<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(AMENDMENT NO. 4)
PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
ALLIED GROUP, INC.
(NAME OF SUBJECT COMPANY)
NATIONWIDE GROUP ACQUISITION CORPORATION
NATIONWIDE MUTUAL INSURANCE COMPANY
(Bidders)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
019220102
(CUSIP Number of Class of Securities)
W. SIDNEY DRUEN
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
NATIONWIDE MUTUAL INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
TELEPHONE: (614) 249-7111
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidders)
WITH A COPY TO:
ERIC M. FOGEL, ESQ.
HAROLD W. NATIONS, ESQ.
HOLLEB & COFF
55 E. MONROE STREET, SUITE 4100
CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 807-4600
This Statement amends and supplements the Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") filed with the Securities and Exchange
Commission on May 19, 1998 by Nationwide Group Acquisition Corporation, an Ohio
corporation and a wholly owned subsidiary of Nationwide Mutual Insurance
Company, an Ohio mutual insurance company, to purchase all outstanding shares
of common stock, no par value (the "Common Shares"), of Allied Group, Inc., an
Iowa corporation, at a price of $47.00 per Common Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated May 19, 1998 (the "Offer to Purchase")
and in the related Letter of Transmittal. Capitalized terms used and not
defined herein shall have the meanings assigned such terms in the Offer to
Purchase and the Schedule 14D-1.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(27) Press release dated June 4, 1998
(g)(5) Agreement and Plan of Merger by and among Nationwide Mutual Insurance
Company, Nationwide Group Acquisition Corporation and Allied Group,
Inc. dated as of June 3, 1998
<PAGE> 2
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: June 4, 1998
NATIONWIDE MUTUAL INSURANCE COMPANY
By: /s/ David A. Diamond
----------------------------------------------------
Name: David A. Diamond
Title: Vice President - Enterprise Controller
NATIONWIDE GROUP ACQUISITION CORPORATION
By: /s/ Mark B. Koogler
----------------------------------------------------
Name: Mark B. Koogler
Title: Vice President - Associate General Counsel
<PAGE> 1
Exhibit (a)(27)
NEWS FROM NATIONWIDE
INSURANCE
CONTACTS: For Nationwide Insurance For Allied Group
John C. Millen Media: Donna Smith
Nationwide Insurance (515) 280-4891
(614) 249-6348 Investors: Paul Curran
(515) 280-4644
Vince Duffy Joele Frank/Dan Katcher
Powell Tate Abernathy MacGregor Frank
(212) 521-5215 (212) 371-5999
NATIONWIDE AND ALLIED ENTER INTO
DEFINITIVE AGREEMENTS TO SELL ALLIED GROUP
TO NATIONWIDE AND TO
MERGE ALLIED MUTUAL INTO NATIONWIDE
Columbus, Ohio and Des Moines, Iowa, June 4, 1998 -- Nationwide Mutual Insurance
Company and Allied Group, Inc. (NYSE:GRP) announced today that they have entered
into a definitive agreement providing for the acquisition of all of the shares
of Allied Group by Nationwide at a price of $48.25 per share. In connection with
the definitive agreement, the Board of Directors of Allied Group has recommended
acceptance of Nationwide's cash tender offer by the shareholders of Allied
Group. The transaction will have a total value of approximately $1.5 billion.
In addition, the Allied Mutual Insurance Company Board of Directors has entered
into a definitive agreement providing for the merger of Allied Mutual into
Nationwide Mutual Insurance Company. The agreement provides that Allied Mutual
policyholders' interests would be converted into rights as policyholders of
Nationwide, becoming part of a combined national company of unquestioned
financial strength with a broad range of
<PAGE> 2
products and services. Allied Mutual policyholders will also receive an
extraordinary dividend of $110 million in cash.
Nationwide will also pay $30 a share for the approximately 2.8 million shares of
Allied Life Financial Corporation that are publicly held.
The transaction, which will be financed from internal resources, will augment
one of the country's largest diversified insurance and financial services
organizations and a Fortune 500 company. The combined companies will rank as the
country's 4th largest auto insurer and 4th largest homeowners insurer.
Dimon R. McFerson, Nationwide's Chairman and Chief Executive Officer, said,
"Nationwide is extremely pleased to be partnering with Allied. This transaction
ensures continued strong growth for Nationwide and Allied.
"This new team will benefit from am expanded geographical reach that will
feature a strong, diversified distribution network of Nationwide career agents
and Allied's independent agents," McFerson said. "We look forward to working
with Allied's skilled management and capable employees. All have worked hard to
make Allied one of the premier performers in the property-casualty business in
recent years."
McFerson said that Douglas L. Andersen, President and Chief Executive Officer of
Allied Group, had agreed to continue in those roles and that Nationwide planned
no changes in Allied's management. "We consider the management team to be one of
the prime assets in this transaction", he said.
Mr. Andersen said, "In Nationwide we have found a partner with unparalleled
financial strength who is committed to all our constituencies. Employees and
agents will be part of a larger organization that is able to provide
policyholders of both Allied and Nationwide access to a broader range of
products and services than either company could provide on its own. We are
confident that this transaction will provide many new outlets for both
companies, create significant growth opportunities for employees and agents and
benefit the communities we serve. We look forward to a rapid completion of the
transaction and to working with Nationwide to ensure the smoothest transition
possible. And finally, we
<PAGE> 3
are extremely pleased that our stockholders, policyholders and employees will
receive outstanding value for their Allied investment."
Allied employees who are participants in the company's Employee Stock Ownership
Plan (ESOP) will benefit from a tripling of their stock account's value both as
a result of the Nationwide tender offer of $48.25 per share and an earnings
allocation of the unallocated portion of the ESOP after payment of the ESOP's
debt with the proceeds from the tender offer. Nationwide is fully vesting all
participants in the Allied ESOP.
McFerson underscored Nationwide's long-term commitment to Des Moines and the
cities where Allied has regional operations: Denver, Colorado; Lincoln, Nebraska
and Santa Rosa, California. "Our Farmland Insurance operation has been
headquartered in Des Moines since 1982 and we are pleased to be expanding our
involvement there. When we announced the tender offer, we pledged to maintain
the current level of employment of the Allied operations and our plan to add 400
new jobs in the Des Moines area during the next four years."
The dealer manager and financial advisor to Nationwide for the offers is Credit
Suisse First Boston. Georgeson & Company Inc. is the information agent. For more
information call 1-800-223-2064 or visit our web site at georgeson.com.
Nationwide's law firm for the transaction is Holleb & Coff of Chicago.
The offers for Allied Group and Allied Life are being made through wholly owned
subsidiaries of Nationwide.
Allied Group's financial advisor is Morgan Stanley & Co. Incorporated. Allied
Group is represented by the law firm of Debevoise & Plimpton.
The Allied Group and Allied Mutual mergers are subject to insurance regulatory
approvals in Iowa, Ohio, Arizona and any other states that may assert
jurisdiction; and all required clearances under the Hart-Scott-Rodino Antitrust
Improvements Act. The Allied Mutual merger is also subject to policyholders
approval for both Allied Mutual and Nationwide Mutual.
#
<PAGE> 1
Exhibit (g)(5)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NATIONWIDE MUTUAL INSURANCE COMPANY
NATIONWIDE GROUP ACQUISITION CORPORATION
AND
ALLIED GROUP, INC.
DATED AS OF JUNE 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE OFFER..................................................................................2
Section 1.1 The Offer..................................................................................2
Section 1.2 Allied Actions.............................................................................4
Section 1.3 Directors..................................................................................6
ARTICLE II THE MERGER.................................................................................7
Section 2.1 The Merger.................................................................................7
Section 2.2 Closing....................................................................................7
Section 2.3 Effective Time.............................................................................8
Section 2.4 Articles of Incorporation and By-Laws of the Surviving Corporation.........................8
Section 2.5 Board of Directors and Officers............................................................9
Section 2.6 Effect of Merger on Sub Capital Stock......................................................9
Section 2.7 Conversion of Allied Stock.................................................................9
Section 2.8 Exchange of Certificates and Related Matters..............................................10
Section 2.9 Dissenting Shares.........................................................................12
Section 2.10 Adjustments to Prevent Dilution..........................................................13
Section 2.11 Allied Employee Stock Options, Restricted Stock, etc.....................................13
ARTICLE III ADDITIONAL AGREEMENTS.....................................................................14
Section 3.1 Preparation of Proxy Statement; Information Supplied......................................14
Section 3.2 Meeting of Shareholders...................................................................14
Section 3.3 Filings; Other Action.....................................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ALLIED..................................................16
Section 4.1 Organization and Qualification............................................................16
Section 4.2 Capitalization of Allied..................................................................17
Section 4.3 Subsidiaries..............................................................................17
Section 4.4 Authority Relative to this Agreement......................................................18
Section 4.5 No Violation; Governmental Filings........................................................19
Section 4.6 SAP Statements............................................................................20
Section 4.7 [Intentionally left blank.]...............................................................22
Section 4.8 Reserves..................................................................................22
Section 4.9 SEC Documents.............................................................................22
Section 4.10 Absence of Certain Changes or Events.....................................................23
Section 4.11 No Undisclosed Liabilities...............................................................23
Section 4.12 Takeover Statutes........................................................................23
Section 4.13 Compliance with Law......................................................................24
Section 4.14 Assets...................................................................................24
Section 4.15 Environmental Matters....................................................................25
Section 4.16 Contracts................................................................................26
Section 4.17 [Intentionally Left Blank]...............................................................27
Section 4.18 Taxes and Tax Returns....................................................................27
Section 4.19 Benefit Plans............................................................................28
Section 4.20 Labor Relations and Employment...........................................................31
Section 4.21 Intellectual Property....................................................................31
Section 4.22 Transactions with Affiliates.............................................................32
Section 4.23 Voting Requirements......................................................................32
Section 4.24 Investment Company.......................................................................32
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
AND SUB...................................................................................33
Section 5.1 Organization and Qualification............................................................33
Section 5.2 Authority Relative to this Agreement......................................................33
Section 5.3 No Violation..............................................................................34
Section 5.4 Litigation................................................................................35
Section 5.5 Financial Ability to Perform..............................................................35
ARTICLE VI CERTAIN COVENANTS.........................................................................35
Section 6.1 Allied Conduct of Business Pending the Merger.............................................35
Section 6.2 Disposition of Litigation.................................................................38
Section 6.3 Reasonable Best Efforts...................................................................38
Section 6.4 Intentionally Left Blank..................................................................38
Section 6.5 Access and Information....................................................................39
Section 6.6 Notice of Proceedings.....................................................................40
Section 6.7 Notification of Certain Other Matters.....................................................40
Section 6.8 Indemnification...........................................................................41
Section 6.9 [Intentionally Omitted.]..................................................................43
Section 6.10 Acquisition Proposals....................................................................43
Section 6.11 Maintenance of Benefits..................................................................44
ARTICLE VII CONDITIONS................................................................................45
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger................................45
ARTICLE VIII TERMINATION...............................................................................46
Section 8.1 Termination...............................................................................46
Section 8.2 Effect of Termination.....................................................................47
ARTICLE IX MISCELLANEOUS.............................................................................48
Section 9.1 Survival of Representations and Warranties................................................48
Section 9.2 Fees and Expenses.........................................................................48
Section 9.3 Notices...................................................................................48
Section 9.4 Amendments................................................................................49
Section 9.5 No Waiver.................................................................................49
Section 9.6 Brokers...................................................................................50
Section 9.7 Publicity.................................................................................50
Section 9.8 Headings..................................................................................51
Section 9.9 Nonassignability..........................................................................51
Section 9.10 Beneficiaries............................................................................51
Section 9.11 Duplicates; Counterparts.................................................................51
Section 9.12 Governing Law; Jurisdiction..............................................................51
Section 9.13 Entire Agreement.........................................................................51
Section 9.14 Severability.............................................................................52
Section 9.15 Specific Performance.....................................................................52
Section 9.16 Survival of Certain Covenants............................................................52
Section 9.17 Counting.................................................................................52
Section 10.1 Definitions..............................................................................52
</TABLE>
ii
<PAGE> 4
EXHIBITS
Exhibit A Conditions of the Offer
Exhibit B Shareholder Agreement
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and among
NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company
("Nationwide"), NATIONWIDE GROUP ACQUISITION CORPORATION, an Ohio corporation
and a wholly-owned subsidiary of Nationwide ("Sub") and ALLIED GROUP, INC., an
Iowa corporation ("Allied") (hereinafter sometimes collectively referred to as
the "parties").
WHEREAS, Sub has outstanding an offer (the "Existing Offer," and as
amended, the "Offer") to purchase all of the outstanding shares of common stock,
no par value, of Allied (the "Common Shares"), at a purchase price of $47 per
Common Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
May 19, 1998, and in the related letter of transmittal;
WHEREAS, in consideration of Allied's entering into this Agreement,
Nationwide is willing to cause Sub to increase the price to be paid pursuant to
the Offer to $48.25 per Common Share, net to the seller in cash, without
interest thereon (such amount being hereinafter referred to as the "Offer
Price");
WHEREAS, the Board of Directors of Allied has (i) determined that the
consideration to be paid for each Common Share in the Offer and in the Merger
(as defined below) is fair to and in the best interests of the shareholders of
Allied, (ii) approved this Agreement and the transactions contemplated hereby
and (iii) resolved to recommend acceptance of the Offer and the Merger and
approval of this Agreement by such shareholders; and
WHEREAS, the Boards of Directors of Sub and Nationwide, as sole
stockholder of Sub, have each approved the merger (the "Merger") of Sub with
Allied in accordance with applicable law upon the terms and subject to the
conditions set forth herein.
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Nationwide to enter into this Agreement, Nationwide, Sub and
Allied Mutual Insurance Company ("Allied Mutual") are entering into a
Shareholder Agreement (the "Shareholder
<PAGE> 6
Agreement"), attached hereto as Exhibit B, pursuant to which Allied Mutual has,
among other things, agreed to grant an irrevocable proxy to Nationwide's
designees providing (1) for the vote of all of the outstanding shares of 6-3/4%
Series Preferred Stock, no par value, of Allied (the "Preferred Shares") and all
of the Common Shares owned by Allied Mutual in favor of the Merger and the
tender of all the Common Shares owned by Allied Mutual pursuant to the Offer and
(2) for the vote of all such securities against any "Alternative Transaction" or
"Frustrating Transaction" (as such terms are defined in the Shareholder
Agreement); and the Shareholder Agreement has been approved by the Board of
Directors of Allied; and
WHEREAS, Nationwide, Sub and Allied desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Nationwide, Sub and Allied hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer.
(a) Sub shall amend the Offer as soon as practicable after the date
hereof to (i) increase the purchase price offered to the Offer Price, (ii)
modify the conditions of the Offer to conform to the conditions or events set
forth in Exhibit A hereto (the "Offer Conditions") and no others and (iii) to
make such other amendments as are required to conform the Offer to this
Agreement, it being understood that except for the foregoing amendments or as
otherwise provided herein, the Offer shall be on the same terms and conditions
as the Existing Offer. The obligation of Sub to, and of Nationwide to cause Sub
to, accept for payment, and pay for, any Common Shares tendered pursuant to the
Offer shall be subject to the Offer Conditions (any of which may be waived in
whole or in part by Sub in its sole discretion, provided that, without the
consent of Allied, Sub shall not waive the Minimum Condition or the Insurance
Regulatory
2
<PAGE> 7
Condition (as such terms are defined in Exhibit A) and to the terms and
conditions of this Agreement. Without the consent of Allied, Sub shall not (i)
reduce the number of Common Shares sought in the Offer, (ii) reduce the Offer
Price, (iii) change or add to the Offer Conditions, (iv) except as provided in
the next sentence, extend the Offer, (v) change the form of consideration
payable in the Offer or (vi) amend any other term of the Offer in any manner
adverse to the holders of the Common Shares. Notwithstanding the foregoing, Sub
may, without the consent of Allied, (A) extend the Offer, if at the scheduled or
extended expiration date of the Offer any of the Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(B) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC")
or the staff thereof applicable to the Offer and (C) extend the Offer for any
reason on one or more occasions for an aggregate period of not more than 10
Business Days (for all such extensions pursuant to this clause (C)) beyond the
latest expiration date that would otherwise be permitted under clause (A) or (B)
of this sentence. So long as this Agreement is in effect and the Offer
Conditions have not been satisfied or waived, Sub shall, and Nationwide shall
cause Sub to, cause the Offer not to expire. Subject to the terms and conditions
of the Offer and this Agreement, Sub shall, and Nationwide shall cause Sub to,
accept for payment, and pay for, all Common Shares validly tendered and not
withdrawn pursuant to the Offer that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) As soon as reasonably practicable after the date hereof, Sub shall
amend its Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with
respect to the Offer that was originally filed with the SEC on May 19, 1998, and
shall file such amendment with the SEC. The Schedule 14D-1 will contain a
supplement to the Offer to Purchase dated May 19, 1998, and a revised form of
the related letter of transmittal (which Schedule 14D-1, Offer to Purchase and
other documents, as amended and supplemented, together with any further
amendments or supplements thereto, are referred to herein collectively as the
"Offer Documents"), which shall be mailed to the holders of Common Shares.
