<PAGE>
[LOGO OF Nationwide]
Nationwide Financial Services, Inc. March 31, 2000
One Nationwide Plaza
Columbus, Ohio 43215
Dear Nationwide Financial Services, Inc. Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Nationwide Financial Services, Inc. (the "Company") on May 3, 2000. The
meeting will begin at 1:30 p.m. at the office of the Company at One Nationwide
Plaza, Columbus, Ohio.
The official Notice of Meeting, Proxy Statement and form of proxy are included
with this letter. The matters listed in the Notice of Meeting are described in
detail in the Proxy Statement.
The vote of every stockholder is important. Please sign, date and promptly
mail your proxy. The Board of Directors and management look forward to
greeting those stockholders who are able to attend.
Sincerely,
/s/ Dimon R. McFerson
Dimon R. McFerson
Chairman and Chief Executive Officer
<PAGE>
[LOGO of Nationwide]
NATIONWIDE FINANCIAL SERVICES, INC.
One Nationwide Plaza
Columbus, Ohio 43215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 31, 2000
To the Stockholders of Nationwide Financial Services, Inc.:
The Annual Meeting of Stockholders of Nationwide Financial Services, Inc.
(the "Company") will be held at 1:30 p.m. on May 3, 2000, at One Nationwide
Plaza, Columbus, Ohio, for the following purposes:
(1) To elect the Class III Directors to serve until the expiration of
their terms and until their successors are elected;
(2) To approve the Nationwide Financial Services, Inc. 1996 Long-Term
Equity Compensation Plan and to approve the included amendments to
the Nationwide Financial Services, Inc. 1996 Long-Term Equity
Compensation Plan; and
(3) To transact such other business as may properly come before the
Annual Meeting.
Please read the Proxy Statement for further information about the
individuals nominated as directors.
At least ten (10) days prior to the Annual Meeting, a complete list of
stockholders entitled to vote at the Annual Meeting shall be open for
examination during the ordinary business hours of the Company in the
Secretary's office.
By Order of the Board of Directors,
Dennis W. Click
Vice President and Secretary
<PAGE>
[LOGO of Nationwide]
NATIONWIDE FINANCIAL SERVICES, INC.
One Nationwide Plaza
Columbus, Ohio 43215
PROXY STATEMENT
General
This Proxy Statement (the "Proxy Statement") is being furnished in
connection with the solicitation of proxies on behalf of the Board of
Directors of Nationwide Financial Services, Inc. (the "Company") for the
Annual Meeting of Stockholders (the "Annual Meeting") of the Company to be
held at the office of the Company at One Nationwide Plaza, Columbus, Ohio, on
May 3, 2000, at 1:30 p.m. Only stockholders of record at the close of business
on March 6, 2000, are entitled to notice of and to vote at the Annual Meeting.
Returning your completed proxy will not prevent you from voting in person at
the meeting should you be present and wish to do so. A stockholder may revoke
a proxy, prior to the vote being taken at the meeting, by giving written
notice to the Secretary of the Company, by a duly executed proxy bearing a
later date, or by voting in person at the meeting.
A copy of the Company's Annual Report for the year ended December 31, 1999,
will be mailed to the stockholders together with this Proxy Statement on or
about March 31, 2000.
Solicitation
The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited by directors,
officers and employees of the Company in person or by telephone, or by other
means of communication. These persons will receive no additional compensation
for solicitation of proxies, but may be reimbursed for reasonable out-of-
pocket expenses in connection with such solicitation. Arrangements will also
be made by the Company with custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees and fiduciaries, and the Company will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
Voting
The Company has two classes of common stock entitled to vote upon matters
submitted to a vote at the Annual Meeting. The Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), is entitled to one vote per
share. The Class B Common Stock, par value $.01 per share (the "Class B Common
Stock"), is entitled to ten votes per share. Proposals submitted to a vote of
stockholders will be voted on by the holders of Class A Common Stock and Class
B Common Stock (together the "Common Stock") voting together as a single
class.
Under the Company's Bylaws and Section 216 of the Delaware Corporation Law,
a majority of the shares of Common Stock, present in person or represented by
proxy, including abstentions and broker non-votes,
1
<PAGE>
constitutes a quorum for the purposes of the Annual Meeting. Directors are
elected by a plurality of the votes cast at the Annual Meeting. In the
election of directors, stockholders may cast votes for, or withhold votes;
votes that are withheld will not be included in the vote and will not affect
the outcome.
At the close of business on February 23, 2000, the Company had outstanding
23,791,298 shares of Class A Common Stock and 104,745,000 shares of Class B
Common Stock. As of such date, Nationwide Corporation owned all of the
outstanding shares of Class B Common Stock, which represents approximately
97.8% of the combined voting control of the Company. Therefore, Nationwide
Corporation controls the corporate actions that require stockholder approval.
Nationwide Corporation has advised the Company that it intends to vote its
shares in favor of Ms. Marshall and Messrs. Gasper and Miller. Nationwide
Corporation has also advised the Company that it intends to vote its shares in
favor of the approval and amendment of the Nationwide Financial Services, Inc.
1996 Long-Term Equity Compensation Plan (the "LTEP").
Beneficial Ownership of Common Stock
The following tables set forth certain information regarding beneficial
ownership of (i) each person who is known by the Company to be the beneficial
owner of more than five percent of either class of Common Stock, (ii) each
director and nominee for director, (iii) each of the Named Executive Officers
(as defined herein), and (iv) all of the directors and executive officers of
the Company as a group. The Class B Common Stock is convertible into Class A
Common Stock at any time by the holder on the basis of one share of Class A
Common Stock for each share of Class B Common Stock converted.
CLASS A COMMON STOCK
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
<S> <C> <C>
Goldman Sachs Asset Management.................... 1,626,0181/1/ 6.8%
One New York Plaza
New York, NY 10004
Mellon Financial Corporation...................... 1,364,5112/2/ 5.7%
One Mellon Center
Pittsburgh, PA 15258
</TABLE>
- ------
(1) Based on a Schedule 13G dated February 14, 2000, Goldman Sachs Asset
Management reported shared voting power with respect to 1,030,180 shares
and sole dispositive power with respect to 1,626,018 shares.
(2) Based on a Schedule 13G dated January 27, 2000, Mellon Financial
Corporation reported sole voting power with respect to 959,011 shares,
shared voting power with respect to 72,600 shares, sole dispositive power
with respect to 1,214,137 shares, and shared dispositive power with
respect to 145,227 shares.
CLASS B COMMON STOCK
<TABLE>
<CAPTION>
Name And Address Of Amount And Nature Of Percent
Beneficial Owner Beneficial Ownership Of Class
- ------------------- -------------------- --------
<S> <C> <C>
Nationwide Corporation/1/ ........................ 104,745,000 100%
One Nationwide Plaza
Columbus, Ohio 43215
</TABLE>
- ------
(1) As of February 23, 2000, Nationwide Corporation was the beneficial owner
of 100% of the Class B Common Stock which, because of its ten to one
voting control, represents approximately 97.8% of the combined voting
control of the Company.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AS OF JANUARY 31, 2000
<TABLE>
<CAPTION>
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ---------------- -------------------- ----------------
<S> <C> <C>
Dimon R. McFerson/6/ ................... 157,835/3/ -- /1/
Joseph J. Gasper/2/,/6/ ................ 91,306/3/ -- /1/
James G. Brocksmith, Jr................. 2,936 -- /1/
Charles L. Fuellgraf, Jr./5/,/6/ ....... 14,060/3/ -- /1/
Henry S. Holloway/6/ ................... 7,015/3/ -- /1/
Lydia M. Marshall/2/ ................... 6,415 -- /1/
Donald L. McWhorter..................... 4,015 -- /1/
David O. Miller/2/ ..................... 5,998/3/ -- /1/
James F. Patterson/6/ .................. 6,015/3/ -- /1/
Gerald D. Prothro....................... 3,015 -- /1/
Arden L. Shisler........................ 7,015/3/ -- /1/
Richard A. Karas........................ 41,771/3/ -- /1/
Robert J. Woodward, Jr.................. 33,349/3/ -- /1/
Susan A. Wolken......................... 16,053/3/ -- /1/
Directors and Executive Officers as a
Group (Total of 31).................... 605,405/4/ -- /1/
</TABLE>
- ------
(1) Less than one percent.
(2) Indicates the nominees for Class III Directors.
(3) Total includes options that may be exercised within 60 days for the
following persons: Mr. McFerson --102,500 shares, Mr. Gasper -- 73,333
shares, Mr. Fuellgraf -- 2,000 shares, Mr. Holloway -- 2,000 shares, Mr.
Miller -- 2,000 shares, Mr. Patterson -- 2,000 shares, Mr. Shisler --
2,000 shares, Mr. Karas -- 31,667 shares, Mr. Woodward -- 23,000 shares,
and Ms. Wolken -- 13,042 shares.
(4) Total includes options that may be exercised within 60 days. The aggregate
number of options exercisable within 60 days is 405,508.
(5) Includes 2,000 shares held by spouse.
(6) Total includes shares jointly owned with spouse for the following persons:
Mr. Holloway -- 2,000 shares; Mr. Patterson -- 1,000 shares; Mr. Gasper --
3,500 shares; Mr. McFerson -- 21,500 shares; and Mr. Fuellgraf -- 2,000
shares.
3
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE REPORTING
Section 16 of the Securities Exchange Act of 1934, as amended, requires that
officers, directors and holders of more than 10% of the Common Stock file
reports of their trading in Company equity securities with the Securities and
Exchange Commission ("SEC"). Based solely on a review of Forms 3, 4 and 5
furnished to the Company during 1999, the Company believes that during the
last fiscal year, all Section 16 filing requirements applicable to the
Company's reporting persons were complied with except for the following: Mr.
R. Dennis Noice, an officer of the Company. Mr. Noice inadvertently failed to
timely report the acquisition of certain shares.
Election of Directors
The Company's Board of Directors currently consists of eleven directors
divided into three classes. The initial term of the Class III Directors (the
"Class III Directors") will expire at the Annual Meeting to be held in 2000,
the current term of the Class I Directors (the "Class I Directors") will
expire at the Annual Meeting of Stockholders in 2001, and the current term of
the Class II Directors (the "Class II Directors") will expire at the Annual
Meeting of Stockholders in 2002. Messrs. Brocksmith, Holloway, Patterson and
Prothro are Class I Directors; Messrs. Fuellgraf, McFerson, McWhorter and
Shisler are Class II Directors; and Messrs. Gasper and Miller and Ms. Marshall
are the nominees for Class III Directors. At each Annual Meeting of
Stockholders, directors will be elected for a three-year term to succeed the
directors whose terms are then to expire.
The nominees for the Class III Directors and the Class I and Class II
Directors who will continue in office after the Annual Meeting until the
expiration of their terms, together with certain information regarding them,
are as follows:
NOMINEES FOR CLASS III DIRECTORS
<TABLE>
<CAPTION>
Director Year Term
Name Age Since Class Will Expire
- ---- --- ------------- ----- -----------
<S> <C> <C> <C> <C>
Joseph J. Gasper............................ 56 November 1996 III 2003/1/
Lydia M. Marshall........................... 51 February 1997 III 2003/1/
David O. Miller............................. 61 November 1996 III 2003/1/
</TABLE>
- ------
(1) The date is if elected at the Annual Meeting in 2000.
CLASS I DIRECTORS
<TABLE>
<CAPTION>
Director Year Term
Name Age Since Class Will Expire
- ---- --- ------------- ----- -----------
<S> <C> <C> <C> <C>
James G. Brocksmith, Jr..................... 59 April 1997 I 2001
Henry S. Holloway........................... 67 November 1996 I 2001
James F. Patterson.......................... 58 November 1996 I 2001
Gerald D. Prothro........................... 57 February 1997 I 2001
</TABLE>
CLASS II DIRECTORS
<TABLE>
<CAPTION>
Director Year Term
Name Age Since Class Will Expire
- ---- --- ------------- ----- -----------
<S> <C> <C> <C> <C>
Charles L. Fuellgraf, Jr.................... 68 November 1996 II 2002
Dimon R. McFerson........................... 63 November 1996 II 2002
Donald L. McWhorter......................... 64 February 1997 II 2002
Arden L. Shisler............................ 58 November 1996 II 2002
</TABLE>
4
<PAGE>
Dimon R. McFerson has been Chief Executive Officer of Nationwide since
December 1992. He has been Chairman and Chief Executive Officer of the Company
since December 1996 and a director of the Company since November 1996. Mr.
McFerson has been a director of Nationwide Life Insurance Company and
Nationwide Mutual Insurance Company since April 1988 and Chairman and Chief
Executive Officer of Nationwide Life Insurance Company and Nationwide Mutual
Insurance Company since April 1996. He was elected Chief Executive Officer of
Nationwide Life Insurance Company in December 1992, and President and Chief
Executive Officer of Nationwide Life Insurance Company in December 1993. He
was President and General Manager of Nationwide Mutual Insurance Company from
April 1988 to April 1991; President and Chief Operating Officer of Nationwide
Mutual Insurance Company from April 1991 to December 1992; and President and
Chief Executive Officer of Nationwide Mutual Insurance Company from December
1992 to April 1996. Mr. McFerson has been with Nationwide for 20 years. Mr.
McFerson is also currently the Chairman of United Way of America.
Joseph J. Gasper has been President and Chief Operating Officer of the
Company since December 1996 and a director of the Company since November 1996.
Mr. Gasper has been President and Chief Operating Officer and director of
Nationwide Life Insurance Company since April 1996. Previously, he was
Executive Vice President -- Property and Casualty Operations of Nationwide
Mutual Insurance Company and Nationwide Life Insurance Company from April 1995
to April 1996. He was Senior Vice President -- Property and Casualty
Operations of Nationwide Mutual Insurance Company and Nationwide Life
Insurance Company from September 1993 to April 1995. Prior to that time, Mr.
