events such as hurricanes and floods. This
increased exposure to catastrophic events also results in an increased risk
of
losses as the extent of losses from a catastrophic event is a function of both
the total amount of insured exposure in the area affected by the event and
the
severity of the event. Because United’s business is concentrated in Florida, the
occurrence of one or more catastrophic events or other conditions affecting
losses in Florida could have a material adverse effect on United’s financial
condition and results of operations.
If
market conditions increase the cost or decrease the availability of reinsurance,
United may be required to bear increased risks or reduce the level of its
underwriting commitment.
As
part
of United’s risk management strategy, it purchases reinsurance coverage from
third-party reinsurers. Market conditions beyond United’s control, including
catastrophic events, determine the availability and cost of the reinsurance
it
purchases, which may in turn affect the growth of its business and its
profitability. United may be unable to maintain its current reinsurance
coverage, to obtain additional reinsurance coverage in the event its current
reinsurance limits are exhausted by a catastrophic event, or to obtain other
reinsurance coverage in adequate amounts or at acceptable rates. Similar risks
exist whether United is seeking to replace coverage terminated during the
applicable coverage period or to renew or replace coverage upon the expiration
of such coverage. If United is unable to renew its expiring coverage or to
obtain new reinsurance coverage, either its net exposure to risk would increase
or, if it is unwilling to accept an increase in net risk exposures, United
would
have to reduce the amount of risk it underwrites.
A
single catastrophe could cause us to exhaust available reinsurance limits and
could adversely impact the cost and availability of
reinsurance.
In
the
event United exhausts its available reinsurance limits, it may have to pay
any
future claims out of its own pocket. Alternatively, they could seek additional
sources of reinsurance, which can be expected to be a costly and time consuming
process which may not ultimately be successful. In the event United is
successful in finding an additional or replacement reinsurer, such reinsurance
policy can be expected to be costly. Catastrophic events can also impact the
credit of United’s reinsurers and the credit of the issuers of securities, such
as states or municipalities, in whom United has invested, any of which could
materially and adversely affect United’s results of operations.
If
United’s actual claims exceed its loss reserves, its financial results could be
materially and adversely affected.
If
actual
claims exceed United’s loss reserves, or if changes in the estimated level of
loss reserves are necessary, United’s financial results could be materially and
adversely affected. Claims and claim adjustment expense reserves (loss reserves)
represent management's estimate of ultimate unpaid costs of losses and loss
adjustment expenses for claims that have been reported and claims that have
been
incurred but not yet reported. Loss reserves do not represent an exact
calculation of liability, but instead represent management estimates, generally
utilizing actuarial expertise and projection techniques, at a given accounting
date. These loss reserve estimates are expectations of what the ultimate
settlement and administration of claims will cost upon final resolution in
the
future, based on United’s assessment of facts and circumstances then known,
reviews of historical settlement patterns, estimates of trends in claims
severity and frequency, expected interpretations of legal theories of liability
and other factors. In establishing reserves, United has also taken into account
estimated recoveries from reinsurance, salvage and subrogation.
The
process of estimating loss reserves involves a high degree of judgment and
is
subject to a number of variables. These variables can be affected by both
internal and external events, such as changes in claims handling procedures,
economic inflation, legal trends and legislative changes, and varying judgments
and viewpoints of the individuals involved in the estimation process, among
others. The impact of many of these items on ultimate costs for claims and
claim
adjustment expenses is difficult to estimate. Loss reserve estimation
difficulties also differ significantly by product line due to differences in
claim complexity, the volume of claims, the potential severity of individual
claims, the determination of occurrence date for a claim and reporting lags
(the
time between the occurrence of the policyholder event and when it is actually
reported to the insurer).
United
continually refines its loss reserve estimates in a regular, ongoing process
as
historical loss experience develops and additional claims are reported and
settled. Informed judgment is applied throughout the process, including the
application of various individual experiences and expertise to multiple sets
of
data and analyses. Different experts may choose different assumptions when
faced
with material uncertainty, based on their individual backgrounds, professional
experiences and areas of focus. Hence, such experts may at times produce
estimates materially different from each other. Experts providing input to
the
various estimates and underlying assumptions include actuaries, underwriters,
claims personnel and lawyers. Therefore, management may have to consider varying
individual viewpoints as part of its estimation of loss reserves.
United
attempts to consider all significant facts and circumstances known at the time
loss reserves are established. Due to the inherent uncertainty underlying loss
reserve estimates, the final resolution of the estimated liability for claims
and claim adjustment expenses will likely be higher or lower than the related
loss reserves at the reporting date. Therefore, actual paid losses in the future
may yield a materially different amount than is currently reserved.
Because
of the uncertainties set forth above, additional liabilities resulting from
one
insured event, or an accumulation of insured events, may exceed the current
related reserves. In addition, our estimate of claims and claim adjustment
expenses may change. These additional liabilities or increases in estimates,
or
a range of either, cannot now be reasonably estimated and could materially
and
adversely affect United’s results of operations.
There
are inherent difficulties in estimating the ultimate costs of catastrophes,
which further complicate our ability to estimate reserves.
There
are
inherent difficulties in estimating risks that impact the estimation of ultimate
costs for catastrophes. These difficulties also affect United’s ability to
estimate reserves for catastrophes. For example, the estimation of reserves
related to hurricanes can be affected by the inability to access portions of
the
impacted areas, the complexity of factors contributing to the losses, the legal
and regulatory uncertainties and the nature of the information available to
establish the reserves. Complex factors include, but are not limited to,
determining whether damage was caused by flooding versus wind; evaluating
general liability and pollution exposures; estimating additional living
expenses; the impact of demand surge; infrastructure disruption; fraud; the
effect of mold damage; business interruption costs; and reinsurance
collectibility. The timing of a catastrophe's occurrence, such as at or near
the
end of a reporting period, can also affect the information available to United
in estimating reserves for that reporting period. The estimates related to
catastrophes are adjusted as actual claims emerge and additional information
becomes available. Because of the inherent uncertainty in estimating reserves
for catastrophes, we cannot be sure that our ultimate losses and loss adjustment
expenses will not exceed our reserves. If and to the extent that our reserves
are inadequate, we will be required to increase our reserves for losses and
loss
adjustment expenses and incur a charge to earnings in the period during which
our reserves are increased, which could materially and adversely affect our
financial condition and results of operations.
United's business
is cyclical, which affects its financial performance and may affect the
market price of the combined company's common stock.
Historically,
the financial performance of the property and casualty insurance
industry has been cyclical, characterized by periods of severe price
competition and excess underwriting capacity, or soft markets, followed by
periods of high premium rates and shortages of underwriting capacity, or hard
markets. The profitability of most property and casualty insurance
companies, including United, tend to follow this cyclical pattern.
This cyclicality is due in large part to the actions of United's
competitors and to general economic factors that are not within United's
control, and therefore, United cannot predict how long any given hard or
soft market will last. If United has to reduce premiums or limit premium
increases due to competitive pressures on pricing in a softening
market, United may experience a reduction in its premiums written and
in its profit margins and revenues, which could adversely
affect United's financial results and the market price of the combined
company's common stock.
United's business
is seasonal, which affects its financial performance and may affect the
market price of the combined company’s common
stock.
United’s
business has historically been seasonal. We generally experience higher
losses during the third quarter of the year as a result of an increase
in claims due to weather conditions in Florida during hurricane
season. For example, storms may cause property damage that impacts claim
incidence and severity. The recurrence of these seasonal patterns, or any
deviation from them, could affect the market price of our common
stock.
The
market price of our common stock may be volatile.
The
trading price of our common stock following the Merger may fluctuate
substantially, depending on many factors, some of which are beyond our control
and may not be related to our operating performance. Factors that could cause
such fluctuations include, but are not limited to, the following:
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variations
in actual or anticipated operating results or changes in the expectations
of financial market analysts with respect to our
results;
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investor
perception of the property and casualty insurance industry in general
and
us in particular;
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market
conditions in the insurance industry and any significant volatility
in the
market price and trading volume of insurance companies;
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major
catastrophic events, especially hurricanes;
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sales
of large blocks of Company stock or sales by Company insiders;
or
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departures
of key personnel.
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United
has debt outstanding and failure to comply with the terms of its loan agreements
could have an adverse effect on United’s ability to grow and write additional
insurance policies.
As
of June 30, 2008, United’s total long-term debt outstanding was
approximately $25.2 million. Its long-term debt includes the
following:
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$5.2
million in principal amount outstanding under the loan agreement
between
Columbus Bank and Trust Company (“CB&T”), United, and United Insurance
Management, L.C. ( “ UIM ” ) consisting of a term loan in the principal
amount of $33 million; and
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$20.0
million in principal and interest under UPCIC’s surplus note with the
State Board of Administration of Florida
(“SBA”).
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These
loan agreements contain certain significant covenants, including covenants
requiring the maintenance of minimum specified financial ratios and balances.
United’s failure to meet its payment obligations or to comply with any of these
covenants could result in an event of default which, if not cured or waived,
could result in increased interest rates on United’s indebtedness or the
acceleration of United’s outstanding debt obligations or both. In addition, if
an event of default occurs under one of these loan agreements, CB&T can
elect to take possession of, sell, lease or otherwise dispose of any of United’s
assets that were pledged as collateral for its loan.
