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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(AMENDMENT NO. 5)
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
(g)(6) Agreement and Plan of Merger by and between Nationwide Mutual Insurance
Company, and Allied Mutual Insurance Company dated as of June 3, 1998
(g)(7) Agreement and Plan of Merger by and among Nationwide Mutual Insurance
Company, Nationwide Life Acquisition Corporation and Allied Life
Financial Corporation dated as of June 3, 1998
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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
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Exhibit (g)(6)
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NATIONWIDE MUTUAL INSURANCE COMPANY
AND
ALLIED MUTUAL INSURANCE COMPANY
DATED AS OF JUNE 3, 1998
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ARTICLE I
DEFINITIONS..............................................................1
Section 1.1 Definitions.................................................................................1
ARTICLE II
THE MERGER..............................................................11
Section 2.1 The Merger.................................................................................11
Section 2.2 Closing....................................................................................12
Section 2.3 Effective Time.............................................................................12
Section 2.4 Articles of Incorporation and By-Laws of the Surviving Company.............................13
Section 2.5 Board of Directors and Officers............................................................13
Section 2.6 Effect of Merger on Allied Members.........................................................13
Section 2.7 Policyholder Dividend......................................................................13
ARTICLE III
RELATED MATTERS...........................................................14
Section 3.1 Member Approvals...........................................................................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED.............................................15
Section 4.1 Organization and Qualification.............................................................15
Section 4.2 Capitalization of Allied Subsidiaries......................................................16
Section 4.3 Authority Relative to this Agreement.......................................................17
Section 4.4 No Violation; Governmental Filings.........................................................17
Section 4.5 SAP Statements.............................................................................18
Section 4.6 Reserves...................................................................................19
Section 4.7 Absence of Certain Changes or Events.......................................................19
Section 4.8 No Undisclosed Liabilities.................................................................20
Section 4.9 Litigation.................................................................................20
Section 4.10 Compliance with Law........................................................................20
Section 4.11 Assets.....................................................................................21
Section 4.12 Environmental Matters......................................................................22
Section 4.13 Contracts..................................................................................23
Section 4.14 Insurance Issued by Allied.................................................................25
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Section 4.15 Cancellations...............................................................................27
Section 4.16 Operations Insurance........................................................................27
Section 4.17 Taxes and Tax Returns.......................................................................27
Section 4.18 Employees and Benefit Plans.................................................................29
Section 4.19 Intellectual Property.......................................................................29
Section 4.20 Rating Agencies.............................................................................29
Section 4.21 Investment Company..........................................................................29
Section 4.22 Brokers or Finders..........................................................................30
Section 4.23 No Other Representations or Warranties......................................................30
Section 4.24 Limitation on Nationwide's Representations..................................................30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE........................................30
Section 5.1 Organization and Qualification.............................................................30
Section 5.2 Authority Relative to this Agreement.......................................................31
Section 5.3 No Violation; Government Filings...........................................................31
Section 5.4 SAP Statements.............................................................................32
Section 5.5 GAAP Statements............................................................................33
Section 5.6 Absence of Certain Changes or Events.......................................................33
Section 5.7 No Undisclosed Liabilities.................................................................34
Section 5.8 Litigation.................................................................................34
Section 5.9 Compliance with Law........................................................................34
Section 5.10 Insurance Issued by Nationwide Insurers....................................................35
ARTICLE VI
CERTAIN COVENANTS...........................................................35
Section 6.1 Allied Conduct of Business Pending the Merger..............................................35
Section 6.2 Nationwide Conduct of Business Pending the Merger..........................................40
Section 6.3 Reasonable Efforts.........................................................................41
Section 6.4 Access and Information.....................................................................42
Section 6.5 Notice of Proceedings......................................................................42
Section 6.6 Notification of Certain Other Matters......................................................42
Section 6.7 Indemnification............................................................................43
Section 6.8 Transfer Taxes.............................................................................44
Section 6.9 Acquisition Proposals......................................................................44
Section 6.10 Litigation.................................................................................45
Section 6.11 HSR Act....................................................................................45
Section 6.12 Tax Treatment..............................................................................45
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ARTICLE VII
CONDITIONS..............................................................45
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.................................45
Section 7.2 Conditions to Obligation of Allied to Effect the Merger....................................46
Section 7.3 Conditions to Obligation of Nationwide to Effect the Merger................................46
Section 7.4 Frustration of Closing Conditions..........................................................47
ARTICLE VIII
TERMINATION.............................................................47
Section 8.1 Termination................................................................................47
Section 8.2 Effect of Termination......................................................................48
ARTICLE IX
MISCELLANEOUS...........................................................49
Section 9.1 Survival of Representations and Warranties.................................................49
Section 9.2 Fees and Expenses..........................................................................49
Section 9.3 Notices....................................................................................49
Section 9.4 Amendments.................................................................................51
Section 9.5 Extension; Waiver..........................................................................51
Section 9.6 Publicity..................................................................................51
Section 9.7 Headings...................................................................................52
Section 9.8 Nonassignability...........................................................................52
Section 9.9 Beneficiaries..............................................................................52
Section 9.10 Duplicates; Counterparts...................................................................52
Section 9.11 Governing Law; Jurisdiction................................................................52
Section 9.12 Entire Agreement...........................................................................52
Section 9.13 Severability...............................................................................52
Section 9.14 Specific Performance.......................................................................53
Section 9.15 Survival of Certain Covenants..............................................................53
Section 9.16 Counting...................................................................................53
Section 9.17 Service of Process.........................................................................53
Section 9.18 Interpretation.............................................................................53
Section 9.19 Schedules..................................................................................54
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and
between NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company
("Nationwide"), and ALLIED MUTUAL INSURANCE COMPANY, an Iowa mutual insurance
company ("Allied") (Nationwide and Allied being hereinafter sometimes
collectively referred to as the "parties").
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied deem it advisable and in the best interests of the
policyholders of their respective companies to effect the Merger of Allied with
and into Nationwide (the "Merger") upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied have approved the Merger and this Agreement; and
WHEREAS, Nationwide and Allied desire to make certain
representations, warranties, covenants and agreements in connection with such
Merger; and
WHEREAS, the parties intend that the Merger qualify, for
federal income tax purposes, as a reorganization under Section 368(a) of the
Code (as defined in Section 1.1 hereof); and
WHEREAS, concurrently with the execution of this Agreement,
Nationwide is also entering into agreements with respect to the acquisition of
Allied Group (as defined in Section 1.1 hereof) and Allied Life (as defined in
Section 1.1 hereof); and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein,
Nationwide and Allied, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. When used in this Agreement, the
following words or phrases have the following meanings:
"ACQUISITION PROPOSAL" shall mean any bona fide proposal or
offer, whether in writing or otherwise, from any Person other than a party
hereto or any affiliates thereof (a "Third Party") to acquire a party or all or
a material portion of the assets of a party and its Subsidiaries, taken as
whole, pursuant to a merger, consolidation, conversion, demutualization,
reorganization
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or other method of business combination, sale of assets or similar transaction
with respect to such party, including any single or multi-step transaction or
series of related transactions, which is structured to permit such Third Party
to acquire a party or a material portion of the assets of a party and its
Subsidiaries, taken as a whole.
"AFFILIATE" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act; provided that, for purposes of this Agreement none of Allied
Group, Allied Life and any Subsidiary thereof shall be considered an Affiliate
of Allied.
"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 DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Allied to Nationwide, dated the date hereof.
"ALLIED GROUP" shall mean Allied Group, Inc., an Iowa
corporation.
"ALLIED GROUP SEC DOCUMENTS" shall mean all reports, proxy
statements, forms, and other documents required to be filed by Allied Group with
the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
"ALLIED LIFE" shall mean Allied Life Financial Corporation, an
Iowa corporation.
"ALLIED LIFE SEC DOCUMENTS" shall mean all reports, proxy
statements, forms, and other documents required to be filed by Allied Life with
the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
"ALLIED PROXY STATEMENT" shall have the meaning set forth in
Section 3.1(c) hereof.
"ALLIED REAL PROPERTY" shall mean any real property in which
Allied or any of its Affiliates holds a Lien or owns an interest, or in the
management of which Allied or an Affiliate of Allied actively participates.
"ALLIED SAP STATEMENTS" shall have the meaning set forth in
Section 4.5(d) hereof.
"ALLIED SUBSIDIARY" or "ALLIED SUBSIDIARIES" shall mean the
Subsidiaries of Allied and, without limiting the generality of the foregoing,
shall include any Affiliate or Subsidiary of Allied as to which Allied or an
Allied Subsidiary has guaranteed any obligations or owns any interest; provided
that neither Allied Group nor Allied Life (nor any of their respective
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Subsidiaries) shall be included within the definition of Allied Subsidiary.
References in this Agreement to Subsidiaries of Allied shall mean 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.
"ANTITRUST DIVISION" shall mean the Antitrust Division of the
United States Department of Justice.
"ARTICLES OF MERGER" shall mean the articles of merger in such
form as required by, and executed and acknowledged in accordance with the
relevant provisions of the Iowa Insurance Law.
"ASSETS" shall mean, as to a Person, all rights, titles,
franchises and interests in and to every species of property, real, personal and
mixed, and choses in action thereunto belonging, including, but not limited to,
Environmental Permits, Investment Assets, Intellectual Property, Contracts,
Licenses, privileges and all other assets whatsoever, tangible or intangible, of
such Person.
"BUSINESS" shall mean, as to a Person, the business,
operations, activities and affairs of such Person.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or any other day in which commercial banks in Des Moines, Iowa or 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 Revised Code.
"CLOSING" shall have the meaning set forth in Section 2.2
hereof.
"CLOSING AGREEMENT" shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
"CLOSING DATE" shall have the meaning set forth in Section 2.2
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any
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successor law, and the rules and regulations issued by the IRS pursuant to the
Code or any successor law.
"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.
"CONFIDENTIAL INFORMATION" shall mean all information about a
party furnished by a party or its Representatives to the other party or its
Representatives, whether furnished before or after the date hereof, regardless
of the manner in which it is furnished, together with all analyses,
compilations, studies or other documents prepared by the other party or its
Representatives which reflect or are generated from such information.
Confidential Information does not include, however, information about a party
which (a) is or becomes generally available to the public other than as a result
of a disclosure by the other party or its Representatives, (b) was available to
the other party on a nonconfidential basis prior to its disclosure by the party
supplying the information or its Representatives or (c) becomes available to the
other party on a nonconfidential basis from a Person who is not otherwise bound
by a confidentiality agreement with respect to the information, or is not
otherwise prohibited from transmitting the information to the other party.
"CONSENT OR FILING" shall have the meaning set forth in
Section 4.4(b) hereof.
"CONTRACT" shall mean any written contract, agreement,
commitment, indenture, note, bond, mortgage, license, lease or assignment.
"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 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 applicable local, state or
federal statute, rule, regulation, order, code, directive or ordinance and any
binding judicial or administrative
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interpretation thereof or requirements thereunder pertaining to: (A) the
regulation and protection of human health and safety and the outdoor
environment; (B) the protection or use of surface water and ground water; (C)
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 (D) 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; and 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, and any successor Act and the rules and regulations
thereunder or under any successor Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any successor law, and the rules and regulations of the SEC
promulgated thereunder or under any successor law.
"FTC" shall mean the United States Federal Trade Commission or
any successor agency.
"FINANCIAL STATEMENTS" shall mean balance sheets, statements
of income and statements of cash flows, including, but not limited to, all
notes, schedules, exhibits and other attachments thereto, whether consolidated,
combined or separate or audited or unaudited or prepared in accordance with SAP
or GAAP.
"GAAP" shall mean United States generally accepted accounting
principles.
"GAAP FINANCIAL STATEMENTS" shall mean Financial Statements
prepared in accordance with GAAP.
"GOVERNMENTAL APPROVALS" shall mean the Consents or Filings
identified or described in the Allied Disclosure Schedule.
"GOVERNMENTAL ENTITY" shall mean any (i) nation, state,
county, city, town, village,
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district, or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign or other government; (iii) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or (iv) body exercising,
or entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature, including any
arbitral tribunal.
"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, or any successor law, and the rules and
regulations promulgated thereunder or under any successor law.
"INDEMNITEES" shall have the meaning set forth in Section 6.7
hereof.
"INSURANCE CONTRACT" shall mean any Contract of insurance,
including, but not limited to, reinsurance contracts, variable annuity and fixed
annuity contracts or products, life insurance contracts, and funding agreements.
"INSURANCE LICENSE" shall mean any 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, 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, or any successor law, and the rules and regulations of
the SEC promulgated thereunder or under any successor law.
"INVESTMENT ASSETS" shall mean bonds, notes, debentures,
mortgage loans, collateral loans and all other instruments of indebtedness,
stocks, partnership or joint venture
6
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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, or any successor law, and the rules and regulations of the
SEC promulgated thereunder or under any successor law.
"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 INSURANCE LAW" shall mean Chapters 505 through 523I of
the Iowa Code, as amended, and the rules and regulations promulgated thereunder.
"IOWA SECRETARY OF STATE" shall mean the Secretary of State of
the State of Iowa.
"IRS" shall mean the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE" shall mean, (i) as to Allied or any Allied
Subsidiary, the actual knowledge of the following individuals: John E. Evans,
Douglas L. Andersen, Jamie H. Shaffer, Stephen S. Rasmussen, George T. Oleson
and Cheryl M. Citrelli; and (ii) as to Nationwide or any Nationwide Subsidiary,
the actual knowledge of Dimon R. McFerson, Richard D. Crabtree, Robert A.
Oakley, Robert J. Woodward, Jr. and W. Sidney Druen.
"LAW" shall mean any applicable Order, constitution, law,
ordinance, principle of common law, rule, regulation, statute, treaty, judgment
enacted, promulgated, issued, enforced or entered 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,
franchise, 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, hypothecation, deed of
trust, deed to secure debt, pledge, security interest, charge, claim, levy or
other encumbrance of any kind.
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"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 a material adverse effect
on the business, assets, liabilities, results of operations or financial
condition of any party or any of its Subsidiaries, taken as a whole, or on the
ability of such party to consummate the transactions contemplated by this
Agreement, provided, HOWEVER, that, the effects of changes that are generally
applicable to (i) the insurance industry and the markets for insurance and
insurance-related products and the other industries and markets in which a party
and its Subsidiaries operate or (ii) the United States securities markets shall
be excluded from the determination of a Material Adverse Effect; and PROVIDED,
FURTHER, that any adverse effect on a party and its Subsidiaries resulting from
the announcement of Nationwide's proposal to acquire Allied, the execution of
this Agreement and the announcement of this Agreement and the transactions
contemplated hereby shall also be excluded from the determination of a Material
Adverse Effect.
"MAXIMUM PREMIUM" shall have the meaning set forth in Section
6.7 hereof.
"MEETING NOTICES" shall have the meaning set forth in Section
3.1(b) hereof.
"MEMBER" shall mean, as to Nationwide, each policyholder of
Nationwide entitled to vote upon this Agreement as provided in Section 3941.07
of the Ohio Insurance Law, and, as to Allied, each policyholder who is a member
as provided in Section 515.15 of the Iowa Insurance Law.
"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 GAAP FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 5.5 hereof.
"NATIONWIDE INSURER" shall mean Nationwide and each Nationwide
Subsidiary that transacts or is authorized to transact property and casualty
insurance or reinsurance business.
"NATIONWIDE PROXY STATEMENT" shall have the meaning set forth
in Section 3.1(d) hereof.
"NATIONWIDE SAP STATEMENTS" shall have the meaning set forth
in Section 5.4(d) hereof.
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"NATIONWIDE SUBSIDIARIES" shall mean the Subsidiaries of
Nationwide.
"NOTICES" shall have the meaning set forth in Section 9.3
hereof.
"NPL" shall mean the National Priority List.
"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, decision, award,
verdict, judgment, directive, injunction or decree of any arbitrator or
Governmental Entity.
"PERMITTED LIENS" shall mean, as to a party hereto, (a) those
Liens set forth in the Nationwide Disclosure Schedule or the Allied Disclosure
Schedule, 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 Nationwide Disclosure Schedule or
the Allied Disclosure Schedule, (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) mortgages or security interests shown in any
of the party's SAP Statements or any of the party's GAAP Statements as securing
specified liabilities or obligations, (f) mortgages or security interests
incurred in connection with the purchase of property or assets in the ordinary
course of business after the date of any of the party's SAP Statements or any of
the party's GAAP Statements (such mortgages and security interests being limited
to the property or assets so acquired), (g) minor imperfections of title, if
any, none of which is substantial in amount or materially detracts from the
value or impairs the use of the property subject thereto, (h) zoning laws and
other land use restrictions that do not materially impair the present or
anticipated use of the property subject thereto, (i) 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, and (j) 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, trust, joint venture, labor union, estate, unincorporated organization
or other entity.
"POLICYHOLDER DIVIDEND" shall have the meaning set forth in
Section 2.7 hereof.
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"POOLING AGREEMENT" shall mean that certain January 1, 1993
Pooling Agreement, as amended, between Allied and Allied Group.
"PROCEEDINGS" shall mean any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Entity, other than
any of the foregoing which relate to claims made pursuant to any Insurance
Contract.
"PROXY STATEMENTS" shall have the meaning set forth in Section
3.1(d) 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.
"RABBI TRUST" shall have the meaning set forth in Section 4.17
hereof
"RATING AGENCIES" shall have the meaning set forth in Section
4.19 hereof.
"REPRESENTATIVE" shall mean, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, accountant, legal counsel, agent,
representative or expert retained by or acting on behalf of such Person or its
Subsidiaries).
"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.
"SAP STATEMENTS" shall mean Annual Statements and Quarterly
Statements.
"SEC" shall mean the United States Securities and Exchange
Commission or any successor agency.
"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.
"SUPERIOR PROPOSAL" shall mean an Acquisition Proposal which,
if accepted by a party, is reasonably capable of being consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and which, if consummated, would be reasonably
likely, in the view of the board of directors of the party which is the subject
to the Acquisition Proposal, to result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and
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interests of such party and its Members.
"SURVIVING COMPANY" shall have the meaning set forth in
Section 2.1 hereof.
"TAX" shall mean any federal, state, county, local or foreign
taxes, charges, fees, levies or other assessments, including all net income,
gross income, premiums, sales and use, ad valorem, transfer, gains, profits,
windfall profits, excise, franchise, real and personal property, gross receipts,
capital stock, production, business and occupation, employment, disability,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes, other taxes or similar charges of any kind whatsoever imposed by any
Governmental Entity and includes any interest and penalties (civil or criminal)
on or additions to any such taxes.
"TAX RETURN" shall mean a report, return, statement or other
information required under any applicable Law to be filed or provided to any
taxing authority with respect to Taxes including, where permitted or required,
combined or consolidated returns for any group of entities that includes
Nationwide or any Nationwide Subsidiary on the one hand, or Allied or any Allied
Subsidiary on the other hand and any unitary or similar return, information
return, claim for refund, amended return or declaration of estimated Tax.
"TAX RULING" shall mean a written ruling of a taxing authority
relating to Taxes.
"THIRD PARTY" shall have the meaning set forth in Section 1.1
hereof.
"THIRD PARTY ADMINISTRATOR" shall mean any third party
administrator of either Nationwide or Allied.
"TREASURY REGULATION" shall mean the regulations promulgated
by the U.S. Department of the Treasury pursuant to the Code.
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 Allied shall be merged with and into Nationwide in accordance with the
applicable provisions of the Laws of the States of Ohio and Section 521.12 et.
seq. of the Iowa Insurance Law and the separate corporate existence of Allied
shall thereupon cease, and Nationwide, which shall be the surviving company
(hereinafter sometimes referred to as the "Surviving Company"), shall continue
its corporate existence under the Law of the State of Ohio under the name
"Nationwide Mutual Insurance Company." The Merger shall have the effects
provided in Section 3941.42 of the Ohio Insurance Law and Section 521.12 of the
Iowa Insurance Law, and, from and after the Effective Time, the
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Surviving Company shall possess all the rights, authority, privileges,
immunities, powers, licenses, permits and franchises, or a public or private
nature, of Allied, and shall be subject to all the duties, liabilities and
obligations of Allied, and all the rights, authority, privileges, immunities,
powers, licences, permits and franchises of Allied, and all property, real,
personal and mixed, and all debts due to Allied on whatever account and all
other choses in action and every other interest of or belonging to Allied shall
vest in the Surviving Company; and all property, rights, authority, privileges,
immunities, powers, licenses, permits and franchises and every other interest
shall be thereafter the property of the Surviving Company as they were of
Allied; and the title to any real estate or any interest therein, vested by deed
or otherwise in Allied, shall not revert or be in any way impaired by reason of
the Merger; but all rights of creditors and all liens upon any property of
Allied shall be preserved unimpaired; and all debts, duties, liabilities and
obligations of Allied shall thenceforth attach to the Surviving Company, and may
be enforced against it to the same extent as if said debts, duties, liabilities
and obligations had been incurred or contracted by it.
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 10:00 a.m., New York City time, on the second business day
following the date on 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 Section
3941.38(A) of the Ohio Insurance Law and the regulations promulgated thereunder,
and to the Iowa Commissioner in accordance with Section 521A.3 of the Iowa
Insurance Law and the regulations promulgated thereunder and the Iowa
Commissioner and the Iowa Attorney General in accordance with Section 521.12 of
the Iowa 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, on the Closing Date, the parties shall cause a Certificate of
Merger to be filed with the Ohio Secretary of State and the Articles of Merger
shall be filed with the Iowa Secretary of State, and 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 with the Iowa Secretary of State, and (c) such later time as
the parties may agree to 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 all reasonable efforts
to assure that the filings contemplated hereby are made, and the Effective Time
occurs, as soon as is practicable.
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Section 2.4 ARTICLES OF INCORPORATION AND BY-LAWS OF THE
SURVIVING COMPANY. Following the Effective Time, the Articles of Incorporation
of Nationwide, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Company until thereafter changed
or amended as provided therein or by Law. The Amended and Restated Code of
By-Laws of Nationwide, as in effect immediately prior to the Effective Time,
shall be the Amended and Restated Code of By-Laws of the Surviving Company until
thereafter changed or amended as provided therein, by the Articles of
Incorporation of the Surviving Company or by Law. A copy of Nationwide's
Articles of Incorporation and Amended and Restated Code of By-Laws, as in effect
on the date hereof, has been made available to Allied.
Section 2.5 BOARD OF DIRECTORS AND OFFICERS. The directors of
Nationwide immediately prior to the Effective Time shall be the directors of the
Surviving Company immediately following the Effective Time, each of such
directors to hold office, subject to the applicable provisions of the Articles
of Incorporation and Amended and Restated Code of By-Laws of the Surviving
Company, until his or her successor is duly elected and qualified, or his or her
earlier death, resignation or removal. The officers of Nationwide immediately
prior to the Effective Time shall be the officers of the Surviving Company 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 Amended and Restated Code of By-Laws of the Surviving
Company, until his or her successor is duly elected and qualified, or his or her
earlier death, resignation or removal in accordance with the Articles of
Incorporation and Amended and Restated Code of By-Laws of the Surviving Company.
Section 2.6 EFFECT OF MERGER ON ALLIED MEMBERS. From and after
the Effective Time, the policyholders of Allied will become policyholders of
Nationwide or a Nationwide Insurer, in full satisfaction of all rights
pertaining to the policies of Allied. In addition, each policyholder of Allied
will be granted a certificate of membership, substantially in the form attached
hereto as Exhibit A.
Section 2.7 POLICYHOLDER DIVIDEND. Prior to the Closing Date,
Allied shall declare an extraordinary dividend to its policyholders in the
amount of $110 million (the "Policyholder Dividend") and the Policyholder
Dividend shall be payable on or about the Closing Date. The allocation of the
Policyholder Dividend among Allied's policyholders shall be determined in
accordance with the ratio which the net earned premiums that an Allied
policyholder has properly and timely paid to Allied on insurance policies in
effect during the three years immediately preceding the date hereof bears to the
total earned premiums received by Allied from its policyholders during that
three-year period.
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ARTICLE III
RELATED MATTERS
Section 3.1 MEMBER APPROVALS.
(a) Nationwide and Allied shall each take all actions
necessary in accordance with applicable Law and its articles of incorporation
and by-laws to convene a meeting of its Members as promptly as practicable to
consider and vote upon this Agreement. Nationwide and Allied shall jointly
determine a mutually satisfactory means of satisfying the notice, meeting and
other Member approval requirements of applicable Law. Subject to their duties
under applicable Law, each of the Board of Directors of Nationwide and the Board
of Directors of Allied shall recommend that the Members of its respective
company vote in favor of this Agreement and each of Nationwide and Allied shall
use its best efforts to solicit proxies or ballots, as the case may be, from its
Members in favor of this Agreement and shall take all other actions reasonably
necessary or advisable to secure the votes of its Members which are required in
order to approve this Agreement and effect the Merger. Notwithstanding anything
in this Agreement to the contrary, the Board of Directors of Allied may
withdraw, modify or change its recommendation that its Members vote in favor of
this Agreement to the extent that (A) such Board of Directors determines in good
faith that a third party has submitted to Allied an Acquisition Proposal which
is a Superior Proposal, or (B) such Board of Directors determines in good faith
that the failure to withdraw, modify or change such recommendation is reasonably
likely to result in a breach of such Board of Director's fiduciary duties under
applicable Law.
(b) As soon as practicable after the date hereof, Nationwide
and Allied shall each prepare, and each of Nationwide and Allied shall use its
best efforts to have the Ohio Superintendent and the Iowa Commissioner approve,
their respective notices of meetings (the "Meeting Notices") setting forth the
time, place and purpose of the Members' meetings called for the purpose of
approving the Merger, which Meeting Notices shall include a copy of this
Agreement and a summary thereof, if required. Promptly after receipt of approval
by the Ohio Superintendent and the Iowa Commissioner of the applicable Meeting
Notice, (i) Nationwide shall, as soon as practicable after the date hereof,
comply with the provisions of Section 3941.37 of the Ohio Insurance Law, (ii)
Allied shall, as soon as practicable after the date hereof, comply with the
provisions of Section 521.12 et. seq. of the Iowa Insurance Law, and (iii) both
parties shall promptly comply with all other applicable Laws with respect to the
publication or mailing to their respective Members of the applicable Meeting
Notice.
