UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION ROBERT WINN, JAMES WINN and MARVIN GILL, on behalf of themselves and all others similarly situated, Plaintiffs, No. IP00-0310 C-B/S vs. SYMONS INTERNATIONAL GROUP, INC., GORAN CAPITAL, INC., G. GORDON SYMONS, ALAN G. SYMONS, DOUGLAS H. SYMONS, PRICEWATERHOUSECOOPERS LLP and SCHWARTZ LEVITSKY FELDMAN, LLP, Defendants. NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION TO: ALL PERSONS WHO PURCHASED SHARES OF SYMONS INTERNATIONAL GROUP, INC. ( SYMONS ) AND/OR GORAN CAPITAL INC. ( GORAN ) COM- MON STOCK FROM FEBRUARY 27, 1998 THROUGH NOVEMBER 18, 1999, INCLUSIVE (THE CLASS PERIOD ). IMPORTANT: PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. IF YOU ARE A MEMBER OF THE CLASS, YOU MAY BE ENTITLED TO RECEIVE MONEY PURSUANT TO THE PROPOSED SETTLEMENT DESCRIBED HEREIN. This Notice is given pursuant to an Order of the United States District Court for the Southern District of Indiana to inform you of the proposed settlement (the Settlement ) of the above-captioned class action (the Action ) for $1,303,750. There will be a hearing (the Fairness Hearing ) before the Honorable Sarah Evans Barker on January 20, 2004, at 10:00 a.m. in Courtroom 216 at the United States Courthouse, 46 East Ohio Street, Indianapolis, IN to determine whether: (1) the proposed Settlement as set forth in a Stipulation of Settlement dated as of March 19, 2003 and a Stipulation of Settlement dated as of October 1, 2003 (the Stipulations ) should be approved as fair, reasonable, adequate and in the best interests of class members; (2) a final judgment should be entered dismissing the Action with prejudice as to the Settling Defendants; and (3) the request of Counsel for plaintiff Robert Winn and the class for an award of fees and expenses should be granted.
THE CLASS By Order entered October 3, 2003, the Court certified the following class for purposes of the proposed Settlement (the Class ): Plaintiff Robert Winn and all other persons who purchased Symons and/or Goran common stock during the period February 27, 1998 through and including November 18, 1999. Excluded from the Class are defendants, their subsidiaries, affiliates (both individual and otherwise), officers, directors, partners, members of the families of the individual defendants, and the successors and assigns of any defendant. SUMMARY AND POTENTIAL OUTCOME OF THE ACTION The Stipulations provide for the creation of a settlement fund in the amount of $1,303,750 (the Settlement Fund ) to be distributed to Class members. Based upon estimates of plaintiff s counsel s expert, the average distribution (assuming that every member of the Class submits a claim) will be approximately $0.329 per Symons share for Class members who purchased and held their Symons shares to the end of the Class Period and $0.079 for Class members who purchased and sold Symons shares during the Class Period for a loss, and $0.47 per Goran share for Class members who purchased and held their Goran shares to the end of the Class Period and $0.08 for Class members who purchased and sold Goran shares during the Class Period for a loss, before deduction of fees and expenses to be awarded by the Court. However, your actual recovery from the Settlement Fund will depend upon a number of other variables, including the number of shares you purchased, the timing of your purchases and sales, if any, and the number of claims submitted by other members of the Class. The parties do not agree on the average amount of damages per share that would have been recoverable had the plaintiff prevailed on his alleged claims. Indeed, the Defendants believe that plaintiff should recover no damages. The damage issues on which the parties disagree include: (1) the appropriate economic model for determining the amount by which Symons and Goran common stock were allegedly inflated during the Class Period; (2) the amount by which Symons and Goran common stock were allegedly inflated during the Class Period; (3) the effect of various market forces on the trading price of Symons and Goran common stock during the Class Period; (4) the extent to which the allegedly materially false or misleading statements affected the trading price of Symons and Goran common stock during the Class Period; and (5) whether the alleged misstatements were material to purchasers of Symons and Goran shares. Plaintiff s counsel have not received payment for their services in prosecuting