STOCK PURCHASE AGREEMENT
by and among
GGS MANAGEMENT HOLDINGS, INC.
GS CAPITAL PARTNERS II, L.P.
GORAN CAPITAL INC.
and
SYMONS INTERNATIONAL GROUP, INC.
DATED AS OF
JANUARY 31, 1996
TABLE OF CONTENTS
PAGE
ECTION 1. Issuance and Purchase of Company Common
Stock....................................................... 2
1.1. Pre-Closing Actions......................................... 2
1.2. The GSCP Purchase........................................... 2
1.3. The Superior Purchase....................................... 2
1.4. The Closing................................................. 3
1.5. Certificate of Incorporation and By-laws.................... 3
1.6. Closing Date Balance Sheet of Pafco......................... 3
1.7. Book Value Adjustment....................................... 5
1.8. Definitions................................................. 6
SECTION 2. Representations and Warranties of Goran
and SIG..................................................... 6
2.1. Organization and Good Standing; Power and
Authority; Qualifications................................... 6
2.2. Authorization............................................... 6
2.3. No Conflict................................................. 7
2.4. Consents.................................................... 7
2.5. Capitalization.............................................. 7
2.6. Authorization and Issuance of Capital
Stock....................................................... 8
2.7. Financial Statements........................................ 9
2.8. Absence of Undisclosed Liabilities.......................... 10
2.9. Absence of Material Changes................................. 10
2.10. Intellectual Property Rights................................ 11
2.11. Business of the Company..................................... 12
2.12. Assets; Subsidiaries........................................ 12
2.13. Litigation; Orders.......................................... 12
2.14. Compliance with Laws; Permits............................... 13
2.15. Regulatory Filings.......................................... 13
2.16. Insurance Business.......................................... 14
2.17. Threats of Cancellation..................................... 15
2.18. Restrictions on Business Activities......................... 15
2.19. Material Contracts.......................................... 15
2.20. Environmental............................................... 15
2.21. Related Party Transactions.................................. 16
2.22. Brokers..................................................... 16
SECTION 3. Representations and Warranties of GSCP...................... 17
3.1. Organization and Good Standing; Power and
Authority................................................... 17
3.2. Authorization............................................... 17
3.3. No Conflict................................................. 17
3.4. Consents.................................................... 17
3.5. Investment.................................................. 17
3.6. Brokers..................................................... 18
3.7. Availability of Funds....................................... 18
SECTION 4. Pre-Closing Covenants....................................... 18
4.1. Cooperation................................................. 18
4.2. HSR Act/Form A Filing....................................... 18
4.3. Conduct of Business......................................... 18
4.4. Restricted Activities....................................... 19
4.5. Access...................................................... 19
4.6. No Solicitation............................................. 19
4.7. Communications.............................................. 19
4.8. State Regulatory Authorities................................ 19
4.9. Advice of Changes........................................... 20
4.10. Public Announcements........................................ 20
4.11. Tillinghast Study........................................... 20
4.12. Reinsurance Arrangements.................................... 20
4.13. Quota Share Agreements...................................... 21
4.14. Goran EuroNotes............................................. 21
4.15. IGF......................................................... 22
4.16. Option Plan................................................. 23
4.17. Management Agreements....................................... 23
4.18. Release of Encumbrance...................................... 23
4.19. Resignations................................................ 24
SECTION 5. Additional Covenants........................................ 24
5.1. Access to Records........................................... 24
5.2. Financial Reports........................................... 24
5.3. D&O Insurance............................................... 25
5.4. Investment Banking Services................................. 25
5.5. Policies to be Issued by IGF................................ 26
5.6. Goran Reinsurance........................................... 26
5.7. Certain Repurchases......................................... 26
5.8. Tritech System.............................................. 26
5.9. Intercompany Arrangements................................... 26
5.10. Superior Note Purchase...................................... 27
SECTION 6. Taxes....................................................... 27
6.1. Tax Representations and Warranties.......................... 27
6.2. Returns and Payments........................................ 29
6.3. Indemnification, Audits..................................... 31
6.4. Refunds and Carrybacks...................................... 32
6.5. Cooperation................................................. 32
6.6. Tax Sharing................................................. 32
6.7. Transfer Taxes.............................................. 33
6.8. FIRPTA Affidavit............................................ 33
SECTION 7. Employees and Employee Benefit Plans........................ 33
7.1. Representations and Warranties.............................. 33
7.2. Indemnification............................................. 36
7.3. Covenants................................................... 36
SECTION 8. Conditions.................................................. 36
8.1. Conditions to Obligations of GSCP........................... 36
8.2. Conditions to Obligations of Goran and
SIG......................................................... 38
SECTION 9. Indemnification............................................. 39
9.1. Survival of Representations and
Warranties.................................................. 39
9.2. Indemnification............................................. 39
SECTION 10. Termination................................................. 44
10.1. Termination................................................. 44
10.2. Effect of Termination....................................... 44
SECTION 11. Miscellaneous............................................... 44
11.1. Expenses.................................................... 44
11.2. Remedies.................................................... 45
11.3. Further Assurances.......................................... 45
11.4. Successors and Assigns...................................... 45
11.5. Guarantee................................................... 45
11.6. Entire Agreement............................................ 45
11.7. Notices..................................................... 45
11.8. Amendments.................................................. 47
11.9. Counterparts................................................ 47
11.10. Headings.................................................... 47
11.11. No Third Party Beneficiaries................................ 47
11.12. Governing Law............................................... 47
11.13. Severability................................................ 47
11.14. Interpretation.............................................. 47
11.15. No Waiver................................................... 48
Exhibits
Exhibit A Superior Purchase Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Company Amended and Restated Certificate of Incorporation
Exhibit E Form of Company Amended and Restated By-Laws Exhibit F Pafco Financial
Statements and IGF Financial Statements Exhibit G EuroNotes Waiver Provisions
Exhibit H Form of IGF Holdings Notes Exhibit I Covenants and Events of Default
With Respect to IGF Holdings Note Exhibit J Form of Stock Option Plan Exhibit K
Pafco Management Agreement Exhibit L Form of Employment Agreements Exhibit M
Form of Opinion of Counsel Exhibit N Form of Pledge Agreement
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of January 31, 1996,
by and among GGS MANAGEMENT HOLDINGS, INC., a Delaware corporation (the
"Company"), GS CAPITAL PARTNERS II, L.P., a Delaware limited partnership
("GSCP"), GORAN CAPITAL INC., a Canadian corporation ("Goran"), and SYMONS
INTERNATIONAL GROUP, INC., an Indiana corporation and a wholly-owned subsidiary
of Goran ("SIG").
W I T N E S S E T H :
WHEREAS, Goran owns directly all of the issued and outstanding shares of
Common Stock, with no par value, of SIG;
WHEREAS, SIG owns directly 75 shares of Common Stock, par value $.01 per
share (the "Company Common Stock"), of the Company (representing 75% of the
issued and outstanding shares of Company Common Stock and GSCP owns directly 25
shares of Company Common Stock (representing 25% of the issued and outstanding
shares of Company Common Stock);
WHEREAS, the Company owns directly all of the issued and outstanding shares
of Common Stock, par value $.01 per share (the "Newsub Common Stock"), of GGS
Management, Inc., a newly- formed Delaware corporation ("Newsub");
WHEREAS, SIG owns directly all of the issued and outstanding shares of
Common Stock, par value $125.00 per share (the "Pafco Common Stock"), of Pafco
General Insurance Company, an Indiana corporation ("Pafco");
WHEREAS, Pafco owns directly all of the issued and outstanding shares of
capital stock of IGF Holdings, Inc., a newly-formed Delaware corporation ("IGF
Holdings"), and IGF Insurance Company, an Indiana corporation ("IGF");
WHEREAS, SIG and Goran have entered into a Purchase Agreement (the
"Superior Purchase Agreement") with Fortis, Inc. and Interfinancial Inc., dated
January 31, 1996 (a copy of which is attached as Exhibit A hereto), pursuant to
which SIG has agreed to purchase all of the issued and outstanding capital stock
of Superior Insurance Company, a Florida corporation ("Superior");
WHEREAS, prior to the Closing, (a) SIG will contribute to the Company, and
the Company will contribute to Newsub, (i) all of SIG's rights and obligations
under the Superior Purchase Agreement and (ii) all of the Pafco Common Stock,
and (b) Pafco will effect the IGF Pre-Closing Transactions (defined in Section
4.15(a));
WHEREAS, GSCP desires to purchase, and the Company desires to issue to
GSCP, 479,975 shares of newly issued Company Common Stock, such that immediately
following the Closing, GSCP will own 48%, and SIG will own 52%, of the issued
and outstanding shares of Company Common Stock; and
WHEREAS, at the Closing, the Company, Goran, SIG and GSCP will be entering
into a stockholder agreement substantially in the form of Exhibit B hereto (the
"Stockholder Agreement") and a Registration Rights Agreement substantially in
the form of Exhibit C hereto (the "Registration Rights Agreement");
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. ISSUANCE AND PURCHASE OF COMPANY COMMON STOCK.
1.1. PRE-CLOSING ACTIONS. Prior to the Closing, (a) Goran and SIG shall
cause Pafco to effect the IGF Pre-Closing Transactions (defined in Section
4.15(a)), (b) Goran and SIG shall contribute to the Company, and shall
thereafter cause the Company to contribute to Newsub, all of their rights and
obligations under the Superior Purchase Agreement, (c) SIG shall contribute to
the Company, and shall thereafter cause the Company to contribute to Newsub, all
of the Pafco Common Stock and (d) SIG shall contribute to the Company, and shall
thereafter cause the Company to contribute to Newsub, assets of SIG as
hereinafter agreed by the parties and the Company shall assume liabilities of
SIG as hereinafter agreed by the parties (such assets and liabilities being
referred to herein, collectively, as the "SIG Contributed Items") and shall
thereafter cause Newsub to assume such liabilities.
1.2. THE GSCP PURCHASE. At the Closing, the Company shall issue and sell to
GSCP, and GSCP shall purchase from the Company, 479,975 shares of Company Common
Stock (such that immediately following the Closing 48% of the issued and
outstanding Company Common Stock will be owned by GSCP), for an aggregate
purchase price of $20,000,000 in cash (the "GSCP Purchase Price").
1.3. THE SUPERIOR PURCHASE. At the Closing, the Company shall use the
proceeds of the financing to be provided pursuant to the commitment letter (the
"Bank Commitment Letter") of Chase Manhattan Bank, N.A. and Chase Securities,
Inc. (together, the "Bank"), accepted by Goran and GSCP as of January 24, 1996
(or pursuant to such alternative bank financing as the Company may hereafter
arrange), and the proceeds from the purchase by GSCP of Company Common Stock
pursuant to Section 1.2, for the purchase of all of the issued and outstanding
shares of capital stock of Superior pursuant to the Superior Purchase Agreement
(none of the terms or conditions of which may be waived by Goran or the Company
without the consent of GSCP).
1.4. THE CLOSING.
(a) Subject to the terms and conditions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the
"Closing") will take place on such date which is five business days
following the date (the "Closing Date") upon which all of the conditions
set forth herein have been satisfied (or waived), at 10:00 a.m., at the
offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza,
New York, New York 10004.
(b) At the Closing, the Company shall deliver to GSCP a certificate or
certificates representing the shares of the Company Common Stock purchased
by it, registered in its name or in the name of its nominee. Delivery of
such certificates shall be made against receipt at the Closing by the
Company from GSCP of the GSCP Purchase Price, which shall be paid by wire
transfer to an account designated at least one business day prior to the
Closing Date by the Company.
(c) If the Closing occurs, all actions taken at the Closing shall be
deemed to have occurred simultaneously and no such action shall be
effective until all such actions have been completed.
1.5. CERTIFICATE OF INCORPORATION AND BY-LAWS. Goran and SIG shall cause
the Company (i) to amend and restate its Certificate of Incorporation to read as
set forth in Exhibit D hereto, and such Certificate of Incorporation as so
amended shall be duly filed with the Secretary of State of the State of
Delaware, to be effective as of the Closing Date, and (ii) to amend and restate
its By-laws to read as set forth in Exhibit E hereto, to be effective as of the
Closing Date.
1.6. CLOSING DATE BALANCE SHEET OF PAFCO.
(a) Within 30 days after the Closing Date, Goran and SIG shall cause
the Company to prepare and deliver to GSCP an unconsolidated balance sheet
of Pafco (which for purposes of such Balance Sheet shall be deemed to
include the SIG Contributed Items) (the "Draft Closing Date Balance Sheet")
as of the close of business on the Closing Date (determined on a pro forma
basis as though (x) the IGF Pre-Closing Transactions (defined in Section
4.15(a)) and the Pre-Closing Transactions (defined in Section 4.13) had
been consummated, (y) the SIG Contributed Items had been contributed and
assumed in accordance with Section 1.1(d) (but to and by Pafco rather than
the Company), and (z) no other transactions contemplated by this Agreement
had been consummated). Goran and SIG shall cause the Company to (i) prepare
the Draft Closing Date Balance Sheet in accordance with U.S. GAAP (all
defined terms used in this Section 1.6 and not otherwise defined in this
Agreement are defined in Section 1.8) consistently applied, except that (A)
the materiality standards applied shall not be those historically
applied to Goran but shall be those determined to be appropriate for Pafco
as a stand-alone entity, (B) the Company shall use as the amount of
reserves for losses set forth on such balance sheet the Tillinghast
December 31 Amount (defined in Section 4.11), as adjusted in accordance
with the Tillinghast Methodology (defined in Section 4.11) to account for
events occurring after December 31, 1995, (C) no reserves for consolidated,
combined or unitary Income Taxes (defined in Section 6.1) shall be included
on such balance sheet (it being understood that Reserves for Deferred
Taxes, if any, shall be included on the Closing Balance Sheet), and (D) the
value of the SIG Contributed Items as reflected on such balance sheet shall
equal the value of such assets as reflected on SIG's most recent balance
sheet, and (ii) cause Coopers & Lybrand, L.L.P. (A) to conduct an audit of
Pafco in accordance with (x) United States generally accepted auditing
standards as in effect from time to time and (y) the provisions of this
Section 1.6(a), (B) to make themselves available at reasonable times during
their conduct of such audit to discuss with GSCP, Goran and SIG the Draft
Closing Date Balance Sheet, (C) to determine, as part of such audit, the
appropriate standards of materiality to have been used in preparing the
Draft Closing Date Balance Sheet for Pafco as a stand-alone entity and (D)
to revise the Draft Closing Date Balance Sheet based on such audit (such
revised Draft Closing Date Balance Sheet being referred to herein as the
"Revised Draft Closing Date Balance Sheet"). Goran and SIG shall instruct
Coopers & Lybrand, L.L.P. to furnish a copy of the Revised Draft Closing
Date Balance Sheet to GSCP.