(c) As soon as practicable after the date hereof, Allied
shall prepare a proxy or information statement (together with all amendments,
schedules, and exhibits thereto, the "Allied Proxy Statement") relating to the
solicitation of its Members' approval of the Merger, and shall use its best
efforts to respond promptly to any comments made by any Governmental Entity with
respect to the Allied Proxy Statement and to cause the Allied Proxy Statement to
be mailed to its Members.
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(d) If required, as soon as practicable after the date
hereof, Nationwide shall prepare a proxy or information statement (together with
all amendments, schedules, and exhibits thereto, the "Nationwide Proxy
Statement") relating to the solicitation of its Members' approval of the Merger,
and shall use its best efforts to respond promptly to any comments made by any
Governmental Entity with respect to the Nationwide Proxy Statement and to cause
the Nationwide Proxy Statement to be mailed to its Members. The Allied Proxy
Statement and the Nationwide Proxy Statement are collectively referred to herein
as the "Proxy Statements."
(e) Nationwide and Allied shall furnish all information
concerning it as is reasonably requested to be included in the Meeting Notices
and the Proxy Statements. Each of Allied and Nationwide agrees that the written
information provided by it specifically for inclusion in any Meeting Notice or
the Proxy Statements will not, at the time such Meeting Notice and/or the Proxy
Statements are published or mailed to the Members of each of Allied and
Nationwide and on the date of the meeting relating thereto, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Allied represents and warrants to Nationwide as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION.
(a) Allied is a mutual insurance company duly organized,
validly existing and in good standing under the Laws of the State of Iowa and
has the requisite 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 the requisite power and authority to conduct
its Business as it is currently being conducted. Each of Allied and 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 makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect. Each of the Allied Subsidiaries is listed in the
Allied Disclosure Schedule.
(b) Allied (i) possesses an Insurance License in each
jurisdiction in which Allied 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 business
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reported as being written in the Allied SAP Statements. All such Insurance
Licenses, including, but not limited to, authorizations to transact reinsurance
are in full force and effect without amendment, limitation or restriction, other
than as described in the Allied Disclosure Schedule, and Allied has no 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.
(c) Copies of the Articles of Incorporation and By-laws of
Allied have heretofore been made available to Nationwide and copies of the
Articles of Incorporation and By-laws (and other comparable organizational
documents, if any) of each of the Allied Subsidiaries have heretofore been made
available to Nationwide, and such copies are accurate and complete as of the
date hereof.
(d) Allied does not directly or indirectly beneficially 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,
other than (i) the Allied Subsidiaries, (ii) as disclosed on the Allied
Disclosure Schedule and (iii) investments in publicly traded securities
constituting less than five percent of the outstanding equity of the issuing
entity.
Section 4.2 CAPITALIZATION OF ALLIED SUBSIDIARIES. All of the
outstanding shares of capital stock (or of any other form of equity interest in
the case of an Allied Subsidiary that is not a corporation) of each of the
Allied Subsidiaries have been validly issued and are fully paid and, except as
set forth in the Allied Disclosure Schedule, are owned by either Allied or
another of the Allied Subsidiaries, free and clear of all Liens. Except as set
forth in the Allied Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, calls, rights, convertible securities, obligations to make
capital contributions or advances, or voting trust arrangements, shareholders'
agreements or other agreements, commitments or undertakings of any character to
which Allied or any Allied Subsidiary is a party or by which any of them is
bound relating to the issued or unissued capital stock (or of any other form of
equity interest in the case of an Allied Subsidiary that is not a corporation)
of any of the Allied Subsidiaries or securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of such capital stock
(or of any other form of equity interest in the case of an Allied Subsidiary
that is not a corporation), which obligates Allied or any such Allied Subsidiary
to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered or sold, any such capital stock (or any such other form of equity
interest in the case of an Allied Subsidiary that is not a corporation) or other
securities or obligating Allied or any of the Allied Subsidiaries to issue,
grant, extend or enter into any such subscription, option, warrant, call, right,
security, contribution, advance, arrangement, agreement, commitment or
undertaking. The name and percentage (if less than 100%) of outstanding capital
stock (or of any other form of equity interest in the case of an Allied
Subsidiary that is not a corporation) owned, directly or indirectly, by Allied
are set forth in the Allied Disclosure Schedule with respect to each Allied
Subsidiary.
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Section 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Allied has the requisite corporate power and authority
to execute and deliver this Agreement and, subject to approval of this Agreement
by the Board and Members of Allied, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Allied and the
consummation by Allied 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 Members of Allied, no other corporate
proceedings on the part of Allied are necessary to authorize this Agreement and
the transactions contemplated hereby. The requisite affirmative vote of Members
of Allied at the meeting called pursuant to Section 3.1(a) hereof is the only
vote of Members of Allied necessary to approve and adopt 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 valid and binding
obligation of Nationwide) constitutes a valid and binding agreement of Allied
enforceable against Allied 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.
(c) The Board of Directors of Allied has received the
opinion of Allied's financial advisor, Donaldson, Lufkin & Jenrette Securities
Corporation, to the effect that the aggregate consideration to be received by
the policyholders of Allied pursuant to this Agreement is fair to such
policyholders, as a group, from a financial point of view. It is agreed and
understood that such opinion is for the benefit of Allied's Board of Directors
and may not be relied upon by Nationwide or any Members or Affiliates thereof.
Section 4.4 NO VIOLATION; GOVERNMENTAL FILINGS.
(a) Except as set forth in the Allied Disclosure Schedule,
the execution, delivery and performance of this Agreement by Allied and the
consummation by Allied 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 Contract to which
Allied or any Allied Subsidiary is a party or to which it or any of its Assets
may be subject or (iii) constitute a breach or violation
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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), for any such breaches, violations, conflicts, terminations,
defaults, accelerations or Liens that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
(b) Except for (i) the Governmental Approvals set forth in
the Allied Disclosure Schedule, (ii) the submission of this Agreement with and
the approval of the Merger by the Iowa Commissioner and the Iowa Attorney
General under the Iowa Insurance Law and such other applications, registrations,
declarations, filings, authorizations, Orders, consents and approvals as may be
required under the Laws of other jurisdictions, (iii) the approval of the
Meeting Notice, as contemplated by Section 3.1(b) hereof, (iv) the approval of
this Agreement by the Members of Allied, as contemplated by Section 3.1(a)
hereof, (v) the filings required under the HSR Act and the expiration or earlier
termination of any waiting period applicable to the Merger under such Act, (vi)
the filings pursuant to Section 2.3 hereof, (vii) the filing of appropriate
documents with and such consents as may be required under the Investment Company
Act and the Investment Advisers Act, (viii) any consent or filing that is
disclosed in the Allied Disclosure Schedule or that would not otherwise be
required to be disclosed pursuant to Section 4.4(a) hereof, (ix) such Consents
and Filings as may be required by any applicable state securities or "blue sky"
Laws, and (x) such other such Consents or Filings the failure of which to make
or obtain would not, individually or in the aggregate, be reasonably likely to
prevent or be a material impediment to the consummation of the transactions
contemplated hereby or be reasonably likely to have a Material Adverse Effect,
no consent, approval, permit, notice, Order or authorization of, or
registration, application, declaration or filing with (each a "Consent or
Filing") any Person is required with respect to Allied or any Allied Subsidiary
in connection with the execution and delivery of this Agreement by Allied and
the consummation by Allied of the transactions contemplated hereby.
Section 4.5 SAP STATEMENTS. Allied has previously made
available to Nationwide true and complete copies of the following:
(a) the Annual Statements for Allied as of and for the years
ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statement for Allied as of and for the
calendar quarter ended March 31, 1998;
(c) any supplemental or separate statutory annual statements
or quarterly statements for Allied 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 4.5(a) or (b) hereto; and
(d) the audited SAP balance sheets of Allied as of December
31, 1995, 1996 and 1997 and the related audited summary of operations and
statements of change in capital
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and surplus and cash flows of Allied for each such years, together with the
notes related thereto and the reports thereon of KPMG Peat Marwick, LLP
(collectively with the items described in Section 4.5(a), (b) and (c), the
"Allied SAP Statements").
Since December 31, 1997, Allied 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 is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect.
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, of which Allied has Knowledge, have
been cured or corrected. Each Allied SAP Statement (and the notes related
thereto) referred to in Section 4.5(a), (b), and (d) hereof was prepared (and,
as to SAP Statements filed after the date of this Agreement, will be prepared)
in accordance with SAP and presents (and, as to SAP Statements filed after the
date of this Agreement, will present) fairly, in all material respects, the
financial position of Allied as of the respective dates thereof and the related
summaries of operations and changes in capital and surplus and cash flows of
Allied for the respective periods covered thereby. To the Knowledge of Allied,
each Allied SAP Statement (including the notes related thereto) referred to in
Section 4.5(c) hereof was prepared (or, in the case of similar SAP Statements
filed after the date of this Agreement, will be prepared) in accordance with the
statutory accounting practices required by the insurance Governmental Entity in
the jurisdiction in which such statement was (or will be) filed.
Section 4.6 RESERVES. The aggregate actuarial reserves and
other actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of Allied as established or reflected in its December 31, 1997 Annual
Statement or in the March 31, 1998 Quarterly Statement (the "Allied 1998
Quarterly Statement"): (a)(i) were determined in accordance with generally
accepted actuarial standards consistently applied, (ii) were fairly stated, in
all material respects, in accordance with sound actuarial principles and (iii)
were based on actuarial assumptions that are in accordance with or are more
conservative than those specified in the related Insurance Contracts; and (b)
complied with, in all material respects, the requirements of the Iowa Insurance
Law and all other applicable jurisdictions. Allied owns Assets that qualify as
admitted assets under applicable insurance Laws in an amount at least equal to
the sum of its statutory reserves and other similar amounts.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth in the Allied Disclosure Schedule or as disclosed in the Allied SAP
Statements, since December 31, 1997, each of Allied and the Allied Subsidiaries
has conducted its Business only in the ordinary course of business, consistent
with past practice, and there has not occurred (i) a Material Adverse Effect, or
any event or events which, individually or in the aggregate, are reasonably
likely to have a Material Adverse Effect; (ii) except as required by SAP or
applicable Law, any material change by Allied in its accounting principles,
practices or methods; (iii) any material
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addition or, to the Knowledge of Allied, any development involving a prospective
material addition to Allied's consolidated reserves for future policy benefits
or other policy claims and benefits other than as a result of activities and
events in the ordinary course of business; or (iv) except as required by SAP or
applicable Law, any material change in the accounting, actuarial, investment,
reserving, underwriting or claims administration policies, practices,
procedures, methods, assumptions or principles of Allied. Except as set forth in
the Allied Disclosure Schedule, since December 31, 1997, there has not been any
increase in the compensation payable or that could become payable by Allied or
any of the Allied Subsidiaries to officers or key employees or any amendment of
any of the compensation and benefit plans other than increases or amendments in
the ordinary course or as required by applicable Law.
Section 4.8 NO UNDISCLOSED LIABILITIES. Except as disclosed in
the Allied SAP Statements or as set forth in the Allied Disclosure Schedule,
neither Allied nor any of the Allied Subsidiaries has any Liabilities required
by SAP to be set forth on a balance sheet of Allied or any Allied Subsidiaries,
other than Liabilities arising since the date of the applicable Financial
Statement in the ordinary course of business and consistent with past practice
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
Section 4.9 LITIGATION. Except (i) as set forth in the Allied
Disclosure Schedule or as disclosed in the Allied SAP Statements and (ii) for
any Proceeding which is not reasonably likely to give rise to a Liability in
excess of $250,000, there are no Proceedings pending or, to the Knowledge of
Allied or any of the Allied Subsidiaries, threatened against Allied or any
Allied Subsidiary before any Governmental Entity or arbitrator which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect. Neither Allied nor any Allied Subsidiary is subject to any
Order, except for Orders which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
Section 4.10 COMPLIANCE WITH LAW.
(a) Except as set forth in the Allied Disclosure Schedule,
to the Knowledge of Allied, neither Allied nor any Allied Subsidiary is in
violation (or, with notice or lapse of time or both, would be in violation) of
any term or provision of any Law applicable to it or any of its Assets, the
violation of which is, individually or in the aggregate with all other such
violations, reasonably likely to have a Material Adverse Effect. Allied has made
available to Nationwide all reports (including draft reports) of examinations of
the affairs of Allied (including market conduct examinations) issued by
insurance Governmental Entities for any period ending on a date on or after
January 1, 1993; except as set forth in the Allied Disclosure Schedule, all
deficiencies or violations in such reports for any prior period have been
resolved. Except as set forth in the Allied Disclosure Schedule, all outstanding
Insurance Contracts issued or assumed by Allied are, to the extent required by
Law, on forms and at rates approved by the insurance regulatory authorities of
the jurisdictions where issued or have been filed with and not objected to by
such authorities within the periods provided for objection, except where a
Material Adverse Effect would not result.
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(b) Except as set forth in the Allied Disclosure Schedule,
neither Allied nor any Allied Subsidiary is a party to any Contract with or
other undertaking to, or is subject to any Order by, or is a recipient of any
supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) is reasonably likely to have a Material Adverse
Effect, or (ii) has been received since January 1, 1993 and relates to its
reserve adequacy or its marketing, sales, trade or underwriting practices or
policies and which is reasonably likely to be materially adverse to Allied, nor,
to the Knowledge of Allied, has Allied or any of the Allied Subsidiaries been
notified in writing by any Governmental Entity that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such Order, Contract, undertaking, letter or other written communication.
(c) Allied has implemented procedures and programs which are
designed to provide reasonable assurance that Allied and its agents and
employees are in compliance in all material respects with all applicable Laws,
including, but not limited to, advertising, licensing and sales Laws, except
where noncompliance would not be reasonably likely to have a Material Adverse
Effect.
Section 4.11 ASSETS.
(a) Except as set forth in the Allied Disclosure Schedule
and except for Assets disposed of since December 31, 1997 in the ordinary course
of business and consistent with past practice (i) Allied and each of the Allied
Subsidiaries owns all Assets that are disclosed or otherwise reflected in its
December 31, 1997 Annual Statement and all Assets acquired thereafter, and all
such Assets are owned by such Persons, free and clear of all Liens other than
Permitted Liens; (ii) (A) to Allied's Knowledge, Allied and each Allied
Subsidiary owns good and indefeasible, marketable fee simple title to, or has a
valid leasehold interest in, all real property used in the conduct of its
Business or of a type which would be required to be specifically disclosed by
Allied in Schedule A of its Annual Statement, free and clear of all Liens other
than Permitted Liens; and (B) in the aggregate, all real property, other than
unimproved land, is, in all material respects, suitable for its current uses;
(iii) Allied and each Allied Subsidiary owns, or has a valid leasehold interest
in or has a valid right under Contract to use, all personal property that is
presently used in and is material to the conduct of its Business, free and clear
of all Liens other than Permitted Liens; and (iv) Allied and each Allied
Subsidiary owns, free and clear of all Liens other than Permitted Liens, or is
licensed or otherwise possesses legally enforceable rights to use, all
Intellectual Property that is material to the conduct of its Business; and
neither Allied nor any Allied Subsidiary is in material conflict with or
material violation or material infringement of, nor has Allied or any Allied
Subsidiary received any written notice of any such conflict with or violation or
infringement of, any asserted rights of any other Person with respect to any
Intellectual Property, except for such conflicts and violations which would not
be reasonably likely to have a Material Adverse Effect.
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Section 4.12 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Allied Disclosure Schedule,
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 Environmental Permits required under Environmental Laws and
compliance with the terms and conditions thereof, other than such Allied Real
Property in respect of which the failure to comply with applicable Environmental
Laws is not reasonably likely to have a Material Adverse Effect. Except as set
forth in the Allied Disclosure Schedule, to the Knowledge of Allied, 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, to the Knowledge of
Allied, there are no circumstances that are reasonably likely to prevent or
interfere with such compliance in the future, except to the extent that such
noncompliance is not reasonably likely to have a Material Adverse Effect. To the
Knowledge of Allied, neither Allied nor any Allied Subsidiary has been notified
in writing by any Governmental Entity that any such Environmental Permit will be
modified, suspended or revoked or cannot be renewed or transferred in the
ordinary course of business consistent with past practice or in connection with
the Merger, except where any such modification, suspension or revocation or the
failure to be renewed or transferred is not reasonably likely to have a Material
Adverse Effect.
(b) Except as set forth in the Allied Disclosure Schedule,
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 retained or assumed
either contractually or by operation of Law that is reasonably likely to have a
Material Adverse Effect.
(c) To the Knowledge of Allied, there have been no releases,
spills, leaks or discharges of Hazardous Substances at, from or to any Allied
Real Property (other than those properties set forth in the Allied Disclosure
Schedule) or any other property which 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
which investigation, abatement, removal, remediation, corrective or other
response action is reasonably likely to result in a Material Adverse Effect. To
the Knowledge of Allied, 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 pursuant to applicable Environmental Laws, including, but
not limited to, the CERCLIS or the NPL or (ii) other than those properties set
forth in the Allied Disclosure Schedule, is the subject of any investigation,
abatement,
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removal, remedial, corrective or other response action pursuant to applicable
Environmental Laws.
(d) Except as set forth in the Allied Disclosure Schedule,
to the Knowledge of Allied, no Hazardous Substances were manufactured,
generated, stored, treated, transported from or otherwise managed at any Allied
Real Property, nor were Hazardous Substances from any Allied Real Property
disposed of by Allied at any other property.
Section 4.13 CONTRACTS. Allied has made available to
Nationwide true and complete copies of the following Contracts, which are
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:
(a) all employment, consultation, retirement, termination,
sign-on, buy-out or other Contracts with any present or former officer,
director, trustee, employee, agent, broker or independent contractor of Allied
or any Allied Subsidiary (including, but not limited to, loans or advances to
any such Person or any Affiliate of such Person) providing for annual
compensation of $100,000 or more or for compensation over the term of the
Contract, and any renewal thereof, of $200,000 or more (including, but not
limited to, base salary, bonus and incentive payments and other payments or
fees, whether or not any portion thereof is deferred);
(b) all Contracts (other than, with respect to Investment
Assets, Contracts containing customary restrictions on the ability to own or
operate competing real property in a specified geographic area) with any Person
including, but not limited to, any Governmental Entity, containing any provision
or covenant (i) limiting the ability of Allied or any Allied Subsidiary to
engage in any line of business, to compete with any Person, to do business with
any Person or in any location or to employ any Person or (ii) limiting the
ability of any Person to compete with or obtain products or services from Allied
or any Allied Subsidiary, which, in the case of any such Contract described in
clauses (i) and (ii) is, individually or together with other such Contracts,
reasonably likely to have a Material Adverse Effect;
(c) all Contracts relating to the borrowing of money in
excess of $1,000,000 by Allied or any Allied Subsidiary or the direct or
indirect guarantee by Allied or any Allied Subsidiary of any obligation of any
Person for borrowed money or other financial obligation of any Person in excess
of $1,000,000 (other than indebtedness in respect of Investment Assets), or any
other Liability of Allied or any Allied Subsidiary in respect of indebtedness
for borrowed money or other financial obligation of any Person in excess of
$1,000,000 (other than indebtedness in respect of Investment Assets), including,
but not limited to, any Contract relating to or containing provisions with
respect to (i) the maintenance of compensating balances that are not terminable
by Allied or any Allied Subsidiary without penalty upon not more than ninety
(90) days' notice, (ii) any lines of credit or similar facilities, (iii) the
payment for property, products or services of any other Person even if such
property,
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products or services are not conveyed, delivered or rendered or (iv) any
obligation to satisfy any financial obligation or covenants, including, but not
limited to, take-or-pay, keep-well, make-whole or maintenance of working
capital, capital or earnings levels or financial ratios or to satisfy similar
requirements;
(d) all Contracts (other than Insurance Contracts and other
Contracts entered into in the ordinary course of business) with any Person
containing any provision or covenant relating to the indemnification or holding
harmless by Allied or any Allied Subsidiary of any Person which is reasonably
likely to result in a Liability to Allied or any of the Allied Subsidiaries of
$1,000,000 or more;
(e) all leases or subleases of real property used in the
conduct of the Business of Allied or any Allied Subsidiary and all other leases,
subleases or rental or use Contracts providing for annual rental payments to be
paid by or on behalf of Allied or any Allied Subsidiary, involving, in the case
of each of the foregoing, annual payments in excess of $250,000;
(f) all Contracts relating to the future disposition
(including, but not limited to, restrictions on transfer or rights of first
refusal) or future acquisition of any interest in any business enterprise, and
all Contracts relating to the future disposition of a material portion of the
Assets of Allied or any Allied Subsidiary other than in each case any Investment
Asset or interest in any business enterprise or Assets to be acquired or
disposed of in the ordinary course of business;
(g) all Insurance Contracts (including, but not limited to,
any Contract pursuant to which Allied receives or has received surplus relief)
including, with respect to each such Contract, the ceding and assuming Person,
the business reinsured and the amount of the Liability reinsured;
(h) all other Contracts (other than (i) Insurance Contracts,
(ii) Contracts relating to Investment Assets entered into in the ordinary course
of business, (iii) employment Contracts that are not otherwise required to be
set forth in the Allied Disclosure Schedule, (iv) Contracts solely between
Allied or any Allied Subsidiary, on the one hand, and any Allied Subsidiary, on
the other hand, and (v) other Contracts which are expressly excluded under any
other subsection of this Section 4.14) that involve or are reasonably likely to
involve the payment pursuant to the terms of such Contracts by or to Allied of
$500,000 or more other than Contracts with insurance agents or brokers or the
termination of which is reasonably likely to have a Material Adverse Effect.
(i) all Contracts or arrangements (including, but not
limited to, those relating to allocations of expenses, personnel, services or
facilities) between or among Allied and any Subsidiary or Affiliate of Allied,
other than those Contracts disclosed in the Allied Life SEC Documents or the
Allied Group SEC Documents;
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(j) all outstanding proxies (other than routine proxies in
connection with annual meetings), powers of attorney or similar delegations of
authority of Allied or any Allied Subsidiary to an unrelated Person, other than
those entered into in the ordinary course of business in connection with
Investment Assets; and
(k) all Contracts the terms of which provide that the Merger
will give rise to a severance Liability for Allied, any Allied Subsidiary or the
Surviving Company.
Each of the Contracts made available pursuant to this Section
4.13 is in full force and effect and constitutes a valid and binding obligation
of each of Allied and the Allied Subsidiaries to the extent that it is a party
thereto. Except as set forth in the Allied Disclosure Schedule, neither Allied
nor any Allied Subsidiary is in material violation, breach or default of any
such Contract or, with or without notice or lapse of time or both, would be in
material violation, breach or default of any such Contract, except for any
violation, breach or default which, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect.
Section 4.14 INSURANCE ISSUED BY ALLIED. Except as set forth
in the Allied Disclosure Schedule:
(a) All material contracts, arrangements, treaties and
agreements to which Allied is a party with respect to reinsurance applicable to
insurance in force on the date of this Agreement, and all material contracts,
arrangements, treaties and agreements under which Allied has any obligation to
cede insurance, are valid, binding and in full force and effect in accordance
with their terms. Allied is not in material default of any such material
contract, arrangement, treaty or agreement, except for any default which,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect.
(b) Each insurance policy or certificate form, as well as
any related application form, written advertising material and rate or rule
currently marketed by Allied, the use or issuance of which requires filing or
approval, has been appropriately filed, and if required, approved by the
insurance regulatory authorities of any state in which such policies and forms
are required to be filed, except where the failure to make any such filing or
receive any such approval would not be reasonably expected to have a Material
Adverse Effect. To the Knowledge of Allied, all such policies and certificates,
forms, applications, advertising materials and rates or rules are in compliance
in all material respects with all applicable Laws;
(c) Since January 1, 1994, all claims and benefits claimed
by any Person under any Insurance Contract of Allied have or will have in all
material respects been paid (or provision for payment thereof has been made) in
accordance with the terms of the Contracts under which they arose, and such
payments were not materially delinquent and were paid without fines or
penalties, except for any such claims or claim for benefits of less than
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$500,000 for which Allied reasonably believes there is a reasonable basis to
contest payment and is taking (or is preparing to take) such action;
(d) Except as set forth in the SAP Statements
referred to in Section 4.5 and except as provided by applicable Law, no
provision in any policy in force gives policyholders the right to receive
dividends or distributions on their policies (other than accruals of interest on
cash values or as claim benefits) or otherwise share in the benefits, revenue or
profits of Allied, provided that the practice in certain instances of making
dividends based upon policyholder loss experience or favorable earnings
experience shall not violate the representation contained in this sentence.
Except as incurred in the ordinary course of business, Allied is not liable to
pay commissions upon the renewal of any insurance policy nor is it a party to
any agreement providing for the collection of insurance premiums payable to
Allied by any other Person;
(e) Allied has made available to Nationwide a copy of
all written investment policies and procedures for Allied;
(f) Except as set forth in the Allied Disclosure
Schedule, no Allied Subsidiary is engaged in any activity that would require
registration by Allied or any Allied Subsidiary as an investment company,
broker-dealer, investment advisor or fund administrator under any state or
Federal Law, including the Exchange Act, the Investment Company Act and the
Investment Advisers Act. Neither Allied nor any Allied Subsidiary maintains or
manages any open-end management investment company or portfolio;
(g) Neither Allied nor any Allied Subsidiary is
engaged in the business of serving as a custodian or transfer agent;
(h) Allied has duly and validly filed or caused to be
filed all material reports, statements, documents, registrations, filings or
submissions that were required by applicable insurance Laws to be filed, except
where the failure to make any such filing would not be reasonably likely to have
a Material Adverse Effect; all such filings complied with all applicable Laws in
all material respects when filed, and no material deficiencies have been
asserted with respect to any such filings which have not been satisfied in all
material respects. All outstanding insurance policies, annuity contracts and
assumption certificates issued by Allied and now in force are, to the extent
required under applicable Laws, on forms approved by the insurance regulatory
authority of the jurisdiction where issued and utilize premium rates which if
required to be filed with or approved by insurance regulatory authorities have
been so filed or approved, except where the failure to file or obtain the
approval of such premium rates would not be reasonably likely to have a Material
Adverse Effect, and the premiums charged conform thereto, except where the
failure to conform would not have a Material Adverse Effect;
(i) To Allied's Knowledge, no other party to any
reinsurance, coinsurance or other similar agreement with Allied is in default
thereunder, except for such
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defaults that would not reasonably be expected to have a Material Adverse
Effect.
