<PAGE> 1
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
CHECK THE APPROPRIATE BOX:
[X] PRELIMINARY INFORMATION STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14C-5(D)(2)).
[ ] DEFINITIVE INFORMATION STATEMENT
ALLIED GROUP, INC.
----------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] NO FEE REQUIRED
[X] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14C-5(G) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
COMMON STOCK, WITHOUT PAR VALUE
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
12,050,157 SHARES OF COMMON STOCK, WITHOUT PAR VALUE
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED PURSUANT TO
EXCHANGE ACT RULE 0- 11 (SET FORTH THE AMOUNT ON WHICH THE FILING FEE IS
CALCULATED AND STATE HOW IT WAS DETERMINED):
$48.25 PER SHARE
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
$581,420,075
(5) TOTAL FEE PAID:
$116,284
[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE
0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PREVIOUSLY
PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
<PAGE> 2
[LOGO OF ALLIED GROUP, INC.]
ALLIED GROUP, INC.
701 Fifth Ave., Dept. 2000
Des Moines, IA 50391-2000
October [ ], 1998
To Our Stockholders:
You are cordially invited to attend a special meeting (the "Special
Meeting") of the stockholders of ALLIED Group, Inc. (the "Company"), to be held
on October 30, 1998 at 10:00 a.m., local time, at the Company's offices,
located at 701 Fifth Avenue, Des Moines, Iowa 50391-2000.
At the Special Meeting, those of you who are holders of the Company's
Common Stock, without par value (the "Common Shares"), or the Company's 6-3/4%
Series Preferred Stock, without par value ("Preferred Shares," and together with
the Common Shares, the "Shares"), at the close of business on October 9, 1998
will be entitled to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of June 3, 1998 (the "Merger Agreement"),
among the Company, Nationwide Mutual Insurance Company, an Ohio mutual insurance
company ("Nationwide"), and Nationwide Group Acquisition Corporation, an Ohio
corporation and a wholly owned subsidiary of Nationwide ("Acquisition Sub").
Pursuant to the Merger Agreement, Acquisition Sub will be merged with and into
the Company (the "Merger"), with the Company surviving the Merger as a
subsidiary of Nationwide. In the Merger, each Common Share outstanding on the
effective date of the Merger (the "Effective Date") (other than Common Shares
held by stockholders who perfect their appraisal rights under Iowa law, Common
Shares held in the Company's treasury, and Common Shares held directly by
Acquisition Sub or Nationwide) will be converted into the right to receive
$48.25 per share in cash, without interest. The Preferred Shares will not be
converted into the right to receive cash as part of the Merger. Details of the
Merger and other important information are set forth in the enclosed Information
Statement, which you are urged to read carefully.
As previously communicated in Amendment No. 1 to the
Solicitation/Recommendation Statement on Schedule 14D-9, mailed to stockholders
in June of this year, your Board of Directors believes that the Merger is in the
best interests of the Company and its stockholders. In arriving at its decision
to recommend the Merger, the Board of Directors carefully reviewed and
considered the terms and conditions of the Merger Agreement and the factors
described in the enclosed Information Statement.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition of the Company by Nationwide. On May 19, 1998,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding Common Shares at a price of $47.00 per Common Share. On June 10,
1998, Acquisition Sub amended the Offer to increase the offering price to $48.25
per Common Share. After giving effect to shares acquired in the Offer, which
expired at 5:00 p.m. on September 30, 1998 (the "Expiration Date"), Nationwide
and Acquisition Sub together own approximately ___% of the outstanding Common
Shares. In addition, pursuant to the completion of the merger of ALLIED Mutual
Insurance Company ("ALLIED Mutual") with and into Nationwide on October 1, 1998,
Nationwide owns 100% of the Preferred Shares. As a result of the purchase by
Acquisition Sub of Common Shares in the Offer and the merger of ALLIED Mutual
with and into Nationwide, as of the Record Date, Nationwide and Acquisition Sub
own ___% of the outstanding Common Shares and 100% of the Preferred Shares,
representing approximately ___% of the voting power of all outstanding
securities of the Company.
Nationwide and Acquisition Sub have agreed to vote all Common Shares
acquired in the Offer in favor of the Merger. Approval of the Merger Agreement
requires the affirmative vote of the holders of a majority of the voting power
of the outstanding Common Shares and Preferred Shares, voting together as a
class. Accordingly, Nationwide and Acquisition Sub will have sufficient voting
power at the Special Meeting to approve the Merger Agreement without the vote of
any other stockholder of the Company.
2
<PAGE> 3
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
Sincerely,
DOUGLAS L. ANDERSEN
President and Chief Executive Officer
3
<PAGE> 4
ALLIED GROUP, INC.
701 FIFTH AVENUE
DES MOINES, IOWA 50391-2000
-----------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 30, 1998
-----------------------
Notice is hereby given that a special meeting (the "Special Meeting")
of stockholders of ALLIED Group, Inc. (the "Company") will be held on October
30, 1998 at 10:00 a.m., local time, at the Company's offices, located at 701
Fifth Avenue, Des Moines, Iowa 50391-2000, to consider and act upon the
following:
1. The approval of an Agreement and Plan of Merger, dated as of June
3, 1998 (the "Merger Agreement"), among the Company, Nationwide Mutual Insurance
Company, an Ohio mutual insurance company ("Nationwide"), and Nationwide Group
Acquisition Corporation, an Ohio corporation and a wholly owned subsidiary of
Nationwide ("Acquisition Sub"), pursuant to which Acquisition Sub will be merged
with and into the Company (the "Merger"), with the Company surviving the Merger
as a subsidiary of Nationwide. In the Merger, each share of the Company's common
stock, without par value ("Common Shares"), outstanding on the effective date of
the Merger (the "Effective Date") (other than Common Shares held by stockholders
who perfect their appraisal rights under Iowa law, Common Shares held in the
Company's treasury, and Common Shares held directly by Acquisition Sub or
Nationwide) will be converted into the right to receive $48.25 per share in
cash, without interest. Shares of the Company's 6-3/4% Series Preferred Stock,
without par value ("Preferred Shares"), will not, however, be converted into the
right to receive cash as part of the Merger. Details of the Merger and other
important information are set forth in the enclosed Information Statement, which
you are urged to read carefully.
2. The transaction of such other business as may properly come before
the Special Meeting and any adjournment thereof. The Company's Board of
Directors is not aware of, and does not intend to raise, any other matters to be
considered at the Special Meeting.
Reference is hereby made to the enclosed Information Statement for
more complete information concerning the matters to be acted upon at the Special
Meeting.
Only holders of record of Common Shares and/or Preferred Shares
(except as indicated below) at the close of business on October 9, 1998 (the
"Record Date") are entitled to vote at the Special Meeting on the approval and
adoption of the Merger Agreement, including the consummation of the transactions
contemplated thereby.
The Merger is the second step in a two-part transaction, the purpose
of which is the acquisition of the Company by Nationwide. On May 19, 1998,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding Common Shares at a price of $47.00 per Common Share. On June 10,
1998, Acquisition Sub amended the Offer to increase the offering price to $48.25
per Common Share. After giving effect to shares acquired in the Offer, which
expired at 5:00 p.m. on September 30, 1998 (the "Expiration Date"), Nationwide
and Acquisition Sub together own approximately ___% of the outstanding Common
Shares.
In addition, pursuant to the completion of the merger of ALLIED Mutual
Insurance Company ("ALLIED Mutual") with and into Nationwide on October 1, 1998,
Nationwide owns 100% of the Preferred Shares. As a result of the purchase by
Acquisition Sub of Common Shares in the Offer and the merger of ALLIED Mutual
with and into Nationwide, as of the Record Date, Nationwide and Acquisition Sub
own ___% of the outstanding Common Shares and 100% of the Preferred Shares,
representing approximately ___% of the voting power of all outstanding
securities of the Company.
Nationwide and Acquisition Sub have agreed to vote all Common Shares
acquired through the Offer in favor of the Merger. Approval of the Merger
Agreement requires the affirmative vote of the holders of a majority of the
voting power of the outstanding Common Shares and Preferred Shares, voting
4
<PAGE> 5
together as a class. Accordingly, Nationwide and Acquisition Sub will have
sufficient voting power at the Special Meeting to approve the Merger Agreement
without the vote of any other stockholder of the Company.
Pursuant to Section 490.1321 of the Iowa Business Corporation Act
(the "IBCA"), if the Merger Agreement is approved by the affirmative vote of the
holders of a majority of the voting power of the outstanding Common Shares and
Preferred Shares at the Special Meeting and the Merger is effected by the
Company, any stockholder (i) who files with the Company, before the taking of
the vote on the approval of the Merger Agreement, written objection to the
Merger stating that such stockholder intends to demand payment for such
stockholder's shares if the Merger is consummated, and (ii) in the case of
holders of Common Shares, whose shares are not voted in favor of the Merger
Agreement (including any holder of Common Shares who abstains, which abstention
will be treated as a "no" vote for purposes of determining whether the Merger
Agreement has been adopted or approved), may have the right to demand in writing
from the Company, within the time period specified in the notice from the
Company in writing to such stockholder that the Merger has become effective,
payment for such stockholder's shares and an appraisal of the value thereof. The
Company and any such stockholder shall in such cases have the rights and duties
and shall follow the procedures set forth in Sections 490.1301 to 490.1331,
inclusive, of the IBCA.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
By order of the Board of Directors
Sally J. Malloy
Secretary
October [ ], 1998
Des Moines, Iowa
5
<PAGE> 6
ALLIED GROUP, INC.
701 FIFTH AVENUE
DES MOINES, IOWA 50391-2000
-----------------------
INFORMATION STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 30, 1998
-----------------------
INTRODUCTION
This Information Statement is being furnished on behalf of the Board
of Directors (the "Board") of ALLIED Group, Inc., an Iowa corporation (the
"Company"), to holders as of the Record Date (as defined below) of common stock,
without par value ("Common Shares"), and 6-3/4% Series Preferred Stock, without
par value ("Preferred Shares"), of the Company, in connection with a special
meeting (the "Special Meeting") of stockholders of the Company to be held on
October 30, 1998 at the Company's offices, located at 701 Fifth Avenue, Des
Moines, Iowa 50391-2000, at 10:00 a.m., local time. The date on which this
Information Statement is first being mailed or given to stockholders is on or
about October 9, 1998.
At the Special Meeting, holders of Common Shares and Preferred Shares
will be entitled to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated as of June 3, 1998 (the "Merger Agreement")
among the Company, Nationwide Mutual Insurance Company, an Ohio mutual insurance
company ("Nationwide"), and Nationwide Group Acquisition Corporation, an Ohio
corporation and a wholly owned subsidiary of Nationwide ("Acquisition Sub").
Pursuant to the Merger Agreement, Acquisition Sub will be merged with and into
the Company (the "Merger"), with the Company surviving the Merger (the
"Surviving Company") as a subsidiary of Nationwide. In the Merger, each Common
Share outstanding on the effective date of the Merger (the "Effective Date")
(other than Common Shares held by stockholders who perfect their appraisal
rights under Iowa law, Common Shares held in the Company's treasury, and Common
Shares held directly by Acquisition Sub or Nationwide) will be converted into
the right to receive $48.25 per Common Share in cash, without interest (the
"Offer Price" or the "Merger Consideration"). The Preferred Shares will not be
converted into the right to receive cash as part of the Merger.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition of the Company by Nationwide. On May 19, 1998,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding Common Shares at a price of $47.00 per Common Share. On June 10,
1998, Acquisition Sub amended the Offer to increase the offering price to $48.25
per Common Share. After giving effect to shares acquired in the Offer, which
expired at 5:00 p.m. on September 30, 1998 (the "Expiration Date"), Nationwide
and Acquisition Sub together own approximately ___% of the outstanding Common
Shares.
