Exhibit 2.1
PLAN OF CONVERSION
FROM MUTUAL TO STOCK ORGANIZATION
LEBANON MUTUAL INSURANCE COMPANY
Adopted December 19, 2007
Amended and Restated April 16, 2008
I. BACKGROUND AND BUSINESS
PURPOSE
On December 19, 2007, the Board
of Directors of Lebanon Mutual Insurance Company (“
LMIC ” or the “ Company ”), after
careful study and consideration, adopted this Plan of Conversion
from Mutual to Stock Organization. On April 16, 2008, the
Board of Directors of the Company amended and restated this Plan of
Conversion (as amended and restated, the “ Plan
”) Under this Plan, as of the Effective Date, LMIC will
convert from a Pennsylvania mutual insurance company to a
Pennsylvania stock insurance company pursuant to the Insurance
Company Mutual-to-Stock Conversion Act, 40 P.S.
Sections 911-A, et seq . (“ Act
”), and will simultaneously sell all of its authorized shares
to LMI Holdings, Inc., a Pennsylvania business corporation (“
HoldCo ”), thereby becoming a wholly owned subsidiary
of HoldCo (collectively, the “ Conversion
”).
The Board has determined that the
Conversion will enhance LMIC’s strategic and financial
flexibility and increase its competitive position in a manner that
furthers the interests of LMIC and its Members. The Board has
determined that the Conversion is in the best interest of LMIC. As
converted, LMIC is sometimes hereinafter referred to as the “
Converted Company ” and the foregoing transaction is
sometimes hereinafter referred to as the “ Conversion
.”
Under this Plan, shares of
HoldCo’s capital stock, $0.01 par value (the “
Conversion Stock ”), will be offered and sold first to
qualifying offerees under the Subscription Offering and then to
qualifying offerees under the Community Offering (each, as
hereinafter defined). The Subscription Offering and the Community
Offering are hereinafter referred to collectively as the “
Offering .” HoldCo will be required to sell in the
Offering such number of shares of Conversion Stock as shall be
necessary to generate gross proceeds in an amount within the
Valuation Range as determined by an independent third party
appraiser.
The Conversion is subject to
provisions of the Act and the policies of the Pennsylvania
Insurance Department (“ Department ”). This Plan
is subject to the prior written approval of the Department. The
Plan also must be approved by the affirmative vote of at least
two-thirds of the votes cast at a meeting of Eligible Members of
LMIC called for the purpose of considering and voting upon the
Plan.
II. DEFINITIONS
Capitalized terms used and not
otherwise defined herein shall have the following meanings:
Act means the Insurance
Company Mutual-to-Stock Conversion Act (40 P.S. Sections 911-A,
et seq .).
Acting in Concert means:
(i) knowing participation in a joint activity or
interdependent conscious parallel action toward a common goal
whether or not pursuant to an express agreement, or (ii) a
combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any
contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. A Person who acts in
concert with another Person (“ Other Party ”)
also shall be deemed to be acting in concert with any Person who
also is acting in concert with that Other Party.
Affiliate means, with respect
to a Person, any Person that, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common
control with such Person. For purposes of this definition,
“control” means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract or otherwise, unless the power is the
result of an official position with or corporate office held by the
person. “Control” shall be presumed to exist if any
person, directly or indirectly, owns, controls, holds with the
power to vote or holds proxies representing fifty percent (50%) or
more of the voting securities of another person.
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Amended Articles means the
articles of incorporation of LMIC as amended to authorize the
issuance of shares of capital stock and to conform to the
requirements of a Pennsylvania stock insurance company under the
laws of the Commonwealth of Pennsylvania.
Application means the
application for approval of the Conversion to be filed by LMIC with
the Department as described in Section III of this Plan.
Appraised Value means the
final estimated consolidated pro forma market value of LMIC as
determined by the Appraiser at the conclusion of the
Offering.
Appraiser means a Person that
is not an Affiliate of LMIC and that is an experienced expert in
the area of corporate appraisals, who is retained by LMIC to
determine the Valuation Range and the Appraised Value.