(j) To Allied's Knowledge, (i) each insurance agent
or broker, at the time such agent or broker wrote, sold or produced business for
Allied, was duly licensed as an insurance agent or broker (for the type of
business written, sold or produced by such insurance agent or broker) in the
particular jurisdiction in which such agent or broker wrote, sold or produced
such business for Allied, and (ii) no such insurance agent or broker violated
(or with notice or lapse of time or both would have violated) any term or
provision of any Law or Order applicable to any aspect (including, but not
limited to, the marketing, writing, sale or production) of the Business of
Allied.
Section 4.15 CANCELLATIONS. Except as set forth in the Allied
Disclosure Schedule, between December 31, 1997 and the date of this Agreement,
no Person or group of Persons acting in concert writing, selling or producing
insurance business, which in the aggregate accounted for one percent (1%) or
more of the gross premium income of Allied for the year ended December 31, 1997,
has terminated or substantially reduced, or threatened to terminate or
substantially reduce, its relationship with Allied.
Section 4.16 OPERATIONS INSURANCE. Allied has made available
to Nationwide copies of all liability, property, workers compensation, directors
and officers liability, and other similar Insurance Contracts that insure the
Business or properties of Allied or any Allied Subsidiary or affect or relate to
the ownership, use, or operations of any Assets of Allied or any Allied
Subsidiary and that have been issued to Allied or any Allied Subsidiary. To the
Knowledge of Allied, all such insurance is in full force and effect and is with
financially sound and reputable insurers. To the Knowledge of Allied or any of
the Allied Subsidiaries, all notices of reportable incidents with respect to
such insurance occurring during the last five years have been given in writing
to appropriate carriers on a basis sufficiently timely to preserve the right of
recovery of such insurance, except where the failure for such incident to be
covered by insurance would not be reasonably likely to have a Material Adverse
Effect. Except as set forth in the Allied Disclosure Schedule, to the Knowledge
of Allied or of any of the Allied Subsidiaries, no party to any Insurance
Contract has stated an intent or threatened to terminate or materially increase
the premium in respect of any such Insurance Contract.
Section 4.17 TAXES AND TAX RETURNS. Except as set forth in the
Allied Disclosure Schedule:
(a) All income Tax Returns and all other material Tax
Returns required under applicable Law to be filed with or provided to any Person
by Allied or any Allied Subsidiary have been (and, as to Tax Returns not filed
as of the date hereof, will be) timely filed and such Tax Returns were true,
complete and correct in all material respects;
(b) Allied and each Allied Subsidiary have within the
time and in the manner prescribed by Law paid all material Taxes due and payable
except for those contested
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in good faith and for which adequate reserves have been taken. To the Knowledge
of Allied, no claim has ever been made by an authority in a jurisdiction where
Allied or any Allied Subsidiary does not file Tax Returns that Allied or any
Allied Subsidiary may be subject to taxation by that jurisdiction, except where
any Taxes that would be owed to such jurisdiction would not be reasonably likely
to be material in amount;
(c) Allied and each Allied Subsidiary have
established (and until the Effective Time will maintain) on their books and
records (i) reserves adequate to pay all Taxes not yet due and payable and all
deficiencies asserted, proposed or threatened, in writing, against Allied or any
Allied Subsidiary and (ii) reserves for deferred Taxes, in each case, in
accordance with SAP or GAAP, as the case may be;
(d) Neither Allied nor any Allied Subsidiary has
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been filed;
(e) Neither Allied nor any Allied Subsidiary has
executed any waivers, extensions or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
(f) No outstanding deficiencies, assessments or
written proposals for the assessment of any Taxes have been proposed, asserted
or assessed in writing against Allied or any of the Allied Subsidiaries by any
taxing authority;
(g) No Proceedings are presently pending with regard
to any Taxes or Tax Returns of Allied or any Allied Subsidiary. Allied has no
Knowledge of any threatened Proceeding with respect to any such Taxes or Tax
Returns.
(h) No power of attorney currently in force has been
granted by Allied or any Allied Subsidiary with respect to any matter relating
to Taxes;
(i) Neither Allied nor any Allied Subsidiary has
received a Tax Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing adverse effect after the Effective Time;
(j) Allied and the Allied Subsidiaries have made
available to Nationwide complete and accurate copies of (i) all Federal income
Tax Returns, and any amendments thereto, filed by or on behalf of Allied and
each Allied Subsidiary for all taxable years since 1994 and (ii) all audit
reports received from any taxing authority relating to any Tax Return filed by
Allied or any Allied Subsidiary;
(k) None of Allied or any Allied Subsidiary is a
party to any Tax allocation or sharing agreement with any Person. None of Allied
or any Allied Subsidiary has
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any liability for Taxes of any Person other than Allied or an Allied Subsidiary
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law), as a transferee or successor, by Contract or otherwise;
(l) Neither Allied nor any Allied Subsidiary is a
party to any Contract or arrangement that, separately or in the aggregate,
could, by reason of the transactions contemplated by this Agreement, give rise
to the payment of any "excess parachute payment" within the meaning of Section
280G of the Code;
(m) Neither Allied nor any Allied Subsidiary has
taken any action or has any Knowledge of any fact or circumstance relating to
Allied or any Allied Subsidiary that is reasonably likely to adversely affect
the status of the Merger as a reorganization under Section 368 of the Code; and
(n) Neither Allied nor any Allied Subsidiary has
entered into a records retention agreement with any taxing authority.
Section 4.18 EMPLOYEES AND BENEFIT PLANS. During the last 5
full fiscal years, Allied has had no employees and no "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), and no "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), or any other similar or related
plan, program, arrangement or policy (written or oral), except (i) as set forth
in the Allied Disclosure Schedule and (ii) the Amendment and Settlement of
Excess Benefit Plan, dated February 13, 1990, and the Amended and Restated
Excess Benefit Plan Trust, dated as of March 1, 1990, created thereunder (the
"Rabbi Trust"), and of which John E.
Evans and James D. Kirkpatrick are participants.
Section 4.19 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; and the consummation of this transaction will not result in the loss
of any rights. The use of the Intellectual Property will not infringe or
otherwise violate the rights of any Person and no Person is challenging,
infringing on or otherwise violating any right with respect to the Intellectual
Property.
Section 4.20 RATING AGENCIES. Except as disclosed in the
Allied Disclosure Schedule, since December 31, 1997, none of A.M. Best and
Company, Standard & Poor's Corporation or Moody's Investor Services, Inc.
(collectively, the "Rating Agencies") has, other than as a result of the
announcement of the Merger or the transactions contemplated hereby (a) imposed
conditions (financial or otherwise) on retaining any currently held rating
assigned to Allied or (b) indicated to Allied that it is considering the
downgrade of any rating assigned to Allied.
Section 4.21 INVESTMENT COMPANY. None of the Allied
Subsidiaries maintains any separate accounts. Neither Allied nor any of its
Subsidiaries conducts activities of or is
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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.
Section 4.22 BROKERS OR FINDERS. No broker, investment banker,
financial advisor or other Person other than Allied's financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation, whose fees and expenses
shall be paid by Allied in accordance with Allied's agreement with such firm,
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 Allied.
Section 4.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except
for the representations and warranties contained in this Agreement, neither
Allied nor any other Person makes any other express or implied representation or
warranty on behalf of Allied including, without limitation, any financial
information, whether historical or projected, delivered or made available to
Nationwide or its Representatives.
Section 4.24 LIMITATION ON NATIONWIDE'S REPRESENTATIONS.
Allied acknowledges that in entering into this Agreement it has not relied on
any representations or warranties of Nationwide or on any materials given to or
made available to Allied or its Representatives by Nationwide or its
Representatives other than the representations and warranties of Nationwide set
forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
Nationwide represents and warrants to Allied as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Nationwide is a
mutual insurance company duly organized, validly existing and in good standing
under the Laws of the State of Ohio and has the requisite corporate power and
authority to conduct its Business as it is currently being conducted. Each of
the Nationwide Subsidiaries is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or formation
and has the requisite corporate power and authority to conduct its Business as
it is currently being conducted. Each of Nationwide and the Nationwide
Subsidiaries 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 where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. Nationwide
possesses an Insurance License in Iowa and in
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each jurisdiction in which Nationwide is required to possess an Insurance
License. All such Insurance Licenses, including, but not limited to,
authorizations to transact reinsurance, 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 has the requisite power and authority
to execute and deliver this Agreement and, subject to approval of this Agreement
by the Members of Nationwide, 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. Except for the approval and adoption of this
Agreement by the Members of Nationwide, no other corporate proceedings on the
part of Nationwide are necessary to authorize this Agreement and the
transactions contemplated hereby. The affirmative vote of at least two-thirds of
the Members of Nationwide voting, in person or by properly executed proxy, at
the meeting called pursuant to Section 3.1 is the only vote of Members of
Nationwide necessary to approve and adopt this Agreement and the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Nationwide and (assuming this Agreement is a valid and binding
obligation of Allied) constitutes a valid and binding agreement of Nationwide
enforceable against Nationwide 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.
(c) The Board of Directors of Nationwide has received
the opinion of Nationwide's financial advisor, Credit Suisse First Boston
Corporation, to the effect that the Merger is fair to the policyholders of
Nationwide, taken as a group, from a financial point of view. It is agreed and
understood that such opinion is for the benefit of Nationwide's Board of
Directors and may not be relied on by Allied or any Members or Affiliates
thereof.
Section 5.3 NO VIOLATION; GOVERNMENT FILINGS.
(a) The execution, delivery and performance of this
Agreement by Nationwide and the consummation by Nationwide 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 Nationwide or any Nationwide Subsidiary, (ii) violate, conflict
with, or result in a breach of any provisions of, or constitute a default (or an
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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 or any Nationwide
Subsidiary under, any of the terms, conditions or provisions of any Contract to
which Nationwide 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 or
any Nationwide Subsidiary is subject other than, in the case of clauses (ii) and
(iii), for any such breaches, violations, conflicts, terminations, defaults,
accelerations or Liens that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
(b) Except for (i) the approval of the Meeting Notice
by the Ohio Superintendent as contemplated by Section 3.1(b) hereof, (ii) the
approval of this Agreement by the Board of Nationwide as contemplated by Section
3.1(a) hereof, (iii) the filing of this Agreement with and the approval of such
by the Ohio Superintendent under the Ohio Insurance Law and the Iowa
Commissioner and the Iowa Attorney General under the Iowa Insurance Law and such
other applications, registrations, declarations, filings, authorizations,
Orders, consents and approvals as may be required under the Laws of other
jurisdictions, (iv) the filings required under the HSR Act and the expiration or
earlier termination of any waiting period applicable to 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) such Consents and
Filings as may be required by any applicable state securities or "blue sky"
Laws, and (viii) such other such Consents or Filings the failure of which to
make or obtain would not, individually or in the aggregate, be reasonably likely
to prevent or be a material impediment to the consummation of the transactions
contemplated hereby or be reasonably likely to have a Material Adverse Effect.
No Consent or Filing of or with any Person is required with respect to
Nationwide or any Nationwide Subsidiary or any Nationwide Affiliate in
connection with the execution and delivery of this Agreement by Nationwide and
the consummation by Nationwide of the transactions contemplated hereby.
Section 5.4 SAP STATEMENTS. Nationwide has previously made
available to Allied true and complete copies of the following:
(a) the Annual Statements for each Nationwide Insurer
as of and for the years ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statements for each Nationwide
Insurer as of and for the calendar quarters ended March 31, 1998;
(c) any supplemental or separate statutory annual
statements or quarterly statements for each Nationwide Insurer 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
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that differ from the Annual Statements or the Quarterly Statements described in
Section 5.4(a) or (b) hereto; and
(d) the audited SAP balance sheets of each Nationwide
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
such Nationwide Insurer for each such year, together with the notes related
thereto and the reports thereon of KPMG Peat Marwick, LLP (collectively with the
items described in Section 5.4(a), (b) and (c), the "Nationwide SAP
Statements").
Each Nationwide 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 Nationwide SAP Statement, of which Nationwide has
Knowledge, have been cured or corrected. Each Nationwide SAP Statement (and the
notes related thereto) referred to in Section 5.4(a), (b), and (d) hereof was
prepared (and, as to SAP Statements filed after the date of this Agreement, will
be prepared) in accordance with SAP and presents (and, as to SAP Statements
filed after the date of this Agreement, will present) fairly, in all material
respects, the financial position of the respective Nationwide Insurers as of the
respective dates thereof and the related summaries of operations and changes in
capital and surplus and cash flow of the respective Nationwide Insurers for the
respective periods covered thereby. To the Knowledge of Nationwide, each
Nationwide SAP Statement (including the notes related thereto) referred to in
Section 5.4(c) hereof was prepared (or, in the case of similar SAP Statements
filed after the date of this Agreement, will be prepared) in accordance with the
statutory accounting practices required by the insurance Governmental Entity in
the jurisdiction in which such statement was (or will be) filed.
Section 5.5 GAAP STATEMENTS. Nationwide has previously made
available to Allied true and complete copies of the (i) audited GAAP Financial
Statements for each of the Nationwide Subsidiaries, other than Nationwide
Insurers, for the years ended December 31, 1995, 1996 and 1997 and (ii)
unaudited GAAP Financial Statements for each of the Nationwide Subsidiaries,
other than Nationwide Insurers, for the three months ended March 31, 1998
(collectively, the "Nationwide GAAP Financial Statements"). Each Nationwide GAAP
Financial Statement was prepared in accordance with GAAP (except as may be
indicated in the notes thereto, or, in the case of unaudited financial
statements, subject to normal year-end audit adjustments and the absence of
notes to such financial statements) and presents fairly, in all material
respects, the financial position of the Nationwide Subsidiaries as to which such
Nationwide GAAP Financial Statements have been provided as of the respective
dates thereof and the related results of operations and cash flows of such
Nationwide Subsidiaries for the respective periods covered thereby (subject, in
the case of unaudited financial statements, to normal year-end audit adjustments
and the absence of notes to such financial statements).
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Nationwide GAAP Financial Statements or the Nationwide SAP
Statements, since December
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31, 1997, each of Nationwide and the Nationwide Subsidiaries has conducted its
Business only in the ordinary course of business, consistent with past practice,
and there has not occurred (i) a Material Adverse Effect, or any event or events
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect; (ii) except as required by SAP, GAAP or applicable Law,
any material change by Nationwide in its accounting principles, practices or
methods; or (iii) except as required by SAP, GAAP or applicable Law, any
material change in the accounting, actuarial, investment, reserving,
underwriting or claims administration policies, practices, procedures, methods,
assumptions or principles of Nationwide.
Section 5.7 NO UNDISCLOSED LIABILITIES. Except as disclosed in
the Nationwide GAAP Financial Statements or the Nationwide SAP Statements,
neither Nationwide nor any of the Nationwide Subsidiaries has any Liabilities
required by SAP or GAAP to be set forth on a balance sheet of Nationwide or any
Nationwide Subsidiaries, other than Liabilities arising since the date of the
applicable Financial Statement in the ordinary course of business and consistent
with past practice that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect.
Section 5.8 LITIGATION. Except as disclosed in the Nationwide
GAAP Financial Statements or the Nationwide SAP Statements, there are no
Proceedings pending or, to the Knowledge of Nationwide or any of the Nationwide
Subsidiaries, threatened against Nationwide or any Nationwide Subsidiary before
any Governmental Entity or arbitrator which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect. Neither Nationwide nor
any Nationwide Subsidiary is subject to any Order, except for Orders which,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
Section 5.9 COMPLIANCE WITH LAW.
(a) To the Knowledge of Nationwide, neither
Nationwide nor any Nationwide Subsidiary is in violation (or, with notice or
lapse of time or both, would be in violation) of any term or provision of any
Law applicable to it or any of its Assets, the violation of which is,
individually or in the aggregate with all other such violations, reasonably
likely to have a Material Adverse Effect. Nationwide has made available to
Allied a list of all reports (including, but not limited to, draft reports) of
examinations of the affairs of each Nationwide Insurer (including, but not
limited to, market conduct examinations) issued by insurance regulatory
authorities for any period ending on a date on or after January 1, 1993; all
material deficiencies or violations in such reports for any prior period have
been resolved. All outstanding Insurance Contracts issued or assumed by any
Nationwide Insurer are, to the extent required by Law, on forms and at rates
approved by the insurance regulatory authorities of the jurisdictions where
issued or have been filed with and not objected to by such authorities within
the periods provided for objection.
(b) Neither Nationwide nor any Nationwide Subsidiary
is a party to any Contract with or other undertaking to, or is subject to any
Order by, or is a recipient of any
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supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) is reasonably likely to have a Material Adverse
Effect, or (ii) has been received since January 1, 1993 and relates to its
reserve adequacy or its marketing, sales, trade or underwriting practices or
policies which is materially adverse to Nationwide, nor, to the Knowledge of
Nationwide or of any of the Nationwide Subsidiaries, has Nationwide or any of
the Nationwide Subsidiaries been notified by any Governmental Entity that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such Order, Contract, undertaking, letter or other
written communication.
(c) Nationwide has implemented procedures and
programs which are designed to provide reasonable assurance that Nationwide and
its agents and employees are in compliance in all material respects with all
applicable Laws, including, but not limited to, advertising, licensing and sales
Laws, except where noncompliance would not be reasonably likely to have a
Material Adverse Effect.
Section 5.10 INSURANCE ISSUED BY NATIONWIDE INSURERS.
(a) Since January 1, 1994, all claims and benefits
claimed by any Person under any Nationwide Insurance Contract have or will have
in all material respects been paid (or provision for payment thereof has been
made) in accordance with the terms of the Contracts under which they arose, and
such payments were not materially delinquent and were paid without fines or
penalties, except for any such claims or claim for benefits of less than
$500,000 for which the affected Nationwide Insurer reasonably believes there is
a reasonable basis to contest payment and is taking (or is preparing to take)
such action; and
(b) to the Knowledge of Nationwide, (i) each
insurance agent or broker, at the time such agent or broker wrote, sold or
produced business for Nationwide, was duly licensed as an insurance agent or
broker (for the type of business written, sold or produced by such insurance
agent or broker) in the particular jurisdiction in which such agent or broker
wrote, sold or produced such business for Nationwide, and (ii) no such insurance
agent or broker violated (or with notice or lapse of time or both would have
violated) any term or provision of any Law or Order applicable to any aspect
(including, but not limited to, the marketing, writing, sale or production) of
the Business of Nationwide.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 ALLIED CONDUCT OF BUSINESS PENDING THE MERGER.
Allied covenants and agrees as to itself and the Allied Subsidiaries that, at
all times up to and including the Effective Time, unless Nationwide shall
otherwise consent in writing which consent shall not be unreasonably withheld
(Nationwide agreeing that it will use its best efforts to respond to any
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request received from Allied arising under this Article VI within 2 Business
Days, or sooner as circumstances may require, after receipt of such request), or
as otherwise expressly permitted or contemplated by this Agreement or as set
forth on the Allied Disclosure Schedule:
(a) Allied shall, and shall cause each Allied
Subsidiary to, conduct its Business only in the ordinary course and in
substantially the same manner as heretofore conducted since December 31, 1997,
and Allied and each Allied Subsidiary shall use all reasonable efforts to
preserve intact its present business organization and preserve its regular
services to, and maintain its relationships with, policyholders, insurers,
agents, sales and distribution organizations, underwriters, investment
customers, brokers, suppliers and all others having business dealings with it to
the end that its goodwill and ongoing Business shall not be impaired in any
material respect at the Effective Time;
(b) Except as contemplated by this Agreement, Allied
shall not, and shall not permit any Allied Subsidiary to, make or propose to
make any change in its dividend practices or policies or in its underwriting,
pricing, claims, risk retention, investment, reinsurance practices or policies
in any material respect; and Allied agrees that it will notify Nationwide and
provide Nationwide with information in reasonable detail regarding any material
transactions (excluding investment transactions in the ordinary course of
business consistent with past practice, but including transactions involving the
securitization of Assets of Allied or of any Allied Subsidiary and transactions
involving derivative securities), whether involving a purchase or sale, that it
or any Allied Subsidiary is seriously considering;
(c) Allied shall not make any material change in
accounting methods or practices, including without limitation any change with
respect to establishment of reserves for unearned premiums, losses (including
without limitation incurred but not reported losses) and loss adjustment
expenses, or any change in depreciation or amortization policies or rates
adopted by it, except as required by Law, GAAP or SAP;
(d) Allied shall not, and shall not permit any Allied
Subsidiary to, (i) amend its charter or by-laws (unless contemplated hereby),
(ii) incur any individual Liability or series of related Liabilities in excess
of $1,000,000 other than in the ordinary course of business consistent with past
practice, (iii) incur any indebtedness for money borrowed in the aggregate for
Allied and the Allied Subsidiaries in excess of $10,000,000 for any such
indebtedness having a maturity of 90 days or less or $1,000,000 for any such
indebtedness having a maturity of more than 90 days, (iii) agree to any Merger,
consolidation, demutualization, acquisition, redomestication, sale of all or a
substantial portion of its Assets, bulk or assumption reinsurance arrangement or
other similar reorganization, arrangement or business combination, (iv) prior to
notifying Nationwide, enter into any material partnership, joint venture or
profit sharing Contract, other than as envisioned by the Statement of Operating
Principles, (v) enter into any Contract limiting the ability of Allied or of any
Allied Subsidiary to engage in any Business, to compete with any Person, to do
business with any Person or in any location or to employ any Person or limiting
the ability of any Person to compete with such party
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or any of its Subsidiaries, (vi) enter into any Contract relating to the direct
or indirect guarantee of any obligation of any Person in respect of indebtedness
for borrowed money or other financial obligation of any Person other than in the
ordinary course of business consistent with past practice, (vii) enter into any
Contract that could materially and adversely affect the consummation of the
transactions contemplated hereby, (viii) violate any of its covenants under the
Pooling Agreement, or (ix) modify any Contract with respect to the subject of
any of the foregoing clauses;
(e) Allied shall not permit any Allied Subsidiary to
issue or sell any shares of or interests in, or rights of any kind to acquire
any shares of or interests in, or to receive any payment based on the value of,
the capital stock of or other equity interests in or any securities convertible
into shares of any capital stock of or other equity interests in any Allied
Subsidiary;
(f) Except (x) as set forth in the Allied Disclosure
Schedule, (y) in the ordinary course of business consistent with past practice,
or (z) as required by the terms of agreements or plans already in effect,
applicable Law or as envisioned in the Statement of Operating Principles, Allied
shall not, and shall not permit any Allied Subsidiary to (i) adopt or implement,
or commit to adopt or implement, or materially amend, any collective bargaining,
compensation, employment, consulting, pension, profit sharing, bonus, incentive,
group insurance, termination, retirement or other employee benefit Contract,
plan or policy, (ii) enter into or materially amend any severance Contract,
(iii) increase in any manner the compensation of, or enter into any Contract
relating to the borrowing of money by, its directors, officers or other
employees, except pursuant to the terms of agreements or plans as currently in
effect provided that in no event shall any such individual increase in annual
compensation exceed $400,000 per year, (iv) increase by more than 10% the
aggregate number of its employees, (v) pay or agree to pay any pension,
retirement allowance or other employee benefit not required by the current terms
of any existing plan, agreement or arrangement to any director, officer or other
employee, whether past or present, (vi) voluntarily recognize, or involuntarily
become subject to, any labor organization or any other Person as a collective
bargaining representative of one or more bargaining units comprising a material
number of employees, or (vii) other than obligations that arise by operation of
law or under the by-laws of a party as they exist on the date of this Agreement,
or as contemplated by this Agreement, enter into, adopt or increase any
indemnification or hold harmless arrangements with any directors, officers or
other employees or agents of such party or any of its Subsidiaries or any other
Person; provided that Allied may amend the terms of the Rabbi Trust to provide
for specified investment guidelines with respect to the assets of the Rabbi
Trust;
(g) Other than in the ordinary course of business
consistent with past practice, Allied shall not, and shall not permit any Allied
Subsidiary to, make any capital expenditures or expenditures or commitments for
expenditures for the purchase or lease of any products or services or group of
products or services (other than with respect to Investment Assets) which in one
or a series of related transactions exceed $1,000,000 or which in the
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aggregate for Allied and the Allied Subsidiaries taken as a whole exceed
$2,500,000, except for expenditures relating to this Agreement and the
consummation of the transactions contemplated hereby, and expenditures required
to be made pursuant to existing Contracts to which Allied or any Allied
Subsidiary is a party;
(h) Other than in the ordinary course of business
consistent with past practice or in connection with the redemption of
outstanding guaranteed investment contracts in the exercise of Allied's
reasonable judgment, Allied shall not, and shall not permit any Allied
Subsidiary to, waive any rights with a value in excess of $500,000 or any other
rights which are material to any Contract or make any payment, direct or
indirect, of any Liability in excess of $500,000 before the same comes due in
accordance with its terms, in each case, including, but not limited to, any
provision of any Insurance Contract to permit a cash-out thereof;
(i) Allied shall not, and shall not permit any Allied
Subsidiary to, other than pursuant to the operation of separate accounts in the
ordinary course of business, consistent with existing strategies, (i) sell,
lease, mortgage, encumber or otherwise grant any interest in or dispose of any
of its Assets which, individually or in the aggregate, are material to the
financial condition of Allied or of Allied and the Allied Subsidiaries taken as
a whole, and, in addition, in the case of Liens, for Permitted Liens and Liens
not individually in excess of $500,000 and not aggregating in excess of
$2,000,000 or (ii) restructure, amend, modify or otherwise affect any Investment
Asset or any Contract relating thereto which is material to the financial
condition of Allied or of Allied and the Allied Subsidiaries taken as a whole,
and, in either case described in clauses (i) and (ii), only in accordance with
the statement of investment policy set forth in the Allied Disclosure Schedule
attached hereto; and Allied shall furnish to Nationwide a monthly report, in
detail reasonably acceptable to Nationwide, of all such transactions or other
changes (other than changes in market values or ordinary course changes such as
interest payments, maturities, etc.) affecting Investment Assets of Allied or
any Allied Subsidiary which took place since the last such report;
(j) Allied agrees that it shall not, nor shall it
permit any Allied Subsidiary to, other than pursuant to the operation of
separate accounts involved in real estate in the ordinary course, consistent
with existing strategies, make any equity real estate investments (other than
through restructuring or foreclosure or pursuant to commitments existing at the
date hereof or to protect the value of existing investments in the exercise of
reasonable business judgment) and that neither Allied nor any Allied Subsidiary
shall take any action, other than in the exercise of reasonable business
judgment and following discussion with Nationwide, which results, individually
or in the aggregate, in (i) the realization of any gross capital loss or losses
in an amount of $10,000,000 or more or (ii) an adverse impact on the surplus of
Allied or of an Allied Subsidiary in an amount of $10,000,000 or more;
(k) Other than in the ordinary course of business
consistent with past practice, Allied shall not, and shall not permit any Allied
Subsidiary to, enter into any material Contract or amend or waive any material
provision of any material Contract which would
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involve the payment by Allied or any Allied Subsidiary of $1,000,000 or more;
(l) Other than in the ordinary course of business
consistent with past practice, Allied shall not, and shall not permit any Allied
Subsidiary to, settle or compromise any claim in any action, proceeding or
investigation which could result in an expenditure for Allied and the Allied
Subsidiaries in excess of $2,000,000;
(m) Allied shall not, and shall not permit any Allied
Subsidiary to, purchase or otherwise acquire, except pursuant to a Contract in
effect on the date of this Agreement, (i) any controlling equity interest in any
Person (other than Investment Assets), (ii) any non-publicly traded securities
in excess of $5,000,000 per transaction or $5,000,000 per issuer or credit,
(iii) any investments in fixed income securities rated in NAIC Class 4, 5 or 6,
non-publicly traded equity securities or Assets required to be shown on Schedule
BA of a Person's Annual Statement in excess of $5,000,000 per transaction or
$5,000,000 per issuer or credit, or (iv) any real property or mortgage
investments except in the ordinary course of managing the existing portfolio of
real property and mortgage investments, including foreclosing purchase money
mortgages, extensions and refinancings;
(n) Allied shall not, and shall not permit any Allied
Subsidiary to, enter into any new, or materially amend any existing, reinsurance
Contracts or arrangements, except in accordance with existing reinsurance
agreements or in the ordinary course of business and consistent with past
practice;
(o) Allied shall, and shall cause each Allied
Subsidiary to, maintain uninterrupted its existing insurance coverage of all
types in effect or procure substantially similar substitute insurance policies
with financially sound and reputable insurance companies in at least such
amounts and against such risks as are currently covered by such policies if such
coverage is available, except for insurance coverage the failure to so keep
would not have a Material Adverse Effect;
(p) Allied shall deliver to Nationwide as promptly as
practicable after preparation thereof, unaudited or audited, as the case may be,
SAP Statements filed by or on behalf of Allied after the date hereof;
(q) Allied shall not, nor shall Allied permit any
Allied Subsidiary to, take any actions that would be reasonably likely to
adversely affect the status of the Merger as a reorganization under Section 368
of the Code;
(r) Neither Allied nor any Allied Subsidiary shall
(i) make or rescind any material express or deemed election relating to Taxes,
(ii) make a request for a Tax Ruling or enter into a Closing Agreement,
settlement or compromise with respect to any material Tax matter or (iii) with
respect to any material Tax matter, change any of its methods of reporting
income or deductions for Federal income Tax purposes from those employed in the
preparation
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of its Federal income Tax Return for the Taxable year ending December 31, 1997,
except as may be required by Law;
(s) Other than in the ordinary course of Business and
consistent with past practice, neither Allied nor any Allied Subsidiary shall
declare, set aside or pay any dividends or distributions (whether in cash, stock
or property) in respect of any capital stock of any Allied Subsidiary or redeem,
purchase or otherwise acquire any of such Allied Subsidiary's capital stock;
(t) Neither Allied nor any Allied Subsidiary shall
settle pending or threatened litigation in an amount exceeding $1,000,000, other
than settlement of pending or threatened litigation with respect to claims
arising under contracts of insurance or reinsurance underwritten, ceded or
assumed by any Allied Subsidiary which settlement will not have a Material
Adverse Effect;
(u) Allied shall not amend any agreement with Allied
Group, Allied Life or any Subsidiaries thereof; and
(v) Neither Allied nor any Allied Subsidiary shall
agree, in writing or otherwise, to take any of the actions prohibited by the
foregoing clauses (a) through (u).