(b) After receipt by GSCP of the Revised Draft Closing Date Balance
Sheet, GSCP shall instruct accountants associated with a "Big Six"
accounting firm designated by GSCP (the "GSCP Accountants") to review the
Revised Draft Closing Date Balance Sheet. In the event that GSCP and the
GSCP Accountants have no objections to the Revised Draft Closing Date
Balance Sheet, such balance sheet shall be the "Closing Date Balance
Sheet." In the event that GSCP and the GSCP Accountants object to the
Revised Draft Closing Date Balance Sheet, GSCP shall provide to Goran and
SIG a written statement describing their objections. Goran, SIG and GSCP
shall use reasonable efforts to resolve any disputes with respect to the
Revised Draft Closing Date Balance Sheet, but if a resolution is not
obtained within 20 days after GSCP has submitted to Goran and SIG its
objections, either of Goran, SIG or GSCP may submit any remaining disputes
for resolution to a "Big Six" accounting firm (other than Coopers &
Lybrand, L.L.P. and the GSCP Accountants) mutually agreeable to Goran, SIG
and GSCP or, if Goran, SIG and GSCP are unable to so mutually agree, to a
"Big Six" accounting firm mutually selected by Coopers & Lybrand, L.L.P.
and the GSCP Accountants (in either case, such accounting firm shall be
referred to herein as the "Arbitrating Accountants"), and the Revised Draft
Closing Date Balance Sheet as finally revised based on the mutual agreement
of Goran, SIG and GSCP or by the Arbitrating Accountants, as the case may
be, shall be the "Closing Date Balance Sheet."
(c) GSCP, Goran and SIG shall, and shall cause Pafco to, cooperate
with Coopers & Lybrand, L.L.P. and the GSCP Accountants in all respects
(including in the conduct of the audit of Pafco and the review of the
Revised Draft Closing Date Balance Sheet provided for above). Such
cooperation shall include providing the GSCP Accountants with the work
papers and back-up materials used in preparation of the Draft Closing Date
Balance Sheet and the Revised Closing Date Balance Sheet.
(d) The Company shall pay all fees and expenses of Coopers & Lybrand,
L.L.P., the GSCP Accountants and the Arbitrating Accountants relating to
performance of the services contemplated by this Section 1.6.
1.7. BOOK VALUE ADJUSTMENT.
(a) In the event that the Book Value of Pafco as reflected on the
Closing Date Balance Sheet is less than $14,000,000, Goran shall, upon the
earlier of seven days after an IGF Company Sale (as defined in Section
4.15(a)) and December 31, 1996, contribute to the Company cash equal to the
amount of such deficiency, plus simple interest on such deficiency from the
Closing Date through the date immediately preceding the date of such
contribution, calculated based on an annual rate equal to the Prime Rate.
(b) In the event the Book Value of Pafco as reflected on the Closing
Date Balance Sheet exceeds $14,000,000 (the amount of any such excess being
referred to herein as the "Excess Book Value Amount"), such amount shall be
available to offset any indemnification obligation of Goran or SIG as set
forth in Section 9.2. Notwithstanding the foregoing, at any time after
payment in full of all amounts owing pursuant to the IGF Holdings Notes
(defined in Section 4.15(a)), or such other note as may be issued pursuant
to Section 4.15(a), SIG shall have the right from time to time to elect (by
written notice to GSCP and the Company) to have Pafco pay a dividend (the
"Pafco Excess Book Value Dividend") to Newsub in the amount of all or any
portion of the Excess Book Value Amount, to have Newsub pay a dividend (the
"Newsub Excess Book Value Dividend") to the Company in the same amount as
the Pafco Excess Book Value Dividend, and to have the Company pay to SIG an
amount equal to the amount of the Pafco Excess Book Value Dividend
(subject, in each case, to compliance with all applicable laws, including
obtaining all necessary regulatory approvals therefor). If a Pafco Excess
Book Value Dividend is paid, it shall be payable (i) first (up to the full
amount of the Excess Book Value Amount), by an assignment of all or a
portion of the promissory note of Cliffstan Investments, Inc. held by Pafco
on the date hereof (the "Cliffstan Note") (valued at the book value of such
note as reflected on the Closing Date Balance Sheet), (ii) second (to the
extent that there is any Excess Book Value Amount remaining), by
cancellation of any and all amounts owing to Pafco by SIG or any other
Affiliate of Goran as of the date hereof, and (iii) third (to the extent
that there is any Excess Book Value Amount remaining), in cash. The Excess
Book Value Amount shall
be increased by an amount equal to deemed interest thereon at an annual
rate equal to the Prime Rate, and shall be decreased by the offsetting of
any indemnification obligation of Goran or SIG pursuant to Section 9.2 and
any payments made to SIG pursuant to the preceding sentence following Pafco
Excess Book Value Dividends and Newsub Excess Book Value Dividends.
1.8. DEFINITIONS. "Book Value" means the excess of assets over liabilities.
"U.S. GAAP" means United States generally accepted accounting principles as in
effect from time to time. "Prime Rate" means the prime rate as published in the
"Money Rates" column of The Wall Street Journal, Eastern Edition (or, in the
event that more than one such rate is so published, the average of such rates).
Reserves for Deferred Taxes means reserves for book tax differences, including
without limitation, differences between the tax basis and book basis of the
assets of the Company and book tax timing differences with respect to items of
income or deduction of the Company, but shall not include reserves for
contingent liability for Taxes for which the Seller has full payment
responsibility pursuant to Sections 6.2 or 6.3(a)(i), such as liability for
disputed consolidated federal Income Taxes.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF GORAN AND SIG. Goran and SIG
hereby, jointly and severally, represent and warrant to GSCP as follows:
2.1. ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY; QUALIFICATIONS.
Each of Goran, SIG, the Company, Newsub, Pafco, IGF and IGF Holdings (each, a
"Goran Entity" and, collectively, the "Goran Entities") is a corporation duly
organized, validly existing and in good standing under the Laws (defined in
Section 2.3) of its jurisdiction of incorporation. Each of the Goran Entities
has all requisite corporate power and authority to enter into this Agreement and
the ancillary agreements hereto (including, without limitation, the IGF Holdings
Note (defined in Section 4.15(a))) (collectively, the "Ancillary Agreements") to
which it is a party, and to consummate the transactions contemplated hereby and
thereby. Each of the Goran Entities has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted and as proposed to be conducted after the Closing and is
qualified to transact business as a foreign corporation in, and is in good
standing under the Laws of, all of the jurisdictions wherein the character of
the property owned or leased or the nature of the activities conducted, or
proposed to be conducted, by it makes such qualification necessary.
2.2. AUTHORIZATION. The execution, delivery and performance by each of the
Goran Entities of this Agreement and the Ancillary Agreements to which it is a
party have been duly authorized by all requisite corporate action, and each such
agreement constitutes (or when executed will constitute) the legal, valid and
binding obligation of each of the Goran Entities which is a party thereto,
enforceable against such party in
accordance with its terms. No approval of shareholders of Goran is required in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement or consummation of the transactions contemplated hereby or
thereby.
2.3. NO CONFLICT. The execution, delivery and performance by each of the
Goran Entities of this Agreement and the Ancillary Agreements to which it is a
party, and the consummation by the Goran Entities of the transactions
contemplated hereby or thereby (including, without limitation, the issuance,
sale and delivery by the Company of the Company Common Stock to GSCP and Goran
and the issuance by IGF Holdings of the IGF Holdings Notes), will not (a)
violate any provision of any law, statute, rule, regulation, regulatory
requirement, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) (each, a "Law") applicable to such entity,
or any of its properties or assets, (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any agreement to which such entity is a
party or (c) violate such entity's Certificate of Incorporation or By-laws.
2.4. CONSENTS. Except for (i) a filing on Form A with, and receipt of the
approval of, the Department of Insurance of the State of Indiana, (ii) a filing
on Form A with, and receipt of the approval of the Department of Insurance of
the State of Florida with respect to the Superior Purchase Agreement, (iii)
expiration or termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "HSR Act"), and (iv)
the items set forth on Schedule 2.4, no consent, authorization, consent,
approval, permit or waiver of or by, or any notification of or filing with, any
governmental or regulatory authority (including insurance regulatory
authorities), foreign or domestic, or federal, state or foreign court of
competent jurisdiction (each, a "Governmental Authority"), or any other third
party under any agreement, indenture, lease or other instrument or document to
which any of the Goran Entities is a party or by which any of them is bound, is
required or necessary in connection with the execution, delivery and performance
by each of the Goran Entities of this Agreement and the Ancillary Agreements to
which it is a party, or the consummation by each of the Goran Entities of the
transactions contemplated hereby or thereby.
2.5. CAPITALIZATION. The authorized capitalization and number of shares of
capital stock issued and outstanding, in each case as of the date hereof, of
each of the Company, Newsub, Pafco, IGF Holdings and IGF is as set forth on
Schedule 2.5. As of the date hereof, (i) all of the issued and outstanding
capital stock of Pafco and 75 shares of the Company Common Stock is owned
directly by SIG, (ii) 25 shares of the Company Common Stock is owned directly by
GSCP, (iii) except as set forth in clause (i) and (ii) no shares of capital
stock of the Company are issued and outstanding, (iv) all of the
issued and outstanding capital stock of Newsub is owned directly by the Company
and (v) all of the issued and outstanding capital stock of each of IGF Holdings
and IGF is owned directly by Pafco. Immediately following the Closing, the
authorized capitalization of each of the Company, Newsub, Pafco, IGF Holdings
and IGF will be as set forth on Schedule 2.5. Immediately following the Closing,
(i)(w) 1,000,000 shares of Company Common Stock will be issued and outstanding,
with the balance held in treasury, (x) 520,000 of such shares of issued and
outstanding Company Common Stock will be owned by SIG, (y) 480,000 of such
shares of issued and outstanding Company Common Stock will be owned by GSCP or
its Affiliates (defined in Section 2.20) and (z) no other shares of capital
stock of the Company will be issued and outstanding; (ii)(x) 1,000 shares of
Newsub Common Stock will be issued and outstanding, all of which will be owned
by the Company and (y) no other shares of capital stock of Newsub will be issued
and outstanding; (iii)(x) 10,000 shares of Pafco Common Stock will be issued and
outstanding, with the balance held in treasury, (y) all of such issued and
outstanding shares of Pafco Common Stock will be owned by Newsub and (z) no
other shares of capital stock of Pafco will be issued and outstanding; (iv) no
shares of the capital stock of IGF or IGF Holdings will be owned or held,
directly or indirectly, by the Company, and all of such shares of capital stock
will be owned, directly or indirectly, by SIG, (v) all of the issued and
outstanding shares of capital stock of Superior will be owned by Newsub; (vi)
all of the issued and outstanding shares of capital stock of each of Superior
American Insurance Company, Superior Guarantee Insurance Company and Standard
Plan, Inc. will be owned by Superior; and (vii) there will be no outstanding
options, warrants, script, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of equity securities (each of the foregoing, an "Equity Security") of the
Company, Newsub, Pafco, IGF Holdings, or IGF, or contracts, commitments,
understandings or arrangements by which the Company, Newsub, Pafco, IGF
Holdings, or IGF will or may be bound to issue Equity Securities of the Company,
Newsub, Pafco, IGF Holdings, or IGF (other than pursuant to the options granted
at the Closing pursuant to the Stock Option Plan (defined in Section 4.6)).
2.6. AUTHORIZATION AND ISSUANCE OF CAPITAL STOCK. The authorization,
issuance, sale and delivery of the Company Common Stock, the capital stock of
IGF Holdings, the capital stock of IGF and the IGF Holdings Notes, or such other
note as may be issued pursuant to Section 4.15(a), have been duly authorized by
all requisite corporate action on the part of the Goran Entities, and when
issued, sold and delivered in accordance with this Agreement, the Company Common
Stock, the capital stock of IGF Holdings and the capital stock of IGF will be
validly issued and outstanding, fully paid and non assessable with no personal
liability attaching to the ownership thereof, and (except as disclosed on
Schedule 2.6) free and clear of any mortgages, judgments, claims, liens,
security interests, pledges, escrows, charges or other encumbrances of any kind
or character whatsoever (each, an "Encumbrance"). Immediately following the
Closing, each of GSCP and
(except as disclosed on Schedule 2.6) SIG will have valid title to the shares of
Company Common Stock to be received by it hereunder, free and clear of all
Encumbrances (other than, in the case of SIG, a pledge of its shares of Company
Common Stock to the holders of the EuroNotes pursuant to the EuroNotes Waiver
(each as defined in Section 4.14. (a)).
2.7. FINANCIAL STATEMENTS.
(a) Goran and SIG have delivered to GSCP (i) unaudited pro forma
balance sheets of each of Pafco and IGF on a stand-alone and unconsolidated
basis as of September 30, 1995 (in the case of Pafco, the "Pafco September 30
Balance Sheet" and, in the case of IGF, the "IGF September 30 Balance Sheet"),
and unaudited pro forma statements of the operations of each of Pafco and IGF on
a stand-alone and unconsolidated basis for the nine-month period ended September
30, 1995 (in the case of Pafco, together with the Pafco September 30 Balance
Sheet, the "Pafco September 30 Financial Statements" and, in the case of IGF,
together with the IGF September 30 Balance Sheet, the "IGF September 30
Financial Statements"), and (ii) audited balance sheets of each of Pafco and IGF
on a stand-alone and unconsolidated basis as of December 31, 1994 and December
31, 1993, and audited statements of operations of each of Pafco and IGF on a
stand-alone and unconsolidated basis for each of the fiscal years ended December
31, 1994 and December 31, 1993 (in the case of Pafco, collectively, the "Pafco
Annual Financial Statements" and, in the case of IGF, collectively, the "IGF
Annual Financial Statements") (the Pafco September 30 Financial Statements and
the Pafco Annual Financial Statements being referred to, collectively, as the
"Pafco Financial Statements" and the IGF September 30 Financial Statements and
the IGF Annual Financial Statements being referred to, collectively, as the "IGF
Financial Statements"), copies of each of which are attached as Exhibit F
hereto. The Pafco Financial Statements and the IGF Financial Statements (a) are
in accordance with the books and records of Pafco or IGF, as the case may be,
and (b) fairly present the financial condition and results of operations of
Pafco or IGF, as the case may be, as of their respective dates and for such
periods. The Pafco September 30 Financial Statements have been prepared in
accordance with U.S. GAAP consistently applied (other than with respect to
standards of materiality, which have been applied as appropriate for Pafco or
IGF as the case may be as a stand-alone entity). The Pafco Annual Financial
Statements, the IGF Annual Financial Statements and the IGF September 30
Financial Statements have been prepared in accordance with statutory accounting
principles as prescribed by the Department of Insurance of the State of Indiana,
consistently applied (other than with respect to standards of materiality, which
have been applied as appropriate for Pafco or IGF, as the case may be, as a
stand-alone entity).