Gasper held numerous positions with Nationwide. Mr. Gasper has been with
Nationwide for 33 years.
James G. Brocksmith, Jr. has been a director of the Company since April
1997. Mr. Brocksmith retired from KPMG LLP in January 1997, where he was
Deputy Chairman and Chief Operating Officer. Mr. Brocksmith was employed at
KPMG LLP for 32 years. He was also a director of Vistana, Inc. from April 1998
to October 1999, has been a director of CIBER, Inc. since July 1998, and has
been a director of Sunterra Corporation since January 2000.
Charles L. Fuellgraf, Jr. has been a director of the Company since November
1996. Mr. Fuellgraf has been Chief Executive Officer of Fuellgraf Electric
Company, an electrical contractor in Butler, Pennsylvania, and Nashville,
Tennessee, since 1988. He served on the board of directors of several of the
Nationwide companies from 1969 until his retirement from those positions in
April 1999. He is a trustee of Butler Memorial Hospital Foundation, Chairman
of the Butler YMCA Trustees, and President of Western Pennsylvania NECA
(National Electrical Contractors Association).
Henry S. Holloway has been a director of the Company since November 1996.
Mr. Holloway has been a farm owner and operator in Darlington, Maryland, since
1959. He served as Chairman of the Board of Nationwide Life Insurance Company,
Nationwide Life and Annuity Insurance Company and Nationwide Corporation, and
served on the board of directors of several of the Nationwide companies until
his retirement from those positions in April 1998. He is a director of the
Forest Hill State Bank.
Lydia M. Marshall has been a director of the Company since February 1997.
Ms. Marshall has been Chair and Chief Executive Officer of VentureThink LLC
and eVantage Incorporated since January 2000 and October 1999, respectively.
Previously, she was Managing Director of Rockport Capital Incorporated from
September 1997 to October 1999, and Executive Vice President - Marketing of
the Student Loan Marketing Association ("Sallie Mae") from November 1993 to
September 1997. Prior to that time, Ms. Marshall held several positions with
Sallie Mae and Citicorp. She is Chair of the Board of CARE (Cooperative for
American Relief Everywhere).
Donald L. McWhorter has been a director of the Company since February 1997.
Mr. McWhorter retired from Banc One Corporation in April 1995 after serving as
President and Chief Operating Officer since April 1992. Previously, he was
Chairman and Chief Executive Officer of Banc One Ohio Corporation from July
1989 to April 1992. Prior to that time, Mr. McWhorter held several positions
with Banc One.
5
<PAGE>
David O. Miller has been a director of the Company since November 1996. Mr.
Miller has been a land and apartment developer since 1962. He is the President
of Owen Potato Farm, Inc. and is a partner of M&M Enterprises in Licking
County, Ohio. He is Chairman of the Board of Nationwide Life Insurance
Company, Nationwide Life and Annuity Insurance Company and Nationwide
Corporation, and serves on the board of directors of several of the Nationwide
companies. He is also a director and chairman of the National Cooperative
Business Association.
James F. Patterson has been a director of the Company since November 1996.
Mr. Patterson has operated the Patterson Fruit Farm in Chesterland, Ohio,
since 1964 and has been the President of Patterson Farms, Inc. since December
1991. He is Chairman of the Board of Nationwide Mutual Fire Insurance Company.
He serves on the board of directors of several of the Nationwide companies.
Mr. Patterson is also a trustee of The Ohio State University and serves on the
board of directors of the University Hospitals Health System in Cleveland,
Ohio, and Geauga Hospital, Inc. in Chardon, Ohio. He is also a director of the
National Cooperative Business Association.
Gerald D. Prothro has been a director of the Company since February 1997.
Mr. Prothro has been Senior Vice President of Technology for BroadStream
Communications Corporation since May 1999. Previously, he was Managing
Director of IKT, Inc. from July 1998 to May 1999. He retired from
International Business Machines ("IBM") Corporation after nearly 30 years of
service. Mr. Prothro held executive positions with IBM including Vice
President for Corporate Strategy, Vice President and Chief Information
Officer, and IBM Director and Secretary of the Corporate Management Committee.
He is also a member of the Review and Priority Board of Lehigh
University/Iacocca Institute and is a trustee of Howard University.
Arden L. Shisler has been a director of the Company since November 1996. Mr.
Shisler has been President and Chief Executive Officer of K & B Transport,
Inc., a trucking firm in Dalton, Ohio, since January 1992. Previously, he was
Chief Operating Officer of K & B Transport, Inc. from April 1986 to January
1992. Prior to that time, Mr. Shisler held several positions with K & B
Transport, Inc. He is Chairman of the Board of Nationwide Mutual Insurance
Company and serves on the board of directors of several of the Nationwide
companies. He is also a director of the National Cooperative Business
Association.
The Board of Directors and Its Committees
The full Board of Directors met six times during 1999. During 1999, the
Board of Directors had a standing Audit Committee (the "Audit Committee"), a
Compensation Committee (the "Compensation Committee"), an Executive Committee
(the "Executive Committee"), and a Pricing Committee (the "Pricing
Committee"). The Board of Directors does not have a standing nominating
committee.
Audit Committee
The Audit Committee consists of four directors, none of whom is an officer
or employee of the Company. Ms. Marshall and Messrs. Brocksmith, McWhorter and
Prothro are the members of the committee. The Audit Committee recommends to
the Board of Directors of the Company the selection of independent auditors to
audit annually the books and records of the Company, reviews the activities
and the reports of the independent auditors, and reports the results of such
review to the Board of Directors. The Audit Committee also considers the
adequacy of the Company's internal controls and internal auditing methods and
procedures. The Audit Committee met three times in 1999.
Compensation Committee
The Compensation Committee consists of four directors, none of whom is an
officer or employee of the Company. The Compensation Committee, as authorized
by the Board of Directors, makes determinations with respect to non-cash
compensation to officers, directors and employees of the Company and its
affiliates including grants, options and awards under the LTEP. Messrs.
Brocksmith, Fuellgraf, McWhorter and Miller are the members of such committee.
The Compensation Committee met five times in 1999.
6
<PAGE>
Executive Committee
The Executive Committee consists of six directors and, to the extent
authorized by the Board of Directors, in the interim between meetings of the
Board of Directors, may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Company.
Messrs. Fuellgraf, Holloway, McFerson, Miller, Patterson and Shisler are the
members of such committee. The committee did not meet during 1999.
Pricing Committee
The Pricing Committee consists of three directors. The Pricing Committee
recommends to the Board of Directors the price of both equity and debt
offerings of the Company. Messrs. Gasper, McFerson and Shisler are the members
of the Pricing Committee. The Pricing Committee did not meet during 1999.
Director Attendance
During fiscal year 1999, all incumbent directors attended at least 75% of
the aggregate number of meetings of the Board of Directors and the committees
of the Board of Directors on which they served.
Director Compensation
Directors of the Company who are not employees of the Company or its
affiliates receive an annual retainer of $50,000. Pursuant to the Nationwide
Financial Services, Inc. Stock Retainer Plan for Non-Employee Directors, the
annual retainer will be paid (i) $25,000 in cash and (ii) in shares of Class A
Common Stock having an aggregate market value of $25,000 as of the date of
payment. At the election of such Directors, the Company also provides life,
accident, health and dental insurance benefits ("Welfare Benefits") for those
Directors who do not receive such coverage as a result of service on the Board
of another company of Nationwide. The Company reimburses directors for
reasonable travel expenses incurred in attending meetings of the Board of
Directors and committees thereof.
In addition, some directors of the Company who are not employees of the
Company or its affiliates may also receive compensation for service on the
boards of directors of Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company. For the fiscal year ended December 31, 1999,
Messrs. Miller, Patterson and Shisler received $29,915, $25,531 and $28,866,
respectively, for service to such companies. Such directors also received
Welfare Benefits from Nationwide.
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company ("Nationwide"),
maintain a deferred compensation program applicable to non-employee members of
their boards of directors (the "Directors' Deferred Compensation Program").
Each director who has been elected to the Board of Directors at least twice
and has served for at least three years on the Board of Directors of a
participating company is entitled to monthly payments, following termination
of his or her service on the Board of Directors, of a monthly amount equal to
the monthly director's fee being received by that director at the time of his
or her retirement from the Board of Directors. The number of monthly payments
will equal the number of months the individual served on the Board of
Directors. Messrs. Fuellgraf, Holloway, Miller, Patterson and Shisler, non-
employee members of the Board of Directors of the Company, are or have been
non-employee members of the Board of Directors of Nationwide Life Insurance
Company and are entitled to such payments.
On November 9, 1999, the Company granted to each of the Company's directors
2000 stock options under the LTEP for the Company (the "November Grants"). The
November Grants have a ten year term, with one-third of the November Grants
vesting in each of the first three years. The exercise price of the November
Grants was $38.25 per share which was the fair market value on the date of the
grants.
Executive Compensation and Other Information
Pursuant to the Cost Sharing Agreement (hereinafter defined), the salaries
and benefits of certain officers and employees of the Company and its
subsidiaries, including the Named Executive Officers (hereinafter defined),
will be paid by Nationwide Mutual Insurance Company and reimbursed in
accordance with the terms of the Cost Sharing Agreement. See "Certain
Transactions."
7
<PAGE>
The following table provides certain information concerning compensation
received by the Company's Chief Executive Officer and the four other most
highly paid executive officers (the "Named Executive Officers") for the last
three fiscal years ended December 31, 1999, 1998 and 1997 for services
rendered to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------------
Annual Compensation Awards Payouts
-------------------------------------- ---------- --------
Securities
Other Underlying
Annual Restricted Options/ LTIP All Other
Name and Salary Bonus Compensation Stock SARs Payouts Compensation
Principal Position Year $ $ $ Award(s) $ # $ $
- ------------------ ---- ------- --------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dimon R. McFerson: 1999 466,900 1,008,504/2/ /5/ -- 109,700 -- 22,785/11/
Chairman and Chief 1998 430,970 392,982/3/ /5/ -- 60,000 204,351/9/ 23,278/12/
Executive Officer/1/ 1997 381,717 111,780/4/ /5/ 907,147/7/ 40,000 207,000/10/ 21,751/13/
Joseph J. Gasper: 1999 512,308 952,282/2/ /5/ -- 78,0008 -- 21,492/11/
President and Chief 1998 461,308 330,647/3/ /5/ -- 40,000 143,520/9/ 21,491/12/
Operating Officer 1997 358,066 97,250/4/ /5/ 396,563/7/ 30,000 155,600/10/ 18,155/13/
Robert J. Woodward, Jr.: 1999 280,293 503,928/2/ /5/ -- 21,800 -- 11,406/11/
Executive Vice 1998 236,599 209,607/3/ /5/ -- 12,000 80,694/9/ 10,883/12/
President -- Chief 1997 223,803 53,694/4/ /5/ 182,877/7/ 10,000 73,219/10/ 11,453/13/
Investment Officer/1/
Richard A. Karas: 1999 307,308 330,021/2/ /5/ -- 34,400/8/ -- 13,177/11/
Senior Vice 1998 283,847 212,503/3/ /5/ -- 20,000 90,000/9/ 13,174/12/
President -- Sales -- 1997 246,058 72,900/4/ /5/ 167,508/7/ 10,000 81,000/10/ 13,020/13/
Financial
Services
Susan A. Wolken: 1999 239,962 259,759/2/ /5/ 71,969/6/ 16,715/8/ -- 10,343/11/
Senior Vice Presi- 1998 228,654 156,978/3/ /5/ -- 12,000 68,700/9/ 7,778/12/
dent -- Product Man- 1997 199,443 57,240/4/ /5/ 17,625/7/ 2,000 58,869/10/ 8,316/13/
agement and Nationwide
Financial Marketing
</TABLE>
- ------
(1) Figures in the table, other than Restricted Stock, Securities Underlying
Options/SARs and All Other Compensation, represent compensation received
by Mr. McFerson and Mr. Woodward for their service rendered to the
Company and its subsidiaries as allocated pursuant to the Cost Sharing
Agreement. See "Certain Transactions."
(2) Represents the amount received by the Named Executive Officers under the
PIP (hereinafter defined) in 2000 for the 1999 award year.
(3) Represents the amount received by the Named Executive Officers under the
PIP in 1999 for the 1998 award year.
(4) Represents the amount received by the Named Executive Officers under the
MIP (hereinafter defined) in 1998 for the 1997 award year.
(5) Aggregate perquisites and other personal benefits are less than the lower
of $50,000 or 10% of combined salary and bonus.
(6) The following is the number of shares and value of restricted stock at
the end of the last fiscal year for: Ms. Wolken - 1,750 shares at a value
of $48,891.
(7) The following are the number of shares and value of the restricted shares
at the end of the last fiscal year for: Mr. McFerson -- 15,000 shares at
a value of $419,063; Mr. Gasper -- 10,000 shares at a value of $279,375;
Mr. Karas -- 4,000 shares at a value of $111,750; Mr. Woodward -- 3,500
shares at a value of $97,781; and Ms. Wolken -- 750 shares at a value of
$20,953.
8
<PAGE>
(8) Mr. Gasper's options include 2,500 Villanova Capital, Inc. ("VCI") (a
subsidiary of the Company) options; Mr. Karas's options include 2,000 VCI
options; and Ms. Wolken's options include 1,500 VCI options.
(9) Represents the amount received by the Named Executive Officers under the
EIP (hereinafter defined) in 1999 for the award period 1996 to 1998.
(10) Represents the amount received by the Named Executive Officers under the
EIP in 1998 for the award period 1995 to 1997.