As
of
December 31, 2007 and June 30, 2008, UPCIC was not in compliance with the
ratio
of net written premium to surplus requirement of 2:1 (the “Minimum Writing
Ratio”) contained in the SBA loan agreement. As a result, the SBA increased
UPCIC’s interest rate on the SBA loan from the stated rate of interest by 450
basis points to 8.60% for the quarter ended March 31, 2008 and 7.97% for
the
quarter ended June 30, 2008. UPCIC’s
ratio of net written premium to surplus at June 30, 2008 was 1.52:1 which
is at
least 1.5:1 and, as a result, UPCIC will incur an interest rate charge of
25
basis points above the stated rate of interest for the third quarter of 2008.
During
the second quarter of 2008, the Florida Legislature passed a law that allows
the
board to amend the terms of surplus notes issued prior to January 1, 2008
based
upon the requirements of the new law changes. The new law contains various
methods of computing writing ratios that may be more favorable than the terms
of
the current SBA note. United is evaluating the impact of the terms of the
new
law to determine if it will amend the terms of its loan agreement with the
SBA. If UPCIC’s ratio of net written premium to surplus is below 1.5:1
for three consecutive quarters following December 31, 2007, UPCIC will be
obligated to repay a portion of the SBA note such that the Minimum Writing
Ratio
will be obtained for the following quarter.
The
SBA
note provides that the SBA may, among other things, declare its loan immediately
due and payable for all defaults existing under the SBA note. Acceleration
of
the principal and interest under the SBA loan would limit, but not preclude,
United Insurance’s ability to write additional insurance policies.
The
effects of emerging claim and coverage issues on the insurance business are
uncertain.
As
industry practices and legal, judicial, social and other environmental
conditions change, unexpected and unintended issues related to claim and
coverage may emerge. These issues may adversely affect United’s business
following the Merger by either extending coverage beyond its underwriting intent
or by increasing the number or size of claims. Examples of emerging claims
and
coverage issues include, but are not limited to:
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adverse
changes in loss cost trends, including inflationary pressures in
medical
costs and home repair costs;
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judicial
expansion of policy coverage and the impact of new theories of liability;
and
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plaintiffs
targeting property and casualty insurers, in purported class action
litigation relating to claims-handling and other
practices.
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In
some
instances, these emerging issues may not become apparent for some time after
issuance of the affected insurance policies. As a result, the full extent of
liability under insurance policies we may issue following the Merger may not
be
known for many years after the policies are issued.
The
effects of these and other unforeseen emerging claim and coverage issues are
extremely hard to predict and could harm United’s business and materially and
adversely affect our results of operations and future
operations.
United
may not be able to collect all amounts due to it from reinsurers, and
reinsurance coverage may not be available in the future at commercially
reasonable rates or at all.
United
uses, and we expect to continue to use following the Merger, reinsurance to
help
manage our exposure to property and casualty risks. The availability and cost
of
reinsurance are each subject to prevailing market conditions which can affect
business volume and profitability. Although reinsurers are liable to United
to
the extent of the ceded reinsurance, United remains liable as the direct insurer
on all risks reinsured. As a result, ceded reinsurance arrangements do not
eliminate United’s obligation to pay claims. Accordingly, United is subject to
credit risk with respect to its ability to recover amounts due from reinsurers.
In the past, certain reinsurers have ceased writing business and entered into
runoff. Some of United’s reinsurance claims may be disputed by the reinsurers,
and United may ultimately receive partial or no payment.
In
a
number of jurisdictions, particularly the European Union and the United Kingdom,
a reinsurer is permitted to transfer a reinsurance arrangement to another
reinsurer, which may be less creditworthy, without a counterparty's consent,
provided that the transfer has been approved by the applicable regulatory and/or
court authority. United does not currently have any reinsurance arrangements
that permit such a transfer. However, United may enter into such arrangements
in
the future, in which case the ability of reinsurers to transfer their risks
to
other, less creditworthy reinsurers would impact United’s risk of collecting
amounts due to it.
Based
on
the foregoing, United may not be able to collect all amounts due to it from
reinsurers, and reinsurance coverage may not be available to it in the future
at
commercially reasonable rates or at all, and thus United’s results of operations
and future operations could be materially and adversely affected.
We
will be exposed to credit risk in certain of our business operations and in
our
investment portfolio.
We
will
be exposed to credit risk in several areas of our business operations, including
credit risk relating to reinsurance, as discussed above, and credit risk
associated with commissions paid to independent agents. We pay commissions
to
our agents in advance, on an annual basis. Therefore, if an insurer cancels
a
policy during the policy year, the agent will owe us a pro rata portion of
the
commission we paid to such agent, based on the number of months during the
policy year that the policy was not in force. Typically, we deduct any such
commissions owed to us from commissions on other policies we owe to the agent.
If we do not owe the agent any other commissions, then we will be subject to
the
risk that the agent may not be able to repay us the balance of a commission,
which could adversely affect our financial position.
The
value
of our investment portfolio will also be subject to the risk that certain
investments may become impaired due to a deterioration in the financial position
of one or more issuers of securities held in our portfolio, or due to a
downgrade of the credit ratings of an insurer that guarantees an issuer's
payments of such investments in our portfolio. In addition, defaults by the
issuer and, where applicable, its guarantor, of certain investments that result
in the failure of such parties to fulfill their obligations with regard to
any
of these investments could reduce our net investment income and net realized
investment gains or result in investment losses.
While
we
will attempt to manage these risks through underwriting and investment
guidelines, collateral requirements and other oversight mechanisms, our efforts
may not be successful. To a large degree, the credit risk we face is a function
of the economy; accordingly, we face a greater risk in an economic downturn
or
recession. As a result, our exposure to any of the above credit risks could
materially and adversely affect our results of operations.
Competition
could harm our ability to maintain or increase United’s profitability and
premium volume following the Merger.
The
property and casualty insurance industry is highly competitive, and we believe
it will remain highly competitive for the foreseeable future. We compete with
both regional and national insurers as well as Florida domestic property and
casualty companies, some of which have greater financial resources than we
do.
Based on legislation passed in 2007, Citizens Property Insurance Corporation
(“Citizens”), a Florida state-supported insurer, is also authorized to compete
with us. Our primary competitors include Universal Insurance Company of North
America, Olympus Insurance Group and Universal Property & Casualty. The
principal competitive factors in our industry are price, service, commission
structure and financial condition. In addition, our competitors may offer
products for alternative forms of risk protection. If competition limits our
ability to retain existing business or write new business at adequate rates,
our
results of operations could be materially and adversely affected.
The
insurance industry is the subject of a number of investigations by state and
federal authorities in the United States. We cannot predict the outcome of
these
investigations or the impact on our business practices or financial
results.
As
part
of ongoing, industry-wide investigations, we may from time to time receive
subpoenas and written requests for information from government agencies and
authorities, including from the Attorney General of the State of Florida,
Florida insurance and business regulators and the Securities and Exchange
Commission. If we are subpoenaed for information by government agencies and
authorities, potential outcomes could include enforcement proceedings or
settlements resulting in fines, penalties and/or changes in business practices
that could materially and adversely affect our results of operations and future
growth prospectus. In addition, these investigations may result in changes
in
laws and regulations affecting the industry in general which could, in turn,
also materially and adversely affect our results of
operations.
The
insurance business is heavily regulated and changes in regulation may reduce
our
profitability and limit our growth following the Merger.
Following
the Merger, we will be extensively regulated and supervised in the jurisdictions
in which we conduct business, including licensing and supervision by government
regulatory agencies in such jurisdictions. This regulatory system is generally
designed to protect the interests of policyholders, and not necessarily the
interests of insurers, their stockholders and other investors. This regulatory
system also addresses authorization for lines of business, capital and surplus
requirements, limitations on the types and amounts of certain investments,
underwriting limitations, transactions with affiliates, dividend limitations,
changes in control, premium rates and a variety of other financial and
non-financial components of an insurer's business.
In
recent
years, the state insurance regulatory framework has come under increased federal
scrutiny, and some state legislatures have considered or enacted laws that
may
alter or increase state authority to regulate insurance companies and insurance
holding companies. Further, the National Association of Insurance Commissioners
(“NAIC”) and state insurance regulators continually reexamine existing laws and
regulations, specifically focusing on modifications to holding company
regulations, interpretations of existing laws and the development of new laws
and regulations. In addition, Congress and some federal agencies from time
to
time investigate the current condition of insurance regulation in the United
States to determine whether to impose federal or national regulation or to
allow
an optional federal charter, similar to the option available to most banks.
We
cannot predict the effect any proposed or future legislation or NAIC initiatives
may have on the conduct of our business following the Merger.
Although
the United States federal government does not directly regulate the insurance
business, changes in federal legislation, regulation and/or administrative
policies in several areas, including changes in financial services regulation
(e.g., the repeal of the McCarran-Ferguson Act) and federal taxation, can
significantly harm the insurance industry.
Insurance
laws or regulations that are adopted or amended may be more restrictive than
current laws or regulations and may result in lower revenues and/or higher
costs
and thus could materially and adversely affect our results of operations and
future growth prospectus.
A
downgrade in United’s financial strength rating could adversely impact our
business volume, adversely impact our ability to access the capital markets
and
increase our borrowing costs, following the Merger.
Financial
strength ratings have become increasingly important to an insurer's competitive
position. Rating agencies review their ratings periodically, and our current
ratings may not be maintained in the future. A downgrade in our rating following
the Merger could negatively impact our business volumes, as it is possible
demand for certain of our products in certain markets may be reduced or our
ratings could fall below minimum levels required to maintain existing business.
Additionally, we may find it more difficult to access the capital markets and
we
may incur higher borrowing costs. If significant losses, such as those resulting
from one or more major catastrophes, or significant reserve additions were
to
cause our capital position to deteriorate significantly, or if one or more
rating agencies substantially increase their capital requirements, we may need
to raise equity capital in the future in order to maintain our ratings or limit
the extent of a downgrade. For example, a continued trend of more frequent
and
severe weather-related catastrophes may lead rating agencies to substantially
increase their capital requirements.