(b) Goran and SIG have delivered to GSCP true and complete copies of
the Reports on Examination as to Condition for Pafco, constituting the last two
National
Association of Insurance Commissioners Zone Examinations for Pafco under
applicable insurance laws. Such Reports fairly present the matters required to
be presented therein.
2.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on Schedule
2.8, neither Pafco nor IGF has any liabilities or obligations (or facts giving
rise thereto), whether accrued, absolute, contingent, unliquidated or otherwise,
and whether due or to become due, other than (i) liabilities or obligations
reserved against or otherwise disclosed on the Pafco September 30 Balance Sheet
or the IGF September 30 Balance Sheet and (ii) other liabilities or obligations
which were incurred after September 30, 1995 in the ordinary course of business
consistent (in amount and kind) with past practice and which do not exceed
$100,000 in the aggregate.
2.9. ABSENCE OF MATERIAL CHANGES. Except as set forth on Schedule 2.9,
since December 31, 1994, each of Pafco and IGF has conducted its business in the
ordinary course consistent with past practice, and there has not been any (a)
material adverse change in the condition (financial or otherwise), results of
operations, business, assets, liabilities or prospects of Pafco or IGF, or any
fact, event or condition which could reasonably be expected to result in such a
material adverse change, (b) material adverse change in the relationships
between Pafco and its customers, reinsurers, agents, or others having business
relationships with it, (c) incurrence, discharge or satisfaction of any material
claim, liability or obligation of Pafco, nor entry into any material transaction
by Pafco, other than in the ordinary course of business consistent with past
practice, (d) Encumbrance placed on any of the assets of Pafco, other than in
the ordinary course of business consistent with past practice, (e) payment of
dividends on, or other distribution with respect to, or any direct or indirect
redemption or acquisition of, any securities of Pafco, (f) sale, assignment or
transfer of any tangible or intangible assets of Pafco, except in the ordinary
course of business consistent with Pafco's investment policies, (g) loan by
Pafco, to any officer, director, employee, consultant or shareholder of Pafco,
(h) damage, destruction or loss (whether or not covered by insurance) materially
affecting the assets, property, financial condition or results of operations of
Pafco, (i) increase, direct or indirect, in the compensation paid or payable to
any officer or director of Pafco or, other than in the ordinary course of
business consistent with past practice, to any other employee, consultant or
agent of Pafco, (j) change in the accounting methods, practices or policies of
Pafco (including, without limitation, any change in any assumption underlying,
or method of calculating, any contingency or other reserve), (k) indebtedness
incurred for borrowed money by Pafco, other than in the ordinary course of
business consistent with past practice, (l) indebtedness owed to Pafco forgiven
or canceled, or any rights or claims of Pafco of material value waived, (m)
amendment to or termination of any material agreement to which Pafco is a party,
other than the expiration of any such agreement in accordance with its terms,
(n) change (other than as a result of insurance coverage issued or renewed or
lapses and terminations thereof) in the reserves for Pafco's insurance policy
benefits, losses, claims and expenses, (o) change, other than changes in
the ordinary course of business consistent with past practice, in Pafco's rates,
actuarial assumptions, policy forms, contractual arrangements or claims
procedures, (p) change with respect to the regulation of Pafco or its activities
by any administrative agency or governmental body, (q) material change in the
manner of business or operations of Pafco, or (r) agreement, arrangement or
commitment (contingent or otherwise) by Pafco to do any of the things set forth
in clauses (c) through (q) above.
2.10. INTELLECTUAL PROPERTY RIGHTS.
(a) Except as disclosed on Schedule 2.10(a), Pafco owns or has the
right to use pursuant to license, sub license, agreement or permission all
Intellectual Property (as defined below), individually or in the aggregate,
material to the operation of its business as currently conducted. Each item of
Intellectual Property owned or used by Pafco immediately prior to the Closing
will be owned or available for use by Pafco on identical terms and conditions
immediately subsequent to the Closing.
(b) (i) (A) Pafco has not interfered with, infringed upon or
misappropriated any Intellectual Property rights of third parties, and (B) the
business conducted and proposed to be conducted by the Company will not
interfere with, infringe upon or misappropriate any Intellectual Property rights
of third parties, and (ii) Pafco has not received any charge, complaint, claim,
demand or notice alleging any such interference, infringement or
misappropriation (including any claim that it must license or refrain from using
any Intellectual Property rights of any third party). To the best knowledge of
the Goran Entities, no third party has interfered with, infringed upon or
misappropriated any Intellectual Property rights of Pafco.
(c) "Intellectual Property" means (a) all world-wide inventions and
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e) all know-how, trade secrets and confidential
business information, whether patentable or unpatentable and whether or not
reduced to practice (including ideas, research and development, formulas,
compositions, manufacturing and production process and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (f) all
computer software (including data and related
documentation), (g) all management information systems (including, without
limitation, the Tritech System), (h) all other proprietary rights, (i) all
copies and tangible embodiments thereof (in whatever form or medium) and (j) all
licenses and agreements in connection therewith.
(d) SIG owns and has the right to use pursuant to license,
sublicense, agreement or permission, the Tritech System management information
system currently being implemented for use by Pafco (the "Tritech System").
After the Closing, the Tritech System will be available for use by the Company
and its subsidiaries.
2.11. BUSINESS OF THE COMPANY. None of the Company, Newsub nor IGF Holdings
has ever conducted, nor does either of them conduct, any business, nor has any
of them owned, nor do any of them own, directly or indirectly, any capital stock
of, or other proprietary interest in, any corporation, association, trust,
partnership, joint venture or other entity, other than as contemplated by this
Agreement and the Ancillary Agreements. None of the Company, Newsub or IGF
Holdings has any liabilities or obligations (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due), other than
as contemplated by this Agreement and the Ancillary Agreements.
2.12. ASSETS; SUBSIDIARIES.
(a) Each of Pafco, IGF and the Company has good and marketable title
to all of its assets and properties, free and clear of any Encumbrances, except
as disclosed in Schedule 2.12(a).
(b) Except as set forth on Schedule 2.12(b), the buildings,
facilities, equipment, furniture, leasehold and other improvements, fixtures,
vehicles, structures, any related capitalized items and other tangible property
owned by or leased to Pafco (i) are in good operating condition and repair
(normal wear and tear excepted), free of any material structural or engineering
defects, (ii) are in all material respects subject to continued repair and
replacement in accordance with past practice and all applicable regulations, and
(iii) are materially suitable for their current use.
(c) SIG's only direct and indirect subsidiaries are Pafco, Newsub,
the Company and the entities listed on Schedule 2.12(c). Pafco's only direct and
indirect subsidiaries are IGF Holdings and IGF. Immediately following the
Closing, the Company's only direct and indirect subsidiaries will be Newsub,
Pafco, Superior, Superior American Insurance Company, Superior Guarantee
Insurance Company and Standard Plan, Inc.
2.13. LITIGATION; ORDERS. Except as set forth on Schedule
2.13, there is no civil, criminal or administrative action, suit,
claim, notice, hearing, inquiry, proceeding or
investigation at Law or in equity by or before any Governmental Authority,
arbitrator or similar panel, now pending or, to the best knowledge of the Goran
Entities, threatened (i) against or affecting Pafco or IGF or any of their
respective directors, officers or employees relating to the business of Pafco or
IGF, which is material, or (ii) against or affecting Goran or any of its
Affiliates, or their directors or officers, which seeks to enjoin or obtain
damages in respect to the consummation of the transactions contemplated hereby
or by the Ancillary Agreements or the assets or the business of Pafco or IGF.
Except as set forth in Schedule 2.13, none of the Goran Entities is subject to
any order, writ, injunction or decree of any Governmental Authority that are or
may be materially adverse to the Company, Pafco, IGF or Superior.
2.14. COMPLIANCE WITH LAWS; PERMITS. Each of Pafco and IGF (a) has complied
in all material respects with all federal, state, local and foreign Laws
applicable to it and its business and (b) has all federal, state, local and
foreign governmental licenses, permits and qualifications necessary in the
conduct of its business as currently conducted, such licenses, permits and
qualifications are in full force and effect, and no violations have been
recorded in respect of any such licenses, permits and qualifications, and no
proceeding is pending or, to the best knowledge of the Goran Entities,
threatened to revoke or limit any such license, permit or qualification.
Schedule 2.14 sets forth a list of all such licenses, permits and qualifications
with respect to Pafco, and the expiration dates thereof.
2.15. REGULATORY FILINGS.
(a) Schedule 2.15 contains a true and complete list of all annual
statements ("Annual Insurance Statements") which Goran, SIG or Pafco have filed
with or submitted to the insurance regulatory authorities of the State of
Indiana (and any other state in which such statements are required to be filed
with respect to Pafco) and all reports of examinations issued by such insurance
authorities since December 31, 1991. Except as indicated in such annual
statements or reports, (i) such filings or submissions were in compliance with
applicable law when filed and, as of their respective dates, did not contain any
untrue statement or misstatement of fact or omit to state any material fact
necessary to make the statements set forth therein, in light of the
circumstances under which such statements were made, not misleading; (ii) no
deficiencies have been asserted by any such regulatory authority with respect to
such filings or submissions; (iii) except as disclosed on Schedule 2.15(a)(iii),
since December 31, 1991, no fine or penalty has been imposed on Goran, SIG or
Pafco by any insurance regulatory authority with respect to Pafco; and (iv) no
deposits have been made by Goran, SIG or Pafco with any insurance regulatory
authority which were not shown in the most recent Annual Insurance Statement.
(b) The amounts shown in the Annual Insurance Statements with respect
to Pafco on account of (i) aggregate reserves for claim and claim expense,
future policy benefits, unearned premiums and policyholders' funds and (ii)
policy and contract claims liability, are computed in accordance with commonly
accepted industry standards consistently applied, meet the requirements of the
insurance and other applicable laws and regulations of the State of Indiana,
make a good and sufficient provision for all unmatured obligations of the
Company under the terms of its policies and are consistent with the assumptions
previously employed.
(c) Goran or SIG has filed or otherwise provided all material
reports, data, other information and applications required to be filed with or
otherwise provided to all federal, state or local Governmental Authorities with
jurisdiction over Pafco, and all regulatory registrations and approvals of all
federal, state or local Governmental Authorities with jurisdiction over Pafco
are in full force and effect. Since December 31, 1991, there have been no
material disputes or controversies with or investigations undertaken by any such
regulatory authorities, except as set forth in Schedule 2.15.
2.16. INSURANCE BUSINESS.
(a) All contracts, arrangements, treaties, understandings and
agreements to which Pafco (or any Goran Entity wholly or partially on behalf of
Pafco) is a party with respect to reinsurance applicable to insurance in force
(including grace periods and other extensions) on the date of this Agreement,
and all such contracts, arrangements, treaties, understandings and agreements
under which Pafco (or any Goran Entity wholly or partially on behalf of Pafco)
has any obligation to cede insurance (all of the foregoing being referred to,
collectively, as the "Reinsurance Agreements"), are valid, binding and in full
force and effect in accordance with their terms. No Goran Entity is, and, to the
knowledge of the Goran Entities, no other party thereto, is in material default
of any Reinsurance Agreement and no Reinsurance Agreement contains any provision
providing that the other party or parties thereto may terminate the same by
reason of the transactions contemplated by this Agreement or any other provision
which would be altered or otherwise become applicable by reason of such
transactions, except as disclosed on Schedule 2.16. Schedule 2.16 contains a
true and complete list of all Reinsurance Agreements (other than any Reinsurance
Agreements with respect to which liabilities retained by Pafco do not exceed
$100,000 in the aggregate).
(b) Except with respect to terms specifically negotiated with
policyholders, all policies of insurance issued by Pafco and now in force are,
to the extent required under applicable law, on forms approved by applicable
insurance regulatory authorities in the jurisdictions where issued or have been
filed with and not objected to by such authorities within the period provided
for objection. None of the terms embraced by the exception to the representation
and warranty contained in the immediately preceding
sentence adversely affects the enforceability of any of such policies or
jeopardizes the licensing or authorization of Pafco in any jurisdiction. The
transactions contemplated by this Agreement will not affect the validity or
binding character of any policy of insurance issued by Pafco or render any
admissible assets of Pafco inadmissible under the applicable insurance laws of
any jurisdiction or the regulations promulgated thereunder by insurance
regulatory authorities.
2.17. THREATS OF CANCELLATION. Except as set forth in Schedule 2.17, since
December 31, 1992, no policyholder or related group of policyholders, agents, or
persons or entities producing insurance business which, singly or in the
aggregate, accounted for five percent or more of the gross income of Pafco for
the year ended December 31, 1992 has or have, at its or their initiative,
terminated or threatened to terminate its or their relationship with Pafco,
either as a result of the transactions contemplated by this Agreement or
otherwise, and Pafco has no reason to believe that any such termination will
occur.
2.18. RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, nor, to
the knowledge of the Goran Entities, any Law or other instrument binding upon
any of the Goran Entities which has or would reasonably be expected to have the
effect of prohibiting or materially restricting any business practice of, any
acquisition of property by, or the conduct of business by the Company, Pafco or
Superior as presently conducted.
2.19. MATERIAL CONTRACTS. Except for agreements, contracts, plans,
arrangements or commitments disclosed to GSCP pursuant to Schedule 2.19 (a copy
of each of which has been provided to GSCP) (collectively, "Material
Agreements"), Pafco is not a party or subject to any agreement, contract, plan,
lease, arrangement or commitment which is material to Pafco or which is not made
in the ordinary course of business. All Material Agreements are valid and
binding agreements and are in full force and effect, and neither Pafco nor, to
the knowledge of the Goran Entities, any other party thereto is in default in
any respect under the terms of any such Agreement. No Material Agreement
contains any provision providing that the other party or parties thereto may
terminate the same by reason of the transactions contemplated by this Agreement
or any other provision which would be altered or otherwise become applicable by
reason of such transactions, except as set forth on Schedule 2.19.
2.20. ENVIRONMENTAL.
(a) The Goran Entities and their predecessors and their "affiliates"
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) ("Affiliates") have complied in all
material respects with all Environmental Laws (as defined below), and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced
against any of them alleging any failure so to comply. Without limiting the
foregoing, the Goran Entities and its predecessors and Affiliates have obtained
and been in compliance with all the terms and conditions of all permits,
licenses and other authorizations which are required under, and have complied
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are contained in, all
Environmental Laws.
