FMG Acquisition and privately held United Insurance Holdings have entered into a merger agreement whereby United will merge with a wholly owned subsidiary of FMG.

Under the terms of the transaction, United’s members will receive $25 million in cash, financed by FMG’s cash on hand, and 8.75 million newly issued, registered shares of FMG at closing, representing approximately 60% ownership in the combined entity.

In addition, United’s members may earn additional cash consideration of up to a maximum of $5 million, based on the management’s ability to generate net income in excess of $25 million during the 12-month period covering either July 1, 2008 through June 30, 2009, or calendar year 2009.

Under the earn-out plan, United’s members will receive $2 for every $1 of net income over $25 million. The maximum payout of $5 million assumes 12-month net income meets or exceeds $27.5 million.

The transaction is subject to the review of FMG’s proxy materials by the SEC, stockholder approval by the holders of FMG common stock, member approval by United’s owners and other customary closing conditions.

Upon the closing of the transaction, which is anticipated in the second quarter of 2008, FMG will change its name to United Insurance Holdings (UIHC) and will seek an AMEX or Nasdaq listing.

The senior management of United, which averages more than 20 years of insurance industry experience and is led by chairman Greg Branch and president/CEO Donald Cronin, will remain unchanged following the transaction.
Gordon Pratt, chairman, president and CEO of FMG, will become vice chairman of UIHC. Each of the FMG and United members will name three of UIHC’s six initial board members.