this case, nor have they been reimbursed for their out-of-pocket expenses. If the Settlement is approved by the Court, plaintiff s counsel will apply to the Court for attorneys fees and reimbursement of expenses to be paid from the Settlement Fund. If the amount requested by plaintiff s counsel is approved by the Court, the average cost (assuming that every member of the Class submits a claim) per Symons share would be approximately $0.10 for Class members who purchased and held their Symons shares to the end of the Class Period and $0.02 for Class members who purchased and sold Symons shares during the Class Period for a loss, and approximately $0.16 per Goran share for Class members who purchased and held their Goran shares to the end of the Class Period and $0.03 for Class members who purchased and sold Goran shares during the Class Period for a loss. Lead Counsel for plaintiff Robert Winn and the Class is Neil L. Selinger, Esq., LOWEY DANNENBERG BEMPORAD & SELINGER, P.C., One North Lexington Avenue, The Gateway 11 th Floor, White Plains, NY 10601, (914) 997-0500. The firm is available to answer questions from members of the Class concerning any matter contained in this Notice. 2
HISTORY AND BACKGROUND OF THE SETTLEMENT On February 23, 2000, the Action was commenced in the United States District Court for the Southern District of Indiana by Robert Winn, James Winn and Marvin Gill ( Named Plaintiffs ), suing on behalf of themselves and other similarly situated purchasers of shares of Symons and/or Goran common stock. On June 30, 2002, Named Plaintiffs filed an Amended Complaint (the Amended Complaint ) on behalf of themselves and all other purchasers of the common stock of Symons and/or Goran from February 27, 1998 through and including November 18, 1999. In the Amended Complaint, Named Plaintiffs brought claims for violations of Section 20(a) and 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Named Plaintiffs alleged that defendants Symons and Goran, their accountants (PricewaterhouseCoopers LLP and Schwartz Levitsky Feldman, LLP) and individual officers and directors (Gordon Symons, Alan G. Symons, and Douglas H. Symons) made material misrepresentations or omissions of fact to the investing public in their press releases, reports filed with the Securities and Exchange Commission ( SEC ), and widely disseminated news reports and articles regarding the lack of necessary internal controls and the unreliability of their financial statements. Specifically, Named Plaintiffs alleged that defendants aggressively built a portfolio: (1) in the nonstandard automobile and crop insurance business without a sufficiently operational and integrated computer system, and (2) in the newly developed agriculture business interruption insurance area without any testing, loss experience or reinsurance and without sufficient internal controls to properly measure the amount of reserves required in either business area. On or about September 13, 2000 each of the Defendants moved to dismiss the Amended Complaint: (1) pursuant to Fed. R. Civ. P. 9(b) for failure to plead securities fraud with the requisite particularity, and (2) pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim under the federal securities laws upon which relief can be granted. Following extensive briefing, on February 19, 2002, the Court issued an opinion granting in part and denying in part the motions to dismiss the Amended Complaint. On May 1, 2002, the Court issued an opinion denying defendants motion for reconsideration and their motion to certify an order for appeal under 28 U.S.C. 1292(b). On March 21, 2001, the Court entered an Order, nunc pro tunc to May 23, 2000, appointing Named Plaintiffs Robert Winn, James Winn and Marvin Gill as Lead Plaintiffs and appointing Lowey Dannenberg Bemporad & Selinger, P.C. as Lead Counsel. On March 5, 2002, Named Plaintiffs filed a renewed motion for Class certification. In connection with the Class certification motion, defendants served document requests and interrogatories on each of the Named Plaintiffs, to which Named Plaintiffs responded. Defendants also subpoenaed records from third parties. Defendants deposed each of the Named Plaintiffs, as well as the registered representative who handled their transactions in Symons and/or Goran stock. On August 26, 2002, defendants filed papers in opposition to Named Plaintiffs Class certification motion. On or about May 15, 2002, each Defendant