(b) Neither Pafco nor IGF has any material liability (and, except as
disclosed on Schedule 2.20, none of the Goran Entities, their predecessors or
Affiliates has handled or disposed of any substance, arranged for the deposit of
any substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against any of the
Goran Entities or their Affiliates giving rise to any liability) for damage to
any site, location or body of water, for any illness of or personal injury to
any employee or other individual or for any reason under any Environmental Law.
(c) "Environmental Laws" mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, each as amended, together with all other Laws of federal,
state, local and foreign Governmental Authorities concerning pollution or
protection of the environment, including Laws relating to emissions, discharges,
releases or material releases of pollutants, contaminants or chemical,
industrial, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or chemical, industrial, hazardous or toxic
material or waste.
2.21. RELATED PARTY TRANSACTIONS. Except as set forth on Schedule 2.21, (i)
no current stockholder, director, officer or employee of Pafco or IGF, or any
Affiliate or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of any of the foregoing persons is presently, or during the past
five years has been, a party to any agreement or transaction with respect to
which Pafco or IGF currently has any liability (contingent or otherwise) and
(ii) there are no agreements or ongoing transactions between Pafco or IGF on the
one hand and any Goran Entity or Affiliate of Goran (including Pafco or IGF) on
the other hand. Each ongoing intercompany transaction set forth on Schedule 2.21
is on terms that are (i) consistent with the past practice of Pafco or IGF, as
the case may be, and (ii) at least as favorable to Pafco or IGF, as the case may
be, as would be available with independent third parties dealing at arms'
length.
2.22. BROKERS. Except as set forth on Schedule 2.22, none
of the Goran Entities, nor any of their respective officers,
directors, employees, stockholders or agents, has
employed any broker or finder in connection with this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby. The Goran
Entities have furnished to GSCP copies of all arrangements disclosed on Schedule
2.22 and the Company will not have any liability thereunder except up to
$250,000.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF GSCP. GSCP
hereby represents and warrants to Goran as follows:
3.1. ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY. GSCP is a limited
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, with all requisite organizational authority
to enter into this Agreement and the Ancillary Agreements and to consummate the
transactions contemplated hereby or thereby.
3.2. AUTHORIZATION. The execution, delivery and performance by GSCP of this
Agreement and the Ancillary Agreements have been duly authorized by all
requisite partnership action on the part of GSCP and each such agreement
constitutes (or when executed will constitute) the legal, valid and binding
obligation of GSCP, enforceable against it in accordance with its terms.
3.3. NO CONFLICT. The execution, delivery and performance by GSCP of its
obligations under this Agreement and the Ancillary Agreements, and the
consummation by GSCP of the transactions contemplated hereby or thereby, will
not (a) violate any provision of any Law applicable to it, or any of its
properties or assets, (b) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time, or both) a default (or give rise to any right of termination, cancellation
or acceleration) under any agreement to which it is a party or (c) violate
GSCP's organizational documents.
3.4. CONSENTS. Except as set forth on Schedule 3.4, no permit,
authorization, consent, approval or waiver of or by, or any notification of or
filing with, any Governmental Authority or third party is required in connection
with the execution, delivery and performance by GSCP of this Agreement and the
Ancillary Agreements and the consummation by GSCP of the transactions
contemplated hereby or thereby.
3.5. INVESTMENT. GSCP is acquiring the Company Common Stock for investment
and not with a view to the distribution thereof in violation of any applicable
securities laws. GSCP understands that (i) the Company Common Stock will not be,
in connection with the transactions contemplated by this Agreement, registered
under the Securities Act or any state securities laws, by reason of their
issuance by the Company in a transaction exempt from the registration
requirements thereof and (ii) the Company Common Stock may not be sold unless
such disposition is registered under the Securities Act and applicable state
securities laws or is exempt from registration thereunder.
3.6. BROKERS. Neither GSCP nor any of its officers,
employees, partners or agents has employed any broker or finder
in connection with this Agreement and the Ancillary Agreements or
the transactions contemplated hereby or thereby.
3.7. AVAILABILITY OF FUNDS. GSCP has, or will on the
Closing Date have, sufficient cash to pay the GSCP Purchase
Price.
SECTION 4. PRE-CLOSING COVENANTS.
4.1. COOPERATION. Each of the parties hereto shall use all reasonable
efforts to cause the transactions contemplated hereby and by the Ancillary
Agreements to be consummated, including, without limitation, seeking to obtain
all consents, approvals, authorizations, permits or waivers required to be
obtained from, and making all notifications required to be made to, Governmental
Authorities and other third parties in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby or thereby.
4.2. HSR ACT/FORM A FILING. Each of the parties hereto shall timely and
promptly make and shall cooperate with each other in making, (i) all filings
required under the HSR Act, (ii) a filing on Form A with the Department of
Insurance of the State of Indiana and (iii) and all other filings required by
Law to be made with any other Governmental Authority and shall provide any
additional information or documentation requested by the Federal Trade
Commission, the Department of Justice, the Department of Insurance of the State
of Indiana or any other Governmental Authority, in connection with such filings.
4.3. CONDUCT OF BUSINESS. Goran and SIG shall cause Pafco to conduct its
business between the date hereof and the Closing Date in the ordinary course of
business, consistent with past practice, including, without limitation, (a)
performing in all material respects all of its contracts and agreements and (b)
using its reasonable efforts to maintain (i) all of its buildings, facilities,
equipment, leasehold and other improvements, fixtures, any related capitalized
items and other tangible property owned by or leased to it in good operating
condition and repair, free of any material structural or engineering defects,
(ii) its present workforce and agents, customer base, reinsurance arrangements
and other business relationships substantially intact, and (iii) all its
licenses, permits and qualifications in good standing. Prior to the Closing,
Goran and SIG shall consult with GSCP from time to time with respect to the
conduct of the business of Pafco, and shall cause the Company not to conduct any
business other than such actions as are required to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements.
4.4. RESTRICTED ACTIVITIES. Between the date hereof and the Closing Date,
Goran and SIG shall cause Pafco not to engage in any of the activities described
in clauses (c) through (r) of Section 2.9, without the prior written consent of
GSCP (other than, with respect to clause (n), a change in the reserves for
losses made pursuant to Section 4.11).
4.5. ACCESS. From the date hereof and prior to the Closing, the Goran
Entities shall provide GSCP with such information as GSCP may from time to time
reasonably request with respect to the Goran Entities and the transactions
contemplated by this Agreement and the Ancillary Agreements (including, without
limitation, the EuroNotes and the EuroNotes Waiver (both as defined in Section
4.14) and any IGF Company Sale), and shall provide GSCP and its representatives,
accountants and lenders reasonable access during regular business hours and upon
reasonable notice to the employees and books and records of Pafco or the Company
as GSCP may from time to time reasonably request.
4.6. NO SOLICITATION. Between the date hereof and the Closing, none of the
Goran Entities, any of their Affiliates or any director, officer, employee,
agent or representative of any of the foregoing, shall, directly or indirectly,
initiate, solicit, encourage or participate in, discussions or negotiations
with, provide any information to, or enter into any agreement, with any person
or entity with respect to any merger, consolidation, recapitalization, sale of
capital stock, sale of substantial assets or similar transaction with respect to
(x) any of SIG, Pafco, the Company, Superior or any subsidiary of Superior (but,
for purposes of clarity, not including IGF, Symons International Group, Inc. -
Florida ("SIG - Florida"), Granite Reinsurance Company Ltd. ("Granite Re") or
Granite Insurance Company) or (y) Goran to the extent that an Acceleration Event
(as defined in the Stockholder Agreement) would occur. The Goran Entities shall,
promptly after receipt thereof by any of them, notify GSCP of the terms of any
offer by any person or entity with respect to any of the foregoing.
4.7. COMMUNICATIONS. Between the date hereof and the Closing Date,
communications from Goran or any of its Affiliates to any of Goran's or its
Affiliates' or Superior's employees, policyholders, reinsurers, suppliers or
others having business relationships with any of them, regarding the
transactions contemplated by this Agreement and including any reference to GSCP
or its Affiliates, will be provided to GSCP in advance for its approval.
4.8. STATE REGULATORY AUTHORITIES. The Goran Entities will use their best
efforts to cooperate with all applicable state regulatory authorities with
respect to any request, investigation (for example, a market conduct audit) or
requirement thereof relating to Pafco, and Goran and SIG will cause Pafco to
advise GSCP of the receipt and the status thereof on an ongoing basis.
4.9. ADVICE OF CHANGES. Each of Goran and SIG, on the one hand, and GSCP,
on the other hand, will use its best efforts promptly to advise the other in
writing of any event occurring after the date hereof which would render any of
its representations and warranties contained in this Agreement, if made on or as
of the date of such event or as of the Closing Date, untrue or inaccurate.
4.10. PUBLIC ANNOUNCEMENTS. GSCP on the one hand, and the Goran Entities on
the other hand, agree that, prior to the Closing, they will not issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby without obtaining the prior consent of the
other as to the timing, content and wording thereof, except as required by
applicable Law. In the event of any disclosure required by applicable Law, the
parties will consult with each other as to the contents thereof prior to making
such disclosure, if it is possible (consistent with the applicable legal
requirements) to do so.
4.11. TILLINGHAST STUDY. Prior to the Closing, Goran and SIG shall cause
Pafco to retain Tillinghast, a Towers Perin company, to conduct a study of the
reserves for losses established, as of December 31, 1995, by Pafco in respect of
its insurance policies (the "Tillinghast Study") in order to (i) establish the
appropriate amount of reserves for losses (the "Tillinghast December 31 Reserve
Amount") to be included by the Company in preparing the unconsolidated balance
sheet of Pafco as of December 31, 1995 and (ii) to make recommendations as to
the optimum methodology for reflecting appropriate reserves for losses (the
"Tillinghast Methodology"). After receipt by Pafco of the Tillinghast Study,
Goran and SIG shall cause Pafco to adjust its books and records, and to
establish reserves for losses (including on the Draft Closing Balance Sheet), in
accordance with the Tillinghast Methodology. Pafco will continue, after the
Closing, to establish reserves for losses consistent with the Tillinghast
Methodology.
4.12. REINSURANCE ARRANGEMENTS.
(a) Prior to the Closing, Goran and SIG shall cause Pafco to enter
into agreements of reinsurance with respect to all insurance policies issued
prior to the date hereof by Pafco (x) on behalf of SIG-Florida (the "SIG Florida
Policies") and (y) in respect of any type of insurance other than non-standard
auto insurance (the "Other Insurance Policies"). Pursuant to such agreements of
reinsurance, all liabilities under and all rights to receive premiums with
respect to all SIG-Florida Policies and all Other Insurance Policies shall be
assigned to and assumed by a third party (it being understood that Pafco may
enter into such agreements of reinsurance with Granite Re), so long as each such
agreement meets the requirements set forth in Section 2.3(h) of the Stockholder
Agreement). Goran and SIG agree that they will, jointly and severally, hold each
of Pafco, the Company and GSCP harmless from and against any and all Losses
(defined in Section 9.2(c)) with respect to the SIG Florida Policies and the
Other Insurance Policies.
(b) Prior to the Closing, Goran and SIG shall cause Pafco and IGF to
enter into agreements of reinsurance pursuant to which all liabilities under and
all rights to receive premiums with respect to all policies relating to
non-standard automobile insurance issued prior to the date hereof by IGF on
behalf of Pafco shall be assigned to and assumed by Pafco.
(c) Each agreement of reinsurance entered into by Pafco pursuant to
Sections 4.12(a) and (b) (collectively, the "Reinsurance Arrangements") shall be
on Pafco's standard form of reinsurance agreement (and copies of each such
Reinsurance Arrangement shall be provided to GSCP) or otherwise in form and
substance reasonably satisfactory to GSCP.
(d) Between the date hereof and the Closing Date, Goran and SIG shall
cause Pafco not to issue insurance policies on behalf of any Affiliate of Goran
(except in accordance with Section 5.7 hereof) and Goran shall cause each of its
Affiliates (other than Pafco) not to issue insurance on behalf of Pafco, unless
the parties hereto shall have consented thereto in writing; provided, however,
that SIG-Florida may continue to issue insurance policies on behalf of Pafco
consistent with past practice.
4.13. QUOTA SHARE AGREEMENTS Prior to the Closing, except for quota share
agreements entered into by Pafco pursuant to Sections 4.12(a) and (b), Goran and
SIG shall cause Pafco to cancel and make null and void, without any liability to
Pafco arising from such cancellation, all quota share agreements to which Pafco
is a party as of the date hereof (the "Quota Share Cancellation," and together
with the Reinsurance Arrangements, the "Pre-Closing Transactions"). Between the
date hereof and the Closing Date, Goran and SIG shall cause Pafco not to enter
into any quota share arrangements.
4.14. GORAN EURONOTES.
(a) Prior to the Closing, Goran shall obtain, at no direct or
indirect cost, expense or liability (including any indirect economic cost) to
GSCP or the Company, from or on behalf of the holders of notes (the "EuroNotes")
issued by Goran pursuant to the Amended and Restated Trust Indenture, dated
December 29, 1992 (such indenture and all documents ancillary thereto being
referred to herein as the "EuroNote Documents"), between Goran and Montreal
Trust Company of Canada, a waiver (the "EuroNotes Waiver") containing the
provisions set forth on Exhibit G. Goran shall keep GSCP apprised of the status
of its efforts to obtain the EuroNote Waiver.
(b) Without limiting Section 4.14(a), in the event that, at any time
after the date hereof, there exists any restriction (a "EuroNote Restriction")
on the operation of the business of the Company, Newsub, Pafco, Superior or any
subsidiaries thereof by reason of the EuroNotes or the EuroNote Documents, Goran
and SIG shall, within 30
days after learning of the existence thereof, take such action as is necessary
to remove such EuroNote Restriction, including, without limitation, redeeming
all of the outstanding EuroNotes. In the event that such EuroNote Restriction is
not so removed, GSCP, in addition to any other remedies it may have, shall be
entitled to elect to purchase from SIG a number of the shares of Company Common
Stock, at a price per share equal to (a) the Total Investment (as defined in
Section 9.2), divided by (b) the number of shares of Investment Company Common
Stock (as defined in Section 9.2), such that such sale of shares of Company
Common Stock will provide SIG and Goran with such proceeds as are necessary for
Goran to redeem all of the outstanding EuroNotes, which proceeds shall be used
by Goran for such purpose.
(c) Goran and SIG, jointly and severally, agree to indemnify and hold
harmless each GSCP Indemnified Party from any and all Losses arising out of,
resulting from or relating to the EuroNotes, the EuroNotes Waiver, or the
EuroNote Documents (including, without limitation, any liabilities arising or
fees, expenses or other amounts already paid or to be paid to the Bank pursuant
to the Bank Commitment Letter in the event that (x) arrangements are not made
with respect to the EuroNotes which are satisfactory to the Bank and (y) the
Bank terminates its obligations under the Bank Commitment Letter).
