First Mercury Financial 8-K 2010
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 30, 2010
FIRST MERCURY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
PROPOSED LITIGATION SETTLEMENT
As previously announced, on October 28, 2010, First Mercury Financial Corporation (the Company), entered into an Agreement and Plan of Merger, (the Merger Agreement), with Fairfax Financial Holdings Limited (Fairfax), and Fairfax Investments III USA Corp., a Delaware corporation and an indirect wholly-owned subsidiary of Fairfax (Merger Sub), pursuant to which Merger Sub will merge with and into the Company, and the Company will continue as the surviving corporation (the Merger).
On December 14, 2010, the Company filed with the SEC a definitive proxy statement in connection with the proposed merger (the Definitive Proxy Statement). At the special meeting of stockholders of the Company, which is scheduled for January 14, 2011, stockholders of the Company will be asked to consider and vote upon the proposal to adopt the Merger Agreement.
As previously disclosed on pages 14 and 53 of the Definitive Proxy Statement and the Companys Current Report on Form 8-K filed with the SEC on November 12, 2010, a putative class action lawsuit relating to the Merger was filed in the United States District Court Eastern District of Michigan Southern Division (the Lawsuit), alleging that the consideration that the Companys stockholders will receive in connection with the Merger is inadequate and that the Companys directors breached their fiduciary duties to stockholders in negotiating and approving the Merger Agreement. The Lawsuit further alleges that the Company and Fairfax aided and abetted the alleged breaches by the Companys directors.
On December 30, 2010, the Company entered into a memorandum of understanding with the plaintiffs regarding the settlement of the Lawsuit.
The Company believes that the Definitive Proxy Statement complies with applicable laws and that no further disclosure is required to supplement the Definitive Proxy Statement. However, to avoid the risk that the Lawsuit may delay or otherwise adversely affect the consummation of the Merger and to minimize the expense of defending the Lawsuit, the Company has agreed to make certain supplemental disclosures related to the proposed Merger, all of which are set forth below. Subject to completion of certain confirmatory discovery by counsel to the plaintiffs, the memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to the Companys stockholders. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled at which the United States District Court Eastern District of Michigan Southern Division will consider the fairness, reasonableness, and adequacy of the settlement. If the settlement is finally approved by the court, it will resolve and release all claims in all actions that were or could have been brought challenging any aspect of the proposed Merger, the Merger Agreement, and any disclosure made in connection therewith (but excluding claims for appraisal under Section 262 of the Delaware General Corporation Law), pursuant to terms that will be disclosed to stockholders prior to final approval of the settlement. In addition, in connection with the settlement, the parties contemplate that plaintiffs counsel will file a petition in the United States District Court Eastern District of Michigan Southern Division for an award of attorneys fees. The settlement costs, comprised of the attorneys fees awarded to the plaintiffs counsel and the costs incurred by the Company to defend the Lawsuit, will be paid by the Company. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated.
The Company and the other defendants have vigorously denied, and continue to vigorously deny, that they have committed or aided and abetted in the commission of any violation of law or engaged in any of the wrongful acts that were or could have been alleged in the Lawsuit, and expressly maintain that, to the extent applicable, they diligently and scrupulously complied with their fiduciary and other legal burdens and are entering into the contemplated settlement solely to eliminate the burden and expense of further
litigation, to put the claims that were or could have been asserted to rest, and to avoid any possible delay in the consummation of the Merger. Nothing in this Current Report on Form 8-K, the parties memorandum of understanding or any stipulation of settlement shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein.
AMENDMENT TO MERGER AGREEMENT
Under the terms of the memorandum of understanding, Fairfax, Merger Sub and the Company have entered into Amendment No. 1 to the Merger Agreement (Amendment No. 1) to reduce the Termination Fee (as defined in the Merger Agreement and discussed on pages 65 and 66 of the Definitive Proxy Statement) payable to Fairfax under certain circumstances from $9.0 million to $8.5 million. The foregoing description of Amendment No. 1 does not purport to be complete and is subject to, and qualified in its entirety by, the full text of Amendment No. 1 attached hereto as Exhibit 2.1, which is incorporated herein by reference.
SUPPLEMENT TO DEFINITIVE PROXY STATEMENT
In connection with the memorandum of understanding described above, the Company has agreed to make these supplemental disclosures to the Definitive Proxy Statement. This supplemental information should be read in conjunction with the Definitive Proxy Statement, which should be read in its entirety. Defined terms used but not defined herein have the meanings set forth in the Definitive Proxy Statement.