In addition, pursuant to the completion of the merger of ALLIED Mutual
Insurance Company ("ALLIED Mutual") with and into Nationwide on October 1, 1998,
Nationwide owns 100% of the Preferred Shares. As a result of the purchase by
Acquisition Sub of Common Shares in the Offer and the merger of ALLIED Mutual
with and into Nationwide, as of the Record Date, Nationwide and Acquisition Sub
own ___% of the outstanding Common Shares and 100% of the Preferred Shares,
representing approximately ___% of the voting power of all outstanding
securities of the Company.
Nationwide and Acquisition Sub have agreed to vote all Common Shares
and all Preferred Shares owned by them in favor of the Merger. Approval of the
Merger Agreement requires the affirmative vote of the holders of a majority of
the voting power of the outstanding Common Shares and Preferred Shares, voting
together as a class. Accordingly, Nationwide and Acquisition Sub will have
sufficient voting power at the Special Meeting to approve the Merger Agreement
without the vote of any other stockholder of the Company.
6
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Only holders of record of Common Shares or Preferred Shares at the
close of business on October 9, 1998 (the "Record Date") are entitled to vote
at the Special Meeting on the approval and adoption of the Merger Agreement,
including the consummation of the transactions contemplated thereby.
No person has been authorized to give any information or to make any
representation other than those contained in this Information Statement in
connection with the matters to be acted upon at the Special Meeting and, if
given or made, such information or representation must not be relied upon as
having been authorized by the Company or any other person.
----------------
THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT HAS NOT BEEN
PASSED UPON BY THE SECURITIES AND EXCHANGE COMMISSION OR BY THE INSURANCE
DEPARTMENT OF ANY STATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
All information contained in this Information Statement with respect
to the Company has been supplied by the Company and all information with
respect to Nationwide and Acquisition Sub has been supplied by Nationwide.
The date of this Information Statement is October [ ], 1998.
7
TABLE OF CONTENTS
<TABLE>
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Page
SUMMARY......................................................................00
THE SPECIAL MEETING..........................................................00
Time, Date and Place of the Special Meeting.............................00
Matters to Be Considered at the Special Meeting.........................00
Voting and Record Date..................................................00
THE MERGER...................................................................00
The Company.............................................................00
Nationwide and Acquisition Sub..........................................00
Background and Reasons for the Merger...................................00
Reasons for the Board's Approval of the Merger Agreement................00
Opinion of Morgan Stanley & Co. Incorporated............................00
Interests of Certain Persons in the Merger..............................00
Certain Regulatory Matters..............................................00
Litigation..............................................................00
Accounting Treatment....................................................00
Certain United States Federal Income Tax Consequences...................00
Effect of the Merger on the Company's Stockholders......................00
Dissenting Stockholders' Rights.........................................00
THE MERGER AGREEMENT.........................................................00
The Offer...............................................................00
The Merger..............................................................00
Effective Time of the Merger............................................00
Exchange of Certificates and Payment of Merger Consideration............00
Dissenting Stockholders' Rights.........................................00
Representations and Warranties..........................................00
Covenants of the Company................................................00
Prohibition on Solicitation.............................................00
Stockholder Approval....................................................00
Access to Information...................................................00
Reasonable Best Efforts.................................................00
Certain Litigation......................................................00
Board of Directors; Corporate Governance................................00
Treatment of Stock Options; Certain Benefits;
Indemnification and Insurance......................................00
Conditions to the Merger................................................00
Termination of the Merger Agreement.....................................00
Fees and Expenses.......................................................00
Amendment...............................................................00
Shareholder Agreement...................................................00
Plans for the Company...................................................00
Going Private Transactions..............................................00
Dividends and Distributions.............................................00
CERTAIN INFORMATION WITH RESPECT TO THE COMPANY'S STOCK......................00
SELECTED CONSOLIDATED FINANCIAL DATA.........................................00
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............00
EXPERTS......................................................................00
OTHER MATTERS................................................................00
</TABLE>
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Annex I Agreement and Plan of Merger
Annex II Sections 490.1301 through 490.1331 of the Iowa Business Corporation Act
Annex III Opinion of Morgan Stanley & Co. Incorporated
</TABLE>
8
AVAILABLE INFORMATION
---------------------
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files with the Commission reports, proxy statements and
other information. Such reports, proxy statements and other information filed
with the Commission by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Suite 1300, Seven World Trade Center, New York, New York 10048, and Room 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago Illinois 60661. The
Commission maintains an Internet site on the World Wide Web containing reports,
proxy and information statements and other information filed electronically by
the Company with the Commission. The address of the World Wide Web site
maintained by the Commission is http://www.sec.gov. The Company's Common Stock
is listed on the New York Stock Exchange (the "NYSE") and such reports, proxy
statements and other information concerning the Company also are available for
inspection and copying at the offices of the NYSE, 20 Broad Street, New York,
New York 10005. Reports, proxy statements and other information concerning the
Company are available from the Company without charge, upon written or oral
request to Sally J. Malloy, Secretary, ALLIED Group, Inc., 701 Fifth Avenue, Des
Moines, Iowa 50391-2000, telephone (515) 280-4211.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
This Information Statement incorporates by reference documents relating to
the Company that are not presented herein or delivered herewith. Such documents,
excluding exhibits unless specifically incorporated therein, are available,
without charge to any person, including beneficial owners of Common Stock to
whom this Information Statement is delivered, upon written or oral request, to
Sally J. Malloy, Secretary, ALLIED Group, Inc., 701 Fifth Avenue, Des
Moines, Iowa 50391-2000, telephone (515) 280-4211. In
order to ensure timely delivery of the documents prior to the Special Meeting,
any request should be made by October 25, 1998.
The following documents filed with the Commission by the Company under the
Exchange Act are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
(b) The Company's Current Report on Form 8-K dated January 5, 1998.
(c) The Company's Current Report on Form 8-K dated January 15, 1998.
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
(e) The Company's Current Report on Form 8-K dated May 5, 1998.
(f) The Company's definitive Proxy Statement relating to its 1998 Annual
Meeting of Shareholders held on May 5, 1998.
(g) The Company's Solicitation/Recommendation statement on Schedule 14D-9
and the amendments thereto (the "Schedule 14D-9").
(h) The Company's Information Statement on Schedule 14F-1 (the
"Schedule 14F-1") dated June 12, 1998.
(i) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
Such incorporation by reference shall not be deemed to incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and until the date of the
Special Meeting shall be deemed to be incorporated by reference herein and made
a part hereof from the date any such document is filed. The information
relating to the Company contained in this Information Statement does not
purport to be complete and should be read together with the information in the
documents incorporated by reference herein. Any statement contained herein or
in a document incorporated herein by reference shall be deemed to be modified
or superseded for purposes hereof to the extent that a subsequent statement
contained herein or in any other subsequently filed document incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part hereof.
Any statements contained in this Information Statement involving matters
of opinion, whether or not expressly so stated, are intended as such and not as
representations of fact.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SHARES OF COMPANY COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS INFORMATION STATEMENT NOR ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO
SHALL IMPLY OR CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR IN THE INFORMATION SET FORTH HEREIN SUBSEQUENT TO THE
DATE HEREOF.
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in public filings and releases by the
Company, contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
premiums earned, investment income, property-casualty losses, market trends in
the insurance industry and various business trends. Forward-looking statements
may be made by management orally or in writing including, but not limited to,
the Management's Discussion and Analysis of Financial Condition and Results of
Operations section and other sections of the Company's filings with the
Commission under the Exchange Act and the Securities Act of 1933 (the
"Securities Act").
Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, changes in interest rates,
loss ratios, actuarial results, the Company's successful execution of internal
operating plans, changes in the market for the Company's products, regulatory
uncertainties and legal proceedings. Future results will also be dependent upon
the ability of the Company to continue to penetrate existing and new markets.
Many of these factors are described in greater detail in the Company's filings
with the Commission under the Exchange Act and the Securities Act referenced
herein under "Incorporation of Certain Documents by Reference".
<PAGE> 8
<PAGE> 9
SUMMARY
The following is a summary of certain information contained in this
Information Statement. This summary is not intended to be a complete statement
of all information, facts or materials relevant to the matters to be voted upon
at the Special Meeting and is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Information Statement, the
Annexes hereto and the documents referred to herein. Stockholders are urged to
read this Information Statement and the Annexes hereto in their entirety. All
references to the "Company" include the Company and its subsidiaries unless
otherwise indicated by the context.
THE SPECIAL MEETING
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Time, Date and Place of the
Special Meeting..................... The Special Meeting will be held at the Company's
offices, located at 701 Fifth Avenue, Des Moines, IA
50391-2000 on October 30, 1998, at 10:00 a.m., local time.
Matters To Be Considered at
The Special Meeting ................ The purpose of the Special Meeting is to consider and
vote upon a proposal to approve and adopt the Merger
Agreement, including the consummation of the transactions
contemplated thereby. See "THE MERGER" and "THE MERGER
AGREEMENT."
Record Date; Shares Entitled to
Vote ............................... Only holders of record of Common Shares or Preferred
Shares on October 9, 1998 are entitled to vote at the
Special Meeting on the approval and adoption of the
Merger Agreement, including the consummation of the
transactions contemplated thereby. See "THE SPECIAL
MEETING -- Voting and Record Date."
Required Vote....................... The affirmative vote of the holders of at least a
majority of the voting power of the Common Shares and
Preferred Shares outstanding on the Record Date, voting
together as a single class, are required to approve the
Merger Agreement. Abstentions shall be treated as "no"
votes for purposes of determining whether the Merger has
been approved. Nationwide and Acquisition Sub will have
sufficient voting power at the Special Meeting to approve
the Merger Agreement without the vote of any other stockholder
of the Company. See "THE SPECIAL MEETING -- Voting and Record
Date -- Approval of the Merger."
THE MERGER
The Company......................... The Company, an Iowa corporation, is primarily involved
in the business of selling property and casualty
insurance products through its subsidiaries. The address
of the Company's principal executive offices is 701 Fifth
Avenue, Des Moines, IA 50391-2000, and its telephone
number is (515) 280-4211. See "THE MERGER -- The
Company."
Nationwide and Acquisition Sub...... Nationwide, an Ohio mutual insurance company, is the lead
company in the Nationwide Insurance Enterprise, an
insurance and financial services organization. Together with its
affiliates, Nationwide comprises the sixth largest property and
casualty insurance group and the fourth largest automobile
insurance group in the United States.
</TABLE>
9
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Acquisition Sub, a wholly owned subsidiary of Nationwide, was
organized to acquire the Company and has not conducted any unrelated
activities since its organization. The address of the
principal executive offices of Nationwide and Acquisition Sub is
One Nationwide Plaza, Columbus, OH 43215, and their telephone number
is (614) 249-7111. See "THE MERGER -- Nationwide and
Acquisition Sub."
Background and Reasons for
The Merger......................... The Offer and Merger represent the culmination of a
series of negotiations between Nationwide and the Company
that began in January 1998 at Nationwide's initiative. See "THE
MERGER -- Background and Reasons for the Merger." Nationwide
intends to expand the Company's business and utilize the Company's
infrastructure and capabilities to improve the performance of
Nationwide's existing property/casualty operations. See "THE
MERGER AGREEMENT -- Plans for the Company."