served an answer to the Amended Complaint denying all allegations of liability, asserting affirmative defenses, and demanding judgment on the merits dismissing the Amended Complaint. Plaintiff s counsels decision to settle the Action was based on their analysis of: (1) public filings made by Defendants with the SEC, analyst reports, news releases and articles that appeared in the press concerning the business and financial condition of Symons and Goran; (2) expert analyses on the damages allegedly suffered by the Class; and (3) a thorough study of the legal principles applicable to plaintiff s claims against Defendants and the potential defenses thereto, including the extensive research performed in connection with the briefing on Defendants motions to dismiss the Amended Complaint. 3
Notwithstanding their belief that the claims asserted in the Amended Complaint have merit, plaintiff Robert Winn and his counsel recognized the expense, length and uncertainty of trial and the subsequent inevitable appeals. Plaintiff Robert Winn and his counsel also considered the defenses that Settling Defendants have interposed to plaintiff s claims. In view of the foregoing and the size of the recovery, plaintiff Robert Winn and his counsel have concluded that it is desirable to settle the Action on the terms and conditions set forth in the Stipulations. Settling Defendants have denied, and continue to deny, the allegations of wrongdoing made against them. They assert that the claims are without merit, that Settling Defendants have meritorious defenses to those claims, that the conduct of Settling Defendants has been lawful and proper in all respects and that no person or entity has suffered any harm or damages as a result of any matter that is the subject of or underlies any of the claims against them in the Action. Settling Defendants have entered into the Settlement described herein to avoid the continuing additional risk, expense, inconvenience and distraction of this Action and without admitting any wrongdoing whatsoever. By so doing, Settling Defendants seek to settle, compromise and terminate with prejudice the Action and to put to rest forever all claims which have or could have been asserted or which arise from or are in any way related to the acts, facts, transactions, occurrences, representations or omissions alleged in the Amended Complaint or the other complaints previously filed in this Action. Two of the original plaintiffs, James Winn and Marvin Gill, requested that they be relieved of their obligations under the Settlement agreement. On September 9, 2003, the Court entered an Order removing plaintiffs James Winn and Marvin Gill as Class representatives in this litigation, and further ordered that plaintiff Robert Winn shall continue as the Class representative. SUMMARY OF THE PROPOSED SETTLEMENT AND PLAN OF ALLOCATION The terms and conditions of the proposed Settlement are set forth in the Stipulations which have been filed with the Court; the following is only a summary of their terms. Subject to the terms and conditions of the Stipulation, defendants Symons, Goran, G. Gordon Symons, Alan G. Symons, and Douglas H. Symons (the Symons Defendants ), PricewaterhouseCoopers LLP ( PwC ), and Schwartz, Levitsky, and Feldman ( SLF ) (collectively, the Settling Defendants ) have agreed to pay $1,303,750 into the Settlement Fund, in settlement of all claims which are or could have been asserted against them in the Action. $900,000 will be paid on behalf of the Symons Defendants, $395,000 on behalf of PwC, and $8,750 on behalf of SLF. The Settlement Fund, minus the costs of notice to the Class, administration of the Settlement, any applicable taxes and related expenses, and the award of fees and disbursements to plaintiff s counsel, is referred to as the Net Settlement Fund. The Net Settlement Fund will be distributed to members of the Class who submit Proofs of Claim which have not been disallowed ( Authorized Claimants ) in accordance with the following Plan of Allocation: For purposes of determining the amount an Authorized Claimant may recover under the Plan of Allocation (the Recognized Loss ), the Class was divided into four subgroups relating to the differences in the likelihood of establishing liability and damages at trial. The four subgroups are: (1) Authorized Claimants who purchased Symons shares during the Class Period and retained those shares through the close of trading on November 18, 