Associate , when used to
indicate a relationship with any Person, means: (i) any
corporation or organization (other than LMIC or a majority-owned
subsidiary of LMIC or any other entity that is a member of the same
consolidated group as LMIC under generally accepted accounting
principles) of which such Person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities, (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary
capacity, except that such term shall not include a Qualified Stock
Plan in which a Person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, and
(iii) any relative or spouse of such Person, or any relative
of such spouse, in each case, who has the same home as such
Person.
Closing means the conversion
of LMIC pursuant to this Plan by the filing of the Amended Articles
in the office of the Department of State of the Commonwealth of
Pennsylvania.
Commissioner means the
Insurance Commissioner of the Commonwealth of Pennsylvania.
Community Offering means the
offering by HoldCo of shares of Conversion Stock to the public that
is described at Section V. HoldCo may retain the assistance of
a broker-dealer or a
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syndicate of broker-dealers to assist it in connection with the
sale of Conversion Stock in the Community Offering.
Conversion means:
(i) the amendment of the articles of incorporation of LMIC to
authorize the issuance of shares of capital stock and to conform to
the requirements of a Pennsylvania stock insurance company under
the laws of the Commonwealth of Pennsylvania, (ii) the offer
and sale of Conversion Stock by HoldCo in the Offering, and
(iii) the issuance to HoldCo of all of the capital stock of
LMIC; all in accordance with the terms of this Plan.
Conversion Mailing has the
meaning given in Section IV.
Conversion Stock means the
shares of capital stock, $0.01 par value, of HoldCo to be offered
and sold in the Offering pursuant to this Plan.
Converted Company means LMIC
in its form as a Pennsylvania stock insurance company resulting
from its conversion to the stock form of organization in accordance
with the terms of this Plan.
Effective Date means the date
the Amended Articles are filed in the office of the Department of
State of the Commonwealth of Pennsylvania or such later date as may
be specified in the Amended Articles.
Eligibility Record Date means
the close of business on December 19, 2007 the effective date
of the adoption of this Plan by the Board of Directors of
LMIC.
Eligible Member means a
Person who, on the Eligibility Record Date, is a named insured
under a Qualifying Policy that is an individual policy.
LMIC Legacy Participants
means the directors, officers and employees of LMIC as of the
Eligibility Record Date and, without duplication, the directors
officers and employees of LMIC as of the Effective Date
LMIC Special Meeting means
the Special Meeting of Eligible Members to be called by LMIC for
the purpose of submitting this Plan to Eligible Members for
approval.
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LMIC means Lebanon Mutual
Insurance Company, a Pennsylvania corporation.
Maximum of the Valuation
Range means the valuation that is fifteen percent (15%) above
the midpoint of the Valuation Range as provided in
Section VII(A)(1) of this Plan.
Member means the named
insured under an individual insurance policy issued by LMIC.
Minimum of the Valuation
Range means the valuation that is fifteen percent (15%) below
the midpoint of the Valuation Range as provided in
Section VII(A)(1) of this Plan.
MTS means Griffin MTS
Partners LLC, a Pennsylvania limited liability company formed to
assist LMIC in connection with the Conversion and to purchase
Conversion Stock in the Offering in accordance with
Section VII of this Plan.
MTS Investment Agreement
means the Investment Agreement dated December 19, 2007 among,
HoldCo, LMIC and MTS pursuant to which (i) MTS agrees, among
other things, to assist LMIC in connection with the Conversion and
to purchase Conversion Stock in the Offering, (ii) LMIC
agrees, among other things, to reimburse MTS for expenses incurred
or paid by MTS in connection with the Conversion, and
(iii) HoldCo agrees to redeem the shares of Conversion Stock
purchased by MTS in the Offering.
Natural Person means any
individual.
Non-Tax-Qualified Employee Stock
Benefit Plan means any defined benefit plan or defined
contribution plan of HoldCo which is not a Qualified Stock
Plan.
Offering means the offering
of Conversion Stock by HoldCo pursuant to this Plan via the
Subscription Offering and the Community Offering.
Offering Prospectus means the
final prospectus forming a part of the Registration Statement to be
used in connection with the Offering.
Order Form means the original
order form or forms to be used by subscribers to purchase
Conversion Stock pursuant to this Plan.
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Participant means a Person to
whom Conversion Stock is offered under the Offering.
Person means any individual
and any corporation, partnership, association, limited liability
company, trust or other entity.