Nationwide and Sub represent and agree that the Offer Documents complied (and,
as amended from time to time, shall comply) in all material respects with the
Exchange Act and the rules and regulations promulgated thereunder and the Offer
Documents, on the date first published, sent or given to Allied's shareholders,
shall not
3
<PAGE> 8
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no covenant is made by Nationwide or Sub with respect to
information supplied by Allied or any of its shareholders specifically for
inclusion or incorporation by reference in the Offer Documents. Nationwide, Sub
and Allied each agrees promptly to correct any information provided by it for
use in the Offer Documents that shall have become false or misleading in any
material respect, and Nationwide and Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Common Shares, in each case as and to the extent required by applicable federal
securities laws. Allied and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-1 prior to its filing with the SEC or
dissemination to shareholders of Allied. Nationwide and Sub agree to provide
Allied and its counsel with copies of any comments Nationwide, Sub or their
counsel may receive from the SEC or its staff with respect to the Schedule 14D-1
promptly after the receipt of such comments.
(c) Nationwide shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Common Shares
that Sub becomes obligated to accept for payment, and pay for, pursuant to the
Offer.
Section 1.2 Allied Actions.
(a) Allied hereby approves of and consents to the Offer and represents
that the Board of Directors of Allied, at a meeting duly called and held, duly
and unanimously adopted resolutions adopting this Agreement, approving the
Shareholder Agreement, approving the Offer and the Merger, determining that the
terms of the Offer and the Merger are fair to, and in the best interests of,
Allied's shareholders, recommending that Allied's shareholders accept the Offer,
tender their shares pursuant to the Offer and approve this Agreement (if
required) and approving the acquisition of Common Shares by Sub pursuant to the
Offer and the other transactions contemplated by this Agreement. Allied has been
advised by each of its directors and executive officers that each such person
intends to tender all Common Shares owned by such person pursuant to the Offer.
4
<PAGE> 9
(b) On June 2, 1998, Allied filed with the SEC a Solicitation/
Recommendation Statement on Schedule 14D-9 with respect to the Existing Offer
(such Schedule 14D-9 as amended from time to time, the "Schedule 14D-9").
Simultaneously with the filing of the amendment to the Schedule 14D-1 by
Nationwide and Sub, Allied shall file with the SEC an amendment to the Schedule
14D-9 which contains the recommendation described in Section 1.2(a) and shall
mail the Schedule 14D-9 as so amended to the shareholders of Allied. Allied
agrees that the Schedule 14D-9 shall comply in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to Allied's shareholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
covenant is made by Allied with respect to information supplied by Nationwide or
Sub specifically for inclusion in the Schedule 14D-9. Each of Allied, Nationwide
and Sub agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and Allied further agrees to take
all steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Allied shareholders, in each case as and to the extent
required by applicable federal securities laws. Nationwide and its counsel shall
be given reasonable opportunity to review and comment upon the Schedule 14D-9
prior to its filing with the SEC or dissemination to shareholders of Allied.
Allied agrees to provide Nationwide and its counsel any comments Allied or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger and promptly following
the execution of this Agreement, Allied shall cause its transfer agent to
furnish Sub promptly with mailing labels containing the names and addresses of
the record holders of Common Shares as of a recent date and of those persons
becoming record holders subsequent to such date, together with copies of all
lists of shareholders, security position listings and computer files and all
other information in Allied's possession or control regarding the beneficial
owners of Common Shares,
5
<PAGE> 10
and shall furnish to Sub such information and assistance (including updated
lists of shareholders, security position listings and computer files) as
Nationwide may reasonably request in communicating the Offer and any and all
amendment thereto to Allied's shareholders. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Nationwide and Sub and their agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will, upon request, deliver, and will use their reasonable efforts
to cause their agents to deliver, to Allied all copies and any extracts or
summaries from such information then in their possession or control.
Section 1.3 Directors. Promptly upon the acceptance for payment of
Common Shares by Sub pursuant to the Offer, Sub shall be entitled to designate
such number of directors on the Board of Directors of (i) Allied as will give
Sub, subject to compliance with Section 14(f) of the Exchange Act, a majority of
such directors, and Allied shall, at such time, cause Sub's designees to be so
elected by its existing Board of Directors and (ii) each Subsidiary of Allied
and each committee of the Board of Directors of Allied and each such Subsidiary
as will give Sub a majority of such directors or committee, and Allied shall, at
such time, cause Sub's designees to be so elected. In the event that Sub's
designees are elected to the Board of Directors of Allied, until the Effective
Time such Board of Directors shall have at least two directors who are directors
on the date of this Agreement and who are not officers of Allied (the
"Independent Directors"); provided that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to fill such vacancy who
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers or Affiliates of Allied
or any of its Subsidiaries, or officers or Affiliates of Nationwide or any of
its Subsidiaries, and such persons shall be deemed to be Independent Directors
for purposes of this Agreement.
Subject to applicable law, Allied shall take all action requested by
Nationwide necessary to effect any such election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1
6
<PAGE> 11
promulgated thereunder, and Allied agrees to make such mailing with the mailing
of the Schedule 14D-9 (provided that Sub shall have provided to Allied on a
timely basis all information required to be included in the Information
Statement with respect to Sub's designees). In connection with the foregoing,
Allied will promptly, at the option of Nationwide, either increase the size of
Allied's Board of Directors and/or obtain the resignation of such number of its
current directors as is necessary to enable Sub's designees to be elected or
appointed to Allied's Board of Directors as provided above.
Following the election or appointment of Sub's designees pursuant to
this Section 1.3 and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors then in office shall be required by Allied
to (i) amend or terminate this Agreement by Allied, (ii) exercise or waive any
of Allied's rights or remedies under this Agreement or (iii) extend the time for
performance of Nationwide's and Sub's respective obligations under this
Agreement.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms of this Agreement and subject to
the satisfaction of the conditions set forth herein, at the Effective Time Sub
shall be merged with and into Allied in accordance with the applicable
provisions of the Laws of the States of Ohio and Iowa and the separate corporate
existence of Sub shall thereupon cease, and Allied, which shall be the surviving
company (hereinafter sometimes referred to as the "Surviving Corporation"),
shall continue its corporate existence under the Laws of the State of Iowa under
the name "Allied Group, Inc." From and after the Effective Time, the Surviving
Corporation shall possess all the assets and other rights, privileges,
immunities, powers and purposes of each of Sub and Allied and shall be liable
for all of the Liabilities of the Sub and Allied, all to the full extent
provided in Section 1701.82 of the General Corporation Law of the State of Ohio
(the "OGCL") and Section 490.1106 of the Iowa Business Corporation Act ("IBCA").
Section 2.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take place
at 9:00 a.m. on the second business day following the date on
7
<PAGE> 12
which the last of the conditions set forth in Article VII shall be fulfilled or
waived in accordance with this Agreement (the "Closing Date"), at the offices of
Holleb & Coff, 55 E. Monroe Street, Chicago, Illinois 60603, unless another
date, time or place is agreed to in writing by the parties hereto.
Section 2.3 Effective Time. As soon as is practicable following the
execution of this Agreement, the parties shall cause this Agreement to be
provided to the Ohio Superintendent in accordance with, and in such form as
required by, Section 3925.08(D)(2) of the Ohio Insurance Law and the regulations
promulgated thereunder, to the Iowa Commissioner in accordance with Section
521A.3 of the Iowa Insurance Law and the regulations promulgated thereunder and
the Iowa Attorney General in accordance with Section 521.12 of the Iowa
Insurance Law, and to the Arizona Director in accordance with Sections 20-481.02
of the Arizona Insurance Law, in each case together with all other documents as
may be required by applicable Law. Subject to the conditions set forth in
Article VII of this Agreement, the Merger shall become effective (the "Effective
Time") upon the last to occur of (a) the filing of the Certificate of Merger
with the Ohio Secretary of State, (b) the filing of the Articles of Merger as
required by Iowa law and (c) such later time as the parties designate in such
filings; provided, however, the Effective Time shall not be more than one year
from the date of approval of the Merger by the Ohio Superintendent or 31 days
after the filing and recording of the Articles of Merger as described herein.
Upon the terms and subject to the conditions of this Agreement, the parties
hereto will use reasonable best efforts to assure that the filings contemplated
hereby are made, and the Effective Time occurs, as soon as is practicable.
Section 2.4 Articles of Incorporation and By-Laws of the Surviving
Corporation. Following the Effective Time, the Articles of Incorporation of
Allied, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter changed
or amended as provided therein or by Law. The Amended and Restated Code of
By-Laws of Allied, as in effect immediately prior to the Effective Time, shall
be the Amended and Restated Code of By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by Law.
8
<PAGE> 13
Section 2.5 Board of Directors and Officers. The directors of Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation immediately following the Effective Time, each of such directors to
hold office, subject to the applicable provisions of the Articles of
Incorporation and Code of By-Laws of the Surviving Corporation, until his or her
successor is duly elected and qualified, or his or her earlier death,
resignation or removal. The officers of Allied immediately prior to the
Effective Time shall be the officers of the Surviving Corporation at and
immediately following the Effective Time, each of such officers to hold their
respective offices, subject to the applicable provisions of the Articles of
Incorporation and Code of By-Laws of the Surviving Corporation, until his or her
successor is duly elected and qualified, or his or her earlier death,
resignation or removal.
Section 2.6 Effect of Merger on Sub Capital Stock. Each share of
capital stock, par value $1.00 per share, of Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
validly issued, fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation.
Section 2.7 Conversion of Allied Stock.
(a) Outstanding Common Stock. Subject to the other provisions of this
Section 2.7, each Common Share issued and outstanding immediately prior to the
Effective Time (other than shares owned by Nationwide or Sub, shares held as
treasury shares by Allied and Dissenting Shares (as defined in Section 2.9
below)) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive $48.25 per Common Share
(or if a greater per Common Share price shall have been paid in the Offer, such
greater price), net to the shareholder in cash, without interest thereon (the
"Merger Consideration").
(b) Treasury Shares and Nationwide Owned Shares. Each Common Share and
each Preferred Share issued and outstanding immediately prior to the Effective
Time which is then held as a treasury share by Allied, or owned by Nationwide or
Sub, immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Allied, be cancelled and retired and cease to
exist, without any conversion thereof.
9
<PAGE> 14
(c) Preferred Shares. Each Preferred Share issued and outstanding prior
to the Effective Time (other than Preferred Shares held by Allied or by
Nationwide, Sub or any other Subsidiary of Nationwide) shall not be affected by
the Merger and shall remain issued and outstanding Preferred Shares of the
Surviving Corporation.
Section 2.8 Exchange of Certificates and Related Matters.
(a) Paying Agent. As of the Effective Time, Sub shall, and Nationwide
shall cause Sub to, deposit, on an as needed basis, with a bank or trust company
selected by Nationwide and reasonably acceptable to Allied (the "Paying Agent"),
for the benefit of the holders of Common Shares, cash in an aggregate amount
equal to the aggregate Merger Consideration (such amount being sometimes
hereinafter referred to as the "Payment Fund").
(b) Exchange Procedure. Upon surrender to the Paying Agent of a
certificate representing Common Shares for cancellation, together with a letter
of transmittal and such other customary documents as may be required by the
instructions to the letter of transmittal (collectively, the "Certificate"), the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the number of Common Shares previously represented by
such Certificate shall have been converted pursuant to Section 2.7. The Paying
Agent shall accept such Certificate upon compliance with such reasonable terms
and conditions as the Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than the person in whose name the Certificate representing Common Shares
surrendered in exchange therefor is registered on the record books of Allied, it
shall be a condition to such exchange that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable. After the Effective Time, there shall be no further transfer
on the records of the Surviving Corporation or its transfer agent of any
Certificate representing Common Shares and if any such Certificate is presented
to the Surviving Corporation for transfer, it shall be cancelled against
delivery of the Merger Consideration as hereinabove provided. Until
10
<PAGE> 15
surrendered as contemplated by this Section 2.8(b), each Certificate
representing Common Shares (other than a Certificate representing Common Shares
to be cancelled in accordance with Section 2.7(b) or representing Dissenting
Shares), shall, at any time after the Effective Time, represent only the right
to receive upon such surrender the Merger Consideration, without any interest
thereon.
(c) Letter of Transmittal. Promptly after the Effective Time (but in no
event more than five business days thereafter), Nationwide shall require the
Paying Agent to mail to each record holder of Certificates that immediately
prior to the Effective Time represented Common Shares which have been converted
pursuant to Section 2.7(a), a letter of transmittal (which shall specify that
delivery shall be effective, and risk of loss and title shall pass, only upon
proper delivery of Certificates representing Common Shares to the Paying Agent
and shall be in such form and have such provisions as Nationwide reasonably may
specify) and instructions for use in surrendering such Certificates and
receiving the Merger Consideration to which such holder shall be entitled
therefor pursuant to Section 2.7.
(d) No Further Ownership Rights in Shares. The Merger Consideration
paid upon the surrender for exchange of Certificates representing Common Shares
in accordance with the terms of this Article II shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to the Common
Shares theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation (if any) to pay any dividends or make any
other distributions with a record date prior to the Effective Time which may
have been declared by Allied on such Common Shares in accordance with the terms
of this Agreement or prior to the date of this Agreement and which remain unpaid
at the Effective Time.
(e) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the holders of the Certificates representing Common
Shares for 180 days after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Common Shares who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and only as general creditors thereof for payment, without
interest, of their claim for any Merger Consideration with respect to their
Common Shares.
11
<PAGE> 16
(f) No Liability. None of Nationwide, Sub, the Surviving Corporation or
the Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates representing Common Shares shall not have been surrendered
prior to seven years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration in respect of such Certificate
would otherwise escheat to or become the property of any Governmental Entity),
any such cash, shares, dividends or distributions payable in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation free and clear of all claims or interest
of any person previously entitled thereto.
Section 2.9 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, the Common Shares outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has demanded properly in writing
appraisal for such Common Shares in accordance with Sections 490.1301 through
490.1331 of the IBCA and who shall not have withdrawn such demand or otherwise
have forfeited appraisal rights shall not be converted into or represent the
right to receive the Merger Consideration ("Dissenting Shares"). Such
shareholders shall be entitled to receive payment of the appraised value of such
Common Shares held by them in accordance with the Iowa Corporation Law, except
that all Dissenting Shares held by shareholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such Common Shares held by them under such Iowa Corporation Law shall thereupon
be deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without any interest thereon, the
Merger Consideration, upon surrender, in the manner provided in Section 2.8(b),
of the Certificate or Certificates that formerly evidenced such Common Shares.
Allied shall give Nationwide prompt notice of any demands of appraisal received
by Allied, withdrawals of such demands, and any other instruments served
pursuant to Iowa Corporation Law and received by Allied, and Nationwide shall
have the right to participate in all negotiations and proceedings with respect
to such demands. Prior to the Effective Time, Allied shall not, except with the
prior written consent of Nationwide, make any payment with respect to any
demands for appraisal, or settle or offer to settle, any such demands.
12
<PAGE> 17
Section 2.10 Adjustments to Prevent Dilution. In the event that Allied
changes the number of Common Shares issued and outstanding prior to the
Effective Time as a result of a reclassification, stock split (including a
reverse split), stock dividend or distribution, recapitalization, merger,
subdivision or other similar transaction, the Merger Consideration shall be
equitably adjusted.
