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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 1)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ALLIED GROUP, INC.
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(NAME OF SUBJECT COMPANY)
ALLIED GROUP, INC.
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(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, NO PAR VALUE
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(TITLE OF CLASS OF SECURITIES)
019220102
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(CUSIP NUMBER OF CLASS OF SECURITIES)
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GEORGE OLESON, ESQ.
VICE PRESIDENT AND CORPORATE COUNSEL
ALLIED GROUP, INC.
701 FIFTH AVENUE
DES MOINES, IOWA 50391-2000
(515) 280-4211
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING)
WITH A COPY TO:
STEVEN OSTNER, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
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This amendment ("Amendment No. 1") amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 as from time to time
amended (the "Schedule 14D-9") filed with the Securities and Exchange
Commission (the "Commission") on June 2, 1998 by ALLIED Group, Inc., an Iowa
corporation (the "Company"), with respect to the tender offer by Nationwide
Mutual Insurance Company, an Ohio corporation ("Nationwide"), and Nationwide
Group Acquisition Corporation, an Ohio corporation and wholly owned subsidiary
of Nationwide ("Nationwide Sub" and, collectively with Nationwide, the
"Bidder"), disclosed in a tender offer statement on Schedule 14D-1, filed with
the Commission on May 19, 1998 (as the same may be amended from time to time,
the "Schedule 14D-1"), to purchase up to 30,634,052 shares (the "Shares"), at
a price of $47 per Share, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated May 19, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which collectively constitute the "Initial Offer" and, as
proposed to be amended as described herein, the "Offer"). Capitalized terms
used herein without separate definition are used with the meanings specified
in this Schedule 14D-9.
ITEM 2. TENDER OFFER OF THE BIDDER
On June 3, 1998, Nationwide, Nationwide Sub and the Company entered into an
Agreement and Plan of Merger, dated as of June 3, 1998 (the "Merger
Agreement"), a copy of which has been filed as Exhibit 35 to this Schedule
14D-9, and is incorporated herein by reference. Pursuant to the Merger
Agreement, as soon as practicable following the consummation of the Offer and
the satisfaction or waiver of certain conditions, Nationwide Sub will be
merged with and into the Company (the "Merger"), with the Company continuing
as the surviving corporation (the "Surviving Corporation"). In the Merger,
each Share outstanding at the effective time of the Merger (other than Shares
owned by Nationwide or Nationwide Sub, shares held as treasury shares by the
Company and Dissentary Shares (as defined in the Merger Agreement)) will, by
virtue of the Merger and without any action by the holder thereof, be
converted into the right to receive $48.25 per Share, net to the seller in
cash, without interest thereon (the "Merger Consideration"), upon surrender of
the certificate formerly representing such Shares (a "Certificate"). The
Merger Agreement is summarized in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
(b) MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which has been filed as
Exhibit 35 to this Schedule 14D-9. The Merger Agreement should be read in its
entirety for a more complete description of the matters summarized below.
The Offer. In the Merger Agreement, the Bidder has agreed, subject to
certain conditions, and among other things, to amend the Initial Offer (a) to
increase the purchase price offered from $47 per Share to $48.25 per Share net
to the seller in cash without interest, and (b) to modify the conditions of
the Initial Offer to those set forth below under "Amended Conditions to the
Offer". The Merger Agreement provides that, without the consent of the
Company, the Nationwide Sub shall not (a) reduce the number of Shares sought
in the Offer, (b) reduce the Offer price to a price less than $48.25 per
Share, (c) change or add to the conditions set forth below under "Amended
Conditions to the Offer", (d) except as provided in the next sentence, extend
the Offer, (e) change the form of consideration payable in the Offers (f)
waive the Minimum Condition or the Insurance Regulatory Condition without the
Company's consent, or (g) amend any other term of the Offer in any manner
adverse to the holders of the Shares.
Notwithstanding the foregoing, Nationwide Sub may, without the consent of
the Company, (A) extend the Offer, if at the scheduled or extended expiration
date of the Offer any of the conditions to the Bidder's obligation to purchase
the Shares shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (B) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
or the staff thereof applicable to the Offer and (C) extend the Offer for any
reason on one or more occasions for an aggregate period of not more than 10
business days (for all such extensions) pursuant to this clause (C) beyond the
latest expiration date that would otherwise be permitted under clause (A) or
(B) of this sentence. So long as
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the Merger Agreement is in effect, and the Offer Conditions (as defined below)
have not been satisfied or waived, Nationwide Sub shall, and Nationwide shall
cause Sub to, cause the Offer not to expire. Subject to the terms and
conditions of the Offer and the Merger Agreement, Nationwide Sub shall, and
Nationwide shall cause Nationwide Sub to accept for payment, and pay for, all
Shares validly tendered and not withdrawn pursuant to the Offer that
Nationwide Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer as soon as practicable after the expiration of the Offer.
The Merger. The Merger Agreement provides that, following the satisfaction
or waiver of the conditions set forth therein, Nationwide Sub will be merged
with and into the Company, with the Company continuing as the Surviving
Corporation, and each Share then outstanding (other than Shares owned by
Nationwide or Nationwide Sub shares held as treasury shares by the Company and
Dissenting Shares will, by virtue of the Merger and without any action by the
holder thereof, be converted into the right to receive $48.25 per Share, net
to the seller in cash, without interest thereon, upon the surrender of the
Certificate formerly representing such Shares.
Representations and Warranties. The Merger Agreement contains
representations and warranties by the Company with respect to, among other
things, the organization, qualification and capitalization of the Company, the
subsidiaries of the Company, the authority of the Company relative to the
Merger Agreement, the absence of violations of law, required governmental
filings, the statutory financial statements of the Company's insurance company
subsidiaries and their actuarial reserves, the SEC filings of the Company the
absence of certain changes or events and of any undisclosed liabilities, the
inapplicability of state takeover statutes, compliance with applicable law,
the assets of the Company, environmental matters, contracts of the Company,
taxes and tax returns, benefit plans, labor relations, intellectual property,
transactions with affiliates, voting requirements applicable to the Merger and
the status of the Company's subsidiaries as regulated investment companies.
The Merger Agreement also contains representations and warranties of
Nationwide and Nationwide Sub with respect to, among other things, their
organization and qualification, their authority relative to the Merger
Agreement, the absence of violations of law, required governmental filings,
the absence of certain litigation, and their financial ability to perform.
Covenants of the Company. In the Merger Agreement, the Company has
covenanted and agreed that, among other things, during the period from the
date of the Merger Agreement until the effective time of the Merger (the
"Effective Time"), unless Nationwide shall otherwise agree in writing, or
except as otherwise contemplated in the Merger Agreement, the Company and its
subsidiaries shall conduct their respective businesses in the ordinary course
consistent with past practice and shall use all reasonable efforts to preserve
intact their business organizations and relationships with third parties
(including but not limited to their respective relationships with
policyholders, insureds, agents, underwriters, brokers and investment
customers), and to keep available the services of their present officers and
key employees, subject to the terms of the Merger Agreement. In addition,
except as otherwise contemplated by the Merger Agreement, from the date
thereof until the Effective Time, without the prior written consent of
Nationwide, (a) the Company shall not adopt or propose any change in its
Restated Articles of Incorporation or Bylaws; (b) the Company shall not
declare, set aside or pay any dividend or other distribution with respect to
any shares of capital stock of the Company except for regular quarterly
dividends payable in an amount no greater than $0.14 per share on the Shares
and the regular quarterly dividends per share on the Preferred Shares, or
split, combine or reclassify any of the Company's capital stock, and the
Company and its subsidiaries shall not repurchase, redeem or otherwise acquire
any shares of capital stock or other securities of, or other ownership
interests in, the Company; (c) the Company shall not, and shall not permit any
of its subsidiaries to, merge or consolidate with any other person or (except
in the ordinary course of business) acquire a material amount of assets of any
other person; (d) the Company shall not, and shall not permit any subsidiary
to, sell, lease, license or otherwise surrender, relinquish or dispose of (i)
any material facility owned or leased by the Company or any of its
subsidiaries or (ii) any assets or property which are material to the Company
and its subsidiaries taken as a whole, except pursuant to existing contracts
or commitments, or in the ordinary course of business consistent with past
practice; (e) the Company shall not, and
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shall not permit any of its subsidiaries to, settle any material audit, make
or change any material tax election or file materially amended tax returns;
(f) the Company and its subsidiaries shall not issue any capital stock or
other securities or enter into any amendment of any material term of any
outstanding security of the Company, and the Company and its subsidiaries
shall not incur any material indebtedness except in the ordinary course of
business pursuant to existing credit facilities or arrangements, amend or
otherwise increase, accelerate the payment or vesting of the amounts payable
or to become payable under or fail to make any required contribution to, any
Benefit Plan (as defined in the Merger Agreement) or materially increase any
non-salary benefits payable to any employee or former employee, except in the
ordinary course of business consistent with past practice or as otherwise
permitted by the Merger Agreement; (g) the Company shall not, and shall not
permit any of its subsidiaries to, grant any increase in the compensation or
benefits of directors, officers, employees, consultants or agents of the
Company or any of its subsidiaries other than increases in the ordinary course
of business consistent with past practice; (h) the Company shall not, and
shall not permit any of its subsidiaries to, enter into or amend any
employment agreement or other employment arrangement with any employee of the
Company or any of its subsidiaries, except in the ordinary course of business
consistent with past practices (which past practices shall not be deemed to
include actions taken in connection with the Merger); (i) the Company shall
not change any method of accounting or accounting practice by the Company or
any of its subsidiaries, except for any such required change in GAAP or SAP
(as such terms are defined in the Merger Agreement); (j) the Company shall not
permit any Allied Insurer to conduct transactions in investment assets except
in compliance with the investment policies of such Allied insurance
subsidiaries in effect on the date hereof and all applicable insurance laws
and regulations; (k) the Company shall not, and shall not permit any of its
subsidiaries to, enter into any agreement to purchase, or to lease for a term
in excess of one year, any real property, provided that the Company, or any of
its subsidiaries, (i) may as a tenant, or a landlord, renew any existing lease
for a term not to exceed eighteen months and (ii) may, in its capacity as a
landlord, renew any lease pursuant to an option granted prior to the date
hereof; and (l) none of the Allied insurance subsidiaries may make any
material change in its underwriting, claims management or reserving practices.
In addition to the foregoing, the Company has agreed that, except to the
extent necessary to comply with the requirements of applicable laws and
regulations, it shall not, and shall not permit any of its subsidiaries to,
(a) take, or agree or commit to take, any action that would make any
representation and warranty of the Company in the Merger Agreement inaccurate
in any material respect at, or as of any time prior to, the Effective Time,
(b) omit, or agree or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in any material
respect at any such time, provided however, that the Company shall be
permitted to take or omit to take such action which (without any uncertainty)
can be cured, and in fact is cured, at or prior to the Effective Time or (c)
take, or agree or commit to take, any action that would result in, or is
reasonably likely to result in, any of the conditions of the Merger set forth
in the Merger Agreement not being satisfied.
Prohibition on Solicitation. Pursuant to the Merger Agreement, the Company
has agreed that it will not, and will not permit or cause any of its
subsidiaries or any of the officers or directors of it or its subsidiaries to,
and shall direct its and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the
making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any
purchase of 20 percent or more of the assets or any equity securities of, the
Company or any of its Significant Subsidiaries (as defined in Regulation S-X
promulgated by the Commission) other than as set forth in the Allied
Disclosure Letter, or any other business combination (any such proposal or
offer, an "Acquisition Proposal").
The Merger Agreement further provides that the Company 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) 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,
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whether made before or after the date of the Merger Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
provided, however, that nothing contained in the Merger Agreement shall
prevent the Company or its Board of Directors from (i) complying with Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal or (ii) at any time prior to the payment for Shares pursuant to the
Offer (A) providing information in response to a request therefor by a person
who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from such person an executed confidentiality
agreement on customary terms; (B) engaging in any negotiations or discussions
with any person who has made an unsolicited bona fide written Acquisition
Proposal; or (C) recommending such an Acquisition Proposal to the shareholders
of the Company, 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 the Company
determines in good faith after consultation with outside legal counsel that
such action is reasonably likely to be necessary in order for its directors to
comply with their respective fiduciary duties under applicable law and (ii) in
the case referred to in clause (C) above, the Board of Directors of the
Company 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 the Merger Agreement, taking into account the long-term
prospects and interests of the Company and its shareholders.
The Company has agreed in the Merger Agreement to 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,
and that it will notify Nationwide immediately if any such inquiries,
proposals or offers are received by, any such information is requested from,
or any such discussions or negotiations are sought to be initiated or
continued with, any of its representatives indicating, in connection with such
notice, the name of such person and the material terms and conditions of any
proposals or offers and thereafter shall keep Nationwide informed, on a
reasonably current basis, of the status and terms of any such proposals or
offers and the status of any such negotiations or discussions.
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 the Company and its shareholders than the
transactions contemplated by the Merger Agreement, and if the Board of
Directors of the Company, after consultation with outside counsel, shall have
determined that failure to terminate the Merger Agreement is reasonably likely
to be inconsistent with the fiduciary duties of the Board of Directors under
applicable law, the Company may terminate the Merger Agreement. If the Company
so elects to terminate the Merger Agreement, the Company shall, immediately
prior to any such termination, pay a termination fee in the amount of $30
million in immediately available funds by wire transfer to a bank account
designated by Nationwide.
Stockholder Approval; Preparation of Proxy Statement. The Merger Agreement
provides that as soon as practicable following the purchase of the Shares
pursuant to the Offer, the Company shall prepare and file with the Commission
the Proxy Statement, if required by applicable law. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to its
shareholders as promptly as practicable. Nationwide and Nationwide Sub will
use their reasonable best efforts to assist the Company in the preparation and
filing of the Proxy Statement.
Subject to the fiduciary obligations of the Board of Directors of the
Company, as described above, the Merger Agreement provides that following the
purchase of Shares in the Offer, if Nationwide and its subsidiaries shall not
following such purchase own shares representing at least 90% of the Company's
outstanding Shares and 90% of Allied's outstanding Preferred Shares, the
Company will take all actions necessary in accordance with applicable law and
its Articles of Incorporation and By-laws to convene a meeting, if required by
applicable law, of its shareholders (the "Shareholders Meeting") to consider
and vote upon the approval of the Merger Agreement and the Merger. Subject to
the fiduciary obligations of the Board of Directors of the Company, as
described above, the Merger Agreement further provides that the Company will,
through its Board of Directors, recommend to its shareholders approval of the
Merger Agreement and the Merger, and that the Company will
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use its reasonable best efforts to hold the Shareholders Meeting (unless
following the purchase of Shares in the Offer Nationwide and its subsidiaries
own at least 90% of the Company's outstanding Shares and 90% of the Company's
outstanding Preferred Shares), as soon as practicable after the date of the
Merger Agreement.
For a description of the short-form merger provisions of the Iowa Business
Corporation Law, which, under certain circumstances, could be applicable to
the Merger, see the introduction to the Bidder's Offer to Purchase.
Access to Information. Pursuant to the Merger Agreement, subject to
applicable law, the Company (a) shall afford to Nationwide's and Nationwide
Sub's accountants, legal counsel and other advisors ("Representatives") full
access during normal business hours through the period immediately prior to
the Effective Time to all of its and the its Significant Subsidiaries' assets,
books, contracts, commitments and records (including, but not limited to, tax
returns), and (b) during such period, shall furnish promptly to Nationwide and
Nationwide 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 Nationwide Sub may reasonably request. Unless otherwise required
by law, Nationwide and Nationwide Sub will, and will cause their
Representatives to, hold any such information in confidence until such time as
such information otherwise becomes publicly available through no wrongful act
of Nationwide, Nationwide Sub or their Representatives. In the event of the
termination of the Merger Agreement for any reason, Nationwide will, and will
cause Nationwide Sub and their respective Representatives to, return to the
Company all copies of written information furnished by the Company or its
Representatives to Nationwide, Nationwide Sub or their Representatives and
destroy all memoranda, notes and other writings prepared by Nationwide,
Nationwide Sub or their Representatives based upon or including the
information furnished by the Company or any of its Representatives to
Nationwide, Nationwide Sub or their Representatives (and Nationwide will
certify to the Company that such destruction has occurred) and neither
Nationwide nor Nationwide Sub shall use any such information for any purpose.
Prior to the completion of the Offer and, if the Merger Agreement is
terminated, during the two-year period following the date of termination,
Nationwide will not (and will not assist or encourage others, including its
subsidiaries, to) solicit the services, as employee, consultant or otherwise,
of any employee of the Company, provided, that nothing in the Merger Agreement
shall be deemed to prohibit general solicitations of employment of persons in
Nationwide's ordinary course of business not directed specifically toward
employees of the Company, solicitations through executive recruiting firms not
directed specifically toward employees of the Company or employees that make
contact with Nationwide.
Reasonable Best Efforts. Each of the parties to the Merger Agreement agrees
to use its reasonable best efforts to take, or cause to be taken all action,
to do, or cause to be done, and to assist and cooperate with the other parties
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 the Merger Agreement, including, but not limited
to, (i) the holding of the Shareholders Meeting and the preparation of the
Proxy Statement, (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 that are conditions to the closing of the Merger, (iv) the
resolution of all organizational and human resources issues relating to the
transactions contemplated by the Merger Agreement, (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 to the Merger and (vi) the defending of any legal
proceedings challenging the Merger Agreement or the consummation of the
transactions contemplated thereby, the defense of which shall, at the request
of either the Company or Nationwide, be conducted jointly by Nationwide and
the Company on a basis that is satisfactory to both the Company and
Nationwide. The Company grants Nationwide the right to decide for purposes of
the insurance regulatory hearings whether to submit regulatory applications
for the Company, Allied Life and Allied Mutual concurrently or separately, and
whether to conduct the regulatory hearing and approval proceeds concurrently
or separately for each of the Company, Allied Life and Allied Mutual. Both the
Company and Nationwide agree to use their reasonable best efforts to
coordinate and cooperate during the regulatory approval process.
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Certain Litigation. Nationwide shall cease, in any and all respects, the
prosecution of any litigation against the Company or its affiliates.
Immediately following the Effective Time Nationwide shall dismiss without
prejudice any and all litigation brought by Nationwide against the Company or
its affiliates. See "Pending Litigation".
Board of Directors; Corporate Governance. Promptly upon acceptance for
payment of the Shares by Nationwide Sub pursuant to the Offer, Nationwide Sub
shall be entitled to designate such number of directors on the Board of
Directors of the Company as will give Nationwide Sub, subject to compliance
with Section 14(f) of the Exchange Act, a majority of such directors, and the
Company shall, at such time, cause Nationwide Sub's designees to be so elected
by its existing Board of Directors and each subsidiary of Company and each
committee of the Board of Directors of the Company and each such Subsidiary as
will give Nationwide Sub a majority of such directors or committee, and the
Company shall, at such time, cause Nationwide Sub's designees to be so
elected. Subject to applicable law, the Company shall take all action
requested by Nationwide necessary to effect any such election. In connection
with the foregoing, the Company will promptly, at the option of Nationwide,
either increase the size of its Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Nationwide Sub's designees to be elected or appointed to the Company's Board
of Directors.
Treatment of Stock Options; Certain Benefits. Pursuant to the Merger
Agreement, as of immediately prior to the Effective Time each option to
acquire Shares (each, an "Option"), restricted stock award ("Restricted
Stock") or stock appreciation right ("SARs" and, together with the Options and
Restricted Stock, the "Awards") outstanding under any of the Company's Long-
Term Management Incentive Plan, the Nonqualified Stock Option Plan, the Stock
Option Plan, the Executive Equity Incentive Plan or any other similar plan,
arrangement or agreement (together, the "Company Plans"), whether or not then
exercisable or vested, shall become fully exercisable and vested and shall be
canceled or repurchased and, in consideration of such cancellation or
repurchase, the Company shall pay to the holder of such Award an amount in
respect thereof equal to the product of (A) the Applicable Amount, multiplied
by (B) the number of shares subject thereto (such payment to be net of
applicable withholding taxes). The term "Applicable Amount" shall mean (i) in
the case of Awards of Restricted Stock, the Merger Consideration, (ii) in the
case of Awards of Options, the excess of (A) the Merger Consideration over (B)
the exercise price of such Option or (iii) in the case of Awards of SARS, the
excess of (A) the Merger Consideration over (B) the grant price of such SAR.
The Merger Agreement provides that, for a period of at least one year
following the Effective Time, Nationwide shall provide each employee or former
employee of the Company or any of its subsidiaries with (i) the same basic
compensation (including base salary, wages or commissions) and annual
incentive opportunity, to the extent applicable, and (ii) benefits, which, in
the aggregate, are substantially comparable, in each case to the compensation
and benefits that were provided to such employee or former employee by the
Company or any of its subsidiaries (including, but not limited to any Allied
Benefit Plan) as of immediately prior to the Effective Time, provided that the
foregoing items (i) and (ii) shall not be deemed to require Nationwide to
offer an employee stock ownership plan or other equity related arrangement.
Nationwide is not required to continue any such employee's employment
following the Effective Time, provided, however, that, in the event that any
such employee is terminated involuntarily following the Effective Time and
prior to the first anniversary thereof by action of Nationwide or any of its
subsidiaries, such employee shall receive at least the same severance and
termination benefits as he or she would have received under the terms of the
applicable Allied Benefit Plan, as in effect immediately prior to the
Effective Time. From and after the Effective Time, for purposes of determining
eligibility, but not for purposes of benefit accrual under the Nationwide
defined benefit plan, and for purposes of determining entitlement to vesting
and entitlement to vacation, severance and other benefits for employees under
any compensation, severance, welfare, pension (but not for purposes of benefit
accrual), benefit, savings or other plan of Nationwide or any of its
subsidiaries in which employees of the Company or any of its subsidiaries
become eligible to participate, service with the Company or any of its
subsidiaries shall be credited as if such service had been rendered to
Nationwide or such Nationwide Subsidiary; provided that Nationwide may, in
lieu of providing retiree medical coverage under Nationwide's retiree medical
plan, cause Allied to continue to offer its retiree medical plan as currently
in effect to its current and former employees. For purposes of each
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outstanding Company short-term, mid-term and long-term incentive award held by
any Company employee that is based in whole or in part on the achievement of
any performance or other similar criteria, such award shall be adjusted, as
determined by Nationwide in consultation with the Company, to reflect factors
that adversely impact the opportunity of such Allied employee to achieve such
performance or other criteria, and which shall include financial advisory,
legal and other expenses incurred in connection with the transactions
contemplated by this Agreement.
Indemnification and Insurance. The Merger Agreement provides that, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation by or in
the right of the Company or any of its subsidiaries, in which any of the
present officers or directors (the "Indemnified Parties") of the Company or
any of its subsidiaries is, or is threatened to be, made a party by reason of
the fact that he or she is or was a director, officer, employee or agent of
the Company or any of its subsidiaries, or is or was serving at the request of
the Company or any of its subsidiaries as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, whether before or after the Effective Time, the parties to the
Merger Agreement will cooperate and use their best efforts to defend against
and respond thereto. It is understood and agreed that the Company shall
indemnify and hold harmless, and after the Effective Time the Surviving
Corporation and Nationwide, jointly and severally, shall indemnify and hold
harmless, as and to the full extent permitted by applicable Law, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys, fees and expenses), judgments, fines
and amounts paid in settlement in connection with any such claim, action,
suit, proceeding or investigation, and, in the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Indemnified Parties may retain one counsel
satisfactory to them unless there are conflicts under applicable professional
standards, and the Company, or the Surviving Corporation and Nationwide after
the Effective Time, shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received and
(ii) the Company and the Surviving Corporation and Nationwide will use their
respective reasonable best efforts to assist in the vigorous defense of any
such matter; provided, that neither the Company nor the Surviving Corporation
nor Nationwide shall be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld); and
provided further that the Surviving Corporation and Nationwide shall have no
obligation under the Merger Agreement to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated by the Merger Agreement
is prohibited by applicable law.
The Merger Agreement further provides that Nationwide shall cause the
Surviving Corporation to keep in effect in its By-Laws a provision for a
period of not less than six years from the Effective Time (or, in the case of
matters occurring prior to the Effective Time which have not been resolved
prior to the sixth anniversary of the Effective Time, until such matters are
finally resolved) which provides for indemnification of the Indemnified
Parties to the full extent permitted by applicable law.
In addition, the Merger Agreement provides that Nationwide shall cause to be
maintained in effect for not less than six years from the Effective Time the
current policies of the directors' and officers' liability insurance
maintained by the Company (provided that Nationwide may substitute therefor
policies of at least the same coverage containing terms and conditions which
are no less advantageous) with respect to matters occurring prior to the
Effective Time; provided, however, that if the aggregate annual premiums for
such insurance at any time during such period shall exceed 200% of the per
annum rate of premium currently paid by the Company and its Subsidiaries for
such insurance on the date of the Merger Agreement, then Nationwide shall
cause the Company (or the Surviving Corporation if after the Effective Time)
to, and the Company (or the Surviving Corporation if after the Effective Time)
shall, provide the maximum coverage that shall then be available at an annual
premium equal to 200% of such rate, and Nationwide, in addition to the
indemnification described above, shall indemnify the Indemnified Parties for
the balance of such insurance coverage on the same terms and conditions as
though Nationwide were the insurer under those policies.
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Conditions to the Merger. The respective obligation of each party to the
Merger Agreement to effect the Merger shall be subject to the satisfaction,
prior to the closing of the transactions contemplated by the Merger Agreement,
of the following conditions: (a) the Offer shall have been successfully
completed; (b) if required by applicable law, the Merger Agreement and the
Merger shall have been approved and adopted by the vote of the shareholders of
the Company at the Shareholders Meeting called for such purpose; and (c) no
order entered or law promulgated or enacted by any governmental entity shall
be in effect which would prevent the consummation of the Merger or any other
material transactions completed by the Merger Agreement, 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 by the Merger
Agreement.