To the extent that information in this Form 8-K differs from or updates information contained in the Definitive Proxy Statement, the Definitive Proxy Statement shall be deemed updated by this Form 8-K.
Background of the Merger (Page 21 of Definitive Proxy Statement)
The following disclosure supplements the discussion in the second paragraph in the section Background of the Merger set forth on page 21 of the Definitive Proxy Statement concerning the unsolicited calls that the Company had received from private equity groups interested in discussing potential transactions:
The following disclosure supplements the discussion set forth in the third full paragraph on page 22 of the Definitive Proxy Statement with respect to Party 2s decision to no longer pursue a transaction with the Company:
The fifth full paragraph on page 26 of the Definitive Proxy Statement is restated as follows to supplement the discussion with respect to the areas of concern identified by Party 4 in its due diligence of the Company:
The fifth full paragraph on page 30 of the Definitive Proxy Statement is restated as follows to supplement the disclosure regarding the concerns raised by Fairfax:
Opinion of BofA Merrill Lynch (Page 35 of the Definitive Proxy Statement)
The first full paragraph on page 38 of the Definitive Proxy Statement is replaced with the following:
The bulleted information under the subsection captioned Selected Publicly Traded Companies Analysis set forth on page 38 of the Definitive Proxy Statement is replaced with the following:
The last full paragraph on page 38, which carries over to page 39, of the Definitive Proxy Statement is replaced with the following:
The first full paragraph on page 39 of the Definitive Proxy Statement is replaced with the following:
The last full paragraph on page 39 of the Definitive Proxy Statement is replaced with the following:
The first full paragraph on page 40 of the Definitive Proxy Statement is replaced with the following:
The third full paragraph on page 40 of the Definitive Proxy Statement is replaced with the following:
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements if accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed. Statements containing words such as expect, anticipate, believe, estimate, likely, or similar words that are used herein or in other written or oral information conveyed by or on behalf of the Company, are intended to identify forward-looking statements. Forward-looking statements are made based upon managements current expectations and beliefs concerning future developments and their potential effects on the Company. Such forward-looking statements are not guarantees of future events. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors: (1) the stockholders of the Company may not adopt the Merger Agreement; (2) the parties may be unable to obtain governmental and regulatory approvals required for the Merger, or required governmental and regulatory approvals may delay the Merger or result in the imposition of conditions that could cause the parties to abandon the Merger; (3) the parties may be unable to complete the Merger because, among other reasons, conditions to the closing of the Merger may not be satisfied or waived; (4) the possibility of disruption from the Merger making it more difficult to maintain business and operational relationships; (5) developments beyond the parties control, including but not limited to, changes in domestic or global economic conditions, competitive conditions and consumer preferences, adverse weather conditions or natural disasters, health concerns, international, political or military developments and technological developments; or (6) the risk factors and other factors referred to in the Companys reports filed with or furnished to the SEC. There can be no assurance that other factors not currently anticipated by the Company will not materially and adversely affect future events. Stockholders are cautioned not to place undue reliance on any forward-looking statements made by or on behalf of the Company, Parent or Merger Sub. Forward-looking statements speak only as of the date the statement was made. None of the Company, Parent or Merger Sub undertakes any obligation to update or revise any forward-looking statement.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, the Company has filed a Definitive Proxy Statement with the SEC. INVESTORS AND STOCKHOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES THERETO.
Investors and stockholders may obtain free copies of the Definitive Proxy Statement and other documents filed by the Company, at the SECs web site at www.sec.gov or in the Investor Relations section of the Companys web site at www.firstmercury.com. The Definitive Proxy Statement and such other documents may also be obtained for free from the Company by directing such request to First Mercury Financial Corporation, 29110 Inkster Road, Suite 100, Southfield, Michigan 48034, Attn: Corporate Financial Reporting, telephone: (800) 762-6837.
The Company and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from the Companys stockholders in connection with the proposed transaction. Information concerning the interests of those persons is set forth in the Definitive Proxy Statement.
2.1 Amendment No. 1 to the Agreement and Plan of Merger, dated as of December 30, 2010, by and among Fairfax, Merger Sub and the Company.
Pursuant to the requirements of the Securities Exchange act of 1934, as amended, the company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.