Our
investment portfolio may suffer reduced returns or losses.
Investment
returns are expected to be an important part of our overall profitability
following the Merger. Accordingly, fluctuations in interest rates or in the
fixed income, real estate, equity or alternative investment markets could
materially and adversely affect our results of operations.
Changes
in the general interest rate environment will affect our returns on, and the
market value of, our fixed income and short-term investments following the
Merger. A decline in interest rates reduces the returns available on new
investments, thereby negatively impacting our net investment income. Conversely,
rising interest rates reduces the market value of existing fixed income
investments. In addition, defaults under, or impairments of, any of these
investments as a result of financial problems with the issuer and, where
applicable, its guarantor of the investment could reduce our net investment
income and net realized investment gains or result in investment
losses.
We
may
decide to invest a portion of our assets following the Merger in equity
securities or other investments, which are subject to greater volatility than
fixed income investments. General economic conditions, stock market conditions
and many other factors beyond our control can adversely affect the value of
our
non-fixed income investments and the realization of net investment income.
As a
result of these factors, we may not realize an adequate return on our
investments, we may incur losses on sales of our investments and we may be
required to write down the value of our investments, which could reduce our
net
investment income and net realized investment gains or result in investment
losses.
Our
investment portfolio may be invested, in significant part, in tax-exempt
obligations. Our portfolio may also benefit from certain other tax laws,
including, but not limited to, those governing dividends-received deductions
and
tax credits. Federal and/or state tax legislation could be enacted that would
lessen or eliminate some or all of these tax advantages and could adversely
affect the value of our investment portfolio. This result could occur in the
context of deficit reduction or various types of fundamental tax
reform.
United
depends on its network of independent agents for revenues, and therefore,
United’s business may be materially and adversely affected if it cannot retain
and attract independent agents or if it experiences disruptions in its
relationships with its independent agents.
United’s
network of 1,400 independent agents accounts for approximately 64% of the
gross
premiums on insurance policies that it writes and constitutes its primary
distribution channel for its products. Many of United’s competitors also rely on
independent agents. Independent agents are not obligated to market or sell
United’s insurance products or consult with United. As a result, United must
compete with other insurers for independent agents’ business. Some of
United’s competitors may offer a larger variety of products, lower prices for
insurance coverage and higher commissions for independent agents. If United’s
products, pricing and commissions do not remain competitive, United may find
it
more difficult to attract business from independent agents to sell its
products. A material reduction in the amount of United’s products that
independent agents sell would negatively affect its results of operations.
A
certain portion of United’s business is concentrated with relatively few agents.
For example, for the six months ended June 30, 2008, and the year ended
December 31, 2007, our top five agents produced 50% and 25%, respectively,
of our gross premiums written. Loss of all or a substantial portion of the
business provided through such agents and brokers could materially and adversely
affect United’s future business volume and results of
operations.
United
relies on Internet applications for the marketing and sale of certain products
through its agents, and may increasingly rely on Internet applications and
toll-free numbers for distribution following the Merger. If Internet disruptions
occur causing United’s independent agents frustration with its business
platforms or distribution initiatives, the resulting loss of business could
materially and adversely affect United’s future business volume and results of
operations.
We
could be adversely affected if United’s controls to ensure compliance with
guidelines, policies and legal and regulatory standards are not
effective.
United’s
business is highly dependent on its ability to engage on a daily basis in a
large number of insurance underwriting, claim processing and investment
activities, many of which are highly complex and are subject to state laws
and
regulations in Florida. These activities, involve, among other
things:
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the
use of non-public consumer information and related privacy
issues;
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the
use of credit history in underwriting;
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limitations
on the ability to charge additional policy fees;
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limitations
on the payment of dividends;
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limitations
on types and amounts of investments;
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the
acquisition or disposition of an insurance company or of any company
controlling an insurance company;
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the
purchase of reinsurance;
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reporting
with respect to financial condition; and
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periodic
financial and market conduct examinations performed by state insurance
department examiners.
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United
develops internal guidelines and policies in an effort to ensure compliance
with
legal and regulatory standards governing its business. A control system, no
matter how well designed and operated, can provide only reasonable assurance
that the control system's objectives will be met. If United’s controls prove to
be ineffective, it could lead to financial loss, unanticipated risk exposure
(including underwriting, credit and investment risk) or damage to United’s
reputation.
United’s
failure to implement and maintain adequate internal controls over financial
reporting in its business could have a material adverse effect on its business,
financial condition, results of operations and stock price.
If
the
Merger is consummated, United expects to comply with Section 404 of the
Sarbanes-Oxley Act of 2002 no later than the time it is required to file its
annual report for fiscal year 2008 with the Securities and Exchange Commission.
Section 404 requires annual management assessments of the effectiveness of
United’s internal controls over financial reporting and a report by United’s
independent auditors on the effectiveness of our internal controls. United
is in
the process of documenting its internal control procedures in order to satisfy
the requirements of Section 404. United has begun to take measures to
address and improve its financial reporting and compliance capabilities and
it
is in the process of instituting changes to satisfy its obligations as a public
company, including the requirements associated with the Sarbanes-Oxley Act
of
2002.
If
United
fails to achieve and maintain the adequacy of its internal controls in
accordance with applicable standards as then in effect, and as supplemented
or
amended from time to time, United may be unable to conclude on an ongoing basis
that it has effective internal controls over financial reporting in accordance
with Section 404. Moreover, effective internal controls are necessary for
United to produce reliable financial reports. If United cannot produce reliable
financial reports or otherwise maintain appropriate internal controls, its
business, financial condition and results of operations could be harmed,
investors could lose confidence in its reported financial information, and
the
market price for its stock could decline.
If
we experience difficulties with technology, data security and/or outsourcing
relationships following the Merger our ability to conduct our business could
be
negatively impacted.
While
technology can streamline many business processes and ultimately reduce the
cost
of operations, technology initiatives present certain risks. United’s business
is highly dependent upon its contractors and third-party administrators ability
to perform, in an efficient and uninterrupted fashion, necessary business
functions, such as the processing of new and renewal business, and the
processing and payment of claims. Because our information technology and
telecommunications systems interface with and depend on these third-party
systems, we could experience service denials if demand for such service exceeds
capacity or a third-party system fails or experiences an interruption. If
sustained or repeated, such a business interruption, system failure or service
denial could result in a deterioration of our ability to write and process
new
and renewal business, provide customer service, pay claims in a timely manner
or
perform other necessary business functions. Computer viruses, hackers and other
external hazards could expose our data systems to security breaches. These
increased risks, and expanding regulatory requirements regarding data security,
could expose us to data loss, monetary and reputational damages and significant
increases in compliance costs. As a result, our ability to conduct our business
might be adversely affected.
Attempts
to grow our business could have an adverse effect on the
Company.
Although
rapid growth may not occur, to the extent that it does occur, it could place
a
significant strain on our financial, technical, operational and administrative
resources. Our planned growth may result in increased responsibility for both
existing and new management personnel. Effective growth management will depend
upon our ability to integrate new personnel, to improve our operational,
management and financial systems and controls, to train, motivate and manage
our
employees, and to increase our services and capabilities. Our ability to
effectively manage our future growth may have a material and adverse effect
on
our results of operations, financial condition, and viability as a business.
In
addition, growth may not occur or growth may not produce profits for the
Company.
United
has entered into certain debt agreements, which may reduce our financial
flexibility following the Merger.
In
February of 2007, United and UIM entered into a loan agreement with CB&T
which provides for a term loan in the amount of $33 million. The CB&T term
note provides for accrual and monthly payment of interest on the amount of
principal then outstanding under the note and provides for principal to be
paid
in 36 equal monthly installments of approximately $0.9 million. On
August
11, 2008, the CB&T agreement was modified to allow for payments of interest
only from August 1, 2008 through March 31, 2009. The entire unpaid
principal balance, as well as all accrued and unpaid interest thereon, will
be
due and payable no later than February 20, 2010.
On
September 22, 2006, UPCIC entered into a surplus note with the SBA (the “SBA
note”). Under the SBA note, which has a 20 year term, UPCIC is required to make
quarterly payments (October 1, January 1, April 1, and July 1). For the first
three years of the SBA note, UPCIC is only required to make interest payments.
Because United Insurance failed to meet certain financial covenants contained
in
the SBA note, the interest rate under the SBA note was 8.6% for the first
quarter of 2008 and 7.97% for the second quarter of 2008. UPCIC’s
ratio of net written premium to surplus at June 30, 2008 was 1.52:1 which
is at
least 1.5:1. As a result, UPCIC will incur an interest rate charge of 25
basis
points above the stated rate which is the 10 Year Constant Treasury rate
for the
third quarter of 2008. UPCIC has no debt service obligation under the SBA
note until September 2009 and management does not anticipate making any
debt payments on the loan during the fiscal year ended December 31,
2008.
We
expect
we will continue to have outstanding debt obligations under both the CB&T
loan agreement and the SBA note following the Merger. This level of debt may
affect our operations in several important ways, including the
following:
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·
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a
portion of our cash flow from operations is likely to be dedicated
to the
payment of the principal of and interest on this
indebtedness;
|
|
·
|
our
ability to obtain additional financing in the future for working
capital,
capital expenditures or acquisitions may be
limited;
|
|
·
|
we
may be unable to refinance this indebtedness on terms acceptable
to us, or
at all; and
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|
·
|
we
may default on our obligations and the lenders may accelerate the
indebtedness or foreclose on their security interests that secure
their
loans.