Section 6.2 NATIONWIDE CONDUCT OF BUSINESS PENDING THE MERGER.
Nationwide covenants and agrees that, at all times up to and including the
Effective Time, unless Allied shall otherwise consent in writing which consent
shall not be unreasonably withheld (Allied agreeing that it will use its best
efforts to respond to any request received from Nationwide arising under this
Article VI within 2 Business Days after the receipt of such request), or as
otherwise expressly permitted or contemplated by this Agreement:
(a) Nationwide shall use all reasonable efforts to
preserve intact its present business organization and preserve its regular
services to, and maintain its significant business relationships with,
policyholders, insureds, agents, underwriters, brokers, investment customers,
suppliers and all others having business dealings with it to the end that its
goodwill and ongoing Business shall not be impaired in any material respect;
(b) Nationwide shall not (i) amend its articles of
incorporation or by-laws in a manner which would be inconsistent with the
consummation of the transactions contemplated hereby, (ii) agree to any Merger
in which it is not the surviving entity or any consolidation, demutualization,
redomestication, sale of all or substantially all of its Assets or any other
similar reorganization, arrangement or business combination or (iii) enter into
or modify any Contract in a manner that will or is reasonably likely to
materially and adversely affect the consummation of the transactions
contemplated hereby;
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(c) Nationwide shall maintain uninterrupted its
existing insurance coverage of all types in effect or procure substantially
similar substitute insurance policies with financially sound and reputable
insurance companies in at least such amounts and against such risks as are
currently covered by such policies if such insurance coverage is available,
except for insurance coverage the failure to so keep in effect would not have a
Material Adverse Effect;
(d) Nationwide shall not, nor shall Nationwide permit
any Nationwide Subsidiary to, take any actions that would be reasonably likely
to adversely affect the status of the Merger as a reorganization under Section
368 of the Code; and
(e) Nationwide shall not agree, in writing or
otherwise, to take any of the actions prohibited by the foregoing clauses (a)
through (d).
Section 6.3 REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions
herein provided, each of the parties hereto agrees to use all reasonable 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
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 resolution of all organizational
and human resources issues relating to the transactions contemplated hereby,
(iv) the obtaining or making of all Consents, Environmental Permits, Filings or
Licenses necessary or desirable to ensure that the Business of the Surviving
Company may be conducted without disruption consistent with the past practice of
each of the parties and (v) 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 reasonably
satisfactory to both Allied and Nationwide. Nothing set forth in this Section
6.3 shall limit or affect actions permitted to be taken pursuant to Section 6.9.
(b) Nationwide covenants that it will submit the Form
A regulatory applications for Allied, Allied Group and Allied Life
simultaneously, and will amend its current Form A filing for Allied Group to
include supplemental Form A filings for Allied and Allied Life, shall use its
reasonable best efforts to (i) conduct the regulatory hearing and approval
process concurrently for each of Allied, Allied Group and Allied Life, (ii) seek
concurrent regulatory approvals for Nationwide's transactions with each of
Allied, Allied Group and Allied Life, and (iii) conduct the regulatory approval
process in a manner so as to protect the policyholder interests of each of
Allied and Nationwide. Both Allied and Nationwide agree to use their respective
reasonable best efforts to coordinate and cooperate during the regulatory
approval process.
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Section 6.4 ACCESS AND INFORMATION.
(a) Subject to the terms of Section 6.4(b), each of
Nationwide and Allied shall (i) afford to the other and the Representatives of
the other, including environmental consultants, reasonable access during normal
business hours through the period commencing on the date hereof and continuing
until immediately prior to the Effective Time to all of its and its
Subsidiaries' Assets, books, Tax Returns, Contracts, commitments and records,
including for purposes of environmental assessments and other environmental due
diligence, and (ii) during such period, each of Nationwide and Allied shall
furnish promptly to the other all such information concerning its Business,
Assets and personnel or those of any of its Affiliates, in either clause (i) or
(ii), as the other may reasonably request.
(b) Unless otherwise agreed in writing by the
parties, each of the parties agree (a) except as required by law, to keep all
Confidential Information confidential and not to disclose or reveal any
Confidential Information to any person other than those Persons employed by it
or on its behalf who are actively and directly participating in the planning,
negotiation and implementation of the transactions contemplated hereby or who
otherwise need to know the Confidential Information and to cause those persons
to observe the terms of this Section 6.4(b) and (b) not to use the Confidential
Information for any purpose other than in connection with the planning,
negotiation and implementation of the transactions contemplated hereby. In the
event of the termination of this Agreement for any reason, each of the parties
agrees to return, and cause its Representatives to return, to the other all
copies of written Confidential Information relating to the other and to destroy
all memoranda, notes and other writings prepared based upon or including
Confidential Information supplied by the other party and neither party shall use
Confidential Information supplied by the other for any purpose.
Section 6.5 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
best of its Knowledge, threatened which relate to the execution of this
agreement or the consummation of the transactions contemplated hereby.
Section 6.6 NOTIFICATION OF CERTAIN OTHER MATTERS. Each party
shall promptly notify the other of any of the following events should any such
events occur subsequent to the date hereof:
(a) the receipt by such party of any written notice
from 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
is reasonably likely to have a Material Adverse Effect; and
(b) the receipt by such party of any written notice
from or to any Governmental Entity in connection with this Agreement or the
transactions contemplated hereby.
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In furtherance of the foregoing, to the fullest extent permitted under
applicable Law, each party shall make available to 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 6.7 INDEMNIFICATION.
(a) Nationwide agrees that all rights to
indemnification now existing in favor of any of the current or former employees,
directors, agents or officers of Allied or any of the Allied Subsidiaries (the
"Indemnitees"), with respect to any Losses (including, but not limited to,
Losses arising out of any litigation or threatened litigation) based on,
arising, in whole or in part, out of, or otherwise in respect of, any action
which is taken, or matter existing or occurring on or prior to the Effective
Time, as provided in Allied's articles of incorporation or by-laws or any
indemnification agreements by and between any of the Indemnitees and Allied or
otherwise existing to the fullest extent under Law on the date hereof shall
survive the Merger.
(b) From and after the Effective Time, Nationwide
agrees that it will indemnify and hold harmless each of the Indemnitees from and
against any and all Losses (including, but not limited to, Losses arising out of
any litigation or threatened litigation) based on, arising, in whole or in part,
out of, or otherwise in respect of, any action which is taken, or matter
existing or occurring on or prior to the Effective Time. Nothing contained
herein, however, shall require Nationwide to indemnify any Indemnitee if a court
of competent jurisdiction shall have determined that such indemnification is
unenforceable or void as a matter of public policy, and such determination shall
have become final and nonappealable.
(c) For a period of six years after the Effective
Time, Nationwide shall maintain in effect directors' and officers' liability
insurance covering those persons who are currently covered by Allied's
directors' and officers' liability insurance policy on terms (including the
amounts of coverage and the amounts of deductibles, if any) that are comparable
to the terms now applicable to directors and officers of Nationwide, or, if more
favorable to Allied's directors and officers, the terms now applicable to them
under Allied's current policies; provided, however, that in no event shall
Nationwide be required to expend in excess of the greater of 200% of the annual
premium currently paid by Allied for such coverage and the annual premium paid
by Nationwide for its current directors' and officers' liability insurance
coverage (the "Maximum Premium"); and provided further, that if the premium for
such coverage exceeds the Maximum Premium, Nationwide shall purchase a policy
with the greatest coverage available for
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the Maximum Premium.
(d) In the event that Nationwide or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Nationwide assume
the obligations set forth in this Section 6.7.
(e) The provisions of this Section 6.7 shall survive
the consummation of the Merger at the Effective Time and are intended to be for
the benefit of, and shall be enforceable by, each Indemnitee, his or her heirs
and his or her representatives and are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such Person
may have under the articles of incorporation or by-laws of the Surviving Company
or any of its Subsidiaries, under any contract, under applicable Law or
otherwise.
Section 6.8 TRANSFER TAXES. The Surviving Company shall pay or
cause to be paid any real property transfer and similar Taxes to which the
Allied policyholders may be subject as a result of the Merger and the
transactions contemplated hereby, and the Surviving Company shall file or cause
to be filed all Tax Returns relating to such transfer Taxes which are due.
Section 6.9 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'
Representatives not to, directly or indirectly, initiate, solicit, knowingly
encourage or otherwise knowingly facilitate the making of any 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 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 knowingly 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 (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 such an Acquisition
Proposal to the Members 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 that the failure to take such action is
reasonably likely to result in a breach of such Board's fiduciary duties under,
or otherwise violate, applicable Law; and (ii) in each case referred to in
clause (B) or (C) above, the Board of Directors of Allied determines in good
faith that such Acquisition Proposal may be a Superior Proposal. Allied will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations
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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 6.9.
Section 6.10 LITIGATION. From and after the date hereof and
until the Effective Time, Nationwide shall cease, in any and all respects, the
prosecution of any pending 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 6.11 HSR ACT. Nationwide and Allied shall take all
actions necessary to file as soon as practicable after the date hereof all
notifications, filings and other documents required under the HSR Act, and to
respond as promptly as practicable to any inquiries received from the FTC, the
Antitrust Division and any other Governmental Entity for additional information
or documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection therewith.
Section 6.12 TAX TREATMENT. The parties intend the Merger to
qualify as a reorganization under Section 368(a) of the Code; each party and
its affiliates shall use its best efforts to cause the Merger to so qualify.
Each of the parties agrees that neither it nor any of its Affiliates shall take
any action, including any transfer or other disposition of assets or any
interest in Allied after the Closing, that would cause the Merger not to qualify
as a reorganization under Section 368(a) of the Code. Nationwide shall report
the Merger for income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and any comparable state or local tax statute.
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 Closing Date of the following
conditions:
(a) this Agreement and the Merger shall have been
approved and adopted by the requisite votes of the respective Members of
Nationwide and Allied at a special meeting of the Members of Nationwide and
Allied called for such purpose;
(b) the waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been earlier terminated
and, other than the filings provided for in subclauses (a) and (b) of the second
sentence of Section 2.3, all Governmental Approvals and other Consents or
Filings which are required to be obtained prior to the Effective
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Time (other than those Governmental Approvals for which the failure to obtain
would not be reasonably likely to have a Material Adverse Effect) shall have
been obtained and not rescinded or adversely modified or limited or, if merely
required to be filed, such filings shall have been made and accepted, and all
waiting periods prescribed by applicable Law shall have expired or been
terminated in accordance with applicable Law; provided that no such Governmental
Approval or other Consent or Filing shall contain any conditions or limitations
that impose or seek to impose any limitation on the ability of the Surviving
Company and its Subsidiaries, taken as a whole, to conduct its Business or own
its Assets after the Effective Time in substantially the same manner as the
parties and their respective Subsidiaries presently conduct their Business or
own their Assets and which conditions and limitations would have a Material
Adverse Effect on the Surviving Company and its Subsidiaries, taken as a whole;
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.
Section 7.2 CONDITIONS TO OBLIGATION OF ALLIED TO EFFECT THE
MERGER. The obligations of Allied to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, any one
or more of which may be waived by Allied, but only to the extent permitted by
Law and subject to Section 9.5 hereof:
(a) The representations and warranties of Nationwide
contained in this Agreement shall be true and correct on the date hereof and on
and as of the Closing Date as though made on the Closing Date (other than those
representations and warranties that expressly address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and correct as of such date or with respect to such period), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), does not have, and is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Nationwide; and
(b) Nationwide shall have performed and complied in
all material respects with all obligations, covenants and agreements required to
be performed and complied with by it under this Agreement at or prior to Closing
Date.
Section 7.3 CONDITIONS TO OBLIGATION OF NATIONWIDE TO EFFECT
THE MERGER. The obligations of Nationwide to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions,
any one or more of which may be waived by Nationwide, but only to the extent
permitted by Law and subject to Section 9.5 hereof:
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(a) The representations and warranties of Allied
contained in this Agreement shall be true and correct on the date hereof and on
and as of the Closing Date as though made on the Closing Date (other than those
representations and warranties that expressly address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and correct as of such date or with respect to such period), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), does not have, and is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Allied; and
(b) Allied shall have performed and complied in all
material respects with all obligations, covenants and agreements required to be
performed and complied with by it under this Agreement at or prior to the
Closing Date.
Section 7.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Allied
nor Nationwide may rely on the failure of any condition set forth in Section
7.1, 7.2 or 7.3, as the case may be, to be satisfied if such failure was caused
by such party's failure to use its best efforts to consummate the Merger and the
other transactions contemplated by this Agreement.
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 Members of Nationwide or of Allied:
(a) by the mutual written agreement of the parties
hereto duly authorized by action taken by or on behalf of their respective
Boards of Directors; or
(b) by Nationwide or Allied if the Merger shall not
have occurred on or before June 30, 1999; or
(c) by Nationwide if the number of votes in favor of
this Agreement cast by the Members of Nationwide required for the consummation
of the Merger shall not have been obtained at the meeting of its Members or at
any adjournment thereof duly held for such purpose; or
(d) by Allied if the number of votes in favor of this
Agreement cast by the Members of Allied required for the consummation of the
Merger shall not have been obtained at the meeting of its Members or at any
adjournment thereof duly held for such purpose; or
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(e) by Allied if Nationwide (x) breaches or fails in
any material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have, or is reasonably likely to
have, a Material Adverse Effect on Nationwide, in each case such that the
conditions set forth in Section 7.1 or Section 7.2 would not be satisfied;
PROVIDED, HOWEVER, that if any such breach is curable by Nationwide through the
exercise of its best efforts and for so long as Nationwide shall be so using its
best efforts to cure such breach, Allied may not terminate this Agreement
pursuant to this Section 8.1(e); or
(f) by Nationwide if Allied (x) breaches or fails in
any material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have, or is reasonably likely to
have, a Material Adverse Effect on Allied, in each case such that the conditions
set forth in Section 7.1 or Section 7.3 would not be satisfied; PROVIDED,
HOWEVER, that if any such breach is curable by Allied through the exercise of
its best efforts and for so long as Allied shall be so using its best efforts to
cure such breach, Nationwide may not terminate this Agreement pursuant to this
Section 8.1(f); or
(g) by Allied, if the Board of Directors of Allied
(or any committee thereof) shall have withdrawn or modified or changed in a
manner adverse to Nationwide its approval or recommendation of this Agreement
or the Merger in order to approve and permit Allied to execute a definitive
agreement with a Third Party relating to an Superior Proposal; or
(h) by Nationwide, if the Board of Directors of
Allied (or any committee thereof) shall have withdrawn or modified or changed in
a manner adverse to Nationwide its approval or recommendation of this Agreement
or the Merger or shall have recommended an Superior Proposal, or Allied shall
have entered into a definitive agreement providing for an Superior Proposal
with a Third Party.
Section 8.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement by either
Nationwide or Allied, as provided in Section 8.1, written notice thereof shall
forthwith be given to the other party specifying the provision hereof pursuant
to which such termination is made, this Agreement shall thereafter become void
and 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,
policyholders, shareholders or agents (or those of any of its Subsidiaries or
Affiliates), except that (i) any such termination shall be without prejudice to
the rights of either party hereto (or any of its Subsidiaries or Affiliates)
arising out of the willful breach by the other party of any covenant or
agreement contained in this Agreement, and (ii) with respect to Nationwide and
Allied, the obligations pursuant to this Section 8.2, Section 6.4(b) and
Section 9.2 shall survive termination.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time or the termination of this Agreement.
Section 9.2 FEES AND EXPENSES. Whether or not the Merger is
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 policyholders which shall be
borne by Nationwide and Allied in proportion to the number of Members thereof.
Section 9.3 NOTICES. 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
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, Vice President and Associate General Counsel
Roger A. Craig, Counsel
Facsimile No.: (614) 249-7254
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with a copy to:
Holleb & Coff
55 E. Monroe
Chicago, Illinois 60603
Attention: Eric M. Fogel, Esq.
Facsimile No.: (312) 807-3900
If to Allied, 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
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
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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.
Section 9.4 AMENDMENTS. Subject to applicable Law, this
Agreement may be amended by the parties hereto at any time before or after the
approval of this Agreement by the Members of Nationwide or of Allied, but after
such approval no amendment or modification shall be made which in any way
materially adversely affects the rights of such Members without the further
approval of such Members. Any amendment, modification or material waiver of this
Agreement shall be subject to the approval of the Ohio Superintendent, the Iowa
Commissioner and the Iowa Attorney General. This Agreement may not be amended,
modified or supplemented except by written agreement of the parties hereto.
Section 9.5 EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any inaccuracies
in the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) except
as provided by Section 9.4, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. Nothing contained in
this Agreement shall cause the failure of either party to insist upon strict
compliance with any covenant, obligation, condition or 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 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 in this Agreement
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
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of the respective Members of Nationwide and Allied and (iii) shall promptly
notify the other party of 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 9.7 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 9.8 NONASSIGNABILITY. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either
party hereto by operation of Law or otherwise without the prior written consent
of the other party hereto.
Section 9.9 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,
shareholder 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 Section 2.6, Section 2.7, Section 6.7, Section 6.8,
Section 6.10 and Section 6.12 hereof.
Section 9.10 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.
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.
Section 9.11 GOVERNING LAW; JURISDICTION. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Iowa without regard to the conflict or choice of laws rules thereof or
of any other jurisdiction.
Section 9.12 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to
the subject matter hereof and thereof.
Section 9.13 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 the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction or other authority declares that
any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court making such determination shall have the
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power to reduce the scope, duration, area or applicability of the term or
provision, to delete specific words or phrases, or to replace any invalid, void
or unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision; 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 9.14 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 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, in equity or pursuant to this Agreement.
Section 9.15 SURVIVAL OF CERTAIN COVENANTS. The provisions of
Section 2.6, Section 2.7, Section 6.7, Section 6.8, Section 6.9, Section 6.10
and Section 6.12 hereof shall survive the Effective Time.
Section 9.16 COUNTING. If the due 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.
Section 9.17 SERVICE OF PROCESS. Each party irrevocably
consents to the service of process in any action or proceeding by mailing copies
thereof by registered United States mail, postage prepaid, return receipt
requested, to its address as specified in or pursuant to Section 9.3 hereof.
However, the foregoing shall not limit the right of a party to effect service of
process on the other party by any other legally available method.
Section 9.18 INTERPRETATION.
(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation."
(c) 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
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to any particular provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Agreement unless otherwise specified.
(d) 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.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and permitted
assigns.
(f) 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.
(g) All references to "$" and dollars shall be deemed
to refer to United States currency unless otherwise specifically provided.
(h) The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available.
Section 9.19 SCHEDULES. The Allied Disclosure Schedule and the
Nationwide Disclosure Schedule shall each be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein. Any matter disclosed pursuant to the Allied Disclosure Schedule
or the Nationwide Disclosure Schedule shall be deemed to be disclosed for all
purposes under this Agreement but such disclosure shall not be deemed to be an
admission or representation as to the materiality of the item so disclosed.
54
<PAGE> 59
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Nationwide and of Allied as of the
date first above written.
NATIONWIDE MUTUAL INSURANCE COMPANY
By
----------------------------------------
Name: Mark B. Koogler
Title: Vice President and Associate General Counsel
ALLIED MUTUAL INSURANCE COMPANY
By
----------------------------------------
Name: Douglas L. Andersen
Title: President and Chief Executive Officer
<PAGE> 60
Exhibit A
NATIONWIDE MUTUAL INSURANCE COMPANY
CERTIFICATE OF ASSUMPTION, MEMBERSHIP
AND PARTICIPATION
You are hereby notified that Allied Mutual Insurance Company ("Allied")
has, effective as of ___________ (the "Effective Time"), merged (the "Merger")
with and into Nationwide Mutual Insurance Company ("Nationwide").
From and after the Effective Time, all references in your policy with
Allied are hereby changed to Nationwide. Nationwide has initially assumed all
rights and duties under your policy.
Nationwide is one insurance company in a large group of affiliated
insurance companies called the Nationwide Insurance Enterprise (the
"Enterprise"). Nationwide agrees that for as long as your policy remains
continuously in force (including renewals or replacements thereof) from and
after the Effective Time with an insurance company within the Enterprise that is
authorized to transact property and casualty insurance or reinsurance business:
A. Your policy shall have those voting rights within Nationwide as if
it were a policy issued by Nationwide, as and to the extent provided under the
Ohio Insurance Law and Nationwide's Articles of Incorporation;
B. Your policy shall have those rights in the event of the liquidation,
merger, consolidation, mutual holding company reorganization, demutualization or
similar extraordinary transaction of Nationwide as if your policy had been
continuously with Nationwide since the date of its initial issuance by Allied.
Such rights shall not be reduced by reason of any policyholder dividend paid in
respect of your policy in connection with the Merger.
This Certificate shall continue in effect as long as your policy has
been renewed or replaced, without a lapse in coverage, by any insurance company
within the Enterprise that is authorized to transact property and casualty
insurance or reinsurance business. This Certificate, as of the Effective Time,
forms a part of and should be attached to your policy.
<PAGE> 61
IN WITNESS WHEREOF, Nationwide Mutual Insurance Company has caused this
Certificate of Assumption, Membership and Participation to be duly signed and
issued.