(11) Represents contributions made or credited by the Company for 1999 under
the Savings Plan (hereinafter defined) and the DC Supplemental Plan
(hereinafter defined). The following are the amounts for the Savings Plan
and the DC Supplemental Plan. Mr. McFerson -- $2,241 for the Savings
Plan, and $20,544 for the DC Supplemental Plan; Mr. Gasper --$4,800 for
the Savings Plan and $16,692 for the DC Supplemental Plan; Mr. Karas --
$4,800 for the Savings Plan and $8,377 for the DC Supplemental Plan; Mr.
Woodward -- $3,665 for the Savings Plan and $7,741 for the DC
Supplemental Plan; and Ms. Wolken -- $4,800 for the Savings Plan and
$5,543 for the DC Supplemental Plan.
(12) Represents contributions made or credited by the Company for 1998 under
the Savings Plan and the DC Supplemental Plan. The following are the
amounts for the Savings Plan and the DC Supplemental Plan and in the case
of Mr. McFerson, above market interest on deferred compensation: Mr.
McFerson -- $2,206 for the Savings Plan and $20,224 for the DC
Supplemental Plan and $848 for the above market interest on deferred
compensation; Mr. Gasper -- $4,800 for the Savings Plan and $16,691 for
the DC Supplemental Plan; Mr. Karas -- $4,800 for the Savings Plan and
$8,374 for the DC Supplemental Plan; Mr. Woodward --$3,497 for the
Savings Plan and $7,386 for the DC Supplemental Plan; and Ms. Wolken --
$4,800 for the Savings Plan and $2,978 for the DC Supplemental Plan.
(13) Represents contributions made or credited by the Company for 1997 under
the Savings Plan and the DC Supplemental Plan. The following are the
amounts for the Savings Plan and the DC Supplemental Plan: Mr.
McFerson -- $2,142 for the Savings Plan and $19,609 for the DC
Supplemental Plan; Mr. Gasper --$4,760 for the Savings Plan and $13,395
for the DC Supplemental Plan; Mr. Karas -- $4,760 for the Savings Plan
and $8,260 for the DC Supplemental Plan; Mr. Woodward -- $3,468 for the
Savings Plan and $7,985 for the DC Supplemental Plan; and Ms. Wolken --
$4,760 for the Savings Plan and $3,556 for the DC Supplemental Plan.
Management Incentive Plan
Prior to 1999, Nationwide Mutual Insurance Company and certain of its
subsidiaries and affiliates, including Nationwide Life Insurance Company,
maintained the Management Incentive Plan (the "MIP"). Under the MIP, prior to
1998, annual payments were made to the Named Executive Officers and certain
other management employees of the participating companies based on the
achievement of measures tied to the performance of Nationwide and the relevant
operating company, the relevant business unit and the individual participant
over the preceding year. Performance measures were based on profitability,
growth, expense management and key strategic objectives, which were
established in advance. Under the MIP, the participant was granted a target
incentive amount that represented a percentage (from 5% to 15% depending on
the participant's position within the participating company) of the
participant's base salary. The actual amount received by the participant under
the MIP ranged from zero to twice the target incentive amount, depending
solely on the achievement of the performance measures.
Nationwide and the participating subsidiaries and affiliates terminated the
MIP, with respect to these officers, at the close of calendar year 1997 and,
for all other participants, at the close of calendar year 1998. Beginning in
1998, the Named Executive Officers and certain other officers of the
participating companies no longer participated in the MIP, but rather
participated in the PIP (hereinafter defined).
9
<PAGE>
Performance Incentive Plan
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company, maintain the
Performance Incentive Plan (the "PIP"), first implemented in 1998. Under the
PIP, annual payments are made to the Named Executive Officers and certain
other management employees of the participating companies based on the
achievement of measures tied to the performance of Nationwide, the relevant
operating company, the relevant business unit and the individual participant
over the preceding year. Performance measures are based on a broad series of
key financial results, financial and operational comparison to external peer
comparators, the extent of accomplishment of strategic initiatives, and other
factors and results impacting organization performance, and further based upon
individual employee performance. Under the PIP, the participant will be
granted a target incentive amount that represents a percentage (from 5% to 50%
depending on the participant's position within the participating company) of
the participant's base salary. The actual amount received by the participant
under the PIP will range from zero to no maximum factor of the participant's
base salary, depending solely on the achievement of the performance measures.
Executive Incentive Plan
Prior to May 1999, Nationwide Mutual Insurance Company and certain of its
subsidiaries and affiliates, including Nationwide Life Insurance Company,
maintained the Executive Incentive Plan (the "EIP"). Under the EIP, annual
payments were made to the Named Executive Officers and certain other officers
of the participating companies based on the achievement of measures tied to
the performance of Nationwide and the relevant operating company over the
preceding three years. Performance measures were based on profitability and
growth objectives that were established in advance by the Board of Directors
of the participating company. Under the EIP, the participant was granted a
target incentive amount that represented a percentage (from 10% to 30%
depending on the participant's position within the participating company) of
the participant's base salary. The actual amount received by the participant
ranged from zero to twice the target incentive amount, depending solely on the
achievement of the performance measures.
Nationwide and the participating subsidiaries and affiliates terminated the
EIP in May 1999. As of May 1999, the Named Executive Officers and certain
other officers of the participating companies no longer participated in the
EIP, but rather participated in the PIP.
Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan
The purpose of the LTEP is to benefit the stockholders of the Company by
encouraging high levels of performance by selected officers, directors and
employees of the Company and certain of its affiliates, attracting and
retaining the services of such individuals, and aligning the interests of such
individuals, with those of the stockholders.
The LTEP provides for the grant of any or all of the following types of
awards: (i) stock options, including incentive stock options and nonqualified
stock options, for shares of Class A Common Stock; (ii) stock appreciation
rights ("SARs"), either in tandem with stock options or freestanding; (iii)
restricted stock; and (iv) performance awards. Any stock option granted in the
form of an incentive stock option must satisfy the applicable requirements of
Section 422 of the Internal Revenue Code ("IRC"). Awards may be made to the
same person on more than one occasion and may be granted singularly, in
combination or in tandem as determined by the Compensation Committee.
The LTEP grants the Compensation Committee, which administers the LTEP,
flexibility in creating the terms and restrictions deemed appropriate for
particular awards as facts and circumstances warrant. The LTEP is intended to
constitute a nonqualified, unfunded, unsecured plan for incentive and deferred
compensation and is not intended to be subject to any requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Awards
under the LTEP which are performance-based are intended to qualify as
"performance-based compensation" for purposes of Section 162(m) of the IRC of
1986, as amended.
10
<PAGE>
No awards may be granted under the LTEP after December 11, 2006, and the
LTEP may be terminated by the Board of Directors of the Company prior to such
date. In the event of expiration or earlier termination of the LTEP, the LTEP
will remain in effect until such time as all awards previously granted
thereunder have been satisfied or have expired.
Deferred Compensation Program
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company, maintain a deferred
compensation program (the "Officers' Deferred Compensation Program") pursuant
to which officers of participating companies may elect to defer payment of
amounts otherwise payable to them. An eligible officer is permitted to enter
into a deferral agreement pursuant to which such officer may annually elect to
defer a portion of his or her salary or incentive compensation earned during
the following year. Any such election is effective prospectively. Amounts
deferred under the Officers' Deferred Compensation Program will generally be
payable in annual installments beginning in January of the calendar year
following the calendar year in which the officer terminates employment or
after the expiration of the deferral period elected by the participant.
Amounts deferred under the Officers' Deferred Compensation Program are
credited with interest. The interest rate is based on the fixed rate option in
the Savings Plan.
Savings Plan
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company, maintain the
Nationwide Savings Plan (the "Savings Plan"), a qualified profit-sharing plan
including a qualified cash or deferred arrangement covering eligible employees
of participating companies. Under the Savings Plan, participants who are not
residents of Puerto Rico may elect to contribute between 1% to 22% of their
compensation to accounts established on their behalf under the Savings Plan in
the form of voluntary salary reductions on a pretax basis; participants who
are residents of Puerto Rico may make contributions on an after-tax basis. The
participating companies are obligated to make matching employer contributions,
for the benefit of their participating employees, at the rate of 70% of the
first 2% of compensation deferred or contributed to the Savings Plan by each
employee, and 40% of the next 4% of compensation deferred or contributed by
each employee to the Savings Plan. All amounts contributed to the Savings Plan
are held in a separate account for each participant and are invested in one or
more funds made available under the Savings Plan and selected by the
participant. Normally, a participant receives the value of his or her account
upon termination of employment, although a participant may withdraw all or a
part of the amounts credited to his or her account during employment under
certain circumstances including attainment of age 59 1/2, or receive a loan of
a portion of his or her account balance. Under the Savings Plan, a participant
is immediately vested in all amounts credited to his or her account as a
result of salary deferrals (and earnings on those deferrals) or after-tax
contributions (and earnings on those contributions), as applicable. A
participant is vested in amounts attributable to employer matching
contributions (and earnings on those contributions) over a period of five
years.
Supplemental Defined Contribution Plan
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company, maintain an unfunded,
nonqualified defined contribution supplemental benefit plan, the Nationwide
Supplemental Defined Contribution Plan (the "DC Supplemental Plan"), which
provides benefits, equal to employer matching contributions that would have
been made under the Savings Plan for the participants, in the absence of the
IRC Section 401(a)(17) limitation on compensation that can be considered and
the IRC Section 402(g) limitation on amounts that can be deferred under the
Savings Plan, reduced by actual employer matching contributions made to the
Savings Plan. Participants are limited to those elected officers earning in
excess of $170,000 annually. Benefits under the DC Supplemental Plan vest at
the same time as employer matching contributions vest under the Savings Plan.
11
<PAGE>
Stock Options and Stock Appreciation Rights
The following table shows, as to the Named Executive Officers in the Summary
Compensation Table, certain information concerning stock options granted
during the 1999 fiscal year under the LTEP.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------
Number Of % Of Total
Securities Options
Underlying Granted To Exercise Grant Date
Options /SARs Employees Or Base Price Expiration Present Value
Name Granted/1/ In Fiscal Year $/sh Date $/2/
- ---- ------------- -------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Dimon R. McFerson......... 75,000 7.2% $48.125 February 9, 2009 1,508,250
34,700 3.4% $38.250 November 9, 2009 545,137
Joseph J. Gasper.......... 50,000 4.8% $48.125 February 9, 2009 1,005,500
25,500 2.5% $38.250 November 9, 2009 400,605
Robert J. Woodward, Jr. .. 15,000 1.4% $48.125 February 9, 2009 301,650
6,800 0.7% $38.250 November 9, 2009 106,828
Richard A. Karas.......... 25,000 2.4% $48.125 February 9, 2009 502,750
7,400 0.7% $38.250 November 9, 2009 116,254
Susan A. Wolken........... 9,215 0.9% $48.125 February 9, 2009 185,314
6,000 0.6% $38.250 November 9, 2009 94,260
</TABLE>
- ------
(1) One-third of the options granted become exercisable each year on the
anniversary of the grant date. Options may be accelerated upon a change of
control or certain other events of termination of employment.
(2) The estimated grant date present value dollar amounts in this column are
the result of calculations made using the Black-Scholes model, a
theoretical method for estimating the present value of stock options based
on a complex set of assumptions. The material assumptions and adjustments
incorporated in the Black-Scholes model used to estimate the value of
these options include the following:
. An exercise price on the options equal to the fair market value of the
underlying stock on the date of the grant, as listed in the table.
. The rate available at the time the grant was made on zero-coupon U.S.
Government issues with a remaining term equal to the expected life. The
risk-free rate was 4.91% for the February 9, 1999 grant and 5.97% for the
November 9, 1999 grant.
. Dividends at a rate of $0.30 per share for the February 9, 1999 grant and
$0.40 for the November 9, 1999 grant, representing the annualized
dividends paid on shares of common stock at the date of grant.
. An option term before exercise of five years, which represents the
typical period that options are held prior to exercise.
. Volatility of the stock price of 42.02% for the February 9, 1999 grant,
reflecting the daily stock price volatility for the one-year period prior
to the grant date, and 41.23% for the November 9, 1999 grant, reflecting
the daily stock price volatility for the one-year period prior to the
grant date.
. No adjustments were made for vesting requirements, non-transferability or
risk of forfeiture.
12
<PAGE>
Options/SARs Exercises and Holdings
The following table provides information, with respect to the Named
Executive Officers, concerning the exercise of options and/or SARs during 1999
and unexercised options and SARs held as of fiscal year-end December 31, 1999,
under the LTEP.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value Of
Unexercised
Number Of Securities In-The-Money
Shares Underlying Unexercised Options At
Acquired Options/SARs FY-End ($)
On Value At FY-End # Exercisable/
Name Exercise Realized Exercisable/Unexercisable Unexercisable
- ---- -------- -------- ------------------------- --------------
<S> <C> <C> <C> <C>
Dimon R. McFerson.......... 2,500 $31,250 44,167/163,033 107,241/59,165
Joseph J. Gasper........... -- -- 33,333/112,167 88,750/44,375
Robert J. Woodward, Jr. ... -- -- 10,667/33,133 29,585/14,790
Richard A. Karas........... -- -- 13,333/49,067 29,585/14,790
Susan A. Wolken............ -- -- 5,333/23,792 5,915/2,960
</TABLE>
The following table shows, as to the Named Executive Officers in the Summary
Compensation Table, certain information concerning stock options granted
during the 1999 fiscal year for Villanova Capital, Inc., a subsidiary of the
Company ("VCI").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
FOR VCI
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------
Number Of
Securities % Of Total Potential Realizable
Underlying Options Exercise Value At Assumed
Options Granted Or Base Annual Rates Of Stock
Granted To Employees Price Price Appreciation
Name #/1/ In Fiscal Year $/sh Expiration Date For Option Term
- ---- ---------- -------------- -------- ----------------- ----------------------
5% ($) 10% ($)
---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dimon R. McFerson.......... -- -- -- -- -- --
Joseph J. Gasper........... 2,500 7.9% 200.00 December 17, 2009 314,447 796,871
Robert J. Woodward, Jr. ... -- -- -- -- -- --
Richard A. Karas........... 2,000 6.4% 200.00 December 17, 2009 251,558 637,497
Susan A. Wolken............ 1,500 4.8% 200.00 December 17, 2009 188,668 478,123
</TABLE>
- ------
(1) One-fifth of the options granted become exercisable each year on the
anniversary of the grant date. Options may be accelerated upon a change of
control or certain other events of termination of employment. The exercise
price is the fair market value on the grant date.