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From
time to time we may enter into additional secured credit facilities to finance
any or all of the Company’s capital requirements. Any such secured credit
facility may have a material and adverse effect on the
Company.
From
time
to time following the Merger, we may enter into additional secured credit
facilities to finance any or all of our capital requirements. As part of a
secured credit facility, we would likely be required to make periodic payments
of principal and interest to the lender. We can provide no assurance we will
have cash flow in an amount sufficient to repay our debt obligations under
any
or all of such secured credit facilities. Furthermore, these secured credit
facilities normally contain numerous default provisions and may or may not
provide us with the possibility to cure a default before accelerating the due
date. If this were to happen, we might not be able to repay any or all of our
secured debts in full and might be forced to declare bankruptcy. If the lender
is a secured lender, the lender would have a priority right to receive repayment
from a bankruptcy estate or may have the right to foreclose on the secured
assets if we are not in bankruptcy but are in default of its secured contract.
In addition, a default under any secured credit facility may force us to seek
bankruptcy protection. As such, the fact that we may, from time to time, enter
into secured credit facilities with any person, business, or organization,
whether related or unrelated, may have a material and adverse effect on the
financial position, results of operations and viability of the Company.
RISKS
RELATED TO THE COMPANY'S CURRENT STATUS AS A BLANK CHECK
COMPANY
Our
sponsor warrants are non-redeemable provided they are held by the initial
purchasers or their permitted transferees, which could provide such purchasers
the ability to realize a larger gain than our public warrants
holders.
As
set
forth above, the warrants held by our public warrant holders may be called
for
redemption at any time after the warrants become exercisable upon satisfaction
of certain conditions. However, the 1,250,000 warrants (less such number
as is
forfeited pursuant to the Merger Agreement) purchased by our founders are
not subject to redemption . As a result, holders of the insider warrants,
or
their permitted transferees, could realize a larger gain than our public
warrant
holders.
Our
directors may not be considered "independent" under the policies of the North
American Securities Administrators Association, Inc. and we thus may not
have the benefit of independent directors examining our financial statements
and
the propriety of expenses incurred on our behalf subject to
reimbursement.
All
of
our officers and directors own shares of our common stock and will own common
stock following consummation of the Merger. No salary or other compensation
has
been or will be paid to our officers or directors for services rendered by
them
on our behalf prior to or in connection with the Merger. Although we believe
three of the members of our Board of Directors are “independent” as that term is
commonly used, under the policies of the North American Securities
Administrators Association, Inc., because our directors may receive
reimbursement for out-of-pocket expenses incurred by them in connection with
activities on our behalf such as identifying potential merger partners and
performing due diligence on suitable business combinations, it is likely state
securities administrators would take the position we do not have the benefit
of
independent directors examining the propriety of expenses incurred on our behalf
and subject to reimbursement. Additionally, there is no limit on the amount
of
out-of-pocket expenses that could be incurred and there is no review of the
reasonableness of the expenses by anyone other than our Board of Directors,
which would include persons who may seek reimbursement, or a court of competent
jurisdiction if such reimbursement is challenged. Although we believe all
actions taken by our directors on our behalf have been and will be in our best
interests, whether or not any directors are deemed to be "independent," we
cannot assure you this will actually be the case. If actions are taken or
expenses are incurred that are actually not in our best interests, it could
have
a material adverse effect on our business and operations and the price of our
stock held by the public stockholders.
Our
outstanding warrants may have an adverse effect on the market price of common
stock and make it more difficult to obtain public financing in the
future.
In
connection with the IPO, we issued warrants to purchase 4,733,625 shares
of
common stock. In connection with the Merger, we will issue an additional
1,093,750 warrants, plus up to an additional 212,877 warrants. Furthermore,
certain of our directors own an aggregate of 1,099,266 shares of common stock
and 1,250,000 warrants (to the extent not forfeited pursuant to the Merger
Agreement). The sale or even the possibility of sale, of the shares underlying
these warrants, could have an adverse effect on the price for our securities
on
the equity market and on our ability to obtain public financing in the future.
If and to the extent these warrants are exercised, you may experience dilution
to your holdings which may correspond with a decline in value of the market
price for our stock.
If
our initial stockholders exercise their registration rights, it may have an
adverse effect on the market price of our common stock.
Our
initial stockholders are entitled to require us to register the resale of
their
shares of common stock at any time after the date on which their shares are
released from escrow, which, except in limited circumstances, will not be
before
the one year anniversary of the consummation of a business combination. If
our
initial stockholders exercise their registration rights with respect to all
of
their 1,183,406 shares of common stock and the shares of common stock underlying
the 1,250,000 warrants, then there will be an additional 2,433,406 shares
of
common stock (less such number as is forfeited by FMG Investors LLC pursuant
to
the Merger Agreement) eligible for trading in the public market, assuming
the
Merger is approved. The presence of this additional number of shares of common
stock eligible for trading in the public market may have an adverse effect
on
the market price of our common stock.
Provisions
in our charter documents and Delaware law may inhibit a takeover of us, which
could limit the price potential investors might be willing to pay in the future
for our common stock and could entrench management.
Our
charter and bylaws contain provisions that may discourage unsolicited takeover
proposals that stockholders may consider to be in their best interests. Our
Board of Directors is divided into two classes, each of which will generally
serve for a term of two years with only one class of directors being elected
in
each year. As a result, at any annual meeting not all of the Board of Directors
will be considered for election. Since our "staggered board" could prevent
our
stockholders from replacing a majority of our Board of Directors at any annual
meeting, it may entrench management and discourage unsolicited stockholder
proposals that may be in the best interests of stockholders.
Moreover,
our Board of Directors has the ability to designate the terms of and issue
new
series of preferred stock which could be issued to create different or greater
voting rights which may affect an acquiror's ability to gain control of the
Company.
We
are
also subject to anti-takeover provisions under Delaware law, which could delay
or prevent a change of control. Together these provisions may make more
difficult the removal of management and may discourage transactions that
otherwise could involve payment of a premium over prevailing market prices
for
our securities.
If
we are forced to declare bankruptcy prior to consummation of our initial
business combination, you may receive less than $7.91 per share from the trust
account.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us under Chapters 7 or 11 of the United States Bankruptcy Code, and
that claim is not dismissed, the funds held in our trust account will be subject
to applicable bankruptcy law and may be included in our bankruptcy estate.
Furthermore, the estate may be subject to administrative expenses, including
but
not limited to post-petition legal fees including court costs, the
securitization of cash collateral to maintain the business as a going concern,
obtaining additional financing, taxes owed, and claims of both secured and
unsecured third parties with priority over those claims of our public
stockholders. To the extent bankruptcy claims deplete the trust account; we
cannot assure you we will be able to return to our public stockholders the
liquidation amounts due to them. Accordingly, the actual per share amount
distributed from the trust account to our public stockholders could be
significantly less than approximately $7.91 per share due to the claims of
creditors. This amount has been calculated without taking into account interest
earned on the trust account. Claims by creditors could cause additional delays
in the distribution of trust accounts to the public stockholders beyond the
time
periods required to comply with the Delaware General Corporation Law procedures
and federal securities laws and regulations.
The
Notes issued in the private placement and will rank senior to our common
stock
with respect to distributions upon our liquidation.
The
Notes
issued in the private placement will rank senior to our common stock for
purposes of any liquidation event. Accordingly, as long as any Notes are
outstanding, no distributions upon liquidation may be made to the holders
of our
common stock unless the holders of the Notes have received all amounts to
which
they are then entitled under the Notes. As a result, it is possible that,
upon
liquidation, all of the amounts available for distribution to our equity
holders
would be paid to the holders of the Notes and our stockholders would not
receive any payment.
After
the private placement and exchange offer, holders of the Notes may have
influence or control over our management and affairs.
The
note
purchase agreement includes certain negative covenants, which restrict the
Company from engaging in certain activities. Accordingly, the Company’s ability
to incur additional debt, sell or lease its assets, make any payment to reduce
its capital (including paying any dividends), merge, sell or acquire assets,
change its line of business or dissolve will be limited. A majority of the
holders of the Notes have the discretion to waive certain of these negative
covenants. As a result, these holders may have influence or control over
our
management and affairs and could make it more difficult or even impossible
for a
third party to acquire FMG without its consent.
RISKS
RELATING TO THE TENDER OFFER
A
stockholder is not guaranteed to be able to sell all of its shares to us
as part
of the tender offer.
On the
date of the mailing of this proxy statement to our stockholders, we intend
to
commence a tender offer to repurchase up to 3,320,762 shares of our common
stock (reduced by the number of shares for which conversion is elected) at
a
price of $8.05 per share. Due to the fact there will be 3,864,060 shares
of
common stock outstanding after the exchange of shares that are not held by
the
founding stockholders, who have agreed not to tender any shares, it is possible
that the tender offer will be oversubscribed. In such an event, we will purchase
the shares pro rata, which means that each stockholder who accepts the offer
will have only a portion of such stockholder’s shares bought by us.
Consequently, a stockholder cannot be assured it will be able to sell all
of its
shares to us as part of the tender offer.
If
certain events do not take place, FMG will not complete the tender offer.
FMG
plans
to use the proceeds of the private placement to complete the tender offer.
The
private placement is conditioned on stockholder approval of Proposals 1,
2, 3
and 5. If Proposals 1, 2, 3 and 5 are not approved by stockholders, FMG will
not
complete the tender offer.
We
may encounter delays in completing the tender offer.