Termination. The Merger 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 the Company; (b) by Nationwide if the Board
of Directors of the Company withdraws its recommendation to the Company's
shareholders to approve the Merger; (c) by Nationwide or the Company if
consummation of the Merger is barred by a permanent injunction which is final
and non-appealable; (d) by the Company if, prior to the purchase of Shares
pursuant to the Offer, there is an Acquisition Proposal which the Board of
Directors of the Company determines represents a more favorable transaction to
the Company and its shareholders than the transactions contemplated by the
Merger Agreement, and if the Board of Directors, after consultation with
outside counsel, shall have determined that failure to terminate the Merger
Agreement is reasonably likely to be inconsistent with the fiduciary duties of
the Board of Directors of the Company under applicable law; (e) by the Company
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 Nationwide 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 (as
defined in the Merger Agreement) after written notice thereof has been given
to Nationwide (materiality being construed in light of the transactions
contemplated by the Merger Agreement); (f) by Nationwide prior to the
completion of the Offer, upon a material breach of any representation, or
warranty of the Company or the Company's failure to comply in any material
respect with any of its covenants or agreements, or if any representation or
warranty of the Company 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 the Company (materiality being construed in light of the transactions
contemplated by the Merger Agreement); or (g) by Nationwide or by the Company,
if Shares shall not have been purchased pursuant to the Offer by December 31,
1998 (the "Termination Date"), provided that such right to terminate the
Merger Agreement shall not be available to a party whose failure to fulfill
any obligation under the Merger Agreement has been the cause of the failure of
such purchase to occur by such date.
Fees and Expenses. The Merger Agreement provides that, if the Merger is not
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby 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 the Company.
Notwithstanding the foregoing provisions, as described under "Prohibition on
Solicitation", above, 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 the Company and its
shareholders than the transactions contemplated by the Merger Agreement, and
if the Board of Directors of the Company, after consultation with outside
counsel, shall have determined that failure to terminate the Merger Agreement
is reasonably likely to be inconsistent with the fiduciary duties of the Board
of Directors under applicable Law, the Company may terminate the Merger
Agreement. If the Company so elects to terminate the Merger Agreement, the
Company shall, immediately prior to any such termination, pay a termination
fee in the amount of $30 million in
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immediately available funds by wire transfer to a bank account designated by
Nationwide. In the event of a termination by Nationwide for a willful breach
of a representation or warranty, the Company shall pay Nationwide $10 million.
The Company will also pay a $30 million termination fee following the
termination of the Merger Agreement by Nationwide (i) following a withdrawal
by the Board of Directors of its recommendation that the shareholder approve
the Merger Agreement (other than if the recommendation is withdrawn because
the conditions to the consummation of the Merger cannot be fulfilled for any
reason other than a breach by the Company), or (ii) (A) by virtue of an
uncured breach of covenant by the Company or (B) after the Termination Date,
in each case following the making of an Acquisition Proposal by a third party,
and with the termination fee only upon the execution, within one year of such
termination, of a definitive agreement implementing an Acquisition Proposal.
Amendment. The Merger Agreement may be amended by the parties thereto at any
time before or after the approval of the Merger Agreement by the shareholders
of the Company, 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. The Merger
Agreement may not be amended, modified or supplemented except by written
agreement of the parties thereto.
Amended Conditions of the Offer. Notwithstanding any other term of the Offer
or the Merger Agreement, the Bidder is not required to accept for payment, or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to Nationwide Sub's obligation
to pay for or return tendered Shares after the termination or withdrawal of
the Offer), to pay for any Shares not theretofore accepted for payment or paid
for (a) unless (A) there are validly tendered and not properly withdrawn prior
to the expiration of the Offer that number of Shares which constitute a
majority of the Shares on a fully-diluted basis (the "Minimum Condition"), and
(B) all insurance regulatory approvals necessary for Nationwide and Nationwide
Sub's acquisition of control of the Company and its Insurance 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 have expired
or been terminated, or (b) if at any time on or after the date of the Merger
Agreement and at or before the time that the particular Shares are accepted
for payment (whether or not any other Shares shall theretofore have been
accepted for payment or paid for pursuant to the Offer) any of the following
conditions exists: (A) there shall have occurred and be continuing (i) any
general suspension of, or limitation on prices for, trading in securities on
the New York Stock Exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, or (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving the United States which has a material adverse
effect on the general economic conditions in the United States; (B) any
statute, rule, regulation, or temporary, preliminary or permanent order or
injunction shall be promulgated, enacted, entered, enforced or deemed
applicable to the Offer, the Merger or performance under the Merger 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 Nationwide Sub effectively to exercise full rights of
ownership with respect to the Shares, including, without limitation, the right
to vote any Shares purchased by it on all matters properly presented to the
stockholders of the Company; provided that Nationwide and Nationwide Sub shall
have used their best efforts to have any such decree, order or injunction
vacated or reversed; (C) the Company shall have entered into an agreement
obligating the Company to enter into an Acquisition Transaction with a person
other than Nationwide, Nationwide Sub or an affiliate of either; (D) (i) the
Company shall have breached or failed to perform in any material respect any
of its material obligations covenants or agreements under the Merger
Agreement, (ii) the representations and warranties of the Company contained in
Merger Agreement shall not be true and correct as of the date of the Merger
Agreement or as of the scheduled or extended expiration of the Offer, as if
made as of such dates (provided that representations and warranties made as of
a specified date on or prior to the date of the Merger Agreement, need only be
true as of such date), unless the failure to be so true and correct (without
regard to any materiality
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qualifiers) would not, in the aggregate, be reasonably likely to have a
"Material Adverse Effect" (defined as any change in or effect on the business,
operations, or financial condition of the Company or any of its subsidiaries
that is materially adverse to the Company and its subsidiaries taken as a
whole except for (1) any change or effect resulting from general economic,
financial or market conditions, (2) any change or effect resulting from
conditions or circumstances generally affecting the property and casualty
insurance industry, (3) any change or effect resulting from the actions of
Allied Mutual or of Allied Life Financial Corporation ("Allied Life"),
including but not limited to the termination of any agreements between or
among, the Company, Allied Mutual and/or Allied Life and (4) any change or
effect resulting from the announcement of the Offer or of the Merger
Agreement, including but not limited to the termination by any agents of their
affiliation with the Company), or (iii) the representations and warranties of
the Company in the Merger Agreement with respect to the capitalization of the
Company and the Company's authority to enter into and perform its obligations
under the Merger Agreement shall not be true and correct in all material
respects; (E) the Board of Directors shall have withdrawn its recommendation
or modified its recommendation in a manner adverse to Nationwide or Nationwide
Sub; or (F) the failure to obtain any governmental approvals which failure, in
the aggregate, would reasonably be expected to have a Material Adverse Effect.
The foregoing conditions are for the sole benefit of Nationwide Sub and may
be asserted by Nationwide Sub regardless of the circumstances giving rise to
any such condition or may be waived by Nationwide 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 Nationwide Sub at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right,
the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
SHAREHOLDER AGREEMENT
The following summary of the Shareholder Agreement is qualified in its
entirety by reference to the Shareholder Agreement, a copy of which has been
filed as Annex B to Exhibit 35 to this Schedule 14D-9 and is incorporated by
reference herein. The Shareholder Agreement should be read in its entirety for
a more complete description of the matters summarized below:
Pursuant to the Shareholder Agreement, ALLIED Mutual agrees (i) not to sell,
transfer, pledge, assign or otherwise dispose of, or enter into any Contract
(as defined herein), option or other arrangement (including any profit sharing
arrangement) or understanding with respect to the sale, transfer, pledge,
assignment or other disposition of, the Shares or shares of 6 3/4% Series
Preferred Stock held by ALLIED Mutual (collectively, the "Securities") to any
person other than Nationwide or Nationwide's designee, (ii) not to enter into
any voting arrangement, whether by proxy, voting agreement, voting, trust,
power-of-attorney or otherwise, with respect to the Securities and (iii) to
tender, and not to withdraw, the Shares it holds pursuant to the Offer.
ALLIED Mutual agrees not to, and agrees not to permit any investment banker,
financial adviser, attorney, accountant or other representative or agent of
ALLIED Mutual 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.
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, ALLIED Mutual agrees to, including by initiating a written consent
solicitation if requested by Nationwide, vote (or cause to be voted) ALLIED
Mutual'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 ALLIED Mutual's
vote, consent or other approval is sought, ALLIED Mutual will vote (or cause
to be voted) ALLIED Mutual's
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Securities against (i) any merger (other than the Merger), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any other
Acquisition Proposal (collectively, "Alternative Transactions") or (ii) any
amendment of the Company's Certificate of Incorporation or by-laws or other
proposal or transaction involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement including any consent
to the treatment of any Securities in or in connection with such transaction
(collectively, "Frustrating Transactions").
The Shareholder Agreement terminates upon the earlier to occur of a
termination of the Merger Agreement or a termination of the ALLIED Mutual
Merger Agreement (as defined below), in either case in accordance with such
agreement's terms.
ALLIED Mutual irrevocably grants to, and appoints, any individual who shall
be designated by Nationwide as ALLIED Mutual's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of
ALLIED Mutual, to vote ALLIED Mutual'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.
Nationwide, in addition to entering into the Merger Agreement, has entered
into an Agreement and Plan of Merger, dated as of June 3, 1998 (the "ALLIED
Mutual Merger Agreement"), with ALLIED Mutual, providing for the merger of
ALLIED Mutual into Nationwide (the "ALLIED Mutual Merger"). A copy of the
ALLIED Mutual Merger Agreement is attached hereto as Exhibit 36 and
incorporated herein by reference. The ALLIED Mutual Merger Agreement
contemplates that, immediately prior to the consummation of the ALLIED Mutual
Merger, ALLIED Mutual would make an extraordinary distribution of $110 million
in cash to ALLIED Mutual's policyholders. Nationwide has also entered into an
Agreement and Plan of Merger, dated as of June 3, 1998 (the "ALLIED Life
Merger Agreement"), with ALLIED Life, providing for the merger of a subsidiary
of Nationwide with and into ALLIED Life, with ALLIED Life being the surviving
corporation (the "ALLIED Life Merger"). In the ALLIED Life Merger, the holders
of the outstanding shares of common stock of ALLIED Life (other than ALLIED
Mutual and holders exercising dissenters' rights of appraisal) would receive
$30 per share in cash. A copy of the ALLIED Life Merger Agreement is attached
hereto as Exhibit 37 and incorporated herein by reference.
Certain of the directors and officers of the Company are also directors
and/or officers of ALLIED Mutual and/or of ALLIED Life. A majority of the
Company's directors, Messrs. Carpenter, Colby, Jacobson, Taylor, Timmons and
Willis (the "Unaffiliated Directors"), are not officers or directors of, or
otherwise affiliated with, either ALLIED Mutual or ALLIED Life.
Except as described in this Schedule 14D-9, there are no material contracts,
agreements, arrangements or understandings or any actual or potential
conflicts of interest between the Company or its affiliates and (i) any of the
Company's executive officers, directors or affiliates or (ii) Bidder and its
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4(a)-(b) of the Schedule 14D-9 is hereby amended and supplemented by
the following:
The Board of Directors of the Company, acting on the unanimous
recommendation of a committee (the "Committee") consisting of all of the
Unaffiliated Directors, has unanimously determined that the Offer and the
Merger are fair to and in the best interests of the shareholders of the
Company (other than Nationwide and its subsidiaries) and recommends that all
shareholders of the Company accept the Offer, tender their Shares pursuant to
the Offer and, if required, vote in favor of the Merger.
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This recommendation is based in part upon an opinion received by the
Company from Morgan Stanley, the Company's financial advisor, that the
consideration to be received by the Company's stockholders pursuant to the
Offer and received by the Company's stockholders in the Merger, taken
together, is fair to such stockholders (other than Nationwide and its
affiliates) from a financial point of view. THE FULL TEXT OF THE FAIRNESS
OPINION RECEIVED BY THE COMPANY FROM MORGAN STANLEY IS FILED AS EXHIBIT 38
TO THIS SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX A. STOCKHOLDERS
ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
As set forth in the Offer Documents, Nationwide Sub will purchase the
Shares tendered prior to the close of the Offer if the Minimum Tender
Condition has been satisfied by that time and if all other conditions to
the Offer, including, without limitation, the condition that Bidder have
obtained all required insurance regulatory approvals, have been satisfied
(or waived). Stockholders considering not tendering their Shares in order
to wait for the Merger should note that if the Minimum Tender Condition is
not satisfied or any other condition to the Offer is not satisfied, the
Purchaser is not obligated to purchase any Shares, and can terminate the
Offer and the Merger Agreement and not proceed with the Merger. Under Iowa
law, the approval of the Board of Directors and the affirmative vote of the
holders of a majority of the voting power of the outstanding Shares and the
6 3/4% Series Preferred Stock, voting together as a class, is required to
approve the Merger. Accordingly, if the Minimum Tender Condition is
satisfied, the Bidder will have sufficient voting power to cause the
approval of the Merger without the affirmative vote of any other
stockholder. Pursuant to the Shareholder Agreement described above, ALLIED
Mutual has, among other things, agreed to grant an irrevocable proxy to
Nationwide's designees providing (i) for the vote of all the outstanding
Shares and the shares of 6 3/4% Series Preferred Stock owned by ALLIED
Mutual in favor of the Merger and (ii) voting against any Alternative
Transaction or Frustrating Transaction (as such terms are defined in the
Shareholder Agreement).
The Offer is scheduled to expire at 12:00 midnight, New York City time,
on June 16, 1998, but it is expected that the Bidder will extend the period
of time for which the Offer remains open.
A copy of the press release issued jointly by the Company and Nationwide on
June 4, 1998 announcing the Merger and the amended Offer has been filed as
Exhibit 39 to this Schedule 14D-9 and is incorporated herein by reference in
its entirety.
A copy of a letter to shareholders from the President and Chief Executive
Officer of the Company relating to the Board's recommendation is filed as
Exhibit 40 hereto and is incorporated herein by reference.
(b) Background: Reasons for the Recommendation. In reaching its conclusions
described as to the amended Offer, the Committee and the Board of Directors
considered a number of factors, including, without limitation, the following:
(i) the financial and other terms and conditions of the Offer and the
Merger Agreement;
(ii) the fact that the $48.25 per share price to be received by the
shareholders in both the Offer and the Merger represents a substantial
premium over the closing market price of $27 3/4 per Share on May 15, 1998,
the last full trading day prior to Nationwide's first public announcement
of the intention to commence a tender offer for the Shares;
(iii) the oral opinion of Morgan Stanley, confirmed in writing, that the
consideration to be received by the Company's shareholders pursuant to the
Offer and the Merger, taken together, is fair to such shareholders (other
than Nationwide and its affiliates) from a financial point of view. A copy
of Morgan Stanley's written opinion is attached to this Schedule 14D-9 as
Annex A and is incorporated herein by reference. Such opinion should be
read in its entirety for a description of the procedures followed,
assumptions and qualifications made, matters considered and limitations of
the review undertaken by Morgan Stanley;
(iv) the presentation of Morgan Stanley to the Committee and the Board of
Directors at meetings on May 27, June 2 and 3, 1998, as to various
financial and other matters deemed relevant to the Board of Directors;
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(v) the fact that no other potential strategic partner had expressed an
interest in engaging in a business combination or other strategic
transaction that would likely be on terms as favorable to the Company's
shareholders as those of the Offer and Merger;
(vi) the risk, in light of the Offer, that delay by the Company would
damage its franchise and would have an adverse impact on the Company's
relationships with its employees, agents, regulators and customers, and the
risk that any such damage or adverse impact would increase with time; and
(vii) the fact that, prior to the purchase of Shares in the Offer, the
Company may terminate the Merger Agreement if there is an acquisition
proposal that the Board of Directors determines represents a more favorable
transaction to the Company and its shareholders than the Offer and the
Merger, if the Board of Directors, after consulting with outside counsel,
shall have determined that failure to terminate is reasonably likely to be
inconsistent with the Board's fiduciary duties under applicable law,
following prior notice to Nationwide concerning the other acquisition
proposal and upon the payment of a $30,000,000 termination fee, inclusive
of Nationwide's expenses associated with the Offer and the Merger. See
"Termination" under the description of the Merger Agreement above.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
Item 6(b) of the Schedule 14D-9 is hereby amended by adding to it the
following:
(b) To the best knowledge of the Company, the executive officers and
directors of the Company intend to tender all Shares owned by them pursuant to
the Offer, as amended by the Merger Agreement. The foregoing statement does
not include any Shares over which, or with respect to which, any such
executive officer, director or affiliate acts in a fiduciary or representative
capacity or is subject to the instructions of a third party with respect to
such decision to tender.
In connection with the execution and delivery of the Merger Agreement,
ALLIED Mutual has entered into a Shareholder Agreement with Bidder pursuant to
which ALLIED Mutual has, among other things, agreed to grant an irrevocable
proxy to Nationwide's designees providing (i) for the vote of all of the
outstanding Preferred Stock owned by ALLIED Mutual in favor of the Merger and
(ii) voting against any Alternative Transaction or Frustrating Transaction (as
such terms are defined in the Shareholder Agreement). A copy of the
Shareholder Agreement appears as Exhibit B to the Merger Agreement filed as
Exhibit 35 hereto and incorporated herein by reference.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Item 7(a)-(b) of the Schedule 14D-9 is amended by adding to it the
following:
On the terms and subject to the conditions of the Merger Agreement, the
Company has terminated discussions with third parties with respect to their
possible interest in acquiring or merging with the Company.
Except as set forth in this Schedule 14D-9, there is no transaction, board
resolution, agreement in principle or signed contract in response to the Offer
that relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any subsidiary thereof,
(ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary thereof, (iii) a tender offer for or other
acquisition of securities by or of the Company, or (iv) any material change in
the present capitalization or dividend policy of the Company.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 2 Motion filed in Rieff v. ALLIED Group in the Iowa District Court in
and for Polk County on June 1, 1998.
Exhibit 3 Text of Press Release issued by the Company on June 2, 1998.
Exhibit 35 Agreement and Plan of Merger, dated June 3, 1998, among Nationwide,
Nationwide Sub and ALLIED Group (including the Shareholder Agreement
among Nationwide, Nationwide Sub and ALLIED Mutual attached as
Exhibit B).
Exhibit 36 Agreement and Plan of Merger, dated as of June 3, 1998, between
Nationwide Mutual Insurance Company and ALLIED Mutual.
Exhibit 37 Agreement and Plan of Merger, dated as of June 3, 1998, among
Nationwide, Nationwide Life Acquisition Corporation and ALLIED Life.
Exhibit 38 Opinion of Morgan Stanley & Co. Incorporated, dated June 3, 1998
(incorporated by reference to Annex A to this Amendment No. 1 to
Schedule 14D-9).
Exhibit 39 Joint Press Release, dated June 4, 1998, of the Company and
Nationwide.
Exhibit 40 Letter, dated June 4, 1998, of Douglas L. Andersen addressed to the
shareholders of the Company.*
- --------
* Included in copies mailed to shareholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dated: June 4, 1998
ALLIED Group, Inc.
/s/ Sally J. Malloy
By: _________________________________
Name: Sally J. Malloy
Title: Corporate Secretary
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[LOGO] Morgan Stanley
Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
(212) 761-4000
June 3, 1998
The Committee of Unaffiliated Directors
and
The Board of Directors
ALLIED Group, Inc.
701 Fifth Avenue
Des Moines, IO 50391
Gentlemen:
We understand that ALLIED Group, Inc. ("ALLIED" or the "Company"),
Nationwide Mutual Insurance Company (the "Buyer") and Nationwide Group
Acquisition Corporation, a wholly owned subsidiary of the Buyer ("Acquisition
Sub") have entered into an Agreement and Plan of Merger, dated as of June 3,
1998 (the "Merger Agreement"), which provides, among other things, for (i) the
amendment by Acquisition Sub of its existing tender offer (the "Tender Offer")
for all issued and outstanding shares of common stock, no par value (the
"Company Common Stock"), of the Company to increase the purchase price from
$47.00 to $48.25 per share net to the seller in cash and (ii) the subsequent
merger (the "Merger") of Acquisition Sub with and into the Company. Pursuant
to the Merger, the Company will become a wholly owned subsidiary of the Buyer,
and each outstanding share of the Company Common Stock, other than shares held
in treasury or held by the Buyer or any affiliate of the Buyer or as to which
dissenters' rights have been perfected, will be converted into the right to
receive $48.25 per share net to the holder in cash. The terms and the
conditions of the Tender Offer and the Merger are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of the Company Common Stock in the Tender
Offer and the Merger, taken together, is fair from a financial point of view
to such holders (other than the Buyer and its affiliates).
For purposes of the opinion set forth herein, we have:
(ii) reviewed certain publicly available financial statements and other
business and financial information of the Company;
(iii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management of the
Company;
(iv) reviewed certain financial forecasts prepared by the management of
the Company;
(v) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(vi) reviewed the reported prices and trading activity for the Company
Common Stock;
(vii) compared the financial performance of the Company and the prices
and trading activity of the Company Common Stock with that of certain other
comparable publicly traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions deemed relevant;
(ix) participated in discussions and negotiations among representatives
of the Company and the Buyer and their financial and legal advisors;
(x) reviewed the Merger Agreement and certain related documents; and
(xi) performed such other analyses and other factors as we have deemed
appropriate.
A-1
<PAGE>
[LOGO] MORGAN STANLEY
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial forecasts, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. We have also assumed that the Tender Offer and the Merger will be
consummated on the terms set forth in the Merger Agreement. Our opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Committee of Unaffiliated
Directors of the Board and to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Buyer and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Committee of
Unaffiliated Directors and of the Board of Directors of the Company, except
that this opinion may be included in its entirety in any filing made by the
Company in respect of the transaction with the Securities and Exchange
Commission. In addition, Morgan Stanley expresses no opinion or recommendation
as to whether the holders of Company Common Stock should accept the Tender
Offer.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of the
Company Common Stock pursuant to the Tender Offer and the Merger, taken
together, is fair from a financial point of view to such holders (other than
the Buyer and its affiliates).
Very truly yours,
Morgan Stanley & Co. Incorporated
/s/ Phillip Barnett
By: _________________________________
Phillip Barnett
Managing Director
A-2
<PAGE>
EXHIBIT 2
IN THE IOWA DISTRICT COURT
IN AND FOR POLK COUNTY, IOWA
MARY M. RIEFF, CIVIL ACTION
SSN: ###-##-#### NO. CE 35780
Plaintiff,
v.
JOHN E. EVANS, DOUGLAS L. ANDERSEN,
HAROLD S. EVANS, JAMIE H. SHAFFER,
JAMES W. CALLISON, JAMES M. HOAK, JR.,
MARK. W. PUTNEY, WILLIAM J. HANCOCK,
JAMES D. KIRKPATRICK, CHARLES I.
COLBY, GEORGE E. MOORE, HERSCHEL
G. LANGDON, CHARLES F. MORGAN,
HARDY G. KUYKENDALL, WALTER J.
FAYLE and ALLIED GROUP, INC.
Defendants,
and
ALLIED MUTUAL INSURANCE COMPANY,
Nominal Defendant
PLAINTIFF'S MOTION FOR TEMPORARY AND PERMANENT
INJUNCTIVE RELIEF AND FOR A HEARING
-----------------------------------
Plaintiff, Mary M. Rieff, in the above-captioned action hereby moves
this Court to enter a temporary and permanent injunction enjoining the defendant
directors of Allied Mutual Insurance Company ("Allied Mutual" or "Company") from
negotiating or approving or otherwise acting on a proposed merger offer made by
Nationwide Mutual Insurance Company of Ohio ("Nationwide") and made public May
18, 1998, or any other mergers or acquisitions affecting Allied Mutual and its
<PAGE>
policyholders for whom the Company is exclusively operated, until further order
of this Court. Plaintiff further requests that the Court set a date for a speedy
hearing on the merits of this motion at the Monday, June 8, 8:00 a.m. scheduling
conference in this action. The grounds for this motion are the director
defendants' irreconcilable conflicts of interest, as further discussed herein
and in the Complaint, as significant stockholders in, directors and officers of,
and current or recent-past senior executives of defendant stock company Allied
Group, Inc. ("Allied Group"), whose interests are also divergent from those of
Allied Mutual. Nationwide made a simultaneous acquisition proposal for Allied
Group's stock for $1.44 billion (a 69% premium price), a deal which is premised
on acquiring Allied Mutual through the proposed merger at a potential windfall
exceeding $500 to $750 million. The directors and executive officers of Allied
Mutual would receive in excess of a $30 million premium on their stock holdings
alone from the Allied Group deal. Upon information and belief, the director
defendants of Allied Mutual have also negotiated for themselves and received
assurances from Nationwide for indemnification from any judgment resulting from
plaintiff's claim, which gives them an additional reason to ignore the Company's
interests in favor of their own interests. As a result, these directors continue
to demonstrate an inability to represent Allied Mutual and its policyholders'
interest rather than their own.
Plaintiff moves as follows:
1. Allied Mutual is a mutual insurance company, that is, its
policyholders are its sole owners, and it exists solely to provide the best,
low-cost insurance to its policyholder-owners.
2. This motion arises from this derivative action in which plaintiff is
seeking the return of over $750 million (at current stock trading prices) in
assets improperly taken by the defendants from Allied Mutual and its
policyholder-owners. As set forth in detail in the Complaint, the
2
<PAGE>
individual defendants -- all current and prior members of the board of directors
of Allied Mutual -- defrauded and breached their duties to the company by a
scheme in which they and their predecessors created a wholly-owned stock
subsidiary of Allied Mutual, called Allied Group, Inc. ("Allied Group"), and
subsequently granted and sold its stock to themselves and other inside investors
for grossly inadequate or no consideration.