Section 2.11 Allied Employee Stock Options, Restricted Stock, etc. As
of immediately prior to the Effective Time each option to acquire Common Shares
(each, an "Option"), restricted stock award ("Restricted Stock") or stock
appreciation right ("SARs" and, together with the Options and Restricted Stock,
the "Awards") outstanding under any of Allied's Long-Term Management Incentive
Plan, the Nonqualified Stock Option Plan, the Stock Option Plan, the Executive
Equity Incentive Plan or any other similar plan, arrangement or agreement of
Allied or any Allied Subsidiaries (together, the "Allied Plans"), whether or not
then exercisable or vested, shall become fully exercisable and vested and shall
be cancelled or repurchased and, in consideration of such cancellation or
repurchase, Allied shall pay to the holder of such Award an amount in respect
thereof equal to the product of (A) the Applicable Amount, multiplied by (B) the
number of shares subject thereto (such payment to be net of applicable
withholding taxes). The term "Applicable Amount" shall mean (i) in the case of
Awards of Restricted Stock, the Merger Consideration, (ii) in the case of Awards
of Options, the excess of (A) the Merger Consideration over (B) the exercise
price of such Option or (iii) in the case of Awards of SARs, the excess of (A)
the Merger Consideration, over (B) the grant price of such SAR. No consent or
other authorization is required by the holder of any Awards to effectuate the
transactions contemplated by this Section 2.11. In addition, following the
Effective Time, no Person has any options, warrants, or other rights to buy any
Securities of the Surviving Corporation.
13
<PAGE> 18
ARTICLE III
ADDITIONAL AGREEMENTS
Section 3.1 Preparation of Proxy Statement; Information Supplied.
(a) Proxy Statement. As soon as practicable following the purchase of
the Common Shares pursuant to the Offer, Allied shall prepare and file with the
SEC the Proxy Statement (as defined below), if required by applicable law.
Allied will use its reasonable Best Efforts to cause the Proxy Statement to be
mailed to Allied's shareholders as promptly as practicable. Nationwide and Sub
will use their reasonable best efforts to assist Allied in the preparation and
filing of the Proxy Statement.
(b) Allied Information. Allied agrees that none of the information
supplied or to be supplied by Allied specifically for inclusion in the Proxy
Statement will, at the date it is first mailed to Allied's shareholders or at
the time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder.
(c) Nationwide Information. Nationwide and Sub agree that none of the
information supplied or to be supplied by Nationwide specifically for inclusion
in the Proxy Statement will, at the date it is first mailed to Allied's
shareholders or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 3.2 Meeting of Shareholders. Subject to Section 6.10 hereof,
following the purchase of Shares in the Offer, if Nationwide and its
subsidiaries shall not following such purchase own shares representing at least
90% of Allied's outstanding Common Shares and 90% of Allied's outstanding
Preferred Shares, Allied will take all actions necessary in accordance with
applicable law and its Articles of Incorporation and By-laws to convene a
meeting, if required by applicable law, of its shareholders (the "Shareholders
Meeting") to consider and vote upon the approval of this Agreement and the
Merger. Subject to Section 6.10 hereof, Allied will, through
14
<PAGE> 19
its Board of Directors, recommend to its shareholders approval of this Agreement
and the Merger. Allied will use its reasonable best efforts to hold the
Shareholders Meeting (unless following the purchase of Shares in the Offer
Nationwide and its subsidiaries own at least 90% of Allied's outstanding Common
Shares and 90% of Allied's outstanding Preferred Shares), as soon as practicable
after the date hereof.
Section 3.3 Filings; Other Action. As promptly as practicable, (i)
Nationwide and Allied shall make any additional filings and submissions under
the HSR Act, (ii) Nationwide shall make any additional filings required by the
insurance regulatory authorities in Iowa, Arizona and Ohio and deliver notices
and consents to jurisdiction to such state insurance departments, each as
reasonably may be required to be made in connection with this Agreement and the
transactions contemplated hereby, and (iii) Allied and Nationwide shall
cooperate in all reasonable respects with each other in (A) determining if other
filings are required to be made prior to the Effective Time with, or if other
material consents, approvals, permits, notices or authorizations are required to
be obtained prior to the Effective Time from any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (B) timely making all
such filings and timely seeking all such consents, approvals, permits, notices
or authorizations. In connection with the foregoing, Allied will provide
Nationwide, and Nationwide will provide Allied, with copies of correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between such party or any of its representatives, on the one hand, and any
Governmental Entity or members of their respective staffs, on the other hand,
with respect to this Agreement and the transactions contemplated hereby. Each of
Nationwide and Allied acknowledge that certain actions may be necessary with
respect to the foregoing in making notifications and obtaining clearances,
consents, approvals, waivers or similar third party actions which are material
to the consummation of the transactions contemplated hereby, and each of
Nationwide and Allied agree to take such action as is reasonably necessary to
complete such notifications and obtain such clearances, approvals, waivers or
third party actions.
15
<PAGE> 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Except as otherwise disclosed to Nationwide and Sub in a letter
delivered to it prior to the execution hereof (which letter contains appropriate
references to identify the representations and warranties herein to which the
information in such letter relates) (the "Allied Disclosure Letter"), Allied
represents and warrants to Nationwide and Sub as follows:
Section 4.1 Organization and Qualification. (a) Allied is a corporation
duly incorporated, validly existing and in good standing under the Laws of the
State of Iowa and has full corporate power and authority to conduct its business
as it is currently being conducted. Each of the Allied Subsidiaries is duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or formation and has full power, authority and
legal right to conduct its business as it is currently being conducted. Allied
and each of the Allied Subsidiaries is duly qualified to do business, and is in
good standing, in the respective jurisdictions where the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each of the Allied Subsidiaries is listed in the Allied
Disclosure Letter.
(b) Each Allied Insurer is listed in the Allied Disclosure Letter. Each
Allied Insurer (i) possesses an Insurance License in each jurisdiction in which
such Allied Insurer is required to possess an Insurance License and (ii) is duly
authorized in its jurisdiction of incorporation and each other applicable
jurisdiction to write each line of direct insurance being written in the
Quarterly Statement for such Allied Insurer as of and for the quarter ended
March 31, 1998, except where such insurance is written on an excess or surplus
lines-basis and except where the failure to possess such Insurance License or to
be so authorized would not reasonably be expected to have a Material Adverse
Effect. All such Insurance Licenses are in full force and effect without
amendment, limitation or restriction, other than as described in the Allied
Disclosure Letter and except where the failure to be in full force and effect
would not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect and to the Knowledge of Allied, there is no event,
inquiry or Proceeding which is reasonably likely to lead to the revocation,
amendment, failure to renew, limitation, suspension or restriction of any such
Insurance License.
16
<PAGE> 21
(c) Except for its Subsidiaries, Allied does not directly or indirectly
own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
that directly or indirectly conducts any activity which is material to Allied.
Section 4.2 Capitalization of Allied. The authorized capital stock of
Allied consists of 80,000,000 Common Shares and 7,500,000 Preferred Shares. At
the close of business on June 2, 1998 (i) 30,114,827 Common Shares were issued
and outstanding; (ii) no Common Shares were held as treasury stock; (iii) no
Common Shares were held by Allied Subsidiaries; (iv) 5,174,437 Common Shares
were reserved for issuance upon the exercise of options or other rights to
purchase Common Shares under the Allied Plans (of which options or rights with
respect to 1,113, 281 shares have been granted), and (v) 1,827,222 Preferred
Shares were issued and outstanding. Except as disclosed in the SEC Documents,
all outstanding shares of capital stock of Allied are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. No
bonds, debentures, notes or other indebtedness of Allied having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the shareholders of Allied may vote are issued or
outstanding. Except under the Allied Plans or as set forth in the Allied
Disclosure Letter, Allied does not have any outstanding option, warrant,
subscription or other right, agreement or commitment which either obligates
Allied to issue, sell or transfer, repurchase, redeem or otherwise issue,
acquire or vote any shares of capital stock of Allied, or which restricts the
transfer of Common Shares. Since May 29, 1998, no shares have been issued except
subject on the exercise of options listed above and no options granted.
Following the Effective Time, no Person shall have any right to acquire any
securities of the Surviving Corporation. Except as described in this Section
4.2, no shares of capital stock, or any securities entitling any person to
acquire such shares, are outstanding.
Section 4.3 Subsidiaries. The Allied Disclosure Letter sets forth, as
to each Allied Subsidiary, its authorized capital stock and the number of its
issued and outstanding shares of capital stock. Except as set forth in the
Allied Disclosure Letter or the SEC Documents, Allied
17
<PAGE> 22
is, directly or indirectly, the record and beneficial owner of all of the
outstanding shares of capital stock of each of the Allied Subsidiaries, and no
capital stock of any Allied Subsidiary is or may become required to be issued by
reason of any options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable or exercisable for, shares of any capital stock of any
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which Allied or any Allied Subsidiary is or may be bound to
issue, redeem, purchase or sell additional shares of capital stock of any Allied
Subsidiary or securities convertible into or exchangeable or exercisable for any
such shares. All of such shares so owned by Allied are validly issued, fully
paid and nonassessable and are owned by it or by another wholly-owned Allied
Subsidiary thereof free and clear of all liens, claims, encumbrances, restraints
on alienation, or any other restrictions with respect to the transferability or
assignability thereof (other than restrictions on transfer imposed by federal or
state securities laws).
Section 4.4 Authority Relative to this Agreement. (a) Allied has full
corporate authority and legal right to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved and authorized by the Board of Directors of Allied. Except
for the approval of this Agreement by the shareholders of Allied, no other
corporate proceedings on the part of Allied are necessary to authorize this
Agreement and the transactions contemplated hereby. The affirmative vote of at
least the majority of the votes entitled to be cast by shareholders of Allied
present or represented by a properly executed proxy at the meeting called
pursuant to Section 3.2 hereof, if required under applicable law, is the only
vote of shareholders of Allied necessary to approve this Agreement and the
transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Allied and (assuming this Agreement is a legal, valid and binding obligation of
Nationwide) constitutes a legal, valid and binding agreement of Allied
enforceable against Allied in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
18
<PAGE> 23
(c) Based upon the recommendation of a committee comprised of members
of the Board of Directors of Allied who are not directors or otherwise
affiliated with any of Allied's subsidiaries or affiliates (the "Special
Committee") appointed by the Board of Directors of Allied in connection with the
Offer and the Merger, the Board of Directors of Allied (i) has declared that
this Agreement, the Offer, the Merger and the other transactions contemplated
hereby and thereby are advisable and in the best interests of Allied and (ii)
has authorized, approved and adopted in all respects this Agreement, the
Shareholder Agreement, the Offer, the Merger and the other transactions
contemplated hereby and thereby. The Special Committee and the Board of
Directors of Allied have received the opinion of the Special Committee's
financial advisor, Morgan Stanley & Co. Incorporated, to the effect that the
consideration to be received by the shareholders in the Offer and Merger, taken
together, is fair from a financial point of view to such shareholders (other
than Nationwide and its Affiliates). It is agreed and understood that such
opinion is for the benefit of the Special Committee and Allied's Board of
Directors and may not be relied on by Nationwide.
Section 4.5 No Violation; Governmental Filings.
(a) Except as set forth in the Allied Disclosure Letter, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) constitute a breach or violation
of or default under the articles of incorporation or the by-laws (or similar
organizational documents) of Allied or of any of the Allied Subsidiaries, (ii)
violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the assets
of Allied or of any of the Allied Subsidiaries under any of the terms,
conditions or provisions of any Allied Contract or (iii) constitute a breach or
violation of or default under any Environmental Permit, Law or License to which
Allied or any of the Allied Subsidiaries is subject, other than, in the case of
clauses (ii) and (iii), such violations, conflicts, breaches, defaults or events
or other matters that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or to prevent or delay the
consummation of the transactions contemplated hereby.
19
<PAGE> 24
(b) Except for (i) the Governmental Approvals set forth in the Allied
Disclosure Letter, (ii) the filing of this Agreement with and the approval of
such by the Iowa Commissioner, the Iowa Attorney General, and the Arizona
Director under the Iowa Insurance Law and the Arizona Insurance Law,
respectively, and such other applications, registrations, declarations, filings,
authorizations, Orders, consents and approvals as may be required under the Laws
of other jurisdictions listed in the Allied Disclosure Letter, (iii) the
approval of this Agreement by shareholders of Allied, if required by applicable
law, (iv) the filings required under the HSR Act and the expiration or other
termination of any waiting period applicable to the Offer and the Merger under
such Act, (v) the filings pursuant to Section 2.3 hereof, (vi) the filing of
appropriate documents with and such consents as may be required under the
Investment Company Act and the Investment Advisers Act, (vii) the filing with
the SEC of (x) a proxy statement relating to the approval by the shareholders of
Allied of the Merger (the "Proxy Statement"), and (y) such reports under the
Exchange Act, as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (viii) the filing of the
certificate of merger with the Iowa Secretary of State and appropriate documents
with the relevant authorities of other states in which Allied is qualified to do
business and (ix) any consent or filing that is disclosed in the Allied
Disclosure Letter or that would not otherwise be required to be disclosed
pursuant to Section 4.5(a) hereof, no consent, approval, permit, notice, Order
or authorization of, or registration, application, declaration or filing with
(each a "Consent or Filing") any Governmental Entity is required with respect to
Allied or any Allied Subsidiary in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
except for such Consents or Filings the failure of which to make or obtain would
not, individually or in the aggregate, prevent or be a material impediment to
the consummation of the transactions contemplated hereby or reasonably be
expected to have a Material Adverse Effect or to prevent or delay the
consummation of the transactions contemplated hereby.
Section 4.6 SAP Statements. (a) "Allied SAP Statements" shall mean:
(i) the Annual Statements for the Allied Insurers as of and for the
years ended December 31, 1995, 1996 and 1997;
20
<PAGE> 25
(ii) the Quarterly Statements for the Allied Insurers as of and for the
calendar quarter ended March 31, 1998;
(iii) any supplemental or separate statutory annual statements or
quarterly statements for Allied Mutual and the Allied Insurers for any of the
periods ended December 31, 1995, 1996 or 1997 or March 31, 1998, that are filed
with any insurance Governmental Entity and that differ from the Annual
Statements or the Quarterly Statements described in Section 4.6(i) or (ii)
hereto; and
(iv) the audited SAP balance sheets of each Allied Insurer as of
December 31, 1995, 1996 and 1997 and the related audited summary of operations
and statements of change in capital and surplus and cash flow of each Allied
Insurer for each such years, together with the notes related thereto and the
reports thereon of KPMG Peat Marwick, LLP.
(b) Since December 31, 1997, each of the Allied Insurers has filed all
SAP Statements required to be filed with or submitted to the appropriate
regulatory authorities, except for such filings or submissions, the failure to
so file or submit would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect. With respect to any Allied Insurer,
each Allied SAP Statement complied (and, as to SAP Statements filed after the
date of this Agreement, will comply) in all material respects with all
applicable Laws when so filed, and all material deficiencies with respect to any
such Allied SAP Statement have been cured or corrected, or are being contested
in good faith by such Allied Insurer. With respect to any Allied Insurer, each
Allied SAP Statement (and any notes related thereto) referred to in Section
4.6(a)(i), (ii), and (iv) hereof was prepared (and, as to Allied SAP Statements
filed after the date of this Agreement, will be prepared) in accordance with SAP
as in effect at the time of preparation and presents (and, as to Allied SAP
Statements filed after the date of this Agreement, will present) fairly in all
material respects the financial position of the Allied Insurers as of the
respective dates thereof. With respect to any Allied Insurer, each Allied SAP
Statement referred to in Section 4.6(c) hereof was prepared (or, in the case of
similar Allied SAP Statements filed after the date of this Agreement, will be
prepared) in accordance, in all material respects, with the statutory accounting
practices required or permitted by the insurance Governmental Entity in the
jurisdiction in which such statement was (or will be) filed. The parties agree
that the
21
<PAGE> 26
foregoing representations shall not be interpreted to apply to the actuarial
reserves and other actuarial amounts held in respect of Liabilities with respect
to insurance contracts of the Allied Insurers, as to which the only
representations or warranties made in this Agreement are set forth in Section
4.8.
Section 4.7 [Intentionally left blank.]