----------------------- ----------------------
Secretary President
<PAGE> 1
Exhibit (g)(7)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NATIONWIDE MUTUAL INSURANCE COMPANY
NATIONWIDE LIFE ACQUISITION CORPORATION
AND
ALLIED LIFE FINANCIAL CORPORATION
DATED AS OF JUNE 3, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I 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........................................................8
Section 2.3 Effective Time.................................................8
Section 2.4 Articles of Incorporation and By-Laws of the Surviving
Corporation....................................................9
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.....................................10
Section 2.8 Exchange of Certificates and Related Matters...................10
Section 2.9 Dissenting Shares..............................................13
Section 2.10 Adjustments to Prevent Dilution................................14
Section 2.11 Options........................................................14
ARTICLE III ADDITIONAL AGREEMENTS..........................................14
Section 3.1 Preparation of Proxy Statement; Information Supplied...........14
Section 3.2 Meeting of Shareholders........................................15
Section 3.3 Filings; Other Action..........................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ALLIED.......................17
Section 4.1 Organization and Qualification.................................17
Section 4.2 Capitalization of Allied.......................................18
Section 4.3 Subsidiaries...................................................19
Section 4.4 Authority Relative to this Agreement...........................20
Section 4.5 No Violation; Governmental Filings.............................21
Section 4.6 SAP Statements.................................................23
Section 4.7 GAAP Statements................................................24
Section 4.8 Reserves.......................................................24
Section 4.9 SEC Documents..................................................25
Section 4.10 Absence of Certain Changes or Events...........................26
Section 4.11 No Undisclosed Liabilities.....................................26
Section 4.12 Takeover Statutes..............................................27
Section 4.13 Compliance with Law............................................27
Section 4.14 Assets.........................................................29
Section 4.15 Environmental Matters..........................................31
Section 4.16 Contracts......................................................33
Section 4.17 Insurance Issued by Allied Insurers............................37
Section 4.18 Cancellations..................................................41
i
<PAGE> 3
Section 4.19 Operations Insurance...........................................41
Section 4.20 Taxes and Tax Returns..........................................42
Section 4.21 Benefit Plans..................................................47
Section 4.22 Labor Relations and Employment.................................51
Section 4.23 Reserved.......................................................53
Section 4.24 Properties.....................................................53
Section 4.25 Intellectual Property..........................................53
Section 4.26 Transactions with Affiliates...................................53
Section 4.27 Voting Requirements............................................54
Section 4.28 Reserved.......................................................54
Section 4.29 Investment Company.............................................54
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NATIONWIDE AND SUB...........54
Section 5.1 Organization and Qualification.................................54
Section 5.2 Authority Relative to this Agreement...........................55
Section 5.3 No Violation...................................................55
ARTICLE VI CERTAIN COVENANTS..............................................57
Section 6.1 Allied Conduct of Business Pending the Merger..................57
Section 6.2 Reserved.......................................................64
Section 6.3 Reasonable Efforts.............................................64
Section 6.4 Access and Information.........................................65
Section 6.5 Environmental Due Diligence....................................65
Section 6.6 Notice of Proceedings..........................................65
Section 6.7 Notification of Certain Other Matters..........................66
Section 6.8 Indemnification, Directors' and Officers' Insurance............67
Section 6.9 Intercompany Agreements........................................68
Section 6.10 Acquisition Proposals..........................................69
ARTICLE VII CONDITIONS.....................................................71
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.....71
Section 7.2 Conditions to Obligation of Allied to Effect the Merger........72
Section 7.3 Conditions to Obligation of Nationwide to Effect the Merger....72
ARTICLE VIII TERMINATION....................................................73
Section 8.1 Termination....................................................73
Section 8.2 Effect of Termination..........................................75
ARTICLE IX MISCELLANEOUS..................................................76
Section 9.1 Survival of Representations and Warranties.....................76
Section 9.2 Fees and Expenses..............................................76
Section 9.3 Notices........................................................76
Section 9.4 Amendments.....................................................77
ii
<PAGE> 4
Section 9.5 No Waiver......................................................77
Section 9.6 Brokers........................................................78
Section 9.7 Publicity......................................................78
Section 9.8 Headings.......................................................79
Section 9.9 Nonassignability...............................................79
Section 9.10 Beneficiaries..................................................79
Section 9.11 Duplicates; Counterparts.......................................79
Section 9.12 Governing Law; Jurisdiction....................................79
Section 9.13 Entire Agreement...............................................80
Section 9.14 Severability...................................................80
Section 9.15 Specific Performance...........................................80
Section 9.16 Survival of Certain Covenants..................................81
Section 9.17 Counting.......................................................81
ARTICLE X DEFINITIONS....................................................81
Section 10.1 Definitions....................................................81
EXHIBITS
Exhibit A Conditions of the Offer
Exhibit B Nationwide Life Acquisition Corporation, Articles of
Incorporation and Code of By-laws
Exhibit C 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 LIFE ACQUISITION CORPORATION, an Ohio corporation and
a wholly-owned subsidiary of Nationwide ("Sub") and ALLIED LIFE FINANCIAL
CORPORATION, an Iowa corporation ("Allied") (hereinafter sometimes collectively
referred to as (the "parties").
WHEREAS, Nationwide and Sub propose to make a tender offer (as it
may be amended from time to time as permitted under this Agreement, the "Offer")
to purchase all outstanding shares of common stock, no par value, of Allied (the
"Common Shares"), at a purchase price of $30.00 per share, net to the seller in
cash, without interest thereon (the "Offer Price"), upon the terms and subject
to the conditions set forth in this Agreement; and the Board of Directors of
Allied has adopted resolutions approving the Offer and recommending that holders
of Common Shares accept the Offer;
WHEREAS, the merger of Sub with Allied (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding Common Share, other than Common Shares owned directly or
indirectly by Nationwide and, if applicable, Dissenting Shares (as defined in
Section 2.9), will be converted into the right to receive in cash the Offer
Price, has been authorized by all necessary corporate action on behalf of
Nationwide and Sub and has been adopted by the Board of Directors of Allied;
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 Agreement"), attached hereto as Exhibit
C, pursuant to which Allied Mutual has, among other things, agreed (1) to sell
all of its Common Shares to Sub at the
<PAGE> 6
Offer Price, upon the terms and subject to the conditions set forth in the
Shareholder Agreement, and (2) to sell to Sub all of the outstanding shares of
6.75% Series Preferred Stock (the "Preferred Shares") owned by Allied Mutual;
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) Subject to the provisions of this Agreement, as promptly as
practicable but in no event later than five (5) Business Days after the public
announcement by Nationwide and Allied of this Agreement, Nationwide and Sub
shall commence the Offer. The obligation of Sub to, and of Nationwide to cause
Sub to, complete the Offer and accept for payment, and pay for, any Common
Shares tendered pursuant to the Offer shall be subject only to the conditions
set forth in the Offer to Purchase (any of which may be waived in whole or in
part by Sub in its reasonable discretion, except that Sub shall not waive the
Minimum Condition (as defined in Exhibit A) without the consent of Allied) and
to the terms and conditions of this Agreement. Sub expressly reserves the right
to modify the terms of the Offer, except that, without the consent of Allied,
Sub shall not (i) reduce the number of Common Shares subject to the Offer, (ii)
reduce the Offer Price, (iii) amend or add to the conditions to the Offer
described in Exhibit A, (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,
2
<PAGE> 7
(i) 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, (ii) extend the Offer for any
period required by any rule, regulation, interpretation or position of the SEC
or the staff thereof applicable to the Offer and (iii) extend the Offer for any
reason on one or more occasions for an aggregate period of not more than 10
business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence. 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 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 promptly as practicable after the
expiration of the Offer.
(b) On the date of commencement of the Offer, Nationwide and
Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which contained an offer to
purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents included therein pursuant to which the Offer
has been made, together with any supplements or amendments thereto, the "Offer
Documents"). Nationwide and Sub agree that the Offer Documents shall comply as
to form 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 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. Each of Nationwide, Sub and Allied agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information 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
3
<PAGE> 8
Documents as so corrected to be disseminated to Allied's shareholders, in each
case as and to the extent required by applicable federal securities laws.
Subsequent to the execution of this agreement, Allied and its counsel shall be
given reasonable opportunity to review and comment upon the Offer Documents
prior to their filing with the SEC or dissemination to the shareholders of
Allied. Nationwide and Sub agree to provide Allied and its counsel any comments
Nationwide, Sub or their counsel may receive from the SEC or its staff with
respect to the Offer Documents 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 Offer and the Merger (and effecting the other actions referred to
herein), 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.
(b) On the date the Offer Documents are filed with the SEC,
Allied shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the shareholders of Allied.
Allied agrees that the Schedule 14D-9 shall comply (and, as amended from time to
time, shall comply) as to form in all material respects with
4
<PAGE> 9
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 Allied's 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
simultaneously with 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, 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. Allied further agrees that copies of any and all amendments to the
Schedule 14D-9 shall be disseminated to Allied's shareholders by
5
<PAGE> 10
Nationwide and Sub. 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 or directors of Allied Mutual (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
6
<PAGE> 11
Statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 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 the 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 Life Financial Corporation." 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 Sub and Allied, all to the full extent
provided in Section 1701.82 of the Ohio Insurance Law and Section 490.1106 of
the Iowa Corporation Law.
7
<PAGE> 12
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
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 3941.38(A) of the Ohio Insurance Law and the regulations
promulgated thereunder, and 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, 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 with the Iowa
Commissioner and recording in the offices of the registers of deeds of the
counties in the State of Iowa in which the principal offices of Nationwide and
Allied are located and in the county in the State of Iowa in which the Surviving
Corporation will have its principal office in such state, 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 any required insurance
regulatory approval of the Merger. Upon the terms and subject to the conditions
of this Agreement, the parties hereto will use all reasonable efforts to assure
that the filings contemplated hereby are made, and the Effective Time occurs, as
soon as is practicable.
8
<PAGE> 13
Section 2.4 Articles of Incorporation and By-Laws of the
Surviving Corporation. Following the Effective Time, the Articles of
Incorporation of Sub, 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 Sub, as in effect immediately prior to the Effective
Time, shall be the Amended and Restated By-Laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by Law. A copy of
Sub's Articles of Incorporation and Code of By-Laws are attached hereto as
Exhibit B.
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 of Sub issued and outstanding immediately prior to the Effective
Time shall, without further action by Sub or Nationwide, be converted into one
validly issued, fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation.
9
<PAGE> 14
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 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 $30.00 per Common Share, net to the shareholder in
cash, without interest thereon (the "Merger Consideration").
(b) Preferred Stock. Subject to the other provisions of this
Section 2.7, each Series A ESOP Preferred Share issued and outstanding
immediately prior to the Effective Time (other than shares held as treasury
shares by Allied) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be deemed converted into the right to receive Common
Shares in accordance with the procedures set forth in Section 8(b) of the
Certificate of Designations, Series A ESOP Convertible Preferred Stock of
Allied.
(c) Treasury Shares. Each Common Share and Series A ESOP
Preferred Share issued and outstanding immediately prior to the Effective Time
which is then held as a treasury share by Allied 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.
Section 2.8 Exchange of Certificates and Related Matters.
(a) Paying Agent. As of the Effective Time, Nationwide shall
deposit with a bank 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
10
<PAGE> 15
other customary documents as may be required by the instructions to the letter
of transmittal (collectively, the "Certificate") and acceptance thereof by the
Paying Agent, 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(a) or (b). 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 Allied or its
transfer agent of any Certificate representing Common Shares and if any such
Certificate is presented to Allied for transfer, it shall be cancelled against
delivery of the Merger Consideration as hereinabove provided. Until 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), shall be deemed at any time after the Effective
Time to 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 (5) 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 letter of transmittal (which shall
specify that delivery shall be effective, and risk of loss and title
11
<PAGE> 16
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 120 days after the Effective Time shall be delivered to
Nationwide, upon demand, and any holders of Common Shares who have not
theretofore complied with this Article II shall thereafter look only to
Nationwide and only as general creditors thereof for payment, without interest,
of their claim for any Merger Consideration with respect to their Common Shares.
(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 or Preferred 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
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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 or Preferred 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 or Preferred Shares in
accordance with Sections 490.1301 through 490.1331 of the Iowa Corporation Law
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 or
Preferred 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 or Preferred Shares held by them under the 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 or Preferred 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.
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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 Options. Allied has taken all necessary action so
that, effective as of the Effective Time, (i) cause each outstanding employee or
director stock option (the "Options") to purchase Common Shares granted under
the Allied Life Financial Corporation Executive Stock Option Plan and the Allied
Life Financial Corporation Long-Term Management Incentive Plan (the "Option
Plans"), whether or not then exercisable or vested, will become fully
exercisable and vested, (ii) cause each Option that is then outstanding to be
cancelled and (iii) in consideration of such cancellation cause Allied (or, at
Nationwide's option, Sub) to pay to such holders of Options an amount in respect
thereof equal to the product of (A) the excess, if any, of the Merger
Consideration over the exercise price of each such Option and (B) the number of
Shares previously subject to the Option immediately prior to its cancellation
(such payment to be net of withholding taxes). Allied represents and warrants
that it will use all commercially reasonable efforts to ensure that (a) no
consent of any holder of an Option is required to effect the transactions
contemplated by this Section 2.11 and (b) following the Effective Time, no
Option or any other option, warrant or right will give any person any right to
acquire any securities of the Surviving Corporation.
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. Allied
will use its reasonable best efforts
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to cause the Proxy Statement to be mailed to Allied's shareholders as promptly
as practicable.
(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 agrees 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. If necessary, Allied will
take all action necessary in accordance with applicable law and its Articles of
Incorporation and By-laws to convene a meeting 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 its Board
of Directors, recommend to its shareholders approval of this Agreement and the
Merger. Without limiting the generality of the foregoing, Allied agrees that,
subject to its right to terminate this Agreement pursuant to Section 8.1, its
obligations pursuant to the first sentence of this Section 3.2 shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to Allied of any Acquisition Proposal or (ii) the withdrawal or
modification by the Board of Directors of Allied of its approval or
recommendation of this Agreement or the Merger. Allied will use
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its reasonable best efforts to hold the Shareholders Meeting as soon as
practicable after the date hereof.
Section 3.3 Filings; Other Action. As promptly as practicable,
(i) Allied, Nationwide and Sub shall make all filings and submissions under the
HSR Act, (ii) Nationwide shall make all filings required by the insurance
regulatory authorities in Iowa 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, giving
all such notices, and timely seeking all such consents, approvals, permits,
notices or authorizations as required by applicable law. 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.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Allied represents and warrants to Nationwide and Sub as follows:
Section 4.1 Organization and Qualification.
(a) Allied is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Iowa and has full corporate
power, authority and legal right to conduct its Business as it is currently
being conducted. Allied is duly qualified to do business, and is in good
standing, in the 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, have a Material Adverse Effect. Each of the Allied Subsidiaries
is listed in the Allied Disclosure Schedule.
(b) Each Allied Insurer is listed in the Allied Disclosure
Schedule. 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 business reported as
being written in the Allied SAP Statements for 1997. All such Insurance
Licenses, including, but not limited to, authorizations to transact reinsurance,
are listed and described in the Allied Disclosure Schedule and are in full force
and effect without amendment, limitation or restriction, other than as described
in the Allied Disclosure Schedule, and neither Allied nor any Allied Insurer has
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.
(c) Copies of the articles of incorporation and by-laws of Allied
have heretofore been delivered to Nationwide and copies of the articles of
incorporation and by-laws (or other constitutive documents) of each of the
Allied Subsidiaries have heretofore been delivered to Nationwide, and such
copies are accurate and complete as of the date hereof.
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Allied does not have any other constitutive documents, other than its articles
of incorporation and by-laws.
(d) Except for the Allied 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 25,000,000 Common Shares and 7,500,000 Preferred
Shares. At the close of business on June 2, 1998 (i) 4,420,974 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) 193,686 Common
Shares were reserved for issuance upon the exercise of issued options to
purchase Common Shares; and (v) 2,330,772 6.75% Series Preferred Shares were
issued and outstanding and 104,726 Series A ESOP Preferred Shares were issued
and outstanding. 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. The Allied Disclosure Schedule sets forth the
following information with respect to each Employee Option and Restricted Stock
award which has been forfeited by an eligible employee: (x) the name of the
recipient, (y) the number of Common Shares subject to such Employee Option and
Restricted Stock award, and (z) the applicable exercise price for each Employee
Option. Except as set forth above or in the Allied Disclosure Schedule, 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.
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Section 4.3 Subsidiaries.
(a) The Allied Disclosure Schedule sets forth the name of each
Subsidiary and the state or jurisdiction of its incorporation and indicates
which Allied Subsidiaries are insurance companies. Each Allied Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the corporate power and
authority and all necessary government approvals to own, lease and operate its
properties and to carry on its Business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority or necessary governmental approvals would not individually or in
the aggregate have a Material Adverse Effect. Each Allied Subsidiary is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not individually or in the aggregate have a Material
Adverse Effect. Except as disclosed in the Allied Disclosure Schedule, each of
the Allied Subsidiaries that is an insurance company is (a) duly licensed or
authorized as an insurance company in its jurisdiction of incorporation and (b)
duly licensed or authorized as an insurance company and in good standing in each
other jurisdiction where it is required to be so licensed or authorized as set
forth in Schedule T to the most recent Annual Statement. The Allied subsidiaries
(other than the Allied Subsidiaries), if considered as a whole, would not
constitute a "significant subsidiary" within the meaning of Rule 1-02 of
Regulation S-X adopted pursuant to the regulations promulgated by the SEC.
(b) The Allied Disclosure Schedule sets forth, as to each Allied
Subsidiary, its authorized capital stock and the number of its issued and
outstanding shares of capital stock. Allied 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,
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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 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 Allied. Except for any required 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 properly executed proxy at the meeting called pursuant to Section
3.2 hereof, if required, 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,
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reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(c) Based upon the recommendation of the Coordinating Committee
of the Board of Directors of Allied (the "Special Committee") appointed by the
Board of Directors of Allied in connection with 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, as of the date
hereof, advisable and in the best interests of Allied, (ii) has authorized,
approved and adopted this Agreement, the Offer, the Merger and the other
transactions contemplated hereby and thereby, and (iii) has received the opinion
of the Special Committee's financial advisor, Fox-Pitt, Kelton Inc., to the
effect that the consideration to be received by the shareholders in the Offer
and Merger, taken together, is fair to such shareholders from a financial point
of view. 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 Schedule, 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 Contract to which Allied or any such
Allied 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 Allied or any of the Allied Subsidiaries is
subject, other
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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.
(b) Except for (i) the Governmental Approvals set forth in the
Allied Disclosure Schedule, (ii) the filing of this Agreement with and the
approval of such by the Iowa Commissioner and Iowa Attorney General under the
Iowa Insurance Law 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 Schedule, (iii)
the approval of this Agreement by the Members of Allied, if required by the Iowa
Commissioner, as contemplated by Section 3.2 hereof, (iv) the filings required
under the HSR Act and the expiration or other termination of any waiting period
applicable to 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 Advisors 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 Schedule 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 Person 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 have a Material
Adverse Effect.
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Section 4.6 SAP Statements. Allied has previously delivered to
Nationwide true and complete copies of the following:
(a) the Annual Statements for each Allied Insurer as of and for
the years ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statements for each Allied Insurer as of and
for the calendar quarter ended March 31, 1998;
(c) any supplemental or separate statutory annual statements or
quarterly statements for each Allied Insurer 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(a) or (b) hereto; and
(d) 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 such Allied
Insurer for each such years, together with the notes related thereto and the
reports thereon of KPMG Peat Marwick, LLP (collectively with the items described
in Section 4.6(a), (b) and (c), the "Allied SAP Statements").
Since December 31, 1997, each Allied Insurer 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 is not individually or in the aggregate, reasonably likely to have a
Material Adverse Effect.
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, of which Allied has Knowledge, have
been cured or corrected. Each Allied SAP Statement
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(and the notes related thereto) referred to in Section 4.6(a), (b), and (d)
hereof was prepared (and, as to SAP Statements filed after the date of this
Agreement, will be prepared) in accordance with SAP and presents (and, as to SAP
Statements filed after the date of this Agreement, will present) fairly the
financial position of the respective Allied Insurers as of the respective dates
thereof and the related summaries of operations and changes in capital and
surplus and cash flow of the respective Allied Insurers for the respective
periods covered thereby. To the Knowledge of Allied, each Allied SAP Statement
(including the notes related thereto) referred to in Section 4.6(c) hereof was
prepared (or, in the case of similar SAP Statements filed after the date of this
Agreement, will be prepared) in accordance with the statutory accounting
practices required by the insurance Governmental Entity in the jurisdiction in
which such statement was (or will be) filed.
Section 4.7 GAAP Statements. Except as set forth in the Allied
Disclosure Schedule, Allied has previously delivered to Nationwide true and
complete copies of the (i) audited GAAP Financial Statements for each of the
Allied Subsidiaries, other than Allied Insurers, for the years ended December
31, 1995, 1996 and 1997 and (ii) unaudited GAAP Financial Statements for each of
the Allied Subsidiaries, other than Allied Insurers, for the three months ended
March 31, 1998 (collectively, the "Allied GAAP Financial Statements"). Each
Allied GAAP Financial Statement was prepared in accordance with GAAP (except, in
the case of such unaudited GAAP Financial Statements, for the absence of notes)
and presents fairly the financial position of the Allied Subsidiaries as to
which such Allied GAAP Financial Statements have been provided as of the
respective dates thereof and the related results of operations and cash flow and
shareholders' interest of such Allied Subsidiaries for the respective periods
covered thereby.
Section 4.8 Reserves. The aggregate actuarial reserves and other
actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of each Allied Insurer as established or reflected in its December 31,
1997 Annual Statement or in the March 31, 1998 Quarterly Statement, (the "Allied
1998 Quarterly Statement") of such
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Allied Insurer: (a)(i) were determined in accordance with generally accepted
actuarial standards consistently applied, (ii) were fairly stated in accordance
with sound actuarial principles and (iii) were based on actuarial assumptions
that are in accordance with or more conservative than those specified in the
related Insurance Contracts; (b) met the requirements of the insurance Laws of
such Allied Insurer's state of domicile and all other applicable jurisdictions;
(c) included provision for all actuarial reserves and related statement items
which ought to be established and (d) were, in the reasonable judgment of
Allied, adequate at such date (under generally accepted actuarial standards
consistently applied) to cover the total amount of all reasonably anticipated
matured and unmatured Liabilities of such Allied Insurer under all outstanding
Insurance Contracts pursuant to which such Allied Insurer has any Liability. To
the Knowledge of Allied, the actuarial opinion delivered to its Board of
Directors with respect to the 1997 Annual Statement exhibits 8, 9, 10 and 11 of
Allied is true, complete and accurate in all material respects. Each of the
Allied Insurers owns Assets that qualify as admitted assets under applicable
insurance Laws in an amount at least equal to the sum of its statutory reserves
and other similar amounts.
Section 4.9 SEC Documents. Allied has timely filed all required
reports, schedules, forms, statements and other documents with the SEC since
January, 1998 (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 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
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applied on a consistent basis during the periods presented (except as may be
indicated in the notes thereto or, in the case of unaudited interim 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 Allied 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.
Section 4.10 Absence of Certain Changes or Events. Except as set
forth in the Allied Disclosure Schedule, since December 31, 1997, each of Allied
and the Allied Subsidiaries has conducted its Business only in the ordinary
course of business, consistent with past practice, and there has not occurred
(i) a Material Adverse Effect, or any event or events which, individually or in
the aggregate, are reasonably likely to have a Material Adverse Effect; (ii)
except as required by GAAP or SAP, any material change by Allied in accounting
principles, practices or methods; (iii) any material addition, or any
development involving a prospective material addition, to Allied's consolidated
reserves for future policy benefits or other policy claims and benefits other
than as a result of ordinary sales activities or otherwise in the ordinary
course of business; or (iv) except as required by GAAP or SAP, any material
change in the accounting, actuarial, investment, reserving, underwriting or
claims administration policies, practices, procedures, methods, assumptions or
principles of Allied. Except as set forth in the Allied Disclosure Schedule,
since December 31, 1997, there has not been any increase in the compensation
payable or that could become payable by Allied or any of the Allied Subsidiaries
to officers or key employees or any amendment of any of the compensation and
benefit plans other than increases or amendments in the ordinary course.
Section 4.11 No Undisclosed Liabilities. Except as disclosed in
the Financial Statements delivered to Nationwide pursuant to Sections 4.6 and
4.7 hereof or as set forth in the Allied Disclosure Schedule, neither Allied nor
any of the Allied Subsidiaries has any Liabilities, other than Liabilities
arising since the date of the applicable Financial
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Statement in the ordinary course of business and consistent with past practice
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
Section 4.12 Takeover Statutes. Allied has taken or will take all
actions necessary such that no restrictive provision of any "fair price,"
"moratorium," "control share acquisition," "interested shareholder" or other
similar anti-takeover statute or regulation (including, without limitation,
section 490.1110 of the Iowa Corporation Law) (each a "Takeover Statute") or
restrictive provision of any applicable anti-takeover provision in the charter
or by-laws of Allied is, or at the Effective Time will be, applicable to Allied,
Nationwide, the Common Shares, the Offer, the Merger or any other transactions
contemplated by this Agreement.
Section 4.13 Compliance with Law.
(a) Except as set forth in the Allied Disclosure Schedule,
neither Allied nor any Allied Subsidiary is in violation (or, with notice or
lapse of time or both, would be in violation) of any term or provision of any
Law applicable to it or any of its Assets, the violation of which is,
individually or in the aggregate with all other such violations, reasonably
likely to have a Material Adverse Effect. Allied has delivered to Nationwide all
reports (including, but not limited to, draft reports) of examinations of the
affairs of each Allied Insurer (including, but not limited to, market conduct
examinations) issued by insurance Governmental Entities for any period ending on
a date on or after January 1, 1992; except as set forth in the Allied Disclosure
Schedule, all deficiencies or violations in such reports for any prior period
have been resolved. Except as set forth in the Allied Disclosure Schedule, all
outstanding Insurance Contracts issued or assumed by any Allied Insurer are, to
the extent required by Law, on forms and at rates approved by the insurance
regulatory authorities of the jurisdictions where issued or have been filed with
and not objected to by such authorities within the periods provided for
objection.
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(b) Except as set forth in the Allied Disclosure Schedule,
neither Allied nor any Allied Subsidiary is a party to any Contract with or
other undertaking to, or is subject to any Order by, or is a recipient of any
supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) currently materially adversely affects or is
reasonably likely to have a Material Adverse Effect, or (ii) has been received
since January 1, 1993 and relates to its reserve adequacy or its marketing,
sales, trade or underwriting practices or policies, nor, to the Knowledge of
Allied or of any of the Allied Subsidiaries, has Allied or any of the Allied
Subsidiaries been notified in writing by any Governmental Entity that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such Order, Contract, undertaking, letter or other
written communication.
(c) Allied has implemented procedures and programs which are
reasonably designed to provide assurance that each of Allied, the Allied
Insurers and their respective agents and employees are in compliance in all
material respects with all applicable Laws, including, but not limited to,
advertising, licensing and sales Laws. Allied has previously provided Nationwide
with a true, complete and correct copy of Allied's compliance program and
procedures and, except as previously disclosed to Nationwide, Allied has no
Knowledge of any noncompliance therewith in any material respect.