We
will
be required to file a Schedule TO and an offer to purchase with the SEC in
connection with our planned tender offer, and the tender offer will be made
only
pursuant to the terms of such filed materials. Such tender offer will be
effected in compliance with the requirements of Rule 13e-4 under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and all other applicable
securities laws and regulations. While we plan to commence the tender offer
on
the date of the mailing of this proxy statement to our stockholders, there
can
be no assurance we will not encounter delays in completing the tender offer
as a
result of our need to comply with applicable securities laws.
Our
repurchase of shares pursuant to our planned tender offer could reduce the
liquidity of the trading market for our common stock.
The
tender of a significant number of outstanding shares of common stock to FMG
in
the tender offer would decrease the number of outstanding shares available
for
sale in the public market and therefore could adversely affect the liquidity
of
the trading market for our common stock. Such diminished liquidity could
have an
adverse effect on the market price of our common stock following the completion
of the tender offer.
FORWARD-LOOKING
STATEMENTS
We
believe some of the information in this proxy statement/prospectus constitutes
forward-looking statements. You can identify these statements by forward-looking
words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,”
“estimate,” “intends,” and “continue” or similar words. You should read
statements that contain these words carefully because they:
·
discuss
future expectations;
·
contain
projections of future results of operations or financial condition;
and
·
state
other “forward-looking” information.
There
may
be events in the future the Company is not able to accurately predict or over
which the Company has no control. The risk factors and cautionary language
discussed in this proxy statement/prospectus provide examples of risks,
uncertainties and events which may cause actual results to differ materially
from the expectations described by the Company in its forward-looking
statements, including among other things:
·
changing
interpretations of generally accepted accounting principles;
·
the
general volatility of the market price of our securities;
·
the
availability of qualified personnel;
·
changes
in interest rates or the debt securities markets
·
outcomes
of government reviews, inquiries, investigations and related
litigation;
·
continued compliance with government regulations;
·
legislation or regulatory environments, requirements or changes adversely
affecting the businesses in which United is engaged;
·
statements about industry trends;
·
general
economic conditions; and
·
geopolitical events.
You
are
cautioned not to place undue reliance on these forward-looking statements,
which
speak only as of the date of this proxy statement/prospectus.
All
forward-looking statements included herein attributable to the Company, United
or any person acting on either party’s behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
We caution you that these statements are based on a combination of facts
currently known by FMG and United and our projections of the future, about
which
we cannot be certain. Except to the extent required by applicable laws and
regulations, the Company undertakes no obligation to update these
forward-looking statements to reflect events or circumstances after the date
of
this proxy statement/prospectus or to reflect the occurrence of unanticipated
events.
Before
you grant your proxy or instruct how your vote should be cast or vote on
the
approval of the Merger you should be aware that the occurrence of the events
described in the “Risk Factors” section and elsewhere in this proxy
statement/prospectus could have a material adverse effect on the Company,
or
United, upon completion of the Merger, private placement and tender
offer.
THE
COMPANY SPECIAL MEETING OF STOCKHOLDERS
The
Company Special Meeting
The
Company is furnishing this proxy statement to you as part of the solicitation
of
proxies by the Company Board of Directors for use at the Special Meeting in
connection with the proposed Acquisition, the proposed First Amendment, the
proposed Second Amendment, the proposed Third Amendment, the proposed Director
elections and the proposed Adjournment. This proxy statement provides you with
the information you need to be able to vote or instruct your vote to be cast
at
the Special Meeting.
Date,
Time and Place
The
Special Meeting will be held
at ,
Eastern Time,
on ,
2008, at the offices
of ,
to vote on each of the Merger Proposal, the First Amendment Proposal, the Second
Amendment Proposal, the Third Amendment Proposal, the Director Proposal and
the
Adjournment Proposal.
Purpose
of the Special Meeting
At
the
Special Meeting, you will be asked to consider and vote upon the
following:
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·
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The
Merger Proposal—the proposed acquisition of all of the membership units of
United Insurance Holdings, L.C., a limited liability company formed
under
the laws of the State of Florida, pursuant to the Merger Agreement,
dated
as of April 2, 2008, as amended and restated on August 15, 2008,
by and
among the Company, United and United Subsidiary and the transactions
contemplated thereby (“Proposal 1” or the “Merger
Proposal”);
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·
|
The
First Amendment Proposal—the amendment to the Company’s amended and
restated certificate of incorporation (the “First Amendment”), to remove
certain provisions containing procedural and approval requirements
applicable to the Company prior to the consummation of the business
combination that will no longer be operative after the consummation
of the
Merger (“Proposal 2” or the “First Amendment
Proposal”);
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|
·
|
The
Second Amendment Proposal—the amendment to the Company’s amended and
restated certificate of incorporation (the “Second Amendment”), to
increase the amount of authorized shares of common stock from 20,000,000
to 50,000,000 (“Proposal 3” or the “Second Amendment
Proposal”);
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·
|
The
Third Amendment Proposal—the amendment to the Company’s amended and
restated certificate of incorporation (the “Third Certificate of
Incorporation Amendment”), to change the name of the Company to United
Insurance Holdings Corp. (“Proposal 4” or the “Third Amendment
Proposal”);
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·
|
The
Director Proposal—to elect three (3) directors to the Company’s Board
of Directors to hold office until the next annual meeting of stockholders
and until their successors are elected and qualified (“Proposal 5” or
the “Director Proposal”);
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·
|
The
Adjournment Proposal—to consider and vote upon a proposal to adjourn the
special meeting to a later date or dates, if necessary, to permit
further
solicitation and vote of proxies in the event that, based upon
the
tabulated vote at the time of the Special Meeting, the Company
would not
have been authorized to consummate the Merger—we refer to this proposal as
the adjournment proposal. (“Proposal 6” or the “Adjournment Proposal”);
and
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·
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such
other business as may properly come before the meeting or any adjournment
or postponement thereof.
|
The
Company’s Board of Directors:
·
has
unanimously determined the Merger Proposal, the First Amendment Proposal, the
Second Amendment Proposal, the Third Amendment Proposal, the Director Proposal,
and the Adjournment Proposal are fair to, and in the best interests of, the
Company and its stockholders;
·
has
determined the consideration to be paid in connection with the Merger is fair
to
our current stockholders from a financial point of view and the fair market
value of United is equal to or greater than 80% of the value of the net assets
of the Company;
·
has
unanimously approved and declared it advisable to approve the Merger Proposal,
the First Amendment Proposal, the Second Amendment Proposal, the Third Amendment
Proposal, the Director Proposal and the Adjournment Proposal; and
·
unanimously recommends the holders of the Company common stock vote “FOR”
Proposal 1, the Merger Proposal, “FOR” Proposal 2, the First Amendment
Proposal; “FOR” Proposal 3, the Second Amendment Proposal; “FOR” Proposal
4, the Third Amendment Proposal; “FOR” Proposal 5, the Director Proposal;
and “FOR” Proposal 6, the Adjournment Proposal.
Record
Date; Who is Entitled to Vote
The
Record Date for the Special Meeting
is ,
2008. Record holders of the Company common stock at the close of business on
the
Record Date are entitled to vote or have their votes cast at the Special
Meeting. On the Record Date, there were
outstanding
shares of the Company common stock.
Each
share of the Company common stock is entitled to one vote at the Special
Meeting.
Any
shares of the Company common stock held by our officers and directors prior
to
the Company’s IPO will be voted in accordance with the majority of the votes
cast at the Special Meeting with respect to the Merger Proposal. Any shares
of
the Company common stock acquired by our officers and directors in the Company’s
IPO or afterwards will be voted in favor of the Merger. We have a total of
5,917,031 shares outstanding, of which 1,183,406 were issued prior to the IPO
and are held by our officers, directors and special advisor.
The
Company’s issued and outstanding warrants do not have voting rights and record
holders of the Company warrants will not be entitled to vote at the Special
Meeting.
Voting
Your Shares
Each
share of the Company common stock that you own in your name entitles you to
one
vote. Your proxy card shows the number of shares of the Company common stock
that you own.
There
are
two ways to vote your shares of Company common stock:
·
You can
vote by signing and returning the enclosed proxy card. If you vote by proxy
card, your “proxy,” whose name is listed on the proxy card, will vote your
shares as you instruct on the proxy card. If you sign and return the proxy
card,
but do not give instructions on how to vote your shares, your shares will be
voted, as recommended by the Company Board, “FOR” Proposal 1, the Merger
Proposal, “FOR” Proposal 2, the First Amendment Proposal; “FOR” Proposal 3,
the Second Amendment Proposal; “FOR” Proposal 4, the Third Amendment Proposal;
“FOR” Proposal 5, the Director Proposal; and “FOR” Proposal 6, the
Adjournment Proposal.
·
You can
attend the Special Meeting and vote in person. The Company will give you a
ballot when you arrive. However, if your shares are held in the name of your
broker, bank or another nominee, you must get a proxy from the broker, bank
or
other nominee. That is the only way the Company can be sure that the broker,
bank or nominee has not already voted your shares.
Who
Can Answer Your Questions About Voting Your Shares
If
you
have any questions about how to vote or direct a vote in respect of your Company
common stock, you may call our Secretary, Larry G. Swets, Jr. at
(860) 677-2701.
No
Additional Matters May Be Presented at the Special Meeting
The
Special Meeting has been called only to consider the approval of the Merger
Proposal, the First Amendment Proposal, the Second Amendment Proposal, the
Third
Amendment Proposal, the Director Proposal and the Adjournment Proposal. Under
the Company’s bylaws, other than procedural matters incident to the conduct of
the meeting, no other matters may be considered at the Special Meeting if they
are not included in the notice of the meeting.