Board of Directors Approval
Of the Merger Agreement............. The Board has determined that the terms of the Merger are
fair to and in the best interests of the Company and its
stockholders and has unanimously approved the Merger Agreement
and the consummation of the transactions contemplated thereby.
The Board's decision to enter into the Merger Agreement was based
upon its evaluation of a number of factors discussed in detail
below, including the opinion of the Company's financial
advisor. See "THE MERGER -- Background and Reasons for the
Merger," " -- Reasons for the Board's Approval of the Merger
Agreement" and " -- Opinion of Morgan Stanley."
Opinion of Financial Advisor........ Morgan Stanley & Co. Incorporated ("Morgan Stanley") has rendered a
written opinion dated June 3, 1998 to the Committee of Unaffiliated
Directors of the Board and the Board to the effect that, as of the
date of such opinion, and based upon and subject to the matters set
forth in its opinion, the consideration to be received by the
holders of the Company's Common Shares pursuant to the Offer and the
Merger, taken together, is fair from a financial point of view to
such holders (other than Nationwide and its affiliates). See "THE
MERGER -- Opinion of Morgan Stanley & Co. Incorporated." A copy of
such opinion, which sets forth the assumptions made, the procedures
followed, the matters considered and the limitations of Morgan
Stanley's review, is attached to this Information Statement as Annex
III and should be read carefully and in its entirety.
Interests of Certain Persons
In the Merger....................... Nationwide, as successor in interest to ALLIED Mutual, and
certain of the directors and officers of the Company occupy
roles or have interests with respect to affiliates of the Company
which could be potentially in conflict with their roles with
respect to the Company, and/or have interests different from or
potentially in conflict with the interests of Company stockholders.
Such potential conflicts derive from shared management and employees,
severance arrangements, participation in the Company's Employee
Stock Ownership Plan, entitlement to certain Company stock options,
entitlement to continued Company benefits, and protection through
indemnification and insurance. See "THE MERGER -- Interests of
Certain Persons in the Merger" and "THE MERGER AGREEMENT -- Treatment
of Stock Options; Certain Benefits; Indemnification and
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Insurance."
Certain Regulatory Matters.......... The Offer was subject to the requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder (the "HSR Act"),
which provided that the Offer could only be consummated
following the expiration of a 15-calendar day waiting
period following the filing by Nationwide of a
Notification and Report Form with respect to the Offer,
unless Nationwide had received a request for additional
information or unless early termination of the waiting
period was granted. Nationwide made such filing on May
19, 1998, and the waiting period expired on June 3, 1998.
Therefore, the Company does not believe that this or any
other material federal regulatory approvals are required
for consummation of the Merger. The Offer and Merger are
also subject to certain state regulatory approvals,
including the approvals of the insurance departments of
the respective states of domicile of the merging entities
and their subsidiaries. In its Findings of Fact and Conclusions
of Law dated September 11, 1998, the Iowa Commissioner of
Insurance approved Nationwide's acquisition of the Company.
The Arizona Director of Insurance issued an Order approving the
transaction on August 24, 1998. By letter dated July 20,
1998, the Ohio Department of Insurance approved Nationwide's
investment in the Company. To the extent other states may
require that notice be given to, or approval be obtained
from, the insurance department of such state, the Company
believes that the Merger can be effected in accordance
with applicable laws and that no material delay in
consummating the Merger will result therefrom. See "THE
MERGER -- Certain Regulatory Matters."
Accounting Treatment................ The Merger will be accounted for by Nationwide as a
purchase of the Company under statutory accounting
practices. See "THE MERGER -- Accounting Treatment."
Certain United States Federal Income
Tax Requirements.................... The receipt of cash by holders of Common Shares pursuant
to the Merger or upon the exercise of dissenters' rights
will be a taxable transaction for Federal income tax
purposes and may also be a taxable transaction under
applicable state, local, foreign or other tax laws. All
stockholders should consult their own tax advisors as to
the particular tax consequences of the Merger to them,
including the applicability and effect of the alternative
minimum tax and of any state, local and foreign tax laws.
See "THE MERGER -- Certain United States Federal Income
Tax Consequences."
Effect of the Merger on
The Company's Stockholders.......... As a result of the Merger, the entire equity interest in
the Company will be owned by Nationwide and the Company's
current stockholders will no longer have any equity
interest in the Company. See "THE MERGER -- Effect of
the Merger on the Company's Stockholders."
Dissenting Stockholders' Rights..... Stockholders who comply with Sections 490.1301 through
490.1331 of the Iowa Business Corporation Act ("IBCA")
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are entitled to appraisal rights. Failure to adhere
strictly to those statutory requirements may result in
the loss of appraisal rights. Holders of Common Shares
who exercise such rights will not be entitled to receive
the Merger Consideration (as defined herein), but may
demand payment for their Common Shares in writing.
Disagreements between the Company and dissenting
stockholders as to fair value will be resolved in a court
proceeding, as provided in the IBCA. See "THE MERGER --
Dissenting Stockholders' Rights," "THE MERGER AGREEMENT -
- Dissenting Stockholders' Rights" and Annex II to this
Information Statement.
THE MERGER AGREEMENT
The Merger.......................... Pursuant to the terms of the Merger Agreement, following
the satisfaction or waiver of the conditions to the
Merger (see "THE MERGER AGREEMENT -- Conditions to the
Merger"), Acquisition Sub will be merged with and into
the Company, and each then outstanding Common Share
(other than Common Shares held directly by stockholders
who perfect their appraisal rights under Iowa law, Common
Shares held in the Company's treasury and Common Shares
held by Nationwide or Acquisition Sub) will be converted
into the right to receive $48.25 per Common Share in
cash, without interest (the "Merger Consideration"). See
"THE MERGER AGREEMENT -- The Merger."
Effective Time of the Merger........ The Effective Time of the Merger will be 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. The
parties to the Merger Agreement agreed to use reasonable
best efforts to assure that the Effective Time occurs as
soon as practicable. See "THE MERGER AGREEMENT --
Effective Time of the Merger.
Exchange of Certificates And Payment
of Merger Consideration............. Pursuant to the Merger Agreement, Nationwide shall make
available on a timely basis to Chase Mellon (the
"Paying Agent") funds necessary to pay the Merger
Consideration to holders of Common Shares entitled
thereto. Payment of the Merger Consideration will be made by the
Paying Agent after it receives certificates representing Common
Shares and other required documents that will be furnished to
stockholders by the Paying Agent. See "THE MERGER AGREEMENT --
Exchange of Certificates and Payment of Merger Consideration."
Conditions to the Merger............ The consummation of the Merger is subject to the prior
approval of the Merger Agreement by the holders of Common
Shares and Preferred Shares and the satisfaction or
waiver of certain other customary closing conditions.
Acquisition Sub has sufficient voting power to approve
the
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Merger Agreement without the vote of any other
stockholder of the Company. See "THE MERGER AGREEMENT --
Conditions to the Merger."
Termination of the Merger Notwithstanding approval of the Merger Agreement and the
Agreement........................... transactions contemplated thereby by the stockholders of
the Company, the Merger Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time: (a) by
mutual consent of Nationwide and the Company; (b) by Nationwide
if the Company Board 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; or (d) by
Nationwide or the Company under certain circumstances involving
breaches or of defaults under the Merger Agreement). See "THE
MERGER AGREEMENT -- Termination of the Merger Agreement."
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 and expenses, except for costs of mailing and
solicitation of proxies and all filing fees and related
expenses which shall be borne equally by Nationwide and
the Company. The Company will pay a $30 million
termination fee if Nationwide terminates the Merger
Agreement (i) following a withdrawal by the Company Board
of its recommendation that the shareholders 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 being payable only upon the execution,
within one year of such termination, of a definitive
agreement implementing an Acquisition Proposal. In the
event of a termination by Nationwide for a willful breach
of a representation or warranty, the Company shall pay
Nationwide $10 million. See "THE MERGER AGREEMENT --
Fees and Expenses."
Stock Options....................... As of immediately prior to the Effective Time, each
option to acquire Common Shares, restricted stock award,
or stock appreciation right ("SAR") outstanding under any
of the Company's incentive plans and similar
arrangements, whether or not then exercisable or vested,
shall become fully exercisable and vested and the holder
thereof shall be entitled to receive consideration for each
option, award or right in respect of a Common Share in the
amount of (a) in the case of awards of restricted stock,
the Merger Consideration, (b) in the case of awards of
options, the excess of the Merger Consideration over the
exercise price of such option or (c) in the case of SARs,
the excess of the Merger Consideration over the grant
price of such SAR. See "THE MERGER
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AGREEMENT -- Treatment of Stock Options; Certain Benefits."
Market Prices of the The Common Shares are quoted on the New York Stock Exchange
Common Shares....................... ("NYSE") under the symbol GRP. The last reported sale price of
the Common Shares on June 3, 1998 (the last full trading day
prior to the public announcement of the execution of the Merger
Agreement) on the NYSE was $46 3/16 per Common Share and on
September 28, 1998 was $48 1/8 per Common share. See "CERTAIN
INFORMATION WITH RESPECT TO THE COMPANY'S STOCK."
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THE SPECIAL MEETING
TIME, DATE AND PLACE OF THE SPECIAL MEETING
This Information Statement is being furnished to the holders of
record on the Record Date of Common Shares and Preferred Shares in connection
with the Special Meeting to be held on October 30, 1998 at 10:00 a.m., local
time, at the Company's office, located at 701 Fifth Avenue, Des Moines, Iowa
50391-2000.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the holders of Common Shares and Preferred
Shares will be entitled to consider and vote upon a proposal to approve the
Merger Agreement, including the consummation of the transactions contemplated
thereby. In addition, the holders of Common Shares and Preferred Shares will be
entitled to consider and vote upon such other business as may properly come
before the meeting.
VOTING AND RECORD DATE
Approval of the Merger
The Board has fixed the close of business on October 9, 1998 as the
Record Date for the determination of stockholders entitled to notice of and to
vote at the Special Meeting. Accordingly, only holders of record of Common
Shares and/or Preferred Shares at the close of business on October 9, 1998 are
entitled to vote at the Special Meeting on the approval of the Merger Agreement.
As of the Record Date, there were ________ Common Shares and 1,827,222 Preferred
Shares issued and outstanding and entitled to vote on the approval of the Merger
Agreement.
Each holder of record of Common Shares on the Record Date is entitled
to cast one vote per share, exercisable in person or by a properly executed
proxy, with respect to the approval and adoption of the Merger Agreement. As of
the Record Date, the Common Shares were held by ________ stockholders of record.
Each holder of record of Preferred Shares on the Record Date is
entitled to cast 3.375 votes per share, exercisable in person or by properly
executed proxy, with respect to the approval and adoption of the Merger
Agreement. As of the Record Date, the only holder of Preferred Shares is
Nationwide. As of the Record Date, Nationwide held shares entitled to
____________ votes or approximately _____% of the outstanding voting power of
all outstanding securities of the Company. See "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding Shares entitled to vote is necessary to
constitute a quorum at the Special Meeting with respect to the proposal to
approve the Merger Agreement. Under the laws of the State of Iowa and the
Company's Articles of Incorporation, the affirmative votes of the holders of at
least a majority of all votes entitled to be cast by holders of Common Shares
and Preferred Shares issued and outstanding on the Record Date, voting together
as a single class, are required to approve the Merger Agreement. Nationwide and
Acquisition Sub will own Common Shares and Preferred Shares having sufficient
voting power at the Special Meeting to approve the Merger Agreement without the
vote of any other stockholder of the Company.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
The Board does not know of any matters, other than as described in
the Notice of Special Meeting attached to this Information Statement, which are
to come before the Special Meeting.
