FREMONT MUTUAL INSURANCE COMPANY PLAN OF CONVERSION

 

EXHIBIT 2

FREMONT MUTUAL INSURANCE COMPANY

PLAN OF CONVERSION

 

Dated: August 25, 2003, as amended

 

TABLE OF CONTENTS

 

ARTICLE I     GENERAL PROVISIONS
	Section 1.1  Definitions	1
	Section 1.2  Headings	5
ARTICLE II     THE PLAN
	Section 2.1  Approval of Plan	6
	Section 2.2  Reasons for Proposed Conversion	6
ARTICLE III     REQUIREMENTS FOR CONVERSION APPROVAL
	Section 3.1  Application to OFIS	6
	Section 3.2  Notice to Eligible Policyholders	7
	Section 3.3  Articles of Incorporation	7
	Section 3.4  The Special Meeting	7
ARTICLE IV     THE CONVERSION
	Section 4.1  Purchase Price and Determination of the Number of Subscription
	Shares to be Offered	8
	Section 4.2  Number of Subscription Shares to be Sold	8
	Section 4.3  Effective Date of Conversion	10
	Section 4.4  Status of Policies in Force on the Effective Date	10
	Section 4.5  Notice to Non-eligible Policyholders	10
ARTICLE V      THE SUBSCRIPTION OFFERING
	Section 5.1  Allocation of Subscription Rights	11
	Section 5.2  Subscription Rights	11
	Section 5.3  Limitations Upon Purchases of Subscription Shares	11
	Section 5.4  Timing of Subscription Offering and Compliance with Applicable
	Securities Laws	13
	Section 5.5  Offering Document	13
	Section 5.6  Mailing of Offering Materials and Collection of Subscriptions	13
ARTICLE VI     THE COMMUNITY OFFERING AND OTHER OFFERINGS
	Section 6.1  Community Offering	14
	Section 6.2  Alternate Financing Strategies	14
ARTICLE VII     ADDITIONAL RELATED TRANSACTIONS
	Section 7.1  Conversion of the Surplus Notes	14
	Section 7.2  The Stock Compensation Plans	15

i

 

ARTICLE VIII     SALE AND TRANSFER REQUIREMENTS AND RESTRICTIONS
	Section 8.1  Method of Payment for Subscription Shares	15
	Section 8.2  Undelivered, Defective or Late Order Forms, Insufficient Payment	16
	Section 8.3  Sales of Subscription Shares to Persons Who Reside in Certain
	Jurisdictions	16
	Section 8.4  Restrictions on Transfer of Shares	16
	Section 8.5  Purchases of Shares by Directors, Officers and Associates
	Following Conversion	17
	Section 8.6  Maximum Purchase Restrictions	17
ARTICLE IX     INTERPRETATION, AMENDMENT AND TERMINATION OF THE PLAN
	Section 9.1  Interpretation of the Plan	17
	Section 9.2  Amendment
	Section 9.3  Termination	18
	Section 9.4  Binding Upon Eligible Policyholders	19

ii

 

FREMONT MUTUAL INSURANCE COMPANY

PLAN OF CONVERSION

          This Plan of Conversion is effective August 25, 2003, having been duly adopted by the Board of Directors pursuant to Chapter 59 of the Michigan Insurance Code.

 

ARTICLE I
GENERAL PROVISIONS

          Section 1.1          Definitions. The following terms shall have the following meanings when used in this document:

          "Act" means Chapter 59 of the Michigan Insurance Code, MCL 500.5901, et seq., as amended, which provides for the conversion of a domestic mutual insurer to a domestic stock insurer.

          "Acting in Concert" means (i) knowing participation in a joint activity or interdependent conscious parallel action towards 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") shall also be deemed to be acting in concert with any person who is also acting in concert with that other party. Notwithstanding anything to the contrary express or implied in the Plan, for purposes of this Plan, and with respect to the Conversion, no Designated Person shall be acting in concert with, or be deemed to be acting in concert with, any Person or any other party.

          "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary express or implied in the Plan or the Act, for purposes of this Plan, and with respect to the Conversion, no Designated Person shall be an Affiliate, or be deemed to be an Affiliate, of any other Designated Person.

          "Application" means the application for approval of the Conversion to be filed by Fremont Mutual with OFIS as contemplated in Section 3.1 of the Plan.

          "Appraisal" means the Independent Appraiser's estimated evaluation of the consolidated Pro Forma Market Value of the Holding Company.

          "Associate" when used to indicate a relationship with any Person, means: (i) any Person (other than Fremont Mutual or the Holding Company, a majority-owned subsidiary of Fremont Mutual or the Holding Company, or any other Person that is a member of the same consolidated group as Fremont Mutual or the Holding Company 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; and (iii) any relative or spouse of such Person, or any relative of such spouse who has the same home as such person. Notwithstanding anything to the contrary express or implied in the Plan or the Act, for purposes of this Plan, and with respect to the Conversion, no Designated Person shall be an Associate, or be deemed to be an Associate, of any other Designated Person.

 

 

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Commissioner" means the Commissioner of the Office of Financial and Insurance Services of Michigan.

          "Community Offering" means the offering of Shares to the general public by the Holding Company concurrently with the Subscription Offering, giving preference in the following order to:

	1)	policyholders of Fremont whose policies were issued after the Eligibility Record Date,
	2)	Fremont's insurance agents, agencies and owners of its insurance agencies;
	3)	public or private foundations based in Michigan; and
	4)	Residents of the State of Michigan.