13
<PAGE>
Options/SARs Excercises and Holdings
The following table provides information, with respect to the Named
Executive Officers, concerning the exercise of options and/or SARs during 1999
and unexercised options and SARs held as of fiscal year-end December 31, 1999
for VCI.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES FOR VCI
<TABLE>
<CAPTION>
Value Of
Unexercised
In-The-Money
Number Of Securities Options At
Underlying Unexercised FY-End ($)
Options At FY-End # Exercisable/
Name Exercisable/Unexercisable Unexercisable
- ---- ------------------------- -------------
<S> <C> <C>
Dimon R. McFerson....................... --/-- --/--
Joseph J. Gasper........................ 0/2,500 0/0
Robert J. Woodward, Jr.................. --/-- --/--
Richard A. Karas........................ 0/2,000 0/0
Susan A. Wolken......................... 0/1,500 0/0
</TABLE>
Pension Plans
Retirement Plan
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company, maintain a qualified
defined-benefit plan, Nationwide Retirement Plan (the "Retirement Plan"). In
general, a participant's annual retirement benefit under the Retirement Plan
will be equal to the sum of (i) 1.25% of the participant's Final Average
Compensation times years of service (to a maximum of 35 years) and (ii) 0.50%
of the participant's Final Average Compensation in excess of Social Security
Covered Compensation times years of service (to a maximum of 35 years). Final
Average Compensation, for the portion of the participant's benefit, which is
attributable to service on or after January 1, 1996, is the average of the
highest five consecutive covered compensation amounts of the participant in
the participant's last 10 years of service. For the portion of a participant's
benefit attributable to service prior to January 1, 1996, Final Average
Compensation is the average of the highest three consecutive covered
compensation amounts of the participant in the participant's last 10 years of
service. Covered compensation, for purposes of determining Final Average
Compensation under either method, is calculated on a calendar-year basis and
includes compensation from any company of Nationwide. With respect to Messrs.
Gasper and Karas and Ms. Wolken, because each such officer's compensation is
allocated solely to the Company and its subsidiaries, covered compensation
includes the compensation listed under the headings Salary, Bonus and LTIP
Payouts shown in the Summary Compensation Table. Covered compensation for
Messrs. McFerson and Woodward includes the amount set forth under the headings
Salary, Bonus and LTIP shown in the Summary Compensation Table and additional
compensation amounts received for services rendered to other companies of
Nationwide. Social Security Covered Compensation means the average of the
Social Security wage bases in effect during the 35-year period ending with the
last day of the year the participant attains Social Security retirement age.
The portion of a participant's benefit attributable to years of service
credited prior to 1996 is also subject to post-retirement increases following
the commencement of benefits or the participant's attainment of age 65,
whichever is later.
A participant becomes fully vested after the completion of five years of
vesting service. The Retirement Plan generally provides for payments to or on
behalf of each vested participant upon such participant's retirement on his or
her normal retirement date or later, although provision is made for payment of
early retirement benefits on a reduced basis commencing at age 55 for those
participants with 15 or more years of vesting service or at age 62 for those
with five or more years of vesting service. The normal retirement date under
the Retirement Plan is the later of the date the participant attains age 65 or
completes five years of vesting service. Death benefits are payable to a
participant's spouse or, under certain circumstances, the named beneficiary of
a participant who dies with a vested benefit under the Retirement Plan or
while an employee. The Retirement Plan also provides for the funding of
retiree medical benefits under Section 401(h) of the IRC.
14
<PAGE>
Excess and Supplemental Plans
Nationwide Mutual Insurance Company and certain of its subsidiaries and
affiliates, including Nationwide Life Insurance Company, maintain an unfunded,
nonqualified defined-benefit excess benefit plan (the "Nationwide Excess
Benefit Plan") and an unfunded, nonqualified defined-benefit supplemental
benefit plan pursuant to which certain participants may receive a supplemental
retirement benefit, Nationwide Supplemental Retirement Plan (the "Supplemental
Plan"). Any participant whose benefits are limited under the Retirement Plan
by reason of limitations under Section 415 of the IRC on the maximum benefit
that may be paid under the Retirement Plan will receive, under the Excess
Plan, that portion of the benefit that he or she would have been entitled to
receive under the Retirement Plan in the absence of such limitations. Officers
who earn in excess of $170,000 annually, have at least five years of vesting
service, and whose benefits under the Retirement Plan are limited by reason of
certain other limitations under the IRC, may receive benefits under the
Supplemental Plan. Benefits under the Supplemental Plan will be the sum of (i)
1.25% of the participant's Final Average Compensation times years of service
(up to a maximum of 40 years) and (ii) 0.75% of the participant's Final
Average Compensation in excess of Social Security Covered Compensation times
years of service (up to a maximum of 40 years) reduced by benefits accrued
under the Retirement Plan and the Excess Plan. The benefits under the
Supplemental Plan, for individuals participating in that plan on January 1,
2000, and the Excess Plan vest at the same time as benefits vest under the
Retirement Plan. Benefits for all other participants in the Supplemental Plan
vest over a period of five years of participation in that plan.
The chart below indicates the estimated maximum annual retirement benefits
that a hypothetical participant would be entitled to receive under the
Retirement Plan, including payments made under the Excess and Supplemental
Plans as a result of limitations imposed by the IRC, computed on a straight-
life annuity basis, if retirement occurred at age 65 and the number of
credited years of service and Final Average Compensation equaled the amounts
indicated. For purposes of the chart, it is assumed that the Final Average
Compensation is the same whether measured over the three-year averaging period
that applies to service accumulated prior to 1996 or the five-year period that
applies to service accumulated after 1995. In actual operation, the total
benefit received under the Retirement Plan (including payments made under the
Excess and Supplemental Plans) would be the total of the benefit determined
based on years of service earned under each method.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------------
Final
Average
Compensation 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 30,342 $ 40,456 $ 50,570 $ 60,684 $ 70,798
$ 150,000 $ 36,905 $ 49,206 $ 61,508 $ 73,809 $ 86,111
$ 175,000 $ 48,794 $ 65,059 $ 81,324 $ 97,589 $113,853
$ 200,000 $ 56,294 $ 75,059 $ 93,824 $112,589 $131,353
$ 225,000 $ 63,794 $ 85,059 $106,324 $127,589 $148,853
$ 250,000 $ 71,294 $ 95,059 $118,824 $142,589 $166,353
$ 300,000 $ 86,294 $115,059 $143,824 $172,589 $201,353
$ 350,000 $101,294 $135,059 $168,824 $202,589 $236,353
$ 400,000 $116,294 $155,059 $193,824 $232,589 $271,353
$ 450,000 $131,294 $175,059 $218,824 $262,589 $306,353
$ 500,000 $146,294 $195,059 $243,824 $292,589 $341,353
$ 600,000 $176,294 $235,059 $293,824 $352,589 $411,353
$ 700,000 $206,294 $275,059 $343,824 $412,589 $481,353
$ 800,000 $236,294 $315,059 $393,824 $472,589 $551,353
$ 900,000 $266,294 $355,059 $443,824 $532,589 $621,353
$1,000,000 $296,294 $395,059 $493,824 $592,589 $691,353
$1,100,000 $326,294 $435,059 $543,824 $652,589 $761,353
$1,200,000 $356,294 $475,059 $593,824 $712,589 $831,353
</TABLE>
15
<PAGE>
All Named Executive Officers have a portion of their benefit calculated
based on the post-1995 definition of Final Average Compensation. As of
December 31, 1995, the number of credited years of service under the
Retirement Plan for Messrs. McFerson, Gasper, Karas and Woodward and Ms.
Wolken was 23 years, 29.5 years, 31.5 years, 31.67 years and 21.17 years,
respectively. Mr. McFerson's credited years of service include, pursuant to an
agreement with Nationwide Mutual Insurance Company, 8.17 years in excess of
those actually earned through employment by Nationwide. The benefit
attributable to those additional years will be paid by Nationwide Mutual
Insurance Company (not the Retirement Plan) and is reduced by the benefit
payable under the retirement plan of Mr. McFerson's previous employer. Each of
the Named Executive Officers earned additional years of service in 1996, 1997,
1998 and 1999 and their benefit for such years and all future years will be
calculated under the new definition of Final Average Compensation. Covered
Compensation paid by the Company for the fiscal year ended December 31, 1999,
for Messrs. McFerson, Gasper, Karas and Woodward and Ms. Wolken was
$1,074,758, $988,802, $611,209, $525,070 and $465,640, respectively.
16
<PAGE>
COMPENSATION COMMITTEE JOINT REPORT ON EXECUTIVE COMPENSATION
Introduction
Approximately 20 percent of the shares of the Company are publicly traded.
Nationwide Mutual Insurance Company through a wholly-owned subsidiary, owns
approximately 80 percent of the outstanding shares of the Company. Because
Nationwide Life Insurance Company is the principal operating subsidiary of the
Company, the Nationwide Life Insurance Company Compensation Committee (the
"Nationwide Life Compensation Committee") established all components of 1999
compensation for the Company's executive officers, with the exception of
stock-based incentive grants made by the Company Compensation Committee under
the LTEP.
Dimon R. McFerson, the Company's Chairman and Chief Executive Officer,
serves also in the same capacity for Nationwide Life Insurance Company. Robert
J. Woodward Jr., the Company's Executive Vice President -- Chief Investment
Officer, serves also in the same capacity for Nationwide Life Insurance
Company. Pursuant to the Cost Sharing Agreement, compensation for Mr. McFerson
and Mr. Woodward is allocated among the companies in Nationwide for whom
services are performed. The amounts are paid by Nationwide Mutual Insurance
Company and reimbursed by the other companies in accordance with the terms of
the Cost Sharing Agreement. The 1999 compensation for Mr. McFerson and Mr.
Woodward reported in the compensation tables and discussed in this report is
the amount allocated to the Company and its subsidiaries under the Cost
Sharing Agreement and is solely for services rendered to the Company and its
subsidiaries. Compensation for the other executives named in the compensation
tables was not allocated and is their aggregate 1999 compensation for services
rendered to the Company and its subsidiaries.
The Nationwide Life Compensation Committee and the Company Compensation
Committee are both comprised solely of non-employee directors.
Compensation Philosophy and Objectives
The Nationwide Life Compensation Committee and the Company Compensation
Committee (collectively referred to herein as the "Compensation Committees")
believe that the compensation program for the Company's executive officers
should support the Company and Nationwide's vision and business strategies. In
addition, compensation should be determined within a competitive framework
based on overall financial results, business unit results, teamwork, and
individual contributions that help build value for the Company's stockholders.
The primary objectives of the compensation program are to:
. Provide a direct link between pay and performance;
. Allocate a larger percentage of executive compensation to pay that is
at-risk in order to positively influence behavior and support
accountability;
. Attract, retain and motivate top-caliber employees required for new
business directions;
. Offer total compensation opportunities that are fully competitive with
the appropriate external markets in design and pay level; and
. Emphasize the need to focus on stockholder value, in addition to
providing competitive value to customers.
As part of the overall compensation philosophy, the Compensation Committees
have determined that total compensation and each of the elements that comprise
total compensation (base salary, annual incentives, long-term incentives)
should be targeted at the 50th percentile of the market. The Compensation
Committees believe that differences in individual performance should result in
significantly different levels of compensation. Therefore, individual pay
delivered may be higher or lower than the 50th percentile of the market,
depending on individual performance.
17
<PAGE>
Competitive market data is provided to the Compensation Committees by
independent compensation consultants. This data compares the Company's and
Nationwide's compensation practices to various groups of comparator companies.
These comparator companies compete with the Company for customers, capital and
employees, and are comparable to the Company in size, scope and business
focus. This group includes both multi-line insurers and diversified financial
organizations.
The companies chosen for the compensation comparator group are not
necessarily the same companies that comprise the peer group in the Performance
Graph included in this Proxy Statement. The compensation comparator group
includes more companies than those in the peer group because it provides the
Compensation Committees a broader database for comparison purposes.
Elements of 1999 Executive Compensation
The key elements of the Company's executive compensation program are base
salary, annual incentives and long-term compensation. The following discussion
relates to the Company's executive officers other than Mr. McFerson whose
compensation is discussed separately in the Compensation of the Chief
Executive Officer.
Base Salaries
Base salaries offer security to executives and allow the Company to attract
competent executive talent and maintain a stable management team. They also
allow executives to be rewarded for individual performance and encourage the
development of executives. Pay for individual performance rewards executives
for achieving goals that may not be immediately evident in common financial
measurements.
Base salaries for executive officers are initially determined by evaluating
executives' levels of responsibility, prior experience, breadth of knowledge,
internal equity and external pay practices.