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<PAGE> 16
THE MERGER
THE COMPANY
The Company is an Iowa corporation with its principal executive
offices located at 701 Fifth Avenue, Des Moines, Iowa 50391-2000. Through its
subsidiaries, the Company provides property-casualty and excess and surplus
lines insurance products exclusively in the United States and primarily in the
central and western states. The Company's property-casualty subsidiaries and
Nationwide, as successor in interest to ALLIED Mutual, are parties to a
reinsurance pooling arrangement (the "ALLIED Pool"). Iowa and California
accounted for 21.4% and 23.7%, respectively, of the ALLIED Pool's 1997 direct
written premiums. The companies in the ALLIED Pool market their products through
three distributions systems: independent agents, exclusive agencies and direct
response.
The Company was originally chartered in the State of Iowa in 1970
and, since its initial public offering in 1985, has operated as a publicly
traded holding company. At December 31, 1997, the Company was the direct
employer of personnel for all subsidiaries of the Company and of ALLIED Mutual
and its subsidiaries other than ALLIED Life, employing approximately 2,700
persons.
NATIONWIDE AND ACQUISITION SUB
Acquisition Sub, an Ohio corporation and a wholly owned subsidiary of
Nationwide, was organized in 1998 to acquire the Company and has not conducted
any unrelated activities since its organization. All outstanding shares of
capital stock of Acquisition Sub are owned by Nationwide. The principal office
of Acquisition Sub is located at the principal executive offices of Nationwide.
Nationwide is an Ohio mutual insurance company with its principal
executive offices located at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is the controlling company of the Nationwide Insurance Enterprise, an
insurance and financial services organization (the "Enterprise"). In 1997,
Nationwide had $5.1 billion of net written premium. Nationwide is a party to the
Nationwide Intercompany Pooling Agreement (the "Nationwide Pooling Agreement")
with 12 other property and casualty insurance companies within the Enterprise
which provides that Nationwide shares in a specified percentage of the combined
underwriting results and dividends to policyholders incurred by such companies
(the "Nationwide Pool"). The insurance companies comprising the Nationwide Pool
were the sixth largest property and casualty insurance group and were the fourth
largest automobile insurance group in the United States, with approximately $8.4
billion in total net written premium at December 31, 1997 and approximately a
3.3% market share. The principal lines of business of the Nationwide Pool based
on net written premium for the year ended December 31, 1997 were personal auto
(approximately 53.9%), commercial operations (approximately 29.4%) and
homeowners (approximately 12.9%).
Nationwide was originally chartered in the State of Ohio in 1925 as
the Farm Bureau Mutual Automobile Insurance Company and it adopted its present
name in 1955. At December 31, 1997, the Enterprise employed approximately 28,000
employees and Nationwide had more than 4,300 exclusive career agents who market
the Enterprise's core property and casualty products, individual life insurance
and annuity products, as well as other financial services.
BACKGROUND AND REASONS FOR THE MERGER
The Offer and Merger represent the culmination of a series of
negotiations between Nationwide and the Company that began in January 1998 at
Nationwide's initiative. On January 26, 1998, John E. Evans, Chairman of the
Company, received a telephone call from Dimon R. McFerson, Chairman and Chief
Executive Officer of the Nationwide Insurance Enterprise. In the call, Mr.
McFerson expressed Nationwide's interest in a possible transaction with the
Company, ALLIED Mutual Insurance Company ("ALLIED Mutual") and ALLIED Life
Financial Corporation ("ALLIED Life," collectively with the Company and ALLIED
Mutual, "ALLIED").
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<PAGE> 17
On January 28, 1998, at the request of Mr. McFerson, Mr. Evans,
Douglas L. Andersen, President and Chief Executive Officer of the Company, and
other representatives of the Company met with representatives of Nationwide to
discuss Nationwide's interest in acquiring each of the Company, ALLIED Mutual
and ALLIED Life. After the January 28, 1998 meeting, Nationwide provided a draft
confidentiality agreement to Mr. Andersen which did not include customary
standstill provisions.
On February 6, 1998, Mr. McFerson and Mr. Andersen engaged in further
discussions by telephone regarding Nationwide's interest in acquiring the
Company, ALLIED Mutual and ALLIED Life. Mr. McFerson requested that the Company,
ALLIED Mutual and ALLIED Life agree to deal exclusively with Nationwide. Mr.
Andersen informed Mr. McFerson that the ALLIED companies would not agree to deal
exclusively with Nationwide, expressed concerns about the absence of an
acceptable confidentiality agreement and other elements of Nationwide's proposal
and stated that Nationwide's proposal could not be considered formally until it
was received in writing by the Company, ALLIED Mutual and ALLIED Life. On
February 10, 1998, the Company provided to Nationwide its own form of
confidentiality agreement, executed by the Company, which included a customary
standstill provision.
Also, on February 10, 1998, Nationwide sent draft merger agreements
to the Company, which provided for a transaction whereby Nationwide's
wholly owned subsidiaries would acquire the Company and ALLIED Life and
Nationwide would merge with ALLIED Mutual. The draft merger agreements provided
for the purchase of the Common Shares for $47 per Share and the purchase of all
outstanding shares of ALLIED Life for $30 per share, subject to various
conditions, including that the acquisitions of all three ALLIED companies close
simultaneously. The draft merger agreements with ALLIED Mutual provided for no
distribution to ALLIED Mutual's policyholders. Each of the merger agreements
included provisions requiring payment to Nationwide of termination fees,
totaling $75 million in the aggregate, plus expenses of Nationwide in the event
of the termination of the merger agreements under certain circumstances.
On February 17, 1998, at a joint meeting of the Boards of Directors
of the Company, ALLIED Mutual and ALLIED Life, Nationwide's proposal and
proposed merger agreements were discussed. Following the joint Boards meeting, a
special meeting of the Company Board was convened. At that meeting it was noted
that Nationwide's proposal was contingent on the consummation of transactions
with all three ALLIED companies. The Board discussed the potential difficulty in
obtaining approval from ALLIED Mutual policyholders and ALLIED Life
shareholders, that the Company's employees and independent agents could perceive
the proposal and change in control unfavorably and that the Company could suffer
loss of business and disruption of its employee force. The Board noted that
Nationwide's proposal included an exclusivity provision which restricted the
Company from soliciting proposals from third parties and which limited the
Board's ability to accept a superior offer from a third party for a period of
180 days. The Board also noted that Nationwide had declined to sign a
confidentiality agreement with a standstill provision that would prevent it from
making a hostile bid for a specified period of time after it had reviewed
confidential documents of the Company. The Board discussed the various
regulatory approvals required before the acquisition could be approved and the
uncertainty of obtaining those approvals. Finally, the Board noted that the
substantial termination fees proposed by Nationwide presented additional risk to
the Company. The Board determined that the proposal was not in the best
interests of the Company and its shareholders and unanimously (with one member
absent) determined that the proposal should be rejected.
On February 19, 1998, at a special joint meeting of the Executive
Committees of the Company, ALLIED Mutual and ALLIED Life, Mr. Andersen was
authorized to advise Mr. McFerson that Nationwide's proposal had been rejected.
On February 19, 1998, Nationwide sent to the Company a form of
confidentiality agreement, signed on behalf of Nationwide and Acquisition Sub,
which again did not contain the standstill provision and certain other items
that the Company had proposed.
On February 20, 1998, Mr. Andersen informed Mr. McFerson via
telephone that the respective Boards of Directors of the ALLIED companies had
rejected Nationwide's proposal as presented.
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Later on February 20, 1998, Nationwide sent to the Company a letter
indicating that Nationwide was withdrawing the executed confidentiality
agreement that it had sent to the Company on February 19, 1998.
On May 4, 1998, Mr. McFerson telephoned Mr. Evans to express that
Nationwide wished to re-initiate contact with ALLIED. Mr. Evans indicated that
Nationwide should speak with Mr. Andersen, but requested that Nationwide delay
contacting Mr. Andersen for 30 days.
On May 18, 1998, Mr. McFerson made an unannounced visit to the
Company's Des Moines, Iowa offices and asked to see Mr. Andersen. However, Mr.
Andersen and other executive officers of the Company were out of the country.
Members of the Company's legal department met with Mr. McFerson, who stated that
the purpose of his visit was to announce a tender offer for all the Common
Shares. Mr. McFerson delivered three letters, addressed to ALLIED Mutual and the
Company, which letters were also publicly released by Nationwide, communicating
the substance of the Offer.
Also, on May 18, 1998, Nationwide and Acquisition Sub filed a
complaint against the Company and its directors in the United States District
Court for the Southern District of Iowa seeking, among other things, an order
compelling the Board to approve the Offer and the proposed Merger for purposes
of Section 490.1110 (the "Business Combination Statute," of the Iowa Business
Corporation Act (the "Iowa Corporation Act")).
Later on May 18, 1998, the Company issued a press release stating
that the Board would review the Offer and requesting shareholders not to tender
their Common Shares until they have been advised of the Board's position with
respect to the Offer.
On May 19, 1998, the Directors of the Company convened by conference
call to discuss the Offer. At the recommendation of the Unaffiliated Directors,
the Directors authorized the retention of Morgan Stanley & Co. Incorporated
("Morgan Stanley") as the Company's financial advisor concerning the Offer or
any other acquisition transaction.
Also on May 19, Nationwide delivered two letters to the Company
requesting that the Company provide Nationwide with a list of the Company's
shareholders. The Company delivered letters to Nationwide, dated May 21, 1998
and May 22, 1998, advising Nationwide that, as permitted by law, the Company was
electing to deliver the Bidder's tender offer materials to the Company's
shareholders rather than provide Nationwide with a shareholder list.
On May 22, 1998, the Company's Board received a letter from
Nationwide stating that Nationwide intended to file a proxy statement that
proposed to call a special meeting of shareholders of the Company for the
purpose of removing the members of the Board and electing new directors who
support the Offer.
On May 27, 1998, the Board met with management and the Company's
financial and legal advisors. The Board authorized a committee (the "Committee")
of the Unaffiliated Directors of the Company to conduct or supervise
negotiations, if any, with Nationwide or with any other party, on behalf of the
Company; to make recommendations to the Board as to any proposed transaction; to
consult with ALLIED Mutual and ALLIED Life and their financial advisors; and to
give instructions to Morgan Stanley. Following the meeting of the Board, the
Committee met with the Company's financial and legal advisors to discuss the
Offer and the Company's response. The Committee authorized Morgan Stanley to
contact Nationwide's financial advisor, who had expressed an interest in
meeting, to discuss the possibility of a mutually acceptable negotiated
transaction.
On May 28, 1998, the Company, Nationwide and Acquisition Sub entered
into an agreement as to the confidentiality of settlement discussions on or
before June 2, 1998 regarding the litigation filed by Nationwide. Beginning on
May 28, 1998, representatives of Morgan Stanley (consulting with and under the
supervision of the Committee) and representatives of Nationwide's financial
advisor met on several occasions to discuss the terms of the Offer and whether a
negotiated transaction could be achieved.
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On June 1, Nationwide stated that it was prepared to increase the per
share price of its Offer to $48.25 as part of a negotiated merger agreement, and
also to reduce the amount of the termination fee that would be payable under
certain circumstances pursuant to Nationwide's proposed merger agreement. On
June 1, as directed by the Board of Directors on the unanimous recommendation of
the Committee, Morgan Stanley informed Nationwide that the Board determined that
it was prepared in principle to recommend a transaction at that price and with
the revised termination fee provisions, subject to negotiation of an acceptable
transaction agreement.