1999; (2) Authorized Claimants who purchased Goran shares during the Class Period and retained those shares through the close of trading on November 18, 1999; (3) Authorized Claimants who purchased Symons shares during the Class Period and sold those shares during the Class Period; and (4) Authorized Claimants who purchased Goran shares during the Class Period and sold those shares during the Class Period. Under plaintiff s theory of the case, Authorized Claimants who purchased shares during the Class Period and retained the shares until after November 18, 1999 were damaged by having purchased their shares in an artificially inflated market. By comparison, under plaintiff s theory of the case, Authorized 4
Claimants who purchased during the Class Period and sold prior to the end of the Class Period, although they too purchased their shares at allegedly inflated prices, also sold at inflated prices. Thus, establishing the necessary causation and damages at trial for that group of Authorized Claimants would be more difficult. Accordingly, each Authorized Claimant s Recognized Loss will be calculated as follows: (a) For shares of Symons and/or Goran common stock that were purchased during the Class Period and retained through the close of trading on November 18, 1999, the Recognized Loss per share is the difference between the price paid per share and $1.75 per Symons share or $2.75 per Goran share. (b) For shares of Symons and/or Goran common stock that were purchased during the Class Period and sold before November 18, 1999, the Recognized Loss per share is 20% of the price paid per share minus the price received. All profits derived from sales within the Class Period shall be subtracted from all losses to determine the net Recognized Loss of each Authorized Claimant. Payments to Authorized Claimants shall be proportional based upon each Authorized Claimant s Recognized Loss as compared to the total amount of Recognized Losses of all Authorized Claimants. The date of purchase or sale is the contract or trade date as distinguished from the settlement date. For Class members who made multiple purchases or multiple sales of Symons and/or Goran common stock during the Class Period, the earliest subsequent sale shall be matched with the earliest purchase and chronologically thereafter for purposes of calculating Recognized Loss. No payment will be made on any claims where the amount to be distributed is $10.00 or less, but the Authorized Claimant will otherwise be bound by the final judgment entered by the Court. Payment pursuant to the Plan of Allocation set forth above will be conclusive against all Authorized Claimants. No person shall have any claim against plaintiff s counsel, the Settlement Administrator or other agents designated by plaintiff s counsel, or any Settling Defendant or their counsel based on the distributions made substantially in accordance with the Stipulation, the Plan of Allocation, or further orders of the Court. All Class Members who fail to complete and submit a valid and timely Proof of Claim will be barred from participating in distributions from the Net Settlement Fund (unless otherwise ordered by the Court), but otherwise will be bound by all of the terms of the Stipulation, including the terms of any judgment and release. ATTORNEYS FEES AND EXPENSES Counsel for plaintiff Robert Winn and the Class intend to make a joint application to the Court for an award of attorneys fees and for reimbursement of plaintiff s counsels costs and expenses (including, without limitation, the fees and expenses of plaintiffs experts) in an amount not to exceed one-third of the Settlement Fund. EXCLUSION FROM THE CLASS You may, if you so desire, request to be excluded from the Class. To do so, you must mail a written request to: Symons Securities Litigation c/o Berdon Claims Administration LLC P.O. Box 9014 Jericho, NY 11753-8914 5