In determining increases to base salaries for 1999, the Nationwide Life
Compensation Committee considered relevant external market data, as described
above in Compensation Philosophy and Objectives. However, increases to base
salaries were driven primarily by individual performance that was evaluated
based on levels of individual contribution to the Company and Nationwide. When
evaluating individual performance, the Nationwide Life Compensation Committee
considered, among other things, the executive's efforts in promoting the
values of the Company and Nationwide; continuing educational and management
training; improving product quality; developing relationships with customers,
suppliers and employees; and demonstrating leadership abilities among
coworkers. No specific formula was used in evaluating individual performance,
and the weighting given to each factor with respect to each executive officer
was within the individual discretion and judgment of each member of the
Nationwide Life Compensation Committee. Base salaries for the executive
officers, including promotion and market competitive-driven increases, were
increased in 1999 by an average of 13.5%, a rate comparable to the base salary
increases provided at comparator companies. Executive officer salaries were
established at a level that is consistent with the goals stated in
Compensation Philosophy and Objectives.
Annual Incentive Compensation
The PIP promotes the pay-for-performance philosophy of the Compensation
Committees by providing executives with direct financial rewards in the form
of annual cash incentives. Awards for 1999 were based on return on equity,
earnings and premium growth, and other key financial measures, financial and
operational comparison to external peer competitors, the extent of
accomplishment of strategic initiatives, and other factors and results
impacting performance for the Company and return on equity, revenue growth and
expense management of Nationwide, and further based upon individual employee
performance.
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Each year, the Nationwide Life Compensation Committee establishes many
specific performance measures used for the PIP. Participants are provided a
target incentive opportunity that represents a percentage of their base
salary. In 1999, individual targets ranged from 20 to 85 percent of base
salary. Individual payouts under the PIP may range from zero to no maximum
factor of the individual's target incentive amount, depending on the
achievement of the performance measures. For 1999, the excellent results
achieved for the return on equity, the earnings and premium growth, and other
financial and strategic performance measures of the Company and of Nationwide
resulted in a payout of 175 percent of target for Mr. Gasper, and an average
of 192 percent of target for Mr. Woodward, Mr. Karas and Ms. Wolken. These
amounts are reflected in the Bonus column in the Summary Compensation Table.
Long-Term Incentive Compensation
In keeping with the philosophy of the Compensation Committees to provide a
total compensation package that favors at-risk components of pay, long-term
incentives comprise a significant portion of an executive's total compensation
package. When determining long-term incentive award sizes, the Compensation
Committees consider the executives' levels of responsibility, position within
the Company, prior experience, historical award data, various performance
criteria, and compensation practices at comparator companies.
The Compensation Committees utilize the long-term incentive plan described
below. This plan is designed to achieve a balance between market pay
orientation and alignment of executive interests with that of stockholders.
Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan
The LTEP authorizes grants of stock options, stock appreciation rights,
restricted stock and performance awards. The objectives of the LTEP are to
encourage high levels of performance by selected officers, directors and
employees of the Company and certain of its affiliates, to attract and retain
the services of such individuals, and to align the interests of such
individuals with those of the stockholders.
During February 1999 and November 1999, the Company Compensation Committee
made grants to executive officers and others under the LTEP. Award sizes were
determined based on competitive equity grant practices using the median
practices at comparator companies and the individual's impact on the Company's
performance and were determined consistent with the goals stated in
Compensation Philosophy and Objectives. The grant was awarded in nonqualified
stock options that have an exercise price equal to the fair market value of
the Common Stock on the date of the option grant. Such options become
exercisable in equal installments over a three-year term, and expire ten years
after the date of grant.
Compensation of the Chief Executive Officer
Dimon R. McFerson serves as the Company's Chairman and Chief Executive
Officer, as well as in the same capacity for Nationwide Life Insurance
Company. Except for grants made under the LTEP in February and November 1999
by the Company Compensation Committee, all components of Mr. McFerson's
compensation for 1999 were established by the Nationwide Life Compensation
Committee.
As discussed above in the Introduction, a portion of Mr. McFerson's annual
compensation is allocated to the Company for services rendered to the Company,
based on the time Mr. McFerson devotes to his responsibilities with the
Company. The compensation reported for Mr. McFerson in the compensation tables
and discussed in this report represents amounts paid for Mr. McFerson's
services as Chairman and Chief Executive Officer of the Company and its
subsidiaries.
Mr. McFerson's 1999 compensation was determined pursuant to the same
philosophy and objectives described earlier in this report and used for all
executive officers. In determining the compensation of
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Mr. McFerson for 1999, the Nationwide Life Compensation Committee reviewed the
strong financial results of the Company for 1998, Mr. McFerson's superior
leadership of Nationwide since 1992, his extensive experience in the industry,
and his successful efforts in the Company. The portion of Mr. McFerson's base
salary compensation allocated to the Company totaled $466,900 in 1999, an
increase of 8.3 percent over 1998. This increase reflects both an adjustment
in Mr. McFerson's annual base salary rate, and an increase in the cost
allocation. In 1999, Mr. McFerson's annual base salary rate was increased by
5.3 percent. This increase positioned Mr. McFerson's base salary compensation
at approximately the 50th percentile of the comparator companies.
The portion of Mr. McFerson's annual incentive award allocated to the
Company earned in 1999 under the PIP was $1,008,504. This award was 216
percent of his allocated base salary compensation and reflected 180 percent of
his target incentive. This payment was determined by the level of achievement
of specified financial, operational and strategic goals as assessed by the
Nationwide Life Insurance Company Board of Directors in their annual
performance evaluation of Mr. McFerson.
Under the LTEP, the Company Compensation Committee granted Mr. McFerson
109,700 stock option shares. This number of stock option shares is slightly in
excess of the maximum shares permitted to be granted per person per year under
the LTEP prior to its amendment. The number of shares in excess of the limit,
9,700, cannot be considered as performance-based compensation at the time of
their exercise under Section 162(m) of the IRC. In making this grant, the
Company Compensation Committee took into account competitive levels of long-
term compensation for Chief Executive Officers of major diversified insurance
and financial services organizations with similar size and scope, as well as
Mr. McFerson's role in the continued strategic positioning of the Company. In
addition, the Company Compensation Committee reflected the Company's desire to
have top officers build a significant personal level of stock ownership in the
Company, so as to better align their interests with those of other
stockholders.
Policy on Deductibility of Compensation
Section 162(m) of the IRC provides that executive compensation in excess of
$1 million in any calendar year will not be deductible for purposes of
corporate income taxes unless it is performance-based compensation and is paid
pursuant to a plan meeting certain requirements of the IRC. The Compensation
Committees intend to continue increased reliance on performance-based
compensation programs. Such programs will be designed to fulfill, in the best
possible manner, future corporate business objectives. To the extent
consistent with this goal, the Compensation Committees currently anticipate
that such programs will also generally be designed to satisfy the requirements
of Section 162(m) of the IRC with respect to the deductibility of compensation
paid. However, the Compensation Committees may award compensation that is not
fully deductible if the Compensation Committees determine that such an award
is consistent with their philosophy and in the best interests of the Company
and its stockholders.
Nationwide Financial Services Compensation Committee
David O. Miller, Chairman
James G. Brocksmith, Jr.
Charles L. Fuellgraf, Jr.
Donald L. McWhorter
Nationwide Life Insurance Company Compensation Committee
Willard J. Engel, Chairman
Fred C. Finney
Robert L. Stewart
Nancy C. Thomas
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The following graph shows a comparison of the Company's cumulative total
stockholder return since its initial public offering on March 6, 1997, with
the S&P Composite Index and an index of peer companies selected by the
Company. Companies in the peer group are the following: Allmerica Financial
Corporation; AFLAC Inc.; American General Corporation; AXA Financial, Inc.;
Hartford Life, Inc.; Jefferson Pilot Corporation; Lincoln National
Corporation; Protective Life Corporation; Reliastar Financial Corporation; and
T. Rowe Price & Associates. Companies included in the peer group have business
operations similar to the Company, and are considered to be significant
competitors to the Company.
The graph plots the changes in the value of an initial $100 investment over
the indicated time periods, assuming reinvestment of all dividends. Returns of
the two indices have been weighted according to their respective aggregate
market capitalization at the beginning of each period shown on the graph.
COMPARISON OF 34-MONTH CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
3/6/97 12/97 12/98 12/99
---------------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONWIDE FINANCIAL SERVICES, INC. 100 155 223 122
PEER GROUP 100 135 179 178
S&P 500 100 123 158 192
</TABLE>
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates this
graph by reference, and shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the preceding
graph. The Company will not make or endorse any predictions as to future stock
performance.
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CERTAIN TRANSACTIONS
The Company, Nationwide Mutual Insurance Company and Nationwide Corporation
entered into an Intercompany Agreement, certain provisions of which are
summarized below (the "Intercompany Agreement"). As used herein, "Nationwide
Mutual Insurance Company" means Nationwide Mutual Insurance Company
collectively with its subsidiaries and affiliates (other than the Company and
its subsidiaries).
Nationwide Mutual Insurance Company Consent to Certain Events. The
Intercompany Agreement provides that until Nationwide Mutual Insurance Company
ceases to control at least 50% of the combined voting power of the outstanding
voting stock of the Company, the prior written consent of Nationwide Mutual
Insurance Company will be required for: (i) any consolidation or merger of the
Company or any of its subsidiaries with any person (other than with a wholly-
owned subsidiary); (ii) any sale, lease, exchange or other disposition or
acquisition of assets by the Company or any of its subsidiaries (other than
transactions to which the Company and its subsidiaries are the only parties),
or any series of related dispositions or acquisitions involving consideration
in excess of $250 million; (iii) any change in the authorized capital stock of
the Company or the creation of any additional class or series of capital stock
of the Company; (iv) any issuance by the Company or any subsidiary of the
Company of any equity securities or rights, warrants or options to purchase
such equity securities, except (a) up to 2.6 million shares of Class A Common
Stock pursuant to employee and director stock option, profit-sharing and other
benefit plans of the Company and its subsidiaries and any options exercisable
therefor, (b) shares of Class A Common Stock issued upon the conversion of any
Class B Common Stock, (c) the issuance of shares of capital stock of a wholly-
owned subsidiary of the Company to the Company or another wholly-owned
subsidiary of the Company and (d) in the public offering of Class A Common
Stock in March 1997; (v) the dissolution, liquidation or winding up of the
Company; (vi) the amendment of the Certificate of Incorporation and certain
provisions of the Bylaws affecting corporate governance; (vii) the election,
removal or filling of a vacancy in the office of the Chairman, Chief Executive
Officer or President of the Company; (viii) the declaration of dividends on
any class or series of capital stock of the Company, except dividends not in
excess of the most recent regular cash dividend or any dividend per share not
in excess of 15% of the then current per share market price of the Class A
Common Stock; (ix) capital expenditures or series of related capital
expenditures of the Company or any of its subsidiaries in excess of $250
million during any period of 12 consecutive months; (x) the creation,
incurrence or guaranty by the Company or any of its subsidiaries of
indebtedness for borrowed money in excess of $100 million, except in
connection with the Capital Securities and the Senior Notes; and (xi) any
change in the number of directors on the Board of Directors of the Company,
the determination of members of the Board of Directors or any committee
thereof and the filling of newly created memberships and vacancies on the
Board of Directors or any committee thereof.
License to Use Nationwide Name and Service Marks. Pursuant to the
Intercompany Agreement, Nationwide Mutual Insurance Company granted to the
Company and certain of its subsidiaries a non-exclusive, nonassignable,
revocable license to use the "Nationwide" trade name and certain other service
marks specifically identified in the Intercompany Agreement (collectively, the
"Service Marks") solely for the purpose of identifying and advertising the
Company's long-term savings and retirement business and activities related to
such business.
Equity Purchase Rights. The Company has agreed that, to the extent permitted
by the New York Stock Exchange (the "NYSE") and so long as Nationwide Mutual
Insurance Company controls at least 50% of the combined voting power of the
outstanding voting stock of the Company, Nationwide Corporation may purchase
its pro rata share (based on its then current percentage voting interest in
the Company) of any voting equity securities to be issued by the Company
(excluding any such securities offered pursuant to employee stock options or
other benefit plans, dividend reinvestment plans and other offerings other
than for cash).
Registration Rights. The Company has granted to Nationwide Corporation
certain demand and "piggyback" registration rights with respect to shares of
Common Stock owned by it. Nationwide Corporation has the right to request up
to two demand registrations in each calendar year, but not more than four in
any five-year period. Nationwide Corporation will also have the right, which
it may exercise at any time and from time to
22
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time, to include the shares of Common Stock held by it in any registration of
common equity securities of the Company, initiated by the Company on its own
behalf or on behalf of any other stockholders of the Company. These rights are
subject to certain "blackout" provisions. Such registration rights are
transferable by Nationwide Corporation.
Nationwide Mutual Insurance Company Agents. In the Intercompany Agreement,
Nationwide Mutual Insurance Company has agreed to allow the Company to
distribute its variable annuity, fixed annuity and individual universal,
variable and traditional life insurance products through Nationwide Mutual
Insurance Company agents. Such right is exclusive to the Company, subject to
the limited right of certain companies of Nationwide to sell such products
through the agency force, for at least five years following the Equity
Offerings.
Federal Income Taxes
The Company is included in the consolidated United States federal income tax
return for which Nationwide Mutual Insurance Company is the common parent and
the Company's tax liability will be included in the consolidated federal
income tax liability of Nationwide Mutual Insurance Company. The Company also
may be included in certain state and local tax returns of Nationwide Mutual
Insurance Company or its subsidiaries.
The Company is a party to an agreement, with Nationwide Mutual Insurance
Company and the other companies in the consolidated returns of Nationwide
Mutual Insurance Company, to determine the manner in which their respective
tax liabilities will be determined (the "Tax Sharing Agreement") for 1996 and
subsequent years, as long as the Company is included in the consolidated
federal income tax return for Nationwide Mutual Insurance Company. It will
also be effective for any year in which the Company is included in a
consolidated or combined state or local tax return. Under the Tax Sharing
Agreement, the Company will pay to Nationwide Mutual Insurance Company amounts
equal to the taxes that the Company would otherwise have to pay if the Company
were to file a separate federal income, or a separate state or local income or
franchise, tax return (including any amounts determined to be due as a result
of a redetermination of the tax liability of the consolidated or combined
group of which Nationwide Mutual Insurance Company is the common parent
arising from any audit or otherwise). The Company will be responsible for all
taxes, including assessments, if any, for prior years with respect to all
other taxes payable by the Company or any of its subsidiaries, and for all
other federal, state and local taxes that may be imposed upon the Company and
that are not addressed in the Tax Sharing Agreement.