On June 2 and June 3, 1998, representatives of Nationwide and the
Company, together with their legal counsel and financial advisors, held meetings
with respect to the negotiation of a definitive agreement.
On June 3, 1998, Nationwide, Acquisition Sub and the Company entered
into the Merger Agreement. Pursuant to the Merger Agreement, as soon as
practicable following the consummation of the Offer and the satisfaction or
waiver of certain conditions, Acquisition 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 Common Share
outstanding at the effective time of the Merger (other than Common Shares owned
by Nationwide or Acquisition Sub, shares held as treasury shares by the Company
and Dissenting 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 Common Share, net to the seller in cash, without
interest thereon (the "Merger Consideration"), upon surrender of the certificate
formerly representing such Common Shares (a "Certificate").
Also on June 3, 1998, Nationwide, Nationwide Life Acquisition
Corporation (a wholly-owned subsidiary of Nationwide) and ALLIED Life entered
into an Agreement and Plan of Merger (which was subsequently amended on August
31, 1998), providing for the merger of Nationwide Life Acquisition Corporation
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 Nationwide, as
successor-in-interest to ALLIED Mutual and holders exercising dissenters' rights
of appraisal) will receive $30 per share in cash without interest.
REASONS FOR THE BOARD'S APPROVAL OF THE MERGER AGREEMENT
The Board of Directors of the Company, acting on the unanimous
recommendation of the Committee, 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 recommended that all
shareholders of the Company accept the Offer, tender their Common Shares
pursuant to the Offer and, if required, vote in favor of the Merger.
In reaching its conclusions described above, the Committee and the
Board 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 Common 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 Common Shares;
(iii) the oral opinion of Morgan Stanley, confirmed in writing, that the
consideration to be received by the holders of the Company's Common Shares
pursuant to the Offer and the Merger, taken together, is fair from a financial
point of view to such holders (other than Nationwide and its affiliates) from a
financial point of view. A copy of Morgan Stanley's written opinion is attached
to this Information Statement as Annex III and is incorporated herein by
reference. Such opinion should be read carefully and 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;
(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;
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<PAGE> 20
(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 Common 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, 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 of the Merger Agreement" under the description
of the Merger Agreement below.
OPINION OF MORGAN STANLEY & CO. INCORPORATED
In its role as financial advisor to the Company, Morgan Stanley was
asked by the Company to render its opinion to the Board as to the fairness, from
a financial point of view, of the consideration to be received by the holders of
the Common Shares (other than Nationwide and its affiliates) in the Offer and
the Merger, taken together. At the meeting of the Board held on June 3, 1998,
Morgan Stanley delivered its opinion orally to the effect that, based upon and
subject to the assumptions, limitations and qualifications set forth in such
opinion, as of such date, the consideration to be received by the holders of the
Company's Common Shares in the Offer and the Merger, taken together, was fair
from a financial point of view to such holders (other than Nationwide and its
affiliates). Such opinion was later confirmed in writing as of such date.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY, DATED JUNE 3,
1998, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, THE
PROCEDURES FOLLOWED, THE MATTERS CONSIDERED AND THE LIMITATIONS OF THE REVIEW
UNDERTAKEN BY MORGAN STANLEY IN CONNECTION WITH SUCH OPINION, IS ATTACHED HERETO
AS ANNEX III TO THIS INFORMATION STATEMENT AND IS INCORPORATED HEREIN BY
REFERENCE. STOCKHOLDERS OF THE COMPANY ARE URGED TO, AND SHOULD, READ SUCH
OPINION CAREFULLY AND IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF MORGAN
STANLEY SET FORTH IN THIS INFORMATION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
No limitations were imposed by the Company on the scope of Morgan
Stanley's investigation or the procedures to be followed by Morgan Stanley in
rendering its opinion. In arriving at its opinion, Morgan Stanley did not
ascribe a specific value to the Company, but rather made its determination as to
the fairness, from a financial point of view, of the consideration to be offered
to holders of Common Shares in the Offer and the Merger, taken together. In
arriving at its opinion, Morgan Stanley performed a variety of financial and
comparative analyses and considered the results of all of its analyses as a
whole without attributing any particular weight to any analysis or factor
considered by it. Morgan Stanley's opinion is for the use and benefit of the
Board and was rendered to the Board in connection with its consideration of the
Offer and the Merger. Morgan Stanley's opinion is not intended to be and does
not constitute a recommendation to any stockholder of the Company as to whether
to accept the consideration offered to such stockholders in connection with the
Offer and the Merger. Morgan Stanley was not requested to opine as to, and its
opinion does not address, the Company's underlying business decision to proceed
with or effect the Offer and the Merger.
In arriving at its opinion, Morgan Stanley, among other things (i)
reviewed certain publicly available financial statements and other business and
financial information of the Company; (ii) reviewed certain internal financial
statements and other financial and operating data concerning the Company
prepared by the management of the Company; (iii) reviewed certain financial
forecasts prepared by the management of the Company; (iv) discussed the past and
current operations and financial condition and the prospects of the Company with
senior executives of the Company; (v) reviewed the reported prices and trading
activity for the Company Common Shares; (vi) compared the financial performance
of the Company and the prices and trading activity of the Company Common Shares
with that of certain other comparable publicly traded companies and their
securities; (vii) reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions deemed relevant; (viii)
participated in discussions and negotiations among
21
<PAGE> 21
representatives of the Company and Nationwide and their financial and legal
advisors; (ix) reviewed the Merger Agreement and certain related documents; and
(x) performed such other analyses and reviewed such other factors as it deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon
without independent verification the accuracy and completeness of the
information reviewed by it for the purposes of its opinion. With respect to the
financial forecasts, Morgan Stanley assumed that they had been reasonably
prepared on bases reflecting the best then currently available estimates and
judgments of the future financial performance of the Company. Morgan Stanley did
not make any independent valuation or appraisal of the assets or liabilities of
the Company, nor was it furnished with any such appraisals. Morgan Stanley also
assumed that the Offer and the Merger would be consummated on the terms set
forth in the Merger Agreement. Morgan Stanley's opinion was necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to it as of, the date of such opinion.
Morgan Stanley is an internationally recognized investment banking
firm and, as a part of its investment banking activities, is regularly engaged
in, among other things, the valuation of businesses and their securities in
connection with mergers and acquisitions. The Board selected Morgan Stanley
because of its expertise and reputation and because its investment banking
professionals have substantial experience in transactions comparable to the
Offer and Merger.
Morgan Stanley has acted as financial advisor to the Committee and
the Board in connection with this transaction and will receive a fee for its
services equal to $6 million. In addition, the Company has agreed to reimburse
Morgan Stanley for certain expenses incurred in connection with its services as
financial advisor and to indemnify Morgan Stanley for certain liabilities that
may arise out of its engagement. In the past, Morgan Stanley and its affiliates
have provided financial advisory and financing services for Nationwide and have
received fees for such services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stockholders should be aware that the executive officers and
directors of the Company have interests in the Merger that are in addition to or
different from the interests of stockholders of the Company generally. These
interests are discussed below.
General. In considering the recommendation of the Company Board with
respect to the Merger, Company stockholders should be aware that certain of the
directors and officers of the Company (i) occupy roles or have interests with
respect to other ALLIED companies, including ALLIED Life, which could be
potentially in conflict with their roles with respect to the Company, and/or
(ii) have interests different from or potentially in conflict with the interests
of Company stockholders. Additionally, Company stockholders should be aware that
Nationwide, as successor to the interests of ALLIED Mutual by virtue of the
merger of ALLIED Mutual with and into Nationwide with Nationwide continuing as
the surviving corporation, and certain of the directors of the Company serving
as designees of Acquisition Sub pursuant to rights granted under the Merger
Agreement (i) occupy roles or have interests with respect to other ALLIED
companies which could be potentially in conflict with their roles with respect
to the Company, and/or (ii) have interests different from or potentially in
conflict with the interests of Company stockholders.
The Company Board. John E. Evans, Harold S. Evans and James W.
Callison, members of the Board, are also directors of ALLIED Life. Richard D.
Crabtree, Charles L. Fuellgraf, Dimon R. McFerson, David O. Miller, James F.
Patterson, Arden L. Shisler, members of the Board, are also directors of
Nationwide. These individuals together with Douglas L. Andersen, who is
currently a member of the Board, are serving as the designees of Acquisition Sub
(the "Acquisition Sub Designees"). As a result of these overlapping
directorships, among other things, there may be a number of potential conflicts
of interest among the Company, Nationwide, as successor in interest to ALLIED
Mutual, and ALLIED Life.
Shared Management and Employees. Pursuant to the Intercompany
Operating Agreement among the Company, Nationwide, as successor in interest to
ALLIED Mutual, ALLIED Life and each of their respective subsidiaries (the
"IOA"), the Company leases to Nationwide, as successor in interest to ALLIED
Mutual and the former ALLIED Mutual subsidiaries the employees utilized in their
operations for a fee and reimbursement of personnel costs based on certain
allocation methods. In addition, certain executive officers of the Company hold
corresponding positions with Nationwide, as successor in interest to ALLIED
Mutual. Accordingly, such officers may have interests in the Merger arising from
their relationship with Nationwide. Additional information concerning the
benefits that various members of the Company's management are expected to
receive pursuant to the Merger Agreement is presented in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, filed with the
Securities and Exchange Commission ("SEC") on June 2, 1998 (the "Schedule
14D-9"), Amendment No. 1 to the Company's Solicitation/Recommendation Statement
on Schedule 14D-9, filed with the SEC on June
22
<PAGE> 22
4, 1998, the Company's Information Statement on Schedule 14F-1, filed with the
SEC on June 12, 1998, and the exhibits to each such filing.
Intercompany Operating Agreement. The Company and its subsidiaries
are parties to the IOA with ALLIED Life, Nationwide, as successor in interest to
ALLIED Mutual, and each of their respective subsidiaries. The full text of the
IOA and the amendments thereto are filed as Exhibits 9 through 12 to the
Schedule 14D-9. The IOA provides for the sharing of employees, office space,
agency forces, data processing, and other services and facilities. The IOA
extends through December 31, 2004 and continues thereafter subject to any party
providing two years notice that such party intends to cease participation.
The Company leases to Nationwide, as successor in interest to ALLIED
Mutual, and the former ALLIED Mutual subsidiaries (except for ALLIED Life) the
employees utilized in their operations for a fee and reimbursement of personnel
costs based on certain allocation methods. The Company is obligated to provide
the entire requirements for employees to Nationwide, as successor in interest to
ALLIED Mutual, and the former ALLIED Mutual subsidiaries (other than ALLIED
Life), but Nationwide, as successor in interest to ALLIED Mutual, reserves the
right to hire employees independently rather than leasing them from the Company.
The Company has the right to determine the compensation and benefits of all
leased employees. However, if the Company wishes to adopt or amend any employee
benefit plan or program and pass on the increased costs thereof with respect to
employees leased by Nationwide, as successor in interest to ALLIED Mutual, it
must obtain the approval of Nationwide, as successor in interest to ALLIED
Mutual (or a joint Compensation Committee consisting of directors of the Company
and Nationwide). The IOA contains a covenant not to compete that binds each of
the Company, ALLIED Life, and Nationwide, as successor in interest to ALLIED
Mutual, not to engage in a business that competes with the products or markets
of any other party or such party's subsidiaries for the term of the IOA and five
years thereafter.