Section 4.8 Reserves. To the Knowledge of Allied, the aggregate
reserves of the Allied Insurers as recorded in the Allied SAP Statements have
been determined in accordance with generally accepted actuarial principles
consistently applied (except as set forth therein). Except as disclosed in the
SEC Reports or the Allied Disclosure Letter, the insurance reserving practices
and policies of the Allied Insurers have not changed, in any material respect,
since December 31, 1997, and the results of the application of such practices
and policies are reflected in the Allied SAP Statements. All reserves of the
Allied Insurers set forth in the Allied SAP Statements are, to the Knowledge of
Allied, fairly stated in accordance with sound actuarial principles and meet the
requirements of the insurance laws of the applicable insurance authority, except
where the failure to so state such reserves or meet such requirements would not
reasonably be expected to have a Material Adverse Effect.
Section 4.9 SEC Documents. Allied has timely filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1995 (such reports, schedules, forms, statements and other documents
are hereinafter referred to as the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents as of such dates contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of Allied
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim
22
<PAGE> 27
financial statements, as permitted by Rule 10-01 of Regulation S-X) and fairly
present, in all material respects, the consolidated financial position of Allied
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited interim financial statements, to normal year-end audit
adjustments) in accordance with GAAP. The parties agree that the representations
set forth in the previous sentence shall not be interpreted to apply to the
actuarial reserves and other actuarial amounts held in respect of Liabilities
with respect to insurance contracts of the Allied Insurers, as to which the only
representations or warranties made in this Agreement are set forth in Section
4.8.
Section 4.10 Absence of Certain Changes or Events. Except as set forth
in the Allied Disclosure Letter, since March 31, 1998, there has been no event
or condition which has had (or would reasonably be expected to result in) a
Material Adverse Effect, and except as set forth in the Allied Disclosure
Letter, Allied and the Allied Subsidiaries have in all material respects
conducted their businesses in the ordinary course consistent with past practices
and have not taken any of the actions contemplated by Section 6.1 hereto.
Section 4.11 No Undisclosed Liabilities. Except as set forth in the
Allied Disclosure Letter or the SEC Documents filed prior to the date hereof and
for Liabilities arising since March 31, 1998 in the ordinary course of business
and consistent with past practice, or in connection with the Offer or the
transactions contemplated by this Agreement, neither Allied nor any of the
Allied Subsidiaries has any Liabilities of a nature required by GAAP to be
reflected in a consolidated balance sheet of Allied (or reflected in the notes
thereto). The parties agree that the representations set forth in the previous
sentence shall not be interpreted to apply to the actuarial reserves and other
actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of the Allied Insurers, as to which the only representations or
warranties made in this Agreement are set forth in Section 4.8.
Section 4.12 Takeover Statutes. Allied has taken all actions necessary
such that the provisions of Section 490.1110 of the IBCA and any applicable
anti-takeover provision in the Restated Articles of Incorporation or By-laws of
Allied is not, or at the Effective Time will not be, applicable to Allied,
Nationwide, the Common Shares, the Offer, the Merger or any other
23
<PAGE> 28
transactions contemplated by this Agreement and, to the Knowledge of Allied, no
other restrictive provision of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover statute or
regulation is so applicable.
Section 4.13 Compliance with Law. Except as set forth in the Allied
Disclosure Letter or the SEC Documents filed prior to the date hereof, the
businesses of Allied and the Allied Subsidiaries are not being conducted and
since January 1, 1995 have not been conducted in violation of any applicable
Law, except for violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
Section 4.14 Assets.
(a) Except as set forth in the SEC Documents filed prior to the date
hereof or the Allied Disclosure Letter, each of Allied and the Allied
Subsidiaries (i) has good and valid title to all of its properties, assets and
other rights that do not constitute real property, free and clear of all Liens
other than Permitted Liens, and (ii) owns, has valid leasehold interests in or
valid contractual rights to use, all of the assets, tangible and intangible,
used by, or necessary for the conduct of, its business, except where the failure
to have such valid leasehold interests or such valid contractual rights would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth in the SEC Reports filed prior to the date
hereof or the Allied Disclosure Letter, each of Allied and the Allied
Subsidiaries:
(i) represents that it does not own any real
property;
(ii) is in peaceful and undisturbed possession of the
space and/or estate under each lease under which it is a
tenant, and there are no material defaults by it as tenant
thereunder; and
(iii) has good and valid rights of ingress and egress
to and from all the real property leased by such party from
and to the public street systems for all usual street, road
and utility purposes.
24
<PAGE> 29
Section 4.15 Environmental Matters. Except as set forth in the Allied
Disclosure Letter or the SEC Reports, or as would not reasonably be expected to
have a Material Adverse Effect:
(a) Each of Allied and the Allied Subsidiaries and, to the Knowledge of
Allied, all Allied Real Property (including all owners or operators thereof) is
in substantial compliance in all material respects with all applicable
Environmental Laws, which compliance includes, but is not limited to, the
possession of all material Environmental Permits required under Environmental
Laws and compliance with the terms and conditions thereof. Neither Allied nor
any Allied Subsidiary has received any written communication, whether from a
Governmental Entity, citizens' group, employee or otherwise, that alleges that
Allied or any Allied Subsidiary or any Allied Real Property (including any owner
or operator thereof) is not in such compliance, and, there are no circumstances
that are reasonably likely to prevent or interfere with such compliance in the
future. Neither Allied nor any Allied Subsidiary has been notified by any
Governmental Entity that any such material Environmental Permit will be
suspended or revoked or cannot be renewed in the ordinary course of business
consistent with past practice.
(b) There is no Environmental Claim pending or, to the Knowledge of
Allied, threatened against Allied, any Allied Subsidiary, any Allied Real
Property (including any owner or operator thereof) or any Person whose Liability
for any Environmental Claims Allied or any Allied Subsidiary has or may have
retained or assumed either contractually or, by operation of Law and, there are
no facts existing on the date hereof which are reasonably likely to result in
any such Environmental Claim.
(c) There have been no releases, spills, leaks or discharges of
Hazardous Substances at, from or to any Allied Real Property or any other
property which required or is reasonably likely to require Allied or any Allied
Subsidiary to undertake investigation, abatement, removal, remedial, corrective
or other response action pursuant to applicable Environmental Laws. None of the
Allied Real Property (i) is listed or proposed for listing on any list
maintained by any Governmental Entity of sites that may require investigation,
abatement, removal, remedial, corrective or other response action, including,
but not limited to, the CERCLIS or the NPL or (ii) is the subject of any
investigation, abatement, removal, remedial, corrective or other response
action.
25
<PAGE> 30
Section 4.16 Contracts. (a) The Allied Disclosure Letter contains a
true and complete list of all the following Contracts (true and complete copies
of all such written Contracts having been made available to Nationwide),
currently in force, to which Allied or any Allied Subsidiary is a party or by
which any assets of Allied or any Allied Subsidiary are or may be bound, as such
Contracts may have been amended to the date hereof:
(i) has been entered into since March 31, 1998 and
would be required to be filed by Allied as an exhibit to an
SEC Document filed after such date under Item 10 of Rule 601
of Regulation S-K under the Exchange Act;
(ii) is a reinsurance or retrocession contract which
requires the payment of premiums by the Allied or the Allied
Subsidiaries of amounts in excess of $500,000 per year; or
(iii) contains covenants limiting the freedom of the
Allied or any of the Allied Subsidiaries to engage in any line
of business in any geographic area or to compete with any
person or entity or restricting the ability of the Allied
Subsidiaries to acquire equity securities of any person or
entity; or
(iv) is an employment or severance contract
applicable to any employee, director or consultant of the
Allied or the Allied Subsidiaries, including without
limitation contracts to employ executive officers and other
contracts with officers or directors of the Allied or any of
the Allied Subsidiaries, other than agent contracts with
insurance agents and any such contract which by its terms is
terminable by the Allied or any of the Allied Subsidiaries on
not more than 60 days' notice without material liability; or
(v) is a contract for borrowed money in excess of
$2,500,000; or
(vi) is a contract providing for the payment or
receipt of over $2,500,000 per year.
26
<PAGE> 31
(b) As to all contracts with respect to which Allied or its
Subsidiaries is bound, except as disclosed in the Allied Disclosure Letter or as
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect:
(i) such contract is (assuming due power and
authority of, and due execution and delivery by, the other
party or parties thereto) valid and binding upon each party
thereto and is in full force and effect;
(ii) there is no default or claim of default on the
part of Allied or the Allied Subsidiary party thereto or, to
the Knowledge of Allied, by other parties thereto, and no
event has occurred which, with the passage of time or the
giving of notice (or both), would constitute such default
thereunder.
Section 4.17 [Intentionally left blank.]
Section 4.18 Taxes and Tax Returns. Except as set forth in the Allied
Disclosure Letter or the SEC Documents:
(a) All material Tax Returns required under applicable Law to be filed
by Allied or any Allied Subsidiary have been timely filed;
(b) Allied and each Allied Subsidiary have paid or made provision in
accordance with GAAP (or there has been paid or provision has been made on its
behalf) for the payment of all Taxes for all periods or portions thereof ending
through the date hereof;
(c) The federal income tax returns of Allied and each Allied Subsidiary
have been examined by the Internal Revenue Service (or the applicable statutes
of limitation for the assessment of federal income taxes have expired) for all
periods through and including 1993;
(d) No outstanding deficiencies, assessments or written proposals for
the assessment of any Taxes have been proposed, asserted or assessed against
Allied or any of the Allied Subsidiaries which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect; and
27
<PAGE> 32
(e) No audits or other administrative proceedings or court proceedings
are presently pending with regard to any Taxes or Tax Returns of Allied or any
Allied Subsidiary wherein an adverse determination or ruling in any one such
proceeding or in all such proceedings in the aggregate would reasonably be
expected to have a Material Adverse Effect.
Section 4.19 Benefit Plans. The Allied Disclosure Letter sets forth a
complete and correct list of all Benefit Plans (as defined below). Except as
disclosed in the Allied Disclosure Letter or the SEC Documents:
(a) Each "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other
material plan, program, arrangement or policy (written or oral) relating to
bonuses, deferred compensation, performance compensation, compensation, stock
purchases, stock options, stock appreciation, severance, salary continuation,
vacation, sick leave, holiday pay, fringe benefits, reimbursement programs,
incentive, insurance, welfare or other employee benefits, in each case
maintained or contributed to, or required to be maintained or contributed to, by
Allied and the Allied Subsidiaries for the benefit of any present or former
officers, employees, agents, directors or independent contractors of Allied or
the Allied Subsidiaries (all the foregoing being herein called "Benefit Plans")
has been administered in accordance with its terms and all applicable laws and
regulations except where the failure to be so administered would not reasonably
be expected to result in a Material Adverse Effect. All required contributions
to the Benefit Plans have been made or provided for, except where the failure to
do so would not reasonably be expected to result in a Material Adverse Effect.
Allied, the Allied Subsidiaries and all the Benefit Plans are in compliance with
the applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements, except where the failure to do so
would not reasonably be expected to result in a Material Adverse Effect.
Complete and correct copies of all current and prior documents, including all
amendments thereto, with respect to each Benefit Plan have been delivered or
made available to Nationwide. Copies of all summary plan descriptions, summary
annual reports, IRS
28
<PAGE> 33
determination letters, summaries of material modifications, other communications
to employees concerning the Benefit Plans, and the three most recent Forms 5500
for each Benefit Plan have also been delivered or made available to Nationwide.
(b) None of Allied or any other person or entity that together with
Allied is treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code (each a "Commonly Controlled Entity") has incurred any material
liability to a Pension Plan covered by Title IV of ERISA (a "Title IV Plan")
(other than for contributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums not yet due) which liability
has not been fully paid as of the date hereof. No Commonly Controlled Entity has
withdrawn from a Pension Plan covered by Title IV of ERISA (a "Title IV Plan")
during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA) where such withdrawal could result in liability of
such substantial employer pursuant to Section 4062(e) or 4063 of ERISA that
would reasonably be expected to result in a Material Adverse Effect. No Commonly
Controlled Entity has filed a notice of intent to terminate any Title IV Plan or
adopted any amendment to treat any such plan as terminated. The Pension Benefit
Guarantee Corporation has not instituted proceedings to terminate any Title IV
Plan in which a Commonly Controlled Entity participates. No accumulated funding
deficiency, whether or not waived, exists with respect to any such plan, and no
condition has occurred or exists which by the passage of time would be expected
to result in an accumulated funding deficiency as of the last day of the current
plan year of any such plan. No reportable event, as described in Section 4043 of
ERISA, has occurred and is continuing with respect to Title IV Plan in which a
Commonly Controlled Entity participates which would constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any such plan. No amendment with respect to which security is
required under Section 307 of ERISA has been made or is reasonably expected to
be made to any Title IV Plan. Since the last valuation date for each such plan,
there has been no amendment or change to such plan that would increase
materially the amount of benefits thereunder. In addition to the documents
listed in subsection (a) above, Allied has delivered or made available to
Nationwide, for each Title IV Plan in which a Commonly Controlled Entity
participates, copies of the following documents: (i) the Form PBGC-1 filed in
each of the most recent three plan years, and (ii) the actuarial report as of
the three most recent valuation dates and the retirement plan disclosures
required under Financial Accounting Standard 87 for the most recent fiscal year.
29
<PAGE> 34
(c) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid.
(d) There are no pending or threatened claims (other than routine
benefit claims), lawsuits or arbitrations which have been asserted or instituted
against any Benefit Plan, any of the fiduciaries thereof or Allied or the Allied
Subsidiaries with respect to their duties under the Benefit Plans that,
individually or in the aggregate, would reasonably be expected to result in a
Material Adverse Effect.
(e) Neither Allied nor a Commonly Controlled Entity, nor to the
Knowledge of Allied, any of their respective employees or directors, nor to the
Knowledge of Allied, any fiduciary, has engaged in any transaction in violation
of Section 406(a) or (b) of ERISA or which is a "prohibited transaction" (as
defined in Section 4975(c)(i) of the Code) for which no exemption exists under
Section 408(b) of ERISA or Section 4975(d) of the Code or for which no
administrative exemption has been granted under Section 408(a) of ERISA.
(f) The Benefit Plans and their related trusts intended to qualify
under Section 401 of the Code received favorable determination letters from the
IRS and to the Knowledge of Allied, such Plans and their related trusts continue
to qualify and operate as designed.
(g) Allied and the Allied Subsidiaries have no liability (contingent or
otherwise) under Section 4069 of ERISA by reason of a transfer of any
underfunded pension plan.
(h) Complete and correct copies of the most recent actuarial reports
(including for purposes of Financial Accounting Standards Board report nos. 87,
106 and 112) with respect to each Benefit Plan providing retiree medical or life
insurance coverage for employees of Allied and the Allied Subsidiaries have been
provided or made available to Nationwide. Except as
30
<PAGE> 35
disclosed in the Allied Disclosure Letter, no current employee of Allied or the
Allied Subsidiaries would be entitled if his or her employment with Allied and
the Allied Subsidiaries is terminated to any retiree medical or insurance
coverage.
(i) No amount that could be received as a result of any of the
transactions contemplated by this Agreement by any employee, officer or director
of Allied or any of the Allied Subsidiaries under any employment, severance or
termination agreement, other compensation arrangement or Benefit Plan currently
in effect would be characterized as an "excess parachute payment" (as such term
is defined in Section 280G of the Code).
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee (current, former or retired) of Allied and
the Allied Subsidiaries, (ii) increase any benefits under any Benefit Plan or
(iii) result in the acceleration of the time of payment of, vesting of or other
rights with respect to any such benefits.
Section 4.20 Labor Relations and Employment. (a) Except to the extent
set forth in the Allied Disclosure Letter or the SEC Documents, (i) there is no
labor strike, material labor dispute, slowdown, stoppage or lockout actually
pending, or to the Knowledge of Allied, threatened against or affecting Allied
or any of the Allied Subsidiaries, and since January 1, 1998 there has not been
any such action; (ii) to the Knowledge of Allied, no union claims to represent
the employees of Allied or any of the Allied Subsidiaries, there are no current
union organizing activities among the employees of Allied or of any of the
Allied Subsidiaries and Allied has not received notice of any unfair labor
practice complaint or charge against it pending before the National Labor
Relations Board and (iii) neither Allied nor any of the Allied Subsidiaries is a
party to or is bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association, applicable to employees of Allied or of
any Allied Subsidiary.