By virtue of its control of the Company and the terms of the Tax Sharing
Agreement, Nationwide Mutual Insurance Company effectively controls all of the
Company's tax decisions. Under the Tax Sharing Agreement, Nationwide Mutual
Insurance Company will have sole authority to respond to and conduct all tax
proceedings (including tax audits) relating to the Company, to file all
returns on behalf of the Company, and to determine the amount of the Company's
liability to (or entitlement to payment from) Nationwide Mutual Insurance
Company under the Tax Sharing Agreement. This arrangement may result in
conflicts of interest between the Company and Nationwide Mutual Insurance
Company. For example, under the Tax Sharing Agreement, Nationwide Mutual
Insurance Company may choose to consent, compromise or settle any adjustment
or deficiency proposed by the relevant tax authority in a manner that may be
beneficial to Nationwide Mutual Insurance Company and detrimental to the
Company. Under the Tax Sharing Agreement, however, Nationwide Mutual Insurance
Company is obligated to act in good faith with regard to all persons included
in the applicable returns.
The Tax Sharing Agreement may not be amended without the prior written
consent of the Company.
Legal Services
The attorneys in the Office of General Counsel of Nationwide Mutual
Insurance Company also operate as the law firm of Dietrich, Reynolds &
Koogler, LLP. Pursuant to a partnership agreement, the firm limits its
23
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representation to the companies of Nationwide. Through a retainer arrangement,
some Nationwide companies pay an annual retainer fee based upon an estimate of
time devoted to rendering legal services. Other Nationwide companies pay based
upon a cost allocation basis. Thomas W. Dietrich, Lucinda A. Reynolds and Mark
B. Koogler are the senior partners in such firm, and all attorneys of the firm
are salaried employees of Nationwide Mutual Insurance Company. The firm
applies all of its retainer fees and certain cost allocations toward office
overhead under a rental and office expense agreement with Nationwide Mutual
Insurance Company and to pay for professional liability insurance. For the
years ended December 31, 1999, 1998 and 1997, the Company paid the firm $2.8
million, $2.5 million and $2.6 million, respectively, for legal services
rendered to the Company which amounts were immediately remitted to Nationwide
Mutual Insurance Company.
Lease
Pursuant to an arrangement between Nationwide Mutual Insurance Company and
certain of its subsidiaries, the Company leases approximately 597,000 square
feet of office space at One Nationwide Plaza, Two Nationwide Plaza and Three
Nationwide Plaza, Columbus, Ohio, at a current market rate of $19.12 per
square foot, with limited exceptions. Under the arrangement, the Company
determines the amount of office space necessary to conduct its operations and
leases such space from Nationwide Mutual Insurance Company, subject to
availability. For the years ended December 31, 1999 and 1998, the Company made
payments in respect to its operating budget to Nationwide Mutual Insurance
Company and its subsidiaries totaling $11.4 million and $10.9 million,
respectively, under such arrangement.
Purchase of Affiliates
On September 1, 1999, the Company purchased from Nationwide Corporation all
of the outstanding capital stock of Employers Life Insurance Company of Wausau
and Pension Associates, Inc. for total consideration of $124.2 million.
Immediately thereafter, Employers Life Insurance Company of Wausau was merged
with and into Nationwide Life Insurance Company.
Modified Coinsurance Agreements
Effective as of January 1, 1996, Nationwide Life Insurance Company entered
into a 100% modified coinsurance agreement with Employers Life Insurance
Company of Wausau. Under the agreement, Nationwide Life Insurance Company
cedes to Employers Life Insurance Company of Wausau and Employers Life
Insurance Company of Wausau assumes Nationwide Life's non-variable group and
wholesale life insurance business and group and franchise health insurance
business and any ceded or assumed reinsurance applicable to such group
business. Effective July 1, 1999, the modified coinsurance agreement was
terminated. For the years ended December 31, 1999 and 1998, Nationwide Life
Insurance Company ceded $31.8 million and $106.3 million, respectively, of
premium to Employers Life Insurance Company of Wausau.
Effective as of January 1, 1996, Nationwide Life Insurance Company also
entered into a 100% modified coinsurance agreement with Nationwide Mutual
Insurance Company. Under the agreement, Nationwide Life Insurance Company
cedes to Nationwide Mutual Insurance Company and Nationwide Mutual Insurance
Company assumes Nationwide Life's individual accident and health insurance
business and any ceded or assumed reinsurance applicable to such individual
business. Effective July 1, 1999, the modified coinsurance agreement was
amended to include Nationwide Life's group and franchise health insurance
business and any ceded or assumed reinsurance applicable to such group
business. For the years ended December 31, 1999 and 1998, Nationwide Life
Insurance Company ceded $113.9 million and $90.1 million, respectively, of
premium to Nationwide Mutual Insurance Company.
24
<PAGE>
Cost Sharing Agreement
Pursuant to a Cost Sharing Agreement (the "Cost Sharing Agreement") among
Nationwide Mutual Insurance Company and certain of its direct and indirect
subsidiaries, including the Company, Nationwide Mutual Insurance Company
provides certain operational and administrative services, such as sales
support, advertising, personnel and general management services, to those
subsidiaries. Expenses covered by such agreement are subject to allocation
among Nationwide Mutual Insurance Company and such subsidiaries. Under the
Cost Sharing Agreement, expenses are allocated in accordance with NAIC
guidelines and are based on standard allocation techniques and procedures
acceptable under general cost accounting practices. In addition, beginning in
1999, Nationwide Services Company, a subsidiary of Nationwide Mutual Insurance
Company, provides computer, telephone, mail, employee benefits administration,
and other services to Nationwide Mutual Insurance Company and certain of its
direct and indirect subsidiaries, including the Company, based on specified
rates for units of service consumed. For the years ended December 31, 1999 and
1998, the Company made payments to Nationwide Mutual Insurance Company and
Nationwide Services Company totaling $132 million and $95 million,
respectively.
Cash Management Agreements
Nationwide Mutual Insurance Company has entered into an Investment Agency
Agreement with Nationwide Cash Management Company ("NCMC"), an affiliate of
the Company. NCMC makes, holds and administers short-term investments (those
maturing in one year or less) for Nationwide Mutual Insurance Company and
certain of its affiliates, including Nationwide Life Insurance Company and
certain of the Company's other subsidiaries. Under the agreements, expenses of
NCMC are allocated pro rata among the participants based upon the
participant's ownership percentage of total assets held by NCMC. For the year
ending December 31, 1999, the Company paid NCMC fees and expenses totaling
$102,727 under such agreements.
Repurchase Agreement
Nationwide Life Insurance Company and certain of the Company's other
subsidiaries are parties to Master Repurchase Agreements with various
affiliates pursuant to which securities or other financial instruments are
transferred between parties against the transfer of funds by the transferee
upon the demand of either party.
PROPOSALS BY STOCKHOLDERS FOR THE 2001 ANNUAL MEETING
The Company's Bylaws provide that in order to submit any business to or
nominate any person for election to the Board of Directors, a stockholder must
give written notice to the Secretary of the Company (containing certain
information specified in the Bylaws) not less than 60 days and not more than
90 days prior to the first anniversary date of the Company's Proxy Statement
in connection with the last annual meeting.
Rule 14a-4 of the Securities Exchange Act of 1934, as amended allows the
Company to use discretionary voting authority to vote on matters coming before
an Annual Meeting of Stockholders, if the Company does not have notice of the
matter at least 45 days before the anniversary of the date on which the
Company first mailed its proxy materials for the prior year's Annual Meeting
of Stockholders or the date specified by an advance notice provision in the
Company's Bylaws. The Company's Bylaws contain such an advance notice
provision as described above. For the Company's Annual Meeting expected to be
held on May 9, 2001, stockholders must submit such written notice to the
Secretary of the Company not earlier than January 2, 2001, and not later than
January 31, 2001.
These requirements are separate and apart from and in addition to the SEC's
requirements that a stockholder must meet in order to have a stockholder
proposal included in the Company's Proxy Statement under Rule 14a-8 of the
Securities Exchange Act of 1934, as amended. For purposes of the Company's
2001 Annual Meeting, any stockholder who wishes to submit a proposal for
inclusion in the Company's Proxy Statement must submit such proposal to the
Secretary of the Company on or before December 1, 2000.
25
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INDEPENDENT AUDITORS
The firm of KPMG LLP served as independent auditors for 1999.
Representatives of the firm are expected to be present at the Annual Meeting,
with the opportunity to make a statement should they desire to do so, and will
be available to respond to appropriate questions from the stockholders.
APPROVAL AND AMENDMENT OF THE NATIONWIDE FINANCIAL SERVICES, INC. 1996 LONG-
TERM EQUITY COMPENSATION PLAN
To create incentives for superior performance, to link compensation to total
stockholder returns, and to facilitate the retention by the Company and its
designated subsidiaries of valued key employees and directors, the Company's
Board of Directors adopted the LTEP. The LTEP is intended to provide a greater
community of interest between key employees and directors and the Company's
stockholders, and to enable the Company to attract and retain individuals of
outstanding ability. In order to clarify the provisions of the LTEP concerning
participation by directors and to expand the number of shares available under
the LTEP, the Company's Board of Directors approved the First Amendment of the
LTEP (the "LTEP Amendment") on February 9, 2000.
A maximum of 2,600,000 shares (subject to adjustment for stock dividends,
stock splits and the like) of the Company's Class A Common Stock will be
available to be issued under the LTEP. If approved by the Company's
stockholders, the LTEP will be effective as of December 11, 1996, and
effective upon stockholder approval, the number of shares available to be
issued under the LTEP will increase to 6,100,000 pursuant to the LTEP
Amendment.
Section 162(m) of the IRC limits the maximum annual deduction that the
Company may claim for compensation paid to each of the Named Executive
Officers to $1 million. That limit does not apply to performance-based
compensation as defined by applicable regulations. As part of its effort to
ensure that compensation paid under the LTEP is "performance based" and
therefore fully deductible for federal income tax purposes, the Board of
Directors of the Company will submit the LTEP, as amended by the LTEP
Amendment, for stockholder adoption and approval at the Annual Meeting of
Stockholders, scheduled for May 3, 2000. The amended and restated LTEP plan
document is included as Exhibit A to this Proxy Statement. The following
summary of certain features of the LTEP is qualified in its entirety by
reference to the amended and restated LTEP plan document.
Administration
The Board of Directors has delegated the responsibility to administer the
LTEP to the Company Compensation Committee. The Company Compensation
Committee, subject to the provisions of the LTEP, is authorized to interpret
and administer the LTEP; select key employees and directors to whom awards
will be granted; to determine the type and amount of such awards; determine
and amend, in accordance with the LTEP plan provisions, the terms and
conditions of such awards; and exercise all other powers allocated to the
Company Compensation Committee under the LTEP, including a determination as to
whether performance goals have been met.
The LTEP may be amended in writing by the Board of Directors without
stockholder approval, except where such amendment requires stockholder
approval in order for the LTEP to comply with Rule 16b-3 of the Securities and
Exchange Act of 1934 as amended, or to preserve the deductibility of amounts
granted under the LTEP for federal income tax purposes. Effective upon
stockholder approval, the LTEP will be amended to require stockholder approval
of any amendment requiring such approval pursuant to the rules of the SEC or
any securities exchange on which the shares of the Company are listed.
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Eligibility
Key employees or directors of the Company or any of its subsidiaries who are
selected from time to time by the Company Compensation Committee will be
granted awards under the LTEP. The receipt of an award under the LTEP will not
confer upon any individual the right to receive additional awards under the
LTEP.
Awards
Awards made under the LTEP shall consist of stock options, SARs, restricted
stock and performance shares or performance units. Awards made to a Named
Executive Officers, with respect to IRC Section 162(m), are generally designed
to comply with the performance-based exception from the tax deductibility
limitations described in IRC Section 162(m). The Company Compensation
Committee may choose from a pre-established list of performance measures in
determining the particular performance goal or target to be met by such named
executive officer in order to obtain an award under the LTEP. The performance
measures to be used for the purpose of establishing performance goals are as
follows: earnings per share, economic value added, market share (actual or
targeted growth), net income (before or after taxes), operating income, return
on assets (actual or targeted growth), return on capital (actual or targeted
growth), return on equity (actual or targeted growth), return on investment
(actual or targeted growth), revenue (actual or targeted growth), share price,
stock price growth, or total stockholder return. In general, the Company
Compensation Committee shall have the discretion to determine the extent to
which pre-established performance goals have been met and to make awards or
payment, in some cases pro-rated, based on such determinations. However, in no
event shall the Company Compensation Committee increase the amount of an award
at any target level. The Company Compensation Committee will evaluate the
performance of participants over the applicable performance period.
An award of a "stock option" means the grant of either an incentive stock
option or a nonqualified stock option within the meaning of IRC Section 422.
Each award shall specify the option price, which will be equal to at least
100% of the fair market value of a share of Class A Common Stock on the date
the stock option is granted. No individual may be granted stock options to
acquire more than 100,000 shares of Class A Common Stock in any one fiscal
year. Subject to stockholder approval of the LTEP as amended by the LTEP
Amendment, the maximum aggregate number of shares that may be granted to a
participant in the form of stock options will increase to 300,000 shares.