Any disputes regarding the use of occupancy or facilities or the
terms on which property is leased or used are to be referred to the Coordinating
Committee, consisting of two directors of each of the Company, Nationwide, as
successor in interest to ALLIED Mutual, and ALLIED Life, for resolution.
Decisions of the Coordinating Committee must be unanimous and are binding on the
parties. If an issue is not resolved by the Coordinating Committee, it will be
submitted to arbitration. In such arbitration, each party to the dispute selects
one arbitrator, and if such dispute involves only two parties, such arbitrators
select third arbitrator.
During 1997, the Company received revenues of $2.6 million for
employees leased to ALLIED Mutual and certain of ALLIED Mutual's subsidiaries,
substantially all of which represented cost reimbursement. The IOA also provides
for the leasing by Nationwide, as successor in interest to ALLIED Mutual, to the
Company of substantially all of the office space utilized by the Company and the
provision of data processing services by the Company to Nationwide, as successor
in interest to ALLIED Mutual, and its subsidiaries. The Company paid to ALLIED
Mutual rent expense for office space of $3.6 million for the year ended December
31, 1997. Nationwide, as successor in interest to ALLIED Mutual, the Company,
and ALLIED Life share agency forces as well as other services and facilities.
Pooling Agreement
Nationwide, as successor in interest to ALLIED Mutual, and the
Company's three property-casualty subsidiaries, AMCO Insurance Company ("AMCO"),
ALLIED Property and Casualty Insurance Company ("ALLIED Property and Casualty")
and Depositors Insurance Company ("Depositors"), are parties to a reinsurance
pooling agreement ("Pooling Agreement") in which the Company's property-casualty
subsidiaries in the aggregate were 64% participants in 1997. The full text of
the Pooling Agreement and the amendments thereto are filed as Exhibits 13
through 16 to the Schedule 14D-9. The Pooling Agreement provides that
Nationwide, as successor in interest to ALLIED Mutual, ALLIED Property and
Casualty, and Depositors cede to AMCO (the pool administrator) premiums, losses,
allocated loss settlement expenses, commissions, premium taxes, service charge
income, and dividends to policyholders and assume from AMCO an amount of the
pooled property-casualty business equal to their participation in the pooling
agreement. The agreement provides that AMCO will pay certain underwriting
expenses, unallocated loss settlement expenses, and premium collection expenses
for all of the pool participants and receive a fee equal to a specified
percentage of premiums. AMCO charges each of the other pool participants 12.85%
of written premiums for underwriting services, 7.25% of earned premiums for
unallocated loss settlement expenses, and 0.75% of earned premiums for premium
collection services. During 1997, ALLIED Mutual paid AMCO $71 million in fees
under the pooling agreement.
In the event of a change of control of the Company, Nationwide, as
successor in interest to ALLIED Mutual, may, in its sole discretion at any time
after such change of control, (i) terminate the Pooling Agreement as well as the
MIS Agreement and IOA upon six months' notice to the Company, AMCO, APC and
Depositors, (ii) extend the term of all three agreements for up to 10 additional
years beyond December 31, 2004 upon six months' notice to the Company, AMCO, APC
and Depositors, or (iii) allow the agreements to continue in effect. A change of
control is any event whereby a person, group or entity unaffiliated with the
Company or ALLIED Mutual acquires the ownership of 50% or more of the voting
stock of the Company. The Pooling Agreement is not assignable.
On May 5, 1998, the Company announced an amendment to the reinsurance
pooling agreement between the Company's property-casualty segment and ALLIED
Mutual. Beginning July 1, 1998, the amended pooling agreement phases out the
provisions which provide that the pool administrator is reimbursed for such
expenses by the other pool participants on a set percentage-of-premiums basis.
Once the phase-out is completed by the year 2001, all underwriting expenses,
loss adjusting expense and premium collection expenses will be allocated based
on each participant's pool participation percentage in the same manner premiums
and losses are allocated.
In the event of a change of control (whenever ownership of 50% or
more of the voting stock of ALLIED Life is acquired by a nonaffiliated party) of
ALLIED Life, either the Company or Nationwide, as successor in interest to
ALLIED Mutual, may (i) terminate the IOA and the MIS Agreement (as defined
below) on 6 months notice to ALLIED Life, (ii) extend the term of both
agreements for up to 10 years beyond December 31, 2004 upon six months' notice,
or (iii) allow the agreements to remain in effect without change. Pursuant to
the ALLIED Life Merger Agreement, however, ALLIED Life has agreed that prior to
the termination of the ALLIED Life Merger Agreement, ALLIED Life will not invoke
against the Company any of the change of control provisions contained in the
I0A, JMA, MIS Agreement or Stock Rights Agreement dated August 25, 1993 by and
between ALLIED Life and Nationwide, as successor in interest to ALLIED Mutual,
that ALLIED Life may herewith be entitled to exercise as a result of the
transactions contemplated by the Merger Agreement, the ALLIED Life Merger
Agreement and the merger agreement pursuant to which ALLIED Mutual merged with
and into Nationwide. Nationwide, as successor in interest to ALLIED Mutual, may
(i) terminate all three of the IOA, the Pooling Agreement (as defined below),
and the MIS Agreement on six months' notice to the party with respect to which a
change of control takes place, (ii) extend the term of all three agreements for
up to 10 years beyond December 31, 2004 upon six months' notice, or (iii) allow
the agreements to remain in effect without change. ALLIED Life enjoys the same
rights of termination on a change of control of the Company with respect to the
IOA and the MIS Agreement.
<PAGE> 23
Management Information Services Agreement
The Company, Nationwide, as successor in interest to ALLIED Mutual,
ALLIED Life, and other affiliated companies are parties to a Management
Information Services Agreement ("MIS Agreement") with AMCO, whereby AMCO
provides certain computer services, printing, equipment leasing, and mail and
communication services to affiliates on a fee basis. The full text of the MIS
Agreement and the amendments thereto, are filed as Exhibits 17 and 18 to the
Schedule 14D-9. The agreement terminates on December 31, 2004 and has an
extension provision similar to that in the IOA described above. Any disputes
under this agreement are to be referred to the Coordinating Committee for
resolution. Decisions of the Coordinating Committee must be unanimous and are
binding on the parties. If an issue is not resolved by the Coordinating
Committee, it will be submitted to arbitrators for resolution. For the year
1997, amounts paid to AMCO and certain subsidiaries of the Company by ALLIED
Mutual, ALLIED Life and their subsidiaries under the MIS Agreement were $2.5
million.
In the event of a change of control of ALLIED Life, either the
Company or Nationwide, as successor in interest to ALLIED Mutual, may, in its
sole discretion at any time after such change of control, (i) terminate the MIS
Agreement and IOA upon six months' notice to ALLIED Life, (ii) extend the term
of the MIS Agreement and IOA for up to 10 additional years beyond December 31,
2004 upon six months' notice to ALLIED Life, or (iii) allow the agreements to
continue in effect. A change of control is any event whereby a person, group or
entity unaffiliated with ALLIED Life or Nationwide, as successor in interest to
ALLIED Mutual, acquires the ownership of 50% or more of the voting stock of
ALLIED Life. In the event of a change of control of the Company, Nationwide, as
successor in interest to ALLIED Mutual, may, in its sole discretion at any time
after such change of control, (i) terminate the Pooling Agreement, the MIS
Agreement and IOA upon six months' notice, (ii) extend the term of all three
agreements for up to 10 additional years beyond December 31, 2004 upon six
months' notice to the Company, AMCO, ALLIED Property and Casualty and
Depositors, or (iii) allow the agreements to continue in effect. ALLIED Life
enjoys the same rights with respect to the MIS Agreement and the IOA in the
event of a change of control of the Company. A change of control is any event
whereby a person, group or entity unaffiliated with the Company or Nationwide,
as successor in interest to ALLIED Mutual, acquires the ownership of 50% or
more of the voting stock of the Company.
Joint Marketing Agreement
AMCO, ALLIED Property and Casualty, and Depositors are parties to the
ALLIED Group Joint Marketing Agreement ("JMA") with Nationwide, as successor in
interest to ALLIED Mutual, and ALLIED Life Insurance Company ("ALIC"). The full
text of the JMA and the amendments thereto, are filed as Exhibits 19 and 20 to
the Schedule 14D-9. The JMA requires Nationwide, as successor in interest to
ALLIED Mutual, and the Company's property-casualty subsidiaries to promote to
their customers and agents the sale of the products of ALIC. The JMA provides
for payment by ALIC to AMCO (as pool administrator for the property-casualty
companies) of an annual access fee of $100,000 plus an annual new production
incentive fee ("NPIF"), calculated based on the percentage increase from the
preceding year's production credit premiums for ALIC produced by the independent
property-casualty agencies representing Nationwide, as successor in interest to
ALLIED Mutual, AMCO, ALLIED Property and Casualty, and Depositors ("ALLIED
agencies"). The annual NPIF is not payable unless production credit premiums
increase by at least 10% over the prior year and is capped at an increase of 25%
over the prior year. For the year ended December 31, 1997, the fee incurred by
ALIC under the JMA totaled $100,000. The JMA also provides for joint systems
development, including joint data bases of customers and agents, multiple
account billing systems, marketing plans and promotions, and other systems to be
developed. Development costs are to be allocated on a mutually agreeable basis
reflecting projected and actual utilization of the systems.
The JMA continues to the year 2008 and continues thereafter subject
to termination on two years notice given by any party. The JMA contains a
non-compete provision structured along product lines which are applicable during
the term of the JMA and for a period of ten years thereafter. The non-compete
provision prevents Nationwide, as successor in interest to ALLIED Mutual, and
the property-casualty subsidiaries of the Company, directly or indirectly
through any subsidiary, affiliate, joint venture or partnership from selling
life insurance or annuities in the states where ALIC now sells these life
products (or on termination of the JMA, any states where the life insurance and
annuity products are sold by ALIC). Nationwide, as successor in interest to
ALLIED Mutual, and the property-casualty subsidiaries, which are not licensed to
sell life insurance or annuity products, do not operate in all the states in
which ALIC operates. The JMA non-compete provision also prevents ALIC from
offering property-casualty products in states in which Nationwide, as successor
in interest to ALLIED Mutual, and the property-casualty subsidiaries of the
Company now operate. In the event of a change of control of ALIC or ALLIED Life
(whenever ownership of 50% or more of the voting stock is acquired by a
nonaffiliated party), the Company, Nationwide, as successor in interest to
ALLIED Mutual, or any of the Company's property-casualty subsidiaries may (i)
terminate it upon six months' notice; (ii) extend the term for up to ten
additional years beyond 2008; or (iii) allow the JMA to continue in effect
without change. Those three rights are also given to ALIC in the event of a
change of control of the Company, any of its property-casualty subsidiaries or
Nationwide, as successor in interest to ALLIED Mutual. Pursuant to the ALLIED
Life Merger Agreement, however, ALLIED Life has agreed that prior to the
termination of the ALLIED Life Merger Agreement, ALLIED Life will not invoke
against the Company or any of its affiliates any of the covenants not to compete
or agreements not to compete contained in the IOA and JMA. Disputes are to be
resolved by the Coordinating Committee. Decisions of the Coordinating Committee
must be unanimous and are binding on the parties. If the Coordinating Committee
fails to resolve an issue, it would be submitted to arbitration. In such
arbitration, one arbitrator will be appointed jointly by ALLIED Mutual and the
Company's property-casualty subsidiaries and a second arbitrator will be
appointed by ALLIED Life. Both arbitrators so selected will jointly select a
third arbitrator.