3. This scheme was perpetrated through a series of complex transactions
beginning in 1985 whereby Allied Mutual went from owning 100% of Allied Group to
owning none of its equity, or common stock. As alleged in the Complaint, Allied
Mutual's interest in Allied Group has been effectively reduced to that of a
subordinated creditor owning only a fixed-rate 6-3/4% series of Preferred Stock
of Allied Group. In addition, defendants permitted Allied Group to take numerous
corporate opportunities from Allied Mutual without any consideration, and in at
least one instance they caused Allied Mutual to finance one of Allied Group's
acquisitions for no consideration. See Complaint at (P)(P) 1, 43 and 46.
4. The individual defendants reorganized Allied Mutual and Allied Group
in 1990 such that Allied Mutual was stripped of its employees and its agency
distribution force, which Allied Group took for no consideration. In addition,
an employee stock ownership plan ("ESOP") was established and, with Allied
Group's complicity, purchased 8.1 million shares (then 37% of Allied Group's
stock) of 8% Convertible Preferred Stock of Allied Group (each share convertible
to 1 share of common stock) for approximately half its market value at $36
million. This diluted Allied Mutual's interests for clearly inadequate
consideration, while it benefitted the ESOP with a windfall exceeding $200
million at the pre-offer value, and directly benefitted the director defendants
and other Allied Group employee beneficiaries. See Complaint at (P)(P)
44(b)-(c).
3
<PAGE>
5. The individual defendants also manipulated a critical pooling
agreement through which virtually all the business of the two companies (and
other Allied Group subsidiaries) was administered by Allied Mutual with expenses
and profits apportioned on a pro rata basis. Through a series of unfair changes
in the pooling agreement and the unjustifiable transfer to Allied Group of
Allied Mutual's valuable right to administer the pool, Allied Mutual and its
policyholder-owners were deprived of an asset worth over $200 million for no
consideration, and suffer significant on-going overcharges on pool expenses. See
Complaint at (P)(P) 44(d), 47-52. Allied Group's strong earnings performance is
a direct result of the improper siphoning of Allied Mutual's assets for Allied
Group's benefit, Allied Group's taking of Allied Mutual's corporate
opportunities, its taking of Allied Mutual's employees and agency force without
consideration, the manipulation of the pooling agreement to Allied Mutual's
disadvantage, and the transfer of significant benefits through incentive plans
and otherwise to the directors and employees who were thereby unduly enriched.
See Complaint at (P)(P) 31-54.
6. This transfer of two-thirds of Allied Mutual's value resulted in the
de facto demutualization of Allied Mutual (i.e., conversion to stock form)
without the approval of policyholders or the payment of consideration to them as
required under state law. I.C.A. (S)515G.1 et seq. See Complaint at (P)(P) 1 and
53. As a result, Allied Mutual's policyholders have suffered and continue to
suffer significant economic harm, including loss of property, decreased
dividends, increased premiums, and a decreased bargaining position regarding any
suitors.
7. On May 18, 1998, Nationwide made two simultaneous offers; a hostile
cash tender offer to purchase all of Allied Group, Inc. ("Allied Group") stock
at $47 a share (a 69% premium over the then $27 trading price), and an
unsolicited offer to acquire Allied Mutual by merging it into
4
<PAGE>
Nationwide. Under the merger proposal, Allied Mutual's policyholders' interests
would be grossly diluted.
8. Although the offers were made separately, they are in reality
inseparably intertwined for three fundamental reasons. First, Nationwide is
proposing to merge with Allied Mutual without paying anything for it, even
though Allied Mutual is worth considerably more than $500 million (calculated at
less than double its $270 million in current surplus assets, a conservative
valuation of an insurer). In fact, this savings alone to Nationwide
approximates the additional above-market-share cost Nationwide would incur
through it current offer to acquire Allied Group stock for a premium. Absent
the Allied Mutual merger, the Allied Group acquisition proposal would be at
least $500 million less attractive and, therefore, almost surely prohibitively
expensive.
9. Second, the two offers are inseparable because the Allied Mutual and
Allied Group, once solely owned by Allied Mutual's policyholders, are still
integrated. For example, Allied Mutual and Allied Group share the same board
chairman, and have identical executive officers, including the president, chief
executive officer, chief financial officer, and vice presidents. This is in
addition to the four of Allied Mutual's six directors who also serve on Allied
Group's board and four-man executive committee. In addition, Allied Mutual and
Allied Group share the same agency distribution system which is highly coveted
by Nationwide to "augment exponentially" its own capacity in sales. Absent a
merger with Allied Mutual, Nationwide will be clearly restrained in how it can
utilize this critically valuable asset, thereby significantly lessening the
value of Allied Group.
10. Third, the two offers are inseparable because Nationwide seeks total
ownership and control of Allied Group, and its objectives are not achievable as
long as Allied Mutual retains ownership of preferred stock which controls 18.2%
of Allied Group's voting stock. Moreover, a
5
<PAGE>
hostile takeover by Nationwide of Allied Group can be blocked by Allied Mutual
through its control of the 18.2% voting stock since Nationwide will not be able
to acquire 85% of outstanding voting securities to effectuate the takeover as
required by Section 490.1110 of the Iowa Code. Of course, Nationwide has
conditionally offered to buy out Allied Mutual's preferred stock of Allied Group
for $65 million, if the transactions are approved, and to make a one-time
distribution of the net proceeds to Allied Mutual's current 220,000
policyholders. This, however, is grossly inadequate consideration to
policyholders for the acquisition through merger of their valuable mutual, the
loss of their last vestiges of interest in Allied Group (upon which they are
totally dependent for all employee, distribution system and business services),
and the loss of valuable voting leverage in Allied Group.
11. Nationwide's offers are not fair and equitable to Allied Mutual. The
offer would: facilitate the absorption of Allied Mutual into Ohio-based
Nationwide for inadequate consideration and the benefit of Nationwide's
policyholders and facilitate the distribution of a significant financial
windfall to Allied Group shareholders which belongs to Allied Mutual and its
policyholders. The offers fail to make Allied Mutual, and therefore its
policyholders, whole for, inter alia, the many years policyholders overpaid on
their insurance premiums, received no or lower dividends than appropriate, and
received no compensation for the de facto demutualization of most of their
mutual insurer. Clearly, Allied Mutual and its policyholders' harms will not be
rectified until they are compensated for their over $750 million losses.
Nationwide's proposal to distribute anything less than the full value of Allied
Mutual to Allied Mutual's 220,000 policyholders (the current offer is for under
$300 per policyholder), pursuant to the merger, falls grossly short of what is
fair and in the best interests of policyholders.
6
<PAGE>
12. Although Allied Mutual's and Allied Group's directors have not
approved the Nationwide offers to date, upon information and belief, both Allied
Mutual and Allied Group have retained or are in the process of retaining
investment bankers and other advisors to negotiate the offers.
13. Plaintiff seeks to enjoin defendants from taking any action in
furtherance of these transactions because all six members of Allied Mutual's
board of directors suffer from irreconcilable conflicts of interest with Allied
Mutual and its policyholders and lack the necessary independence to consider,
negotiate or approve them. Four of Allied Mutual's board members are also on
the board of Allied Group and make up Allied Group's executive committee which
has broad authority to act on behalf of the entire Allied Group board. John
Evans, chairman of both Allied Mutual's and Allied Group's board, is also a
highly paid consultant to Allied Mutual, Allied Group (and Allied Life Financial
Corporation ("Allied Life") - see below). Douglas Andersen is president and
chief executive officer for both Allied Mutual and Allied Group. Of the other
two Allied Mutual directors and of the other two directors, one is a current and
one a recent-past senior executive of Allied Group. All of Allied Mutual's
directors own significant stock and stock options in Allied Group and stand to
benefit personally from a premium price buy out and any future negotiated
benefits for shareholders. As such, defendants cannot exercise the requisite
independent business judgement on behalf of Allied Mutual in considering the
intertwined offers while wearing at least four additional hats - that of Allied
Group top executives, directors, and significant stockholders, and that of
directors and shareholders of Allied Life, a publicly traded subsidiary of
Allied Mutual for which a separate offer has reportedly been made by Nationwide.
These defendants have also each presided
7
<PAGE>
over all or part of the decimation of Allied Mutual since 1985 and have breached
their fiduciary duty to Allied Mutual and its policyholders.
14. Each of the director defendants has an additional personal stake in
the transactions to the extent that the transactions relate to this and any
other claims against them. Upon information and belief, director defendants have
successfully negotiated with Nationwide for their own indemnification as to the
claims in this lawsuit. Thus, there is all the more incentive for director
defendants to approve the merger in order to obtain this additional personal
benefit. Nationwide's indemnification of defendants would permit defendants to
keep their substantial ill-gotten gains in a miscarriage of justice which is
grossly prejudicial to Allied Mutual's policyholders.
15. As a result of the foregoing, plaintiff will be irreparably harmed
absent the requested Order because Allied Mutual's directors have been
considering, may be negotiating, and could approve the merger proposal at any
time. Allied Group's shareholders have been informed that its directors will
respond to the offer on or around June 1, 1998 and so it is imminent. Any
negotiations or approval by Allied Mutual's self-interested directors of the
offers will result in an irreparable harm to the plaintiff and nominal defendant
Allied Mutual on whose behalf this derivative suit has been filed. Plaintiff
further states that such an Order is necessary to preserve the status quo and to
prevent said immediate and irreparable harm.
LEGAL ARGUMENT
--------------
16. The law on this issue is clear and concise. The directors of a
corporation owe a fiduciary duty to the corporation and must serve in a manner
believed to be in good faith to the best interest of the corporation. Cookies
-------
Food Products v. Lakes Warehouse, 430 N.W. 447, 451 2d (Iowa 1988); see also
- --------------------------------
Schildberg v. Rock Prods. Co., 140 N.W. 2d 132, 136 (Iowa 1966.) The law
- -----------------------------
8
<PAGE>
commonly describes the fiduciary duties of corporate directors as two-fold,
"consisting both of a duty of care and a duty of loyalty," Cookies Food Products
---------------------
v. Lakes Warehouse, supra, at 451; see also Norlin Corporation v. Rooney, Pace
- ------------------------- ----------------------------------
Inc., 744 F.2d, 255, 264 (2d Cir. 1984). The duty of loyalty derives from the
- ----
prohibition against self-dealing that inheres in the fiduciary relationship.
Id.; citing Pepper v. Litton, 308 U.S. 295, 306-07 (1939). In Norlin, the Court
- -- ---------------- ------
of Appeals held that "[o]nce a prima facie showing is made that directors have a
self-interest in a particular corporate transaction, the burden shifts to them
to demonstrate that the transaction is fair and serves the best interest of the
corporation and its shareholders." Norlin Corporation v. Rooney, Pace Inc.,
---------------------------------------
supra, at 264.
- -----
17. In Norlin, the Court of Appeals affirmed the district court's
------
granting of a preliminary injunction ruling that the director' transfer of stock
to an Employee Stock Option Plan ("ESOP") was perpetrated by the directors in an
effort to remain in control of the corporation and to avert a potential hostile
take over. Id. at 265. The Court rejected the directors' contention that the
--
creation of the ESOP was a prudent business decision and thus permissible under
the business judgment rule. The Court repudiated this argument, holding that the
"business judgment rule governs only where the directors are not shown to have
a self-interest in the transaction at issue," and once "self dealing or bad
faith is demonstrated, the duty of loyalty supersedes the duty of care, and the
burden shifts to the directors to 'prove that the transaction was fair and
reasonable to the corporation'." Id. at 265; quoting Treadway Companies, Inc. v.
-- ---------------------------
Care Corp., 638 F.2d 367, 382 (2d Cir. 1980).
- ----------
18. Iowa law similarly holds that when "the interest of the officer or
director will be brought into conflict with that of his corporation, the law
will not permit him to seize the opportunity for himself" when "in fairness it
belongs to the corporation." Rowen v. LeMars Mut. Ins. Co. of Iowa, 282 N.W. 2d
-------------------------------------
639, 660 (1979). In circumstances where the directors have a self-interest,
these transactions "are scanned by the courts with skepticism and scrutiny, and
may be nullified on slight grounds. It is the policy of the courts to put such
fiduciaries beyond the reach of temptation and the
9
<PAGE>
enticement of illicit profit." Des Moines Bank & Trust Co. v. George M. Bechtel
------------------------------------------------
& Co., 51 N.W. 2d 174, 216 (Iowa 1952). Moreover, if in fact it is deemed that
- -----
the interests of the corporation have been betrayed by the self-interest of the
directors, "the corporation may elect to claim all of the benefit of the
transaction for itself, and the law will impress a trust in favor of the
corporation, upon the property, interests, and profits so acquired." Rowen v.
--------
LeMars Mut. Ins. Co. of Iowa, supra, at 660.
- -----------------------------------
19. In the present case, it is clear that the directors of Allied Mutual
have persuasive self-interests involved in the transaction with Nationwide.
Thus, based on this inherent conflict of interest, it is inconceivable that
these directors can or should be allowed to negotiate the terms of a transaction
that cannot be "beyond the reach of temptation and the enticement of illegal
profit" and has potentially fatal consequences to Allied Mutual's policyholders
and benefits the directors' respective self-interests. See Des Moines Bank &
-----------------
Trust Co., v. George M. Bechtel & Co, supra, at 216. A prima facie showing has
- ------------------------------------ -----
been made that the directors have a self-interest in the present transaction,
and consequently, the burden shifts to the directors to demonstrate that they
are in any position to exercise business judgment, and that the transaction is
fair and serves the best interest of Allied Mutual. Cookies Food Products v.
------------------------
Lakes Warehouse, supra, at 451; see also Norlin Corporation v. Rooney, Pace
- --------------- ----- ----------------------------------
Inc., supra, at 264.
- ---- -----
INJUNCTION
----------
20. Pursuant to I.R.C.P. 321, an injunction is an appropriate remedy
when "the commission or continuance of some act...would greatly or
irreparabl[y] injure" the plaintiff. A temporary injunction is a preventative
remedy to maintain the status quo of the parties prior to final judgment and to
protect the subject of the litigation. Atlas Mini Storage v. First Interstate
--------------------------------------
Bank, 426 N.W. 2d 686 (Iowa App. 1988). In Berger v. Amana Society, 95 N.W. 2d
- ---- -----------------------
909 (Iowa 1959), the Iowa
10
<PAGE>
Supreme Court affirmed the lower court's decision granting the plantiffs'
(stockholders in the defendant corporation) request for an injunction. The
plaintiffs sought to enjoin the directors of the defendant corporation from
effectuating certain amendments to the articles of incorporation which would
make radical changes in the stock structure of the corporation. Id. at 911. The
--
Court held that the amendments "went beyond the power of the corporation" id. at
--
915, and that in granting the injunction "the trial court ruled correctly" id.
--
at 916.
21. Moreover, in Norlin Corporation v. Rooney, Pace Inc., supra, at 260,
--------------------------------------- -----
a preliminary injunction was deemed to be an appropriate remedy where the
directors had conflicting interest in attempting to create an ESOP to prevent a
hostile takeover. The Court held that the potential irreparable harm (the
delisting of the common stock) justified the imposition of a temporary
injunction.
22. Similarly, in the present case, without an injunction there is a
significant danger that Allied Mutual and its policyholders will be irreparably
harmed. These harms include, without limitation: (i) the distribution of a
significant financial windfall to Allied Group shareholders -- including
defendants -- most of which belongs to Allied Mutual and its policyholders; (ii)
the extensive self-dealings of defendants; and (iii) the risk that Allied Mutual
will not avail itself of legitimate corporation opportunities for the full
value.
WHEREFORE, the Plaintiff moves that this Court:
1. Set a date for a speedy hearing at the Monday, June 8, 1998
scheduling conference in this action. Plaintiff's counsel intend to attend this
scheduling conference in person.
2. Provide for notice to defendants that the scheduling of a speedy
hearing date on Plaintiff's Motion for Temporary and Permanent Injunctive Relief
----------------------------------------------------------------
shall be considered at the June 8,
11
<PAGE>
1998 scheduling conference. Plaintiff has served copies of this motion, via
express overnight mail, on counsel of record for defendants. On this date,
Plaintiff also has served copies of her motion, via express overnight mail, to
individual defendants for whom no counsel have yet appeared, at their last known
addresses as provided by counsel for defendants of record. Plaintiff requests
that the Court find that the above-described service is sufficient;
3. After such hearing, issue an Injunction to bar the six Allied Mutual
directors from considering, negotiating, or approving any transaction on behalf
of Allied Mutual, with Nationwide, or any other mergers or acquisitions
affecting Allied Mutual and its policyholders, until further order of this
Court.
Plaintiff seeks leave to further supplement this motion prior to the
hearing, and post-hearing to propose a fair and equitable alternative to the
defendant directors considering, negotiating or approving the transactions at
issue. But for now, it is clear that the defendant directors must be prohibited
from passing judgment on a matter in which they are so obviously self-interested
and in which their self-interest conflicts with the interests of Allied Mutual.
Respectfully submitted,
Mary M. Rieff,
By her attorneys,
/s/ Brad J. Brady
-----------------------
Brad J. Brady
Brady & O'Shea, P.C.
2735 1st Avenue SE,
Cedar Rapids, IA 52402
(319) 866-9277
12
<PAGE>
-and-
/s/ Jason B. Adkins
--------------------------
Jason B. Adkins
Adkins & Kelston
90 Canal Street, 5th Floor
Boston, MA 02114
(617) 367-1040
-and-
BARRACK, RODOS & BACINE
/s/ Daniel Bacine
------------------------
Daniel Bacine
Leslie Molder
3300 Two Commerce Square
2001 Market Street
Philadelphia, PA 19103
(215) 963-0600
-and-
/s/ David L. Kelston
--------------------------
David L. Kelston
90 Canal Street, 5th Floor
Boston, MA 02114
(617) 367-1040
-and-
/s/ Paula Isola
-----------------------------
Paula Isola
Center for Insurance Research
1130 Massachusetts Avenue
Cambridge, MA 02138
(617) 441-2900
Dated: June 1, 1998
cc: Hon. Larry J. Eisenhauer
304 Polk County Courthouse
500 Mulberry Street
Des Moines, IA 50309
13
<PAGE>
CERTIFICATE OF SERVICE
----------------------
I, Dorothy Bergquist certify that true and correct copies of the
Plaintiff's Motion For Temporary And Permanent Injunctive Relief And For A
Hearing were served, via Express Mail, Overnight Delivery, this 1st day of June,
1998, upon counsel for defendants, or upon Defendants not yet represented by
counsel, as follows:
David L. Brown John E. Evans
John A. McClintock 47218 Crystal Loop Eldorado
8th Floor Fleming Building Indian Wells, CA 92210
218 Sixth Avenue
Des Moines, Iowa 50309 Harold S. Evans
5220 5th Avenue
Bruce W. Fourdree Pittsburgh, PA 15232
Michael R. Hasson
Lord, Bissell & Brook James W. Callison
115 S. Lasalle Street 5821 Woodland Avenue
Chicago, Illinois 60603 West Des Moines, LA 50312
Glenn L. Smith James M. Hoak, Jr.
Finley, Alt, Smith, Scharnbert, Hoak Capital
May & Craig, P.C. 13355 Noel Road, Suite 1050
4th Floor Equitable Building Dallas, Texas 75240
604 Locust Street
Des Moines, Iowa 50309 Mark W. Putney
600 Stevens Port Drive
J. William Koegel North Sioux City, SD 57049
Steptoe & Johnson, LLP
1330 Connecticut Avenue William J. Hancock
Washington, D.C. 20036-1795 Windsor Heights
7205 Bellaire Avenue
Kent M. Forney Des Moines, Iowa 50311
Jason T. Madden
Bradshaw, Fowler, Proctor & Hardy G. Kuykendall
Fairgrave, P.C. 3709 Avenida Johanna
801 Grand Avenue, Suite 3700 LaMesa, CA 91941
Des Moines, Iowa 50309-2727
14
<PAGE>
Walter J. Fayle James Kirkpatrick
676 Rinaldo Street 2908 S.W. 30th Street
Santa Rosa, CA 95409 Des Moines, Iowa 50321
/s/ Dorothy Bergquist
---------------------------
Dorothy Bergquist
15
<PAGE>
EXHIBIT 3
- -----------------------------------------------------------------------------
NEWS GRP ALLIED
RELEASE Listed GROUP
NYSE INSURANCE
ALLIED Group, Inc.
701 5th Ave.
Des Moines, IA 50391-2000
- -----------------------------------------------------------------------------
For Immediate Release . www.alliedgroupinc.com . Contact: JIM SHAFFER
(515) 280-4326
CONTACT:
Joele Frank / Dan Katcher
Abernathy MacGregor Frank
(212) 371-5999
FOR IMMEDIATE RELEASE
- ---------------------
ALLIED GROUP IN TALKS WITH NATIONWIDE MUTUAL
Recommends That Shareholders Not Tender Pending Outcome
DES MOINES, Iowa - June 2, 1998 -- ALLIED Group, Inc. (NYSE: GRP) announced
today that it has filed with the Securities and Exchange Commission a Schedule
14D-9 with respect to the tender offer by Nationwide Mutual Insurance Company
for shares of ALLIED Group at $47 per share. In the filing, the ALLIED Group
Board of Directors recommends that shareholders defer making a decision whether
to tender their shares pending the outcome of discussions between ALLIED Group
and Nationwide.
In those discussions, Nationwide has stated that it will increase the price per
ALLIED Group share to $48.25 as part of a negotiated merger agreement, and the
ALLIED Group Board, on the recommendation of a committee of the directors who
are not affiliated with ALLIED Mutual Insurance Company or with ALLIED Life
Financial Corporation, has determined that it is prepared in principle to
recommend a transaction at that price, subject to negotiation of an acceptable
merger agreement.
ALLIED Group intends to inform its shareholders if a definitive agreement is
reached with Nationwide or if discussions are terminated.
<PAGE>
EXHIBIT 35
AGREEMENT AND PLAN OF MERGER
by and among
NATIONWIDE MUTUAL INSURANCE COMPANY
NATIONWIDE GROUP ACQUISITION CORPORATION
and
ALLIED GROUP, INC.
Dated as of June 3, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I THE OFFER.................................................................2
Section 1.1 The Offer...............................................................2
Section 1.2 Allied Actions..........................................................4
Section 1.3 Directors...............................................................6
ARTICLE II THE MERGER................................................................7
Section 2.1 The Merger..............................................................7
Section 2.2 Closing.................................................................7
Section 2.3 Effective Time..........................................................8
Section 2.4 Articles of Incorporation and By-Laws of the Surviving Corporation......8
Section 2.5 Board of Directors and Officers.........................................9
Section 2.6 Effect of Merger on Sub Capital Stock...................................9
Section 2.7 Conversion of Allied Stock..............................................9
Section 2.8 Exchange of Certificates and Related Matters...........................10
Section 2.9 Dissenting Shares......................................................12
Section 2.10 Adjustments to Prevent Dilution.......................................13
Section 2.11 Allied Employee Stock Options, Restricted Stock, etc..................13
ARTICLE III ADDITIONAL AGREEMENTS....................................................14
Section 3.1 Preparation of Proxy Statement; Information Supplied...................14
Section 3.2 Meeting of Shareholders................................................14
Section 3.3 Filings; Other Action..................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ALLIED.................................16
Section 4.1 Organization and Qualification.........................................16
Section 4.2 Capitalization of Allied...............................................17
Section 4.3 Subsidiaries...........................................................17
Section 4.4 Authority Relative to this Agreement...................................18
Section 4.5 No Violation; Governmental Filings.....................................19
Section 4.6 SAP Statements.........................................................20
Section 4.7 [Intentionally left blank.]............................................22
Section 4.8 Reserves...............................................................22
Section 4.9 SEC Documents..........................................................22
Section 4.10 Absence of Certain Changes or Events..................................23
Section 4.11 No Undisclosed Liabilities............................................23
Section 4.12 Takeover Statutes.....................................................23
Section 4.13 Compliance with Law...................................................24
Section 4.14 Assets................................................................24
Section 4.15 Environmental Matters.................................................25
Section 4.16 Contracts.............................................................26
Section 4.17 [Intentionally Left Blank]............................................27
Section 4.18 Taxes and Tax Returns.................................................27
Section 4.19 Benefit Plans.........................................................28
Section 4.20 Labor Relations and Employment........................................31
Section 4.21 Intellectual Property.................................................31
Section 4.22 Transactions with Affiliates..........................................32
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.23 Voting Requirements...................................................32
Section 4.24 Investment Company....................................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
AND SUB..................................................................33
Section 5.1 Organization and Qualification.........................................33
Section 5.2 Authority Relative to this Agreement...................................33
Section 5.3 No Violation...........................................................34
Section 5.4 Litigation.............................................................35
Section 5.5 Financial Ability to Perform...........................................35
ARTICLE VI CERTAIN COVENANTS........................................................35
Section 6.1 Allied Conduct of Business Pending the Merger..........................35
Section 6.2 Disposition of Litigation..............................................38
Section 6.3 Reasonable Best Efforts................................................38
Section 6.4 Intentionally Left Blank...............................................38
Section 6.5 Access and Information.................................................39
Section 6.6 Notice of Proceedings..................................................40
Section 6.7 Notification of Certain Other Matters..................................40
Section 6.8 Indemnification........................................................41
Section 6.9 [Intentionally Omitted.]...............................................43
Section 6.10 Acquisition Proposals.................................................43
Section 6.11 Maintenance of Benefits...............................................44
ARTICLE VII CONDITIONS...............................................................45
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.............45
ARTICLE VIII TERMINATION..............................................................46
Section 8.1 Termination............................................................46
Section 8.2 Effect of Termination..................................................47
ARTICLE IX MISCELLANEOUS............................................................48
Section 9.1 Survival of Representations and Warranties.............................48
Section 9.2 Fees and Expenses......................................................48
Section 9.3 Notices................................................................48
Section 9.4 Amendments.............................................................49
Section 9.5 No Waiver..............................................................49
Section 9.6 Brokers................................................................50
Section 9.7 Publicity..............................................................50
Section 9.8 Headings...............................................................51
Section 9.9 Nonassignability.......................................................51
Section 9.10 Beneficiaries.........................................................51
Section 9.11 Duplicates; Counterparts..............................................51
Section 9.12 Governing Law; Jurisdiction...........................................51
Section 9.13 Entire Agreement......................................................51
Section 9.14 Severability..........................................................52
Section 9.15 Specific Performance..................................................52
Section 9.16 Survival of Certain Covenants.........................................52
Section 9.17 Counting..............................................................52
Section 10.1 Definitions...........................................................52
</TABLE>
ii
<PAGE>
EXHIBITS
Exhibit A Conditions of the Offer
Exhibit B Shareholder Agreement
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and among
NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company
("Nationwide"), NATIONWIDE GROUP ACQUISITION CORPORATION, an Ohio corporation
and a wholly-owned subsidiary of Nationwide ("Sub") and ALLIED GROUP, INC., an
Iowa corporation ("Allied") (hereinafter sometimes collectively referred to as
the "parties").