Revoking
Your Proxy
If
you
give a proxy, you may revoke it at any time before it is exercised by doing
any
one of the following:
·You
may
send another proxy card with a later date;
·
You may
notify Corporate Secretary, addressed to the Company, in writing before the
Special Meeting that you have revoked your proxy; and
·
You may
attend the Special Meeting, revoke your proxy, and vote in person.
Quorum;
Vote Required
The
approval and adoption of the Merger Agreement and the transactions contemplated
thereby will require the affirmative vote of a majority of the shares of the
Company’s common stock issued in the Company’s IPO cast at the Special Meeting.
A total of 4,733,625 shares were issued in our IPO. In addition, notwithstanding
the approval of a majority, if the holders of 1,419,615 or more shares of common
stock issued in the Company’s IPO vote against the Merger and demand conversion
of their shares into a pro rata portion of the trust account, then the Company
will not be able to consummate the Merger. Each Company stockholder that holds
shares of common stock issued in the Company’s IPO or purchased following such
offering in the open market has the right, assuming such stockholder votes
against the Merger Proposal and, at the same time, demands the Company convert
such stockholder’s shares into cash equal to a pro rata portion of the trust
account in which a substantial portion of the net proceeds of the Company’s IPO
is deposited. These shares will be converted into cash only if the Merger is
consummated and the stockholder requesting conversion holds such shares until
the date the Merger is consummated and tenders such shares to our stock transfer
agent at or prior to the vote at the Special Meeting on the Merger
Proposal.
For
the
purposes of Proposal 2, the affirmative vote of the majority of the
Company’s issued and outstanding common stock as of the Record Date is required
to approve the First Amendment Proposal. For the purposes of Proposal 3,
the affirmative vote of the majority of the Company’s issued and outstanding
common stock as of the Record Date is required to approve the Second Amendment
Proposal. For the purposes of Proposal 4, the affirmative vote of the
majority of the Company’s issued and outstanding common stock as of the Record
Date is required to approve the Third Amendment Proposal. For purposes of
Proposal 5, the affirmative vote of the holders of a plurality of the
shares of common stock cast in the election of directors is required. For
purposes of Proposal 6 the affirmative vote of a majority of the shares of
the Company’s common stock that are present in person or by proxy and entitled
to vote is required to approve the Adjournment Proposal.
It
is
important for you to note that in the event the Merger Proposal does not receive
the necessary vote to approve such proposal, the Company will not consummate
that Acquisition or any other proposal, unless the Adjournment Proposal is
approved. None of United or its affiliates own any shares of Company common
stock entitled to vote at the Special Meeting; however, they are not prohibited
from making such purchases in the event they determine to do so.
Abstentions
and Broker Non-Votes
If
your
broker holds your shares in its name and you do not give the broker voting
instructions, under the rules of FINRA, your broker may not vote your shares
on
the proposals to approve the Merger pursuant to the Merger Agreement. If you
do
not give your broker voting instructions and the broker does not vote your
shares, this is referred to as a “broker non-vote.” Abstentions and broker
non-votes are counted for purposes of determining the presence of a
quorum.
As
long
as a quorum is established at the Special Meeting, if you return your proxy
card
without an indication of how you desire to vote, it: (i) will have the same
effect as a vote in favor of the Merger Proposal and will not have the effect
of
converting your shares into a pro rata portion of the trust account in which
a
substantial portion of the net proceeds of the Company’s IPO are held, unless an
affirmative vote against the Merger Proposal is made and an affirmative election
to convert such shares of common stock is made on the proxy card; (ii) will
have the same effect as a vote in favor of the First Amendment Proposal;
(iii) will have the same effect as a vote in favor of the Second Amendment
Proposal; (iv) will have the same effect as a vote in favor of the Third
Amendment Proposal; (v) will have no effect on the Director Proposal; and
(vi) will have the same effect as a vote in favor of the Adjournment
Proposal.
Since
the
Merger Proposal requires only the affirmative vote of a majority of the Company
shares issued in the IPO that cast a vote at the Special Meeting, abstentions
or
broker non-votes will not count towards such number. This has the effect of
making it easier for the Company to obtain a vote in favor of the Merger
Proposal as opposed to some of the Company’s other proposals or as opposed to
the vote generally required under the Delaware General Corporation Law, namely
a
majority of the shares issued and outstanding. Furthermore, in connection with
the vote required for the Merger Proposal, the founding stockholders of the
Company have agreed to vote their shares of common stock owned or acquired
by
them at or prior to the IPO in accordance with the majority of the Company’s
shares issued in the IPO.
Conversion
Rights
Any
stockholder of the Company holding shares of common stock issued in the
Company’s IPO who votes against the Merger Proposal may, at the same time,
demand the Company convert his shares into a pro rata portion of the trust
account. You must mark the appropriate box on the proxy card in order to
demand
the conversion of your shares. If so demanded, the Company will convert these
shares into a pro rata portion of the net proceeds from the IPO that were
deposited into the trust account, plus your pro rated interest earned thereon
after such date (net of taxes and amounts disbursed for working capital purposes
and excluding the amount held in the trust account representing a portion
of the
underwriters’ discount), if the Merger is consummated. If the holders of
1,419,614 or more shares of common stock issued in the Company’s IPO vote
against the Merger Proposal and demand conversion of their shares into a
pro
rata portion of the trust account, the Company will not be able to consummate
the Merger. Based on the amount of cash held in the trust account as of June
30,
2008, without taking into account any interest or income taxes accrued after
such date, you will be entitled to convert each share of common stock that
you
hold into approximately $7.91 per share (after a provision for payment of
working capital costs and taxes). In addition, the Company will be liquidated
if
a business combination is not consummated by October 4, 2009. In any
liquidation, the net proceeds of the Company’s IPO held in the trust account,
plus any interest earned thereon (net of taxes and amounts disbursed for
working
capital purposes and excluding the amount held in the trust account representing
a portion of the underwriters’ discount), will be distributed on a pro rata
basis to the holders of the Company’s common stock other than the officers,
directors, special advisors and sponsor of FMG, none of whom will share in
any
such liquidation proceeds.
You
will
be required, whether you are a record holder or hold your shares in “street
name”, either to tender your certificates to our transfer agent or to deliver
your shares to the Company’s transfer agent electronically using the Depository
Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at your option,
at any time at or prior to the vote at the Special Meeting on the Merger
Proposal. There is typically a $35 cost associated with this tendering process
and the act of certificating the shares or delivering them through the DWAC
system. The transfer agent will typically charge the tendering broker this
$35,
and the broker may or may not pass this cost on to you.
You
will
have sufficient time from the time we send out this proxy statement/prospectus
through the time of the vote on the Merger Proposal to deliver your shares
if
you wish to exercise your conversion rights. However, as the delivery process
can be accomplished by you, whether or not you are a record holder or your
shares are held in “street name”, within a business day, by simply contacting
the transfer agent or your broker and requesting delivery of your shares through
the DWAC System, we believe this time period is sufficient for an average
investor.
Any
request for conversion, once made, may be withdrawn at any time up to
immediately prior to the vote on the Merger Proposal at the Special Meeting
(or
any adjournment or postponement thereof). Furthermore, if you delivered a
certificate for conversion and subsequently decided prior to the meeting not
to
elect conversion, you may simply request that the transfer agent return the
certificate (physically or electronically) to you. The transfer agent will
typically charge an additional $35 for the return of the shares through the
DWAC
System.
Please
note, however, that once the vote on the Merger Proposal is held at the Special
Meeting, you may not withdraw your request for conversion and request the return
of your stock certificate (either physically or electronically). If the Merger
is not completed, your stock certificate will be automatically returned to
you.
Stockholders
will not be entitled to exercise their conversion rights if such stockholders
return proxy cards to the Company without an indication of how they desire
to
vote with respect to the Merger Proposal or, for stockholders holding their
shares in street name, if such stockholders fail to provide voting instructions
to their brokers. Proxies received by the Company without an indication of how
the stockholders intend to vote on a proposal will be voted in favor of such
proposal.
Appraisal
or Dissenters Rights
No
appraisal rights are available under the Delaware General Corporation Law to
the
stockholders of the Company in connection with the Merger Proposal. The only
rights for those stockholders voting against the Merger who wish to receive
cash
for their shares is to simultaneously demand payment for their shares from
the
trust account.
Under
Florida Statute 608.4352 of the Florida Limited Liability Company Act (the
“FLLCA”), the members of United will be entitled to dissent from the Merger and
obtain cash payment for the fair value of their membership units instead of
the
consideration provided for in the Merger Proposal. For a more complete
description of these rights, see “United Member Approval.”
Solicitation
Costs
The
Company is soliciting proxies on behalf of the Company Board of Directors.
This
solicitation is being made by mail but also may be made by telephone or in
person. The Company and its respective directors and officers may also solicit
proxies in person, by telephone or by other electronic means, and in the event
of such solicitations, the information provided will be consistent with this
proxy statement and enclosed proxy card. These persons will not be paid for
doing this. The Company may engage the services of a professional proxy
solicitation firm. The Company will ask banks, brokers and other institutions,
nominees and fiduciaries to forward its proxy statement materials to their
principals and to obtain their authority to execute proxies and voting
instructions. The Company will reimburse them for their reasonable
expenses.
Stock
Ownership
Of
the
5,917,031 outstanding shares of the Company’s common stock, the Company’s
initial stockholders, including all of its officers, directors and its special
advisor and their affiliates, who purchased shares of common stock prior to
the Company’s IPO and who own an aggregate of approximately 20% of the
outstanding shares of the Company common stock (1,183,406 shares), have agreed
to vote such shares acquired prior to the IPO in accordance with the vote
of the
majority in interest of all other stockholders on the Merger Proposal. Moreover,
all of these persons have agreed to vote all of their shares which were acquired
in or following the IPO, if any, in favor of the Merger Proposal. See “Beneficial
Ownership of Securities - Beneficial Ownership Following the Merger” for
information
regarding the beneficial ownership of FMG common stock following the Merger.