<PAGE> 24
Other Arrangements and Transactions
The Company and Nationwide, as successor in interest to ALLIED
Mutual, are parties to a Stock Rights Agreement which expires in 2005. Under the
Stock Rights Agreement, Nationwide, as successor in interest to ALLIED Mutual,
is entitled to nominate and the Company is required to use its best efforts to
cause the election or retention of a number of members of the Company's Board of
Directors in proportion to Nationwide's, as successor in interest to ALLIED
Mutual's, percentage ownership of the total number of shares of the Company's
voting stock outstanding at the time of nomination. In addition, the Company is
required to elect to its Executive Committee at least one Company director who
has been nominated by Nationwide, as successor in interest to ALLIED Mutual, but
who is not an officer or employee of Nationwide, as successor in interest to
ALLIED Mutual, and the Company must limit the number of directors serving on the
Executive Committee to five at any time. The Stock Rights Agreement restricts
the ability of Nationwide, as successor in interest to ALLIED Mutual, to grant
proxies to other than affiliated individuals and to solicit other stockholders
of the Company. Nationwide, as successor in interest to ALLIED Mutual, has
incidental registration rights and three demand registration rights with respect
to the 6-3/4% Preferred. The full extent of the Stock Rights Agreement and the
amendment thereto, are filed as Exhibits 21 and 22 to the Schedule 14D-9.
The Company and its affiliates pool their excess cash into a
short-term investment fund pursuant to the Intercompany Cash Concentration Fund
Agreement. The fund, administered by AID Finance Services, Inc. (an affiliate of
the Company), also issues short-term loans (30 days or less) to affiliated
companies in accordance with the current intercompany borrowing policy. At
December 31, 1997, the Company had several unsecured notes payable totalling
$5.9 million, bearing interest rate at 8.8%. The Company and its affiliates pay
to AID Finance Services, Inc. a management fee (5 basis points of invested
assets) which is offset against investment income. At December 31, 1997, $8.3
million was invested in the fund by the Company and its subsidiaries, which is
carried as a short-term investment. Interest earned by the Company and its
subsidiaries from the fund during 1997 was $477,000. Interest expense paid to
AID Finance Services, Inc. during 1997 amounted to $424,000. The full text of
the Intercompany Cash Concentration Fund Agreement, is filed as Exhibit 26 to
the Schedule 14D-9.
ALLIED Group Insurance Marketing Company ("AGIMC"), a wholly-owned
subsidiary of AID Finance Services, Inc., markets insurance products for the
Company's property-casualty subsidiaries on a commission basis pursuant to an
Agency Agreement. The Company's share of commissions paid to AGIMC was $3.7
million for the year ending December 31, 1997. The Agency Agreement and
amendments thereto are filed as Exhibits 23 through 25 to the Schedule 14D-9.
The Company paid premiums to ALLIED Life for term life insurance on
the Company's employee group in the amount of $468,000 in 1997.
The property-casualty subsidiaries of the Company paid premiums to
ALLIED Mutual in the amount of $2.9 million for ALLIED Mutual's participation
in a reinsurance agreement with General Re Insurance Company. There were
recoveries from ALLIED Mutual in the amount of $2 million. The reinsurance
agreement for 1997 is filed as Exhibit 27 to the Schedule 14D-9.
On December 31, 1997, State Street Bank and Trust Company, as the
ESOP Trustee, purchased for the ESOP Trust 18,865 shares of Common Stock from
the Company for $540,000.
AMCO administers many of the bank accounts for the affiliated ALLIED
companies. During the fiscal year 1997, AMCO issued checks in payment of certain
transactions between affiliated ALLIED companies and the companies of certain
directors of the Company. During 1997, ALLIED Mutual, as owner of the ALLIED
office buildings, paid $214,000 for construction services to Taylor Ball, of
which John P. Taylor, a director of the Company, is CEO and Chairman. It is
anticipated that in 1998 Nationwide, as successor in interest to ALLIED Mutual,
will continue to use the construction services of Taylor Ball and that AMCO will
issue the checks on behalf of ALLIED Mutual in payment for the construction
services.
During the year ended December 31, 1997, ALLIED Mutual, the Company,
and its subsidiaries paid $1 million in fees and media costs to J.D. Evans &
Associates, of which Julie Evans (daughter of John E. Evans) is a stockholder.
Donald S. Willis, a Director of the Company, is a majority
stockholder of Willis and Moore, Inc., a general insurance agency. During 1997,
ALLIED Mutual, AMCO, APC, and Depositors paid $233,000 in property-casualty
commissions and profit share to Willis and Moore, Inc. These commissions and
profit share were paid on the same basis and terms as those paid to unrelated
agencies.
During 1997, directors and executive officers of the Company
purchased insurance or obtained residential mortgages from the Company or its
subsidiaries on terms comparable to those offered in the normal course of
business to nonaffiliated customers. In addition, corporations of which Company
directors are executive officers purchased insurance from the Company's
subsidiaries and ALLIED Mutual in the ordinary course of business during 1997.
<PAGE> 25
Amendment to Employee Stock Ownership Plan
On June 1, 1998, the Board of Directors of the Company, acting upon
the recommendation of the Compensation Committee of the Board, amended the
ALLIED Group Employee Stock Ownership Plan ("ESOP") to provide that
participants in the ESOP (including executive officers) will be fully vested
in their accounts upon the occurrence of a "Change in Control" (as defined
below) and to clarify that surplus assets following such a Change in Control
will generally be allocated based on the same formula applicable to employer
contributions. The amendment to the ESOP is filed as Exhibit 30 to the
Schedule 14D-9.
For purposes of the foregoing, a "Change in Control" shall be deemed
to have occurred upon the first to occur of the following:
(i) Any person other than (a) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company, (b)
a corporation owned directly or indirectly by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, or (c) ALLIED Mutual, is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the total voting
power represented by the Company's then outstanding voting
securities, or
(ii) During any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the Board
plus any new Director (a) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the Directors at the beginning of the
period or whose election or nomination for election was previously so
approved or (b) whose nomination for election by the Company's
shareholders was made pursuant to the Stock Rights Agreement between
the Company and ALLIED Mutual, cease for any reason to constitute a
majority thereof, or
(iii) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation (and such
merger or consolidation is in fact consummated), other than a merger
or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%) of
the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the
sale of disposition by the Company of all or substantially all the
Company's assets, provided that such merger, consolidation,
liquidation, sale or disposition, as the case may be, is actually
consummated.
As a result of the purchase by Acquisition Sub of Common Shares in
the Offer, a Change of Control shall be deemed to have occurred for purposes
of the vesting and allocation provisions of the ESOP.
Amendment to John Evans Consulting Agreement
The consulting agreement between the Company, ALLIED Mutual, ALLIED
Life and John Evans, which is described in the 1998 Proxy Statement, was amended
on March 24, 1998 to provide for a decrease in the annual compensation payable
to Mr. Evans from $180,000 to $120,000. Such annual compensation is
consideration for consulting services rendered by Mr. Evans and is prorated
among the Company, ALLIED Mutual, and ALLIED Life. The consulting agreement and
the amendments thereto are filed as Exhibits 31 to 34 to the Schedule 14D-9.
<PAGE> 26
Change of Control Provisions in Long-Term Management Incentive Plan
As discussed in the 1998 Proxy Statement, the Company maintains a
Long-Term Management Incentive Plan (the "Long-Term Plan") which provides for
the award of stock options, stock appreciation rights ("SAR's") and shares of
restricted stock. On March 10, 1998, the following option grants were made to
executive officers of the Company: Douglas L. Anderson - 25,000 options, W. Kim
Austen - 7,500 options, Steven A. Biggi - 15,000 options, Marla J. Franklin -
8,000 options, James J. Hachenbucher - 10,000 options, Michael D. Holmes -
15,000 options, Steven P. Larsen - 15,000 options, Charles H. McDonald - 5,000
options, Michael L. Pollard - 12,000 options, Stephen S. Rasmussen - 18,000
options, Scott E. Reddig - 10,000 options, Jamie H. Shaffer - 15,000 options,
Edward E. Sullivan - 10,000 options and Kirt A. Walker - 7,500 options.
Additionally, on May 30, 1998, Paul J. Curran was granted 5,000 shares of
restricted stock pursuant to the Long-Term Plan. The Long-Term Plan provides
that upon a change of control (as defined in the Long-Term Plan), all options
and SAR's shall become immediately exercisable, and any restriction periods and
restrictions imposed on restricted stock will lapse.
Amendments to Stock Option Plans
On May 30, 1998, the Compensation Committee of the Company's Board of
Directors, seeking to provide parallel treatment of employee stock options upon
a change in control, determined that it would interpret the Company's Restated
and Amended Stock Option Plan and Nonqualified Stock Option Plan (together, the
"Option Plans") in the same manner as the Long-Term Plan with respect to a
change in control. On June 1, 1998, the Board of Directors approved and ratified
the action of the Compensation Committee.
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Severance Arrangements. On May 30, 1998, the Compensation Committee
of the Board (the "Compensation Committee"), following publication of the Offer
and after consideration of the potentially destabilizing effects of the pendency
of such proposal on the morale and retention of Company employees, approved the
adoption by the Company of a severance policy applicable to the Company's
salaried and hourly employees and approved the entry by the Company into
separate severance agreements (the "Severance Agreements") with executives and
certain other employees of the Company. On June 1, 1998, the Board approved and
ratified these actions of the Compensation Committee. The full text of the
ALLIED Group, Inc. Severance Pay Plan (the "Severance Pay Plan") was filed as
Exhibit 28 to the Schedule 14D-9.
The Severance Pay Plan provides for certain benefits to eligible
employees following an involuntary termination of employment or Company-approved
resignation. The benefits consist of a lump sum payment equal to one week's base
salary for each full calendar year of employment (or such greater or lesser
amount as determined by the administrator) and continuation of health benefits
for a number of months approximately equal to the eligible employee's number of
full calendar years of employment divided by four (4). Benefit continuation
terminates when the employee becomes eligible to receive benefits from another
employer. An employee is not eligible to receive severance benefits if his
termination of employment is due to death, transfer of employment to an
affiliate or successor of the Company or for "Cause."
"Cause" is generally defined, with respect to the termination of an
eligible employee's employment with the Company, as termination (or deemed
termination) because the employee has consistently failed to function as
required by Company standards. In the event an employee's employment terminates
for any reason and the administrator subsequently determines that Cause for
termination existed at the time the employee's employment terminated, such
employee shall be deemed to have been terminated for Cause.
Enhanced benefits are provided to employees who are terminated by the
Company without Cause or, who terminate employment because such employment has
been adversely affected or who resign with the Company's approval, any of such
terminations occurring during the one-year period following a "Change in
Control" (as defined below). The enhanced benefits consist of an additional lump
sum payment equal to such employee's base salary for a period equal to the
greater of three (3) months or from the date of termination of employment
through the first anniversary of the Change in Control, benefit continuation for
the additional period and outplacement services to be provided at the expense of
the Company.
Each Severance Agreement, the form of which was filed as Exhibit 29
to the Schedule 14D-9, generally provides that in the event of any involuntary
termination (other than for Cause or disability) or constructive termination of
employment (including a material reduction in responsibilities, a reduction in
base pay or incentive compensation opportunities or an involuntary relocation)
within the two-year period following a Change in Control, an employee who is a
party to such an agreement would receive the employee's base salary through the
date of termination and, in lieu of any other severance, a lump sum payment
equal to one year's base pay plus the employee's highest bonus over the
preceding two years and benefit continuation for eighteen months following the
termination of employment (or until the employee becomes eligible for benefits
under a new employer). For a small number of employees, the benefit would be a
lump sum severance payment equal to two times annual base salary plus the
employee's highest bonus over the preceding two years and benefit continuation
for eighteen months following the termination of employment (or until the
employee becomes eligible for benefits under a new employer). In the event that
such severance payments would subject the employee to an excise tax imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder, the amount of the severance otherwise
payable will generally be reduced to avoid the imposition of such excise tax.