          "Conversion" means: (i) the conversion of Fremont Mutual to, and the amendment of the articles of incorporation of Fremont Mutual to conform to the requirements of, a Michigan domiciled stock insurance company under the laws of the State of Michigan, (ii) the establishment of the Holding Company as a Michigan business corporation under the Michigan Business Corporation Act, as amended, (iii) the issuance of 100% of the authorized capital stock of the Converted Company to the Holding Company, (iv) the offer and sale of Shares of the Holding Company in the Subscription Offering, and otherwise, and (v) the conversion of the Surplus Notes, all in accordance with the terms of the Plan.

          "Converted Company" means Fremont Mutual, following its conversion to a Michigan stock insurance company from a Michigan mutual insurance company pursuant to the Plan. The name of the Converted Company will be Fremont Insurance Company.

          "Converted Company Capital Stock" means any and all authorized shares of capital stock of the Converted Company.

          "Designated Person" means each of Fremont Mutual, the Holding Company, the Converted Company and each director and each officer of those entities.

          "Director" means a director of Fremont Mutual.

          "Dollars" and the sign "$" mean the currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

          "Effective Date" means the date the Conversion of Fremont Mutual is completed, and the amended and restated articles of incorporation for the Converted Company are filed with OFIS or such later date as may be specified in those articles.

          "Eligibility Record Date" means the close of business on August 25, 2003, the effective date of the adoption of the Plan by the Board of Directors of Fremont Mutual.

 

2

 

          "Eligible Policyholder" means a Person who, on the Eligibility Record Date, is a named insured under a Qualifying Policy issued by Fremont Mutual; provided however, that if the Qualifying Policy lists more than one named insured, all persons identified on the Qualifying Policy as a named insured shall jointly constitute one Eligible Policyholder with respect to that Qualifying Policy. Notwithstanding anything to the contrary expressed or implied in the Plan or the articles of incorporation or bylaws of Fremont Mutual, (i) no Qualifying Policy shall have more than one Eligible Policyholder, and (ii) with respect to each Qualifying Policy for which there is more than one named insured, the act of any one of the named insureds shall constitute the act of the Eligible Policyholder for the Qualifying Policy and all of the named insureds for the Qualifying Policy shall be bound by that act. A person insured under a group policy is not an Eligible Policyholder.

          "Fremont Mutual" means Fremont Mutual Insurance Company.

          "Holding Company" means Fremont Michigan InsuraCorp, Inc., a Michigan business corporation incorporated at the direction of Fremont Mutual for the purpose of becoming a holding company for the Converted Company through (i) the issuance and sale of Shares under the Plan, and (ii) the concurrent acquisition of all of the Converted Company Capital Stock to be issued and sold pursuant to the Plan.

          "Holding Company Stock" means any and all authorized shares of capital stock of the Holding Company.

          "Independent Appraiser" means a person independent of Fremont Mutual and the Holding Company, experienced and expert in the area of corporate appraisals, to be selected and retained by Fremont Mutual to prepare an appraisal of the consolidated Pro Forma Market Value of the Holding Company.

          "Local Community" means the State of Michigan, which State comprises the geographic market area of Fremont Mutual.

          "Offering" means the offering of Shares by the Holding Company in the Subscription Offering, the Community Offering and in a Public Offering or otherwise pursuant to the Plan.

          "Offering Maximum" means the Valuation Range Maximum less the product of (i) the number of Shares to be issued to the Surplus Note holders pursuant to Section 7.1 of the Plan multiplied by (ii) the Purchase Price.

          "Offering Minimum" means the Valuation Range Minimum less the product of (i) the number of Shares to be issued to the Surplus Note holders pursuant to Section 7.1 of the Plan multiplied by (ii) the Purchase Price.

          "Offering Range" means any Dollar amount between the Offering Maximum and the Offering Minimum.

          "Officer" means an officer of Fremont Mutual.

          "OFIS" means the Michigan Office of Financial and Insurance Services.

          "Order Form" means the order form or forms to be used by Eligible Policyholders, other persons eligible to purchase Shares pursuant to the Plan, and holders of Surplus Notes desiring to convert their Surplus Note in whole or in part to Shares.

 

3

 

          "Participant" means a Michigan Resident entitled to purchase Shares in the Subscription Offering (i.e., an Eligible Policyholder, or an Officer or Director of Fremont Mutual).

          "Person" means any individual, corporation, partnership, association, limited liability company, trust or other entity.

          "Plan" means this Plan of Conversion, as it may from time to time be amended, under which Fremont Mutual will convert from a Michigan mutual insurance company to a Michigan stock insurance company and become a wholly-owned subsidiary of the Holding Company.

          "Private Placement" means the offer and sale of Shares in a private placement as contemplated under Section 6.2 of the Plan.

          "Pro Forma Market Value" means the Independent Appraiser's evaluation of the consolidated, pro forma market value of the Holding Company upon conversion, as discounted to attract full subscription for the Subscription Shares, as indicated by the Independent Appraiser.

          "Purchase Price" means the uniform price per share at which the Shares will be offered and sold in the Offering, which price shall be determined by Fremont Mutual and the Holding Company in accordance with Section 4.1 of the Plan.

          "Qualifying Policy" means a policy of insurance issued by Fremont Mutual 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 to it filed by the Holding Company with the SEC pursuant to the Securities Act of 1933, as amended, to register the Shares to be offered in the Subscription Offering or otherwise pursuant to the Plan.

          "Resident" as used in this Plan in relation to the preference afforded natural persons and trusts of natural persons in the Local Community means any natural person who occupies a dwelling within the Local Community, has an intention to remain within the Local Community for a period of time (manifested by establishing a physical, ongoing, non-transitory presence within the Local Community) and continues to reside in it at the time of the Subscription and Community Offerings. Fremont Mutual may utilize policyholder records and such other evidence as it may determine to be relevant to make a determination as to whether a person resides in the Local Community. In the case of a corporation or other business entity, the entity shall be deemed to be a