This request for exclusion must state: (1) your name, address, and telephone number; (2) your purchases and sales of Symons and/or Goran common stock during the Class Period, including the dates, the number of shares, and price paid or received per share for each such purchase or sale; and (3) that you wish to be excluded from the Class. TO BE VALID, A REQUEST FOR EXCLUSION MUST STATE ALL OF THE FOREGOING INFORMATION. Your exclusion request must be postmarked on or before December 19, 2003. All persons who submit valid and timely requests for exclusion shall have no rights under the Stipulation, shall not share in the distribution of the Net Settlement Fund, and shall not be bound by any judgment or release. THE FAIRNESS HEARING As set forth above, the Court has scheduled a hearing on January 20, 2004, to consider the fairness, reasonableness and adequacy of the proposed Settlement and to consider the request of plaintiff s counsel for an award of attorneys fees and expenses. The Fairness Hearing may be adjourned by the Court without further notice to the members of the Class. It is not necessary for any member of the Class to appear at the Fairness Hearing. If you do not appear, you will be represented by Plaintiff s Lead Counsel, Neil L. Selinger, Esq., Lowey Dannenberg Bemporad & Selinger, P.C., The Gateway 11 th Floor, One North Lexington Avenue, White Plains, NY 10601. Any member of the Class who does not timely request exclusion therefrom may, however, appear at the Fairness Hearing, in person or by counsel, and show cause why the proposed Settlement should not be approved as fair, reasonable and adequate, or why a judgment should not be entered dismissing the Action as described above, or why plaintiffs counsel should not be awarded fees and expenses as requested. However, no Class member or any other person shall be heard or entitled to contest any of these matters unless, on or before December 19, 2003, that person has served by hand or first-class mail: (1) a notice of intention to appear; (2) a statement identifying the number of shares of Symons and/or Goran common stock purchased and sold, and the dates of such purchases and sales during the Class Period; (3) a statement specifying the Class member s objections to the Settlement, and/or the application of plaintiff s counsel for attorneys fees and expenses; and (4) all other documents and writings which such Class member desires the Court to consider, upon: Neil L. Selinger, Esq. Jay H. Ham, III Lowey Dannenberg Bemporad Baker & Daniels & Selinger, P.C. and 300 North Meridian Street The Gateway 11th Floor Suite 2700 One North Lexington Avenue Indianapolis, IN 46204-1782 White Plains, NY 10601-1714 Plaintiff s Lead Counsel Counsel for the Symons Defendants and filed said objections and documents with the Clerk of the United States District Court for the Southern District of Indiana, United States Courthouse, 46 East Ohio Street, Indianapolis, IN 46204 (which may be done by first-class mail). The written objection shall identify the identity of any witness whose testimony the Class member wishes to present to the Court. Any such objection should bear the caption Winn v. Symons International Group, Inc., No. IP00-0310-C-B/S. Plaintiff s counsel shall promptly serve copies of all objections, briefs and other related papers on counsel for defendants PricewaterhouseCoopers LLP and Schwartz Levitsky Feldman, LLP. Any member of the Class who does not make his, her or its objection in this manner shall be deemed to have waived such objection and shall forever be foreclosed from making any objection to the fairness or adequacy of the proposed Settlement, the dismissal of claims, or the fee and expense request of plaintiffs counsel. 6
THE JUDGMENT AND RELEASE If the Court approves the Settlement provided for in the Stipulations, a final judgment or judgments will be entered: (1) approving the proposed Settlement; (2) dismissing with prejudice as to all Settling Defendants the Amended Complaint; and (3) awarding plaintiff s counsel such fees, expenses and disbursements as the Court deems appropriate. Additionally, plaintiff Robert Winn and all other members of the Class who have not been excluded therefrom, on behalf of themselves, their respective heirs, executors and administrators, successors and assigns and any person(s) they represent (collectively, the Releasors ), in any and every capacity whatsoever, shall be deemed to have fully, finally and irrevocably remised, released, relinquished and forever discharged each and every one of the Settling Defendants and any and all of their former and present parents, subsidiaries, affiliates, partners, principals, employees, directors, officers, agents, accountants, attorneys, insurers, reinsurers, and all of their respective predecessors, successors, assigns, agents, representatives and their current and past partners, principals and employees (collectively, the Released Parties ) from all claims (including unknown claims), demands, rights, liabilities, and