WHEREAS, Sub has outstanding an offer (the "Existing Offer," and as
amended, the "Offer") to purchase all of the outstanding shares of common stock,
no par value, of Allied (the "Common Shares"), at a purchase price of $47 per
Common Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
May 19, 1998, and in the related letter of transmittal;
WHEREAS, in consideration of Allied's entering into this Agreement,
Nationwide is willing to cause Sub to increase the price to be paid pursuant to
the Offer to $48.25 per Common Share, net to the seller in cash, without
interest thereon (such amount being hereinafter referred to as the "Offer
Price");
WHEREAS, the Board of Directors of Allied has (i) determined that the
consideration to be paid for each Common Share in the Offer and in the Merger
(as defined below) is fair to and in the best interests of the shareholders of
Allied, (ii) approved this Agreement and the transactions contemplated hereby
and (iii) resolved to recommend acceptance of the Offer and the Merger and
approval of this Agreement by such shareholders; and
WHEREAS, the Boards of Directors of Sub and Nationwide, as sole stockholder
of Sub, have each approved the merger (the "Merger") of Sub with Allied in
accordance with applicable law upon the terms and subject to the conditions set
forth herein.
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Nationwide to enter into this Agreement, Nationwide, Sub and
Allied Mutual Insurance Company ("Allied Mutual") are entering into a
Shareholder Agreement (the "Shareholder
<PAGE>
Agreement"), attached hereto as Exhibit B, pursuant to which Allied Mutual has,
among other things, agreed to grant an irrevocable proxy to Nationwide's
designees providing (1) for the vote of all of the outstanding shares of 6-3/4%
Series Preferred Stock, no par value, of Allied (the "Preferred Shares") and all
of the Common Shares owned by Allied Mutual in favor of the Merger and the
tender of all the Common Shares owned by Allied Mutual pursuant to the Offer and
(2) for the vote of all such securities against any "Alternative Transaction" or
"Frustrating Transaction" (as such terms are defined in the Shareholder
Agreement); and the Shareholder Agreement has been approved by the Board of
Directors of Allied; and
WHEREAS, Nationwide, Sub and Allied desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the Merger
and also to prescribe various conditions to the Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Nationwide, Sub and Allied hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer.
---------
(a) Sub shall amend the Offer as soon as practicable after the date hereof
to (i) increase the purchase price offered to the Offer Price, (ii) modify the
conditions of the Offer to conform to the conditions or events set forth in
Exhibit A hereto (the "Offer Conditions") and no others and (iii) to make such
other amendments as are required to conform the Offer to this Agreement, it
being understood that except for the foregoing amendments or as otherwise
provided herein, the Offer shall be on the same terms and conditions as the
Existing Offer. The obligation of Sub to, and of Nationwide to cause Sub to,
accept for payment, and pay for, any Common Shares tendered pursuant to the
Offer shall be subject to the Offer Conditions (any of which may be waived in
whole or in part by Sub in its sole discretion, provided that, without the
consent of Allied, Sub shall not waive the Minimum Condition or the Insurance
Regulatory
2
<PAGE>
Condition (as such terms are defined in Exhibit A) and to the terms and
conditions of this Agreement. Without the consent of Allied, Sub shall not (i)
reduce the number of Common Shares sought in the Offer, (ii) reduce the Offer
Price, (iii) change or add to the Offer Conditions, (iv) except as provided in
the next sentence, extend the Offer, (v) change the form of consideration
payable in the Offer or (vi) amend any other term of the Offer in any manner
adverse to the holders of the Common Shares. Notwithstanding the foregoing, Sub
may, without the consent of Allied, (A) extend the Offer, if at the scheduled or
extended expiration date of the Offer any of the Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(B) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC")
or the staff thereof applicable to the Offer and (C) extend the Offer for any
reason on one or more occasions for an aggregate period of not more than 10
Business Days (for all such extensions pursuant to this clause (C)) beyond the
latest expiration date that would otherwise be permitted under clause (A) or (B)
of this sentence. So long as this Agreement is in effect and the Offer
Conditions have not been satisfied or waived, Sub shall, and Nationwide shall
cause Sub to, cause the Offer not to expire. Subject to the terms and conditions
of the Offer and this Agreement, Sub shall, and Nationwide shall cause Sub to,
accept for payment, and pay for, all Common Shares validly tendered and not
withdrawn pursuant to the Offer that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) As soon as reasonably practicable after the date hereof, Sub shall
amend its Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with
respect to the Offer that was originally filed with the SEC on May 19, 1998, and
shall file such amendment with the SEC. The Schedule 14D-1 will contain a
supplement to the Offer to Purchase dated May 19, 1998, and a revised form of
the related letter of transmittal (which Schedule 14D-1, Offer to Purchase and
other documents, as amended and supplemented, together with any further
amendments or supplements thereto, are referred to herein collectively as the
"Offer Documents"), which shall be mailed to the holders of Common Shares.
Nationwide and Sub represent and agree that the Offer Documents complied (and,
as amended from time to time, shall comply) in all material respects with the
Exchange Act and the rules and regulations promulgated thereunder and the Offer
Documents, on the date first published, sent or given to Allied's shareholders,
shall not
3
<PAGE>
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no covenant is made by Nationwide or Sub with respect to
information supplied by Allied or any of its shareholders specifically for
inclusion or incorporation by reference in the Offer Documents. Nationwide, Sub
and Allied each agrees promptly to correct any information provided by it for
use in the Offer Documents that shall have become false or misleading in any
material respect, and Nationwide and Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Common Shares, in each case as and to the extent required by applicable federal
securities laws. Allied and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-1 prior to its filing with the SEC or
dissemination to shareholders of Allied. Nationwide and Sub agree to provide
Allied and its counsel with copies of any comments Nationwide, Sub or their
counsel may receive from the SEC or its staff with respect to the Schedule 14D-1
promptly after the receipt of such comments.
(c) Nationwide shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Common Shares
that Sub becomes obligated to accept for payment, and pay for, pursuant to the
Offer.
Section 1.2 Allied Actions.
--------------
(a) Allied hereby approves of and consents to the Offer and represents that
the Board of Directors of Allied, at a meeting duly called and held, duly and
unanimously adopted resolutions adopting this Agreement, approving the
Shareholder Agreement, approving the Offer and the Merger, determining that the
terms of the Offer and the Merger are fair to, and in the best interests of,
Allied's shareholders, recommending that Allied's shareholders accept the Offer,
tender their shares pursuant to the Offer and approve this Agreement (if
required) and approving the acquisition of Common Shares by Sub pursuant to the
Offer and the other transactions contemplated by this Agreement. Allied has
been advised by each of its directors and executive officers that each such
person intends to tender all Common Shares owned by such person pursuant to the
Offer.
4
<PAGE>
(b) On June 2, 1998, Allied filed with the SEC a Solicitation/
Recommendation Statement on Schedule 14D-9 with respect to the Existing Offer
(such Schedule 14D-9 as amended from time to time, the "Schedule 14D-9").
Simultaneously with the filing of the amendment to the Schedule 14D-1 by
Nationwide and Sub, Allied shall file with the SEC an amendment to the Schedule
14D-9 which contains the recommendation described in Section 1.2(a) and shall
mail the Schedule 14D-9 as so amended to the shareholders of Allied. Allied
agrees that the Schedule 14D-9 shall comply in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to Allied's shareholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
covenant is made by Allied with respect to information supplied by Nationwide or
Sub specifically for inclusion in the Schedule 14D-9. Each of Allied,
Nationwide and Sub agrees promptly to correct any information provided by it for
use in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect, and Allied further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Allied shareholders, in each case as and to the extent
required by applicable federal securities laws. Nationwide and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to shareholders of
Allied. Allied agrees to provide Nationwide and its counsel any comments Allied
or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger and promptly following the
execution of this Agreement, Allied shall cause its transfer agent to furnish
Sub promptly with mailing labels containing the names and addresses of the
record holders of Common Shares as of a recent date and of those persons
becoming record holders subsequent to such date, together with copies of all
lists of shareholders, security position listings and computer files and all
other information in Allied's possession or control regarding the beneficial
owners of Common Shares,
5
<PAGE>
and shall furnish to Sub such information and assistance (including updated
lists of shareholders, security position listings and computer files) as
Nationwide may reasonably request in communicating the Offer and any and all
amendment thereto to Allied's shareholders. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Nationwide and Sub and their agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will, upon request, deliver, and will use their reasonable efforts
to cause their agents to deliver, to Allied all copies and any extracts or
summaries from such information then in their possession or control.
Section 1.3 Directors. Promptly upon the acceptance for payment of Common
---------
Shares by Sub pursuant to the Offer, Sub shall be entitled to designate such
number of directors on the Board of Directors of (i) Allied as will give Sub,
subject to compliance with Section 14(f) of the Exchange Act, a majority of such
directors, and Allied shall, at such time, cause Sub's designees to be so
elected by its existing Board of Directors and (ii) each Subsidiary of Allied
and each committee of the Board of Directors of Allied and each such Subsidiary
as will give Sub a majority of such directors or committee, and Allied shall, at
such time, cause Sub's designees to be so elected. In the event that Sub's
designees are elected to the Board of Directors of Allied, until the Effective
Time such Board of Directors shall have at least two directors who are directors
on the date of this Agreement and who are not officers of Allied (the
"Independent Directors"); provided that, in such event, if the number of
--------
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to fill such vacancy who
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers or Affiliates of Allied
or any of its Subsidiaries, or officers or Affiliates of Nationwide or any of
its Subsidiaries, and such persons shall be deemed to be Independent Directors
for purposes of this Agreement.
Subject to applicable law, Allied shall take all action requested by
Nationwide necessary to effect any such election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1
6
<PAGE>
promulgated thereunder, and Allied agrees to make such mailing with the mailing
of the Schedule 14D-9 (provided that Sub shall have provided to Allied on a
timely basis all information required to be included in the Information
Statement with respect to Sub's designees). In connection with the foregoing,
Allied will promptly, at the option of Nationwide, either increase the size of
Allied's Board of Directors and/or obtain the resignation of such number of its
current directors as is necessary to enable Sub's designees to be elected or
appointed to Allied's Board of Directors as provided above.
Following the election or appointment of Sub's designees pursuant to this
Section 1.3 and prior to the Effective Time, the affirmative vote of a majority
of the Independent Directors then in office shall be required by Allied to (i)
amend or terminate this Agreement by Allied, (ii) exercise or waive any of
Allied's rights or remedies under this Agreement or (iii) extend the time for
performance of Nationwide's and Sub's respective obligations under this
Agreement.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms of this Agreement and subject to
----------
the satisfaction of the conditions set forth herein, at the Effective Time Sub
shall be merged with and into Allied in accordance with the applicable
provisions of the Laws of the States of Ohio and Iowa and the separate corporate
existence of Sub shall thereupon cease, and Allied, which shall be the surviving
company (hereinafter sometimes referred to as the "Surviving Corporation"),
shall continue its corporate existence under the Laws of the State of Iowa under
the name "Allied Group, Inc." From and after the Effective Time, the Surviving
Corporation shall possess all the assets and other rights, privileges,
immunities, powers and purposes of each of Sub and Allied and shall be liable
for all of the Liabilities of the Sub and Allied, all to the full extent
provided in Section 1701.82 of the General Corporation Law of the State of Ohio
(the "OGCL") and Section 490.1106 of the Iowa Business Corporation Act ("IBCA").
Section 2.2 Closing. Unless this Agreement shall have been terminated and
-------
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take place
at 9:00 a.m. on the second business day following the date on
7
<PAGE>
which the last of the conditions set forth in Article VII shall be fulfilled or
waived in accordance with this Agreement (the "Closing Date"), at the offices of
Holleb & Coff, 55 E. Monroe Street, Chicago, Illinois 60603, unless another
date, time or place is agreed to in writing by the parties hereto.
Section 2.3 Effective Time. As soon as is practicable following the
--------------
execution of this Agreement, the parties shall cause this Agreement to be
provided to the Ohio Superintendent in accordance with, and in such form as
required by, Section 3925.08(D)(2) of the Ohio Insurance Law and the regulations
promulgated thereunder, to the Iowa Commissioner in accordance with Section
521A.3 of the Iowa Insurance Law and the regulations promulgated thereunder and
the Iowa Attorney General in accordance with Section 521.12 of the Iowa
Insurance Law, and to the Arizona Director in accordance with Sections 20-481.02
of the Arizona Insurance Law, in each case together with all other documents as
may be required by applicable Law. Subject to the conditions set forth in
Article VII of this Agreement, the Merger shall become effective (the "Effective
Time") upon the last to occur of (a) the filing of the Certificate of Merger
with the Ohio Secretary of State, (b) the filing of the Articles of Merger as
required by Iowa law and (c) such later time as the parties designate in such
filings; provided, however, the Effective Time shall not be more than one year
-------- -------
from the date of approval of the Merger by the Ohio Superintendent or 31 days
after the filing and recording of the Articles of Merger as described herein.
Upon the terms and subject to the conditions of this Agreement, the parties
hereto will use reasonable best efforts to assure that the filings contemplated
hereby are made, and the Effective Time occurs, as soon as is practicable.
Section 2.4 Articles of Incorporation and By-Laws of the Surviving
------------------------------------------------------
Corporation. Following the Effective Time, the Articles of Incorporation of
- -----------
Allied, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter changed
or amended as provided therein or by Law. The Amended and Restated Code of By-
Laws of Allied, as in effect immediately prior to the Effective Time, shall be
the Amended and Restated Code of By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by Law.
8
<PAGE>
Section 2.5 Board of Directors and Officers. The directors of Sub
-------------------------------
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation immediately following the Effective Time, each of such directors to
hold office, subject to the applicable provisions of the Articles of
Incorporation and Code of By-Laws of the Surviving Corporation, until his or her
successor is duly elected and qualified, or his or her earlier death,
resignation or removal. The officers of Allied immediately prior to the
Effective Time shall be the officers of the Surviving Corporation at and
immediately following the Effective Time, each of such officers to hold their
respective offices, subject to the applicable provisions of the Articles of
Incorporation and Code of By-Laws of the Surviving Corporation, until his or her
successor is duly elected and qualified, or his or her earlier death,
resignation or removal.
Section 2.6 Effect of Merger on Sub Capital Stock. Each share of capital
-------------------------------------
stock, par value $1.00 per share, of Sub issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one validly issued,
fully paid and nonassessable share of common stock, no par value, of the
Surviving Corporation.
Section 2.7 Conversion of Allied Stock.
--------------------------
(a) Outstanding Common Stock. Subject to the other provisions of this
------------------------
Section 2.7, each Common Share issued and outstanding immediately prior to the
Effective Time (other than shares owned by Nationwide or Sub, shares held as
treasury shares by Allied and Dissenting Shares (as defined in Section 2.9
below)) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive $48.25 per Common Share
(or if a greater per Common Share price shall have been paid in the Offer, such
greater price), net to the shareholder in cash, without interest thereon (the
"Merger Consideration").
(b) Treasury Shares and Nationwide Owned Shares. Each Common Share and
-------------------------------------------
each Preferred Share issued and outstanding immediately prior to the Effective
Time which is then held as a treasury share by Allied, or owned by Nationwide or
Sub, immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Allied, be cancelled and retired and cease to
exist, without any conversion thereof.
9
<PAGE>
(c) Preferred Shares. Each Preferred Share issued and outstanding prior to
----------------
the Effective Time (other than Preferred Shares held by Allied or by Nationwide,
Sub or any other Subsidiary of Nationwide) shall not be affected by the Merger
and shall remain issued and outstanding Preferred Shares of the Surviving
Corporation.
Section 2.8 Exchange of Certificates and Related Matters.
--------------------------------------------
(a) Paying Agent. As of the Effective Time, Sub shall, and Nationwide
------------
shall cause Sub to, deposit, on an as needed basis, with a bank or trust company
selected by Nationwide and reasonably acceptable to Allied (the "Paying Agent"),
for the benefit of the holders of Common Shares, cash in an aggregate amount
equal to the aggregate Merger Consideration (such amount being sometimes
hereinafter referred to as the "Payment Fund").
(b) Exchange Procedure. Upon surrender to the Paying Agent of a
------------------
certificate representing Common Shares for cancellation, together with a letter
of transmittal and such other customary documents as may be required by the
instructions to the letter of transmittal (collectively, the "Certificate"), the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the number of Common Shares previously represented by
such Certificate shall have been converted pursuant to Section 2.7. The Paying
Agent shall accept such Certificate upon compliance with such reasonable terms
and conditions as the Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than the person in whose name the Certificate representing Common Shares
surrendered in exchange therefor is registered on the record books of Allied, it
shall be a condition to such exchange that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable. After the Effective Time, there shall be no further transfer
on the records of the Surviving Corporation or its transfer agent of any
Certificate representing Common Shares and if any such Certificate is presented
to the Surviving Corporation for transfer, it shall be cancelled against
delivery of the Merger Consideration as hereinabove provided. Until
10
<PAGE>
surrendered as contemplated by this Section 2.8(b), each Certificate
representing Common Shares (other than a Certificate representing Common Shares
to be cancelled in accordance with Section 2.7(b) or representing Dissenting
Shares), shall, at any time after the Effective Time, represent only the right
to receive upon such surrender the Merger Consideration, without any interest
thereon.
(c) Letter of Transmittal. Promptly after the Effective Time (but in no
---------------------
event more than five business days thereafter), Nationwide shall require the
Paying Agent to mail to each record holder of Certificates that immediately
prior to the Effective Time represented Common Shares which have been converted
pursuant to Section 2.7(a), a letter of transmittal (which shall specify that
delivery shall be effective, and risk of loss and title shall pass, only upon
proper delivery of Certificates representing Common Shares to the Paying Agent
and shall be in such form and have such provisions as Nationwide reasonably may
specify) and instructions for use in surrendering such Certificates and
receiving the Merger Consideration to which such holder shall be entitled
therefor pursuant to Section 2.7.
(d) No Further Ownership Rights in Shares. The Merger Consideration paid
-------------------------------------
upon the surrender for exchange of Certificates representing Common Shares in
accordance with the terms of this Article II shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Common Shares
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared by Allied on such Common Shares in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Effective Time.
(e) Termination of Payment Fund. Any portion of the Payment Fund which
---------------------------
remains undistributed to the holders of the Certificates representing Common
Shares for 180 days after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Common Shares who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and only as general creditors thereof for payment, without
interest, of their claim for any Merger Consideration with respect to their
Common Shares.
11
<PAGE>
(f) No Liability. None of Nationwide, Sub, the Surviving Corporation or
------------
the Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates representing Common Shares shall not have been surrendered
prior to seven years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration in respect of such Certificate
would otherwise escheat to or become the property of any Governmental Entity),
any such cash, shares, dividends or distributions payable in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation free and clear of all claims or interest
of any person previously entitled thereto.
Section 2.9 Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, the Common Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded properly in writing appraisal
for such Common Shares in accordance with Sections 490.1301 through 490.1331 of
the IBCA and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights shall not be converted into or represent the right to
receive the Merger Consideration ("Dissenting Shares"). Such shareholders shall
be entitled to receive payment of the appraised value of such Common Shares held
by them in accordance with the Iowa Corporation Law, except that all Dissenting
Shares held by shareholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Common Shares
held by them under such Iowa Corporation Law shall thereupon be deemed to have
been converted into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the Merger
Consideration, upon surrender, in the manner provided in Section 2.8(b), of the
Certificate or Certificates that formerly evidenced such Common Shares. Allied
shall give Nationwide prompt notice of any demands of appraisal received by
Allied, withdrawals of such demands, and any other instruments served pursuant
to Iowa Corporation Law and received by Allied, and Nationwide shall have the
right to participate in all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, Allied shall not, except with the prior
written consent of Nationwide, make any payment with respect to any demands for
appraisal, or settle or offer to settle, any such demands.
12
<PAGE>
Section 2.10 Adjustments to Prevent Dilution. In the event that Allied
-------------------------------
changes the number of Common Shares issued and outstanding prior to the
Effective Time as a result of a reclassification, stock split (including a
reverse split), stock dividend or distribution, recapitalization, merger,
subdivision or other similar transaction, the Merger Consideration shall be
equitably adjusted.
Section 2.11 Allied Employee Stock Options, Restricted Stock, etc. As of
-----------------------------------------------------
immediately prior to the Effective Time each option to acquire Common Shares
(each, an "Option"), restricted stock award ("Restricted Stock") or stock
appreciation right ("SARs" and, together with the Options and Restricted Stock,
the "Awards") outstanding under any of Allied's Long-Term Management Incentive
Plan, the Nonqualified Stock Option Plan, the Stock Option Plan, the Executive
Equity Incentive Plan or any other similar plan, arrangement or agreement of
Allied or any Allied Subsidiaries (together, the "Allied Plans"), whether or not
then exercisable or vested, shall become fully exercisable and vested and shall
be cancelled or repurchased and, in consideration of such cancellation or
repurchase, Allied shall pay to the holder of such Award an amount in respect
thereof equal to the product of (A) the Applicable Amount, multiplied by (B) the
number of shares subject thereto (such payment to be net of applicable
withholding taxes). The term "Applicable Amount" shall mean (i) in the case of
Awards of Restricted Stock, the Merger Consideration, (ii) in the case of Awards
of Options, the excess of (A) the Merger Consideration over (B) the exercise
price of such Option or (iii) in the case of Awards of SARs, the excess of (A)
the Merger Consideration, over (B) the grant price of such SAR. No consent or
other authorization is required by the holder of any Awards to effectuate the
transactions contemplated by this Section 2.11. In addition, following the
Effective Time, no Person has any options, warrants, or other rights to buy any
Securities of the Surviving Corporation.
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ARTICLE III
ADDITIONAL AGREEMENTS
Section 3.1 Preparation of Proxy Statement; Information Supplied.
----------------------------------------------------
(a) Proxy Statement. As soon as practicable following the purchase of the
---------------
Common Shares pursuant to the Offer, Allied shall prepare and file with the SEC
the Proxy Statement (as defined below), if required by applicable law. Allied
will use its reasonable Best Efforts to cause the Proxy Statement to be mailed
to Allied's shareholders as promptly as practicable. Nationwide and Sub will
use their reasonable best efforts to assist Allied in the preparation and filing
of the Proxy Statement.
(b) Allied Information. Allied agrees that none of the information
------------------
supplied or to be supplied by Allied specifically for inclusion in the Proxy
Statement will, at the date it is first mailed to Allied's shareholders or at
the time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder.
(c) Nationwide Information. Nationwide and Sub agree that none of the
----------------------
information supplied or to be supplied by Nationwide specifically for inclusion
in the Proxy Statement will, at the date it is first mailed to Allied's
shareholders or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 3.2 Meeting of Shareholders. Subject to Section 6.10 hereof,
-----------------------
following the purchase of Shares in the Offer, if Nationwide and its
subsidiaries shall not following such purchase own shares representing at least
90% of Allied's outstanding Common Shares and 90% of Allied's outstanding
Preferred Shares, Allied will take all actions necessary in accordance with
applicable law and its Articles of Incorporation and By-laws to convene a
meeting, if required by applicable law, of its shareholders (the "Shareholders
Meeting") to consider and vote upon the approval of this Agreement and the
Merger. Subject to Section 6.10 hereof, Allied will, through
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its Board of Directors, recommend to its shareholders approval of this Agreement
and the Merger. Allied will use its reasonable best efforts to hold the
Shareholders Meeting (unless following the purchase of Shares in the Offer
Nationwide and its subsidiaries own at least 90% of Allied's outstanding Common
Shares and 90% of Allied's outstanding Preferred Shares), as soon as practicable
after the date hereof.