4.15. IGF.
(a) Prior to the Closing, Goran and SIG shall (x) cause Pafco to
divest all of the capital stock of IGF held by Pafco such that Pafco will not
hold, directly or indirectly, any of the capital stock of IGF) and, (y) in
connection therewith, shall (a) cause IGF Holdings to pay a cash dividend to
Pafco in an amount (the "IGF Amount") equal to the greater of the book value or
the statutory surplus of IGF as of December 31, 1995, as set forth on the
audited financial statements of Pafco as of December 31, 1995, (b) cause IGF
Holdings to pay a dividend to Pafco in the form one or more promissory notes of
IGF Holdings in the aggregate principal amount of the IGF Amount, with each such
note being substantially in the form of Exhibit H hereto (the "IGF Holding
Notes"), or (c) cause to be issued to Pafco by any Affiliate of Goran reasonably
acceptable to GSCP such other promissory notes in the aggregate principal amount
of the IGF Amount (with respect to clause (c), with an accompanying arrangement,
which shall include a pledge agreement with terms similar to the terms of the
Pledge Agreement (as defined in 9.2(j)), providing Pafco with a fully perfected
first security interest in all the issued and outstanding shares of capital
stock of IGF, to secure repayment of such note) or such other assets as shall be
reasonably acceptable to Pafco (the actions referred to in clauses (x) and (y)
of this Section 4.15(a) being referred to herein, collectively, as the "IGF
Pre-Closing Transactions"). An "IGF Company Sale" shall mean (i) a sale or
public offering of any of the shares of capital stock of IGF or IGF Holdings
(pursuant to a merger or consolidation of IGF or IGF Holdings with, or sale of
such stock to, another person or
entity) or (ii) a sale of any assets of IGF or IGF Holdings not in the ordinary
course of business consistent with past practice.
(b) If the IGF Holdings Notes are issued as set forth in Section
4.15(a), Goran and SIG jointly and severally agree that, so long as there remain
obligations of IGF Holdings pursuant to the IGF Holdings Notes, each shall cause
SIG, IGF Holdings and IGF to comply with the covenants set forth on Exhibit I
hereto, and, upon the occurrence of any of the events set forth in Exhibit I
hereto under the heading "Events of Default," (each, an "Event of Default"),
then, and in such event, GSCP may declare all or a portion of the outstanding
principal amounts of the IGF Holdings Notes (with accrued interest thereon) and
all other amounts owing to Pafco pursuant to the IGF Holdings Notes to be
immediately due and payable, whereupon the same shall immediately become due and
payable. All representations and warranties contained herein relating to IGF and
IGF Holding, shall survive only until all of the outstanding principal amounts,
accrued interest and all other obligations owing, pursuant to the IGF Holdings
Notes have been paid in full. If notes other than the IGF Holdings Notes are
issued as set forth in Section 4.15(a), covenants and events of default similar
to those set forth in Exhibit I shall be applicable, all in form and substance
reasonably satisfactory to GSCP.
(c) Goran and SIG shall cause (i) IGF Holdings to conduct no business
except as expressly contemplated by this Agreement and (ii) IGF to conduct its
business between the date hereof and the Closing Date in the ordinary course of
business, consistent with past practice.
4.16. OPTION PLAN. Effective as of the Closing, the Company
shall adopt a stock option plan substantially in the form of the
plan set forth in Exhibit J hereto (the "Stock Option Plan").
4.17. MANAGEMENT AGREEMENTS. Effective as of the Closing, SIG shall assign
to Newsub all of SIG's rights, and Newsub shall assume all of SIG's obligations,
under the Agreement dated May 1, 1987, between Pafco and SIG attached as Exhibit
K hereto (the "Pafco Management Agreement") and Goran, SIG and the Company shall
cause Newsub and Superior to enter into an administrative services agreement
reasonably satisfactory to GSCP (such agreements being referred to herein as the
"Superior Administrative Management Agreements").
4.18. RELEASE OF ENCUMBRANCE. Prior to the Closing, Goran and SIG (i) shall
cause to be released any Encumbrances existing on the assets or properties of
Pafco pursuant to the Commercial Pledge Agreement (the "Union Pledge
Agreement"), dated December 29, 1994, between Union Federal Savings Bank of
Indianapolis ("Union") and Pafco, and (ii) shall cause the standby letter of
credit, dated December 29, 1994, among United National Insurance Company
("United") and Pafco to be cancelled and of no
further force and effect, or, if, after using its best efforts to do so, United
shall not agree to such cancellation, then Goran and SIG shall cause Granite Re
to post collateral to secure such letter of credit and shall obtain from Union a
release of any Encumbrance existing pursuant to the Union Pledge Agreement.
4.19. RESIGNATIONS. Immediately prior to the Closing, Goran
and SIG shall cause all officers of the Company to resign their
positions, effective as of the Closing.
SECTION 5. ADDITIONAL COVENANTS.
5.1. ACCESS TO RECORDS. From and after the Closing, the Company shall
afford GSCP and its employees, counsel and other authorized representatives full
access, during normal business hours, upon reasonable advance notice, to all of
Pafco's books, records and properties, and to all of its officers and key
employees for any purpose.
5.2. FINANCIAL REPORTS.
(a) For a period of twelve months after the Closing (the "Initial
Period"), the Company agrees to furnish to GSCP and Goran, within 30 days after
the end of each fiscal month, (i) internal summary financial and operating
statements for such month, prepared by management of the Company ("Monthly
Financial"), (ii) a letter or memorandum prepared by management of the Company
discussing the revenues and operations of the Company and the summary financial
information for such period (a "Management Letter") and (iii) a statement,
certified by the Chief Financial Officer of the Company, certifying that the
financial position at such month-end and results of operations of the Company
for such period as reflected in the Monthly Financial are presented fairly and
have been prepared in accordance with U.S. GAAP (subject to normal year-end
adjustments and the absence of footnotes) consistently applied.
(b) After the Initial Period, the Company will furnish to Goran and
GSCP, after the end of each fiscal quarter, (i) internal summary financial and
operating statements for such quarter, prepared by management of the Company
("Quarterly Financials"), and a letter or memorandum discussing the revenues and
operations of the Company and the summary financial information for such period,
(ii) a Management Letter and (iii) a statement, certified by the Chief Financial
Officer of the Company, certifying that the financial position at such
quarter-end and results of operations of the Company for such period as
reflected in the Quarterly Financials are presented fairly and have been
prepared in accordance with U.S. GAAP (subject to normal year-end adjustments
and the absence of footnotes) consistently applied. The Company will use its
best efforts to deliver the foregoing within 45 days after the end of each
fiscal quarter.
(c) Commencing with the first fiscal year ending after the Closing,
the Company agrees to use its best efforts to furnish to Goran and GSCP, within
90 days after
the end of each fiscal year, commencing with the first fiscal year ending after
the Closing, (i) audited balance sheets and an income statement as of the end of
such fiscal year, together with statements of retained earnings and cash flow
for such fiscal year, all in reasonable detail and certified by a recognized
"Big Six" national firm of independent accountants (selected by the Board of
Directors of the Company) as presenting fairly the financial position at such
year-end and results of operations of the Company for such period as having been
prepared in accordance with U.S. GAAP consistently applied, including their
opinion thereon, and (ii) a Management Letter. The Company will use its best
efforts to deliver the foregoing within 90 days after the end of each fiscal
year.
(d) Promptly upon becoming available, (i) copies of all filings made
by the Company with the Securities and Exchange Commission, any securities
exchange or any insurance regulatory agency and (ii) any other information that
GSCP or Goran shall reasonably request.
(e) The financial statements and information delivered pursuant to
the foregoing Sections 5.2(a), (b) and (c) shall be the consolidated and
consolidating financial statements of the Company and all subsidiaries the
accounts of which are consolidated with those of the Company.
5.3. D&O INSURANCE. The Company shall maintain, at all times after the
Closing, with financially sound and reputable insurers, adequate directors' and
officers' liability insurance.
5.4. INVESTMENT BANKING SERVICES. Goldman, Sachs & Co. ("Goldman Sachs") or
any Affiliate of Goldman Sachs shall have the right to perform all investment
banking services for the Company for which an investment banking firm is
retained after the date hereof (including, without limitation, with respect to
the sale of the Company) (but not including with respect to any IGF Company Sale
or the proposed recapitalization or sale of Granite Re or Granite Insurance
Company) and Goldman Sachs shall have the right to act as the lead managing
underwriter with respect to any public offering of securities of the Company or
any secondary offering of the securities of the Company, in each case, upon
customary terms, including compensation, consistent with an arm's-length
transaction. If the Company engages Goldman Sachs or any of its Affiliates to be
a managing underwriter in connection with any underwriting of its capital stock
and the Company desires to engage one or more investment bankers as co-managing
underwriter(s) in connection with such offerings, the Company shall have the
right to select such co-managing underwriter(s). If the Company and Goldman
Sachs or its Affiliate, after good faith discussions, cannot agree on the terms
of any such engagement, the Company may hire such other investment banker as it
finds acceptable, provided that Goldman Sachs shall then be entitled to be a
co-managing underwriter in connection with any such underwriting of capital
stock of the Company.
5.5. POLICIES TO BE ISSUED BY IGF. After the Closing, when requested by the
Company, so long as Goran, directly or indirectly, has voting control of IGF (it
being understood that Goran shall be deemed to have such voting control of IGF
for so long as (1) in the aggregate it holds, directly or indirectly, in excess
of 25% of the outstanding capital stock of IGF the holders of which are entitled
to vote generally for the election of directors of IGF and (2) no other holder
or "group" (as such term is defined by the Securities Act of 1934, as amended)
of holders holds in excess of 10% of such stock), Goran and SIG shall cause IGF
to issue insurance policies on behalf of Pafco. The Company shall cause Pafco to
enter into agreements of reinsurance with IGF pursuant to which all liabilities
under and rights to receive premiums with respect to such policies shall be
assumed by Pafco.
5.6. GORAN REINSURANCE. In the event that the Board approves the Company,
Pafco or any other subsidiary of the Company issuing any insurance policy on
behalf of Goran, SIG or any of their Affiliates, Goran shall arrange for the
Company or its subsidiary, as the case may be, to enter into agreements of
reinsurance pursuant to which all liabilities and rights to receive premiums
with respect to such policy shall be assumed by a third party (it being
understood that, subject to Section 2.3 of the Stockholder Agreement, the
Company, Pafco or any other subsidiary of the Company may enter into such
agreements of reinsurance with Granite Re). Goran and SIG agree that they will,
jointly and severally, indemnify and hold harmless each of the Company, its
subsidiaries and GSCP from and against all Losses relating to any such policies.
5.7. CERTAIN REPURCHASES. Prior to December 31, 1996, Goran and SIG,
jointly and severally, agree to (a) purchase from the Company or Pafco, as the
case may be, the Cliffstan Note, (to the extent that such Note has not
theretofore been assigned pursuant to Section 1.7(b)), at a purchase price equal
to the book value of such note as reflected on the Closing Date Balance Sheet,
and (b) to repay any and all amounts owing to Pafco by SIG or any other
Affiliate of Goran as of the date hereof (to the extent that such amounts have
not been canceled pursuant to Section 1.7(b)).
5.8. TRITECH SYSTEM. After the Closing, Goran or SIG shall
make available for use by the Company the Tritech System, without
charge therefor.
5.9. Intercompany Arrangements. Except as set forth on Schedule 5.9 or as
expressly contemplated by this Agreement or the Ancillary Agreements, as of the
Closing Date, any and all transactions, agreements or arrangements between Pafco
or IGF on the one hand and Pafco, IGF, SIG, Goran or any of their Affiliates on
the other hand, will be terminated and of no further force and effect, without
any liability to Pafco, IGF or the Company.
5.10. SUPERIOR NOTE PURCHASE. In the event that pursuant to Section 4.15,
the IGF Holdings Notes or any other notes are issued to Pafco, then, promptly
after the Closing (but in no event later than 10 days from the date thereof),
the Company shall cause Superior to purchase from Pafco, and Pafco to sell to
Superior, one or more notes with an aggregate principal amount equal to 75% of
the aggregate principal amount of the IGF Holdings Notes (or such other notes,
as the case may be).
SECTION 6. TAXES.
6.1. TAX REPRESENTATIONS AND WARRANTIES.
(a) For purposes of this Section 6, the following terms shall have
the meanings set forth below, and all of the representations and warranties made
herein are made jointly and severally by Goran and SIG:
"Tax" or "Taxes" means any taxes, assessments, duties, fees, levies,
imposts, deductions, withholdings, including, without limitation, income, gross
receipts, ad valorem, value added, excise, real or personal property, asset,
sales, use, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes, or other
governmental charges of any nature whatsoever imposed by any government or
taxing authority of any country or political subdivision of any country and any
liabilities with respect thereto, including any penalties, additions to tax,
fines or interest thereon, and includes any liability of any of the Goran
Entities arising under any tax sharing agreement to which any of them is or has
been a party.
"Income Tax" or "Income Taxes" means any income or franchise Taxes or
other Taxes measured in whole or in part by net income.
"Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) Except as set forth on Schedule 6.1(b), (i) all Tax Returns
required by Law to have been filed by or with respect to Pafco have been timely
filed, (ii) all Taxes shown to have become due pursuant to such Returns have
been paid, (iii) all Taxes (other than those being contested in good faith) for
which a notice of or assessment or demand for payment has been received or which
are otherwise due and payable have been paid and (iv) all such Tax Returns were
true, correct and complete in all material respects. The accruals and reserves
for Taxes in each of the balance sheets included in the Financial Statements are
adequate to cover any liability of Pafco for Taxes for periods through the dates
of such balance sheets. The accruals and reserves for deferred tax
liability in each of such balance sheets are adequate to cover any such
liability. If Pafco files its Tax Returns for its taxable year that includes the
date hereof in conformance with its past practices and tax reporting, to the
best knowledge of the Goran Entities or any of their directors, officers or
employees, there will be no basis for any material adverse audit adjustments
under any of the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), or any provisions of state, local or foreign Tax Law, with respect
to operations and activities of Pafco during the period which began on January
1, 1995 and ends on the date hereof.