The
following table sets forth information regarding the beneficial ownership of
our
common stock as of August 15, 2008 by:
·
each
person known by us to be the beneficial owner of more than 5% of our outstanding
shares of common stock;
·
each of
our officers and directors; and
·
all our
officers and directors as a group.
Unless
otherwise indicated, we believe all persons named in the table have sole voting
and investment power with respect to all shares of common stock beneficially
owned by them.
|
|
Common Stock
|
|
Name and Address of Beneficial
Owners(1)
|
|
Number of Shares (2)
|
|
Percentage of
Common
Stock
|
|
|
|
|
|
|
|
FMG
Investors LLC(3)
|
|
|
1,099,266
|
|
|
18.57
|
%
|
Gordon
G. Pratt, Chairman, Chief Executive Officer and President
|
|
|
1,099,266
|
(3)
|
|
18.57
|
%
|
Larry
G. Swets, Jr., Chief Financial Officer, Secretary, Treasurer, Executive
Vice President
|
|
|
1,099,266
|
(3)
|
|
18.57
|
%
|
Thomas
D. Sargent, Director
|
|
|
21,035
|
|
|
0.36
|
%
|
David
E. Sturgess, Director(4)
|
|
|
21,035
|
|
|
0.36
|
%
|
James
R. Zuhlke, Director
|
|
|
21,035
|
|
|
0.36
|
%
|
HBK
Investments L.P.(5)
|
|
|
547,250
|
|
|
9.2
|
%
|
Brian
Taylor (6)
|
|
|
437,500
|
|
|
7.4
|
%
|
Bulldog
Investors(7)
|
|
|
1,282,167
|
|
|
21.67
|
%
|
Millenco
LLC(8)
|
|
|
189,375
|
|
|
3.2
|
%
|
D.B.
Zwirn Special Opportunities Fund, L.P.(9)
|
|
|
178,500
|
|
|
3.02
|
%
|
D.B.
Zwirn Special Opportunities Fund, Ltd. (9)
|
|
|
246,500
|
|
|
4.17
|
%
|
D.B.
Zwirn & Co., L.P. (9)
|
|
|
425,000
|
|
|
7.18
|
%
|
DBZ
GP, LLC(9)
|
|
|
425,000
|
|
|
7.18
|
%
|
Zwirn
Holdings, LLC(9)
|
|
|
350,000
|
|
|
5.92
|
%
|
Daniel
B. Zwirn(9)
|
|
|
350,000
|
|
|
5.92
|
%
|
Weiss
Asset Management, LLC(10)
|
|
|
180,642
|
|
|
3.1
|
%
|
Weiss
Capital, LLC(10)
|
|
|
90,395
|
|
|
1.5
|
%
|
Andrew
M. Weiss, Ph.D.(10)
|
|
|
271,037
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
All
Directors and Officers as a Group (5 persons)
|
|
|
1,162,371
|
|
|
19.64
|
%
|
(1)
|
Unless
otherwise indicated, the business address of each of the stockholders
is
Four Forest Park, Second Floor, Farmington, Connecticut
06032.
|
|
|
(2)
|
Unless
otherwise indicated, all ownership is direct beneficial
ownership.
|
|
|
(3)
|
Each
of Messrs. Pratt and Swets are the managing members of our sponsor,
FMG Investors LLC, and may be deemed to each beneficially own the
1,099,266 shares owned by FMG Investors LLC.
|
|
|
(4)
|
The
business address of David E. Sturgess is c/o Updike, Kelly & Spellacy,
P.C., One State Street, Hartford, Connecticut 06103.
|
|
|
(5)
|
Based
on information contained in a Statement on Schedule 13G filed by
HBK
Investments L.P., HBK Services LLC, HBK Partners II L.P., HBK Management
LLC and HBK Master Fund L.P. on February 12, 2008. The address of
all such
reporting parties is 300 Crescent Court, Suite 700, Dallas, Texas
75201.
HBK Investments L.P. has delegated discretion to vote and dispose
of the
Securities to HBK Services LLC (“Services”). Services may, from time to
time, delegate discretion to vote and dispose of certain of the Securities
to HBK New York LLC, a Delaware limited liability company, HBK Virginia
LLC, a Delaware limited liability company, HBK Europe Management
LLP, a
limited liability partnership organized under the laws of the United
Kingdom, and/or HBK Hong Kong Ltd., a corporation organized under
the laws
of Hong Kong (collectively, the “Subadvisors”). Each of Services and the
Subadvisors is under common control with HBK Investments L.P. The
Subadvisors expressly declare that the filing of the statement on
Schedule
13G shall not be construed as an admission that they are, for the
purpose
of Section 13(d) or 13(g), beneficial owners of the Securities. Jamiel
A.
Akhtar, Richard L. Booth, David C. Haley, Lawrence H. Lebowitz, and
William E. Rose are each managing members (collectively, the "Members")
of
HBK Management LLC. The Members expressly declare that the filing
of the
statement on Schedule 13G shall not be construed as an admission
that they
are, for the purpose of Section 13(d) or 13(g), beneficial owners
of the
Securities.
|
|
|
(6)
|
Based
on information contained in a Statement on Schedule 13D filed by
Brian
Taylor, Pine River Capital Management L.P. and Nisswa Master Fund
Ltd. on
October 12, 2007. All reporting parties have shared voting and dispositive
power over such securities. The address of all such reporting parties
is
800 Nicollet Mall, Suite 2850, Minneapolis, MN 55402.
|
|
|
(7)
|
Based
on information contained in a Statement on Schedule 13D filed by
Bulldog
Investors, Phillip Goldstein and Andrew Dakos on February 13, 2008.
All
reporting parties have shared voting and dispositive power over such
securities. The address of all such reporting parties is Park 80
West,
Plaza Two, Saddle Brook, NJ 07663.
|
|
|
(8)
|
Based
on information contained in a Statement on Schedule 13G filed by
Millenco
LLC, Millenium Management LLC and Israel A. Englander on December
11,
2007. All reporting parties have shared voting and dispositive power
over
such securities. The address of all such reporting parties is 666
Fifth
Avenue, New York, NY 10103.
|
(9)
|
Based
on information contained in a Statement on Schedule 13G/A filed by
D.B.
Zwirn & Co., L.P., DBZ GP, LLC, D.B. Zwirn Special Opportunities Fund,
L.P. and D.B. Zwirn Special Opportunities Fund, Ltd. on January 25,
2008.
D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings, LLC, and Daniel
B. Zwirn may each be deemed the beneficial owner of (i) 178,500 shares
of
common stock owned by D.B. Zwirn Opportunities Fund, L.P. and (ii)
246,500
shares of common stock owned by D.B. Zwirn Special Opportunities
Fund,
Ltd. (each entity referred to in (i) through (ii) is herein referred
to as
a "Fund" and, collectively, as the "Funds"). D.B. Zwirn & Co., L.P. is
the manager of the Funds, and consequently has voting control and
investment discretion over the shares of common stock held by the
Fund.
Daniel B. Zwirn is the managing member of and thereby controls Zwirn
Holdings, LLC, which in turn is the managing member of and thereby
controls DBZ GP, LLC, which in turn is the general partner of and
thereby
controls D.B. Zwirn & Co., L.P. The foregoing should not be construed
in and of itself as an admission by any Reporting Person as to beneficial
ownership of shares of common stock owned by another Reporting Person.
In
addition, each of D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings,
LLC and Daniel B. Zwirn disclaims beneficial ownership of the shares
of
common stock held by the Funds.
|
|
|
(10)
|
Based
on information contained in a Statement on Schedule 13G filed by
Weiss
Asset Management, LLC, Weiss Capital, LLC and Andrew M. Weiss, Ph.D.
on
July 18, 2008. Shares reported for Weiss Asset Management, LLC include
shares beneficially owned by a private investment partnership of
which
Weiss Asset Management, LLC is the sole general partner. Shares reported
for Weiss Capital, LLC include shares beneficially owned by a private
investment corporation of which Weiss Capital is the sole investment
manager. Shares reported for Andrew Weiss include shares beneficially
owned by a private investment partnership of which Weiss Asset Management
is the sole general partner and which may be deemed to be controlled
by
Mr. Weiss, who is the Managing Member of Weiss Asset Management,
and also
includes shares held by a private investment corporation which may
be
deemed to be controlled by Dr. Weiss, who is the managing member
of Weiss
Capital, the Investment Manager of such private investment corporation.
Dr. Weiss disclaims beneficial ownership of the shares reported herein
as
beneficially owned by him except to the extent of his pecuniary interest
therein. Weiss Asset Management, Weiss Capital, and Dr. Weiss have
a
business address of 29 Commonwealth Avenue, 10th Floor, Boston,
Massachusetts 02116.
|
PROPOSAL 1
THE
MERGER PROPOSAL
The
discussion in this proxy statement/prospectus of the Merger Proposal and
the
principal terms of the Merger Agreement, dated April 2, 2008, as amended
and
restated on August 15, 2008, by and among the Company, United and United
Subsidiary Corp., and the associated agreements are subject to, and are
qualified in their entirety by reference to, the Merger Agreement, which
is
attached as Annex A, to this proxy statement/prospectus and is incorporated
in this proxy statement/prospectus by reference.