Plan means this Plan of
Conversion, as it from time to time may be amended, under which
LMIC will convert from a Pennsylvania mutual insurance company to a
Pennsylvania stock insurance company.
Proxy Statement has the
meaning given in Section IV.
Purchase Limit means the
maximum number of shares of Conversion Stock that each Participant
is permitted to purchase as specified in Section VII(E)(2) of
this Plan.
Purchase Price means the
uniform price per share at which the Conversion Stock will be
offered and sold in the Offering, which price shall be determined
by LMIC in accordance with Section VII(A)(2) of this
Plan.
Qualified Stock Plan means
any defined benefit plan or defined contribution plan of HoldCo,
such as an employee stock ownership plan, stock bonus plan, profit
sharing plan or other plan, that, with its related trust, meets the
requirements to be “qualified” under Section 401
of the Internal Revenue Code of 1986, as amended.
Qualifying Policy means a
policy of insurance issued by LMIC and in force as of the close of
business on the Eligibility Record Date.
Registration Statement means
the Registration Statement on Form S-1 and any amendments thereto
filed by HoldCo with the SEC pursuant to the Securities Act of
1933, as amended, to register the offer and sale of shares of
Conversion Stock pursuant to the Offering.
Resident , as used in this
Plan in relation to the preference afforded Natural Persons and
trusts of Natural Persons in Berks, Dauphin, Lancaster and Lebanon
Counties, Pennsylvania, means any Natural Person who, as of the
close of business of that date which is thirty days prior to the
Effective Date, occupies a dwelling within Berks, Dauphin,
Lancaster or Lebanon County,
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Pennsylvania, has an intention to remain within Berks, Dauphin,
Lancaster or Lebanon County, Pennsylvania for a period of time
(manifested by establishing a physical, ongoing, non-transitory
presence within Dauphin, Lancaster or Lebanon County, Pennsylvania)
and continues to reside therein at the time of the Offering. LMIC
may utilize such evidence as it may determine to be relevant to
make a determination to confirm that a Natural Person is a
Resident. All determinations as to the status of a Natural Person
as a Resident shall be made by LMIC in its sole and absolute
discretion and shall be final and binding.
SEC means the Securities and
Exchange Commission or any successor agency.
Subscription Offering means
the offering by HoldCo of shares of Conversion Stock that is
described at Section V. HoldCo or LMIC may retain a
broker-dealer to assist it in connection with the sale of
Conversion Stock in the Subscription Offering.
Subscription Rights means the
nontransferable, nonnegotiable, personal rights of Eligible
Members, LMIC Legacy Participants, a Qualified Stock Plan, and MTS
to purchase Conversion Stock under the Plan.
Valuation Range means the
estimated range of the consolidated pro forma market value of LMIC
as a subsidiary of HoldCo, to be prepared by the Appraiser as
provided in Section VII(A)(1) of this Plan.
III. APPLICATION
Within 90 days after adoption of
this Plan by the Board of Directors of LMIC and prior to submission
of this Plan to Eligible Members for approval at the LMIC Special
Meeting, LMIC shall file the Application. The Application shall
contain the following:
(A)
This Plan;
(B) The
MTS Investment Agreement;
(C) The
report of the Appraiser with respect to the determination of the
Valuation Range as required by Section VII(A) of this
Plan;
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(D) The
form of notice required by this Section III;
(E) The
form of proxy to be solicited from Eligible Members pursuant to
Section IV of this Plan;
(F) The
Proxy Statement;
(G) The
form of notice required by Section 809-A of the Act to be
given to Persons whose policies are issued after adoption of this
Plan but before the Effective Date;
(H) The
proposed amended Articles of Incorporation and Bylaws of the
Converted Company; and
(I) The
acquisition of control statements of MTS and HoldCo, as required by
Section 1402 of the Insurance Company Act of 1921, as
amended.