(c) Except as set forth on Schedule 6.1(c), (i) to the best knowledge
of the Goran Entities or any of their directors, officers, or employees, there
is no action, suit, proceeding, investigation, audit, claim or assessment
pending or proposed with respect to any liability for Tax that relates to Pafco,
(ii) all amounts required to be collected or withheld by Pafco with respect to
Taxes have been duly collected or withheld and any such amounts that are
required to be remitted to any taxing authority have been duly remitted, (iii)
no extension of time within which to file any Return that relates to Pafco has
been requested, which Return has not since been filed, (iv) there are no waivers
or extensions of any applicable statute of limitations for the assessment or
collection of Taxes with respect to any Return that relates to Pafco which
remain in effect, (v) there are no tax rulings, requests for rulings, or closing
agreements to which Pafco is a party or is subject which could affect its
liability for Taxes for any period after the Closing, (vi) all federal, state,
local and foreign Income Tax Returns of Pafco with respect to taxable periods
through the year ended December 31, 1991, have been examined and closed or are
Returns with respect to which the applicable statute of limitations has expired
without extension or waiver, (vii) no power of attorney has been granted by
Pafco or SIG with respect to any matter relating to Taxes of Pafco which is
currently in force, (viii) no consent under Section 341(f) of the Code or any
comparable provision of state or local Tax Law has been filed by or with respect
to Pafco, (ix) Pafco has not agreed nor is required to include in income any
adjustment pursuant to Section 481(a) of the Code (or similar provisions of
state, local or foreign Tax Law) by reason of a change in accounting method or
otherwise, and the Internal Revenue Service (or other taxing authority) has not
proposed, and to the knowledge of Pafco or SIG is not considering, any such
change in accounting method in connection with an ongoing audit of Pafco, (x)
Pafco has not disposed of any property in a transaction being accounted for
under the installment method pursuant to Section 453 of the Code or any similar
provision of state, local or foreign Tax Law, (xi) none of the Tax Returns of
Pafco filed, or to be filed on or before the Closing Date, contain, or will
contain, a disclosure statement under Section 6662 of the Code or any similar
provision of state, local, or foreign Tax Law and (xii) to the best knowledge of
the Goran Entities, or any of their directors, officers, or employees, no taxing
authority in any jurisdiction in which Pafco does not file Tax Returns has made
a claim, assertion or threat that Pafco is or may be subject to taxation by such
jurisdiction.
(d) Complete copies of all (i) federal Income Tax Returns, including
amended Returns, of Pafco, that have been filed with respect to taxable periods
beginning on and after December 31, 1990 through the date hereof, and (ii) the
most recently filed state, local and foreign Income Tax and other Returns,
including amended Returns, of Pafco have been delivered or made available to
GSCP prior to the date hereof. Prior to the date hereof, Pafco has provided to
GSCP copies of all revenue agents' reports and other written assertions by
governmental authorities of deficiencies or other liabilities for Taxes of Pafco
with respect to past periods for which the limitations period has not run, and
each of such items have been set forth on Schedule 6.1(d). Schedule 6.1(d)
contains a list of states, territories and jurisdictions (whether foreign or
domestic) in which Pafco has filed an income, franchise, sales or use Tax Return
for taxable periods ending on or after December 31, 1990.
6.2. RETURNS AND PAYMENTS. (a) The Company shall cause Pafco to consent to
join, for all taxable periods of Pafco ending on or before the Closing Date for
which it is eligible to do so, in any consolidated, combined or unitary Income
Tax Returns which SIG shall request it to join. SIG shall cause to be prepared
and filed all such consolidated, combined or unitary Returns. The Company agrees
to cooperate with SIG and its affiliates in the preparation of the portions of
such Returns pertaining to Pafco. For purposes of this Section 6.2(a), SIG shall
treat (and shall cause Pafco to treat) the Closing Date as the last date of the
taxable period of Pafco in which the Closing occurs. SIG shall cause to be
timely paid all Taxes to which such Returns relate for all periods covered by
such Returns.
(b) The Company shall cause to be prepared and filed, subject to
review by SIG, all required Tax Returns of Pafco (other than those to be filed
by SIG pursuant to paragraph (a) of this Section 6.2) for any period which ends
on or before the Closing Date for which Tax Returns have not been filed as of
the Closing Date. For purposes of this Section 6.2(b), to the extent permitted
by applicable state, local or foreign Law, the Company shall treat (and shall
cause Pafco to treat) the Closing Date as the last day of the taxable period in
which the Closing occurs. SIG shall pay all Taxes to which such Returns relate
for all periods covered by such Returns (after taking into account any estimated
Taxes paid prior to the Closing and to the extent in excess of any amounts
reserved with respect thereto on the Closing Date Balance Sheet) within five
days of the Company's request therefor or five days prior to the date on which
the related tax liability is due, whichever is later.
(c) The Company shall cause to be prepared and filed, subject to
review by SIG, all required Income Tax Returns of Pafco for any period which
begins before and ends after the Closing Date (a "Straddle Period"). The Company
shall cause to be paid all Income Taxes with respect to the Returns to be caused
to be filed by the Company pursuant to this Section 6.2(c). Such Income Taxes to
be caused to be paid by the
Company, to the extent attributable to any period or portion thereof ending on
or before the Closing Date, shall be referred to herein as "Pre-Closing Straddle
Period Income Taxes." SIG shall pay to the Company an amount equal to the
Pre-Closing Straddle Period Income Taxes due with respect to any such Returns
caused to be filed by the Company (after taking into account any estimated Taxes
paid prior to the Closing and to the extent in excess of any amounts reserved
with respect thereto on the Closing Date Balance Sheet). Such Pre-Closing
Straddle Period Income Taxes shall be calculated as though the taxable year of
Pafco terminated at the close of business on the Closing Date; provided,
however, that, in the case of a franchise Tax not based on income, Pre-Closing
Straddle Period Income Taxes shall be equal to the amount of franchise Tax for
the taxable year which would have been imposed if such Tax were determined based
on the assets and liabilities of Pafco as of the Closing, multiplied by a
fraction, the numerator of which shall be the number of days from the beginning
of the taxable year through the Closing Date and the denominator of which shall
be the number of days in the taxable year. Any amounts owed by SIG to the
Company pursuant to this Section 6.2(c) shall be paid by SIG within five days of
the Company's request therefor or five days prior to the date on which the
Company is required to cause to be paid the related Tax liability, whichever is
later.
(d) As of the Closing Date, any Taxes in respect of Pafco (other than
Income Taxes) for any Straddle Period shall be apportioned based on an interim
closing of the books method to determine the amount of such Taxes allocable to
the portion of such Straddle Period elapsed through the Closing Date (provided
that, for this purpose, property Taxes shall be prorated based on the number of
days in the relevant taxable period elapsed through the Closing Date as compared
with the number of days in the Straddle Period). SIG shall be responsible for
all such Taxes (in excess of any amounts reserved with respect thereto on the
Closing Date Balance Sheet) relating (as determined under applicable law) to
periods or portions thereof ending on or before the Closing Date (which Taxes,
together with Pre-Closing Straddle Period Income Taxes, shall be referred to
herein as "Pre- Closing Straddle Period Taxes") and the Company shall be
responsible for all such Taxes relating to periods or portions thereof beginning
after the Closing Date. Any payments or reimbursements of such Taxes required to
be made by SIG to the Company or by the Company to SIG pursuant to this
provision shall be paid by SIG or the Company within the later of five days of
SIG's or the Company's request therefor or five days prior to the date on which
SIG or the Company is required to pay or cause to be paid the related Tax
liability; provided, that in no event shall SIG request such payment prior to
the Closing Date.
(e) To the extent permitted by applicable Law, all Tax Returns
prepared pursuant to this Section 6.2 shall be prepared in all material
respects, and all elections with respect to such Returns shall be made,
consistent with prior practice with respect to
Pafco, except as may be mutually agreed by the Company (with approval of the
Company's Board of Directors) and SIG.
6.3. INDEMNIFICATION, AUDITS.
(a) Goran and SIG shall jointly and severally indemnify and hold
harmless the Company and Pafco against (i) any and all liability assessed
against Pafco for Income Taxes, the Tax Returns for which SIG is responsible for
filing under Section 6.2(a); (ii) any liability for any other Taxes assessed
against Pafco with respect to taxable periods ending on or before the Closing
Date; (iii) any liability assessed against Pafco with respect to any period
ending on or before the last day of the taxable year of SIG's consolidated (or
combined or unitary) group in which the Closing occurs by reason of Pafco being
severally liable for Income Taxes of SIG or any of its affiliates pursuant to
Treasury Regulation Section 1.1502-6 (or any analogous provision of state, local
or foreign Tax Law); (iv) any liability for Pre-Closing Straddle Period Taxes
assessed against Pafco (other than Pre-Closing Straddle Period Taxes for which
SIG has paid the Company pursuant to Sections 6.2(c) and (d)), and (v) any
liability which may be determined to be payable in connection with the execution
and delivery and performance of this Agreement and the Ancillary Agreements or
the consummation of any of the transactions contemplated hereby or thereby
(including, without limitation, the IGF Pre-Closing Transactions and the actions
contemplated by Section 1.1), including without limitation in each of (i)
through (v) above any liability resulting from changes made on audit, but in the
case of Taxes described in (ii) and (iv) above, only to the extent in excess of
the amounts, if any, reserved with respect thereto on the Closing Date Balance
Sheet, as reduced from time to time by payments made with respect thereto. Any
indemnification payable by SIG to the Company or Pafco pursuant to this Section
6.3(a) shall be paid within the later of five days of the Company's request
therefor and five days prior to the date on which the liability upon which the
indemnification is based is required to be satisfied by the Company or Pafco, as
the case may be.
(b) Each party shall promptly notify the other in writing upon
receipt of notice of any pending or threatened federal, state, local or foreign
Tax audits or assessments which may affect the Tax liabilities of Pafco with
respect to periods ending on or before the Closing Date; provided, however, that
the failure of the Company to give SIG prompt notice as provided herein shall
not relieve SIG of any of its obligations hereunder, except to the extent that
SIG's position is actually and materially prejudiced as a result of such
failure. SIG shall, at its own expense, control any audit or determination by
any authority, initiate any claim for refund or amended return, and contest,
resolve and defend against any assessment, notice of deficiency, or other
adjustment or proposed adjustment of Income Taxes (collectively, a "Tax
Contest") attributable to Tax Returns for which it has filing responsibility
pursuant to Section 6.2(a), and shall be responsible for the timely payment of
any liability for Income Taxes that relate to such periods;
provided, however, that to the extent such audit or assessment relates to a Tax
for which Pafco could be held liable or affects the amount of Taxes to be paid
or caused to be paid by the Company, the Company shall have the right to
participate in any such Tax Contest in the manner it deems appropriate and SIG
shall be prohibited from reaching a settlement with regard to such Tax Contest
without the Company's consent. The Company shall, at its own expense, control
all Tax Contests attributable to Tax Returns for which it has filing
responsibility pursuant to Section 6.2(b), and shall be responsible for the
timely payment of any liability for Income Taxes that relate to such periods;
provided, however, that to the extent such audit or assessment relates to a Tax
for which SIG could be held liable or affects the amount of Taxes to be paid or
caused to be paid by SIG, SIG shall have the right to participate in any such
Tax Contest in the manner it deems appropriate and the Company shall be
prohibited from reaching a settlement with regard to such Tax Contest without
SIG's consent.
6.4. REFUNDS AND CARRYBACKS. (a) Any refunds or credits of Taxes of Pafco
received by or credited to the Company or Pafco attributable to periods ending
on or before the Closing Date or to such portions of Straddle Periods ending at
the close of business on the Closing Date, (collectively, "SIG's Refunds"),
shall, to the extent in excess of amounts, if any, accrued with respect thereto
as an asset on the Closing Date Balance Sheet, be for the benefit of SIG. The
Company shall cause any such refund (net of any Tax liability resulting from
such refund) to be paid to SIG within ten days of the Company's or Pafco's
receipt thereof.
(b) SIG agrees that if Pafco carries back any item of loss, deduction
or credit which arises in any taxable period ending after the Closing Date
("Subsequent Loss") into any taxable period beginning before the Closing Date,
then Pafco shall be entitled to any Tax benefit or refund of Taxes realized as a
result thereof (after giving priority to any existing Tax attributes of SIG).
The Company and SIG shall negotiate in good faith to resolve any dispute with
respect to the calculation of any such benefit. Any unresolved disputes with
respect to the calculation of Tax benefits related to a Subsequent Loss shall be
submitted to a "Big Six" accounting firm for arbitration, the costs of which
shall be shared equally by the Company and SIG.
6.5. COOPERATION. After the Closing Date, the Company and SIG shall make
available to the other, as reasonably requested, all information, records,
documents or assistance relating to Tax liabilities or potential Tax liabilities
of Pafco for all periods prior to or including the Closing Date and shall
preserve all such information, records and documents until the expiration of any
applicable statute of limitations or extensions thereof.
6.6. TAX SHARING. Other than pursuant to this Agreement,
as of the Closing Date, Pafco shall have no further rights or
obligations under any Tax-sharing agreement
or arrangement among Pafco and SIG and/or any of SIG's Affiliates, and all
intercompany accounts with respect to Taxes shall be canceled.
6.7. TRANSFER TAXES. SIG will pay all sales, use, transfer, stamp,
conveyance, recording, value added or other similar Taxes, duties, excise or
governmental charges (including any Income Taxes or any real property gains Tax
imposed with respect to the transfer of the stock of Pafco) imposed by any
taxing jurisdiction, domestic or foreign, and all recording or filing fees,
notaries fees and other similar costs of Closing with respect to the transfer of
the stock of Pafco or otherwise on account of this Agreement or the transactions
contemplated hereby.
6.8. firpta affidavit. SIG shall deliver to the Company at the Closing an
affidavit (a so called "FIRPTA Affidavit") in form and substance reasonably
satisfactory to the Company, duly executed and acknowledged, certifying facts
that would exempt the transaction contemplated hereby from the provisions of the
Foreign Investment in Real Property Tax Act.
SECTION 7. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
7.1. REPRESENTATIONS AND WARRANTIES.
(a) Definitions. For purposes of this Section 7, the following terms
shall have the meanings set forth below, and all of the representations and
warranties made herein are made jointly and severally by Goran and SIG:
"Benefit Plan" means each plan, program, policy, payroll practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral and whether or not legally binding,
including, without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA and each "multi-employer plan" within the meaning of
Sections 3(37) or 4001(a)(3) of ERISA.
"Department" means the U.S. Department of Labor.
"Employee" means each current, former, or retired employee, officer,
consultant, independent contractor, agent or director of Pafco, including those
persons who perform services for or write insurance on behalf of Pafco pursuant
to the Agreement between Pafco and SIG dated May 1, 1987.
"Employee Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or contract
between the Pafco, SIG, Goran or any of their Affiliates and an Employee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations promulgated or proposed thereunder.
"ERISA Affiliate" means each business or entity which is a member of
a "controlled group of corporations," under "common control" or a member of an
"affiliated service group" with Pafco within the meaning of Sections 414(b), (c)
or (m) of the Code, or required to be aggregated with Pafco under Section 414(o)
of the Code, or is under "common control" with Pafco, within the meaning of
Section 4001(a)(14) of ERISA.
"Multi-Employer Plan" means each Pafco Benefit Plan which is a
"multi-employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA.