Section 4.21 Intellectual Property. Allied and each Allied Subsidiary
owns or otherwise has rights to use, free and clear of all Liens, all
Intellectual Property used in their respective businesses as currently conducted
except for any failure to have such right which would not,
31
<PAGE> 36
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the Knowledge of Allied, the use of such Intellectual
Property does not infringe or otherwise violate the rights of any Person.
Section 4.22 Transactions with Affiliates. Except as set forth in the
Allied Disclosure Letter or the SEC Documents, neither Allied nor any Allied
Subsidiary has entered into any material transaction with an Affiliate in
connection with which either Allied or an Allied Subsidiary has continuing
obligations, in the ordinary course of business or otherwise, which is not on
the terms at least as favorable to Allied or an Allied Subsidiary as would have
been applicable if such transaction had been entered into on an arm's-length
basis with an unaffiliated third party. Allied has not made or declared any
dividend or distribution that was disproportionate in favor of any Affiliate.
Section 4.23 Voting Requirements. The affirmative vote of the holders
of a majority of the voting power represented by the outstanding Common Shares
and outstanding Preferred Shares voting together as one class and entitled to
vote at the Shareholders Meeting is the only vote of the holders of Allied's
capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
Section 4.24 Investment Company. None of the Allied Subsidiaries
maintains any separate accounts. Neither Allied nor any of its Subsidiaries
conducts activities of or is otherwise deemed under applicable law to control an
"investment advisor" as such term is defined in Section 2(a)(20) of the 1940
Act, whether or not registered under the Investment Advisers Act of 1940, as
amended. Neither Allied nor any of its Subsidiaries is an "investment company"
as defined under the 1940 Act, and neither Allied nor any of its Subsidiaries
sponsors any Person that is such an investment company.
32
<PAGE> 37
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE AND SUB
Nationwide and Sub jointly and severally represent and warrant to
Allied as follows:
Section 5.1 Organization and Qualification. Nationwide is a mutual
insurance company and Sub is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Ohio and has full corporate
power, authority and legal right to conduct its Business as it is currently
being conducted. Each of Nationwide and Sub is duly qualified to do business,
and is in good standing, in the respective jurisdictions where the character of
its assets owned or leased or the nature of its Business makes such
qualification necessary, except for failures to be so qualified or in good
standing which are not, individually or in the aggregate, reasonably likely to
have a material adverse effect on Nationwide. Nationwide possesses an Insurance
License in each jurisdiction in which Nationwide is required to possess an
Insurance License. All such Insurance Licenses are in full force and effect
without amendment, limitation or restriction, and Nationwide does not have
Knowledge of any event, inquiry or Proceeding which is reasonably likely to lead
to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such Insurance License.
Section 5.2 Authority Relative to this Agreement. (a) Nationwide and
Sub have full power, authority and legal right to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly approved and authorized by the Board of
Directors of Nationwide and by the Board of Directors of Sub. No other corporate
proceedings on the part of Nationwide or Sub are necessary to authorize this
Agreement and the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Nationwide and Sub and (assuming this Agreement is a legal, valid and binding
obligation of Allied) constitutes a legal, valid and binding agreement of
Nationwide and Sub enforceable against Nationwide and Sub in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
33
<PAGE> 38
Section 5.3 No Violation. (a) The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) constitute a breach or violation of or default under the articles
of incorporation or the by-laws of Nationwide or under the articles of
incorporation or the by-laws of Sub, (ii) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the assets of Nationwide, Sub or any Nationwide Subsidiary
under, any of the terms, conditions or provisions of any Contract to which
Nationwide, Sub or any Nationwide Subsidiary is a party or to which it or any of
its assets may be subject or (iii) constitute a breach or violation of or
default under any Environmental Permit, Law or License to which Nationwide, Sub
or any Nationwide Subsidiary is subject other than, in the case of clauses (ii)
and (iii), events or other matters that are not, individually or in the
aggregate, reasonably likely to have a material adverse effect on Nationwide or
to prevent or delay the consummation of the transactions contemplated hereby.
(b) Except for (i) the filing of this Agreement with and the approval
of such by the Ohio Superintendent under the Ohio Insurance Law, the Iowa
Commissioner under the Iowa Insurance Law and the Arizona Commissioner under the
Arizona Insurance Law, (ii) the filings required under the HSR Act and the
expiration or other termination of any waiting period applicable to the Merger
under such act, and (iii) any Consent or Filing that would not otherwise be
required to be disclosed pursuant to Section 5.3(a) hereof, no Consent or Filing
of or with any Person is required with respect to Nationwide, Sub or any
Nationwide Subsidiary or any Nationwide Affiliate in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for such Consents or Filings the
failure of which to make or obtain would not, individually or in the aggregate,
prevent or be a material impediment to the consummation of the transactions
contemplated hereby or have a material adverse effect on the business,
operations or financial condition of Nationwide or any of its Subsidiaries,
taken as a whole, or that would prevent Nationwide or Sub from consummating the
transactions contemplated by this Agreement.
34
<PAGE> 39
Section 5.4 Litigation. There is no action, proceeding, investigation
or inquiry pending or threatened against Nationwide and Sub which questions the
validity of this Agreement or the Offer or any action taken or to be taken
pursuant hereto or pursuant to the Offer.
Section 5.5 Financial Ability to Perform. Nationwide and Sub at the
expiration of the Offer and at the Effective Time will have cash funds
sufficient to pay all cash payments for Common Shares in the Offer and the
Merger, and to pay all related fees and expenses.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Allied Conduct of Business Pending the Merger. From the
date hereof until the Effective Time, unless Nationwide shall otherwise agree in
writing, or except as set forth in the Allied Disclosure Letter or as otherwise
contemplated by this Agreement, Allied and the Allied Subsidiaries shall conduct
their respective businesses in the ordinary course consistent with past practice
and shall use all reasonable efforts to preserve intact their business
organizations and relationships with third parties (including but not limited to
their respective relationships with policyholders, insureds, agents,
underwriters, brokers and investment customers) and to keep available the
services of their present officers and key employees, subject to the terms of
this Agreement. Except as set forth in the Allied Disclosure Letter or as
otherwise provided in this Agreement, from the date hereof until the Effective
Time, without the prior written consent of Nationwide:
(i) Allied shall not adopt or propose any change in its
Restated Articles of Incorporation or Bylaws;
(ii) Allied shall not declare, set aside or pay any dividend
or other distribution with respect to any shares of capital stock of
Allied (except for regular quarterly dividends payable in an amount no
greater than $0.14 per share on the Common Shares and the regular
quarterly dividends per share on the Preferred Shares), or split,
combine or reclassify any of Allied's capital stock, and Allied and the
Allied Subsidiaries shall not repurchase, redeem or otherwise acquire
any shares of capital stock or other securities of, or other ownership
interests in, Allied;
35
<PAGE> 40
(iii) Allied shall not, and shall not permit any Allied
Subsidiary to, merge or consolidate with any other person or (except in
the ordinary course of business) acquire a material amount of assets of
any other person;
(iv) Allied shall not, and shall not permit any Allied
Subsidiary to, sell, lease, license or otherwise surrender, relinquish
or dispose of (i) any material facility owned or leased by Allied or
any Allied Subsidiary or (ii) any assets or property which are material
to Allied and the Allied Subsidiaries taken as a whole, except pursuant
to existing contracts or commitments listed in Section 6.1(iv) of the
Allied Disclosure Letter (the terms of which have been disclosed to
Nationwide prior to the date hereof), or in the ordinary course of
business consistent with past practice;
(v) Allied shall not, and shall not permit any Allied
Subsidiary to, settle any material audit, make or change any material
Tax election or file materially amended Tax Returns;
(vi) Allied and the Allied Subsidiaries shall not issue any
capital stock or other securities or enter into any amendment of any
material term of any outstanding security, and Allied and the Allied
Subsidiaries shall not incur any material indebtedness except in the
ordinary course of business pursuant to existing credit facilities or
arrangements, amend or otherwise increase, accelerate the payment or
vesting of the amounts payable or to become payable under or fail to
make any required contribution to, any Benefit Plan (as hereinafter
defined) or materially increase any non-salary benefits payable to any
employee or former employee, except in the ordinary course of business
consistent with past practice or as otherwise permitted by this
Agreement;
(vii) Allied shall not, and shall not permit any Allied
Subsidiary to, grant any increase in the compensation or benefits of
directors, officers, employees, consultants or agents of Allied or any
Allied Subsidiary other than increases in the ordinary course of
business consistent with past practice;
36
<PAGE> 41
(viii) Allied shall not, and shall not permit any Allied
Subsidiary to, enter into or amend any employment agreement or other
employment arrangement with any employee of Allied or any Allied
Subsidiary, except in the ordinary course of business consistent with
past practices (which past practices shall not be deemed to include
actions taken in connection with the Merger);
(ix) Allied shall not change any method of accounting or
accounting practice by Allied or any Allied Subsidiary, except for any
such required change in GAAP or SAP;
(x) Allied shall not permit any Allied Insurer to conduct
transactions in Allied Investments except in compliance with the
investment policies of such Allied Insurer in effect on the date hereof
and all applicable insurance laws and regulations;
(xi) Allied shall not, and shall not permit any Allied
Subsidiary to, enter into any agreement to purchase, or to lease for a
term in excess of one year, any real property, provided that Allied, or
any Allied Subsidiary, (i) may as a tenant, or a landlord, renew any
existing lease for a term not to exceed eighteen months and (ii)
nothing herein shall prevent the Allied, in its capacity as a landlord,
from renewing any lease pursuant to an option granted prior to the date
hereof;
(xii) amend any agreement with Allied Mutual, Allied Life or
any of their affiliates;
(xiii) Allied shall not, and shall not permit any Allied
Subsidiary to, agree or commit to do any of the foregoing;
(xiv) except to the extent necessary to comply with the
requirements of applicable laws and regulations, Allied shall not, and
shall not permit any Allied
37
<PAGE> 42
Subsidiary to, (i) take, or agree or commit to take, any action that
would make any representation and warranty of Allied hereunder
inaccurate in any material respect at, or as of any time prior to, the
Effective Time, (ii) omit, or agree or commit to omit, to take any
action necessary to prevent any such representation or warranty from
being inaccurate in any material respect at any such time, provided
however, that Allied shall be permitted to take or omit to take such
action which (without any uncertainty) can be cured, and in fact is
cured, at or prior to the Effective Time or (iii) take, or agree or
commit to take, any action that would result in, or is reasonably
likely to result in, any of the conditions of the Merger set forth in
Article VIII not being satisfied; and
(xv) none of the Allied Insurers shall make any material
change in its underwriting, claims management or reserving practices.
Section 6.2 Disposition of Litigation. From and after the date hereof
and until the Effective Time, Nationwide shall cease, in any and all respects,
the prosecution of any litigation against Allied or any Affiliates thereof.
Immediately following the Effective Time, Nationwide shall dismiss, with
prejudice, any and all litigation brought by Nationwide against Allied or any
Affiliates thereof.
Section 6.3 Reasonable Best Efforts. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken all action, to do, or
cause to be done, and to assist and cooperate with the other party hereto in
doing or causing to be done, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including, but not limited to, (i)
the actions set forth in Article I, II and III hereof, (ii) the obtaining of all
Governmental Approvals, and all other necessary actions or nonactions, waivers,
consents and approvals from all appropriate Governmental Entities and other
Persons and the making of all necessary registrations and filings, (iii) the
obtaining of the opinions and other documents referred to in Article VII hereof,
(iv) the resolution of all organizational and human resources issues relating to
the transactions contemplated hereby, (v) the obtaining or making of all
Consents, Environmental Permits, Filings or Licenses necessary or desirable to
ensure that the business of the Surviving Corporation may be conducted without
disruption consistent with the past practice of each of the
38
<PAGE> 43
Constituent Companies and (vi) the defending of any Proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby, the
defense of which shall, at the request of either Allied or Nationwide, be
conducted jointly by Nationwide and Allied on a basis that is satisfactory to
both Allied and Nationwide. Allied hereby grants Nationwide the right to decide
for purposes of the Form A regulatory hearings whether to submit regulatory
applications for Allied, Allied Life and Allied Mutual concurrently or
separately, and whether to conduct the regulatory hearing and approval
proceedings concurrently or separately for each of Allied, Allied Life and
Allied Mutual. Both Allied and Nationwide agree to use their reasonable best
efforts to coordinate and cooperate during the regulatory approval process.
Section 6.4 [Intentionally left blank.]
Section 6.5 Access and Information. Subject to provisions of applicable
law, Allied shall (a) afford to Nationwide's and Sub's accountants, legal
counsel and other advisors ("Representatives") full access during normal
business hours through the period immediately prior to the Effective Time to all
of its and the Allied Subsidiaries' assets, books, Contracts, commitments and
records (including, but not limited to, Tax Returns), and (b) during such
period, Allied shall furnish promptly to Nationwide and Sub all such information
concerning its business, assets and personnel or those of any of its Affiliates,
in either clause (a) or (b), as Nationwide or Sub may reasonably request. Unless
otherwise required by law, Nationwide and Sub will, and will cause their
Representatives to, hold any such information in confidence until such time as
such information otherwise becomes publicly available through no wrongful act of
Nationwide, Sub or their Representatives. In the event of the termination of
this Agreement for any reason, Nationwide will, and will cause Sub and their
Representatives to, return to Allied all copies of written information furnished
by Allied, Sub or their Representatives to Nationwide, Sub or their
Representatives and destroy all memoranda, notes and other writings prepared by
Nationwide, Sub or their Representatives based upon or including the information
furnished by Allied or any of its Representatives to Nationwide, Sub or their
Representatives (and Nationwide will certify to Allied that such destruction has
occurred) and neither Nationwide nor Sub shall use any such information for any
purpose. Prior to the completion of the Offer and, if this Agreement is
terminated, during the two-year period following the date of termination,
Nationwide will not (and will not assist or encourage others, including its
Subsidiaries, to) solicit the
39
<PAGE> 44
services, as employee, consultant or otherwise, of any employee of Allied,
provided, that nothing in this Agreement shall be deemed to prohibit general
solicitations of employment of persons in Nationwide's ordinary course of
business not directed specifically toward employees of Allied, solicitations
through executive recruiting firms not directed specifically toward employees of
Allied or employees that make contact with Nationwide.
Section 6.6 Notice of Proceedings. Each of Nationwide and Allied shall
promptly notify the other of, and provide to the other all information relating
to, any Proceedings or investigations commenced or, to the Knowledge of Allied,
threatened against, relating to or involving or otherwise affecting Nationwide
or Allied or any of their respective Subsidiaries which relate to the execution
of this Agreement or the consummation of the transactions contemplated hereby.
Section 6.7 Notification of Certain Other Matters. Each party shall
promptly notify the other of any change or other event which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect,
including, but not limited to, any of the following:
(a) any written notice from or to any Person alleging that the consent
of such Person is or may be required in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby, and where
the failure to obtain such a consent would reasonably be expected to have a
Material Adverse Effect;
(b) any written notice from or to any Governmental Entity in connection
with this Agreement or the transactions contemplated hereby; and
(c) any matter hereafter arising or discovered which, if existing or
known at the date hereof, would have been required to be set forth or described
in the Nationwide Disclosure Letter or the Allied Disclosure Letter, as the case
may be; provided, however, that no such supplemental or amended disclosure by
any party shall be deemed to cure any breach of a representation or warranty
made as of the date hereof.
40
<PAGE> 45
In furtherance of the foregoing, to the fullest extent permitted under
applicable Law, each party shall provide the other with copies (or, to the
extent written materials are not involved, oral notice) of proposed notices,
applications or any other communications to any Governmental Entity or rating
agency in connection with this Agreement or the transactions contemplated
hereby, including, but not limited to, in respect of the Governmental Approvals,
in each case at least three (3) Business Days prior to dispatch of written
materials (or, to the extent written materials are not involved, prior to
initiation) and neither Nationwide nor Allied will dispatch (or, to the extent
written materials are not involved, initiate) such notice, application or
communication without the prior consent of the other party, which consent shall
not be unreasonably withheld or delayed.