Section 3.3 Filings; Other Action. As promptly as practicable, (i)
---------------------
Nationwide and Allied shall make any additional filings and submissions under
the HSR Act, (ii) Nationwide shall make any additional filings required by the
insurance regulatory authorities in Iowa, Arizona and Ohio and deliver notices
and consents to jurisdiction to such state insurance departments, each as
reasonably may be required to be made in connection with this Agreement and the
transactions contemplated hereby, and (iii) Allied and Nationwide shall
cooperate in all reasonable respects with each other in (A) determining if other
filings are required to be made prior to the Effective Time with, or if other
material consents, approvals, permits, notices or authorizations are required to
be obtained prior to the Effective Time from any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (B) timely making all
such filings and timely seeking all such consents, approvals, permits, notices
or authorizations. In connection with the foregoing, Allied will provide
Nationwide, and Nationwide will provide Allied, with copies of correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between such party or any of its representatives, on the one hand, and any
Governmental Entity or members of their respective staffs, on the other hand,
with respect to this Agreement and the transactions contemplated hereby. Each
of Nationwide and Allied acknowledge that certain actions may be necessary with
respect to the foregoing in making notifications and obtaining clearances,
consents, approvals, waivers or similar third party actions which are material
to the consummation of the transactions contemplated hereby, and each of
Nationwide and Allied agree to take such action as is reasonably necessary to
complete such notifications and obtain such clearances, approvals, waivers or
third party actions.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Except as otherwise disclosed to Nationwide and Sub in a letter delivered
to it prior to the execution hereof (which letter contains appropriate
references to identify the representations and warranties herein to which the
information in such letter relates) (the "Allied Disclosure Letter"), Allied
represents and warrants to Nationwide and Sub as follows:
Section 4.1 Organization and Qualification. (a) Allied is a corporation
------------------------------
duly incorporated, validly existing and in good standing under the Laws of the
State of Iowa and has full corporate power and authority to conduct its business
as it is currently being conducted. Each of the Allied Subsidiaries is duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or formation and has full power, authority and
legal right to conduct its business as it is currently being conducted. Allied
and each of the Allied Subsidiaries is duly qualified to do business, and is in
good standing, in the respective jurisdictions where the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each of the Allied Subsidiaries is listed in the Allied
Disclosure Letter.
(b) Each Allied Insurer is listed in the Allied Disclosure Letter. Each
Allied Insurer (i) possesses an Insurance License in each jurisdiction in which
such Allied Insurer is required to possess an Insurance License and (ii) is duly
authorized in its jurisdiction of incorporation and each other applicable
jurisdiction to write each line of direct insurance being written in the
Quarterly Statement for such Allied Insurer as of and for the quarter ended
March 31, 1998, except where such insurance is written on an excess or surplus
lines-basis and except where the failure to possess such Insurance License or to
be so authorized would not reasonably be expected to have a Material Adverse
Effect. All such Insurance Licenses are in full force and effect without
amendment, limitation or restriction, other than as described in the Allied
Disclosure Letter and except where the failure to be in full force and effect
would not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect and to the Knowledge of Allied, there is no event,
inquiry or Proceeding which is reasonably likely to
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lead to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such Insurance License.
(c) Except for its Subsidiaries, Allied does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
that directly or indirectly conducts any activity which is material to Allied.
Section 4.2 Capitalization of Allied. The authorized capital stock of
------------------------
Allied consists of 80,000,000 Common Shares and 7,500,000 Preferred Shares. At
the close of business on June 2, 1998 (i) 30,114,827 Common Shares were issued
and outstanding; (ii) no Common Shares were held as treasury stock; (iii) no
Common Shares were held by Allied Subsidiaries; (iv) 5,174,437 Common Shares
were reserved for issuance upon the exercise of options or other rights to
purchase Common Shares under the Allied Plans (of which options or rights with
respect to 1,113, 281 shares have been granted), and (v) 1,827,222 Preferred
Shares were issued and outstanding. Except as disclosed in the SEC Documents,
all outstanding shares of capital stock of Allied are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. No
bonds, debentures, notes or other indebtedness of Allied having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the shareholders of Allied may vote are issued or
outstanding. Except under the Allied Plans or as set forth in the Allied
Disclosure Letter, Allied does not have any outstanding option, warrant,
subscription or other right, agreement or commitment which either obligates
Allied to issue, sell or transfer, repurchase, redeem or otherwise issue,
acquire or vote any shares of capital stock of Allied, or which restricts the
transfer of Common Shares. Since May 29, 1998, no shares have been issued
except subject on the exercise of options listed above and no options granted.
Following the Effective Time, no Person shall have any right to acquire any
securities of the Surviving Corporation. Except as described in this Section
4.2, no shares of capital stock, or any securities entitling any person to
acquire such shares, are outstanding.
Section 4.3 Subsidiaries. The Allied Disclosure Letter sets forth, as to
------------
each Allied Subsidiary, its authorized capital stock and the number of its
issued and outstanding shares of capital stock. Except as set forth in the
Allied Disclosure Letter or the SEC Documents, Allied
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is, directly or indirectly, the record and beneficial owner of all of the
outstanding shares of capital stock of each of the Allied Subsidiaries, and no
capital stock of any Allied Subsidiary is or may become required to be issued by
reason of any options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable or exercisable for, shares of any capital stock of any
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which Allied or any Allied Subsidiary is or may be bound to
issue, redeem, purchase or sell additional shares of capital stock of any Allied
Subsidiary or securities convertible into or exchangeable or exercisable for any
such shares. All of such shares so owned by Allied are validly issued, fully
paid and nonassessable and are owned by it or by another wholly-owned Allied
Subsidiary thereof free and clear of all liens, claims, encumbrances, restraints
on alienation, or any other restrictions with respect to the transferability or
assignability thereof (other than restrictions on transfer imposed by federal or
state securities laws).
Section 4.4 Authority Relative to this Agreement. (a) Allied has full
------------------------------------
corporate authority and legal right to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved and authorized by the Board of Directors of Allied. Except
for the approval of this Agreement by the shareholders of Allied, no other
corporate proceedings on the part of Allied are necessary to authorize this
Agreement and the transactions contemplated hereby. The affirmative vote of at
least the majority of the votes entitled to be cast by shareholders of Allied
present or represented by a properly executed proxy at the meeting called
pursuant to Section 3.2 hereof, if required under applicable law, is the only
vote of shareholders of Allied necessary to approve this Agreement and the
transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Allied and (assuming this Agreement is a legal, valid and binding obligation of
Nationwide) constitutes a legal, valid and binding agreement of Allied
enforceable against Allied in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
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(c) Based upon the recommendation of a committee comprised of members of
the Board of Directors of Allied who are not directors or otherwise affiliated
with any of Allied's subsidiaries or affiliates (the "Special Committee")
appointed by the Board of Directors of Allied in connection with the Offer and
the Merger, the Board of Directors of Allied (i) has declared that this
Agreement, the Offer, the Merger and the other transactions contemplated hereby
and thereby are advisable and in the best interests of Allied and (ii) has
authorized, approved and adopted in all respects this Agreement, the Shareholder
Agreement, the Offer, the Merger and the other transactions contemplated hereby
and thereby. The Special Committee and the Board of Directors of Allied have
received the opinion of the Special Committee's financial advisor, Morgan
Stanley & Co. Incorporated, to the effect that the consideration to be received
by the shareholders in the Offer and Merger, taken together, is fair from a
financial point of view to such shareholders (other than Nationwide and its
Affiliates). It is agreed and understood that such opinion is for the benefit
of the Special Committee and Allied's Board of Directors and may not be relied
on by Nationwide.
Section 4.5 No Violation; Governmental Filings.
----------------------------------
(a) Except as set forth in the Allied Disclosure Letter, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) constitute a breach or violation
of or default under the articles of incorporation or the by-laws (or similar
organizational documents) of Allied or of any of the Allied Subsidiaries, (ii)
violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the assets
of Allied or of any of the Allied Subsidiaries under any of the terms,
conditions or provisions of any Allied Contract or (iii) constitute a breach or
violation of or default under any Environmental Permit, Law or License to which
Allied or any of the Allied Subsidiaries is subject, other than, in the case of
clauses (ii) and (iii), such violations, conflicts, breaches, defaults or events
or other matters that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or to prevent or delay the
consummation of the transactions contemplated hereby.
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(b) Except for (i) the Governmental Approvals set forth in the Allied
Disclosure Letter, (ii) the filing of this Agreement with and the approval of
such by the Iowa Commissioner, the Iowa Attorney General, and the Arizona
Director under the Iowa Insurance Law and the Arizona Insurance Law,
respectively, and such other applications, registrations, declarations, filings,
authorizations, Orders, consents and approvals as may be required under the Laws
of other jurisdictions listed in the Allied Disclosure Letter, (iii) the
approval of this Agreement by shareholders of Allied, if required by applicable
law, (iv) the filings required under the HSR Act and the expiration or other
termination of any waiting period applicable to the Offer and the Merger under
such Act, (v) the filings pursuant to Section 2.3 hereof, (vi) the filing of
appropriate documents with and such consents as may be required under the
Investment Company Act and the Investment Advisers Act, (vii) the filing with
the SEC of (x) a proxy statement relating to the approval by the shareholders of
Allied of the Merger (the "Proxy Statement"), and (y) such reports under the
Exchange Act, as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (viii) the filing of the
certificate of merger with the Iowa Secretary of State and appropriate documents
with the relevant authorities of other states in which Allied is qualified to do
business and (ix) any consent or filing that is disclosed in the Allied
Disclosure Letter or that would not otherwise be required to be disclosed
pursuant to Section 4.5(a) hereof, no consent, approval, permit, notice, Order
or authorization of, or registration, application, declaration or filing with
(each a "Consent or Filing") any Governmental Entity is required with respect to
Allied or any Allied Subsidiary in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
except for such Consents or Filings the failure of which to make or obtain would
not, individually or in the aggregate, prevent or be a material impediment to
the consummation of the transactions contemplated hereby or reasonably be
expected to have a Material Adverse Effect or to prevent or delay the
consummation of the transactions contemplated hereby.
Section 4.6 SAP Statements. (a) "Allied SAP Statements" shall mean:
--------------
(i) the Annual Statements for the Allied Insurers as of and for the years
ended December 31, 1995, 1996 and 1997;
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(ii) the Quarterly Statements for the Allied Insurers as of and for the
calendar quarter ended March 31, 1998;
(iii) any supplemental or separate statutory annual statements or
quarterly statements for Allied Mutual and the Allied Insurers for any of the
periods ended December 31, 1995, 1996 or 1997 or March 31, 1998, that are filed
with any insurance Governmental Entity and that differ from the Annual
Statements or the Quarterly Statements described in Section 4.6(i) or (ii)
hereto; and
(iv) the audited SAP balance sheets of each Allied Insurer as of December
31, 1995, 1996 and 1997 and the related audited summary of operations and
statements of change in capital and surplus and cash flow of each Allied Insurer
for each such years, together with the notes related thereto and the reports
thereon of KPMG Peat Marwick, LLP.
(b) Since December 31, 1997, each of the Allied Insurers has filed all SAP
Statements required to be filed with or submitted to the appropriate regulatory
authorities, except for such filings or submissions, the failure to so file or
submit would not individually or in the aggregate reasonably be expected to have
a Material Adverse Effect. With respect to any Allied Insurer, each Allied SAP
Statement complied (and, as to SAP Statements filed after the date of this
Agreement, will comply) in all material respects with all applicable Laws when
so filed, and all material deficiencies with respect to any such Allied SAP
Statement have been cured or corrected, or are being contested in good faith by
such Allied Insurer. With respect to any Allied Insurer, each Allied SAP
Statement (and any notes related thereto) referred to in Section 4.6(a)(i),
(ii), and (iv) hereof was prepared (and, as to Allied SAP Statements filed after
the date of this Agreement, will be prepared) in accordance with SAP as in
effect at the time of preparation and presents (and, as to Allied SAP Statements
filed after the date of this Agreement, will present) fairly in all material
respects the financial position of the Allied Insurers as of the respective
dates thereof. With respect to any Allied Insurer, each Allied SAP Statement
referred to in Section 4.6(c) hereof was prepared (or, in the case of similar
Allied SAP Statements filed after the date of this Agreement, will be prepared)
in accordance, in all material respects, with the statutory accounting practices
required or permitted by the insurance Governmental Entity in the jurisdiction
in which such statement was (or will be) filed. The parties agree that the
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foregoing representations shall not be interpreted to apply to the actuarial
reserves and other actuarial amounts held in respect of Liabilities with respect
to insurance contracts of the Allied Insurers, as to which the only
representations or warranties made in this Agreement are set forth in Section
4.8.
Section 4.7 [Intentionally left blank.]
Section 4.8 Reserves. To the Knowledge of Allied, the aggregate reserves
--------
of the Allied Insurers as recorded in the Allied SAP Statements have been
determined in accordance with generally accepted actuarial principles
consistently applied (except as set forth therein). Except as disclosed in the
SEC Reports or the Allied Disclosure Letter, the insurance reserving practices
and policies of the Allied Insurers have not changed, in any material respect,
since December 31, 1997, and the results of the application of such practices
and policies are reflected in the Allied SAP Statements. All reserves of the
Allied Insurers set forth in the Allied SAP Statements are, to the Knowledge of
Allied, fairly stated in accordance with sound actuarial principles and meet the
requirements of the insurance laws of the applicable insurance authority, except
where the failure to so state such reserves or meet such requirements would not
reasonably be expected to have a Material Adverse Effect.
Section 4.9 SEC Documents. Allied has timely filed all required reports,
-------------
schedules, forms, statements and other documents with the SEC since January 1,
1995 (such reports, schedules, forms, statements and other documents are
hereinafter referred to as the "SEC Documents"). As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of Allied included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited interim
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financial statements, as permitted by Rule 10-01 of Regulation S-X) and fairly
present, in all material respects, the consolidated financial position of Allied
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited interim financial statements, to normal year-end audit
adjustments) in accordance with GAAP. The parties agree that the representations
set forth in the previous sentence shall not be interpreted to apply to the
actuarial reserves and other actuarial amounts held in respect of Liabilities
with respect to insurance contracts of the Allied Insurers, as to which the only
representations or warranties made in this Agreement are set forth in Section
4.8.
Section 4.10 Absence of Certain Changes or Events. Except as set forth in
------------------------------------
the Allied Disclosure Letter, since March 31, 1998, there has been no event or
condition which has had (or would reasonably be expected to result in) a
Material Adverse Effect, and except as set forth in the Allied Disclosure
Letter, Allied and the Allied Subsidiaries have in all material respects
conducted their businesses in the ordinary course consistent with past practices
and have not taken any of the actions contemplated by Section 6.1 hereto.
Section 4.11 No Undisclosed Liabilities. Except as set forth in the
--------------------------
Allied Disclosure Letter or the SEC Documents filed prior to the date hereof and
for Liabilities arising since March 31, 1998 in the ordinary course of business
and consistent with past practice, or in connection with the Offer or the
transactions contemplated by this Agreement, neither Allied nor any of the
Allied Subsidiaries has any Liabilities of a nature required by GAAP to be
reflected in a consolidated balance sheet of Allied (or reflected in the notes
thereto). The parties agree that the representations set forth in the previous
sentence shall not be interpreted to apply to the actuarial reserves and other
actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of the Allied Insurers, as to which the only representations or
warranties made in this Agreement are set forth in Section 4.8.
Section 4.12 Takeover Statutes. Allied has taken all actions necessary
-----------------
such that the provisions of Section 490.1110 of the IBCA and any applicable
anti-takeover provision in the Restated Articles of Incorporation or By-laws of
Allied is not, or at the Effective Time will not be, applicable to Allied,
Nationwide, the Common Shares, the Offer, the Merger or any other
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transactions contemplated by this Agreement and, to the Knowledge of Allied, no
other restrictive provision of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover statute or
regulation is so applicable.
Section 4.13 Compliance with Law. Except as set forth in the Allied
-------------------
Disclosure Letter or the SEC Documents filed prior to the date hereof, the
businesses of Allied and the Allied Subsidiaries are not being conducted and
since January 1, 1995 have not been conducted in violation of any applicable
Law, except for violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
Section 4.14 Assets.
------
(a) Except as set forth in the SEC Documents filed prior to the date
hereof or the Allied Disclosure Letter, each of Allied and the Allied
Subsidiaries (i) has good and valid title to all of its properties, assets and
-
other rights that do not constitute real property, free and clear of all Liens
other than Permitted Liens, and (ii) owns, has valid leasehold interests in or
--
valid contractual rights to use, all of the assets, tangible and intangible,
used by, or necessary for the conduct of, its business, except where the failure
to have such valid leasehold interests or such valid contractual rights would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth in the SEC Reports filed prior to the date hereof
or the Allied Disclosure Letter, each of Allied and the Allied Subsidiaries:
(i) represents that it does not own any real property;
(ii) is in peaceful and undisturbed possession of the space
and/or estate under each lease under which it is a tenant, and there
are no material defaults by it as tenant thereunder; and
(iii) has good and valid rights of ingress and egress to and
from all the real property leased by such party from and to the public
street systems for all usual street, road and utility purposes.
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Section 4.15 Environmental Matters. Except as set forth in the Allied
---------------------
Disclosure Letter or the SEC Reports, or as would not reasonably be expected to
have a Material Adverse Effect:
(a) Each of Allied and the Allied Subsidiaries and, to the Knowledge of
Allied, all Allied Real Property (including all owners or operators thereof) is
in substantial compliance in all material respects with all applicable
Environmental Laws, which compliance includes, but is not limited to, the
possession of all material Environmental Permits required under Environmental
Laws and compliance with the terms and conditions thereof. Neither Allied nor
any Allied Subsidiary has received any written communication, whether from a
Governmental Entity, citizens' group, employee or otherwise, that alleges that
Allied or any Allied Subsidiary or any Allied Real Property (including any owner
or operator thereof) is not in such compliance, and, there are no circumstances
that are reasonably likely to prevent or interfere with such compliance in the
future. Neither Allied nor any Allied Subsidiary has been notified by any
Governmental Entity that any such material Environmental Permit will be
suspended or revoked or cannot be renewed in the ordinary course of business
consistent with past practice.
(b) There is no Environmental Claim pending or, to the Knowledge of Allied,
threatened against Allied, any Allied Subsidiary, any Allied Real Property
(including any owner or operator thereof) or any Person whose Liability for any
Environmental Claims Allied or any Allied Subsidiary has or may have retained or
assumed either contractually or, by operation of Law and, there are no facts
existing on the date hereof which are reasonably likely to result in any such
Environmental Claim.
(c) There have been no releases, spills, leaks or discharges of Hazardous
Substances at, from or to any Allied Real Property or any other property which
required or is reasonably likely to require Allied or any Allied Subsidiary to
undertake investigation, abatement, removal, remedial, corrective or other
response action pursuant to applicable Environmental Laws. None of the Allied
Real Property (i) is listed or proposed for listing on any list maintained by
any Governmental Entity of sites that may require investigation, abatement,
removal, remedial, corrective or other response action, including, but not
limited to, the CERCLIS or the NPL or (ii) is the subject of any investigation,
abatement, removal, remedial, corrective or other response action.
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Section 4.16 Contracts. (a) The Allied Disclosure Letter contains a true
---------
and complete list of all the following Contracts (true and complete copies of
all such written Contracts having been made available to Nationwide), currently
in force, to which Allied or any Allied Subsidiary is a party or by which any
assets of Allied or any Allied Subsidiary are or may be bound, as such Contracts
may have been amended to the date hereof:
(i) has been entered into since March 31, 1998 and would be
required to be filed by Allied as an exhibit to an SEC Document filed
after such date under Item 10 of Rule 601 of Regulation S-K under the
Exchange Act;
(ii) is a reinsurance or retrocession contract which requires
the payment of premiums by the Allied or the Allied Subsidiaries of
amounts in excess of $500,000 per year; or
(iii) contains covenants limiting the freedom of the Allied or
any of the Allied Subsidiaries to engage in any line of business in
any geographic area or to compete with any person or entity or
restricting the ability of the Allied Subsidiaries to acquire equity
securities of any person or entity; or
(iv) is an employment or severance contract applicable to any
employee, director or consultant of the Allied or the Allied
Subsidiaries, including without limitation contracts to employ
executive officers and other contracts with officers or directors of
the Allied or any of the Allied Subsidiaries, other than agent
contracts with insurance agents and any such contract which by its
terms is terminable by the Allied or any of the Allied Subsidiaries on
not more than 60 days' notice without material liability; or
(v) is a contract for borrowed money in excess of $2,500,000; or
(vi) is a contract providing for the payment or receipt of over
$2,500,000 per year.
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(b) As to all contracts with respect to which Allied or its Subsidiaries is
bound, except as disclosed in the Allied Disclosure Letter or as would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect:
(i) such contract is (assuming due power and authority of, and
due execution and delivery by, the other party or parties thereto)
valid and binding upon each party thereto and is in full force and
effect;
(ii) there is no default or claim of default on the part of
Allied or the Allied Subsidiary party thereto or, to the Knowledge of
Allied, by other parties thereto, and no event has occurred which,
with the passage of time or the giving of notice (or both), would
constitute such default thereunder.
Section 4.17 [Intentionally left blank.]
Section 4.18 Taxes and Tax Returns. Except as set forth in the Allied
---------------------
Disclosure Letter or the SEC Documents:
(a) All material Tax Returns required under applicable Law to be filed by
Allied or any Allied Subsidiary have been timely filed;
(b) Allied and each Allied Subsidiary have paid or made provision in
accordance with GAAP (or there has been paid or provision has been made on its
behalf) for the payment of all Taxes for all periods or portions thereof ending
through the date hereof;
(c) The federal income tax returns of Allied and each Allied Subsidiary
have been examined by the Internal Revenue Service (or the applicable statutes
of limitation for the assessment of federal income taxes have expired) for all
periods through and including 1993;
(d) No outstanding deficiencies, assessments or written proposals for the
assessment of any Taxes have been proposed, asserted or assessed against Allied
or any of the Allied
27
<PAGE>
Subsidiaries which individually or in the aggregate would reasonably be expected
to have a Material Adverse Effect; and
(e) No audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of Allied or any
Allied Subsidiary wherein an adverse determination or ruling in any one such
proceeding or in all such proceedings in the aggregate would reasonably be
expected to have a Material Adverse Effect.
Section 4.19 Benefit Plans. The Allied Disclosure Letter sets forth a
-------------
complete and correct list of all Benefit Plans (as defined below). Except as
disclosed in the Allied Disclosure Letter or the SEC Documents:
(a) Each "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other
material plan, program, arrangement or policy (written or oral) relating to
bonuses, deferred compensation, performance compensation, compensation, stock
purchases, stock options, stock appreciation, severance, salary continuation,
vacation, sick leave, holiday pay, fringe benefits, reimbursement programs,
incentive, insurance, welfare or other employee benefits, in each case
maintained or contributed to, or required to be maintained or contributed to, by
Allied and the Allied Subsidiaries for the benefit of any present or former
officers, employees, agents, directors or independent contractors of Allied or
the Allied Subsidiaries (all the foregoing being herein called "Benefit Plans")
has been administered in accordance with its terms and all applicable laws and
regulations except where the failure to be so administered would not reasonably
be expected to result in a Material Adverse Effect. All required contributions
to the Benefit Plans have been made or provided for, except where the failure to
do so would not reasonably be expected to result in a Material Adverse Effect.
Allied, the Allied Subsidiaries and all the Benefit Plans are in compliance with
the applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements, except where the failure to do so
would not reasonably be expected to result in a Material Adverse Effect.
Complete and correct copies of all current and prior documents, including all
amendments thereto, with respect to each Benefit Plan have been delivered or
made available to Nationwide. Copies of all summary plan descriptions, summary
annual reports, IRS
28
<PAGE>
determination letters, summaries of material modifications, other communications
to employees concerning the Benefit Plans, and the three most recent Forms 5500
for each Benefit Plan have also been delivered or made available to Nationwide.
(b) None of Allied or any other person or entity that together with Allied
is treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each a "Commonly Controlled Entity") has incurred any material liability
to a Pension Plan covered by Title IV of ERISA (a "Title IV Plan") (other than
for contributions not yet due) or to the Pension Benefit Guaranty Corporation
(other than for the payment of premiums not yet due) which liability has not
been fully paid as of the date hereof. No Commonly Controlled Entity has
withdrawn from a Pension Plan covered by Title IV of ERISA (a "Title IV Plan")
during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA) where such withdrawal could result in liability of
such substantial employer pursuant to Section 4062(e) or 4063 of ERISA that
would reasonably be expected to result in a Material Adverse Effect. No
Commonly Controlled Entity has filed a notice of intent to terminate any Title
IV Plan or adopted any amendment to treat any such plan as terminated. The
Pension Benefit Guarantee Corporation has not instituted proceedings to
terminate any Title IV Plan in which a Commonly Controlled Entity participates.
No accumulated funding deficiency, whether or not waived, exists with respect to
any such plan, and no condition has occurred or exists which by the passage of
time would be expected to result in an accumulated funding deficiency as of the
last day of the current plan year of any such plan. No reportable event, as
described in Section 4043 of ERISA, has occurred and is continuing with respect
to Title IV Plan in which a Commonly Controlled Entity participates which would
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such plan. No amendment with
respect to which security is required under Section 307 of ERISA has been made
or is reasonably expected to be made to any Title IV Plan. Since the last
valuation date for each such plan, there has been no amendment or change to such
plan that would increase materially the amount of benefits thereunder. In
addition to the documents listed in subsection (a) above, Allied has delivered
or made available to Nationwide, for each Title IV Plan in which a Commonly
Controlled Entity participates, copies of the following documents: (i) the Form
PBGC-1 filed in each of the most recent three plan years, and (ii) the actuarial
report as of the
29
<PAGE>
three most recent valuation dates and the retirement plan disclosures required
under Financial Accounting Standard 87 for the most recent fiscal year.
(c) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid.
(d) There are no pending or threatened claims (other than routine benefit
claims), lawsuits or arbitrations which have been asserted or instituted against
any Benefit Plan, any of the fiduciaries thereof or Allied or the Allied
Subsidiaries with respect to their duties under the Benefit Plans that,
individually or in the aggregate, would reasonably be expected to result in a
Material Adverse Effect.