(d) Allied, each Allied Subsidiary and each other Affiliate of
Allied which is required, and each of their officers, independent contractors,
subagents, consultants and employees who are required by reason of the nature of
their employment by Allied, an Allied Subsidiary or such Affiliate, to be
registered or appointed as an investment advisor, investment adviser
representative, broker-dealer agent, broker-dealer, registered representative,
sales person, insurance agent or insurance producer, commodity trading adviser,
commodity pool operator or real estate broker or salesman with the SEC or the
securities commission or insurance department of any state or any
self-regulatory body or other Governmental Entity or any insurer, is duly
registered or appointed as such and such registration or appointment is in full
force and effect, except where the failure to be
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registered or to have such registration in full force and effect is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect. Except as set forth in the Allied Disclosure Schedule, to the Knowledge
of Allied, none of Allied or any of such other Persons has been enjoined,
indicted, convicted or made the subject of any consent decree or administrative
order on account of any material violation of applicable Law in connection with
such Person's actions in any of the foregoing capacities or, to the Knowledge of
Allied, any enforcement or disciplinary proceeding alleging any such violation
since January 1, 1993. Allied and each Allied Subsidiary which is a
broker/dealer Subsidiary have filed all forms, reports, statements and other
documents required by Law to be filed by them with the SEC, all other reports
(periodic or otherwise) and registration statements, including, without
limitation, reports in connection with sales of variable annuity or variable
life contracts, and all amendments and supplements to all such reports and
registration statements, and all such forms, reports, statements and other
documents did not at the time they were filed (at the time they became effective
and so long as they remain effective in case of registration statements and
amendments thereto) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
Section 4.14 Assets.
(a) Except as set forth in the Allied Disclosure Schedule and
except for Assets disposed of since March 31, 1998 in the ordinary course of
business and consistent with past practice: (i) each of Allied and the Allied
Subsidiaries has good title to all Assets that are disclosed or otherwise
reflected in its March 31, 1998 Quarterly Statement or unaudited GAAP Financial
Statements for the three months ended March 31, 1998, as the case may be, and
all Assets acquired thereafter, and all such Assets are owned by such Persons,
free and clear of all Liens, other than Permitted Liens, and the bonds, notes,
debentures and other evidences of indebtedness that constitute Investment
Assets, disclosed or otherwise reflected in its March 31, 1998 Quarterly
Statement or unaudited GAAP Financial Statements for the three months ended
March 31, 1998, as the case may be, or acquired
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thereafter, are, to the Knowledge of each of Allied and the Allied Subsidiaries,
as of the date of this Agreement, in all material respects collectible in
accordance with the terms of the Investment Assets and the documents relating
thereto; (ii)(A) Allied and each Allied Subsidiary owns good and indefeasible,
marketable fee simple title to, or has a valid leasehold interest in, all real
property used in the conduct of its Business or of a type which would be
required to be specifically disclosed by an Allied Insurer in Schedule A of its
Annual Statement, free and clear of all Liens, other than Permitted Liens; (B)
in the aggregate all real property, other than unimproved land, is, in all
material respects, in working condition, without need for repair and suitable
for its current uses; (C) no improvement on any such real property owned or
leased by Allied or any Allied Subsidiary encroaches upon any real property of
another Person without an appurtenant easement or other legal right allowing
such encroachment, nor encroaches over any applicable set back lines without the
benefit of non-conforming use status, a variance or adequate insurance insuring
against any Liability due to the attempted enforceability of the Law creating
such set back line, the result of which encroachments, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect; and (D)
Allied and each Allied Subsidiary owns, leases or, in all material respects, has
the valid right to use adequate means of ingress and egress to, from and over
all such real property; (iii) Allied and each Allied Subsidiary owns good and
indefeasible title to, or has a valid leasehold interest in or has a valid right
under Contract to use, all personal property that is material to the conduct of
its Business, free and clear of all Liens other than Permitted Liens, and, in
the aggregate, all such personal property is, in all material respects, in good
operating condition and repair, ordinary wear and tear excepted, and is, in all
material respects, suitable and adequate for its current uses; and (iv) Allied
and each Allied Subsidiary has the right to use free and clear of any royalty or
other payment obligations, claims of infringement or alleged infringement or
other Liens, other than Permitted Liens and other than contractual agreements
with respect to licensing and maintenance fees, all Intellectual Property that
is material to the conduct of its Business, all of which (other than related
documentation, manuals, training materials and policy forms), as of the date of
this Agreement, is listed in the Allied Disclosure Schedule; and neither Allied
nor any Allied Subsidiary is in material
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conflict with or violation or infringement of, nor has Allied or any Allied
Subsidiary received any notice of any such conflict with or violation or
infringement of, any asserted rights of any other Person with respect to any
Intellectual Property, including, without limitation, the Intellectual Property
listed in the Allied Disclosure Schedule.
(b) No sales or brokerage commission or fee or other compensation
is or will be payable in connection with any Allied Real Property as a result of
the consummation of the transactions contemplated hereby.
Section 4.15 Environmental Matters.
(a) Except as set forth in the Allied Disclosure Schedule, each
of Allied and the Allied Subsidiaries and, to the Knowledge of each of Allied
and the Allied Subsidiaries, 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 Environmental Permits required under Environmental
Laws and compliance with the material terms and conditions thereof, other than
such Allied Real Property in respect of which the failure to comply with
applicable Environmental Laws is not reasonably likely (i) to have a Material
Adverse Effect or (ii) to result in costs of further investigation, clean-up and
related oversight, fines, penalties and third party claims exceeding $250,000 in
any individual case and $2,000,000 in the aggregate during the five-year period
commencing on the date hereof. Except as set forth in the Allied Disclosure
Schedule, neither Allied nor any Allied Subsidiary has received, nor do they
have Knowledge of, any communication (written or oral), 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, to the Knowledge of each of
Allied and of the Allied Subsidiaries, 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, nor do they have
Knowledge of any notification by, any Governmental Entity that any such
Environmental Permit will be modified, suspended or
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revoked or cannot be renewed or transferred in the ordinary course of business
consistent with past practice or in connection with the Merger.
(b) Except as set forth in the Allied Disclosure Schedule, there
is no Environmental Claim pending or, to the Knowledge of each of Allied and of
the Allied Subsidiaries, 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) To the Knowledge of each of Allied and of the Allied
Subsidiaries, there have been no releases, spills, leaks or discharges of
Hazardous Substances at, from or to any Allied Real Property (other than those
properties set forth in the Allied Disclosure Schedule) 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, (ii) other than those properties set
forth in the Allied Disclosure Schedule, is the subject of any investigation,
abatement, removal, remedial, corrective or other response action, or (iii) is
subject to any restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(d) Except as set forth in the Allied Disclosure Schedule, no
Hazardous Substances were manufactured, generated, stored, treated, transported
from or otherwise managed at any Allied Real Property, nor were Hazardous
Substances from any Allied Real Property disposed of at any other property.
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(e) To the Knowledge of each of Allied and the Allied
Subsidiaries, there are no conditions or circumstances concerning or related to
the Business or operations of Allied or such Allied Subsidiaries or at any
Allied Real Property, which are reasonably likely to pose a risk to the
environment, natural resources or the health and safety of any Person.
(f) Except as set forth in the Allied Disclosure Schedule, there
is no Allied Real Property or formerly owned Allied Real Property that was, or
is, subject to notification and/or disclosure requirements pursuant to state
property transfer statutes.
(g) Except as set forth in the Allied Disclosure Schedule, there
are no underground storage tanks or surface impoundments that ever existed, or
currently exist, upon, in or under any Allied Real Property.
Section 4.16 Contracts. The Allied Disclosure Schedule 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:
(a) all employment, consultation, retirement, termination,
sign-on, buy-out or other Contracts with any present or former officer,
director, trustee, employee, agent, broker or independent contractor of Allied
or any Allied Subsidiary (including, but not limited to, loans or advances to
any such Person or any Affiliate of such Person) providing for annual
compensation of $100,000 or more or for compensation over the term of the
Contract, and any renewal thereof, of $200,000 or more (including, but not
limited to, base salary, bonus and incentive payments and other payments or
fees, whether or not any portion thereof is deferred);
(b) all Contracts (other than, with respect to Investment Assets,
Contracts containing customary restrictions on the ability to own or operate
competing real property
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in a specified geographic area) with any Person including, but not limited to,
any Governmental Entity, containing any provision or covenant (i) limiting the
ability of Allied or any Allied Subsidiary to engage in any line of business, to
compete with any Person, to do business with any Person or in any location or to
employ any Person or (ii) limiting the ability of any Person to compete with or
obtain products or services from Allied or any Allied Subsidiary, which, in the
case of any such Contract described in clauses (i) and (ii) is, individually or
together with other such Contracts, reasonably likely to have a Material Adverse
Effect;
(c) all Contracts relating to the borrowing of money in excess of
$1,000,000 by Allied or any Allied Subsidiary or the direct or indirect
guarantee by Allied or any Allied Subsidiary of any obligation of any Person for
borrowed money or other financial obligation of any Person in excess of
$1,000,000 (other than indebtedness in respect of Investment Assets), or any
other Liability of Allied or any Allied Subsidiary in respect of indebtedness
for borrowed money or other financial obligation of any Person in excess of
$1,000,000 (other than indebtedness in respect of Investment Assets), including,
but not limited to, any Contract relating to or containing provisions with
respect to (i) the maintenance of compensating balances that are not terminable
by Allied or any Allied Subsidiary without penalty upon not more than ninety
(90) days' notice, (ii) any lines of credit or similar facilities, (iii) the
payment for property, products or services of any other Person even if such
property, products or services are not conveyed, delivered or rendered or (iv)
any obligation to satisfy any financial obligation or covenants, including, but
not limited to, take-or-pay, keep-well, make-whole or maintenance of working
capital, capital or earnings levels or financial ratios or to satisfy similar
requirements;
(d) all Contracts (other than Insurance Contracts and other
Contracts entered into in the ordinary course of business) with any Person
containing any provision or covenant relating to the indemnification or holding
harmless by Allied or any Allied Subsidiary of any Person which is reasonably
likely to result in a Liability to Allied or any of the Allied Subsidiaries of
$1,000,000 or more;
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(e) all leases or subleases of real property used in the conduct
of the Business of Allied or any Allied Subsidiary and all other leases,
subleases or rental or use Contracts providing for annual rental payments to be
paid by or on behalf of Allied or any Allied Subsidiary, involving, in the case
of each of the foregoing, annual payments in excess of $250,000;
(f) all Contracts relating to the future disposition (including,
but not limited to, restrictions on transfer or rights of first refusal) or
acquisition of any interest in any business enterprise, and all Contracts
relating to the future disposition of a material portion of the Assets of Allied
or any Allied Subsidiary other than in each case any Investment Asset or
interest in any business enterprise or Assets to be acquired or disposed of in
the ordinary course of business;
(g) all investment advisory Contracts with any investment company
registered under the Investment Company Act or with any investment advisory
client;
(h) all Insurance Contracts which constitute Contracts for
reinsurance, and any Contract pursuant to which any Allied Insurer receives or
has received surplus relief including, with respect to each such Contract, the
ceding and assuming Person, the business reinsured and the amount of the
Liability reinsured;
(i) all other Contracts (other than (i) Insurance Contracts, (ii)
Contracts relating to Investment Assets entered into in the ordinary course of
business, (iii) employment Contracts that are not otherwise required to be set
forth in the Allied Disclosure Schedule, (iv) Contracts solely between members
of the Allied Group and (v) other Contracts which are expressly excluded under
any other subsection of this Section 4.14) that involve or are reasonably likely
to involve the payment pursuant to the terms of such Contracts by or to Allied
of $500,000 or more, or that are otherwise material to Allied and the Allied
Subsidiaries taken as a whole;
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(j) list of all Contracts between any Allied Insurer and any
Person involving agency Contracts and marketing relationships, which
relationships have a value over $250,000 per year;
(k) all Contracts or arrangements (including, but not limited to,
those relating to allocations of expenses, personnel, services or facilities)
between or among any Allied Insurer and any Subsidiary or Affiliate of Allied
(including, but not limited to, other Allied Insurers); and
(l) all outstanding proxies (other than routine proxies in
connection with annual meetings), powers of attorney or similar delegations of
authority of Allied or any Allied Subsidiary to an unrelated Person, other than
those entered into in the ordinary course of business in connection with
Investment Assets.
The Allied Disclosure Schedule also contains a listing of all
Third Party Administrators of Allied and the Allied Subsidiaries. All Contracts
the terms of which provide that the Merger will give rise to a severance
Liability for Allied, any Allied Subsidiary or the Surviving Corporation have
previously been disclosed to Nationwide.
Each of the Contracts listed in the Allied Disclosure Schedule is
in full force and effect and constitutes a legal, valid and binding obligation
of each of Allied and the Allied Subsidiaries to the extent that it is a party
thereto, and, to the Knowledge of Allied, of each other Person that is a party
thereto. Except as set forth in the Allied Disclosure Schedule, neither Allied
nor any Allied Subsidiary is, and, to the Knowledge of Allied, no other party to
such Contract is, in material violation, breach or default of any such Contract
or, with or without notice or lapse of time or both, would be in material
violation, breach or default of any such Contract, except for any violation,
breach or default which, individually or in the aggregate, is not reasonably
likely to have a Material Adverse Effect. Except as set forth in the Allied
Disclosure Schedule, to the knowledge of Allied, no such Contract contains
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any provision providing that any party thereto other than Allied or any Allied
Subsidiary may terminate such Contract by reason of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.17 Insurance Issued by Allied Insurers. Except as set forth
in the Allied Disclosure Schedule:
(a) All material contracts, arrangements, treaties and agreements to
which any Allied Insurer is a party with respect to reinsurance applicable to
insurance in force on the date of this Agreement, and all material contracts,
arrangements, treaties and agreements under which any such Allied Insurer has
any obligation to cede insurance, are valid, binding and in full force and
effect in accordance with their terms. To the best Knowledge of any such Allied
Insurer, no Allied Insurer is, and no other party thereto is, in material
default of any provision thereof and no such material agreement contains any
provision providing that the other party thereto may terminate the same by
reason of the transactions contemplated by this Agreement or any other provision
which would be altered or otherwise become applicable by reason of such
transactions;
(b) Each insurance policy or certificate form, as well as any related
application form, written advertising material and rate or rule currently
marketed by each Allied Insurer, the use or issuance of which requires filing or
approval, has been appropriately filed, and if required, approved by the
insurance regulatory authorities of any state in which such policies and forms
are required to be filed. To the knowledge of each Allied Insurer, all such
policies and certificates, forms, applications, advertising materials and rates
or rules are in compliance in all material respects with all applicable Laws and
regulations;
(c) Since December 31, 1997 no form of Insurance Contract written by
any Allied Insurer has been amended in any material respect and, except with
respect to new states and new products, no sales of Insurance Contracts using
any new forms have been
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commenced other than changes to forms which are not, in the aggregate, material
to any Allied Insurer;
(d) Since January 1, 1994 all claims and benefits claimed by any Person
under any Insurance Contract of any Allied Insurer have or will have in all
material respects been paid (or provision for payment thereof has been made) in
accordance with the terms of the Contracts under which they arose, and such
payments were not delinquent and were paid (or will be paid) without fines or
penalties, except for any such claims or claim for benefits of less than
$250,000 for which the affected Allied Insurer reasonably believes there is a
reasonable basis to contest payment and is taking (or is preparing to take) such
action;
(e) Except as set forth in the SAP Statements referred to in Section
4.6, no provision in any policy in force gives policyholders the right to
receive dividends or distributions on their policies (other than accruals of
interest on cash values or as claim benefits) or otherwise share in the
benefits, revenue or profits of any Allied Insurer, provided that the practice
in certain instances of making premium refunds based upon policyholder loss
experience shall not violate the representation contained in this sentence.
Except as paid in the ordinary course of business, no Allied Insurer is liable
to pay commissions upon the renewal of any insurance policy nor is it a party to
any agreement providing for the collection of insurance premiums payable to any
Allied Insurer by any other Person;
(f) Reserved.
(g) Allied has provided Nationwide with a copy of all investment
policies and procedures for Allied and each Allied Insurer;
(h) To the Knowledge of Allied: (i) all amounts recoverable under
reinsurance, coinsurance or other similar Contracts to which any Allied Insurer
is a party (including, but not limited to, amounts based on paid and unpaid
Losses) are fully collectible, (ii) each
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insurance agent or broker, at the time such agent or broker wrote, sold or
produced business for any Allied Insurer, was duly licensed as an insurance
agent or broker (for the type of business written, sold or produced by such
insurance agent or broker) in the particular jurisdiction in which such agent or
broker wrote, sold or produced such business for any Allied Insurer, and (iii)
no such insurance agent or broker violated (or with notice or lapse of time or
both would have violated) any term or provision of any Law or Order applicable
to any aspect (including, but not limited to, the marketing, writing, sale or
production) of the Business of any Allied Insurer;
(i) Neither Allied nor any Subsidiary of Allied is in violation of Law
in which the potential liability exceeds $25,000 regarding the Insurance
Contracts;
(j) Except as set forth in the Allied Disclosure Schedule, no Allied
Subsidiary is engaged is any activity that would require registration as an
investment company, broker-dealer, investment advisor or fund administrator
under any state or Federal Law, including the Exchange Act, the Investment
Company Act and the Investment Advisers Act. Neither Allied nor any Allied
Subsidiary maintains or manages any open-end management investment company or
portfolio;
(k) Neither Allied nor any Allied Subsidiary is engaged in the business
of serving as a custodian or transfer agent;
(l) To the Knowledge of Allied, no Rating Agency has imposed any
conditions on retaining any rating assigned to Allied or any Allied Insurer or
as of the date hereof is reviewing any such rating for a potential downgrade;
and
(m) Each Allied Insurer has duly and validly filed or caused to be
filed all material reports, statements, documents, registrations, filings or
submissions that were required by applicable Laws to be filed; all such filings
complied with all applicable Laws in all material respects when filed, and no
material deficiencies have been asserted with
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respect to any such filings which have not been satisfied. All outstanding
insurance policies, annuity contracts and assumption certificates issued by any
Allied Insurer and now in force are, to the extent required under applicable
Laws, on forms approved by the insurance regulatory authority of the
jurisdiction where issued and utilize premium rates which if required to be
filed with or approved by insurance regulatory authorities have been so filed or
approved, except where such premium rates would not have a Material Adverse
Effect, and the premiums charged conform thereto, except where the failure to
conform would not have a Material Adverse Effect; and
(n) Except as set forth in the Allied Disclosure Schedule, and with
respect to all insurance issued:
(i) No outstanding insurance policy or annuity contract issued
or assumed by any Allied Insurer entitles the holder thereof or any
other Person to receive dividends, distributions or other benefits
based on the revenues or earnings of any Allied Insurer or any other
individual, partnership, firm, corporation, association, trust,
unincorporated organization, governmental authority or other entity, as
well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act;
(ii) To Allied's and each of Allied Insurers Knowledge, no
other party to any reinsurance, coinsurance or other similar agreement
with any of the Allied Insurers is in default thereunder, except for
such defaults that would not reasonably be expected to have a Material
Adverse Effect; and
(iii) The Insurance Contracts of each Allied Insurer meet all
the applicable definitions of the Code and ERISA, and the regulations
and rulings thereunder, necessary to qualify for the tax and other
benefits intended and promised to contractholders, including, but not
limited to, treatment as life
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insurance contracts or annuity contracts under Sections 7702 and 72 of
the Code, respectively.
Section 4.18 Cancellations. Except as set forth in the Allied
Disclosure Schedule, since December 31, 1997 no Person or group of Persons
acting in concert writing, selling or producing insurance business, which in the
aggregate accounted for one and one-half percent (1.5%) or more of the gross
premium income of Allied for the year ended December 31, 1997, has terminated or
substantially reduced, or threatened to terminate or substantially reduce, its
relationship with any Allied Insurer. Except as set forth in the Allied
Disclosure Schedule, to the Knowledge of Allied, since December 31, 1997, no
policyholder or group of policyholders acting in concert has withdrawn or given
notice of its intent to withdraw, or threatened to withdraw, funds under any
Insurance Contract to which an Allied Insurer is a party in excess of one and
one-half percent (1.5%) or more of the insurance reserves of Allied at December
31, 1997.
Section 4.19 Operations Insurance. The Allied Disclosure Schedule
contains a true, complete and correct list of all liability, property, workers
compensation, directors and officers liability, and other similar Insurance
Contracts that insure the Business or properties of Allied or any Allied
Subsidiary or affect or relate to the ownership, use, or operations of any
Assets of Allied or any Allied Subsidiary and that have been issued to Allied or
any Allied Subsidiary (including, but not limited to, the names and addresses of
the insurers, the expiration dates thereof, any deductible amounts in respect
thereof, and the annual premiums and payment terms thereof) and a description of
all claims thereunder or, to the Knowledge of Allied or of any of the Allied
Subsidiaries, any events which have occurred and may be covered thereunder, in
either case in excess of $100,000 per incident since January 1, 1993 through the
date hereof. All such insurance is in full force and effect and, to the
Knowledge of Allied, is with financially sound and reputable insurers. To the
Knowledge of Allied or any of the Allied Subsidiaries, all notices of reportable
incidents with respect to such insurance occurring during the last five years
have been given in writing to appropriate carriers on a basis sufficiently
timely to preserve the right of
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recovery of such insurance. Except as set forth in the Allied Disclosure
Schedule, to the Knowledge of Allied or of any of the Allied Subsidiaries, no
party to any Insurance Contract has stated an intent or threatened to terminate
or materially increase the premium in respect of any such Insurance Contract.
Section 4.20 Taxes and Tax Returns. Except as set forth in the Allied
Disclosure Schedule:
(a) All Tax Returns required under applicable Law to be filed with or
provided to any Person by Allied or any Allied Subsidiary have been (and, as to
Tax Returns not filed as of the date hereof, will be) timely filed or provided
in the manner prescribed by Law and such Tax Returns were (and, as to Tax
Returns not filed as of the date hereof, will be) true, complete and correct,
and all taxes shown due on such Tax Returns have been timely paid, together with
any interest and penalties then due;
(b) Allied and each Allied Subsidiary have within the time and in the
manner prescribed by Law paid (and until the Effective Time will pay within the
time and in the manner prescribed by Law) all Taxes due and payable except for
those contested in good faith and for which adequate reserves have been taken.
No claim has ever been made by an authority in a jurisdiction where Allied or
any Allied Subsidiary does not file Tax Returns that such Person may be subject
to Taxation by that jurisdiction;
(c) Allied and each Allied Subsidiary have established (and until the
Effective Time will maintain) on their books and records (i) reserves adequate
to pay all Taxes not yet due and payable and all deficiencies asserted, proposed
or threatened against Allied or any Allied Subsidiary and (ii) reserves for
deferred Taxes, in each case, in accordance with GAAP. No differences exist
between the amounts of the book basis and the Tax basis of any Assets (net of
liabilities) of Allied or any Allied Subsidiary that are not accounted for by an
accrual on the books for federal income Tax purposes;
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(d) There are no Tax Liens upon the Assets of Allied or any Allied
Subsidiary except Liens for Taxes not yet due;
(e) Allied and each Allied Subsidiary have materially complied (and
until the Effective Time will materially comply) with all applicable Laws
relating to information reporting or to the withholding of Taxes (including, but
not limited to, information reporting and withholding of Taxes pursuant to
Sections 1441, 1442, 3402, 3405, 3406, 6041, 6041A, 6042 6047, 6049, 6051 and
6052 of the Code or similar provisions under any state, local or foreign Laws)
and have, within the time and in the manner prescribed by Law, paid all amounts
required to be so withheld and paid over under all applicable Laws;
(f) Neither Allied nor any Allied Subsidiary has requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed;
(g) Neither Allied nor any Allied Subsidiary has executed any
outstanding waivers, extensions or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Tax Returns. The
statute of limitations for the assessment of all Taxes has expired for all
applicable Tax Returns of Allied and each Allied Subsidiary or those Tax Returns
have been examined by the appropriate Taxing authorities for all periods through
1993, and no deficiency for any Taxes has been proposed, asserted or assessed
against Allied or any Allied Subsidiary that has not been resolved and paid in
full;
(h) 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;
(i) 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. Neither Allied nor any Allied Subsidiary has any Knowledge of
any
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threatened action, audit or administrative or court proceeding with respect to
any such Taxes or Tax Returns. Further, to the best of the Knowledge of Allied
and each Allied Subsidiary, no state of facts exists or has existed which would
constitute grounds for the assessment of any liability for Taxes with respect to
the periods which have not been audited by the IRS or other Taxing authority;
(j) No power of attorney currently in force has been granted by Allied
or any Allied Subsidiary with respect to any matter relating to Taxes;
(k) Neither Allied nor any Allied Subsidiary has received a Tax Ruling
(as defined below) or entered into a Closing Agreement (as defined below) with
any Taxing authority that would have a continuing adverse effect after the
Effective Time. "Tax Ruling" shall mean a written ruling of a Taxing authority
relating to Taxes. "Closing Agreement" shall mean a written and legally binding
agreement with a Taxing authority relating to Taxes;
(l) Allied and each Allied Subsidiary have made available (or, in the
case of Tax Returns not filed as of the date hereof or not immediately
available, will make available) to Nationwide complete and accurate copies of
(i) all Tax Returns, and any amendments thereto, filed by or on behalf of Allied
and each Allied Subsidiary for all Taxable years since 1994 and (ii) all audit
reports received from any Taxing authority relating to any Tax Return filed by
Allied or any Allied Subsidiary;
(m) Neither Allied nor any Allied Subsidiary is a party to any Tax
allocation or sharing agreement with any Person. In addition, neither Allied nor
any Allied Subsidiary has any liability for Taxes of any Person other than
Allied or an Allied Subsidiary under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign Law), as a transferee or
successor, by Contract or otherwise;
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(n) Neither Allied nor any Allied Subsidiary except Allied Life
Insurance Company is subject to Taxation under Part 1 of Subchapter L of the
Code;
(o) Neither Allied nor any Allied Subsidiary is a party to any Contract
or arrangement that, separately or in the aggregate, could, by reason of the
transactions contemplated by this Agreement, give rise to the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code;
(p) Except as set forth in the Allied Disclosure Schedule, no election
under Section 338 of the Code (or any predecessor provisions) has been made by
or with respect to Allied or any Allied Subsidiary or any of their respective
assets or properties;
(q) No property of Allied or any Allied Subsidiary is property that (i)
Allied or any Allied Subsidiary or any party to this transaction is or will be
required to treat as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Code (as in effect prior to its amendment by the Tax
Reform Act of 1986) or (ii) is subject to the "alternative depreciation system"
described in Section 168 of the Code;
(r) Neither Allied nor any Allied Subsidiary is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method as disclosed on IRS Form 3115 (copies of
which are available to be reviewed by Nationwide) initiated by Allied or any
Allied Subsidiary and neither Allied nor any Allied Subsidiary has proposed any
such adjustment or change in accounting method;
(s) All transactions that are likely to give rise to an understatement
of federal income Tax (within the meaning of Section 6661 of the Code for Tax
Returns filed on or before December 31, 1989, and within the meaning of Section
6662 of the Code for Tax Returns filed after December 31, 1989) have been
adequately disclosed (or, with respect to Tax Returns not yet filed as of the
date hereof, will be adequately disclosed) on the Tax
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Returns in accordance with Section 6661(b)(2)(B) of the Code for Tax Returns
filed on or prior to December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns filed after December 31, 1989;
(t) All net operating loss carryovers available to offset future income
of Allied and the Allied Subsidiaries have been disclosed in the Allied
Disclosure Schedule. The Allied Disclosure Schedule discloses the amount of and
year of expiration of each net operating loss carryover, and such net operating
loss carryovers are not subject to any limitations or disallowances, including
but not limited to Sections 382, 269 and 482;
(u) All Tax credit carryovers available to offset future Tax liability
of Allied and the Allied Subsidiaries have been disclosed in the Allied
Disclosure Schedule. The Allied Disclosure Schedule discloses the amount of and
year of expiration of each Tax credit carryover, and such Tax credit carryovers
are not subject to any limitation or reduction;
(v) Allied is not and has not been a United States real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(w) No indebtedness of Allied or any Allied Subsidiary is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code;
(x) Neither Allied nor any Allied Subsidiary has filed (or will file
prior to the Effective Time) a consent pursuant to Section 341(f) of the Code or
has agreed to have Section 341(f)(2) of the Code apply to any disposition of a
"subsection (f) asset" (as that term is defined in Section 341(f)(4) of the
Code) owned by Allied or any Allied Subsidiary;
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(y) Neither Allied nor any Allied Subsidiary has engaged in any
intercompany transactions within the meaning of Treasury Regulation Section
1.1502-13 or Temporary Treasury Regulation Section 1.1502-13T for which any
income or gain will remain unrecognized as of the date hereof and no "excess
loss accounts" exist with respect to the stock of any Allied Subsidiary, within
the meaning of Treasury Regulation Section 1.1502-19, as of the date hereof;
(z) Neither Allied nor any Allied Subsidiary has entered into a records
retention agreement with any taxing authority;
(aa) Neither Allied nor any Allied Subsidiary has invested in any low
income housing tax credit project for which a tax credit pursuant to Section 42
was available to either Allied or any Allied Subsidiary and such Tax credit was
so taken by Allied or any Allied Subsidiary; and
(bb) Neither Allied nor any Allied Subsidiary owns any interest in any
partnership or limited liability company, which interest has a negative capital
account.