Stock options may be exercised at such times and subject to such restrictions
as described in the applicable award agreement between the Company and the
participant. Stock options awarded under the LTEP may not be offered,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or the laws of descent and distribution. Furthermore, incentive
stock options shall be exercisable during the participant's lifetime only by
the participant. Approximately 350 key employees and directors will be
selected to participate in the LTEP. It is not possible to state at this time
which key employees and directors will be granted awards under the LTEP or the
value of such awards since these matters will be determined by the Company
Compensation Committee, in its sole discretion, based on such factors as it
deems pertinent in granting awards.
An award of a SAR means that the participant has been granted the right to
receive payment from the Company, if all applicable terms and conditions in
the award agreement between the Company and the participant are met, of an
amount determined by multiplying the difference between the fair market value
of a share of Class A Common Stock on the date of exercise over the fair
market value on the date of grant, by the number of shares of Class A Common
Stock with respect to which the SAR is exercised. SARs may be granted as
freestanding or tandem SARs, or any combination thereof. No individual may be
granted SARs with respect to more than 100,000 shares of Class A Common Stock
in any one fiscal year. Subject to stockholder approval of the LTEP as amended
by the LTEP Amendment, the maximum aggregate number of shares that may be
subject to SARs will increase to 300,000 shares. SARs may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or the laws of descent and distribution.
An award of "restricted stock" means that the participant has been granted
shares of Class A Common Stock which is subject to forfeiture upon the
happening of certain events. Such shares are to be held in escrow
27
<PAGE>
by the Company during the restriction period. No individual may be granted
more than 100,000 restricted shares of Class A Common Stock in any one fiscal
year. Subject to stockholder approval of the LTEP as amended by the LTEP
Amendment, the maximum aggregate number of restricted shares that may be
granted to a participant will increase to 300,000 shares. Shares of restricted
stock granted under the LTEP may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated by the participant until the end of the
applicable restriction period. During the restriction period, the participant
will have the right to receive cash payments equal to the dividends declared
and paid, if any, with respect to such shares of restricted stock, as well as
to vote such shares.
An award of a "performance unit" or "performance share" means that the
participant has been granted the right to receive payments with respect to the
units or shares of Class A Common Stock subject to the award, if the
performance goals described in the applicable award agreement between the
Company and the participant are met. No individual may be granted performance
units or shares with respect to more than 100,000 shares of Class A Common
Stock in any one fiscal year. Subject to stockholder approval of the LTEP as
amended by the LTEP Amendment the maximum aggregate number of shares that may
be granted to a participant with respect to performance units or shares will
increase to 300,000 shares. Performance units or performance shares may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or the laws of descent and distribution.
Termination of Employment
The extent to which a participant may exercise stock options, SARs or
restricted stock awarded under the LTEP upon termination of employment shall
be set forth in the applicable award agreement between the Company and such
participant. Such provisions may reflect distinctions based on the reason for
termination of employment. The extent to which a participant, who has been
awarded performance units or performance shares under the LTEP, may receive a
prorated payment of the performance units or performance shares upon
termination of employment due to death, disability or retirement shall be
determined by the Company Compensation Committee in its discretion. In the
event the participant terminates employment for any other reason, the
performance units and performance shares shall be forfeited, except to the
extent otherwise determined by the Company Compensation Committee.
Certain Events
In the event that the outstanding shares of Class A Common Stock of the
Company are converted into, or exchangeable for, a different number or kind of
shares or other securities of the Company or of another corporation by reason
of a reorganization, merger, consolidation, reclassification or combination,
all stock options and SARs awarded under the LTEP shall become immediately
exercisable, any restrictions on restricted stock awarded under the LTEP shall
lapse, and all performance goals relating to outstanding awards of restricted
stock and performance units and performance shares shall be deemed to have
been met.
Federal Tax Treatment
Under the present federal tax laws, the federal income tax treatment of
stock options, SARs and restricted stock under the LTEP is as follows: A
participant realizes no taxable income and the Company is not entitled to a
deduction when either an incentive stock option or a nonqualified stock option
is awarded. Upon disposition of the stock acquired through the exercise of an
incentive stock option, the participant will be taxed on the spread, or the
excess of the sale price over the exercise price, at capital gains rates if
the stock has been held for more than two years after the date of the grant of
the option and one year after the date of exercise. If such holding periods
are not satisfied prior to a disposition of the shares by the participant, the
participant will be taxed on the spread at ordinary income rates, and the
Company will be entitled to a corresponding deduction. When a nonqualified
stock option is exercised, the participant will be taxed on the spread at
ordinary income rates if the option is vested, and the Company will be
entitled to a corresponding deduction. If the option is not vested, the
participant will not pay taxes until it has vested, and the Company will be
entitled to a corresponding deduction
28
<PAGE>
at that time. Upon disposition of the stock acquired through the exercise of a
nonqualified stock option, the participant will realize short-term or long-
term capital gain or loss, depending upon whether the shares have been held
for more than one year. Such gain or loss will be equal to the difference
between the sale price of the shares and the fair market value of the shares
on the date that the employee recognized income.
A participant realizes no taxable income and the Company is not entitled to
a deduction when restricted stock is awarded. When the restrictions on the
shares of restricted stock lapse, the employee will realize ordinary income
equal to the fair market value of the shares, and the Company will be entitled
to a corresponding deduction. Upon the sale of the formerly restricted shares,
the employee will realize short-term or long-term capital gain or loss,
depending upon whether the shares have been held for more than one year. Such
gain or loss will be equal to the difference between the sale price of the
shares and the fair market value of the shares on the date that the employee
recognized income.
Participants may make an election under Section 83(b) of the IRC (an "83(b)
Election") with respect to awards of nonqualified stock options and restricted
stock within 30 days of the date the nonqualified stock options or restricted
stock is granted. An 83(b) Election makes the date of the award a taxable
event. Any subsequent appreciation of the stock is taxable upon disposition of
the stock, not upon the date of exercise of the option or, as would ordinarily
be the case with restricted stock, when the restrictions lapse. The income
recognized by the employee upon an 83(b) Election is ordinary income and is
subject to the same income and withholding treatment as wages.
A participant realizes no taxable income and the Company is not entitled to
a deduction when a SAR is granted. Upon exercise of the SAR, the participant
is taxed on the amount received at ordinary income rates and the Company is
entitled to a corresponding deduction.
The Board of Directors recommends the stockholders vote "FOR" the Class III
Board of Directors and "FOR" the approval of and amendments to the LTEP, as
described herein.
29
<PAGE>
Option Grants Under the LTEP
<TABLE>
<CAPTION>
Number Of Securities Exercise Price
Name And Position/Group Underlying Options Granted Per Share ($) Expiration Date
----------------------- -------------------------- -------------- ---------------
<S> <C> <C> <C>
Dimon R. McFerson............................... 40,000 23.5000 03/06/07
Chairman and Chief Executive 60,000 39.3750 02/10/08
Officer 75,000 48.1250 02/09/09
34,700 38.2500 11/09/09
Joseph J. Gasper................................ 30,000 23.5000 03/06/07
President and Chief 40,000 39.3750 02/10/08
Operating Officer 50,000 48.1250 02/09/09
25,500 38.2500 11/09/09
Robert J. Woodward, Jr. ........................ 10,000 23.5000 03/06/07
Executive Vice President-Chief 12,000 39.3750 02/10/08
Investment Officer 15,000 48.1250 02/09/09
6,800 38.2500 11/09/09
Richard A Karas................................. 10,000 23.5000 03/06/07
Senior Vice President- 20,000 39.3750 02/10/08
Sales-Financial Services 25,000 48.1250 02/09/09
7,400 38.2500 11/09/09
Susan A. Wolken................................. 2,000 23.5000 03/06/07
Senior Vice President-Product 12,000 39.3750 02/10/08
Management and Nationwide 9,215 48.1250 02/09/09
Financial Marketing 6,000 38.2500 11/09/09
All current executive officers as a group/1/... 79,500 23.5000 03/06/07
5,000 26.2500 05/19/07
5,000 31.1875 10/13/07
215,500 39.3750 02/10/08
8,100 42.9375 05/12/08
300,325 48.1250 02/09/09
10,000 41.1250 08/09/09
147,900 38.2500 11/09/09
All current directors who are not executive..... 26,000 23.5000 03/06/07
officers, as a group/2/ 8,000 43.4375 05/10/09
38,000 38.2500 11/09/09
Each nominee for election as a director:
Joseph J. Gasper............................ See above See above See above
Lydia M. Marshall........................... 2,000 38.2500 11/09/09
David O. Miller............................. 2,000 38.2500 11/09/09
Each associate of such persons.................. -0- -0- -0-
All employees, including all.................... 63,100 23.5000 03/06/07
current officers who are not 89,500 39.3750 02/10/08
executive officers, as a group. 3,200 42.9375 05/12/08
5,000 40.1875 11/10/08
299,700 48.1250 02/09/09
30,000 46.2500 03/04/09
3,600 43.4375 05/10/09
25,800 41.1250 08/09/09
182,400 38.2500 11/09/09
</TABLE>
(1) All current reporting officers under 16(b) of the Securities Exchange Act
of 1934, as amended, which includes the Named Executive Officers.
(2) Includes directors of affiliates of the Company.
All options granted to date under the LTEP have been non-qualified stock
options with a ten-year term, which vest equally over the first three
anniversaries following the grant date. These stock option grants all have an
exercise price equal to the fair market value on the grant date. All grants
under the LTEP for the named executive officers have been previously reported
as required in the current or previous proxy statements.
30
<PAGE>
OTHER MATTERS
The Board of Directors knows of no further business other than that
described herein that will be presented for consideration at the Annual
Meeting. If, however, other business shall properly come before the meeting,
the persons named in the enclosed form of proxy will vote the shares
represented by such proxy in accordance with their best judgment.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, including financial statements and financial statement
schedules, but excluding exhibits, will be made available without charge to
the stockholders upon written request to John F. Delaloye, Assistant
Secretary, One Nationwide Plaza, Columbus, Ohio 43215.
March 31, 2000
31
<PAGE>
Exhibit A
AMENDED AND RESTATED
NATIONWIDE FINANCIAL SERVICES, INC.
1996 LONG-TERM EQUITY COMPENSATION PLAN
March 2000
<PAGE>
Contents
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Article 1. Establishment, Objectives, and Duration...................... E1
Article 2. Definitions.................................................. E1
Article 3. Administration............................................... E4
Article 4. Shares Subject to the Plan and Maximum Awards................ E4
Article 5. Eligibility and Participation................................ E5
Article 6. Stock Options................................................ E5
Article 7. Stock Appreciation Rights.................................... E6
Article 8. Restricted Stock............................................. E7
Article 9. Performance Units and Performance Shares..................... E8
Article 10. Performance Measures......................................... E9
Article 11. Beneficiary Designation...................................... E10
Article 12. Deferrals.................................................... E10
Article 13. Rights of Participants....................................... E10
Article 14. Change in Control............................................ E10
Article 15. Amendment, Modification, and Termination..................... E11
Article 16. Withholding.................................................. E11
Article 17. Indemnification.............................................. E12
Article 18. Successors................................................... E12
Article 19. Legal Construction........................................... E12
</TABLE>
<PAGE>
AMENDED AND RESTATED
NATIONWIDE FINANCIAL SERVICES, INC.
1996 LONG-TERM EQUITY COMPENSATION PLAN
Article 1. Establishment, Objectives, and Duration
1.1. Establishment of the Plan. Nationwide Financial Services, Inc., a
Delaware corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as the "Nationwide
Financial Services, Inc. 1996 Long-Term Equity Compensation Plan" (hereinafter
referred to as the "Plan"), as set forth in this document and individual award
agreements setting forth certain terms and conditions applicable to awards
granted under the Plan. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares and Performance Units.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of December 11, 1996 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2. Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants
to share in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after December 11, 2006.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Affiliate" means Nationwide Mutual Insurance Company, Nationwide
Mutual Fire Insurance Company, Farmland Mutual Insurance Company, and the
Subsidiaries of each such company, other than the Company.
2.2. "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units.
2.3. "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.4. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5. "Board" or "Board of Directors" means the Board of Directors of the
Nationwide Financial Services, Inc.
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<PAGE>
2.6. "Change in Control" will be deemed to have occurred as of the first day
any one (1) or more of the following paragraphs shall have been satisfied:
(a) At any times when Nationwide Mutual Insurance Company and its
Subsidiaries cease to be the Beneficial Owner, directly or indirectly,
of securities of the Company representing fifty and one-tenth percent
(50.1%) or more of the combined voting power of the Company's then
outstanding securities; or
(b) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets.
2.7. "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.8. "Committee" means the Compensation Committee of the Board, as specified
in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.9. "Company" means Nationwide Financial Services, Inc., a Delaware
corporation, including any and all of its Subsidiaries, and any successor
thereto as provided in Article 18 herein.
2.10. "Director" means any individual who is a member of the Board of
Directors of a member of Enterprise.
2.11. "Disability" shall have the meaning ascribed to such term in the
employee health care plan maintained by the Participant's employer, or if no
such plan exists, at the discretion of the Committee.
2.12. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13. "Employee" means any employee of the Enterprise. Directors who are not
employed by the Enterprise shall not be considered Employees under this Plan.
2.14. "Enterprise" means the Company and the Affiliates.
2.15. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16. "Fair Market Value" shall be equal to the closing sale price of a
Share on the principal securities exchange on which the Shares are traded or,
if there is no such sale on the relevant date, then on the last previous day
on which a sale was reported.
2.17. "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.18. "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.19. "Insider" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.20. "Named Executive Officer" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.21. "Nonemployee Director" shall have the meaning ascribed to such term in
Rule 16b-3 of the Exchange Act.
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<PAGE>
2.22. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.23. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.24. "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.25. "Participant" means an Employee or Director who has outstanding an
Award granted under the Plan.