Section 6.8 Indemnification; Directors' and Officers' Insurance. (a) In
the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation by or in
the right of Allied or any of its Subsidiaries, in which any of the present
officers or directors (the "Indemnified Parties") of Allied or any of its
Subsidiaries is, or is threatened to be, made a party by reason of the fact that
he or she is or was a director, officer, employee or agent of Allied or any of
its Subsidiaries, or is or was serving at the request of Allied or any of its
Subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether before or after
the Effective Time, the parties hereto agree to cooperate and use their
reasonable best efforts to defend against and respond thereto. It is understood
and agreed that Allied shall indemnify and hold harmless, and after the
Effective Time the Surviving Corporation and Nationwide, jointly and severally,
shall indemnify and hold harmless, as and to the full extent permitted by
applicable Law, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys, fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such claim, action, suit, proceeding or investigation, and in the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Indemnified Parties may retain one
counsel satisfactory to them unless there are conflicts under applicable
professional standards, and Allied, or the Surviving Corporation and Nationwide
after the Effective Time, shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are received
and (ii) Allied and the
41
<PAGE> 46
Surviving Corporation and Nationwide will use their respective reasonable best
efforts to assist in the vigorous defense of any such matter; provided, that
neither Allied nor the Surviving Corporation nor Nationwide shall be liable for
any settlement effected without its prior written consent (which consent shall
not be unreasonably withheld); and provided further that the Surviving
Corporation and Nationwide shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and non-appealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 6.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Allied and, after the Effective
Time, the Surviving Corporation and Nationwide, thereof.
(b) Nationwide shall cause the Surviving Corporation to keep in effect
in its By-Laws a provision for a period of not less than six years from the
Effective Time (or, in the case of matters occurring prior to the Effective Time
which have not been resolved prior to the sixth anniversary of the Effective
Time, until such matters are finally resolved) which provides for
indemnification of the Indemnified Parties to the full extent permitted by
applicable law.
(c) Nationwide shall cause to be maintained in effect for not less than
six years from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by Allied (provided that Nationwide may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous) with respect to matters occurring
prior to the Effective Time; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period shall exceed 200% of
the per annum rate of premium currently paid by Allied and its Subsidiaries for
such insurance on the date of this Agreement, then Nationwide shall cause Allied
(or the Surviving Corporation if after the Effective Time) to, and Allied (or
the Surviving Corporation if after the Effective Time) shall, provide the
maximum coverage that shall then be available at an annual premium equal to 200%
of such rate, and Nationwide, in addition to the indemnification provided above
in this Section 6.8, shall indemnify the Indemnified Parties for the balance of
such insurance coverage on the same terms and conditions as though Nationwide
were the insurer under those policies.
42
<PAGE> 47
Section 6.9 [Intentionally Omitted.]
Section 6.10 Acquisition Proposals. Allied will not, and will not
permit or cause any of its Subsidiaries or any of the officers or directors of
it or its Subsidiaries to, and shall direct its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any purchase
of 20 percent or more of the assets or any equity securities of, Allied or any
Allied Subsidiaries (other than as set forth in Section 6.10 of the Allied
Disclosure Letter), or any other business combination (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"). Allied will
not, and will not permit or cause any of its Subsidiaries or any of the officers
and directors of it or its Subsidiaries to and shall direct its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, whether made before or after the
date of this Agreement, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that nothing contained in
this Agreement shall prevent Allied or its Board of Directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal or (ii) at any time prior to the payment for Common Shares pursuant to
the Offer (A) providing information in response to a request therefor by a
Person who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from the Person so requesting such information an
executed confidentiality agreement on customary terms; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such an Acquisition
Proposal to the shareholders of Allied, if and only to the extent that, (i) in
each such case referred to in clause (A), (B) or (C) above, the Board of
Directors of Allied determines in good faith after consultation with outside
legal counsel that such action is reasonably likely to be necessary in order for
its directors to comply with their respective fiduciary duties under applicable
law and (ii) in the case referred to in clause (C) above, the Board of Directors
of Allied determines in good faith (after consultation
43
<PAGE> 48
with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and interests of Allied and its shareholders. Allied will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Allied agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 6.10. Allied will notify Nationwide
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall keep Nationwide
informed, on a reasonably current basis, on the status and terms of any such
proposals or offers and the status of any such negotiations or discussions.
Section 6.11 Maintenance of Benefits. For a period of at least one year
following the Effective Time, Nationwide shall provide each employee or former
employee of Allied or any of its Subsidiaries with (i) the same basic
compensation (including base salary, wages or commissions) and annual incentive
opportunity, to the extent applicable, and (ii) benefits which, not individually
but in the aggregate, are substantially comparable, in each case to the
compensation and benefits that were provided to such employee or former employee
by Allied or any of its Subsidiaries (including, but not limited to any Allied
Benefit Plan) as of immediately prior to the Effective Time provided that the
foregoing items (i) and (ii) shall not be deemed to require Nationwide to offer
an employee stock ownership plan or other equity related arrangement. Nothing in
this Section shall require Nationwide to continue any such employee's employment
following the Effective Time, provided however that, in the event that any such
employee is terminated involuntarily following the Effective Time and prior to
the first anniversary thereof by action of Nationwide or any of its
Subsidiaries, such Employee shall receive at least the same severance and
termination benefits as he or she would have received under the terms of the
applicable Allied Benefit Plan, as in effect immediately prior to the Effective
Time. From and after the Effective Time, for purposes of determining
eligibility, but
44
<PAGE> 49
not for purposes of benefit accrual under the Nationwide defined benefit plan,
and for purposes of determining entitlement to vacation, severance and other
benefits for employees under any compensation, severance, welfare, pension (but
not for purposes of benefit accrual), benefit, savings or other plan of
Nationwide or any of its Subsidiaries in which employees of Allied or any of its
Subsidiaries become eligible to participate, service with Allied or any of its
Subsidiaries shall be credited as if such service had been rendered to
Nationwide or such Nationwide Subsidiary provided that Nationwide may, in lieu
of providing retiree medical coverage under Nationwide's retiree medical plan,
cause Allied to continue to offer its retiree medical plan to its current and
former employees as currently in effect. For purposes of each outstanding Allied
short-term, mid-term, and long-term incentive award held by any Allied employee
that is based in whole or in part on the achievement of any performance or other
similar criteria, such award shall be adjusted, as determined in consultation
with Allied, to reflect factors that adversely impact the opportunity of such
Allied employee to achieve such performance or other criteria and which shall
include financial advisory, legal and other expenses incurred in connection with
the Offer and the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) the Offer shall have been successfully completed;
(b) if required by applicable Law, this Agreement and the Merger shall
have been approved and adopted by the vote of the shareholders of Allied at the
Shareholders Meeting called for such purpose; and
(c) no Order entered or Law promulgated or enacted by any Governmental
Entity shall be in effect which would prevent the consummation of the Merger or
any other material transactions completed hereby, and no Proceeding brought by a
Governmental Entity shall have been commenced and be pending which seeks to
restrain, enjoin, prevent, or materially delay or restructure the Merger or any
other material transactions contemplated hereby.
45
<PAGE> 50
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time, whether before or
after approval of the Merger by the shareholders of Nationwide or of Allied:
(a) by mutual consent of Nationwide and Allied;
(b) by Nationwide if the Board of Directors of Allied withdraws its
recommendation to the Allied shareholders to approve the Merger;
(c) by Nationwide or Allied if consummation of the Merger is barred by
a permanent injunction which is final and non-appealable;
(d) by Allied, if, prior to the purchase of Shares pursuant to the
Offer, there is an Acquisition Proposal which the Board of Directors determines
represents a more favorable transaction to Allied and its shareholders than the
transactions contemplated by this Agreement, and if the Board of Directors,
after consultation with outside counsel, shall have determined that failure to
terminate the Agreement is reasonably likely to be inconsistent with the
fiduciary duties of the Board of Directors under applicable Law and Allied has
given Nationwide three Business Days notice of the terms of such Acquisition
Proposal and has paid Nationwide the fee contemplated by Section 8.2(b);
(e) by Allied prior to the completion of the Offer, upon a material
breach of any representation or warranty of Nationwide or Nationwide's failure
to comply in any material respect with any of its covenants or agreements, or if
any representation or warranty of Nationwide or Sub shall be or become untrue in
any material respect, which breach or failure to comply or untruth is not
curable or, if curable, is not cured within 30 Business Days after written
notice thereof has been given to Nationwide (materiality being construed in
light of the transactions contemplated by this Agreement);
46
<PAGE> 51
(f) by Nationwide prior to the completion of the Offer, (i) upon a
material breach of any representation, or warranty of Allied or if any
representation or warranty of Allied shall be or become untrue in any material
respect, (ii) or Allied's failure to comply in any material respect with any of
its covenants or agreements, which breach or failure to comply or untruth is not
curable or, if curable, is not cured within 30 Business Days after written
notice thereof has been given to Allied, (materiality being construed in light
of the transactions contemplated by this Agreement); or
(g) by Nationwide or by Allied, if Common Shares shall not have been
purchased pursuant to the Offer by December 31, 1998, provided that the right to
terminate this Agreement pursuant to this clause (g) shall not be available to a
party whose failure to fulfill any obligation under this Agreement has been the
cause of the failure of such purchase to occur by such date.
Section 8.2 Effect of Termination. (a) In the event of the termination
of this Agreement by either Nationwide or Allied, as provided above, this
Agreement shall thereafter become void provided, that the obligations of the
parties pursuant to Section 6.5 shall survive any termination of this Agreement
and, except as provided in Section 8.2(b) and Section 9.2 hereof, there shall be
no Liability on the part of either party hereto against the other party hereto,
or on the part of its directors, officers, employees, shareholders or agents (or
those of any of the Allied Subsidiaries or Affiliates), except that any such
termination shall be without prejudice to the rights of either party hereto (or
any of the Allied Subsidiaries or Affiliates) arising out of the willful breach
by the other party (or any of the Allied Subsidiaries or Affiliates) of any
representation or warranty or any covenant or agreement contained in this
Agreement.
(b) In the event of termination of this Agreement (x) by Allied
pursuant to Section 8.1(d), (y) by Nationwide pursuant to Section 8.1(b) (other
than if the recommendation is withdrawn because the conditions to the
consummation of the Offer can not be fulfilled other than due to a breach by
Allied) or (z) following the making of an Acquisition Proposal by a third party,
by Nationwide pursuant to Section 8.1(f)(ii) or (g) or by Allied pursuant to
Section 8.1(g)
47
<PAGE> 52
then Allied shall, immediately prior to any such termination (or, in the case of
(z), immediately following the execution of a definitive agreement implementing
any Acquisition Proposal, provided such execution occurs within one year of
termination), pay a termination fee in the amount of $30 million in immediately
available funds by wire transfer to a bank account designated by Nationwide. In
the event of termination of this Agreement by Nationwide pursuant to Section
8.1(f)(i) as a result of a willful breach of a representation or warranty,
Allied shall pay Nationwide $10,000,000 in immediately available funds by wire
transfer to a bank account designated by Nationwide.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations and Warranties. None of the
representations, warranties and agreements in this Agreement shall survive the
Effective Time except as otherwise provided in this Agreement and except for the
agreements contained in Article II and Section 6.8, which shall survive until
expressly provided therein or, if not so expressly provided, indefinitely.
Section 9.2 Fees and Expenses. Subject to Section 8.2(b) hereof, if the
Merger is not consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses, except for expenses incurred in
connection with the printing, mailing and solicitation of proxies from
shareholders and all filing fees and related expenses which shall be borne
equally by Nationwide and Allied.
Section 9.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, upon receipt,
if mailed by registered or certified mail, postage prepaid, return receipt
requested, overnight delivery, confirmed facsimile transmission or hand
delivery, as follows:
48
<PAGE> 53
(i) If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President-Enterprise
Controller
Facsimile No.: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler; Roger A. Craig
Facsimile No.: (614) 249-7254
(ii) If to Allied, to:
Allied Group, Inc.
701 Fifth Avenue
Des Moines, IA 50391-2000
Attention: Douglas L. Andersen
Facsimile No.: (515) 280-4399
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
Facsimile No.: (212) 909-6836
or to such other address as the Person to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.
Section 9.4 Amendments. This Agreement may be amended by the parties
hereto at any time before or after the approval of this Agreement by the
shareholders of Allied, but after such approval no amendment or modification
shall be made which in any way materially adversely affects the rights of such
shareholders without the further approval of such shareholders. This Agreement
may not be amended, modified or supplemented except by written agreement of the
parties hereto.
Section 9.5 No Waiver. Nothing contained in this Agreement shall cause
the failure of either party to insist upon strict compliance with any covenant,
obligation, condition or
49
<PAGE> 54
agreement contained herein to operate as a waiver of, or estoppel with respect
to, any such covenant, obligation, condition or agreement by the party entitled
to the benefit thereof.
Section 9.6 Brokers. Allied represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Allied, except for Allied's financial
advisor, Morgan Stanley & Co. Incorporated, whose fees shall be paid by Allied.
Nationwide represents and warrants that no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Nationwide, except for Nationwide's financial advisor, Credit Suisse
First Boston, whose fees shall be paid by Nationwide.
Section 9.7 Publicity. So long as this Agreement is in effect, each of
the parties hereto (i) shall not, and shall cause its Affiliates not to, issue
or cause the publication of any press release or other announcement to any
Person with respect to this Agreement or the transactions contemplated hereby
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that nothing contained herein shall (A)
limit the right of each of the parties hereto and their Affiliates to make a
legally required filing or communication, provided that, to the extent possible,
such party shall consult with the other party before making such filing or
communication, or responding to any communications initiated by any
non-affiliated Person, including, but not limited to, any rating agency or
Governmental Entity, (B) prohibit either party hereto (or its Affiliates) from
initiating communications with, and making presentations to, any rating agency
or Governmental Entity relating to the transactions contemplated hereby if such
party gives prior notice thereof to the other party hereto, or (C) prohibit
Nationwide or Allied or any of their respective Affiliates from communicating to
any third party information in any way relating to the Merger that has been made
known to the general public, other than in violation of this Agreement, prior to
the time of such communication, (ii) shall cooperate fully with the other party
hereto with respect to issuing or publishing any press release, or other
announcement or other written communication to any non-affiliated Person and
preparing written and oral communications to the employees and agents of each
party hereto with the purpose of effectuating the Merger in the best interests
of the
50
<PAGE> 55
respective shareholders of Nationwide and Allied and (iii) shall promptly notify
the other party of any announcements which are made to affiliated Persons and
any communications received from and responses provided to non-affiliated
Persons, in either case, with respect to this Agreement or the transactions
contemplated hereby.
Section 9.8 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.9 Nonassignability. This Agreement shall not be assigned by
either party hereto by operation of Law or otherwise without the prior written
consent of the other party hereto.
Section 9.10 Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their permitted assigns,
and nothing in this Agreement, expressed or implied, is intended to confer upon
any other Person (including, but not limited to, any policyholder or employee of
Allied, Nationwide or their Subsidiaries) any rights or remedies of any nature
under or by reason of this Agreement, except as expressly provided in Sections
6.8 hereof.
Section 9.11 Duplicates; Counterparts. This Agreement shall be executed
in duplicate and may be executed in counterparts each of which shall be deemed
to constitute an original and constitute one and the same instrument.
Section 9.12 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Ohio (except to the extent that the Iowa Insurance Law and the Iowa
Corporation Law shall be held to govern the terms of the Merger) without regard
to its conflict of laws rules.
Section 9.13 Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties hereto and
supersede all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof and thereof.
51
<PAGE> 56
Section 9.14 Severability. If any provisions hereof shall be held
invalid or unenforceable by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly construed
and shall not affect the validity or effect of any other provision hereof;
provided, however, that the parties shall use reasonable efforts, including, but
not limited to, the amendment of this Agreement, to ensure that this Agreement
shall reflect as closely as practicable the intent of the parties hereto.
Section 9.15 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other party hereto would be irreparably damaged
in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
each of the parties hereto agrees that they each shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions thereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which Nationwide or Allied may be entitled, at law or in equity.
Section 9.16 Survival of Certain Covenants. The provisions of Section
6.8 and 6.11 hereof shall survive the Effective Time.