Section 4.21 Benefit Plans. The Allied Disclosure Schedule sets forth a
complete and correct list of all Benefit Plans (as defined below). Except as
disclosed in the Allied Disclosure Schedule:
(a) Each "employee pension benefit plan" (as defined in Section 3(2) of
the ERISA) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other
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, personnel policies, reimbursement
programs, incentives, insurance, welfare or other employee benefits, in each
case maintained or contributed to, or required to be
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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. All required contributions to
the Benefit Plans have been made. 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. Complete and correct copies of all current and prior documents,
including all amendments thereto, with respect to each Benefit Plan have been
delivered to Nationwide. Except as described in the Allied Disclosure Schedule,
copies of all summary plan descriptions, summaries of material modifications,
other communications concerning the Benefit Plans, and the three most recent
Forms 5500 for each Benefit Plan have also been delivered 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") maintains, sponsors or
contributes to or within the past six years maintained, sponsored or contributed
to a Pension Plan covered by Title IV of ERISA (a "Title IV Plan").
(c) Neither Allied nor a 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) Except as described in the Allied Disclosure Schedule, 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.
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(e) Neither Allied nor a Commonly Controlled Entity, nor any of their
respective employees or directors, nor any fiduciary, has engaged in any
transaction, including the execution and delivery of this Agreement and other
agreements, instruments and documents for which execution and delivery by Allied
is contemplated herein, 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) Except as set forth in the Allied Disclosure Schedule, the Benefit
Plans and their related trusts intended to qualify under Sections 401 and 501(a)
of the Code, respectively, received favorable determination letters from the IRS
and Allied believes such Plans and their related trusts continue to qualify and
operate as designed. Any voluntary employee benefit association which provides
benefits to current or former employees of Allied and the Allied Subsidiaries,
or their beneficiaries, received a favorable determination letter from the
Internal Revenue Service and Allied believes such associations continue to
qualify and operate as designed. Copies of all such determination letters have
been delivered to Nationwide. No such trust or voluntary employee beneficiary
association is subject to any excise tax or to taxation under Section 511 of the
Code.
(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) A complete and correct copy of the most recent actuarial report
(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 to Nationwide.
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Except as disclosed in the Allied Disclosure Schedule, 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) Except as disclosed in the Allied Disclosure Schedule any 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 not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G of the Code).
(j) Except as disclosed in the Allied Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, as a result of such transactions or any
event occurring thereafter (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.
(k) The Allied Disclosure Schedule sets forth the amounts accrued in
the financial statements of Allied for the amounts payable by Allied to any
person covered by the Benefit Plans as of December 31, 1997 and an accurate
computation based on the assumptions set forth therein of the amounts that will
be payable to any such person for periods thereafter under the Benefit Plans.
The financial statements of Allied include or will include proper accruals for
all applicable benefits and taxes with respect to the foregoing amounts.
(l) All group health plans of each Commonly Controlled Entity have been
operated in compliance with the requirements of Sections 162(k) (as in effect
immediately
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prior to the Technical and Miscellaneous Revenue Act of 1988), 4980B of the
Code, and 9801 et seq. of the Code to the extent such requirements are
applicable.
(m) There has been no act or omission by any Commonly Controlled Entity
that has given rise to or may give rise to fines, penalties, taxes, or related
charges under Section 502(c), (i) or (l), Section 4071 of ERISA or Chapter 43 of
the Code.
Section 4.22 Labor Relations and Employment.
(a) Except to the extent set forth in the Allied Disclosure Schedule,
(i) there is no labor strike, material labor dispute, slowdown, stoppage or
lockout actually pending, or to the Knowledge of Allied or of any of the Allied
Subsidiaries, threatened against or affecting Allied or any of the Allied
Subsidiaries, and since January 1, 1993 there has not been any such action; (ii)
to the Knowledge of Allied or of any of the Allied Subsidiaries, 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; (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; (iv) there are no written personnel policies, rules or
procedures applicable to employees of Allied or any of the Allied Subsidiaries,
other than those set forth in the Allied Disclosure Schedule; and (v) Allied is
in compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours except for claims
that could give rise to a liability of less than $25,000. The Allied Disclosure
Schedule sets forth all the employment agreements to which Allied or any Allied
Subsidiary is a party. Such agreements accurately set forth all compensation
which Allied or any Allied Subsidiary is legally obligated to pay each such
person. Except as set forth in the Allied Disclosure Schedule, no employee,
officer, director or independent contractor of Allied or any Allied Subsidiary
is entitled to any
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payment of money or other thing of value or will receive any rights with respect
to the capital stock of Allied as a result of this Agreement. Except as set
forth in the Allied Disclosure Schedule, none of the transactions contemplated
by this Agreement shall constitute a triggering event under any employment,
severance or termination agreement or other compensation arrangement or any plan
currently in effect which (either alone or upon the occurrence of any additional
or subsequent event) is reasonably likely to result in any payment,
acceleration, vesting or increase in benefits to any current or former officer,
employee, director or independent contractor of Allied or any Allied Subsidiary
and which would constitute an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(b) Since the enactment of the WARN Act, Allied has not effectuated (i)
a "plant closing" (as defined in the WARN Act) affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of Allied or any of the Allied Subsidiaries; or (ii) a "mass layoff"
(as defined in the WARN Act) affecting any site of employment or facility of
Allied; nor has Allied been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local Law. Except as set forth in the Allied Disclosure
Schedule, none of Allied's or any Allied Subsidiary's employees has suffered an
"employment loss" (as defined in the WARN Act) since December 31, 1997.
(c) Allied and each of the Allied Subsidiaries (i) has withheld all
amounts required by Law or by agreement to be withheld from the wages, salaries
and other payments to the employees, former employees, independent contractors,
directors and former directors of Allied and each of the Allied Subsidiaries,
(ii) is not liable for any arrears of wages or any Taxes or any penalty for
failure to comply with any of the foregoing, and (iii) is not liable for any
payment to any trust or other fund or to any Governmental Entity, with respect
to unemployment compensation benefits, social security or other benefits except,
in the cases of clauses (ii) and (iii) to the extent that any such
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violation or liability is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect.
Section 4.23 Reserved.
Section 4.24 Properties. Allied and each Allied Subsidiary has good
title to, or in the case of leased property has valid leasehold interests in,
all of their respective properties and assets (whether or not personal or
intangible) except for imperfections in title or interests which would not have
a Material Adverse Effect. None of the properties is subject to any Liens other
than Liens that are disclosed in the SAP Statements or in the GAAP Statements.
Section 4.25 Intellectual Property. Except as set forth in the Allied
Disclosure Schedule, 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; and the consummation of this
transaction will not result in the loss of any rights. The use of the
Intellectual Property will not infringe or otherwise violate the rights of any
Person and no Person is challenging, infringing on or otherwise violating any
right with respect to the Intellectual Property.
Section 4.26 Transactions with Affiliates. Except as set forth in the
Allied Disclosure Schedule, the SAP Statements or the SEC Documents, neither
Allied nor any Allied Subsidiary has entered into any 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.
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Section 4.27 Voting Requirements. The affirmative vote of the holders
of a majority of 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 4.28 Reserved.
Section 4.29 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.
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. Nationwide possesses an Insurance License in
each jurisdiction in which Nationwide is required to possess an Insurance
License. All such Insurance Licenses, including, but not
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limited to, authorizations to transact reinsurance, 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.
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
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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.
(b) Except for (i) the filing of this Agreement with and the approval
of such by the Ohio Superintendent under the Ohio Insurance Law and the Iowa
Commissioner under the Iowa 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.
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ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Allied Conduct of Business Pending the Merger. Allied
covenants and agrees as to itself and the Allied Subsidiaries that, at all times
up to and including the Effective Time, unless Nationwide shall otherwise
consent in writing (Nationwide agreeing that it will use its best efforts to
respond to any request received from Allied arising under this Article VI within
10 Business Days, or sooner as circumstances may require, after receipt of such
request), or as otherwise expressly permitted or contemplated by this Agreement:
(a) Subject to any applicable regulatory requirements, Allied shall,
and shall cause each Allied Subsidiary to, conduct its Business only in the
ordinary course and in substantially the same manner as heretofore conducted
since December 31, 1997 and in a manner which is not inconsistent with the
consummation of the transactions contemplated hereby, and Allied and each Allied
Subsidiary shall use all reasonable efforts to preserve intact its present
business organization and preserve its regular services to, and maintain its
relationships with policyholders, insurers, agents, sales and distribution
organizations, underwriters, investment customers, brokers, suppliers and all
others having business dealings with it to the end that its goodwill and ongoing
Business shall not be impaired in any material respect;
(b) Subject to any applicable regulatory requirements, Allied shall
not, and shall not permit any Allied Subsidiary to, make or propose to make any
change in its dividend practices or policies or in its underwriting, pricing,
claims, risk retention, investment, reinsurance practices or policies in any
material respect; and Allied agrees that it will notify Nationwide and provide
Nationwide with information in reasonable detail regarding any material
transactions (excluding investment transactions in the ordinary course of
business consistent with past practice, but including transactions involving the
securitization of Assets of Allied or of any Allied Subsidiary and transactions
involving
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derivative securities), whether involving a purchase or sale, that it or any
Allied Subsidiary is seriously considering;
(c) Allied shall not, and shall not permit any Allied Insurer to, make
any material change in accounting methods or practices, including without
limitation any change with respect to establishment of reserves for unearned
premiums, losses (including without limitation incurred but not reported losses)
and loss adjustment expenses, or any change in depreciation or amortization
policies or rates adopted by it, except as required by Law, GAAP or SAP;
(d) Allied shall not, and shall not permit any Allied Subsidiary to,
(i) amend its charter or by-laws (unless contemplated hereby), (ii) incur any
individual Liability or series of related Liabilities in excess of $1,000,000
other than in the ordinary course of business consistent with past practice,
(iii) incur any indebtedness for money borrowed in the aggregate for Allied and
the Allied Subsidiaries in excess of $10,000,000 for any such indebtedness
having a maturity of 90 days or less or $1,000,000 for any such indebtedness
having a maturity of more than 90 days, (iv) agree to any merger, consolidation,
demutualization, acquisition, redomestication, sale of all or a substantial
portion of its Assets, bulk or assumption reinsurance arrangement or other
similar reorganization, arrangement or business combination, (v) prior to
notifying Nationwide, enter into any partnership, joint venture or profit
sharing Contract, (vi) enter into any Contract limiting the ability of Allied or
of any Allied Subsidiary to engage in any Business, to compete with any Person,
to do business with any Person or in any location or to employ any Person or
limiting the ability of any Person to compete with such party or any of the
Allied Subsidiaries, (vii) enter into any Contract relating to the direct or
indirect guarantee of any obligation of any Person in respect of indebtedness
for borrowed money or other financial obligation of any Person other than in the
ordinary course of business consistent with past practice, (viii) incur any
material deterioration in its ability to maintain, access and update
policyholder records which deterioration is not reasonably reparable, (ix) enter
into any Contract that could materially and adversely affect the consummation of
the transactions
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contemplated hereby, or (x) modify any Contract with respect to the subject of
any of the foregoing clauses;
(e) Allied shall not permit any Allied Subsidiary to issue or sell any
shares of or interests in, or rights of any kind to acquire any shares of or
interests in, or to receive any payment based on the value of, the capital stock
of or other equity interests in or any securities convertible into shares of any
capital stock of or other equity interests in any Allied Subsidiary, or
otherwise take any actions that would alter the information set forth in the
Allied Disclosure Schedule other than in the ordinary course of business
consistent with existing agreements and arrangements;
(f) Except (x) as set forth in the Allied Disclosure Schedule, (y) in
the ordinary course of business consistent with past practice, or (z) as
required by the terms of agreements or plans already in effect, applicable Law
or as envisioned in the Statement of Operating Principles, Allied shall not, and
shall not permit any Allied Subsidiary to (i) adopt or implement, or commit to
adopt or implement, or materially amend, any collective bargaining,
compensation, employment, consulting, pension, profit sharing, bonus, incentive,
group insurance, termination, retirement or other employee benefit Contract,
plan or policy, (ii) enter into or materially amend any severance Contract,
(iii) increase in any manner the compensation of, or enter into any Contract
relating to the borrowing of money by, its directors, officers or other
employees, except pursuant to the terms of agreements or plans as currently in
effect and except for annual employee compensation increases made in the
ordinary course of business consistent with past practices; provided that in no
event shall any such individual increase in annual compensation exceed $400,000
per year, (iv) increase by more than 0.5% the aggregate number of its employees,
(v) pay or agree to pay any pension, retirement allowance or other employee
benefit not required by the current terms of any existing plan, agreement or
arrangement to any director, officer or other employee, whether past or present,
(vi) voluntarily recognize, or involuntarily become subject to, any labor
organization or any other Person as a collective bargaining representative of
one or more bargaining units comprising a material number of
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employees, or (vii) other than obligations that arise by operation of law or
under the by-laws of a party as they exist on the date of this Agreement, enter
into, adopt or increase any indemnification or hold harmless arrangements with
any directors, officers or other employees or agents of such party or any of the
Allied Subsidiaries or any other Person;
(g) Other than in the ordinary course of business consistent with past
practice, Allied shall not, and shall not permit any Allied Subsidiary to, make
any capital expenditures or expenditures or commitments for expenditures for the
purchase or lease of any products or services or group of products or services
(other than with respect to Investment Assets) which in one or a series of
related transactions exceed $500,000 or which in the aggregate for Allied and
the Allied Subsidiaries taken as a whole exceed $2,500,000, except for
expenditures relating to this Agreement and the consummation of the transactions
contemplated hereby, and expenditures required to be made pursuant to existing
Contracts to which Allied or any Allied Subsidiary is a party, which Contracts
are set forth in the Allied Disclosure Schedule;
(h) Other than in the ordinary course of business consistent with past
practice or in connection with the redemption of outstanding guaranteed
investment contracts in the exercise of Allied's reasonable judgment, Allied
shall not, and shall not permit any Allied Subsidiary to, waive any rights with
a value in excess of $100,000 or any other rights which are material to any
Contract or make any payment, direct or indirect, of any Liability in excess of
$100,000 before the same comes due in accordance with its terms, in each case,
including, but not limited to, any provision of any Insurance Contract to permit
a cash-out thereof;
(i) Allied shall not, and shall not permit any Allied Subsidiary to,
other than pursuant to the operation of separate accounts in the ordinary course
of business, consistent with existing strategies, (i) sell, lease, mortgage,
encumber or otherwise grant any interest in or dispose of any of its Assets
which, individually or in the aggregate, are material to the financial condition
of Allied or of Allied and the Allied Subsidiaries taken as a whole, and,
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in addition, in the case of Liens, for Permitted Liens and Liens not
individually in excess of $500,000 and not aggregating in excess of $2,000,000
or (ii) restructure, amend, modify or otherwise affect any Investment Asset or
any Contract relating thereto which is material to the financial condition of
Allied or of Allied and the Allied Subsidiaries taken as a whole, and, in either
case described in clauses (i) and (ii), only in accordance with the statement of
investment policy set forth in the Allied Disclosure Schedule attached hereto;
and Allied shall furnish to Nationwide a monthly report, in detail reasonably
acceptable to Nationwide, of all such transactions or other changes (other than
changes in market values or ordinary course changes such as interest payments,
maturities, etc.) affecting Investment Assets of Allied or any Allied Subsidiary
which took place since the last such report;
(j) Allied agrees that it shall not, nor shall it permit any Allied
Subsidiary to, other than pursuant to the operation of separate accounts
involved in real estate in the ordinary course, consistent with existing
strategies, make any equity real estate investments (other than through
restructuring or foreclosure or pursuant to commitments existing at the date
hereof or to protect the value of existing investments in the exercise of
reasonable business judgment) and that neither Allied nor any Allied Subsidiary
shall take any action, other than in the exercise of reasonable business
judgment and following discussion with Nationwide, which results, individually
or in the aggregate, in (i) the realization of any gross capital loss or losses
in an amount of $10,000,000 or more or (ii) an adverse impact on the surplus of
Allied or of an Allied Subsidiary in an amount of $10,000,000 or more;
(k) Other than in the ordinary course of business consistent with past
practice, or as required by applicable regulations, Allied shall not, and shall
not permit any Allied Subsidiary to, enter into any material Contract or amend
or waive any material provision of any material Contract which would involve the
payment by Allied or any Allied Subsidiary of $500,000 or more;
(l) Other than in the ordinary course of business consistent with past
practice, Allied shall not, and shall not permit any Allied Subsidiary to,
settle or compromise any
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claim in any action, proceeding or investigation which could result in an
expenditure for Allied and the Allied Subsidiaries in excess of $1,000,000;
(m) Allied shall not, and shall not permit any Allied Subsidiary to,
purchase or otherwise acquire, except pursuant to a Contract in effect on the
date of this Agreement, (i) any controlling equity interest in any Person (other
than Investment Assets), (ii) any non-publicly traded securities in excess of
$5,000,000 per transaction or $5,000,000 per issuer or credit, (iii) any
investments in fixed income securities rated in NAIC Class 4, 5 or 6,
non-publicly traded equity securities or Assets required to be shown on Schedule
BA of a Person's Annual Statement in excess of $5,000,000 per transaction or
$5,000,000 per issuer or credit, or (iv) any real property or mortgage
investments except in the ordinary course of managing the existing portfolio of
real property and mortgage investments, including foreclosing purchase money
mortgages, extensions and refinancings;
(n) Allied shall not, and shall not permit any Allied Subsidiary to,
enter into any new, or materially amend any existing, reinsurance Contracts or
arrangements, except in accordance with existing reinsurance agreements or in
the ordinary course of business and consistent with past practice;
(o) Allied shall, and shall cause each Allied Subsidiary to, maintain
uninterrupted its existing insurance coverage of all types in effect or procure
substantially similar substitute insurance policies with financially sound and
reputable insurance companies in at least such amounts and against such risks as
are currently covered by such policies if such coverage is available;
(p) Allied shall deliver to Nationwide as promptly as practicable after
preparation thereof, but in no event later than the date of filing with respect
to unaudited or audited, as the case may be, SAP Statements for each Allied
Insurer filed by or on behalf of such Allied Insurer after the date hereof;
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(q) Reserved.
(r) Allied shall inform Nationwide regarding the progress of any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes;
(s) Neither Allied nor any Allied Subsidiary shall (i) make or rescind
any material express or deemed election relating to Taxes, (ii) make a request
for a Tax Ruling or enter into a Closing Agreement, settlement or compromise
with respect to any material Tax matter or (iii) with respect to any material
Tax matter, change any of its methods of reporting income or deductions for
federal income Tax purposes from those employed in the preparation of its
federal income Tax Return for the Taxable year ending December 31, 1997, except
as may be required by Law;
(t) Neither Allied nor any Allied Subsidiary shall declare, set aside
or pay any dividends or distributions (whether in cash, stock or property) in
respect of any capital stock of any Allied Subsidiary (except as consistent with
past practices) or redeem, purchase or otherwise acquire any of such Allied
Subsidiary's capital stock;
(u) Except as provided in the Allied Disclosure Schedule, neither
Allied nor any Allied Subsidiary shall settle pending or threatened litigation
in an amount exceeding $1,000,000, other than settlement of pending or
threatened litigation with respect to claims arising under contracts of
insurance or reinsurance underwritten, ceded or assumed by any Allied Subsidiary
which settlement will not have a Material Adverse Effect;
(v) Neither Allied nor any Allied Subsidiary shall do any other act
which would cause any representation or warranty of Allied or any Allied
Subsidiary in this Agreement to be or become untrue in any material respect,
unless required by applicable law; and
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(w) Neither Allied nor any Allied Subsidiary shall agree, in writing or
otherwise, to take any of the actions prohibited by the foregoing clauses (a)
through (v).
Section 6.2 Reserved.
Section 6.3 Reasonable Efforts.
(a) Upon the terms and subject to the conditions herein provided, each
of the parties hereto agrees to use all reasonable 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 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 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.
(b) Allied hereby grants Nationwide the right to decide for purposes of
the Form A regulatory hearings whether to submit regulatory applications for
Allied, Allied Group and Allied Mutual concurrently or separately, and whether
to conduct the regulatory hearing and approval process concurrently or
separately for each of Allied, Allied Group
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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 Access and Information. Allied shall (a) afford to
Nationwide's and Sub's accountants, legal counsel and other advisors 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. Information provided by Allied shall be kept confidential by
Nationwide and Sub and shall not be disclosed unless such information (1) was
known to Nationwide or Sub or was in their possession prior to the date of this
Agreement and was not identified by Allied as being confidential, (2) is or
becomes generally available to the public other than by unauthorized disclosure
by Nationwide or Sub, (3) becomes available to Nationwide or Sub from a third
party authorized to make such disclosure, (4) is independently developed by
Nationwide or Sub, or (5) is required to be disclosed by law or by court order.
Section 6.5 Environmental Due Diligence. Allied shall cooperate with,
and provide, to the extent practicable, reasonable access to, Nationwide and
Nationwide's representatives for environmental assessments and other
environmental due diligence of each Allied Real Property as Nationwide, in its
sole discretion, deems necessary. Nationwide shall conduct the environmental
assessments or other due diligence in a commercially reasonable manner and shall
use reasonable efforts to minimize any interference with or impairment of the
regular conduct of Allied's Business.
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 best of its
Knowledge, threatened
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against, relating to or involving or otherwise affecting Nationwide or Allied or
any of their respective Subsidiaries, as the case may be, which, if pending on
the date hereof, would have been required to have been disclosed in writing
pursuant to Section 4.10 hereof or 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, is reasonably likely to have a Material Adverse Effect including,
but not limited to, any of the following:
(a) any written notice of a default or event which, with notice or
lapse of time or both, would become a default, received by such party or any of
the Allied Subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time, under any material Contract to which such party or any of
the Allied Subsidiaries is a party or by which such party or any of the Allied
Subsidiaries or any of their respective Assets may be subject or bound;
(b) the occurrence of any event which, with notice or lapse of time or
both, is reasonably likely to result in a default under any material Contract to
which such party or any of the Allied Subsidiaries is a party;
(c) 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 is reasonably likely to have a Material
Adverse Effect;
(d) any written notice from or to any Governmental Entity in connection
with this Agreement or the transactions contemplated hereby; and
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(e) 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 Schedule or the Allied Disclosure Schedule, 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, unless the other party so agrees in writing.
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) From and after the Effective Time, Nationwide agrees that it will
indemnify and hold harmless each present and former director and officer of
Allied, (when acting in such capacity or as a member of the Special Committee)
determined as of the Effective Time (each, an Indemnitee and, collectively, the
"Indemnitees"), against any costs or expenses (including reasonable attorneys'
fees), judgements, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time,
including without limitation any and all shareholder lawsuits existing on the
date hereof, to the fullest extent that Allied would have been permitted under
Iowa law and its charter or by-laws in effect on the date hereof to indemnify
such Person (and Nationwide shall also advance expenses
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as incurred to the fullest extent permitted under applicable law provided the
Person to whom expenses are advanced provides a written affirmation of his or
her good faith belief that the standard of conduct necessary for indemnification
has been met, and an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification).
(b) The Surviving Corporation shall maintain Allied's existing
directors' and officers' liability insurance ("D&O Insurance") or D&O Insurance
that is substantially comparable to Allied's existing D&O Insurance for a period
of two years after the Effective Time so long as the annual premium therefor is
not excess of 200% of the last annual premium paid prior to the date hereof
(such last annual premium being hereinafter referred to as the "Current
Premium"); provided, however, that if the existing D&O Insurance or
substantially comparable D&O Insurance cannot be acquired during the two-year
period for not in excess of 200% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
200% of the Current Premium. If the D&O Insurance is terminated prior to the end
of the sixth anniversary of the Effective Time, the Surviving Corporation will
purchase extended reporting coverage under D&O Insurance covering claims made
during the remainder of such period with respect to acts which occurred prior to
the Effective Time.