causes of action of every nature and description whatsoever, asserted or that might have been asserted, including, without limitation, claims for fraud, negligent misrepresentation, or violations of any state or federal statutes or regulations, by any Plaintiff or Class Member against the Settling Defendants or the Released Parties arising out of, relating to, or in connection with purchases or acquisitions by any other means, directly or indirectly, of Symons or Goran securities during the Class Period, or arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Amended Complaint or otherwise alleged, asserted or contended in the Action, or which could have been asserted or contended in the Action, or which could have been alleged, asserted, or contended in the Action or otherwise as having wrongfully inflated the market price of Symons or Goran securities during the Class Period. SUBMISSION OF PROOFS OF CLAIM BY MEMBERS OF THE CLASS IF YOU ARE A CLASS MEMBER, TO RECEIVE A PAYMENT FROM THE SETTLEMENT FUND YOU MUST COMPLETE AND SIGN THE ENCLOSED PROOF OF CLAIM AND SEND IT, TOGETHER WITH THE REQUESTED DOCUMENTATION, BY PREPAID FIRST-CLASS MAIL, POSTMARKED ON OR BEFORE FEBRUARY 20, 2004, ADDRESSED AS FOLLOWS: Symons Securities Litigation c/o Berdon Claims Administration LLC P.O. Box 9014 Jericho, NY 11753-8914 Any person submitting a Proof of Claim must furnish acceptable proof of purchase, sale or ownership of Symons and/or Goran common stock as may reasonably be required to establish the claimant s right to participate in the Net Settlement Fund. The burden shall be on the Class member to establish his or her right to participate in the Net Settlement Fund by competent proof (e.g., broker s confirmation slips, brokerage account statements, letters from brokers, or other satisfactory documentation). A Class member shall, upon submission of his or her Proof of Claim, be subject to discovery under the Federal Rules of Civil Procedure with respect to his or her Proof of Claim. Any Class member who fails to establish his or her claim to the satisfaction of the Court within the time allowed therefor will not be entitled to receive payment but will nevertheless continue to be deemed a member of the Class and will be bound by the provisions of the Settlement, if it is approved by the Court. Plaintiff s counsel estimates that the claims process will be finalized by approximately June 21, 2004, at which time they will seek approval from the Court to distribute the Net Settlement Fund to Authorized Claimants. 7
INQUIRIES For more information regarding the Action, you may review the pleadings, the Stipulations and other papers on file with the Court. Those documents may be inspected during normal business hours at the Office of the Clerk of the United States District Court, Southern District of Indiana, United States Courthouse, 46 East Ohio Street, Indianapolis, IN 46204. ALL QUESTIONS CONCERNING THIS NOTICE, THE ACTION, OR THE PROPOSED SETTLE- MENT AND THE FINAL JUDGMENT HEARING SHOULD BE DIRECTED TO: Neil L. Selinger, Esq. Lowey Dannenberg Bemporad & Selinger, P.C. The Gateway 11th Floor One North Lexington Avenue White Plains, NY 10601 (914) 997-0500 Plaintiff s Lead Counsel PLEASE DO NOT CONTACT THE COURT OR THE CLERK OF THE COURT. NOTICE TO BROKERS AND OTHER NOMINEES If you were a nominee for any purchasers of Symons and/or Goran common stock during the Class Period, you are requested to promptly: (1) forward this Notice and the Proof of Claim (collectively, the Notice ) to those Class members or, in the alternative; (2) provide the Settlement Administrator with the names and addresses of such beneficial owners, preferably on computer-generated mailing labels, or electronically in MS Word or WordPerfect files (label size Avery # 5162), or in an MS Excel data table setting forth: (a) title/registration; (b) street address; (c) city/state/zip. Additional copies of the Notice may be requested by contacting: Symons Securities Litigation c/o Berdon Claims Administration LLC P.O. Box 9014 Jericho, NY 11753-8914 Telephone: (800) 766-3330 Fax: (516) 931-0810 Website: www.berdonllp.com/claims You are entitled to reimbursement of your reasonable expenses actually incurred in connection with the foregoing upon request and submission of appropriate supporting documentation to the Settlement Administrator. Dated: Indianapolis, Indiana October 17, 2003 BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA 8