2.26. "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.27. "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.28. "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.29. "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.30. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.31. "Restricted Stock" means an Award granted to a Participant pursuant to
Article 8 herein.
2.32. "Retirement" means:
(a) for an Employee, such Employee's termination of employment with all
members of the Enterprise on or after the date on which he or she shall
have:
(1) Attained Normal Retirement Age,
(2) Attained age 55 and completed 180 Months of Vesting Service; or
(3) Attained age 62 and completed 60 Months of Vesting Service,
whichever is earliest; or
(b) for a Director, such Director's termination of service with all members
of the Enterprise on or after the completion of two or more full or
partial terms as a director of the Company or any of its Affiliates.
For purposes of this Section, Normal Retirement Age and Months of Vesting
Service shall have the meanings assigned to them in the Nationwide Retirement
Plan.
2.33. "Shares" means the shares of Class A Common Stock of the Company, no
par value.
2.34. "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 herein.
2.35. "Subsidiary" means any corporation in which an organization owns
directly, or indirectly through subsidiaries, at least fifty percent (50%) of
the total combined voting power of all classes of stock, or any other entity
(including, but not limited to, partnerships and joint ventures) in which the
organization owns at least fifty percent (50%) of the combined equity thereof.
2.36. "Tandem SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
E-3
<PAGE>
Article 3. Administration
3.1. The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be Nonemployee Directors and shall be appointed
from time to time by, and shall serve at the discretion of, the Board of
Directors.
3.2. Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent
with the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan as they apply to Employees and Directors;
establish, amend, or waive rules and regulations for the Plan's administration
as they apply to Employees and Directors; and (subject to the provisions of
Article 15 herein) amend the terms and conditions of any outstanding Award to
the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of
the Plan, as the Plan applies to Employees and Directors. As permitted by law,
the Committee may delegate its authority as identified herein.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company, its stockholders, Directors, Employees,
Participants, and their estates and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares available for grants to
Participants under the Plan shall be six million one hundred thousand
(6,100,000). The Committee shall determine the appropriate methodology for
calculating the number of shares issued pursuant to the Plan.
Unless and until the Committee determines that an Award to a Named Executive
Officer shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in
any one fiscal year to any one Participant shall be three hundred
thousand (300,000).
(b) SARs: The maximum aggregate number of Shares that may be subject to
Stock Appreciation Rights, pursuant to any Award granted in any one
fiscal year to any one Participant shall be three hundred thousand
(300,000).
(c) Restricted Stock: The maximum aggregate grant with respect to Awards of
Restricted Stock granted in any one fiscal year to any one Participant
shall be three hundred thousand (300,000) Shares.
(d) Performance Shares/Performance Units: The maximum aggregate payout with
respect to Awards of Performance Shares or Performance Units granted in
any one fiscal year to any one Participant shall be the value of three
hundred thousand (300,000) Shares at the end of the Performance Period.
4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under Section 4.1, in the number and class of and/or price of Shares
subject to outstanding Awards granted under the
E-4
<PAGE>
Plan, and in the Award limits set forth in subsections 4.1(a) and 4.1(b), as
may be determined to be appropriate and equitable by the Committee, in its
sole discretion, to prevent dilution or enlargement of rights; provided,
however, that the number of Shares subject to any Award shall always be a
whole number.
Article 5. Eligibility and Participation
5.1. Eligibility. Persons eligible to participate in this Plan include all
Employees of the Enterprise, including Employees who are members of the Board,
and all Directors.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees and
Directors, those to whom Awards shall be granted and shall determine the
nature and amount of each Award.
Article 6. Stock Options
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms,
and at any time and from time to time as shall be determined by the Committee.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as
the Committee shall determine. The Award Agreement also shall specify whether
the Option is intended to be an ISO within the meaning of Code Section 422, or
an NQSO whose grant is intended not to fall under the provisions of Code
Section 422.
6.3. Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4. Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5. Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions
as set forth in the Award Agreement and as the Committee shall in each
instance approve, which need not be the same for each grant or for each
Participant. Options which are intended to be ISOs within the meaning of Code
Section 422 shall be subject to the limitation set forth in Code Section
422(d).
6.6. Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), or (c) by a combination of (a) and
(b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares
purchased under the Option(s).
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<PAGE>
6.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable and as are set forth in
the Award Agreement, including, without limitation, restrictions under
applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.
6.8. Termination of Employment or Service. Each Participant's Option Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or, if Participant is a Director, service with the Enterprise. Such
provisions shall be determined in the sole discretion of the Committee, shall
be included in the Award Agreement entered into with each Participant, need
not be uniform among all Options issued pursuant to this Article 6, and may
reflect distinctions based on the reasons for termination of employment.
6.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article
6 shall be exercisable during his or her lifetime only by such
Participant.
Article 7. Stock Appreciation Rights
7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of a
Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to
the ISO exceeds the Option Price of the ISO.
7.3. Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them and sets forth in the Award Agreement.
7.4. SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
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7.5. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
7.7. Termination of Employment or Service. Each SAR Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the SAR following termination of the Participant's employment or, if
Participant is a Director, service with the Enterprise. Such provisions shall
be determined in the sole discretion of the Committee, shall be included in
the Award Agreement entered into with Participants, need not be uniform among
all SARs issued pursuant to the Plan, and may reflect distinctions based on
the reasons for termination of employment.
7.8. Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime
only by such Participant.
Article 8. Restricted Stock
8.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted Stock granted,
and such other provisions as the Committee shall determine.
8.3. Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole discretion and set
forth in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
8.4. Other Restrictions. Subject to Article 11 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable and as are set
forth in the Award Agreement including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted
Stock, restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
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Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
8.5. Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying
Shares while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate and as are set forth in the
Award Agreement. Without limiting the generality of the preceding sentence, if
the grant or vesting of Restricted Shares granted to a Named Executive Officer
is designed to comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to
the payment of dividends declared with respect to such Restricted Shares, such
that the dividends and/or the Restricted Shares maintain eligibility for the
Performance-Based Exception.
8.7. Termination of Employment or Service. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unvested Restricted Shares following termination of the
Participant's employment or, if Participant is a Director, service with the
Enterprise. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted Stock issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment; provided, however that, except in the cases of
terminations connected with a Change in Control and terminations by reason of
death or Disability, the vesting of Shares of Restricted Stock which qualify
for the Performance-Based Exception and which are held by Named Executive
Officers shall occur at the time they otherwise would have, but for the
employment termination.
Article 9. Performance Units and Performance Shares
9.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee and as shall be set forth in the Award
Agreement.
9.2. Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value
of a Share on the date of grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be
paid out to the Participant. For purposes of this Article 9, the time period
during which the performance goals must be met shall be called a "Performance
Period."
9.3. Earning of Performance Units/Shares. Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number and value of
Performance Units/Shares earned by him or her over the Performance Period, to
be determined as a function of the extent to which the corresponding
performance goals have been achieved.
9.4. Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following
the close of the applicable Performance Period. Subject to the terms of this
Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period.
Such Units/Shares may be granted subject to any restrictions deemed
appropriate by the Committee and set forth in the Award Agreement.
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At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which
have been earned, but not yet distributed to Participants (such dividends
shall be subject to the same accrual, forfeiture, and payout restrictions as
apply to dividends earned with respect to Shares of Restricted Stock, as set
forth in Section 8.6 herein). In addition, Participants may, at the discretion
of the Committee, be entitled to exercise their voting rights with respect to
such Shares.
9.5. Termination of Employment or Service Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment or, if Participant
is a Director, service of a Participant with the Enterprise is terminated by
reason of death, Disability, or Retirement during a Performance Period, the
Participant shall receive a payout of the Performance Units/Shares which is
prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's
Award Agreement. Notwithstanding the foregoing, with respect to Named
Executive Officers who retire during a Performance Period, payments shall be
made at the same time as payments are made to Participants who did not
terminate employment during the applicable Performance Period.
9.6. Termination of Employment or Service for Other Reasons. In the event
that a Participant's employment or, if Participant is a Director, service with
the Enterprise terminates for any reason other than those reasons set forth in
Section 9.5 herein, all Performance Units/Shares shall be forfeited by the
Participant to the Company unless determined otherwise by the Committee, as
set forth in the Participant's Award Agreement.
9.7. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Further, except as otherwise
provided in a Participant's Award Agreement, a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime only by the
Participant or the Participant's legal representative.
Article 10. Performance Measures
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Named Executive Officers which are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants shall be chosen from among
earnings per share, economic value added, market share (actual or targeted
growth), net income (before or after taxes), operating income, return on
assets (actual or targeted growth), return on capital (actual or targeted
growth), return on equity (actual or targeted growth), return on investment
(actual or targeted growth), revenue (actual or targeted growth), share price,
stock price growth, or total shareholder return.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Named Executive Officers, may not be adjusted
upward (the Committee shall retain the discretion to adjust such Awards
downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
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Article 11. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Nationwide Financial Services, Inc., and will be effective only when
filed by the Participant in writing with the Company's Compensation Officer
during the Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the
Participant's estate.
Article 12. Deferrals
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Article 13. Rights of Participants
13.1. Continued Service. Nothing in the Plan shall:
(a) interfere with or limit in any way the right of the Company to
terminate any Participant's employment at any time,
(b) confer upon any Participant any right to continue in the employ of any
member of the Enterprise, nor
(c) confer on any Director any right to continue to serve on the Board of
Directors of any member of the Enterprise.
13.2. Participation. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.
Article 14. Change in Control
14.1. Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares
shall lapse;
(c) The target payout opportunities attainable under all outstanding Awards
of Restricted Stock, Performance Units and Performance Shares shall be
deemed to have been fully earned for the entire Performance Period(s)
as of the effective date of the Change in Control. The vesting of all
Awards denominated in Shares shall be accelerated as of the effective
date of the Change in Control, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date of
the Change in Control a pro rata amount based upon an assumed
achievement of all relevant performance goals and upon the length of
time within the Performance Period which has elapsed prior to the
Change in Control.
14.2. Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award
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theretofore granted under the Plan without the prior written consent of the
Participant with respect to said Participant's outstanding Awards; provided,
however, the Board of Directors, upon recommendation of the Committee, may
terminate, amend, or modify this Article 14 at any time and from time to time
prior to the date of a Change in Control. This Section 14.2 shall not operate
to reduce any rights granted to a Participant under Section 15.3.
Article 15. Amendment, Modification, and Termination
15.1. Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with any rule promulgated
by the United States Securities and Exchange Commission or any securities
exchange on which the securities of the Company are listed, shall be effective
unless such amendment shall be approved by the requisite vote of shareholders
of the Company entitled to vote thereon.
15.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan; provided that
no such adjustment shall be authorized to the extent that such authority would
be inconsistent with the Plan's meeting the requirements of Section 162(m) of
the Code, as from time to time amended.
15.3. Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
15.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes
are made to Code Section 162(m) to permit greater flexibility with respect to
any Award or Awards available under the Plan, the Committee may, subject to
this Article 15, make any adjustments it deems appropriate.
Article 16. Withholding
16.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
16.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the Committee,
to satisfy the withholding requirement, in whole or in part, by having the
Company withhold Shares having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax which could be imposed
on the transaction. All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
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Article 17. Indemnification
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company to the fullest
extent permitted by Delaware law against and from any loss, cost, liability,
or expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of any judgement in any such
action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification is subject to the person having been
successful in the legal proceedings or having acted in good faith and what is
reasonably believed to be a lawful manner in the Company's best interests. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the Company's
Articles of Incorporation of Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
Article 18. Successors
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
Article 19. Legal Construction
19.1. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
19.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
19.3. Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
19.5. Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the state of Delaware.
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NATIONWIDE FINANCIAL SERVICES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 3, 2000
The undersigned hereby constitutes and appoints James G. Brocksmith, Jr.,
Donald L. McWhorter and Gerald D. Prothro, each or any of them, proxies of the
undersigned, with full power of substitution, to vote all the shares of
Nationwide Financial Services, Inc. (the "Company") which the undersigned may be
entitled to vote at Annual Meeting of Stockholders of the Company, to be held at
One Nationwide Plaza, Columbus, Ohio, on May 3, 2000 at 1:30 P.M., local time,
and at any adjournment thereof, as follows:
(Continued, and to be marked, dated and
signed on the reverse side)
SEE REVERSE SIDE
ANNUAL MEETING
OF
NATIONWIDE FINANCIAL SERVICES, INC.
May 3, 2000
1:30 P.M.
One Nationwide Plaza
Columbus, Ohio 43215
AGENDA
. ELECTION OF DIRECTORS
. APPROVAL AND AMENDMENT OF THE NATIONWIDE FINANCIAL SERVICES, INC. LONG-TERM
EQUITY COMPENSATION PLAN
. OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING
Please mark your votes as in this example. X
-----
A vote FOR is recommended by the Board of Directors.
1. Election of Directors FOR WITHHELD
----- -----
For, except vote withheld from the following nominee(s):
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<PAGE>
Election of Class III Directors--NOMINEES:
Joseph J. Gasper
Lydia M. Marshall
David O. Miller
2. Approval and Amendment of the Nationwide Financial Services, Inc. 1996
Long-Term Equity Compensation Plan.
FOR AGAINST WITHHELD
----- ----- -----
This proxy will be voted as specified. If a choice is not specified, the proxy
will be voted FOR each director listed and FOR approval and amendment of the
Nationwide Financial Services, Inc. 1996 Long-Term Equity Compensation Plan.
The undersigned hereby acknowledges receipt of the notice of Annual Meeting and
the Proxy Statement, each dated March 31, 2000.
This proxy should be dated and signed by the stockholder exactly as his or her
name appears herein and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate.
- ---------------------------------
- ---------------------------------
SIGNATURE(S) DATE