Section 6.9 Intercompany Agreements. From the execution date of this
Agreement through the termination of this Agreement, Allied covenants as follows
with respect to certain intercompany agreements relating to Allied and its
affiliates:
(a) Allied covenants not to invoke against Allied Group, Inc. or any of
its affiliates ("Allied Group") any of the covenants not to compete or
agreements not to compete contained in (1) that certain Amended and Restated
Intercompany Operating Agreement dated August 25, 1993, as amended (the "IOA"),
and (2) that certain Allied Group Joint Marketing Agreement dated August 30,
1993, as amended (the "JMA"), respectively.
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(b) Allied covenants not to invoke against Allied Group any of the
change of control provisions contained in (1) the IOA, (2) the JMA, (3) that
certain Management Information Services Agreement dated December 31, 1986, as
amended, and (4) that certain Stock Rights Agreement dated August 25, 1993, as
amended, between Allied Mutual and Allied, that Allied may otherwise be entitled
to exercise as a result of the transactions contemplated by (i) this Agreement,
(ii) that certain Agreement and Plan of Merger by and among Nationwide,
Nationwide Group Acquisition Corporation and Allied Group, Inc. or (iii) that
certain Agreement and Plan of Merger by and between Nationwide and Allied
Mutual.
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 15 percent or more of the assets or any equity securities of, Allied or any
of its Subsidiaries, 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 after 180 days from the date hereof if the Merger
shall not by such date have
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been approved by the requisite vote of Allied's shareholders or (iii) at any
time after one year from the date hereof if the Merger shall not by such date
have been approved by the Iowa Commissioner (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 terms
substantially equivalent to those contained in the Confidentiality Agreement;
(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 necessary in order for its directors
to comply with their respective fiduciary duties under applicable law and (ii)
in each case referred to in clause (B) or (C) above, the Board of Directors of
Allied determines in good faith (after consultation 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
and under this Agreement. 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 current basis, on the status and terms of any such proposals or
offers and the status of any such negotiations or discussions.
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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) 2,000,000 Common Shares shall have been purchased pursuant to the
Offer;
(b) if required by applicable Law, this Agreement and the Merger shall
have been approved and adopted by the requisite votes of the respective
shareholders of Allied at the Shareholders Meeting called for such purpose;
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and, other than the
filings provided for in subclauses (a) and (b) of the second sentence of Section
2.3, all Governmental Approvals and other Consents or Filings which the parties
have agreed are required to be obtained prior to the Effective Time shall have
been obtained and not rescinded or adversely modified or limited (as set forth
in the proviso below) or, if merely required to be filed, such filings shall
have been made and accepted, and all waiting periods prescribed by applicable
Law shall have expired or been terminated in accordance with applicable Law;
provided that no such Governmental Approval or other Consent or Filing shall
contain any conditions or limitations that compel or seek to compel the
Surviving Corporation to dispose of or to hold separately all or any material
portion of the Business or Assets of the parties and their respective
Subsidiaries taken as a whole or that impose or seek to impose any material
limitation on the ability of the Surviving Corporation and the Allied
Subsidiaries, taken as a whole, to conduct its Business or own its Assets after
the Effective Time in substantially the same manner as the parties and their
respective Subsidiaries presently conduct their Business or own their Assets;
and
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(d) 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.
Section 7.2 Conditions to Obligation of Allied to Effect the Merger.
The obligations of Allied to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
one or more of which may be waived by Allied, but only to the extent permitted
by Law:
(a) Nationwide shall have performed and complied in all material
respects with all obligations, covenants and agreements required to be performed
and complied with by it under this Agreement at or prior to the Effective Time;
(b) The representations and warranties of Nationwide contained in this
Agreement shall be true and correct when made and at and as of the Effective
Time as if made at and as of such date and time, except to the extent that any
breaches of such representations and warranties, individually or in the
aggregate, have not resulted, or are not reasonably likely to result, in (i)
losses, damages or expenses in excess of $1,000,000 or (ii) a material adverse
effect on the financial condition of the Surviving Corporation, and Allied shall
have received a certificate dated as of the Effective Time of the Chairman and
Chief Executive Officer, the President or an Executive Vice President of
Nationwide as to the satisfaction of this condition.
Section 7.3 Conditions to Obligation of Nationwide to Effect the
Merger. The obligations of Nationwide to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
any one or more of which may be waived by Nationwide, but only to the extent
permitted by Law:
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(a) Allied shall have performed and complied in all material respects
with all obligations, covenants and agreements required to be performed and
complied with by it under this Agreement at or prior to the Effective Time; and
(b) The representations and warranties of Allied contained in this
Agreement shall be true and correct in all material respects when made and at
and as of the Effective Time as if made at and as of such date and time, except
to the extent that any breaches of such representations and warranties,
individually or in the aggregate, have not resulted, or are not reasonably
likely to result, in (i) losses, damages or expenses in excess of $1,000,000 or
(ii) a material adverse effect on the financial condition of the Surviving
Corporation, and Nationwide shall have received a certificate dated as of the
Effective Time by any Vice President of Allied as to the satisfaction of this
condition.
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;
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(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;
(f) by Nationwide prior to the completion of the Offer upon, (i) 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, 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, or (ii) Allied's failure to comply in any material respect
with any of its covenants or agreements (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.
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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 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 by either Allied or
Nationwide pursuant to Section 8.1(b), (d), or (f), Allied shall pay Nationwide
an amount equal to all of the expenses incurred by Nationwide in connection with
this Agreement, the negotiations leading to its execution, the examination and
investigation of Allied, the preparation and negotiation of the Agreement and
related agreements, and in all other ways related to the Merger, including, but
not limited to, all fees and expenses incurred by investment bankers,
accountants, attorneys and other agents, plus the sum of $3 million in cash (the
"Termination Payment") as liquidated damages and not as a penalty, immediately
upon such termination, in same-day funds, provided that Nationwide shall not be
in material breach of its obligations under this Agreement. Moreover, Allied
shall pay the Termination Payment if the Closing does not occur either (i) due
to Allied's failure to satisfy a condition over which it has sole control prior
to December 31, 1998; or (ii) because prior to December 31, 1999, Allied or any
Subsidiary or Affiliate of Allied or any of their respective shareholders
publicly announces, enters into a letter of intent relating to, enters into a
definitive agreement providing for, or consummates, a transaction, which, as
announced, or as provided in such letter or agreement or as consummated,
provides for or relates to the disposition of a controlling interest in Allied
or the sale, transfer or other distribution of assets constituting a majority
(measured by fair market value) of the consolidated assets of Allied.
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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:
(a) 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
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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
(b) If to Allied, to:
Allied Life Financial Corporation
701 Fifth Avenue
Des Moines, Iowa 50391-2003
Attention: Samuel Wells
Facsimile No.: (515) 280-4776
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Richard G. Clemens, Esq.
Facsimile No.: (312) 853-7036
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 Nationwide or 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.
Any amendment, modification or material waiver of this Agreement shall be
subject to the approval of the Ohio Superintendent and the Iowa Commissioner.
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,
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condition or 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, Fox-Pitt, Kelton Inc., 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,
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(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 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
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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.
Each of the parties hereto submits to the jurisdiction of the state and federal
courts sitting in the City of Columbus, County of Franklin and State of Ohio, in
any action or proceeding arising out of or relating to this Agreement and all
claims in respect of any such action or proceeding may be heard or determined in
any such court.
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.
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.
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Section 9.16 Survival of Certain Covenants. The provisions of Section
6.8 hereof shall survive the Effective Time.
Section 9.17 Counting. If the due 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.
"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.
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"Allied Disclosure Schedule" shall mean the disclosure schedule
delivered by Allied to Nationwide, dated the date hereof.
"Allied GAAP Financial Statements" shall have the meaning set forth in
Section 4.7 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 1998 Quarterly Statement" shall have the meaning set forth in
Section 4.8 hereof.
"Allied Real Property" shall mean any real property in which Allied or
any of its Affiliates holds a Lien or owns an interest, or in the management of
which Allied or an Affiliate of Allied actively participates.
"Allied SAP Statements" shall have the meaning set forth in Section
4.6(d) hereof.
"Allied Subsidiary" or "Allied Subsidiaries" shall mean the
Subsidiaries of Allied and, without limiting the generality of the foregoing,
shall include any Subsidiary of Allied as to which Allied or an Allied
Subsidiary has guaranteed any obligations or owns any interest. 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.
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"Articles of Merger" shall mean the articles of merger in such form as
required by, and executed and acknowledged in accordance, with the Iowa
Corporation Law and the Iowa Insurance Law.
"Assets" shall mean, as to a Person, all rights, titles, franchises and
interests in and to every species of property, real, personal and mixed, and
choses in action thereunto belonging, including, but not limited to,
Environmental Permits, Investment Assets, Intellectual Property, Contracts,
Licenses, privileges and all other assets whatsoever, tangible or intangible, of
such Person.
"Benefit Plans" shall have the meaning set forth in Section 4.21
hereof.
"Business" shall mean, as to a Person, the business, operations,
activities and affairs of such Person.
"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 Agreement" shall have the meaning set forth in Section 4.20(k)
hereof.
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"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"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 Share" shall mean share of common stock, no par value, of
Allied.
"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.
"Current Premium" shall have the meaning set forth in Section 6.8
hereof.
"D&O Insurance" shall have the meaning set forth in Section 6.8 hereof.
"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.
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"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 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.
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"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.
"Financial Statements" shall mean balance sheets, statements of income
and statements of cash flows, including, but not limited to, all notes,
schedules, exhibits and other attachments thereto, whether consolidated,
combined or separate or audited or unaudited or prepared in accordance with SAP
or GAAP.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"GAAP Financial Statements" shall mean Financial Statements prepared in
accordance with GAAP.
"Governmental Approvals" shall mean the Consents or Filings required to
be obtained from the Iowa Commissioner and the Ohio Superintendent.
"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.
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"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.
"Indemnitees" shall have the meaning set forth in Section 6.8 hereof.
"Insurance Contract" shall mean any Contract of insurance, including,
but not limited to, reinsurance contracts, variable annuity and fixed annuity
contracts or products, life insurance contracts, and funding agreements.
"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, 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;
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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.
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"Knowledge" shall mean, as to a Person, (i) receipt of notice by, or
actual knowledge or reason to know (assuming for such purposes that reasonable
inquiry has been made) by any officer of such Person with the title of Vice
President or higher (or, if not a corporation, any person holding a similar
title or position) or (ii) the actual Knowledge of any Vice President (or, if
not a corporation, any person holding a similar title or position) of such
Person with respect to any matter or matters within the scope of such Person's
responsibilities.
"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 a material adverse effect on the
business, results of operations or financial condition of any party or any of
its Subsidiaries
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(including, after the Merger, the Surviving Corporation), or of such party and
its Subsidiaries taken as a whole, or on the ability of such party to consummate
the transactions contemplated by this Agreement.
"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.
"NAIC" shall mean the National Association of Insurance Commissioners.
"Nationwide" shall have the meaning set forth in the preamble to this
Agreement.
"Nationwide Disclosure Schedule" shall mean the disclosure schedule
delivered by Nationwide to Allied, dated the date hereof.
"Nationwide Subsidiaries" shall mean the Subsidiaries of Nationwide.
"NPL" shall mean the National Priority List.
"Offer" shall mean the tender offer for the Common Shares commenced by
Nationwide pursuant to Section 1.1., as amended from time to time.
"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.
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"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.
"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 Nationwide Disclosure Schedule or the Allied Disclosure Schedule,
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 Nationwide Disclosure Schedule or the Allied
Disclosure Schedule and any lease or sublease, (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, 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.
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"Preferred Shares" shall mean each share of 6.75% Series Preferred
Shares and Series A ESOP Preferred Shares, collectively
"6.75% Series Preferred Shares" shall mean each share of 6.75% Series
preferred stock, no par value, of Allied.
"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.
"Rating Agencies" shall mean A.M. Best and Company, Standard and Poor's
Corporation, Moody's Investor Services, Inc., and Duff & Phelps Credit Rating
Agency.
"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.
"SAP Statements" shall mean Annual Statements and Quarterly Statements.
"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 mean the Securities and Exchange Commission.
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"SEC Documents" shall have the meaning set forth in Section 4.9 hereof.
"Series A ESOP Preferred Share" shall mean each share of Series A ESOP
Convertible Preferred Stock, no par value, of Allied.
"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 Tax Return" shall mean a report, return or other information
required under any applicable Law to be filed or provided to any Person with
respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes Nationwide or any
Nationwide Subsidiary on the one hand, or Allied or any Allied Subsidiary on the
other hand.
"Tax Ruling" shall have the meaning set forth in Section 4.20(k)
hereof.
"Taxes" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net income, gross
income, premiums, sales and use, ad valorem, transfer, gains, profits, windfall
profits, excise, franchise, real and
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personal property, gross receipts, capital stock, production, business and
occupation, employment, disability, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes, other taxes or similar charges of any
kind whatsoever imposed by any Governmental Entity, whether imposed directly on
a Person or resulting under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law), as a transferee or successor, by
Contract or otherwise and includes any interest and penalties (civil or
criminal) on or additions to any such taxes or in respect of a failure to comply
with any requirement relating to any Tax Return and any expenses incurred in
connection with the determination, settlement or litigation of any such tax
liability.
"Third Party Administrator" shall mean any third party administrator of
either Nationwide or Allied.
"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.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act of 1988, as amended.
"Welfare Plan" shall have the meaning set forth in Section 4.21(a)
hereof.
[SIGNATURE PAGE TO FOLLOW]
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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 LIFE ACQUISITION CORPORATION
By: _________________________________
Name: David A. Diamond
Title: Vice President-Enterprise
Controller
ALLIED LIFE FINANCIAL CORPORATION
By: _________________________________
Name: Samuel J. Wells
Title: President
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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
2,000,000 Common Shares (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 (the "Insurance Regulatory Condition") and any
waiting period applicable to the consummation of the Offer and the Merger under
the HSR Act shall not 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 (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
Exhibit A-1
<PAGE> 101
which has a material adverse effect on the general economic conditions
in the United States;
(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; provided that the Nationwide and Sub shall have
used their 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 or (ii) there shall have occurred, on
the part of Allied, a breach of any representation or warranty
contained in the Agreement as of the date of the Agreement or at the
time of the consummation of the Offer (other than representations and
warranties made as of a specified date prior to the date of the
Agreement) which, in either case, if
Exhibit A-2
<PAGE> 102
not cured would reasonably be expected to have a Material Adverse
Effect and which is not curable or, if curable, is not cured with the
later of (x) 30 calendar days after written notice of such breach is
given by Nationwide to Allied of such breach and (y) the time of
satisfaction of all conditions to the Offer not related to such breach;
provided, however, that the representations contained in Sections 4.2
and 4.4 shall be true as of the consummation of the Offer.
(e) the Allied Board shall have withdrawn its recommendation
or modified its recommendation in a manner adverse to Nationwide or
Sub;
(f) the failure to obtain any Governmental Approvals or third
party Contracts, which failure, in the aggregate, would have a Material
Adverse Effect;
(g) Any insurance regulatory approval necessary for the merger
of Allied Mutual with and into Nationwide (the "Mutual Merger") shall
not have been obtained on terms and conditions reasonably satisfactory
to Nationwide;
(h) the requisite vote of Allied Mutual policyholders in
support of the mutual Merger shall not have been obtained; and
(i) the nominees of Nationwide to the Allied Mutual Board
pursuant to the Mutual Merger shall not have been duly elected or
appointed so as to constitute a majority of the directors on the Allied
Mutual Board.
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
Exhibit A-3
<PAGE> 103
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.
Exhibit A-4
<PAGE> 104
Exhibit B
Nationwide Life Acquisition Corporation Articles
of Incorporation and Code of By-laws
Exhibit B-1
<PAGE> 105
ARTICLES OF INCORPORATION
OF
NATIONWIDE LIFE ACQUISITION CORPORATION
The undersigned, desiring to form a corporation, for profit, under Section
1701.01 et seq. of the Ohio Revised Code, does hereby state the following:
FIRST: The name of said corporation shall be Nationwide Life
Acquisition Corporation.
SECOND: The place in Ohio where its principal office is to be
located is One Nationwide Plaza, Columbus, Franklin County,
Ohio 43215.
THIRD: The purpose or purposes for which the corporation is
organized are:
To engage in the transaction of any lawful act or activity
for which corporations may be formed under Chapter 17 of the
Ohio Revised Code.
FOURTH: The aggregate number of shares which the corporation shall
have authority to issue is 850 common shares of $1.00 par
value.
IN WITNESS WHEREOF, I have hereunto subscribed my name, this 29th day of May,
1998.
/s/ Mark B. Koogler
----------------------------
By: Mark B. Koogler
Its: Sole Incorporator
<PAGE> 106
ORIGINAL APPOINTMENT OF STATUTORY AGENT
The undersigned, being the incorporator of NATIONWIDE LIFE ACQUISITION
CORPORATION, hereby appoints W. Sidney Druen to be statutory agent upon whom
any process, notice or demand required or permitted by statute to be served
upon the corporation may be served. The complete address of the agent is:
W. Sidney Druen, Senior Vice President and General Counsel and Assistant
Secretary
One Nationwide Plaza
Columbus, OH 43215
By: /s/ Mark B. Koogler
------------------------------
Mark B. Koogler, Incorporator
ACCEPTANCE OF APPOINTMENT
The undersigned, W. Sidney Druen, named herein as the statutory agent for
NATIONWIDE LIFE ACQUISITION CORPORATION, hereby acknowledges and accepts the
appointment of statutory agent for said corporation.
By: /s/ W. Sidney Druen
------------------------------
W. Sidney Druen, Statutory Agent
<PAGE> 107
NATIONWIDE LIFE ACQUISITION CORPORATION
CODE OF BYLAWS
For the Government of the
Board of Directors
ARTICLE 1
Meetings of Directors
Section 1. Meetings In or Out of State. Any meeting of the Board of Directors
may be held in or outside of the State of Ohio.
Section 2. Regular Annual Meeting. A regular annual meeting of the Board of
Directors shall be held immediately following the termination of the regular
annual meeting of the shareholders of the Corporation and at the same place of
such shareholder's meeting, unless a different time and place is fixed by
resolution of the Board of Directors. If for any reason the annual meeting is
not held as provided for in this section, then the business to be transacted
thereat may be transacted at any special meeting of the Board of Directors
called as provided for in Section 3 of this Article.
Section 3. Special Meeting of the Board of Directors. Special meetings of the
Board of Directors may be called by the Chairman of the Board, Chairman and
Chief Executive Officer-Nationwide Insurance Enterprise, President, or by a
majority of the members of the Board of Directors acting with or without a
meeting.
Section 4. Notice of Board of Directors' Meetings and Waiver of Notice. A
written or printed notice of each regular or special meeting of the Board of
Directors, stating the time, place and purposes thereof, shall be delivered or
mailed to each Director or sent to him by mail, telegram, cablegram, facsimile,
or electronic mail at his last known post office address, not more than twenty
(20) days nor less than forty-eight (48) hours before the time fixed for the
meeting. Meetings may be held at any time or place without notice if all of the
members of the Board of Directors are present at the meeting or if those who are
absent assent in writing to the holding of the meeting. Such assent may be given
by the absent Directors either before, at or after such meeting. In any event,
any Director may, either before, at or after any meeting of the Board of
Directors, waive any or all of the provisions of law or of this Code of Bylaws
as to notice of such meeting or as to any irregularities in such notice or in
giving thereof, and shall thereby validate the proceedings of such meeting as
fully as though all of the requirements of the provisions waived had been duly
met in their respective cases. If any meeting of the Board of Directors is
adjourned to another time or place, no further notice as to such adjourned
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<PAGE> 108
meeting need be given other than by announcement at the meeting at which such
adjournment is taken.
Section 5. Quorum. A majority of the entire Board of Directors shall constitute
a quorum at all meetings.
Section 6. Order of business. The order of business of the Board of Directors at
regular meetings, unless changed by a majority of the Directors present, shall
be as follows:
1. Reading of minutes of preceding meeting and taking action thereon;
2. Reading and consideration of reports and statements--report of the
Chairman and Chief Executive Officer-Nationwide Insurance Enterprise,
President, any other officer, and any committee;
3. Election of officers (at annual or special meeting called for that
purpose);
4. Old or unfinished business;
5. New business; and
6. Adjournment.
ARTICLE II
Vacancies
Whenever a vacancy occurs in the Board of Directors of the Corporation or in any
other office of the Corporation, for any cause, the vacancy may be filled for
the unexpired term by the vote of a majority of the Board of Directors present,
if those present constitute a quorum thereof; provided, however, if the Board of
Directors is reduced to less than a majority by reason of vacancies, however
caused, the remaining directors, by a majority vote, or the remaining Director
may fill such vacancies. The Board of Directors may declare the office of a
director vacant if the director shall be declared of unsound mind by an order of
court or be adjudicated a bankrupt or if the director does not qualify within
sixty (60) days of election by accepting in writing election to such office or
by acting at a meeting of the Board of Directors and the Board of Directors may
thereupon fill such declared vacancy.
ARTICLE III
Compensation of Officers
The officers of the Corporation shall receive such compensation as shall be
fixed by resolution of the Board of Directors.
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<PAGE> 109
ARTICLE IV
Indemnification
Section 1. Indemnification of Directors, Officers and Employees. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that such person is or was a director, officer or employee of the Corporation,
or is or was serving at the request of the Corporation as a director, trustee,
officer, member, or employee of another corporation, domestic or foreign,
non-profit or for profit, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding, to the extent and under the circumstances permitted by the
Revised Code of the State of Ohio; provided, however, that the Corporation shall
indemnify any such person seeking indemnity in connection with an action, suit
or proceeding (or part thereof) initiated by such person only if such action,
suit or proceeding (or part thereof) initiated by such person was authorized by
the Board of Directors of the Corporation. Such indemnification (unless ordered
by a court) shall be made as authorized in a specific case upon a determination
that indemnification of the director, trustee, officer or employee is proper in
the circumstances because such person has met the applicable standards of
conduct set forth in the Revised Code of the State of Ohio. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not, and are not, parties to or threatened with
any such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or if a majority vote of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel meeting the requirements of
independence prescribed by the Revised Code of the State of Ohio, or (3) by the
shareholders, or (4) by the Court of Common Pleas or the court in which such
action, suit or proceeding was brought.
Section 2. Other Rights. The foregoing right of indemnification shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under the Articles of Incorporation, this Code of Bylaws, any
agreement, vote of shareholders or disinterested directors or otherwise, and
shall continue as to a person who has ceased to be a director, trustee, officer
or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 3. Advance payment of Expenses. The Corporation shall pay to any
director, and may pay to any other person entitled to indemnification pursuant
to Section 1 of this Article IV, expenses, including attorneys' fees, incurred
in defending any action, suit or proceeding referred to in Section 1 of this
Article IV, in advance of the final disposition of such action, suit or
proceeding; provided, however, that the payment of such expenses in advance of
the final disposition of such action, suit or proceeding shall be made only
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<PAGE> 110
upon delivery to the Corporation of any legally required undertaking by or on
behalf of such director or other person.
Section 4. Contractual Rights; Applicability. The right to be indemnified or to
the reimbursement or advancement of expenses pursuant hereto (i) is a contract
right based upon good and valuable consideration, pursuant to which the person
entitled thereto may bring suit as if the provision hereof were set forth in a
separate written contract between the Corporation and such person, (ii) is
intended to be retroactive and shall be available with respect to events
occurring prior to the adoption hereof, and (iii) shall continue to exist after
the rescission or restrictive modification hereof with respect to events
occurring prior thereto.
Section 5. Requested Service. Any person serving, in any capacity, (i) another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the Corporation, or (ii) any employee benefit plan
of the Corporation or of any corporation referred to in clause (i), shall be
deemed to be doing so at the request of the Corporation.
Section 6. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, member, or employee of
the Corporation, or is or was serving at the request of the Corporation as a
director, trustee, officer or employee of another corporation, domestic or
foreign, non-profit or for profit, partnership, joint venture, trust, or other
enterprise against any liability asserted against such person and incurred in
any such capacity, or arising out of the status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under this Article IV.
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<PAGE> 111
ARTICLE V
Amendments
This Code of Bylaws may be adopted, amended, changed or repealed by the
majority vote of the entire Board of Directors at any regular meeting thereof,
or any meeting if such meeting be duly called as a special meeting for that
purpose or if each member of the Board of Directors shall be present at the
meeting or shall waive in writing the call and notice thereof.
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<PAGE> 112
Exhibit C
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 Life Acquisition Corporation,
an Ohio corporation and wholly-owned subsidiary of Nationwide ("Sub"), and
Allied Life Financial Corporation, 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 6.75% 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:
<PAGE> 113
1. 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, 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 shareholders 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
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<PAGE> 114
the treatment of any Securities in or in connection with such transaction
(collectively, "Frustrating Transactions").
2. 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 2 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. The Securityholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
3. Acquisition Proposals.
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
3
<PAGE> 115
Acquisition Proposal; or (C) recommending an Acquisition Proposal to the policy
holders of the Securityholder, the Securityholder's obligations under Sections 1
and 2 of this Agreement shall be deemed inoperative. For purposes of this
Section 3, "Acquisition Proposal" shall have the meaning ascribed thereto in the
Allied Mutual Merger Agreement.
4. 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, 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. 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
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<PAGE> 116
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 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.
5. 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.
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<PAGE> 117
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.
6. Further Assurances. Except as otherwise provided in Section
3, 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 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 2. 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.
7. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate on the earlier of (x) the termination
of the Merger Agreement (except pursuant to Section 8.1(d) of the Merger
Agreement in which case this Agreement shall continue in effect) of in
accordance with its terms and (y) the termination of the Allied Mutual Merger
Agreement. Nothing in this Section 7 shall relieve any party from liability for
willful breach of this Agreement.
8. 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.
6
<PAGE> 118
(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
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
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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
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
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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,
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
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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.
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<PAGE> 122
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
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<PAGE> 123
<TABLE>
SCHEDULE A
<CAPTION>
Common Preferred
Name and Address Shares Shares Warrants Options
---------------- ------ ------ -------- -------
<S> <C> <C>
Allied Mutual Insurance Company 1,521,006 2,292,093 -- --
</TABLE>
12
<PAGE> 124
SCHEDULE A
<TABLE>
<CAPTION>
Name and Address Common Shares 6.75% Preferred Stock
---------------- ------ ------ ---------------------
<S> <C> <C>
Allied Mutual Insurance Company 1,521,006 2,330,772
</TABLE>
Schedule A-1