Section 9.17 Counting. If the date for any action to be taken under
this Agreement (including, but not limited to, the delivery of notices) is not a
Business Day, then such action shall be considered timely taken if performed on
or prior to the next Business Day following such due date.
ARTICLE X
DEFINITIONS
Section 10.1 Definitions. When used in this Agreement, the following
words or phrases have the following meanings:
"Acquisition Proposal" shall have the meaning set forth in Section 6.10
hereof.
52
<PAGE> 57
"Affiliate" shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with another Person or beneficially owns or has the power to vote or
direct the vote of ten percent (10%) or more of the voting stock (or of any
other form of general partnership, limited partnership or voting equity interest
in the case of a Person that is not a corporation) of such other Person. For
purposes of this definition, "control", including the terms "controlling" and
"controlled", means the power to direct the management and policies of a Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee, partner or executor or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including all
Exhibits.
"Allied" shall have the meaning set forth in the preamble to this
Agreement.
"Allied Contracts" shall have the meaning set forth in Section 4.16(a).
"Allied Disclosure Letter" shall mean the disclosure letter delivered
by Allied to Nationwide, dated the date hereof.
"Allied Group" shall mean Allied and the Allied Subsidiaries.
"Allied Insurer" shall mean Allied and each Allied Subsidiary that
transacts or is authorized to transact an insurance or reinsurance business.
"Allied Life" shall mean Allied Life Financial Corporation.
"Allied Mutual" shall have the meaning set forth in the preamble to
this Agreement.
"Allied Real Property" shall have the meaning set forth in Section
4.14(b)
"Allied SAP Statements" shall have the meaning set forth in Section
4.6(iv) hereof.
53
<PAGE> 58
"Allied Subsidiary" or "Allied Subsidiaries" shall mean the
Subsidiaries of Allied that are "significant subsidiaries" within the meaning of
Rule 1-02d of Regulation S-X promulgated by the SEC. References in this
Agreement to Subsidiaries of Allied shall include all of the Allied
Subsidiaries.
"Annual Statements" shall mean, with respect to any Person, the annual
statements of such Person filed with or submitted to the insurance regulatory
body in the jurisdiction in which such Person is domiciled on forms prescribed
or permitted by such regulatory body.
"Arizona Insurance Law" shall mean Title 20 of the Arizona Revised
Statutes, as amended, and the rules and regulations promulgated thereunder.
"Articles of Merger" shall mean the articles of merger in such form as
required by, and executed and acknowledged in accordance, with the IBCA.
"Benefit Plans" shall have the meaning set forth in Section 4.21
hereof.
"Business Day" shall means any day other than Saturday, Sunday or any
other day in which commercial banks in Columbus, Ohio are required to or
permitted to be closed.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"Certificate of Merger" shall mean a certificate of merger in such form
as required by, and executed and acknowledged in accordance with, Section
1701.81 of the Ohio General Corporation Law.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
54
<PAGE> 59
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commonly Controlled Entity" shall have the meaning set forth in
Section 4.21(b) hereof.
"Common Shares" shall have the meaning set forth in the preamble to
this Agreement.
"Computer Software" shall mean any and all computer software consisting
of sets of statements or instructions to be used, directly or indirectly, in a
computer, including, but not limited to, the following: (i) all source code,
object code and natural language code therefor and all component modules
thereof, (ii) all versions thereof, (iii) all screen displays and designs
thereof and (iv) all user, technical, training and other documentation relating
to any of the foregoing.
"Consent or Filing" shall have the meaning set forth in Section 4.5(b)
hereof.
"Contract" or "Contracts" shall mean a contract, agreement, commitment,
indenture, note, bond, mortgage, license, lease, assignment, arrangement or
understanding, whether written or oral.
"Dissenting Shares" shall have the meaning set forth in Section 2.9
hereof.
"Effective Time" shall have the meaning set forth in Section 2.3
hereof.
"Environmental Claim" shall mean any investigation, notice of
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising: (A) pursuant to, or in
connection with, an actual or alleged violation of any Environmental Law; (B) in
connection with any Hazardous Substances or actual or alleged activity
associated with any Hazardous Substances; (C) from any abatement, removal,
remedial, corrective or other response action in connection with any Hazardous
Substances, Environmental Law or other order or directive of any federal, state
or local governmental authority; or (D) from any actual or alleged
55
<PAGE> 60
damage, injury, threat or harm to health, safety, natural resources or the
environment. Environmental Claim shall not include claims for coverage by an
insured.
"Environmental Law" shall mean any local, state or federal statute,
rule, regulation, order, code, directive or ordinance and any binding judicial
or administrative interpretation thereof or requirements thereunder pertaining
to: (A) the regulation and protection of health, safety and the indoor or
outdoor environment; (B) the conservation, management, development, control
and/or use of land (including zoning laws and ordinances), natural resources and
wildlife; (C) the protection or use of surface water and ground water; (D) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, release, threatened release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Substances; or (E)
pollution (including any release into air, land, surface water and ground
water); and includes without limitation the following federal statutes (and
their implementing regulations and the analogous state statutes and
regulations): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984; the Federal Water Pollution Control Act of 1972, as
amended by the Clean Water Act of 1977.
"Environmental Permit" shall mean any permit, license, variance,
certificate, consent, letter, clearance, closure, exemption, authorization,
decision or action or approval required to be obtained from any federal, state
or local governmental authority with jurisdiction over and pursuant to any
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Existing Offer" shall have the meaning set forth in the preamble to
this Agreement.
56
<PAGE> 61
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"Governmental Approvals" shall mean the Consents or Filings identified
or described in the Allied Disclosure Letter or the Nationwide Disclosure
Schedule.
"Governmental Entity" or "Governmental Entities" shall mean a court,
executive office, legislature, governmental agency, commission or
administrative, regulatory or self-regulatory authority or instrumentality,
domestic or foreign.
"Hazardous Substances" shall mean chemicals, products, compounds,
by-products, pollutants, contaminants, hazardous wastes or toxic or hazardous
substances regulated under any Environmental Law, including, but not limited to,
asbestos or asbestos-containing materials, polychlorinated biphenyls, pesticides
and oils, petroleum and petroleum products.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"IBCA" shall mean the Iowa Business Corporation Act.
"Indemnified Parties" shall have the meaning set forth in Section 6.8
hereof.
"Insurance License" shall mean a License granted by a Governmental
Entity to transact an insurance or reinsurance business, issue fixed or variable
annuity contracts or products, or issue life insurance contracts.
"Intellectual Property" shall mean: trademarks, service marks, brand
names, certification marks, trade dress, assumed names, trade names and other
indications of origin, good will associated with the foregoing and registrations
in any extension, modification or renewal of any such registration or
application; inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including but not limited to
divisions,
57
<PAGE> 62
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not in any jurisdiction, and any renewals
or extensions thereof; and any similar intellectual property or proprietary
rights; provided, that Intellectual Property shall include Computer Software.
"Investment Advisers Act" shall mean the Investment Advisers Act of
1940, as amended, and the rules and regulations of the SEC promulgated
thereunder.
"Investment Assets" shall mean bonds, notes, debentures, mortgage
loans, collateral loans and all other instruments of indebtedness, stocks,
partnership or joint venture interests and all other equity interests
(including, but not limited to, equity interests in Subsidiaries or other
Affiliates), real estate and leasehold and other interests therein, certificates
issued by or interests in trusts, cash on hand and on deposit, personal property
and interests therein and all other assets acquired for investment purposes.
"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended, and the rules and regulations of the SEC promulgated thereunder.
"Iowa Attorney General" shall mean the Attorney General of the State of
Iowa.
"Iowa Commissioner" shall mean the Commissioner of Insurance of the
State of Iowa.
"Iowa Corporation Law" shall mean Chapters 490 and 491 of the Iowa
Code, as amended, and the rules and regulations promulgated thereunder.
"Iowa Insurance Law" shall mean Chapters 505 through 523I of the Iowa
Code, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service or any successor agency.
58
<PAGE> 63
"Knowledge of Allied" shall mean the actual knowledge of the officers
of Allied set forth in Section 10.1 of the Allied Disclosure Letter.
"Law" shall mean a law, statute, ordinance, rule or regulation enacted
or promulgated, or Order issued or rendered, by any Governmental Entity.
"Liability" shall mean a liability, obligation, claim or cause of
action (of any kind or nature whatsoever, whether absolute, accrued, contingent
or other, and whether known or unknown), including, but not limited to, any
liability, obligation, claim or cause of action arising pursuant to or as a
result of an Insurance Contract or pursuant to any Environmental Claim.
"License" shall mean a license, certificate of authority, permit or
other authorization to transact an activity or business, whether granted by a
Governmental Entity or by any other Person.
"Lien" shall mean a lien, mortgage, deed of trust, deed to secure debt,
pledge, assessment, security interest, lease, sublease, charge, claim, levy or
other encumbrance of any kind.
"Losses" shall mean all losses, claims, damages, costs, expenses,
liabilities and judgments, including, but not limited to, court costs and
attorneys' fees.
"Material Adverse Effect" shall mean any change in or effect on the
business, operations, or financial condition of Allied or any of its
Subsidiaries that is materially adverse to Allied and its Subsidiaries taken as
a whole except for (i) any change or effect resulting from general economic,
financial or market conditions, (ii) any change or effect resulting from
conditions or circumstances generally affecting the property and casualty
insurance industry, (iii) any change or effect resulting from the actions of
Allied Mutual or of Allied Life Financial Corporation ("Allied Life"), including
but not limited to the termination of any agreements between or among, Allied,
Allied Mutual and/or Allied Life and (iv) any change or effect resulting from
the announcement of the Offer or of this Agreement, including but not limited to
the termination by any agents of their affiliation with Allied.
59
<PAGE> 64
"Merger" shall have the meaning set forth in the preamble to this
Agreement.
"Merger Consideration" shall mean the amount of cash which holders of
Common Shares shall have the right to receive in exchange for their Common
Shares as set forth in Section 2.7 hereof.
"Mutual Merger" shall have the meaning set forth in the preamble to
this Agreement.
"NAIC" shall mean the National Association of Insurance Commissioners.
"Nationwide" shall have the meaning set forth in the preamble to this
Agreement.
"Nationwide Subsidiaries" shall mean the Subsidiaries of Nationwide.
"NPL" shall mean the National Priority List.
"Offer" shall have the meaning set forth in the preamble to this
Agreement.
"Offer Conditions" shall have the meaning set forth in Section 1.1(a).
"Offer Documents" shall have the meaning set forth in Section 1.1 (b)
thereof.
"Offer Price" shall have the meaning set forth in the preamble to this
Agreement.
"Ohio Insurance Law" shall mean Title 39 of the Ohio Revised Code, as
amended, and the rules and regulations promulgated thereunder.
"Ohio Superintendent" shall mean the Superintendent of Insurance of the
State of Ohio.
"Order" shall mean an order, writ, ruling, judgment, directive,
injunction or decree of any arbitrator or Governmental Entity.
60
<PAGE> 65
"Pension Plan" shall have the meaning set forth in Section 4.21(a)
hereof.
"Permitted Liens" shall mean, as to a party hereto, (a) those Liens set
forth in the Allied Disclosure Letter, or otherwise approved in writing by the
other party, (b) any Lien that is set forth in the public records or in title
reports or title insurance binders that have been made available to the other
party relating to any interest in the real property set forth in the Allied
Disclosure Letter, (c) Liens for water and sewer charges and current Taxes not
yet due and payable or being contested in good faith, (d) Liens arising from
securities lending activities undertaken in the ordinary course of business of a
Person, (e) other Liens (including, but not limited to, mechanic's, courier's,
worker's, repairer's, materialman's, warehouseman's and other similar Liens)
arising or incurred in the ordinary course of business as would not,
individually or in the aggregate, materially adversely affect the value of, or
materially adversely interfere with the use of, the property subject thereto or
otherwise reasonably be expected to have a Material Adverse Effect, and (f)
Liens arising or resulting from any action taken by the other party hereto or
any of its respective Subsidiaries (but not including the execution, delivery or
performance of this Agreement or the Merger).
"Person" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, business trust, unincorporated organization or other legal entity.
"Preferred Share" shall have the meaning set forth in the preamble to
this Agreement.
"Proceedings" shall mean civil, criminal or administrative actions,
suits, hearings, claims, investigations and other similar proceedings.
"Proxy Statement" shall have the meaning set forth in Section 4.5(b)
hereof.
"Quarterly Statements" shall mean, with respect to any Person, the
quarterly statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
61
<PAGE> 66
"SAP" shall mean statutory accounting practices prescribed by the NAIC
and prescribed or permitted by the applicable insurance regulatory body applied
on a consistent basis.
"Schedule 14D-1" shall have the meaning set forth in Section 1.1(b)
hereof.
"Schedule 14D-9" shall have the meaning set forth in Section 1.2(b)
hereof.
"SEC" shall have the meaning set forth in Section 1.1(a) hereof.
"SEC Documents" shall have the meaning set forth in Section 4.9 hereof.
"Shareholder Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Shareholders Meeting" shall mean a meeting set forth in Section 3.2
hereof.
"Special Committee" shall have the meaning set forth in Section 4.4(c)
hereof.
"Sub" shall have the meaning set forth in the preamble to this
Agreement.
"Subsidiary" of a Person shall mean an Affiliate of such Person more
than fifty percent of any class of voting stock (or of any other form of voting
equity interest in the case of a Person that is not a corporation) of which is
beneficially owned by the Person directly or indirectly through one or more
other Persons.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Tax or Taxes" shall mean all federal, state, local and foreign taxes,
and other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
62
<PAGE> 67
"Tax Return" shall mean all federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amendments to any of the foregoing relating to Taxes.
"Title IV Plan" shall have the meaning set forth in Section 4.21(b)
hereof.
"Treasury Regulation" shall mean the regulations promulgated by the
U.S. Department of the Treasury pursuant to the Code.
"Welfare Plan" shall have the meaning set forth in Section 4.19(a)
hereof.
[SIGNATURE PAGE TO FOLLOW]
63
<PAGE> 68
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Nationwide, of Sub and of Allied as of the
date first above written.
NATIONWIDE MUTUAL INSURANCE
COMPANY
By
-----------------------------------------
Name: David A. Diamond
Title: Vice President-Enterprise
Controller
NATIONWIDE GROUP ACQUISITION
CORPORATION
By
-----------------------------------------
Name: David A. Diamond
Title: Vice President-Enterprise
Controller
ALLIED GROUP, INC.
By
-----------------------------------------
Name:
Title:
64
<PAGE> 69
Exhibit A
Conditions to the Offer. Notwithstanding any other provision of the
Offer, Sub shall not be required to accept for payment, or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered Common
Shares after the termination or withdrawal of the Offer), to pay for any Common
Shares not theretofore accepted for payment or paid for (i) unless (A) there are
validly tendered and not properly withdrawn prior to the expiration of the Offer
that number of Common Shares which represent a majority of the Common Shares on
a fully-diluted basis (the "Minimum Condition"), and (B) all insurance
regulatory approvals necessary for Nationwide and Sub's acquisition of control
of Allied and its Subsidiaries are obtained on terms and conditions reasonably
satisfactory to Nationwide and such regulatory approval shall have become final
and non-appealable (the "Insurance Regulatory Condition") and any waiting period
applicable to the consummation of the Offer and the Merger under the HSR Act
shall have expired or been terminated, or (ii) if at any time on or after the
date of the Merger Agreement and at or before the time that the particular
Common Shares are accepted for payment (whether or not any other Common Shares
shall theretofore have been accepted for payment or paid for pursuant to the
Offer) any of the following conditions exists:
(a) there shall have occurred and be continuing (i)
any general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States, or (iii) a commencement of a war, armed hostilities
or other international or national calamity directly involving the
United States which has a material adverse effect on the general
economic conditions in the United States;
A-1
<PAGE> 70
(b) any statute, rule, regulation, a temporary, preliminary or
permanent order or injunction shall be promulgated, enacted, entered,
enforced or deemed applicable to the Offer, the Merger or performance
under this Agreement, by any state, federal or foreign government or
governmental authority or court or governmental agency of competent
jurisdiction that (i) prohibits the consummation of the Offer or the
Merger or (ii) imposes material limitations on the ability of Sub
effectively to exercise full rights of ownership with respect to the
Common Shares, including, without limitation, the right to vote any
Common Shares purchased by it on all matters properly presented to the
stockholders of Allied or to operate a material portion of the business
of Allied and its subsidiaries; provided that the Nationwide and Sub
shall have used their reasonable best efforts to have any such decree,
order or injunction vacated or reversed;
(c) Allied shall have entered into an agreement obligating Allied
to enter into an Acquisition Transaction with a person other than
Nationwide, Sub or an affiliate of either;
(d) (i) Allied shall have breached or failed to perform in any
material respect any of its material obligations, covenants or
agreements under the Agreement (materially being construed in light of
the transactions contemplated by the Merger Agreement), (ii) the
representations and warranties of Allied contained in the Agreement
shall not be true and correct as of the date of the Agreement or as of
the scheduled or extended expiration of the Offer, as if made as of
such dates (provided that representations and warranties made as of a
specified date prior to the date of the Agreement, need only be true as
of such date), unless the failure to be so true and correct (without
regard to any materiality qualifiers) would not, in the aggregate, be
reasonably likely to have a Material Adverse Effect or (iii) the
representations and warranties of Allied contained in Sections 4.2 or
4.4 shall not be true and correct in all material respects;
A-2
<PAGE> 71
(e) the Allied Board shall have withdrawn its recommendation or
modified its recommendation in a manner adverse to Nationwide or Sub;
or
(f) the failure to obtain any Governmental Approvals, which
failure, in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
The foregoing conditions are for the sole benefit of Sub and may be
asserted by Sub regardless of the circumstances giving rise to any such
condition or may be waived by Sub in whole or in part at any time and from time
to time in its sole discretion (subject to the terms of the Merger Agreement).