(e) Neither Allied nor a Commonly Controlled Entity, nor to the Knowledge
of Allied, any of their respective employees or directors, nor to the Knowledge
of Allied, any fiduciary, has engaged in any transaction in violation of Section
406(a) or (b) of ERISA or which is a "prohibited transaction" (as defined in
Section 4975(c)(i) of the Code) for which no exemption exists under Section
408(b) of ERISA or Section 4975(d) of the Code or for which no administrative
exemption has been granted under Section 408(a) of ERISA.
(f) The Benefit Plans and their related trusts intended to qualify under
Section 401 of the Code received favorable determination letters from the IRS
and to the Knowledge of Allied, such Plans and their related trusts continue to
qualify and operate as designed.
(g) Allied and the Allied Subsidiaries have no liability (contingent or
otherwise) under Section 4069 of ERISA by reason of a transfer of any
underfunded pension plan.
(h) Complete and correct copies of the most recent actuarial reports
(including for purposes of Financial Accounting Standards Board report nos. 87,
106 and 112) with respect to each Benefit Plan providing retiree medical or life
insurance coverage for employees of Allied and the Allied Subsidiaries have been
provided or made available to Nationwide. Except as
30
<PAGE>
disclosed in the Allied Disclosure Letter, no current employee of Allied or the
Allied Subsidiaries would be entitled if his or her employment with Allied and
the Allied Subsidiaries is terminated to any retiree medical or insurance
coverage.
(i) No amount that could be received as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of Allied or
any of the Allied Subsidiaries under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would be characterized as an "excess parachute payment" (as such term is defined
in Section 280G of the Code).
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee (current, former or retired) of Allied and
the Allied Subsidiaries, (ii) increase any benefits under any Benefit Plan or
(iii) result in the acceleration of the time of payment of, vesting of or other
rights with respect to any such benefits.
Section 4.20 Labor Relations and Employment. (a) Except to the extent
------------------------------
set forth in the Allied Disclosure Letter or the SEC Documents, (i) there is no
labor strike, material labor dispute, slowdown, stoppage or lockout actually
pending, or to the Knowledge of Allied, threatened against or affecting Allied
or any of the Allied Subsidiaries, and since January 1, 1998 there has not been
any such action; (ii) to the Knowledge of Allied, no union claims to represent
the employees of Allied or any of the Allied Subsidiaries, there are no current
union organizing activities among the employees of Allied or of any of the
Allied Subsidiaries and Allied has not received notice of any unfair labor
practice complaint or charge against it pending before the National Labor
Relations Board and (iii) neither Allied nor any of the Allied Subsidiaries is a
party to or is bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association, applicable to employees of Allied or of
any Allied Subsidiary.
Section 4.21 Intellectual Property. Allied and each Allied Subsidiary
---------------------
owns or otherwise has rights to use, free and clear of all Liens, all
Intellectual Property used in their respective businesses as currently conducted
except for any failure to have such right which would not,
31
<PAGE>
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the Knowledge of Allied, the use of such Intellectual
Property does not infringe or otherwise violate the rights of any Person.
Section 4.22 Transactions with Affiliates. Except as set forth in the
----------------------------
Allied Disclosure Letter or the SEC Documents, neither Allied nor any Allied
Subsidiary has entered into any material transaction with an Affiliate in
connection with which either Allied or an Allied Subsidiary has continuing
obligations, in the ordinary course of business or otherwise, which is not on
the terms at least as favorable to Allied or an Allied Subsidiary as would have
been applicable if such transaction had been entered into on an arm's-length
basis with an unaffiliated third party. Allied has not made or declared any
dividend or distribution that was disproportionate in favor of any Affiliate.
Section 4.23 Voting Requirements. The affirmative vote of the holders of
-------------------
a majority of the voting power represented by the outstanding Common Shares and
outstanding Preferred Shares voting together as one class and entitled to vote
at the Shareholders Meeting is the only vote of the holders of Allied's capital
stock necessary to approve this Agreement and the transactions contemplated by
this Agreement.
Section 4.24 Investment Company. None of the Allied Subsidiaries
------------------
maintains any separate accounts. Neither Allied nor any of its Subsidiaries
conducts activities of or is otherwise deemed under applicable law to control an
"investment advisor" as such term is defined in Section 2(a)(20) of the 1940
Act, whether or not registered under the Investment Advisers Act of 1940, as
amended. Neither Allied nor any of its Subsidiaries is an "investment company"
as defined under the 1940 Act, and neither Allied nor any of its Subsidiaries
sponsors any Person that is such an investment company.
32
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE AND SUB
Nationwide and Sub jointly and severally represent and warrant to Allied as
follows:
Section 5.1 Organization and Qualification. Nationwide is a mutual
------------------------------
insurance company and Sub is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Ohio and has full corporate
power, authority and legal right to conduct its Business as it is currently
being conducted. Each of Nationwide and Sub is duly qualified to do business,
and is in good standing, in the respective jurisdictions where the character of
its assets owned or leased or the nature of its Business makes such
qualification necessary, except for failures to be so qualified or in good
standing which are not, individually or in the aggregate, reasonably likely to
have a material adverse effect on Nationwide. Nationwide possesses an Insurance
License in each jurisdiction in which Nationwide is required to possess an
Insurance License. All such Insurance Licenses are in full force and effect
without amendment, limitation or restriction, and Nationwide does not have
Knowledge of any event, inquiry or Proceeding which is reasonably likely to lead
to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such Insurance License.
Section 5.2 Authority Relative to this Agreement. (a) Nationwide and Sub
------------------------------------
have full power, authority and legal right to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly approved and authorized by the Board of Directors of
Nationwide and by the Board of Directors of Sub. No other corporate proceedings
on the part of Nationwide or Sub are necessary to authorize this Agreement and
the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Nationwide and Sub and (assuming this Agreement is a legal, valid and binding
obligation of Allied) constitutes a legal, valid and binding agreement of
Nationwide and Sub enforceable against Nationwide and Sub in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
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Section 5.3 No Violation. (a) The execution, delivery and performance of
------------
this Agreement and the consummation of the transactions contemplated hereby will
not (i) constitute a breach or violation of or default under the articles of
incorporation or the by-laws of Nationwide or under the articles of
incorporation or the by-laws of Sub, (ii) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the assets of Nationwide, Sub or any Nationwide Subsidiary
under, any of the terms, conditions or provisions of any Contract to which
Nationwide, Sub or any Nationwide Subsidiary is a party or to which it or any of
its assets may be subject or (iii) constitute a breach or violation of or
default under any Environmental Permit, Law or License to which Nationwide, Sub
or any Nationwide Subsidiary is subject other than, in the case of clauses (ii)
and (iii), events or other matters that are not, individually or in the
aggregate, reasonably likely to have a material adverse effect on Nationwide or
to prevent or delay the consummation of the transactions contemplated hereby.
(b) Except for (i) the filing of this Agreement with and the approval of
such by the Ohio Superintendent under the Ohio Insurance Law, the Iowa
Commissioner under the Iowa Insurance Law and the Arizona Commissioner under the
Arizona Insurance Law, (ii) the filings required under the HSR Act and the
expiration or other termination of any waiting period applicable to the Merger
under such act, and (iii) any Consent or Filing that would not otherwise be
required to be disclosed pursuant to Section 5.3(a) hereof, no Consent or Filing
of or with any Person is required with respect to Nationwide, Sub or any
Nationwide Subsidiary or any Nationwide Affiliate in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for such Consents or Filings the
failure of which to make or obtain would not, individually or in the aggregate,
prevent or be a material impediment to the consummation of the transactions
contemplated hereby or have a material adverse effect on the business,
operations or financial condition of Nationwide or any of its Subsidiaries,
taken as a whole, or that would prevent Nationwide or Sub from consummating the
transactions contemplated by this Agreement.
34
<PAGE>
Section 5.4 Litigation. There is no action, proceeding, investigation or
----------
inquiry pending or threatened against Nationwide and Sub which questions the
validity of this Agreement or the Offer or any action taken or to be taken
pursuant hereto or pursuant to the Offer.
Section 5.5 Financial Ability to Perform. Nationwide and Sub at the
----------------------------
expiration of the Offer and at the Effective Time will have cash funds
sufficient to pay all cash payments for Common Shares in the Offer and the
Merger, and to pay all related fees and expenses.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Allied Conduct of Business Pending the Merger. From the date
---------------------------------------------
hereof until the Effective Time, unless Nationwide shall otherwise agree in
writing, or except as set forth in the Allied Disclosure Letter or as otherwise
contemplated by this Agreement, Allied and the Allied Subsidiaries shall conduct
their respective businesses in the ordinary course consistent with past practice
and shall use all reasonable efforts to preserve intact their business
organizations and relationships with third parties (including but not limited to
their respective relationships with policyholders, insureds, agents,
underwriters, brokers and investment customers) and to keep available the
services of their present officers and key employees, subject to the terms of
this Agreement. Except as set forth in the Allied Disclosure Letter or as
otherwise provided in this Agreement, from the date hereof until the Effective
Time, without the prior written consent of Nationwide:
(i) Allied shall not adopt or propose any change in its Restated
Articles of Incorporation or Bylaws;
(ii) Allied shall not declare, set aside or pay any dividend or other
distribution with respect to any shares of capital stock of Allied (except
for regular quarterly dividends payable in an amount no greater than $0.14
per share on the Common Shares and the regular quarterly dividends per
share on the Preferred Shares), or split, combine or reclassify any of
Allied's capital stock, and Allied and the Allied Subsidiaries shall not
35
<PAGE>
repurchase, redeem or otherwise acquire any shares of capital stock or
other securities of, or other ownership interests in, Allied;
(iii) Allied shall not, and shall not permit any Allied Subsidiary
to, merge or consolidate with any other person or (except in the ordinary
course of business) acquire a material amount of assets of any other
person;
(iv) Allied shall not, and shall not permit any Allied Subsidiary to,
sell, lease, license or otherwise surrender, relinquish or dispose of (i)
any material facility owned or leased by Allied or any Allied Subsidiary or
(ii) any assets or property which are material to Allied and the Allied
Subsidiaries taken as a whole, except pursuant to existing contracts or
commitments listed in Section 6.1(iv) of the Allied Disclosure Letter (the
terms of which have been disclosed to Nationwide prior to the date hereof),
or in the ordinary course of business consistent with past practice;
(v) Allied shall not, and shall not permit any Allied Subsidiary to,
settle any material audit, make or change any material Tax election or file
materially amended Tax Returns;
(vi) Allied and the Allied Subsidiaries shall not issue any capital
stock or other securities or enter into any amendment of any material term
of any outstanding security, and Allied and the Allied Subsidiaries shall
not incur any material indebtedness except in the ordinary course of
business pursuant to existing credit facilities or arrangements, amend or
otherwise increase, accelerate the payment or vesting of the amounts
payable or to become payable under or fail to make any required
contribution to, any Benefit Plan (as hereinafter defined) or materially
increase any non-salary benefits payable to any employee or former
employee, except in the ordinary course of business consistent with past
practice or as otherwise permitted by this Agreement;
(vii) Allied shall not, and shall not permit any Allied Subsidiary
to, grant any increase in the compensation or benefits of directors,
officers, employees, consultants or
36
<PAGE>
agents of Allied or any Allied Subsidiary other than increases in the
ordinary course of business consistent with past practice;
(viii) Allied shall not, and shall not permit any Allied Subsidiary
to, enter into or amend any employment agreement or other employment
arrangement with any employee of Allied or any Allied Subsidiary, except in
the ordinary course of business consistent with past practices (which past
practices shall not be deemed to include actions taken in connection with
the Merger);
(ix) Allied shall not change any method of accounting or accounting
practice by Allied or any Allied Subsidiary, except for any such required
change in GAAP or SAP;
(x) Allied shall not permit any Allied Insurer to conduct transactions
in Allied Investments except in compliance with the investment policies of
such Allied Insurer in effect on the date hereof and all applicable
insurance laws and regulations;
(xi) Allied shall not, and shall not permit any Allied Subsidiary to,
enter into any agreement to purchase, or to lease for a term in excess of
one year, any real property, provided that Allied, or any Allied
Subsidiary, (i) may as a tenant, or a landlord, renew any existing lease
for a term not to exceed eighteen months and (ii) nothing herein shall
prevent the Allied, in its capacity as a landlord, from renewing any lease
pursuant to an option granted prior to the date hereof;
(xii) amend any agreement with Allied Mutual, Allied Life or any of
their affiliates;
(xiii) Allied shall not, and shall not permit any Allied Subsidiary
to, agree or commit to do any of the foregoing;
(xiv) except to the extent necessary to comply with the requirements
of applicable laws and regulations, Allied shall not, and shall not permit
any Allied
37
<PAGE>
Subsidiary to, (i) take, or agree or commit to take, any action
-
that would make any representation and warranty of Allied hereunder
inaccurate in any material respect at, or as of any time prior to, the
Effective Time, (ii) omit, or agree or commit to omit, to take any action
--
necessary to prevent any such representation or warranty from being
inaccurate in any material respect at any such time, provided however, that
Allied shall be permitted to take or omit to take such action which
(without any uncertainty) can be cured, and in fact is cured, at or prior
to the Effective Time or (iii) take, or agree or commit to take, any action
---
that would result in, or is reasonably likely to result in, any of the
conditions of the Merger set forth in Article VIII not being satisfied; and
(xv) none of the Allied Insurers shall make any material change in its
underwriting, claims management or reserving practices.
Section 6.2 Disposition of Litigation. From and after the date hereof and
-------------------------
until the Effective Time, Nationwide shall cease, in any and all respects, the
prosecution of any litigation against Allied or any Affiliates thereof.
Immediately following the Effective Time, Nationwide shall dismiss, with
prejudice, any and all litigation brought by Nationwide against Allied or any
Affiliates thereof.
Section 6.3 Reasonable Best Efforts. Upon the terms and subject to the
-----------------------
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken all action, to do, or
cause to be done, and to assist and cooperate with the other party hereto in
doing or causing to be done, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including, but not limited to, (i)
the actions set forth in Article I, II and III hereof, (ii) the obtaining of all
Governmental Approvals, and all other necessary actions or nonactions, waivers,
consents and approvals from all appropriate Governmental Entities and other
Persons and the making of all necessary registrations and filings, (iii) the
obtaining of the opinions and other documents referred to in Article VII hereof,
(iv) the resolution of all organizational and human resources issues relating to
the transactions contemplated hereby, (v) the obtaining or making of all
Consents, Environmental Permits, Filings or Licenses necessary or desirable to
ensure that the business of the Surviving Corporation may be conducted without
disruption consistent with the past practice of each of the
38
<PAGE>
Constituent Companies and (vi) the defending of any Proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby, the
defense of which shall, at the request of either Allied or Nationwide, be
conducted jointly by Nationwide and Allied on a basis that is satisfactory to
both Allied and Nationwide. Allied hereby grants Nationwide the right to decide
for purposes of the Form A regulatory hearings whether to submit regulatory
applications for Allied, Allied Life and Allied Mutual concurrently or
separately, and whether to conduct the regulatory hearing and approval
proceedings concurrently or separately for each of Allied, Allied Life and
Allied Mutual. Both Allied and Nationwide agree to use their reasonable best
efforts to coordinate and cooperate during the regulatory approval process.
Section 6.4 [Intentionally left blank.]
Section 6.5 Access and Information. Subject to provisions of applicable
----------------------
law, Allied shall (a) afford to Nationwide's and Sub's accountants, legal
counsel and other advisors ("Representatives") full access during normal
business hours through the period immediately prior to the Effective Time to all
of its and the Allied Subsidiaries' assets, books, Contracts, commitments and
records (including, but not limited to, Tax Returns), and (b) during such
period, Allied shall furnish promptly to Nationwide and Sub all such information
concerning its business, assets and personnel or those of any of its Affiliates,
in either clause (a) or (b), as Nationwide or Sub may reasonably request.
Unless otherwise required by law, Nationwide and Sub will, and will cause their
Representatives to, hold any such information in confidence until such time as
such information otherwise becomes publicly available through no wrongful act of
Nationwide, Sub or their Representatives. In the event of the termination of
this Agreement for any reason, Nationwide will, and will cause Sub and their
Representatives to, return to Allied all copies of written information furnished
by Allied, Sub or their Representatives to Nationwide, Sub or their
Representatives and destroy all memoranda, notes and other writings prepared by
Nationwide, Sub or their Representatives based upon or including the information
furnished by Allied or any of its Representatives to Nationwide, Sub or their
Representatives (and Nationwide will certify to Allied that such destruction has
occurred) and neither Nationwide nor Sub shall use any such information for any
purpose. Prior to the completion of the Offer and, if this Agreement is
terminated, during the two-year period following the date of termination,
Nationwide will not (and will not assist or encourage others, including its
Subsidiaries, to) solicit
39
<PAGE>
the services, as employee, consultant or otherwise, of any employee of Allied,
provided, that nothing in this Agreement shall be deemed to prohibit general
- --------
solicitations of employment of persons in Nationwide's ordinary course of
business not directed specifically toward employees of Allied, solicitations
through executive recruiting firms not directed specifically toward employees of
Allied or employees that make contact with Nationwide.
Section 6.6 Notice of Proceedings. Each of Nationwide and Allied shall
---------------------
promptly notify the other of, and provide to the other all information relating
to, any Proceedings or investigations commenced or, to the Knowledge of Allied,
threatened against, relating to or involving or otherwise affecting Nationwide
or Allied or any of their respective Subsidiaries which relate to the execution
of this Agreement or the consummation of the transactions contemplated hereby.
Section 6.7 Notification of Certain Other Matters. Each party shall
-------------------------------------
promptly notify the other of any change or other event which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect,
including, but not limited to, any of the following:
(a) any written notice from or to any Person alleging that the consent of
such Person is or may be required in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby, and where
the failure to obtain such a consent would reasonably be expected to have a
Material Adverse Effect;
(b) any written notice from or to any Governmental Entity in connection
with this Agreement or the transactions contemplated hereby; and
(c) any matter hereafter arising or discovered which, if existing or known
at the date hereof, would have been required to be set forth or described in the
Nationwide Disclosure Letter or the Allied Disclosure Letter, as the case may
be; provided, however, that no such supplemental or amended disclosure by any
-------- -------
party shall be deemed to cure any breach of a representation or warranty made as
of the date hereof.
40
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In furtherance of the foregoing, to the fullest extent permitted under
applicable Law, each party shall provide the other with copies (or, to the
extent written materials are not involved, oral notice) of proposed notices,
applications or any other communications to any Governmental Entity or rating
agency in connection with this Agreement or the transactions contemplated
hereby, including, but not limited to, in respect of the Governmental Approvals,
in each case at least three (3) Business Days prior to dispatch of written
materials (or, to the extent written materials are not involved, prior to
initiation) and neither Nationwide nor Allied will dispatch (or, to the extent
written materials are not involved, initiate) such notice, application or
communication without the prior consent of the other party, which consent shall
not be unreasonably withheld or delayed.
Section 6.8 Indemnification; Directors' and Officers' Insurance. (a) In
---------------------------------------------------
the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation by or in
the right of Allied or any of its Subsidiaries, in which any of the present
officers or directors (the "Indemnified Parties") of Allied or any of its
Subsidiaries is, or is threatened to be, made a party by reason of the fact that
he or she is or was a director, officer, employee or agent of Allied or any of
its Subsidiaries, or is or was serving at the request of Allied or any of its
Subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether before or after
the Effective Time, the parties hereto agree to cooperate and use their
reasonable best efforts to defend against and respond thereto. It is understood
and agreed that Allied shall indemnify and hold harmless, and after the
Effective Time the Surviving Corporation and Nationwide, jointly and severally,
shall indemnify and hold harmless, as and to the full extent permitted by
applicable Law, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys, fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such claim, action, suit, proceeding or investigation, and in the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Indemnified Parties may retain one
-
counsel satisfactory to them unless there are conflicts under applicable
professional standards, and Allied, or the Surviving Corporation and Nationwide
after the Effective Time, shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are received
and (ii) Allied and the
--
41
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Surviving Corporation and Nationwide will use their respective reasonable best
efforts to assist in the vigorous defense of any such matter; provided, that
--------
neither Allied nor the Surviving Corporation nor Nationwide shall be liable for
any settlement effected without its prior written consent (which consent shall
not be unreasonably withheld); and provided further that the Surviving
-------- -------
Corporation and Nationwide shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and non-appealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 6.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Allied and, after the Effective
Time, the Surviving Corporation and Nationwide, thereof.
(b) Nationwide shall cause the Surviving Corporation to keep in effect in
its By-Laws a provision for a period of not less than six years from the
Effective Time (or, in the case of matters occurring prior to the Effective Time
which have not been resolved prior to the sixth anniversary of the Effective
Time, until such matters are finally resolved) which provides for
indemnification of the Indemnified Parties to the full extent permitted by
applicable law.
(c) Nationwide shall cause to be maintained in effect for not less than six
years from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by Allied (provided that Nationwide may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous) with respect to matters occurring
prior to the Effective Time; provided, however, that if the aggregate annual
-------- -------
premiums for such insurance at any time during such period shall exceed 200% of
the per annum rate of premium currently paid by Allied and its Subsidiaries for
such insurance on the date of this Agreement, then Nationwide shall cause Allied
(or the Surviving Corporation if after the Effective Time) to, and Allied (or
the Surviving Corporation if after the Effective Time) shall, provide the
maximum coverage that shall then be available at an annual premium equal to 200%
of such rate, and Nationwide, in addition to the indemnification provided above
in this Section 6.8, shall indemnify the Indemnified Parties for the balance of
such insurance coverage on the same terms and conditions as though Nationwide
were the insurer under those policies.
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Section 6.9 [Intentionally Omitted.]
Section 6.10 Acquisition Proposals. Allied will not, and will not permit
---------------------
or cause any of its Subsidiaries or any of the officers or directors of it or
its Subsidiaries to, and shall direct its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any purchase
of 20 percent or more of the assets or any equity securities of, Allied or any
Allied Subsidiaries (other than as set forth in Section 6.10 of the Allied
Disclosure Letter), or any other business combination (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"). Allied will
not, and will not permit or cause any of its Subsidiaries or any of the officers
and directors of it or its Subsidiaries to and shall direct its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, whether made before or after the
date of this Agreement, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that nothing contained in
-------- -------
this Agreement shall prevent Allied or its Board of Directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal or (ii) at any time prior to the payment for Common Shares pursuant to
the Offer (A) providing information in response to a request therefor by a
Person who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from the Person so requesting such information an
executed confidentiality agreement on customary terms; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such an Acquisition
Proposal to the shareholders of Allied, if and only to the extent that, (i) in
each such case referred to in clause (A), (B) or (C) above, the Board of
Directors of Allied determines in good faith after consultation with outside
legal counsel that such action is reasonably likely to be necessary in order for
its directors to comply with their respective fiduciary duties under applicable
law and (ii) in the case referred to in clause (C) above, the Board of Directors
of Allied determines in good faith (after consultation
43
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with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and interests of Allied and its shareholders. Allied will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Allied agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 6.10. Allied will notify Nationwide
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall keep Nationwide
informed, on a reasonably current basis, on the status and terms of any such
proposals or offers and the status of any such negotiations or discussions.
Section 6.11 Maintenance of Benefits. For a period of at least one year
-----------------------
following the Effective Time, Nationwide shall provide each employee or former
employee of Allied or any of its Subsidiaries with (i) the same basic
-
compensation (including base salary, wages or commissions) and annual incentive
opportunity, to the extent applicable, and (ii) benefits which, not individually
--
but in the aggregate, are substantially comparable, in each case to the
compensation and benefits that were provided to such employee or former employee
by Allied or any of its Subsidiaries (including, but not limited to any Allied
Benefit Plan) as of immediately prior to the Effective Time provided that the
foregoing items (i) and (ii) shall not be deemed to require Nationwide to offer
an employee stock ownership plan or other equity related arrangement. Nothing
in this Section shall require Nationwide to continue any such employee's
employment following the Effective Time, provided however that, in the event
---------------------
that any such employee is terminated involuntarily following the Effective Time
and prior to the first anniversary thereof by action of Nationwide or any of its
Subsidiaries, such Employee shall receive at least the same severance and
termination benefits as he or she would have received under the terms of the
applicable Allied Benefit Plan, as in effect immediately prior to the Effective
Time. From and after the Effective Time, for purposes of determining
eligibility, but
44
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not for purposes of benefit accrual under the Nationwide defined benefit plan,
and for purposes of determining entitlement to vacation, severance and other
benefits for employees under any compensation, severance, welfare, pension (but
not for purposes of benefit accrual), benefit, savings or other plan of
Nationwide or any of its Subsidiaries in which employees of Allied or any of its
Subsidiaries become eligible to participate, service with Allied or any of its
Subsidiaries shall be credited as if such service had been rendered to
Nationwide or such Nationwide Subsidiary provided that Nationwide may, in lieu
of providing retiree medical coverage under Nationwide's retiree medical plan,
cause Allied to continue to offer its retiree medical plan to its current and
former employees as currently in effect. For purposes of each outstanding Allied
short-term, mid-term, and long-term incentive award held by any Allied employee
that is based in whole or in part on the achievement of any performance or other
similar criteria, such award shall be adjusted, as determined in consultation
with Allied, to reflect factors that adversely impact the opportunity of such
Allied employee to achieve such performance or other criteria and which shall
include financial advisory, legal and other expenses incurred in connection with
the Offer and the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) the Offer shall have been successfully completed;
(b) if required by applicable Law, this Agreement and the Merger shall have
been approved and adopted by the vote of the shareholders of Allied at the
Shareholders Meeting called for such purpose; and
(c) no Order entered or Law promulgated or enacted by any Governmental
Entity shall be in effect which would prevent the consummation of the Merger or
any other material transactions completed hereby, and no Proceeding brought by a
Governmental Entity shall have
45
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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.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the Merger
-----------
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the shareholders of Nationwide or of Allied:
(a) by mutual consent of Nationwide and Allied;
(b) by Nationwide if the Board of Directors of Allied withdraws its
recommendation to the Allied shareholders to approve the Merger;
(c) by Nationwide or Allied if consummation of the Merger is barred by a
permanent injunction which is final and non-appealable;
(d) by Allied, if, prior to the purchase of Shares pursuant to the Offer,
there is an Acquisition Proposal which the Board of Directors determines
represents a more favorable transaction to Allied and its shareholders than the
transactions contemplated by this Agreement, and if the Board of Directors,
after consultation with outside counsel, shall have determined that failure to
terminate the Agreement is reasonably likely to be inconsistent with the
fiduciary duties of the Board of Directors under applicable Law and Allied has
given Nationwide three Business Days notice of the terms of such Acquisition
Proposal and has paid Nationwide the fee contemplated by Section 8.2(b);
(e) by Allied prior to the completion of the Offer, upon a material breach
of any representation or warranty of Nationwide or Nationwide's failure to
comply in any material respect with any of its covenants or agreements, or if
any representation or warranty of Nationwide or Sub shall be or become untrue in
any material respect, which breach or failure to comply or untruth is not
curable or, if curable, is not cured within 30 Business Days after written
46
<PAGE>
notice thereof has been given to Nationwide (materiality being construed in
light of the transactions contemplated by this Agreement);
(f) by Nationwide prior to the completion of the Offer, (i) upon a material
breach of any representation, or warranty of Allied or if any representation or
warranty of Allied shall be or become untrue in any material respect, (ii) or
Allied's failure to comply in any material respect with any of its covenants or
agreements, which breach or failure to comply or untruth is not curable or, if
curable, is not cured within 30 Business Days after written notice thereof has
been given to Allied, (materiality being construed in light of the transactions
contemplated by this Agreement); or
(g) by Nationwide or by Allied, if Common Shares shall not have been
purchased pursuant to the Offer by December 31, 1998, provided that the right to
terminate this Agreement pursuant to this clause (g) shall not be available to a
party whose failure to fulfill any obligation under this Agreement has been the
cause of the failure of such purchase to occur by such date.