General
Description of the Merger
On
April 2, 2008, the Company entered into an Agreement and Plan of Merger (the
“Merger Agreement”) pursuant to which United Subsidiary has agreed to merge with
and into United, and United has agreed, subject to receipt of the Merger
consideration from FMG, to become a wholly-owned subsidiary of FMG (the
“Merger”). The Merger Agreement was amended and restated on August 15, 2008. If
the stockholders of the Company approve the transactions contemplated by
the
Merger Agreement, FMG, through United Subsidiary, which was newly incorporated
in order to facilitate the Merger contemplated thereby, will purchase all
of the
membership units of United in a series of steps as outlined
below.
FMG
and United will merge pursuant to a merger transaction summarized as
follows:
|
·
|
FMG
will create a transitory merger subsidiary, United Subsidiary Corp.,
and
will merge such subsidiary with and into United, with United surviving;
and
|
|
·
|
United
will, as a result, become wholly-owned by
FMG.
|
United’s
members will receive consideration from FMG for their membership units of
up to
$104,316,270 consisting of:
|
·
|
8,750,000
shares of FMG common stock, par value $.0001 per share (assuming
an $8.00
per share value);
|
|
·
|
up
to $5,000,000 of additional consideration which will be paid to
the
members of United in the event certain net income targets are met
by
United, as set forth more particularly herein;
|
|
·
|
1,093,750
newly issued common stock purchase warrants identical in all respects
to
the warrants issued in the Company’s
IPO;
|
|
·
|
up
to an additional 212,877 newly issued common stock purchase warrants
identical in all respects to the warrants issued in the Company’s IPO;
and |
|
·
|
up
to an additional 212,877 shares of FMG common
stock. |
The
aggregate consideration will paid pursuant to the Merger Agreement for the
purchase of the membership units of United. The Company’s Board of Directors has
determined United has a fair market value equal to at least 80% of the Company’s
net assets held in trust.
The
Company, United and United Subsidiary Corp. plan to consummate the Merger as
promptly as practicable after the Special Meeting, provided that:
|
·
|
the
Company’s stockholders have approved and adopted the Merger Proposal and
the transactions contemplated
thereby;
|
|
·
|
holders
of not more than 29.99% of the shares of the common stock issued
in the
Company’s IPO vote against the Merger Proposal and demand conversion of
their shares into cash;
|
|
·
|
holders
of not less than 66% of the membership units of United vote in
favor of
the Merger;
|
|
·
|
the
private placement, including the exchange offer, and the tender
offer
shall have taken place;
|
|
·
|
the
Securities and Exchange Commission has declared effective the registration
statement and prospectus which form a part of this proxy
statement/prospectus; and
|
|
·
|
the
other conditions specified in the Merger Agreement have been satisfied
or
waived.
|
The
obligation of FMG to close on the Merger is contingent on satisfaction or waiver
of the following conditions:
(i)
the
accuracy in all material respects on the date of the Merger Agreement and the
Closing Date of all of United’s representations and warranties, when considered
both collectively and individually;
(ii)
United’s
performance in all material respects of all covenants and obligations required
to be performed by the Closing Date;
(iii)
a
majority of the Company’s stockholders must vote in favor of approving the
Merger;
(iv)
not
more than 29.99% of the shares of the common stock issued in the Company’s
IPO vote against the Merger and demand conversion of their stock into
cash;
(v)
stockholder approval of the First and Second Amendment
Proposals;
(vi)
the
Securities and Exchange Commission has declared effective the registration
statement and prospectus which form a part of this proxy statement;
(vii)
no
governmental authority has enacted, issued, promulgated, enforced or entered
any
law or order that is in effect and has the effect of making the Merger illegal
or otherwise preventing or prohibiting consummation of the Merger;
(viii) the
private placement, including the exchange offer, and the tender offer shall
have
taken place;
(ix)
the
officers are, and the Board of Directors of FMG following the Merger is
constituted, as set forth as the Board of Directors recommends, as fully
described herein; and
(x)
the
consent of not less than 66% of the membership units of United to the Merger
and
no more than ten percent (10%) of the outstanding membership units of United
shall constitute dissenting membership units under Florida
law.
Conditions
(i), (ii) and (ix), as well as the Third Amendment Proposal, are waivable by
the
Company.
United’s
obligation to close on the Merger is contingent upon:
(i)
the
accuracy in all material respects on the date of the Merger Agreement and the
Closing Date of all of FMG’s representations and warranties;
(ii)
FMG’s
performance in all material respects of all covenants and obligations required
to be performed by the Closing Date;
(iii)
a
majority of the Company’s stockholders must vote in favor of approving the
Merger;
(iv)
not
more than 29.99% of the shares of the common stock issued in the Company’s
IPO vote against the Merger and demand conversion of their stock into
cash;
(v)
stockholder approval of the First, Second and Third Amendment
Proposals;
(vi)
the
Securities and Exchange Commission has declared effective the registration
statement and prospectus which form a part of this proxy statement;
(vii)
the private placement, inluding the exchange offer, and the tender offer
shall
have taken place;
(viii) no
governmental authority has enacted, issued, promulgated, enforced or entered any
law or order that is in effect and has the effect of making the Merger illegal
or otherwise preventing or prohibiting consummation of the Merger;
and
(ix)
the
officers and the Board of Directors of FMG following the Merger is constituted
as set forth as the Board of Directors recommends, as fully described
herein.
Conditions
(i), (ii) and (ix), as well as the Third Amendment Proposal, are waivable
by
United.
See
the
description of the Merger Agreement in the section entitled “The Merger
Agreement” beginning on page 64. The Merger Agreement is included
as Exhibit 1.1 to this proxy statement/prospectus and the Merger
Agreement is included as Exhibit 1.2. We encourage you to read the Merger
Agreement in its entirety.
Under
the
terms of the Company’s amended and restated certificate of incorporation, the
Company may proceed with the Merger provided that not more than
29.99% of the Company's public stockholders electing to convert their
shares of common stock to cash and not participate in the Merger.
Background
of the Merger
During
the period immediately subsequent to our initial public offering on October
11,
2007 through March 2008, we were involved in identifying and evaluating
prospective businesses regarding potential business combinations. On October
12,
2007, the day after the consummation of our initial public offering, management
convened a discussion with our Board of Directors to institute centralized
corporate governance procedures and to discuss and begin implementing our
overall plan for identifying, evaluating and, where appropriate, pursuing a
potential business combination. We discussed the most effective means for us
to
solicit and track opportunities, and we determined that we should plan regular
telephonic conferences with our board to discuss our progress. Given our
commitment to source, review and negotiate a transaction, we agreed immediately
to identify and begin the process of making contact with: (i) private companies
we know to be active in the insurance industry and (ii) various prospective
sources of deal flow, including investment banks, actuaries, consultants,
private equity firms and business acquaintances we have established over a
professional lifetime within the insurance industry to encourage them to contact
us with new and old ideas or specific business combination opportunities they
might wish for us to consider and explore. Messrs. Pratt and Swets
discussed with the board various areas within the insurance industry where
they
expected there to be a higher probability of identifying attractive companies
for a business combination, with particular focus on specialty property-casualty
insurance companies, wholesale insurance brokerages and program management
businesses. Messrs. Pratt and Swets discussed with the board some of the
opportunities and risks of a business combination with an insurance company
when
compared to an insurance wholesale broker or program, pointing out that each
type of business holds attractive elements and other elements to
consider.
We
were able to source opportunities both by approaching private companies and
by
responding to inquiries or references from the various sources of deal flow
noted above. We did not limit ourselves to any single transaction structure
(i.e. cash vs. stock issued to potential seller, straight merger, corporate
spin-out or management buy-out). Although the search stayed within the insurance
industry, the definition of insurance remained broad. Active sourcing involved
FMG management, among other things:
|
·
|
Initiating
conversations, via phone, e-mail or other means (whether directly
or via a
private company’s major stockholders, members, or directors as well as
professionals and industry contacts we have known during our professional
careers) with private companies which management believed could make
attractive business combination
partners;
|
|
·
|
Contacting
professional service providers (accountants, attorneys, actuaries
and
consultants);
|
|
·
|
Using
their network of business associates and friends for
leads;
|
|
·
|
Working
with third-party intermediaries, including investment bankers;
and
|
|
·
|
Inquiring
directly of business owners, including private equity firms, of their
interest in having one of their businesses enter into a business
combination.
|
Management
also fielded inquiries and responded to solicitations by: (i) companies
looking for capital or investment alternatives and (ii) investment bankers
or other similar professionals who represent companies engaged in a sale or
fund-raising process. We considered numerous companies in various sectors of
the
insurance industry, including underwriting property-casualty insurance
companies, retail insurance brokerage, wholesale insurance brokerage, insurance
program management, United Kingdom-based employee benefits management, critical
care insurance and management, wholesale life insurance brokerage and
professional employer organization workers’ compensation insurance. Several
non-disclosure agreements were signed.
In
considering potential targets, the Company's management considered the following
factors concerning potential business combination partner, as being material
to
their decision:
|
·
|
Specialty
focus, for example by line of business, geography, product, distribution
or client base;
|
|
|
|
|
·
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Record
of growth and profitability;
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Ability
to operate in difficult, dislocated or fragmented
markets;
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Business
model and approach to building recurring
revenue;
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Ability
to achieve incremental revenue or decrease costs from current core
business;
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Potential
for greater economies of scale or higher profitability through
consolidation;
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Opportunity
to deploy capital at appropriate rates of return in the current business
plan;
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Experience
and skill of management and availability of additional
personnel;
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Capital
requirements;
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Competitive
position;
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Financial
condition;
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Barriers
to entry;
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