Upon the filing of the Application,
LMIC shall send a notice by first class mail to each Eligible
Member (as such address appears on the records of LMIC), which
notice shall: (i) advise each Eligible Member of the adoption
of this Plan, (ii) advise each Eligible Member of the filing
of this Plan with the Department, (iii) notify each Eligible
Member of his or her right to provide comments on this Plan to the
Department and to LMIC, (iv) advise each Eligible Member of
the procedure to be followed in providing comments on this Plan,
(v) notify each Eligible Member of his or her right to request
and receive a copy of this Plan, and (vi) disclose to such
Eligible Member that the initial Plan is not the final approved
Plan and that the Commissioner’s approval, if any, of the
final Plan does not constitute or imply endorsement of this Plan or
the Conversion by the Commissioner or the Department.
IV. THE SPECIAL MEETING
Following the filing of the
Application with, and its approval by, the Department, the LMIC
Special Meeting to vote on this Plan shall be held by LMIC in
accordance with the bylaws of LMIC and applicable law. Notice of
the LMIC Special Meeting will be given by LMIC to Eligible Members
by mailing: (i) a notice of special meeting, (ii) a proxy
statement (the “ Proxy
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Statement ”), (iii) a form of proxy authorized
for use by the Department under which an Eligible Member may vote
in favor of the Conversion, (iv) a copy of this Plan as
approved by the Department, and (v) either a copy of the
Offering Prospectus or a postage paid order form whereby the
Eligible Member may request that an Offering Prospectus be mailed
to them (collectively, the “ Conversion Mailing
”), to the address of each Eligible Member as such address
appears on the records of LMIC on the Eligibility Record Date or
otherwise as provided by this Plan. The Conversion Mailing shall be
made not less than thirty (30) days prior to the date of the
LMIC Special Meeting if it includes a copy of the Offering
Prospectus and not less than forty-five (45) days prior to the
date of the LMIC Special Meeting if it does not include a copy of
the Offering Prospectus.
Pursuant to the Act, the Plan must be
approved by the affirmative vote of at least two-thirds of the
votes cast at the LMIC Special Meeting. Voting may be in person or
by proxy. The Department shall be promptly notified of the vote of
the Eligible Members taken at the LMIC Special Meeting.
V.
OFFERING PROCEDURE
If the Conversion Mailing does not
include a copy of the Offering Prospectus, the Conversion Mailing
will notify and explain to Eligible Members that if the Plan is
approved and if they wish to consider subscribing for Conversion
Stock pursuant to the Plan, then they should obtain a copy of the
Offering Prospectus by completing and returning to LMIC, by a date
certain, an accompanying postage-paid order form requesting that an
Offering Prospectus be mailed to them. HoldCo may commence the
Offering concurrently with, or at any time after the date on which
the Conversion Mailing is made. The Offering may not be closed
until the expiration of at least (i) thirty (30) days after
the date of the Conversion Mailing if a copy of the Offering
Prospectus was included, and (ii) forty-five (45) days
after the date of the Conversion Mailing if a copy of the Offering
Prospectus was not included (“ First Offer Period
”); provided, however , that the Offering may be
extended by HoldCo, in its sole discretion, for up to an additional
forty-five (45) days beyond the expiration of the First Offer
Period.
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HoldCo may make the Subscription
Offering and the Community Offering simultaneously or, at its
discretion, may proceed first with the Subscription Offering before
determining whether the Community Offering will be required in
order to effect the sale of the required number of shares of
Conversion Stock.
The proceeds of subscriptions to
Conversion Stock (“ Subscription Proceeds ”)
shall be deposited by HoldCo in an escrow account and held in that
account pending the satisfaction of all conditions to closing of
the Conversion (“ Closing Conditions ”). The
Subscription Proceeds, while held in escrow, shall be invested only
in obligations of the United States of America or which are
guaranteed as to payment of principal and interest by the full
faith and credit of the United States of America. The Subscription
Proceeds shall be released to HoldCo and the Shares of Conversion
Stock shall be delivered to subscribing Participants, in accordance
with their subscriptions (as accepted and as limited or adjusted
pursuant to the terms of the Plan) when the Closing Conditions have
been satisfied and upon Closing under the Plan and the Investment
Agreement.
Prior to commencement of the
Offering, HoldCo shall file the Registration Statement with the SEC
pursuant to the Securities Act of 1933, as amended. HoldCo shall
not distribute the Offering Prospectus until the SEC has declared
the Registration Statement effective.