The failure by Sub at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right, the waiver of any such right with respect
to particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
The capitalized terms used in this Exhibit A shall have the meanings set forth
in the Merger Agreement.
A-3
<PAGE> 72
Exhibit B
Shareholder Agreement
B-1
<PAGE> 73
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of June 3, 1998, between
Nationwide Mutual Insurance Company, an Ohio mutual insurance company
("Nationwide"), and Allied Mutual Insurance Company, an Iowa mutual insurance
company (the "Securityholder").
WHEREAS, Nationwide, Nationwide Group Acquisition Corporation,
an Ohio corporation and wholly-owned subsidiary of Nationwide ("Sub"), and
Allied Group, Inc., an Iowa corporation (the "Company"), propose to enter into
an Agreement and Plan of Merger, dated the date hereof (as the same may be
amended or supplemented, the "Merger Agreement"), which provides for a cash
tender offer by Sub (as such tender offer may hereafter be amended from time to
time, the "Offer") to purchase all shares of common stock, no par value, of the
Company (the "Common Shares") and, following the consummation of the Offer, the
merger of Sub with the Company (the "Merger");
WHEREAS, the Securityholder is the record and beneficial owner
of the number of (i) Common Shares, and (ii) shares of 6 3/4% Series Preferred
Stock, no par value, of the Company and (collectively, the "Preferred Shares")
set forth on Schedule A hereto; such securities, as they may be adjusted by
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company, together with securities that may be acquired after the date
hereof by the Securityholder, including Common Shares issuable upon the exercise
of options to purchase Common Shares (as the same may be adjusted as aforesaid),
being collectively referred to herein as the "Securities"; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Nationwide has requested that the Securityholder enter into
this Agreement (capitalized terms not otherwise defined herein shall have the
meanings set forth in the Merger Agreement);
NOW, THEREFORE, to induce Nationwide to enter into, and in
consideration of it entering into, the Merger Agreement, and in consideration of
the premises and the representations, warranties and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
1
<PAGE> 74
1. Tender of Common Shares. The Securityholder agrees to
tender (or cause the record owner thereof to tender), pursuant to and in
accordance with the terms of the Offer, and not to withdraw, all Securities
which are Common Shares. Stockholder hereby acknowledges and agrees that
Nationwide's and Sub's obligation to accept for payment and pay for Common
Shares in the Offer, including any Securities tendered by Securityholder, is
subject to the terms and conditions of the Offer. The parties agree that the
Securityholder will, for all Common Shares tendered by Securityholder in the
Offer and accepted for payment and paid for by Sub, receive the same per share
consideration paid to other shareholders who have tendered into the Offer.
2. Covenants of the Securityholder. The Securityholder agrees
as follows:
(a) The Securityholder shall not, except as contemplated by
the terms of this Agreement, (i) sell, transfer, pledge, assign or otherwise
dispose of, or enter into any Contract (as defined below), option or other
arrangement (including any profit sharing arrangement) or understanding with
respect to the sale, transfer, pledge, assignment or other disposition of, the
Securities to any person other than Nationwide or Nationwide's designee, or (ii)
enter into any voting arrangement, whether by proxy, voting agreement, voting
trust, power-of-attorney or otherwise, with respect to the Securities.
(b) The Securityholder shall not, nor shall the Securityholder
permit any investment banker, financial adviser, attorney, accountant or other
representative or agent of the Securityholder to, directly or indirectly (i)
solicit, initiate or knowingly encourage (including by way of furnishing
information), or knowingly facilitate any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal.
(c) At any meeting of shareholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment thereof or
in any other circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger and the Merger
Agreement is sought, the Securityholder shall, including by initiating a written
consent solicitation if requested by Nationwide, vote (or cause to be voted)
such Securityholder's Securities in favor of the Merger, the adoption of the
Merger Agreement and the approval of the other transactions contemplated by the
Merger Agreement. At any meeting of sharehold-
2
<PAGE> 75
ers of the Company or at any adjournment thereof or in any other circumstances
upon which the Securityholder's vote, consent or other approval is sought, the
Securityholder shall vote (or cause to be voted) the Securityholder's Securities
against (i) any merger (other than the Merger), consolidation, combination, sale
of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any other Acquisition Proposal
(collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Certificate of Incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify, the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement including any consent to the treatment of
any Securities in or in connection with such transaction (collectively,
"Frustrating Transactions").
3. Grant of Irrevocable Proxy Coupled with an Interest;
Appointment of Proxy.
(a) Subject to governmental approvals, the Securityholder
hereby irrevocably grants to, and appoints, any individual who shall be
designated by Nationwide as the Securityholder's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Securityholder, to vote the Securityholder's Securities, or grant a consent or
approval in respect of such Securities, at any meeting of shareholders of the
Company or at any adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, (i) in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement, and (ii) against any
Alternative Transaction or Frustrating Transaction.
(b) The Securityholder represents that any proxies heretofore
given in respect of the Securityholder's Securities are not irrevocable, and
that any such proxies are hereby revoked.
(c) THE SECURITYHOLDER HEREBY AFFIRMS THAT THE PROXY SET FORTH
IN THIS SECTION 3 IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE UNTIL SUCH TIME
AS THIS AGREEMENT TERMINATES IN ACCORDANCE WITH ITS TERMS. The Securityholder
hereby further affirms that the irrevocable proxy is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Securityholder under this
Agreement.
3
<PAGE> 76
The Securityholder hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof.
4. Acquisition Proposals.
(a) Notwithstanding anything to the contrary contained in this
Agreement, during any period of time that the Company is not prohibited by the
Merger Agreement from (A) providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal; (B) engaging in any negotiations or discussions with any Person who
has made an unsolicited bona fide written Acquisition Proposal; or (C)
recommending an Acquisition Proposal to the shareholders of the Company, the
Securityholder's obligations under Sections 1, 2 and 3 of this Agreement shall
be deemed inoperative.
(b) Notwithstanding anything to the contrary contained in this
Agreement, during any period of time that the Securityholder is not prohibited
by the Agreement and Plan of Merger, dated as of the date hereof, by and between
Securityholder and Nationwide (the "Allied Mutual Merger Agreement") from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending an Acquisition Proposal
to the policyholders of the Securityholder, the Securityholder's obligations
under Sections 1, 2 and 3 of this Agreement shall be deemed inoperative. For
purposes of this Section 4(b), "Acquisition Proposal" shall have the meaning
ascribed thereto in the Allied Mutual Merger Agreement.
5. Representations and Warranties of the Securityholder. The
Securityholder hereby represents and warrants to Nationwide as follows:
(a) Authority. The Securityholder has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Securityholder. This Agreement has been duly
executed and delivered by the Securityholder and, assuming this Agreement
constitutes a valid and binding obligation of Nationwide, constitutes a valid
and binding obligation of the Securityholder enforceable against the
Securityholder in accordance with its terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorgani-
4
<PAGE> 77
zation, moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. Except for the
informational filings with the Securities and Exchange Commission and except for
any state insurance department approvals or filings, neither the execution,
delivery or performance of this Agreement by the Securityholder nor the
consummation by the Securityholder of the transactions contemplated hereby will
(i) require any filing with, or permit, authorization, consent or approval
(collectively, "Governmental Approvals") of, any federal, state, local or
municipal foreign or other government or subdivision, branch, department or
agency thereof or any governmental or quasi-governmental authority of any
nature, including any court or other tribunal, (a "Governmental Entity"), except
where the failure to obtain any such Governmental Approvals would not be
reasonably likely to adversely affect the transactions contemplated hereby, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, or give rise to any right of
termination, amendment, cancellation or acceleration under, or result in the
creation of any lien upon any of the properties or assets of the Securityholder
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, permit, concession, franchise, contract, agreement or
other instrument or obligation (a "Contract") to which the Securityholder is a
party or by which the Securityholder or any of the Securityholder's properties
or assets, including the Securityholder's Securities, may be bound, except for
such violations, breaches, defaults, rights of termination, amendment,
cancellation and acceleration and liens which would not be reasonably likely to
adversely affect the transactions contemplated hereby or (iii) violate any
judgment, order, writ, preliminary or permanent injunction or decree (an
"Order") or any statute, law, ordinance, rule or regulation of any Governmental
Entity (a "Law") applicable to the Securityholder or any of the Securityholder's
properties or assets, including the Securityholder's Securities, except for such
violations which would not be reasonably likely to adversely affect the
transactions contemplated hereby
(b) The Securities. The Securityholder's Securities and the
certificates representing such Securities are now, and at all times during the
term hereof will be, held by such Securityholder, or by a nominee or custodian
for the benefit of such Securityholder, and the Securityholder has good and
marketable title to such Securities, free and-clear of any liens, proxies,
voting trusts or agreements, understandings or arrangements, except for any such
liens or proxies arising hereunder and the agreements made hereby. The
Securityholder owns of record or beneficially no securities of the Company, or
any options, warrants or rights exercisable for
5
<PAGE> 78
securities of the Company, other than such Securityholder's Securities, as set
forth on Schedule A hereto.
(c) Brokers. Except as provided in the Allied Mutual Merger
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Securityholder.
(d) Merger Agreement. The Securityholder understands and
acknowledges that Nationwide is entering into the Merger Agreement in reliance
upon the Securityholder's execution and delivery of this Agreement.
6. Representations and Warranties of Nationwide. Nationwide
hereby represents and warrants to the Securityholder as follows:
(a) Authority. Nationwide has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Nationwide and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Nationwide. This Agreement has been duly executed and delivered
by Nationwide and, assuming this Agreement constitutes a valid and binding
obligation of the Securityholder, constitutes a valid and binding obligation of
Nationwide enforceable in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) Securities Act. The Securities will be acquired in
compliance with, and Nationwide will not offer to sell or otherwise dispose of
any Securities so acquired by it in violation of any of, the Securities Exchange
Act of 1934, as amended, or the registration requirements of the Securities Act
of 1933, as amended.
7. Further Assurances. Except as otherwise provided in
Sections 4(a) and 4(b), the Securityholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as
Nationwide may reasonably request
6
<PAGE> 79
for the purpose of effectively carrying out the transactions contemplated by
this Agreement and to vest the power to vote the Securityholder's Securities as
contemplated by Section 3. Nationwide agrees to use its best efforts to take,
or cause to be taken, all actions necessary to comply promptly with all legal
requirements that may be imposed with respect to the transactions contemplated
by this Agreement.
8. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate on the earlier of the termination of
the Merger Agreement in accordance with its terms and the termination of the
Allied Mutual Merger Agreement. Nothing in this Section 8 shall relieve any
party from liability for willful breach of this Agreement.
9. General Provisions.
(a) Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns.
(b) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(c) Notice. All notices, consents, requests, approvals,
authorizations and other communications (collectively, "Notices") required or
permitted to be given hereunder by one party to another shall only be effective
if in writing. All Notices shall be sent (i) by registered or certified mail
(with return receipt requested), postage prepaid, or (ii) by Federal Express,
U.S. Post Office Express Mail, Airborne or similar overnight courier which
delivers, if requested, only upon signed receipt of the addressee (with such
signed receipt being requested), or (iii) by facsimile transmission, and
addressed or transmitted as follows or at such other address or facsimile
number, and to the attention of such other person, as the parties shall give
notice as herein provided:
If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
7
<PAGE> 80
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President -- Enterprise
Controller
Facsimile: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler, Vice President and Associate
General Counsel
Roger A. Craig, Counsel
Facsimile: (614) 249-7254
and
if to the Securityholder, to:
Allied Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50391-2000
Attention: John E. Evans, Chairman of the Board
Douglas L. Andersen, President and Chief
Executive Officer
Facsimile No.: 515-280-4399
with copies to:
Nyemaster, Goode, Voigts, West, Hansell & O'Brien
A Professional Corporation
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309-3899
Attention: Mark C. Dickinson, Esq.
Facsimile No.: 515-283-3108
and
8
<PAGE> 81
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Jeffrey W. Tindell, Esq.
Facsimile No.: 212-451-7321
A Notice shall be effective upon receipt and shall be deemed to be received, if
sent by registered or certified mail, U.S. Post Office Express Mail, Federal
Express, Airborne or similar overnight courier, on the date of receipt by the
recipient as shown on the return receipt card, or if sent by facsimile, upon
receipt by the sender of an acknowledgment or transmission report generated by
the machine from which the facsimile was sent indicating that the facsimile was
sent in its entirety to the recipient's facsimile number; provided that if a
Notice is received by facsimile on a day which is not a Business Day, or after
5:00 p.m. on any Business Day at the addressee's location, such Notice shall be
deemed to be received by the recipient at 9:00 a.m. on the first Business Day
thereafter. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no Notice was given shall be deemed to be
receipt of the Notice as of the date of such rejection, refusal or inability to
deliver.
(d) Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement. The plural of
any defined term shall have a meaning correlative to such defined term, and
words denoting any gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a corresponding
meaning. A reference to any party to this Agreement or any other agreement or
document shall include such party's successors and permitted assigns. A
reference to any legislation or to any provision of any legislation shall
include any modification or re-enactment thereof, any legislative provision
substituted therefor and all regulations and statutory instruments issued
thereunder or pursuant thereto. For purposes of this Agreement, "Person" shall
mean an individual, corporation, partnership, association, joint stock company,
9
<PAGE> 82
limited liability company, Governmental Entity, trust, joint venture, labor
union, estate, unincorporated organization or other entity.
(e) Counterparts. This Agreement shall be executed in
duplicate and may be executed in counterparts each of which shall be deemed to
constitute an original and constitute one and the same instrument. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier
shall be as effective as delivery of a manually executed counterpart of this
Agreement. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
(f) Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(g) No Third-Party Beneficiaries. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
(h) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Iowa without regard to any
conflicts or choice of law provisions thereof or of any other jurisdiction.
(i) Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States. This
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
10
<PAGE> 83
IN WITNESS WHEREOF, each of Nationwide and Securityholder has
caused this Agreement to be signed by its officer thereunto duly authorized, as
of the date first written above.
NATIONWIDE MUTUAL INSURANCE
COMPANY
By:
---------------------------------------
Name: Mark B. Koogler
Title: Vice President and Associate General
Counsel
ALLIED MUTUAL INSURANCE
COMPANY
By:
---------------------------------------
Name: George T. Oleson
Title: Vice President and Corporate Counsel
11
<PAGE> 84
<TABLE>
SCHEDULE A
<CAPTION>
Common Preferred
Name and Address Shares Shares Warrants Options
---------------- ------ ------ -------- -------
<S> <C> <C>
Allied Mutual Insurance Company 498,236 1,827,222 -- --
</TABLE>
12