"Pafco Benefit Plan" means each Benefit Plan (other than an Employee
Agreement) which is now or previously has been, or is or was required to be,
sponsored, maintained or contributed to, or with respect to which any withdrawal
liability (within the meaning of Section 4201 of ERISA) has been incurred, by
Pafco, SIG, Goran or any ERISA Affiliate for the benefit of any Employee, and
pursuant to which the Pafco, SIG, Goran or any ERISA Affiliate has or may have
any liability, contingent or otherwise.
"Pension Plan" means each Pafco Benefit Plan (other than a
Multi-Employer Plan) which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA.
"Welfare Plan" means each Pafco Benefit Plan which is an "employee
welfare benefit plan" within the meaning of Section 3(2) of ERISA.
(b) Schedule 7.1(b) contains a true and complete list of each Pafco
Benefit Plan and each Employee Agreement and all material documents relating
thereto have been provided to GSCP. Neither Pafco, SIG, Goran nor any ERISA
Affiliate has any plan or commitment to establish any new Pafco Benefit Plan, to
enter into any Employee Agreement or to modify or to terminate any Pafco Benefit
Plan or Employee Agreement, nor has any intention to do any of the foregoing
been communicated to Employees.
(c) With respect to each Pafco Benefit Plan and/or Employee
Agreement, (i) Pafco, SIG, Goran and each ERISA Affiliate have performed all
material obligations required to be performed by them thereunder, (ii) each
Pafco Benefit Plan has been established and maintained in material compliance
with all applicable laws, statutes, orders, rules and regulations; (iii) each
Pafco Benefit Plan intended to qualify under Section 401 of the Code is, and
since its inception has been, so qualified and each trust forming a part of any
such Pafco Benefit Plan is exempt from tax pursuant to Section 501(a) of the
Code; (iv) no "prohibited transaction," within the meaning of Section 4975 of
the Code or Section 406 of ERISA has occurred with respect to any
Pafco Benefit Plan, (v) there are no audits, investigations, actions,
proceedings, arbitrations, suits or claims (other than routine claims for
benefits) pending, or to the knowledge of the Pafco, SIG, Goran or any ERISA
Affiliate, threatened or anticipated against Pafco, SIG, Goran or any ERISA
Affiliate or any administrator, trustee or other fiduciary of any Pafco Benefit
Plan with respect to any Pafco Benefit Plan or Employee Agreement, or against
any Pafco Benefit Plan or against the assets of any Pafco Benefit Plan; (vi)
each Pafco Benefit Plan and Employee Agreement can be amended, terminated or
otherwise discontinued without liability to Pafco, SIG, Goran or any ERISA
Affiliate; and (vii) Pafco, SIG, Goran and each ERISA Affiliate have made all
payments with respect to all periods through the date hereof, in each case which
are required by each Pafco Benefit Plan, each related trust, each collective
bargaining agreement or by Law to be made to, or with respect to each Pafco
Benefit Plan (including all insurance premiums or intercompany charges with
respect to each Pafco Benefit Plan).
(e) There are no Pension Plans or Multi-Employer
Plans.
(f) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Pafco
Benefit Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee, or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of Pafco or the
Company to amend or terminate any Pafco Benefit Plan. No payment or benefit
which will or may be made by Pafco, SIG, Goran, the Company, or any of their
respective affiliates with respect to any Employee will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
(g) Pafco, SIG, Goran and each of their Affiliates (i) is in
compliance with all applicable laws, rules and regulations relating to
employment with respect to Employees; (ii) is not liable for any arrears of
wages; and (iii) is not liable for any payment to any trust or other fund or to
any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits for Employees.
(h) None of Pafco, SIG, Goran or any of their Affiliates, (i) is
involved in or, to their best knowledge, threatened with any labor dispute,
grievance, or litigation relating to labor matters involving any Employees, (ii)
has engaged in any unfair labor practices within the meaning of the National
Labor Relations Act or the Railway Labor Act, nor (iii) is presently, or has
been in the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees and no such agreement or contract is
currently being negotiated by any of them.
(i) Immediately following the Closing, Newco will be primarily
engaged, directly or through a majority-owned subsidiary or subsidiaries, in the
production or sale of a product or service other than the investment of capital
within the meaning of Department Regulation 2510.3-101 (c), (d) or (e).
7.2. INDEMNIFICATION. SIG and Goran, jointly and severally, agree that they
will indemnify and each will hold harmless the Company and each GSCP Indemnified
Party against any and all Losses arising out of or relating to (i) any Benefit
Plan which is now or previously has been entered into, established, maintained
or contributed to, or required to be established, maintained or contributed to,
by Pafco, SIG, Goran or any ERISA Affiliate, whether arising out of or relating
to any event or state of facts occurring or existing before, on or after the
Closing Date, and including, without limitation, any liabilities arising under
Title IV of ERISA, Section 302 of ERISA and Section 412 or 4971 of the Code,
(ii) any failure prior to the Closing Date by Pafco, SIG, Goran or any ERISA
Affiliate to comply with the continuation coverage requirements contained in
Section 4980B(f) of the Code and/or Section 601 of ERISA, (iii) any claims made
for compensation and/or benefits pursuant to any Benefit Plan established,
maintained or contributed to by Pafco, SIG, Goran or any ERISA Affiliate with
respect to severance, salary continuation, the continuation of medical or other
welfare benefits or similar post-employment benefits, whether arising out of or
relating to any event or state of facts occurring or existing before, on or
after the Closing Date and (iv) any claims made by or relating to Employees with
respect to their employment prior to the Closing Date.
7.3. COVENANTS. Goran and SIG shall take all such actions as are reasonably
necessary to cause all persons currently employed by SIG or its Affiliates who
primarily perform services for the benefit of Pafco to cease to be employed by
SIG and its Affiliates, and to become employees of the Company, as of the
Closing Date.
SECTION 8. CONDITIONS.
8.1. CONDITIONS TO OBLIGATIONS OF GSCP. The obligations of
GSCP to consummate the transactions contemplated hereby at the
Closing is subject to the satisfaction (or waiver by GSCP) of the
following conditions at or prior to the Closing:
(a) (i) Any waiting period under the HSR Act applicable to the
transactions contemplated by this Agreement and by the Ancillary Agreements
shall have expired or been terminated, and (ii) the transactions contemplated by
this Agreement and the Ancillary Agreements shall have been approved by the
Department of Insurance of the State of Indiana, in the case of each of (i) and
(ii), without any material restrictions or conditions applicable to GSCP, the
Company, Newsub, Pafco, IGF, IGF Holdings, Superior or any subsidiary of
Superior.
(b) No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law which has the effect of making the
transactions contemplated by this Agreement or the Ancillary Agreements illegal
or otherwise prohibiting consummation of such transactions.
(c) The Stockholder Agreement shall have been duly executed and
delivered by the Company and Goran.
(d) The Registration Rights Agreement shall have been duly executed
and delivered by the Company and Goran.
(e) Employment and non-competition agreements between the Company and
each of Alan G. Symons and Douglas G. Symons, substantially in the form of
Exhibit L hereto (the "Employment Agreements"), shall have been duly executed
and delivered by the parties thereto, and shall be in full force and effect at
and as of the Closing Date.
(f) The Pafco Management Agreement shall have been assigned by SIG to
Newsub and the Superior Administrative Services Agreement shall have been duly
executed and delivered by the parties thereto.
(g) The Company shall have adopted the Stock Option
Plan.
(h) GSCP shall have received from one or more outside counsel to the
Goran Entities, reasonably acceptable to GSCP, the opinions set forth in Exhibit
M hereto.
(i) The representations and warranties of Goran and SIG set forth in
this Agreement shall have been true and correct as of the date hereof and shall
be true and correct as of the Closing Date with the same effect as though such
representations and warranties had been made as of such date.
(j) Goran and SIG shall have performed in all material respects their
obligations hereunder required to be performed on or prior to the Closing.
(k) GSCP shall have received an officer's certificate, executed by an
officer of each of Goran and SIG, dated the Closing Date, certifying that the
conditions set forth in clauses (i) and (j) of this Section 8.1 are satisfied on
and as of such date; and GSCP shall have received from Goran and SIG such other
documents and information as GSCP may reasonably request to evidence
satisfaction of the other conditions set forth herein.
(l) All material consents, approvals, authorizations or permits
required to be obtained from, or filings required to be made with, or
notifications required to be
made to, any Governmental Authority by any of the Goran Entities in connection
with the execution, delivery and performance of this Agreement and the Ancillary
Agreements or consummation of the transactions contemplated hereby or thereby
shall have been obtained or made.
(m) All material consents, approvals, authorizations or waivers
required to be obtained from, or notifications required to be made to, third
parties (other than Governmental Authorities) in connection with the execution,
delivery and performance of this Agreement and the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby (including,
without limitation, the Eurodebenture Waiver) shall have been obtained or made.
(n) Since December 31, 1994, there shall have occurred no material
adverse effect change in the condition (financial or otherwise), results of
operations, business, assets, liabilities or prospects of any of the Company,
Pafco, IGF Holdings, IGF, or Superior and its subsidiaries taken as a whole.
(o) Concurrently with the Closing, the transactions contemplated by
the Superior Purchase Agreement shall be consummated, substantially on the terms
set forth in the Superior Purchase Agreement (it being agreed that neither SIG
nor the Company shall amend the terms of the Superior Purchase Agreement or
waive any of the conditions to closing thereof without the prior written consent
of GSCP).
8.2. CONDITIONS TO OBLIGATIONS OF GORAN AND SIG. The
obligations of Goran and SIG to consummate the transactions
contemplated hereby at the Closing is subject to the satisfaction
of (or waiver by Goran and SIG) of the following conditions at or
prior to the Closing:
(a) (i) Any waiting period under the HSR Act applicable to the
transactions contemplated by this Agreement and by the Ancillary Agreements
shall have expired or been terminated, and (ii) the transitions contemplated by
this Agreement and the Ancillary Agreements shall have been approved by the
Department of Insurance of the State of Indiana, in the case of each of (i) and
(ii), without any material restrictions or conditions applicable to Goran, the
Company, Pafco or Superior.
(b) No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law which has the effect of making the
transactions contemplated by this Agreement or the Ancillary Agreements illegal
or otherwise prohibiting consummation of such transactions.
(c) The Stockholder Agreement shall have been duly executed and
delivered by GSCP.
(d) The Registration Rights Agreement shall have been duly executed
and delivered by GSCP.
(e) The Employment Agreements shall have been duly executed and
delivered by GSCP.
(f) The representations and warranties of GSCP set forth in this
Agreement shall have been true and correct as of the date hereof and shall be
true and correct as of the Closing Date with the same effect as though such
representations and warranties had been made as of such date.
(g) GSCP shall have performed in all material respects all of its
obligations hereunder required to be performed on or prior to the Closing.
(h) The Company shall have received an officer's certificate, executed
by an officer of GSCP, dated the Closing Date, certifying that the conditions
set forth in clauses (f) and (g) of this Section 8.2 are satisfied on and as of
such date.
SECTION 9. INDEMNIFICATION.
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as otherwise set
forth herein, all representations and warranties herein shall survive the
Closing until the third anniversary of the date hereof (except to the extent an
Indemnification Notice (as defined in Section 9.2(d)) shall have been given
prior to such date with respect to a breach of a representation and warranty, in
which case such representation and warranty shall survive until such claim is
resolved) and shall in no way be affected by any investigation or knowledge of
the subject matter thereof made by or on behalf of any party; provided, however,
that the representations and warranties set forth in Sections 2.1, 2.2, 2.3,
2.4, 2.5, 2.6, 2.11, 2.12, 2.20, 6.1 and 7.1 shall survive the Closing
indefinitely. All statements contained in any certificate or other instrument
delivered by the Goran Entity, or any of their respective officers or
representatives, pursuant to this Agreement or the Ancillary Agreements shall
constitute representations and warranties by Goran and SIG under this Agreement.
9.2. INDEMNIFICATION.
(a) Goran and SIG, jointly and severally, shall indemnify, defend and
hold GSCP, its Affiliates, officers, directors, employees, agents,
representatives, successors and assigns (each a "GSCP Indemnified Party"),
harmless from and against all Losses (as defined below) incurred or suffered by
a GSCP Indemnified Party (whether incurred or suffered directly or indirectly
through ownership of Company Common Stock) arising from or relating to (i) the
breach of any of the representations and warranties or covenants and agreements
made by Goran or SIG herein (in each case,
without regard to materiality or knowledge exceptions contained in any
representation or warranty or covenant or agreement), (ii) the items disclosed
on Schedule 2.20, (iii) the operation of any Goran Entity prior to the Closing
Date or the operation of Goran, SIG or any of their Affiliates (other than the
Company) from and after the Closing Date, (iv) any IGF Company Sale and any
agreements, transactions or liabilities relating thereto or (v) any litigation
seeking to enjoin or to obtain damages in respect of consummation of the
transactions contemplated hereby or by the Stockholder Agreement (other than any
such litigation brought by a competitor of Pafco or Superior). All items that,
individually or in the aggregate, would have been breaches of representations or
warranties made by Goran or SIG herein but for the fact that such items,
individually or in the aggregate, were not material or did not meet a dollar
threshold stated in the representations and warranties shall be deemed to be
breaches of representations and warranties and shall be covered by this
indemnity.
(b) GSCP shall indemnify, defend and hold Goran and SIG, and their
respective affiliates, officers, directors, employees, agents, representatives,
successors and assigns (each a "Goran Indemnified Party"), harmless from and
against all Losses incurred or suffered by a Goran Indemnified Party arising
from or relating to the breach of any of the representations and warranties made
by GSCP herein (in each case, without regard to materiality or knowledge
exceptions contained in any representation or warranty). All items that,
individually or in the aggregate, would have been breaches of representations or
warranties made by GSCP herein but for the fact that such items, individually or
in the aggregate, were not material or did not meet a dollar threshold stated in
the representations and warranties shall be deemed to be breaches of
representations and warranties and shall be covered by this indemnity.
(c) For purposes of this Agreement, "Losses" shall mean each and all
of the following items: claims, losses, (including, without limitation, losses
of earnings), liabilities, obligations, payments, damages (actual, punitive or
consequential), charges, judgments, fines, penalties, amounts paid in
settlement, costs and expenses (including, without limitation, interest which
may be imposed in connection therewith, costs and expenses of investigations,
actions, suits, proceedings, demands and assessments, and fees, expenses and
disbursements of counsel, consultants and other experts), whether direct or
indirect, and if incurred or suffered directly or indirectly through ownership
of Company Common Stock, determined based on, in the case of GSCP, the
Applicable Percentage (as defined in Section 9.2) at the time of the
determination of such Loss and, in the case of Goran and SIG, (x) one minus (y)
the Applicable Percentage at the time of the determination of such Loss.