Section 8.2 Effect of Termination. (a) In the event of the termination
---------------------
of this Agreement by either Nationwide or Allied, as provided above, this
Agreement shall thereafter become void provided, that the obligations of the
--------
parties pursuant to Section 6.5 shall survive any termination of this Agreement
and, except as provided in Section 8.2(b) and Section 9.2 hereof, there shall be
no Liability on the part of either party hereto against the other party hereto,
or on the part of its directors, officers, employees, shareholders or agents (or
those of any of the Allied Subsidiaries or Affiliates), except that any such
termination shall be without prejudice to the rights of either party hereto (or
any of the Allied Subsidiaries or Affiliates) arising out of the willful breach
by the other party (or any of the Allied Subsidiaries or Affiliates) of any
representation or warranty or any covenant or agreement contained in this
Agreement.
(b) In the event of termination of this Agreement (x) by Allied pursuant to
Section 8.1(d), (y) by Nationwide pursuant to Section 8.1(b) (other than if the
recommendation is withdrawn because the conditions to the consummation of the
Offer can not be fulfilled other than due to a breach by Allied) or (z)
following the making of an Acquisition Proposal by a third party, by Nationwide
pursuant to Section 8.1(f)(ii) or (g) or by Allied pursuant to Section 8.1(g)
47
<PAGE>
then Allied shall, immediately prior to any such termination (or, in the case of
(z), immediately following the execution of a definitive agreement implementing
any Acquisition Proposal, provided such execution occurs within one year of
termination), pay a termination fee in the amount of $30 million in immediately
available funds by wire transfer to a bank account designated by Nationwide. In
the event of termination of this Agreement by Nationwide pursuant to Section
8.1(f)(i) as a result of a willful breach of a representation or warranty,
Allied shall pay Nationwide $10,000,000 in immediately available funds by wire
transfer to a bank account designated by Nationwide.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations and Warranties. None of the
------------------------------------------
representations, warranties and agreements in this Agreement shall survive the
Effective Time except as otherwise provided in this Agreement and except for the
agreements contained in Article II and Section 6.8, which shall survive until
expressly provided therein or, if not so expressly provided, indefinitely.
Section 9.2 Fees and Expenses. Subject to Section 8.2(b) hereof, if the
-----------------
Merger is not consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses, except for expenses incurred in
connection with the printing, mailing and solicitation of proxies from
shareholders and all filing fees and related expenses which shall be borne
equally by Nationwide and Allied.
Section 9.3 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given, upon receipt, if
mailed by registered or certified mail, postage prepaid, return receipt
requested, overnight delivery, confirmed facsimile transmission or hand
delivery, as follows:
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<PAGE>
(i) If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President-Enterprise Controller
Facsimile No.: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler; Roger A. Craig
Facsimile No.: (614) 249-7254
(ii) If to Allied, to:
Allied Group, Inc.
701 Fifth Avenue
Des Moines, IA 50391-2000
Attention: Douglas L. Andersen
Facsimile No.: (515) 280-4399
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
Facsimile No.: (212) 909-6836
or to such other address as the Person to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.
Section 9.4 Amendments. This Agreement may be amended by the parties
----------
hereto at any time before or after the approval of this Agreement by the
shareholders of Allied, but after such approval no amendment or modification
shall be made which in any way materially adversely affects the rights of such
shareholders without the further approval of such shareholders. This Agreement
may not be amended, modified or supplemented except by written agreement of the
parties hereto.
Section 9.5 No Waiver. Nothing contained in this Agreement shall cause
---------
the failure of either party to insist upon strict compliance with any covenant,
obligation, condition or
49
<PAGE>
agreement contained herein to operate as a waiver of, or estoppel with respect
to, any such covenant, obligation, condition or agreement by the party entitled
to the benefit thereof.
Section 9.6 Brokers. Allied represents and warrants that no broker,
-------
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Allied, except for Allied's financial
advisor, Morgan Stanley & Co. Incorporated, whose fees shall be paid by Allied.
Nationwide represents and warrants that no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Nationwide, except for Nationwide's financial advisor, Credit Suisse
First Boston, whose fees shall be paid by Nationwide.
Section 9.7 Publicity. So long as this Agreement is in effect, each of
---------
the parties hereto (i) shall not, and shall cause its Affiliates not to, issue
or cause the publication of any press release or other announcement to any
Person with respect to this Agreement or the transactions contemplated hereby
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that nothing contained herein shall (A)
-------- -------
limit the right of each of the parties hereto and their Affiliates to make a
legally required filing or communication, provided that, to the extent possible,
--------
such party shall consult with the other party before making such filing or
communication, or responding to any communications initiated by any non-
affiliated Person, including, but not limited to, any rating agency or
Governmental Entity, (B) prohibit either party hereto (or its Affiliates) from
initiating communications with, and making presentations to, any rating agency
or Governmental Entity relating to the transactions contemplated hereby if such
party gives prior notice thereof to the other party hereto, or (C) prohibit
Nationwide or Allied or any of their respective Affiliates from communicating to
any third party information in any way relating to the Merger that has been made
known to the general public, other than in violation of this Agreement, prior to
the time of such communication, (ii) shall cooperate fully with the other party
hereto with respect to issuing or publishing any press release, or other
announcement or other written communication to any non-affiliated Person and
preparing written and oral communications to the employees and agents of each
party hereto with the purpose of effectuating the Merger in the best interests
of the
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respective shareholders of Nationwide and Allied and (iii) shall promptly notify
the other party of any announcements which are made to affiliated Persons and
any communications received from and responses provided to non-affiliated
Persons, in either case, with respect to this Agreement or the transactions
contemplated hereby.
Section 9.8 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.9 Nonassignability. This Agreement shall not be assigned by
----------------
either party hereto by operation of Law or otherwise without the prior written
consent of the other party hereto.
Section 9.10 Beneficiaries. This Agreement shall be binding upon and
-------------
inure solely to the benefit of the parties hereto and their permitted assigns,
and nothing in this Agreement, expressed or implied, is intended to confer upon
any other Person (including, but not limited to, any policyholder or employee of
Allied, Nationwide or their Subsidiaries) any rights or remedies of any nature
under or by reason of this Agreement, except as expressly provided in Sections
6.8 hereof.
Section 9.11 Duplicates; Counterparts. This Agreement shall be executed
------------------------
in duplicate and may be executed in counterparts each of which shall be deemed
to constitute an original and constitute one and the same instrument.
Section 9.12 Governing Law; Jurisdiction. This Agreement shall be
---------------------------
governed by and construed and enforced in accordance with the laws of the State
of Ohio (except to the extent that the Iowa Insurance Law and the Iowa
Corporation Law shall be held to govern the terms of the Merger) without regard
to its conflict of laws rules.
Section 9.13 Entire Agreement. This Agreement and the Confidentiality
----------------
Agreement constitute the entire agreement between the parties hereto and
supersede all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof and thereof.
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<PAGE>
Section 9.14 Severability. If any provisions hereof shall be held invalid
------------
or unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof; provided,
--------
however, that the parties shall use reasonable efforts, including, but not
- -------
limited to, the amendment of this Agreement, to ensure that this Agreement shall
reflect as closely as practicable the intent of the parties hereto.
Section 9.15 Specific Performance. Each of the parties hereto
--------------------
acknowledges and agrees that the other party hereto would be irreparably damaged
in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
each of the parties hereto agrees that they each shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions thereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which Nationwide or Allied may be entitled, at law or in equity.
Section 9.16 Survival of Certain Covenants. The provisions of Section 6.8
-----------------------------
and 6.11 hereof shall survive the Effective Time.
Section 9.17 Counting. If the date for any action to be taken under this
--------
Agreement (including, but not limited to, the delivery of notices) is not a
Business Day, then such action shall be considered timely taken if performed on
or prior to the next Business Day following such due date
ARTICLE X
DEFINITIONS
Section 10.1 Definitions. When used in this Agreement, the following
-----------
words or phrases have the following meanings:
"Acquisition Proposal" shall have the meaning set forth in Section 6.10
--------------------
hereof.
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"Affiliate" shall mean a Person that directly, or indirectly through one or
---------
more intermediaries, controls, is controlled by or is under common control with
another Person or beneficially owns or has the power to vote or direct the vote
of ten percent (10%) or more of the voting stock (or of any other form of
general partnership, limited partnership or voting equity interest in the case
of a Person that is not a corporation) of such other Person. For purposes of
this definition, "control", including the terms "controlling" and "controlled",
means the power to direct the management and policies of a Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee, partner or executor or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including all
---------
Exhibits.
"Allied" shall have the meaning set forth in the preamble to this
------
Agreement.
"Allied Contracts" shall have the meaning set forth in Section 4.16(a).
----------------
"Allied Disclosure Letter" shall mean the disclosure letter delivered by
------------------------
Allied to Nationwide, dated the date hereof.
"Allied Group" shall mean Allied and the Allied Subsidiaries.
------------
"Allied Insurer" shall mean Allied and each Allied Subsidiary that
--------------
transacts or is authorized to transact an insurance or reinsurance business.
"Allied Life" shall mean Allied Life Financial Corporation.
-----------
"Allied Mutual" shall have the meaning set forth in the preamble to this
-------------
Agreement.
"Allied Real Property" shall have the meaning set forth in Section 4.14(b)
--------------------
"Allied SAP Statements" shall have the meaning set forth in Section 4.6(iv)
---------------------
hereof.
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"Allied Subsidiary" or "Allied Subsidiaries" shall mean the Subsidiaries of
------------------------------------------
Allied that are "significant subsidiaries" within the meaning of Rule 1-02d of
Regulation S-X promulgated by the SEC. References in this Agreement to
Subsidiaries of Allied shall include all of the Allied Subsidiaries.
"Annual Statements" shall mean, with respect to any Person, the annual
-----------------
statements of such Person filed with or submitted to the insurance regulatory
body in the jurisdiction in which such Person is domiciled on forms prescribed
or permitted by such regulatory body.
"Arizona Insurance Law" shall mean Title 20 of the Arizona Revised
---------------------
Statutes, as amended, and the rules and regulations promulgated thereunder.
"Articles of Merger" shall mean the articles of merger in such form as
------------------
required by, and executed and acknowledged in accordance, with the IBCA.
"Benefit Plans" shall have the meaning set forth in Section 4.21 hereof.
-------------
"Business Day" shall means any day other than Saturday, Sunday or any other
------------
day in which commercial banks in Columbus, Ohio are required to or permitted to
be closed.
"CERCLIS" shall mean the Comprehensive Environmental Response,
-------
Compensation, and Liability Information System.
"Certificate of Merger" shall mean a certificate of merger in such form as
---------------------
required by, and executed and acknowledged in accordance with, Section 1701.81
of the Ohio General Corporation Law.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
-------
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
------------
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Commonly Controlled Entity" shall have the meaning set forth in Section
--------------------------
4.21(b) hereof.
"Common Shares" shall have the meaning set forth in the preamble to this
-------------
Agreement.
"Computer Software" shall mean any and all computer software consisting of
-----------------
sets of statements or instructions to be used, directly or indirectly, in a
computer, including, but not limited to, the following: (i) all source code,
object code and natural language code therefor and all component modules
thereof, (ii) all versions thereof, (iii) all screen displays and designs
thereof and (iv) all user, technical, training and other documentation relating
to any of the foregoing.
"Consent or Filing" shall have the meaning set forth in Section 4.5(b)
-----------------
hereof.
"Contract" or "Contracts" shall mean a contract, agreement, commitment,
-------- ---------
indenture, note, bond, mortgage, license, lease, assignment, arrangement or
understanding, whether written or oral.
"Dissenting Shares" shall have the meaning set forth in Section 2.9 hereof.
-----------------
"Effective Time" shall have the meaning set forth in Section 2.3 hereof.
--------------
"Environmental Claim" shall mean any investigation, notice of violation,
-------------------
demand, allegation, action, suit, injunction, judgment, order, consent decree,
penalty, fine, lien, proceeding, or claim (whether administrative, judicial or
private in nature) arising: (A) pursuant to, or in connection with, an actual
or alleged violation of any Environmental Law; (B) in connection with any
Hazardous Substances or actual or alleged activity associated with any Hazardous
Substances; (C) from any abatement, removal, remedial, corrective or other
response action in connection with any Hazardous Substances, Environmental Law
or other order or directive of any federal, state or local governmental
authority; or (D) from any actual or alleged
55
<PAGE>
damage, injury, threat or harm to health, safety, natural resources or the
environment. Environmental Claim shall not include claims for coverage by an
insured.
"Environmental Law" shall mean any local, state or federal statute, rule,
-----------------
regulation, order, code, directive or ordinance and any binding judicial or
administrative interpretation thereof or requirements thereunder pertaining to:
(A) the regulation and protection of health, safety and the indoor or outdoor
environment; (B) the conservation, management, development, control and/or use
of land (including zoning laws and ordinances), natural resources and wildlife;
(C) the protection or use of surface water and ground water; (D) the management,
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement, removal, remediation
or handling of, or exposure to, any Hazardous Substances; or (E) pollution
(including any release into air, land, surface water and ground water); and
includes without limitation the following federal statutes (and their
implementing regulations and the analogous state statutes and regulations): the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act; the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976,
as amended by the Hazardous and Solid Waste Amendments of 1984; the Federal
Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977.
"Environmental Permit" shall mean any permit, license, variance,
--------------------
certificate, consent, letter, clearance, closure, exemption, authorization,
decision or action or approval required to be obtained from any federal, state
or local governmental authority with jurisdiction over and pursuant to any
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the SEC promulgated thereunder.
"Existing Offer" shall have the meaning set forth in the preamble to this
--------------
Agreement.
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"GAAP" shall mean generally accepted accounting principles applied on a
----
consistent basis.
"Governmental Approvals" shall mean the Consents or Filings identified or
----------------------
described in the Allied Disclosure Letter or the Nationwide Disclosure Schedule.
"Governmental Entity" or "Governmental Entities" shall mean a court,
------------------- ---------------------
executive office, legislature, governmental agency, commission or
administrative, regulatory or self-regulatory authority or instrumentality,
domestic or foreign.
"Hazardous Substances" shall mean chemicals, products, compounds, by-
--------------------
products, pollutants, contaminants, hazardous wastes or toxic or hazardous
substances regulated under any Environmental Law, including, but not limited to,
asbestos or asbestos-containing materials, polychlorinated biphenyls, pesticides
and oils, petroleum and petroleum products.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended, and the rules and regulations promulgated thereunder.
"IBCA" shall mean the Iowa Business Corporation Act.
----
"Indemnified Parties" shall have the meaning set forth in Section 6.8
-------------------
hereof.
"Insurance License" shall mean a License granted by a Governmental Entity
-----------------
to transact an insurance or reinsurance business, issue fixed or variable
annuity contracts or products, or issue life insurance contracts.
"Intellectual Property" shall mean: trademarks, service marks, brand names,
---------------------
certification marks, trade dress, assumed names, trade names and other
indications of origin, good will associated with the foregoing and registrations
in any extension, modification or renewal of any such registration or
application; inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including but not limited to
divisions,
57
<PAGE>
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not in any jurisdiction, and any renewals
or extensions thereof; and any similar intellectual property or proprietary
rights; provided, that Intellectual Property shall include Computer Software.
"Investment Advisers Act" shall mean the Investment Advisers Act of 1940,
-----------------------
as amended, and the rules and regulations of the SEC promulgated thereunder.
"Investment Assets" shall mean bonds, notes, debentures, mortgage loans,
-----------------
collateral loans and all other instruments of indebtedness, stocks, partnership
or joint venture interests and all other equity interests (including, but not
limited to, equity interests in Subsidiaries or other Affiliates), real estate
and leasehold and other interests therein, certificates issued by or interests
in trusts, cash on hand and on deposit, personal property and interests therein
and all other assets acquired for investment purposes.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
----------------------
amended, and the rules and regulations of the SEC promulgated thereunder.
"Iowa Attorney General" shall mean the Attorney General of the State of
---------------------
Iowa.
"Iowa Commissioner" shall mean the Commissioner of Insurance of the State
-----------------
of Iowa.
"Iowa Corporation Law" shall mean Chapters 490 and 491 of the Iowa Code, as
--------------------
amended, and the rules and regulations promulgated thereunder.
"Iowa Insurance Law" shall mean Chapters 505 through 523I of the Iowa Code,
------------------
as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service or any successor agency.
---
58
<PAGE>
"Knowledge of Allied" shall mean the actual knowledge of the officers of
-------------------
Allied set forth in Section 10.1 of the Allied Disclosure Letter.
"Law" shall mean a law, statute, ordinance, rule or regulation enacted or
---
promulgated, or Order issued or rendered, by any Governmental Entity.
"Liability" shall mean a liability, obligation, claim or cause of action
---------
(of any kind or nature whatsoever, whether absolute, accrued, contingent or
other, and whether known or unknown), including, but not limited to, any
liability, obligation, claim or cause of action arising pursuant to or as a
result of an Insurance Contract or pursuant to any Environmental Claim.
"License" shall mean a license, certificate of authority, permit or other
-------
authorization to transact an activity or business, whether granted by a
Governmental Entity or by any other Person.
"Lien" shall mean a lien, mortgage, deed of trust, deed to secure debt,
----
pledge, assessment, security interest, lease, sublease, charge, claim, levy or
other encumbrance of any kind.
"Losses" shall mean all losses, claims, damages, costs, expenses,
------
liabilities and judgments, including, but not limited to, court costs and
attorneys' fees.
"Material Adverse Effect" shall mean any change in or effect on the
-----------------------
business, operations, or financial condition of Allied or any of its
Subsidiaries that is materially adverse to Allied and its Subsidiaries taken as
a whole except for (i) any change or effect resulting from general economic,
financial or market conditions, (ii) any change or effect resulting from
conditions or circumstances generally affecting the property and casualty
insurance industry, (iii) any change or effect resulting from the actions of
Allied Mutual or of Allied Life Financial Corporation ("Allied Life"), including
but not limited to the termination of any agreements between or among, Allied,
Allied Mutual and/or Allied Life and (iv) any change or effect resulting from
the announcement of the Offer or of this Agreement, including but not limited to
the termination by any agents of their affiliation with Allied.
59
<PAGE>
"Merger" shall have the meaning set forth in the preamble to this
------
Agreement.
"Merger Consideration" shall mean the amount of cash which holders of
--------------------
Common Shares shall have the right to receive in exchange for their Common
Shares as set forth in Section 2.7 hereof.
"Mutual Merger" shall have the meaning set forth in the preamble to this
-------------
Agreement.
"NAIC" shall mean the National Association of Insurance Commissioners.
----
"Nationwide" shall have the meaning set forth in the preamble to this
----------
Agreement.
"Nationwide Subsidiaries" shall mean the Subsidiaries of Nationwide.
-----------------------
"NPL" shall mean the National Priority List.
---
"Offer" shall have the meaning set forth in the preamble to this Agreement.
-----
"Offer Conditions" shall have the meaning set forth in Section 1.1(a).
----------------
"Offer Documents" shall have the meaning set forth in Section 1.1 (b)
---------------
thereof.
"Offer Price" shall have the meaning set forth in the preamble to this
-----------
Agreement.
"Ohio Insurance Law" shall mean Title 39 of the Ohio Revised Code, as
------------------
amended, and the rules and regulations promulgated thereunder.
"Ohio Superintendent" shall mean the Superintendent of Insurance of the
-------------------
State of Ohio.
"Order" shall mean an order, writ, ruling, judgment, directive, injunction
-----
or decree of any arbitrator or Governmental Entity.
60
<PAGE>
"Pension Plan" shall have the meaning set forth in Section 4.21(a) hereof.
------------
"Permitted Liens" shall mean, as to a party hereto, (a) those Liens set
---------------
forth in the Allied Disclosure Letter, or otherwise approved in writing by the
other party, (b) any Lien that is set forth in the public records or in title
reports or title insurance binders that have been made available to the other
party relating to any interest in the real property set forth in the Allied
Disclosure Letter, (c) Liens for water and sewer charges and current Taxes not
yet due and payable or being contested in good faith, (d) Liens arising from
securities lending activities undertaken in the ordinary course of business of a
Person, (e) other Liens (including, but not limited to, mechanic's, courier's,
worker's, repairer's, materialman's, warehouseman's and other similar Liens)
arising or incurred in the ordinary course of business as would not,
individually or in the aggregate, materially adversely affect the value of, or
materially adversely interfere with the use of, the property subject thereto or
otherwise reasonably be expected to have a Material Adverse Effect, and (f)
Liens arising or resulting from any action taken by the other party hereto or
any of its respective Subsidiaries (but not including the execution, delivery or
performance of this Agreement or the Merger).
"Person" shall mean an individual, corporation, partnership, association,
------
joint stock company, limited liability company, Governmental Entity, business
trust, unincorporated organization or other legal entity.
"Preferred Share" shall have the meaning set forth in the preamble to this
---------------
Agreement.
"Proceedings" shall mean civil, criminal or administrative actions, suits,
-----------
hearings, claims, investigations and other similar proceedings.
"Proxy Statement" shall have the meaning set forth in Section 4.5(b)
---------------
hereof.
"Quarterly Statements" shall mean, with respect to any Person, the
--------------------
quarterly statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
61
<PAGE>
"SAP" shall mean statutory accounting practices prescribed by the NAIC and
---
prescribed or permitted by the applicable insurance regulatory body applied on a
consistent basis.
"Schedule 14D-1" shall have the meaning set forth in Section 1.1(b) hereof.
--------------
"Schedule 14D-9" shall have the meaning set forth in Section 1.2(b) hereof.
--------------
"SEC" shall have the meaning set forth in Section 1.1(a) hereof.
---
"SEC Documents" shall have the meaning set forth in Section 4.9 hereof.
-------------
"Shareholder Agreement" shall have the meaning set forth in the preamble of
---------------------
this Agreement.
"Shareholders Meeting" shall mean a meeting set forth in Section 3.2
--------------------
hereof.
"Special Committee" shall have the meaning set forth in Section 4.4(c)
-----------------
hereof.
"Sub" shall have the meaning set forth in the preamble to this Agreement.
---
"Subsidiary" of a Person shall mean an Affiliate of such Person more than
----------
fifty percent of any class of voting stock (or of any other form of voting
equity interest in the case of a Person that is not a corporation) of which is
beneficially owned by the Person directly or indirectly through one or more
other Persons.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
---------------------
hereof.
"Tax or Taxes" shall mean all federal, state, local and foreign taxes, and
------------
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
62
<PAGE>
"Tax Return" shall mean all federal, state, local and foreign tax returns,
----------
declarations, statements, reports, schedules, forms and information returns and
any amendments to any of the foregoing relating to Taxes.
"Title IV Plan" shall have the meaning set forth in Section 4.21(b) hereof.
-------------
"Treasury Regulation" shall mean the regulations promulgated by the U.S.
-------------------
Department of the Treasury pursuant to the Code.
"Welfare Plan" shall have the meaning set forth in Section 4.19(a) hereof.
------------
[SIGNATURE PAGE TO FOLLOW]
63
<PAGE>
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 /s/ David A. Diamond
-----------------------------------
Name: David A. Diamond
Title: Vice President-Enterprise Controller
NATIONWIDE GROUP ACQUISITION
CORPORATION
By /s/ David A. Diamond
-----------------------------------
Name: David A. Diamond
Title: Vice President-Enterprise Controller
ALLIED GROUP, INC.