If the Conversion cannot be closed
due to the inability of the parties to satisfy all required Closing
Conditions, (i) HoldCo shall notify the subscribing
Participants in writing that the Plan has been terminated and shall
return their subscription payments to them, without interest, (ii)
the Conversion Stock will not be issued, (iii) the Amended
Articles shall not be filed in the office of the Department of
State of the Commonwealth of Pennsylvania, (iv) the articles
of incorporation and bylaws of LMIC will be the articles and bylaws
of LMIC as in force and effect on December 19, 2007, and
(iv) LMIC will continue its corporate existence and operations
as a Pennsylvania mutual insurance company.
Any interest accruing on the
Subscription Proceeds held in the Escrow Account shall be paid over
to HoldCo when the Escrow Account closes (either by termination of
the Plan or by Closing on the Plan). Whether or not all Closing
Conditions have been satisfied and whether the
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Plan
should be terminated for failure to satisfy all Closing Conditions,
shall be determined by HoldCo in its sole discretion, and that
determination shall be final and binding on all parties and
Participants.
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The required conditions to Closing under the Plan shall consist
of the following: |
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1. |
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As of the Effective Date, the Appraiser shall have determined
that the Appraised Value of LMIC is within the Valuation Range, as
the same may be amended. |
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2. |
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Subscriptions shall have been received for the purchase of
Conversion Stock that yield Subscription Proceeds within the
Valuation Range and all other conditions to the closing of the
Offering shall have been satisfied or waived. |
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3. |
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All conditions to Closing under the MTS Investment Agreement
shall have been satisfied or waived and the parties thereto shall
have confirmed in writing their readiness to close thereunder
immediately following Closing under this Plan. |
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4. |
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Each of HoldCo, LMIC and MTS shall have made such filings, and
obtained such permits, authorizations, consents, or approvals
(including the consent of the Insurance Commissioner approving the
Conversion and the acquisition of control of LMIC) as are required
by law to consummate the Conversion, each in form reasonably
satisfactory to them, and the appropriate forms shall have been
executed, filed and approved as required by the corporate and
insurance laws and regulations of all applicable jurisdictions,
including Pennsylvania, all as required under this Plan and the MTS
Investment Agreement. |
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5. |
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The Conversion Plan shall have been approved by vote of the
Eligible Members in accordance with law. |
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6. |
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The Registration Statement shall have become effective under
the Securities Act of 1933 and shall not be the subject of any stop
order or proceedings seeking a stop order. |
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7. |
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The Conversion Stock shall have been authorized for listing on
the NASDAQ Stock Market or other acceptable over the counter
trading system. |
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8. |
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LMIC shall have received a legal opinion dated as of the
Closing Date from Stevens & Lee, special tax counsel to LMIC,
to the effect that, on the basis of certain facts, representations
and assumptions set forth in such opinion and/or ruling which are
consistent with the facts existing at the Closing Date, the
Conversion will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the
Code. |
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VI. CONSUMMATION OF
CONVERSION
The Effective Date will be the date
of Closing under the Plan and the MTS Investment Agreement. On the
Effective Date, (i) the Amended Articles will be filed in the
office of the Department of State of the Commonwealth of
Pennsylvania, (ii) the Conversion Stock will be issued and
sold by HoldCo, (iii) LMIC will issue all of its authorized
shares to HoldCo, and (iv) the separate existence of LMIC shall not
terminate but shall be deemed to be continued in the Converted
Company.
VII. THE OFFERING
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A. |
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Determination of the Number of Shares of Conversion Stock
Required to be Offered and Sold |
The number of shares of Conversion
Stock required to be offered and sold in the Conversion will be
determined as follows:
1. Appraiser . The
Appraiser will be retained by LMIC to determine the Valuation
Range. The Valuation Range will consist of a midpoint valuation, a
valuation fifteen percent (15%) above the midpoint valuation (the
“Maximum of the Valuation Range”) and a valuation
fifteen percent (15%) below the midpoint valuation (the
“Minimum of the Valuation Range”). The Valuation Range
will be based upon the financial condition and results of
operations of LMIC, a comparison of LMIC with comparable
publicly-held insurance companies, and such other factors as the
Appraiser may deem to be relevant and as are not inconsistent with
the provisions of the Act, including (as required by the Act) that
value which the Appraiser estimates to be necessary to attract a
full subscription for the Conversion Stock. The Appraiser
will
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