(d) In the event that any party shall incur or suffer any Losses in
respect of which indemnification may be sought by such party hereunder, the
party seeking to be indemnified hereunder (the "Indemnitee") shall assert a
claim for indemnification by
written notice (an "Indemnification Notice") to the party from whom
indemnification is sought (the "Indemnitor") stating the nature and basis of
such claim. In the case of Losses arising by reason of any third party claim,
the Indemnification Notice shall be given promptly after the filing or other
written assertion of any such claim against the Indemnitee, but the failure of
the Indemnitee to so provide the Indemnification Notice shall not relieve the
Indemnitor of any liability that the Indemnitor may have except to the extent
that the Indemnitor is materially prejudiced thereby.
(e) In the case of third party claims for which indemnification is
sought hereunder, the Indemnitor shall have the option (i) to conduct any
proceedings or negotiations in connection therewith, (ii) to take all other
steps to settle or defend any such claim (provided that the Indemnitor shall not
settle any such claim without the consent of the Indemnitee) and (iii) to employ
counsel (reasonably acceptable to Indemnitee) to contest any such claim or
liability in the name of the Indemnitee or otherwise. In any event, the
Indemnitee shall be entitled to participate at its own expense and by its own
counsel in any proceedings relating to any third party claim. The Indemnitor
shall, within 15 days of receipt of the Indemnification Notice, notify the
Indemnitee of its intention to assume the defense of such claim. Until the
Indemnitee has received notice of the Indemnitor's election whether to defend
any claim, the Indemnitee shall take reasonable steps to defend (but may not
settle) such claim, and, if the Indemnitor shall decline to assume the defense
of any such claim, or shall fail to notify the Indemnitee within 15 days after
receipt of the Indemnification Notice of the Indemnitor's election to defend
such claim, the Indemnitee shall defend against such claim (provided that the
Indemnitee shall not settle such claim without the consent of the Indemnitor,
which consent shall not be unreasonably withheld). The expenses of all
proceedings, contests or lawsuits in respect of such claims shall be borne by
the Indemnitor but only if the Indemnitor is responsible pursuant hereto to
indemnify the Indemnitee in respect of the third party claim. Regardless of
which party shall assume the defense of the claim, the parties agree to
cooperate fully with one another in connection therewith.
(f) In the event that a GSCP Indemnified Party shall at any time be
entitled to be indemnified or held harmless for any Loss pursuant to this
Agreement, such obligation shall be satisfied as follows:
(i) If prior to the earlier of (k) an IGF Company Sale and (y)
the first anniversary of the Closing Date, first, any then existing Excess Book
Value Amount shall be reduced to the extent necessary for such GSCP Indemnified
Party to be fully indemnified and held harmless for such Loss; and second, to
the extent that the amount by which the Excess Book Value Amount must be reduced
for such GSCP Indemnified Party to be fully indemnified and held harmless for
such Loss exceeds the amount of the then existing Excess Book Value Amount (such
excess being referred to herein as the "Subject
Excess"), Goran or SIG shall issue to GSCP a promissory note in an amount (the
"Note Amount") equal to such remaining Loss (or, at GSCP's election, in lieu of
Goran or SIG issuing such note, (1) Goran or SIG shall issue a promissory note
to the Company in an amount equal to the Subject Excess or (2) subject to
paragraph (g) below, the Company shall issue to GSCP a number of shares of
Company Common Stock such that after issuing such shares GSCP and its
Affiliates, in the aggregate, will own the Applicable Percentage of the
Investment Company Common Stock). The "Applicable Percentage" shall mean (a)
$20,000,000 divided by, (b) the Total Investment less (i) the Note Amount, (ii)
in the case of an issuance of shares of Company Stock pursuant to Section
9.2(f)(ii), the Excess Amount or, (iii) in the case of an issuance of shares of
Company Common Stock pursuant to Section 9.2(i), the amount owing pursuant to a
promissory note issued by Goran or SIG and not paid in full when due. The "Total
Investment" means $41,666,667 less (a) the aggregate amount of all Note Amounts
and Excess Amounts which, in lieu of Goran or SIG issuing a promissory note or
paying cash to the Company pursuant to Section 9.2(f)(i) or Section 9.2(f)(ii),
respectively, the Company issued shares of Company Common Stock to GSCP and (b)
the aggregate amount owed pursuant to all promissory notes issued by Goran or
SIG pursuant to Section 9.2 and not paid in full when due and in respect of
which the Company issued shares of Company Common Stock to GSCP. "Investment
Company Common Stock" shall mean the shares of Company Common Stock held as of
the Closing and any shares of Company Common Stock issued pursuant to Section
9.2 hereof, in each case, as adjusted as appropriate to reflect stock dividends
paid, stock splits effected or other similar transactions, by the Company.
(ii) If after the earlier of an IGF Company Sale and (y) the
first anniversary of the Closing Date, first, any then existing Excess Book
Value Amount shall be reduced to the extent necessary for such GSCP Indemnified
Party to be fully indemnified and held harmless for such Loss; and second, to
the extent that the amount by which the Excess Book Value Amount must be reduced
for such GSCP Indemnified Party to be fully indemnified and held harmless for
such Loss exceeds the amount of the then existing Excess Book Value Amount (the
"Excess Amount"), Goran or SIG shall pay to GSCP in cash an amount equal to such
remaining Loss (or, at GSCP's election, in lieu of Goran or SIG paying to GSCP
such amount of cash, (1) Goran or SIG shall contribute to the Company an amount
equal to the Excess Amount or, (2) if such amount is not contributed to the
Company, the Company shall issue to GSCP a number of shares of Company Common
Stock such that after issuing such shares GSCP and its Affiliates, in the
aggregate, will own the Applicable Percentage of the Investment Company Common
Stock).
(g) If the Company is required to issue to GSCP shares of Company
Common Stock pursuant to Section 9.2(f)(i), the maximum number of shares which
the Company shall be required to issue (the "Maximum Number of Shares") shall be
the
number of shares the issuance of which would result in Goran, SIG and their
Affiliates holding, in the aggregate, 50.01% of the outstanding shares of
Company Common Stock. If without reference to this paragraph (g) the number of
shares to be issued pursuant to Section 9.2(f)(i) would be greater than the
Maximum Number of Shares, then, in lieu of the Company issuing such excess
shares, Goran or SIG shall issue to GSCP a promissory note in an amount equal to
the amount of any Loss for which a GSCP Indemnified Party has not been fully
indemnified and held harmless after the Company has issued to GSCP the Maximum
Number of Shares (or, at GSCP's election, shall issue a promissory note to the
Company in an amount necessary for GSCP to be fully indemnified and held
harmless for any Loss for which GSCP has not been fully indemnified and held
harmless.
(h) Any promissory note issued by Goran or SIG pursuant to this
Section 9.2 (i) shall bear interest, from the date of issuance through the date
immediately preceding payment, calculated on the basis of a per annum rate equal
to the Prime Rate, and (ii) shall become due and payable on the earlier of 90
days after (x) an IGF Company Sale or (y) notice from GSCP requesting payment
thereof (on its own behalf or on behalf of the Company, as the case may be)
(provided, however, that such notice may not be delivered by GSCP prior to nine
months after the date of issuance of such promissory note).
(i) If any promissory note issued by, or any payment obligation of,
Goran or SIG pursuant to this Section 9.2 is not paid in full on the date it
becomes due and payable, then, in addition to any other right or remedy which
may be available to GSCP or the Company, as the case may be, GSCP shall have the
right to elect to have the note or the payment obligation satisfied by the
Company's issuing to GSCP a number of shares of Company Common Stock such that
after issuing such shares GSCP and its affiliates, in the aggregate, will own
the Applicable Percentage of the Investment Company Common Stock.
(j) At the Closing, Goran and SIG shall cause IGF Holdings and Pafco
to, enter into a pledge agreement, substantially in the Form of Exhibit N hereto
(the "Pledge Agreement"), and take all such other action (including, without
limitation, pledging to Pafco all certificates representing all of the issued
and outstanding shares of capital stock of IGF) reasonably necessary for Pafco
to have in all of the issued and outstanding shares of capital stock of IGF a
fully perfected first security interest securing the obligations of IGF Holdings
pursuant to the IGF Holdings Notes (or any such other note as may be issued
pursuant to Section 4.15(a)).
SECTION 10. TERMINATION.
10.1. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(i) by mutual written consent of the parties
hereto;
(ii) by either Goran or GSCP if there has been a material
misrepresentation or breach of warranty or covenant on the part of the other
party in the representations and warranties and covenants contained herein;
(iii) by either Goran or GSCP if the Closing shall not have
occurred on or before May 31, 1996; provided, that neither Goran nor GSCP, as
the case may be, may terminate this Agreement pursuant to this clause if such
party's failure to fulfill any of its obligations under this Agreement shall
have been the reason that the Closing shall not have occurred on or before said
date; or
(iv) by either Goran or GSCP if there shall be any (A) Law that
makes consummation of the transactions contemplated hereby illegal or otherwise
prohibited or (B) any judgment, injunction, order or decree enjoining any of the
parties hereto from consummating the transactions contemplated hereby or by the
Stockholder Agreement and such judgment, injunction, order or decree shall
become final and nonappealable.
In the event that this Agreement is terminated at any time prior to the
Closing, the Company shall redeem the shares of Company Common Stock then held
by GSCP at a price equal to the aggregate par value per share thereof.
10.2. EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 10.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that (i) the agreements
contained in Sections 4.10, 4.14(e), 9.2(a)(iv) and (v), 10.1 and 11.1 shall
survive the termination hereof and (ii) such termination shall not relieve any
party from liability for breach of any representation or warranty, covenant or
agreement contained herein arising prior to such termination.
SECTION 11. MISCELLANEOUS.
11.1. EXPENSES. Except as set forth in the next sentence, or as otherwise
expressly provided in this Agreement or the Ancillary Agreements, each of the
parties hereto shall pay all the costs and expenses incurred by it or on its
behalf in connection with this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby. At the
Closing, the Company shall reimburse each of GSCP and Goran for its reasonable
out-of-pocket expenses incurred in
connection with the negotiation and execution of this Agreement and the
Ancillary Agreements (including, without limitation, the fees and expenses of
outside counsel) (but excluding, without limitation, any expenses whatsoever
incurred by or on behalf of Goran and SIG or their Affiliates in connection with
the EuroNotes or the EuroNote Waiver).
11.2. REMEDIES. No right or remedy conferred upon any person under this
Agreement is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and is in addition to every other right or
remedy available hereunder or by law or in equity.
11.3. FURTHER ASSURANCES. Subject to the terms hereof, prior to and after
the Closing, the parties agree to cooperate with each other, and to execute and
deliver any further instruments or documents and to take all such further action
as the other party may reasonably request in order to evidence or effectuate the
consummation of the transactions contemplated hereby and otherwise to carry out
the intent of the parties hereunder.
11.4. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and the respective successors and permitted
assigns. No party hereto may assign its rights and obligations hereunder without
the prior written consent of the other parties hereto, except that GSCP may
assign its rights and obligations hereunder, in whole or in part, to any
affiliate (including any affiliated investment fund) of the Goldman Sachs Group,
L.P.
11.5. GUARANTEE. Goran and SIG hereby, jointly and severally, guarantee all
of the representations, warranties, covenants, agreements, commitments and
obligations of the Company hereunder and of IGF Holdings pursuant to the Pledge
Agreement; and Goran hereby guarantees all of the representations, warranties,
covenants, agreements, commitments and obligations of SIG hereunder (including,
without limitation, the obligations of Goran and SIG under any promissory note
and related agreements or entered into hereunder).
11.6. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto), the Ancillary Agreements (including the Stockholder Agreement
and the Registration Rights Agreement) and the Letter Agreement, dated December
31, 1995, between GSCP and Goran contain the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.
11.7. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be
sufficient if contained in a written instrument delivered in
person or sent by telecopy, nationally recognized overnight
courier or first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at the address set forth below or such
other address as may hereafter be designated in writing by such party to the
other parties:
(i) if to the Company, to:
GGS Management Holdings, Inc.
c/o Symons International Group, Inc.
4720 Kingsway Drive
Indianapolis, Indiana 46205
Telecopy: (317) 259-6395
Attention: Mr. Alan G. Symons
with a copy to each of Goran, SIG and GSCP.
(ii)if to GSCP to:
GS Capital Partners II, L.P.
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Michael A. Pruzan
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: Gail Weinstein, Esq.
(iii) if to SIG or Goran, to:
Goran Capital Inc.
Symons International Group, Inc.
4720 Kingsway Drive
Indianapolis, Indiana 46205
Telecopy: (317) 259-6395
Attention: David L. Bates, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been given when received.
11.8. AMENDMENTS. The terms and provisions of this
Agreement may not be modified or amended, or any of the
provisions hereof waived, temporarily or permanently, without the
prior written consent of each of the parties hereto.
11.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be
deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
11.10. HEADINGS. The headings of the sections of this
Agreement have been inserted for convenience of reference only
and shall not be deemed to be a part of this Agreement.
11.11. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
to or shall create any third party beneficiary rights in any person or entity
(other than the GSCP Designees and the Goran Designees (each as defined in the
Stockholder Agreement) under Sections 1.5 and 5.3).
11.12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflict of laws. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the United States of America located in the County of New York, for
any action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its respective
address set forth in this Agreement shall be effective service of process for
any Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the United States of America located in the
County of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such Litigation
brought in any such court has been brought in an inconvenient forum.
11.13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
11.14. INTERPRETATION. Neither this Agreement nor the Ancillary Agreements,
nor any uncertainty or ambiguity herein or therein, shall be construed or
resolved against any party hereto, whether under any rule of construction or
otherwise. No party shall be considered the draftsperson of this Agreement or
the Ancillary Agreements. On the contrary, this Agreement and the Ancillary
Agreements have been reviewed, negotiated and accepted by all parties hereto and
thereto and their respective legal counsel. For purposes of this Agreement, the
words "herein," "hereof," "herewith," "hereunder," and other words of similar
import refer to this Agreement as a whole and not to any particular provision.
11.15. NO WAIVER. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement as of the date first above written.
GGS MANAGEMENT HOLDINGS, INC.
By: /s/ Alan Symons
------------------------------
Name: Alan Symons
Title: President
GS CAPITAL PARTNERS II, L.P.
By:GS Advisors, L.P., its general partner
By: GS Advisors, Inc., its general
partner
By: /s/ Richard A. Friedman
------------------------------
Name: Richard A. Friedman
Title: President
GORAN CAPITAL INC.
By: /s/ Alan Symons
------------------------------
Name: Alan Symons
Title: President
SYMONS INTERNATIONAL GROUP, INC.
By: /s/ Alan Symons
------------------------------
Name: Alan Symons
Title: Treasurer