By /s/ Douglas L. Andersen
-----------------------------------
Name: Douglas L. Andersen
Title: President and Chief
Executive Officer
<PAGE>
Exhibit A
Conditions to the Offer. Notwithstanding any other provision of the
-----------------------
Offer, Sub shall not be required to accept for payment, or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered Common
Shares after the termination or withdrawal of the Offer), to pay for any Common
Shares not theretofore accepted for payment or paid for (i) unless (A) there are
- -
validly tendered and not properly withdrawn prior to the expiration of the Offer
that number of Common Shares which represent a majority of the Common Shares on
a fully-diluted basis (the "Minimum Condition"), and (B) all insurance
-
regulatory approvals necessary for Nationwide and Sub's acquisition of control
of Allied and its Subsidiaries are obtained on terms and conditions reasonably
satisfactory to Nationwide and such regulatory approval shall have become final
and non-appealable (the "Insurance Regulatory Condition") and any waiting period
applicable to the consummation of the Offer and the Merger under the HSR Act
shall have expired or been terminated, or (ii) if at any time on or after the
--
date of the Merger Agreement and at or before the time that the particular
Common Shares are accepted for payment (whether or not any other Common Shares
shall theretofore have been accepted for payment or paid for pursuant to the
Offer) any of the following conditions exists:
(a) there shall have occurred and be continuing (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, or (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving the United States which has a material adverse
effect on the general economic conditions in the United States;
A-1
<PAGE>
(b) any statute, rule, regulation, a temporary, preliminary or permanent
order or injunction shall be promulgated, enacted, entered, enforced or
deemed applicable to the Offer, the Merger or performance under this
Agreement, by any state, federal or foreign government or governmental
authority or court or governmental agency of competent jurisdiction that
(i) prohibits the consummation of the Offer or the Merger or (ii) imposes
material limitations on the ability of Sub effectively to exercise full
rights of ownership with respect to the Common Shares, including, without
limitation, the right to vote any Common Shares purchased by it on all
matters properly presented to the stockholders of Allied or to operate a
material portion of the business of Allied and its subsidiaries; provided
that the Nationwide and Sub shall have used their reasonable best efforts
to have any such decree, order or injunction vacated or reversed;
(c) Allied shall have entered into an agreement obligating Allied to
enter into an Acquisition Transaction with a person other than Nationwide,
Sub or an affiliate of either;
(d) (i) Allied shall have breached or failed to perform in any material
respect any of its material obligations, covenants or agreements under the
Agreement (materially being construed in light of the transactions
contemplated by the Merger Agreement), (ii) the representations and
warranties of Allied contained in the Agreement shall not be true and
correct as of the date of the Agreement or as of the scheduled or extended
expiration of the Offer, as if made as of such dates (provided that
representations and warranties made as of a specified date prior to the
date of the Agreement, need only be true as of such date), unless the
failure to be so true and correct (without regard to any materiality
qualifiers) would not, in the aggregate, be reasonably likely to have a
Material Adverse
A-2
<PAGE>
Effect or (iii) the representations and warranties of Allied contained in
Sections 4.2 or 4.4 shall not be true and correct in all material respects;
(e) the Allied Board shall have withdrawn its recommendation or modified
its recommendation in a manner adverse to Nationwide or Sub; or
(f) the failure to obtain any Governmental Approvals, which failure, in
the aggregate, would reasonably be expected to have a Material Adverse
Effect.
The foregoing conditions are for the sole benefit of Sub and may be
asserted by Sub regardless of the circumstances giving rise to any such
condition or may be waived by Sub in whole or in part at any time and from time
to time in its sole discretion (subject to the terms of the Merger Agreement).
The failure by Sub at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right, the waiver of any such right with respect
to particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
The capitalized terms used in this Exhibit A shall have the meanings set forth
in the Merger Agreement.
A-3
<PAGE>
EXHIBIT B
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of June 3, 1998, between Nationwide
Mutual Insurance Company, an Ohio mutual insurance company ("Nationwide"), and
Allied Mutual Insurance Company, an Iowa mutual insurance company (the
"Securityholder").
WHEREAS, Nationwide, Nationwide Group Acquisition Corporation, an Ohio
corporation and wholly-owned subsidiary of Nationwide ("Sub"), and Allied Group,
Inc., an Iowa corporation (the "Company"), propose to enter into an Agree ment
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 "Com mon Shares") and, following the consummation of the Offer, the merger
of Sub with the Company (the "Merger");
WHEREAS, the Securityholder is the record and beneficial owner of the
number of (i) Common Shares, and (ii) shares of 6 3/4% Series Preferred Stock,
no par value, of the Company and (collectively, the "Preferred Shares") set
forth on Schedule A hereto; such securities, as they may be adjusted by stock
dividend, stock split, recapitalization, combination or exchange of shares,
merger, consolidation, reorganization or other change or transaction of or by
the Company, together with securities that may be acquired after the date hereof
by the Securityholder, including Common Shares issuable upon the exercise of
options to purchase Common Shares (as the same may be adjusted as aforesaid),
being collectively referred to herein as the "Securities"; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Nationwide has requested that the Securityholder enter into this
Agreement (capitalized terms not otherwise defined herein shall have the
meanings set forth in the Merger Agreement);
NOW, THEREFORE, to induce Nationwide to enter into, and in
consideration of it entering into, the Merger Agreement, and in consideration of
the premises and the representations, warranties and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
<PAGE>
1. Tender of Common Shares. The Securityholder agrees to tender (or
-----------------------
cause the record owner thereof to tender), pursuant to and in accordance with
the terms of the Offer, and not to withdraw, all Securities which are Common
Shares. Stockholder hereby acknowledges and agrees that Nationwide's and Sub's
obligation to accept for payment and pay for Common Shares in the Offer,
including any Securities tendered by Securityholder, is subject to the terms and
conditions of the Offer. The parties agree that the Securityholder will, for
all Common Shares tendered by Securityholder in the Offer and accepted for
payment and paid for by Sub, receive the same per share consideration paid to
other shareholders who have tendered into the Offer.
2. Covenants of the Securityholder. The Securityholder agrees as
-------------------------------
follows:
(a) The Securityholder shall not, except as contemplated by the terms
of this Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of,
or enter into any Contract (as defined below), option or other arrangement
(including any profit sharing arrangement) or understanding with respect to the
sale, transfer, pledge, assignment or other disposition of, the Securities to
any person other than Nationwide or Nationwide's designee, or (ii enter into any
voting arrangement, whether by proxy, voting agreement, voting trust, power-of-
attorney or otherwise, with respect to the Securities.
(b) The Securityholder shall not, nor shall the Securityholder permit
any investment banker, financial adviser, attorney, accountant or other
representative or agent of the Securityholder to, directly or indirectly (i)
solicit, initiate or knowingly encourage (including by way of furnishing
information), or knowingly facilitate any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal or (ii participate in any discussions or negotiations
regarding any Acquisition Proposal.
(c) At any meeting of shareholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the Merger and the Merger Agreement is sought,
the Securityholder shall, including by initiating a written consent solicitation
if requested by Nationwide, vote (or cause to be voted) such Securityholder's
Securities in favor of the Merger, the adoption of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement. At any
meeting of shareholders
2
<PAGE>
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, "Alterna tive Transactions") or (ii any amendment of the
Company's Certificate of Incorpora tion or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify, the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement including any consent to the treatment of
any Securities in or in connection with such transaction (collectively,
"Frustrating Transactions").
3. Grant of Irrevocable Proxy Coupled with an Interest; Appoint ment
-----------------------------------------------------------------
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 Securi ties, at any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote, consent
or other approval is sought, (i) in favor of the Merger, the adoption by the
Company of the Merger Agreement and the approval of the other transactions
contemplated by the Merger Agreement, and (ii against any Alternative
Transaction or Frustrating Transaction.
(b) The Securityholder represents that any proxies heretofore given in
respect of the Securityholder's Securities are not irrevocable, and that any
such proxies are hereby revoked.
(c) THE SECURITYHOLDER HEREBY AFFIRMS THAT THE PROXY SET FORTH IN THIS
SECTION 3 IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE UNTIL SUCH TIME AS THIS
AGREEMENT TERMINATES IN ACCORDANCE WITH ITS TERMS. The Securityholder hereby
further affirms that the irrevocable proxy is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of the Securityholder under this Agreement.
3
<PAGE>
The Securityholder hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof.
4. Acquisition Proposals.
---------------------
(a) Notwithstanding anything to the contrary contained in this
Agreement, during any period of time that the Company is not prohibited by the
Merger Agreement from (A) providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal; (B) engaging in any negotiations or discussions with any Person who
has made an unsolicited bona fide written Acquisition Proposal; or (C)
recommending an Acquisi tion Proposal to the shareholders of the Company, the
Securityholder's obligations under Sections 1, 2 and 3 of this Agreement shall
be deemed inoperative.
(b) Notwithstanding anything to the contrary contained in this
Agreement, during any period of time that the Securityholder is not prohibited
by the Agreement and Plan of Merger, dated as of the date hereof, by and between
Securityholder and Nationwide (the "Allied Mutual Merger Agreement") from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending an Acquisition Proposal
to the policy holders of the Securityholder, the Securityholder's obligations
under Sections 1, 2 and 3 of this Agreement shall be deemed inoperative. For
purposes of this Section 4(b), "Acquisition Proposal" shall have the meaning
ascribed thereto in the Allied Mutual Merger Agreement.
5. Representations and Warranties of the Securityholder. The
----------------------------------------------------
Securityholder hereby represents and warrants to Nationwide as follows:
(a) Authority. The Securityholder has all requisite corporate power
---------
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Securityholder. This Agreement has been duly
executed and delivered by the Securityholder and, assuming this Agreement
constitutes a valid and binding obligation of Nationwide, constitutes a valid
and binding obligation of the Securityholder enforceable against the
Securityholder in accordance with its terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganzation,
4
<PAGE>
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. Except for the
informational filings with the Securities and Exchange Commission and except for
any state insurance department approvals or filings, neither the execution,
delivery or performance of this Agreement by the Securityholder nor the
consummation by the Securityholder of the transactions contemplated hereby will
(i) require any filing with, or permit, authorization, consent or approval
(collectively, "Governmental Approvals") of, any federal, state, local or
municipal foreign or other government or subdivision, branch, department or
agency thereof or any governmental or quasi-governmental authority of any
nature, including any court or other tribunal, (a "Governmental Entity"), except
where the failure to obtain any such Governmental Approvals would not be
reasonably likely to adversely affect the transactions contemplated hereby, (ii
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, or give rise to any right of
termination, amendment, cancellation or acceleration under, or result in the
creation of any lien upon any of the properties or assets of the Securityholder
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, permit, concession, franchise, contract, agreement or
other instrument or obligation (a "Contract") to which the Securityholder is a
party or by which the Securityholder or any of the Securityholder's properties
or assets, including the Securityholder's Securities, may be bound, except for
such violations, breaches, defaults, rights of termination, amendment,
cancellation and acceleration and liens which would not be reasonably likely to
adversely affect the transactions contemplated hereby or (ii 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 hereun der and the agreements made hereby. The
Securityholder owns of record or beneficially no securities of the Company, or
any options, warrants or rights exercisable for
5
<PAGE>
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
commis sion in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Securityholder.
(d) Merger Agreement. The Securityholder understands and acknowledges
----------------
that Nationwide is entering into the Merger Agreement in reliance upon the
Securityholder's execution and delivery of this Agreement.
6. Representations and Warranties of Nationwide. Nationwide hereby
--------------------------------------------
represents and warrants to the Securityholder as follows:
(a) Authority. Nationwide has the requisite corporate power and
---------
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Nationwide and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Nationwide. This Agreement has been duly executed and delivered
by Nationwide and, assuming this Agreement constitutes a valid and binding
obligation of the Securityholder, constitutes a valid and binding obligation of
Nationwide enforceable in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific perfor mance and injunctive relief
may be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(b) Securities Act. The Securities will be acquired in compliance
--------------
with, and Nationwide will not offer to sell or otherwise dispose of any
Securities so acquired by it in violation of any of, the Securities Exchange Act
of 1934, as amended, or the registration requirements of the Securities Act of
1933, as amended.
7. Further Assurances. Except as otherwise provided in Sections
------------------
4(a) and 4(b), the Securityholder will, from time to time, execute and deliver,
or cause to be executed and delivered, such additional or further transfers,
assignments, endorsements, consents and other instruments as Nationwide may
reasonably request
6
<PAGE>
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
contem plated by Section 3. Nationwide agrees to use its best efforts to take,
or cause to be taken, all actions necessary to comply promptly with all legal
requirements that may be imposed with respect to the transactions contemplated
by this Agreement.
8. Termination. This Agreement, and all rights and obligations of
-----------
the parties hereunder, shall terminate on the earlier of the termination of the
Merger Agreement in accordance with its terms and the termination of the Allied
Mutual Merger Agreement. Nothing in this Section 8 shall relieve any party from
liability for willful breach of this Agreement.
9. General Provisions.
------------------
(a) Assignment; Binding Effect. Neither this Agreement nor any of the
--------------------------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns.
(b) Amendments. This Agreement may not be amended except by an
----------
instrument in writing signed by each of the parties hereto.
(c) Notice. All notices, consents, requests, approvals, authoriza
------
tions and other communications (collectively, "Notices") required or permitted
to be given hereunder by one party to another shall only be effective if in
writing. All Notices shall be sent (i) by registered or certified mail (with
return receipt requested), postage prepaid, or (ii) by Federal Express, U.S.
Post Office Express Mail, Airborne or similar overnight courier which delivers,
if requested, only upon signed receipt of the addressee (with such signed
receipt being requested), or (iii) by facsimile transmission, and addressed or
transmitted as follows or at such other address or facsimile number, and to the
attention of such other person, as the parties shall give notice as herein
provided:
If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
7
<PAGE>
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President -- Enterprise
Controller
Facsimile: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler, Vice President and Associate
General Counsel
Roger A. Craig, Counsel
Facsimile: (614) 249-7254
and
if to the Securityholder, to:
Allied Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50391-2000
Attention: John E. Evans, Chairman of the Board
Douglas L. Andersen, President and Chief Executive
Officer
Facsimile No.: 515-280-4399
with copies to:
Nyemaster, Goode, Voigts, West, Hansell & O'Brien
A Professional Corporation
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309-3899
Attention: Mark C. Dickinson, Esq.
8
<PAGE>
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 recipi ent'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 ad dressee's location, such Notice shall
be deemed to be received by the recipient at 9:00 a.m. on the first Business Day
thereafter. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no Notice was given shall be deemed to be
receipt of the Notice as of the date of such rejection, refusal or inability to
deliver.
(d) Interpretation. When a reference is made in this Agreement to a
--------------
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Wherever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement. The plural of
any defined term shall have a meaning correlative to such defined term, and
words denoting any gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a corresponding
meaning. A reference to any party to this Agreement or any other agreement or
document shall include such party's successors and permitted assigns. A
reference to any legislation or to any provision of any legislation shall
include any modification or re-enactment thereof, any
9
<PAGE>
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
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
(h) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Iowa without regard to any conflicts or
choice of law provisions thereof or of any other jurisdiction.
(i) Enforcement. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States.
This being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
10
<PAGE>
IN WITNESS WHEREOF, each of Nationwide and Securityholder has caused
this Agreement to be signed by its officer thereunto duly authorized, as of the
date first written above.
NATIONWIDE MUTUAL INSURANCE COMPANY
By:
------------------------------------------
Name: Mark B. Koogler
Title: Vice President and Associate General Counsel
ALLIED MUTUAL INSURANCE
COMPANY
By:
------------------------------------------
Name: George T. Oleson
Title: Vice President and Corporate Counsel
11
<PAGE>
SCHEDULE A
Common Preferred
Name and Address Shares Shares Warrants Options
- --------------------------------- ------- --------- -------- -------
Allied Mutual Insurance Company 498,236 1,827,222 - -
12
<PAGE>
EXHIBIT 36
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NATIONWIDE MUTUAL INSURANCE COMPANY
AND
ALLIED MUTUAL INSURANCE COMPANY
DATED AS OF JUNE 3, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
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
</TABLE>
ii
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
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
</TABLE>
iii
<PAGE>
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
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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,
5
<PAGE>
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
<PAGE>
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.
7
<PAGE>
"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 gener ally 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 re sulting 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.
8
<PAGE>
"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.
9
<PAGE>
"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
10
<PAGE>
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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<PAGE>
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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<PAGE>
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.
13
<PAGE>
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.
14
<PAGE>
(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 inclu sion 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
15
<PAGE>
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.
16
<PAGE>
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
17
<PAGE>
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
18
<PAGE>
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,
22
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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
26
<PAGE>
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
27
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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 advi sor 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 agree ment 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 corpora tion 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 en forceable 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
44
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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 informa
tion 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 reor ganization 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 ap proval 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 pro viding 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 obli
gations 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
52
<PAGE>
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
53
<PAGE>
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 informa tion 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>
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
/s/ Mark B. Koogler
By------------------------------------------------
Name: Mark B. Koogler
Title: Vice President and Associate General Counsel
ALLIED MUTUAL INSURANCE COMPANY
/s/ Douglas L. Andersen
By------------------------------------------------
Name: Douglas L. Andersen
Title: President and Chief Executive Officer
<PAGE>
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>
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>
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>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
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
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
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
</TABLE>
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>
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>
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>
(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>
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>
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>
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>
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>
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>
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>
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
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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
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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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<PAGE>
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
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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
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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
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maintained or contributed to, or required to be maintained or contributed
to, by Allied and the Allied Subsidiaries for the benefit of any present or
former officers, employees, agents, directors or independent contractors of
Allied or the Allied Subsidiaries (all the foregoing being herein called
"Benefit Plans") has been administered in accordance with its terms and all
applicable laws and regulations. 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.
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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.
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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.
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Section 6.3 Reasonable Efforts.
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(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
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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.
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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.
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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.
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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
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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.
---
92
<PAGE>
"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
93
<PAGE>
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]
94
<PAGE>
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
/s/ David A. Diamond
By: _________________________________
Name: David A. Diamond
Title: Vice President-Enterprise
Controller
NATIONWIDE LIFE ACQUISITION CORPORATION
/s/ David A. Diamond
By: _________________________________
Name: David A. Diamond
Title: Vice President-Enterprise
Controller
ALLIED LIFE FINANCIAL
CORPORATION
/s/ Samuel J. Wells
By: _________________________________
Name: Samuel J. Wells
Title: President
95
<PAGE>
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>
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 not cured
would reasonably be expected to have a Material Adverse Effect and which is
not curable or, if
Exhibit A-2
<PAGE>
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>
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>
Exhibit B
Nationwide Life Acquisition Corporation Articles
of Incorporation and Code of By-laws
Exhibit B-1
<PAGE>
Exhibit C
Shareholder Agreement
Exhibit C-1
<PAGE>
EXHIBIT 39
NEWS FROM LOGO NATIONWIDE
INSURANCE
ONE NATIONWIDE PLAZA-COLUMBUS, OHIO 43215-2220
CONTACTS: For Nationwide Insurance For ALLIED Group
John C. Millen Media: Donna Smith
Nationwide Insurance (515) 280-4891
(614) 249-6348 Investors: Paul Curran
(515) 280-4644
Vince Duffy Joele Frank/Dan Katcher
Powell Tate Abernathy MacGregor Frank
(212) 521-5215 (212) 371-5999
NATIONWIDE AND ALLIED ENTER INTO
DEFINITIVE AGREEMENTS TO SELL ALLIED GROUP
TO NATIONWIDE AND TO
MERGE ALLIED MUTUAL INTO NATIONWIDE
Columbus, Ohio and Des Moines, Iowa, June 4, 1998 - Nationwide Mutual Insurance
Company and ALLIED Group, Inc. (NYSE:GRP) announced today that they have entered
into a definitive agreement providing for the acquisition of all of the shares
of ALLIED Group by Nationwide at a price of $48.25 per share. In connection with
the definitive agreement, the Board of Directors of ALLIED Group has recommended
acceptance of Nationwide's cash tender offer by the shareholders of ALLIED
Group. The transaction will have a total value of approximately $1.5 billion.
In addition, the ALLIED Mutual Insurance Company Board of Directors has entered
into a definitive agreement providing for the merger of ALLIED Mutual into
Nationwide Mutual Insurance Company. The agreement provides that ALLIED Mutual
policyholders' interests would be converted into rights as policyholders of
Nationwide, becoming part of a combined national company of unquestioned
financial strength with a broader range of
<PAGE>
products and services. ALLIED Mutual policyholders will also receive an
extraordinary dividend of $110 million in cash.
Nationwide will also pay $30 a share for the approximately 2.8 million shares of
ALLIED Life Financial Corporation that are publicly held.
The transaction, which will be financed from internal resources, will augment
one of the country's largest diversified insurance and financial services
organizations and a Fortune 500 company. The combined companies will rank as the
country's 4th largest auto insurer and 4th largest homeowners insurer.
Dimon R. McFerson, Nationwide's Chairman and Chief Executive Officer, said,
"Nationwide is extremely pleased to be partnering with ALLIED. This transaction
ensures continued strong growth for Nationwide and ALLIED.
"This new team will benefit from an expanded geographical reach that will
feature a strong, diversified distribution network of Nationwide career agents
and ALLIED's independent agents," McFerson said. "We look forward to working
with ALLIED's skilled management and capable employees. All have worked hard to
make ALLIED one of the premier performers in the property-casualty business in
recent years."
McFerson said that Douglas L. Andersen, President and Chief Executive Officer of
ALLIED Group, had agreed to continue in those roles and that Nationwide planned
no changes in ALLIED's management. "We consider the management team to be one of
the prime assets in this transaction", he said.
Mr. Andersen said, "In Nationwide we have found a partner with unparalleled
financial strength who is committed to all our constituencies. Employees and
agents will be part of a larger organization that is able to provide
policyholders of both ALLIED and Nationwide access to a broader range of
products and services than either company could provide on its own. We are
confident that this transaction will provide many new outlets for both
companies, create significant growth opportunities for employees and agents and
benefit the communities we serve. We look forward to a rapid completion of the
transaction and to working with Nationwide to ensure the smoothest transition
possible. And finally, we
<PAGE>
are extremely pleased that our stockholders, policyholders and employees will
receive outstanding value for their ALLIED investment."
ALLIED employees who are participants in the company's Employee Stock Ownership
Plan (ESOP) will benefit from a tripling of their stock account's value both as
a result of the Nationwide tender offer of $48.25 per share and an earnings
allocation of the unallocated portion of the ESOP after payment of the ESOP's
debt with the proceeds from the tender offer. Nationwide is fully vesting all
participants in the ALLIED ESOP.
McFerson underscored Nationwide's long-term commitment to Des Moines and the
cities where ALLIED has regional operations: Denver, Colorado, Lincoln, Nebraska
and Santa Rosa, California. "Our Farmland Insurance operation has been
headquartered in Des Moines since 1982 and we are pleased to be expanding our
involvement there. When we announced the tender offer, we pledged to maintain
the current level of employment of the ALLIED operations and our plan to add 400
new jobs in the Des Moines area during the next four years."
The dealer manager and financial advisor to Nationwide for the offers is Credit
Suisse First Boston. Georgeson & Company Inc. is the information agent. For more
information call 1-800-223-2064 or visit our web site at georgeson.com.
Nationwide's law firm for the transaction is Holleb & Coff of Chicago.
The offers for ALLIED Group and ALLIED Life are being made through wholly owned
subsidiaries of Nationwide.
ALLIED Group's financial advisor is Morgan Stanley & Co. Incorporated. ALLIED
Group is represented by the law firm of Debevoise & Plimpton.
The ALLIED Group and ALLIED Mutual merger are subject to insurance regulatory
approvals in Iowa Ohio, Arizona and any other states that may assert
jurisdiction, and all required clearances under the Hart-Scott-Rodino Antitrust
Improvements Act. The ALLIED Mutual merger is also subject to policyholders
approval for both ALLIED Mutual and Nationwide Mutual.
<PAGE>
[LOGO] Allied Group
June 4, 1998
Dear Stockholder:
I am pleased to report that on June 3, 1998, ALLIED Group, Inc. entered into
a merger agreement with Nationwide Mutual Insurance Company that provides for
the acquisition of the Company by Nationwide at a price of $48.25 per share.
Under the agreement, Nationwide is increasing the price of its tender offer
for all outstanding shares of common stock to $48.25 per share.
YOUR BOARD OF DIRECTORS, BASED ON A UNANIMOUS RECOMMENDATION OF THE
COMMITTEE OF DIRECTORS NOT AFFILIATED WITH ALLIED MUTUAL INSURANCE COMPANY OR
ALLIED LIFE FINANCIAL CORPORATION, HAS UNANIMOUSLY APPROVED THE NATIONWIDE
OFFER AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE
NATIONWIDE OFFER AND TENDER THEIR SHARES TO NATIONWIDE.
Following completion of the tender offer and approval, if required, by
ALLIED Group shareholders, a Nationwide subsidiary will be merged with the
Company, and all shares not already owned by Nationwide will be converted into
the right to receive $48.25 per share in cash in the merger.
In arriving at its recommendations, the Committee and the Board of Directors
gave careful consideration to a number of factors. These included the
increased price per share, the terms of the merger agreement, the elimination
and modification of certain conditions to the original Nationwide tender
offer, and the opinion of Morgan Stanley & Co. Incorporated, the Company's
financial advisor, that the consideration to be received by the stockholders
in the Nationwide offer and the merger, taken as a whole, is fair to the
Company's stockholders (other than Nationwide and its subsidiaries) from a
financial point of view.
Accompanying this letter is a copy of an amendment to the Company's Schedule
14D-9. We urge you to read carefully the enclosed materials, which contain
information about the terms and conditions of the Nationwide tender offer and
merger agreement.
On behalf of the Board of Directors,
Sincerely,
/s/ Douglas L. Andersen
Douglas L. Andersen
President and Chief Executive
Officer