<PAGE> 28
The Company has offered Severance Agreements that provide for a
severance payment equal to two times the employee's base salary plus the higher
bonus over the preceding two years to the following executive officers of the
Company: Douglas L. Andersen, Michael D. Holmes, and Stephen S. Rasmussen. The
Company has also offered such arrangements to six other employees, who are not
executive officers.
The Company has offered Severance Agreements that provide for a
severance payment equal to the employee's base salary plus the higher bonus over
the preceding two years to the following officers and other senior executives of
the Company: Cheryl M. Critelli, Paul J. Curran, Marla J. Franklin, Sally J.
Malloy, Charles H. McDonald, George T. Oleson, and Jamie H. Shaffer. The Company
has also offered such agreements to 35 other employees, who are not executive
officers.
The Company has calculated that the maximum aggregate lump sum that
could be payable pursuant to all of the Severance Agreements described above
(including non-executive officers), assuming termination of each of these
individuals, is approximately $9.0 million.
In addition, C. Fred Morgan is a party to an agreement with the
Company and Nationwide, as successor in interest to ALLIED Mutual, which
provides for Mr. Morgan to receive certain severance benefits upon the
occurrence of a change of control of the Company such as the consummation of the
Offer and the Merger. According to such agreement, if Mr. Morgan terminates such
agreement due to, among other things, the Company being acquired, then Mr.
Morgan would be entitled to receive through November 9, 2002 the following: (i)
his then existing salary and benefits under ALLIED Group Benefit Plans, and (ii)
his vested and contractually obliged retirement benefits subject to and in
accordance with the terms thereof.
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ALLIED Group Stock Options. Pursuant to the Merger Agreement, as of
immediately prior to the effective time of the Merger, each option to acquire
shares of Company Common Stock (each an "ALLIED Group Option"), restricted stock
award ("Restricted Stock") or stock appreciation right ("ALLIED Group SARs" and,
together with the ALLIED Group Options and Restricted Stock, the "ALLIED Group
Awards") outstanding under any of the Company's Nonqualified Stock Option Plan,
the Company's Stock Option Plan (together, the "ALLIED Group Option Plans"), the
Company's Long-Term Management Incentive Plan (the "ALLIED Group Long-Term
Plan"), the Company's Executive Equity Incentive Plan or any other similar plan,
arrangement or agreement, 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 ALLIED Group 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 ALLIED Group Awards of
Restricted Stock, $48.25, (ii) in the case of ALLIED Group Awards of ALLIED
Group Options, the excess of (A) $48.25 over (B) the exercise price of such
Option or (ii) in the case of ALLIED Group Awards of ALLIED Group SARs, the
excess of (A) $48.25 over (B) the grant price of such ALLIED Group SAR. Mr.
Andersen holds ALLIED Group Options with respect to 145,378 shares and ALLIED
Group SARs with respect to 5,063 shares. Mr. Morgan holds ALLIED Group Options
with respect to 84,375 shares.
Continuation of ALLIED Group Benefits. The Merger Agreement provides
that, for a period of at least one year following the Effective Time of the
Merger, 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, 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 the Company or any of its
subsidiaries (including, but not limited to, those provided pursuant to any
ALLIED Group Benefit Plan (as defined below)) as of immediately prior to the
Effective Time, provided that Nationwide is not required to offer an employee
stock ownership plan or other equity related arrangement. In addition,
Nationwide is not required to continue the employment of any employee of the
Company following the Effective Time; provided, however, 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 Group 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 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 a Nationwide subsidiary; provided that Nationwide
may, in lieu of providing retiree medical coverage under Nationwide's retiree
medical plan, cause the Company to continue to offer its retiree medical plan as
currently in effect to its current and former employees. For purposes of each
outstanding ALLIED Group short-term, mid-term, and long-term incentive award
held by any ALLIED Group 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 Company 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 the Merger Agreement.
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For purposes of the Merger Agreement and this Information Statement,
"ALLIED Group Benefit Plan" means any employee pension benefit plan (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), employee welfare benefit plan (as defined in Section 3(1) of
ERISA) and any other material plan, program, arrangement, or policy (written or
oral) relating to compensation, bonuses, deferred compensation, performance
compensation, stock purchases, stock options, stock appreciation, severance,
salary continuation, vacation, sick leave, holiday pay, fringe benefits,
reimbursement programs, incentive, insurance, welfare or employee benefits, in
each case, maintained or contributed to, or required to be maintained or
contributed to, by the Company and any subsidiaries thereof for the benefit of
any present or former officers, employees, agents, directors, or independent
contractors of the Company or any subsidiaries thereof.
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
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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.
At the time of the Board's approval of the Merger, certain of the
directors and officers of the Company were 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"), were not officers or directors of, or otherwise
affiliated with, either ALLIED Mutual or ALLIED Life.
The Board was aware of the foregoing interests and considered them,
among other matters, in approving the Merger Agreement. Other than as described
above, the Board is not aware of any potential material conflicts of interest
management may have in relation to the Merger.
CERTAIN REGULATORY MATTERS
Iowa Approval. The acquisition of control of an Iowa domestic
insurer, such as the Company, requires the approval of the Commissioner of the
Iowa Department of Insurance (the "Iowa Commissioner") under Section 521A.3 of
the Iowa Insurance Law. Section 521A.3 of the Iowa Insurance Law provides that
when a person or entity enters into an agreement to merge with or otherwise to
acquire control of a domestic insurer, the person or entity shall file with the
Iowa Commissioner a statement containing certain specified information set forth
in Section 521A.3(2) of the Iowa Insurance Law (the "Form A"). The Form A filing
must also be sent to the domestic insurer and the domestic insurer must provide
its stockholders with the information contained in the Form A. Nationwide filed
its Form A concerning the acquisition of the Company with the Iowa Commissioner
on May 19, 1998, and filed amendments to such Form A filing on July 2, 1998 and
July 22, 1998. A summary of the information contained in the Form A filing (as
amended) was also circulated to the Company's stockholders.
A hearing to consider the Merger was held before the Iowa
Commissioner on July 29, 1998, then adjourned and reconvened on August 31, 1998.
In its Findings of Fact and Conclusions of Law dated September 11, 1998, the
Iowa Commissioner formally approved Nationwide's acquisition of the Company.
Arizona Approval. The Company ultimately controls Western Heritage
Insurance Company ("Western Heritage"), which is domiciled in Arizona and is
wholly-owned by the Company's subsidiary, AMCO Insurance Company. Therefore,
Nationwide's acquisition of control of the Company includes the acquisition of
control of Western Heritage and requires the approval of the Director of the
Arizona Department of Insurance (the "Arizona Director") pursuant to Sections
20-481.01 through 20-481.23 of the Arizona Insurance Law. Nationwide filed a
Form A with respect to the Offer and the Merger in Arizona on May 19, 1998, and
filed a supplement and two amendments to the Form A on May 29, July 2, and July
23, 1998, respectively. The Office of Administrative Hearings held a hearing to
consider the Merger on August 6, 1998, and the Arizona Director issued an Order
formally approving Nationwide's acquisition of Western Heritage on August 24,
1998.
Ohio Approval. Section 3925.08(D)(2) of the Ohio Revised Code
requires an insurer to obtain the approval of the Ohio Superintendent of
Insurance before such insurer makes an investment of its accumulated funds or
surplus in stocks of an insurance corporation valued at more than 2.5% of the
total admitted assets of the company making the investment as of the preceding
thirty-first day of December. On June 17, 1998, Nationwide submitted its request
for approval to invest up to $1.5 billion to acquire Common Shares of the
Company. The Ohio Department of Insurance granted the requested approval by
letter dated July 20, 1998.
Other Insurance Regulatory Approvals. Certain other states may
require that notice be given to, or approval be obtained from, the insurance
department of such state. The Company and Nationwide have agreed to use
reasonable efforts to file any required notices or otherwise to take such
actions as are necessary to obtain any required approvals or to comply with
applicable requirements in connection with the Merger under such laws. Based
upon available information, the Company and Nationwide believe that the Merger
can be effected in accordance with such laws and that no material delay in
consummating the Merger will result therefrom.
HSR Act. Under the provisions of the HSR Act applicable to the Offer,
the acquisition of Common Shares under the Offer could only be consummated
following the expiration of a 15-calendar day waiting period following the
filing by Nationwide of a Notification and Report Form with respect to the
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<PAGE> 32
Offer, unless Nationwide had received a request for additional information or
documentary material from the Antitrust Division of the U.S. Department of
Justice ("Antitrust Division") or the Federal Trade Commission ("FTC") prior to
the expiration of such period or unless early termination of the waiting period
was granted. Nationwide made such filing on May 19, 1998. The waiting period
under the HSR Act terminated on June 3, 1998. Therefore, the Company does not
believe that this or any other material federal regulatory approvals are
required for consummation of the Merger.
The Antitrust Division and the FTC frequently scrutinize the legality
under the antitrust laws of transactions such as Acquisition Sub's proposed
acquisition of the Company. At any time before or after Acquisition Sub's
acquisition of Common Shares pursuant to the Offer, the Antitrust Division or
the FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the consummation
of the Merger or seeking the divestiture of Common Shares acquired by
Acquisition Sub or the divestiture of substantial assets of the Company or its
subsidiaries or Nationwide or its subsidiaries. Private parties may also bring
legal action under the antitrust laws under certain circumstances. There can be
no assurance that a challenge to the Offer or the Merger on antitrust grounds
will not be made or, if such a challenge is made, of the result thereof.
LITIGATION
On December 31, 1997, a petition was filed by Mary M. Rieff
("Rieff"), an ALLIED Mutual policyholder, in the Iowa District Court in and for
Polk County, Iowa, against the Company and certain other individuals who are or
were officers and/or directors of ALLIED Mutual and/or the Company. Rieff filed
an amended petition (the "Amended Petition") on or about June 11, 1998. The Iowa
District Court has granted Nationwide's motion to intervene as a party defendant
in this action.
The Amended Petition, an alleged policyholder derivative and class
action, asserts, among other things, (i) that the defendants were responsible
for the inappropriate transfer of ALLIED Mutual's corporate assets, the seizure
of certain corporate opportunities and the implementation of an improper "de
facto demutualization" without informing or compensating policyholders or
receiving the appropriate approval from regulatory authorities; (ii) that this
allegedly wrongful demutualization began on or about January 1, 1985 and was
accomplished through transfers of ALLIED Mutual's assets to the Company and to
the individual defendants for inadequate consideration; (iii) that the
individual defendants breached fiduciary duties owed to ALLIED Mutual, wasted
its corporate assets and intentionally interfered with its contracts,
prospective business advantage and business relationships; and (iv) that the
defendants improperly transferred substantial ownership of and control over the
Company and ALLIED Mutual's insurance business. These claims were brought on
behalf of ALLIED Mutual, which is named as a nominal defendant.
The Amended Petition also asserts claims on behalf of a class of
ALLIED Mutual policyholders who have allegedly been deprived of their property
by the "de facto demutualization" of ALLIED Mutual. The class that Rieff seeks
consists of: (i) all ALLIED Mutual policyholders who held ALLIED Mutual policies
on or about February 18, 1993; and (ii) all current ALLIED Mutual policyholders
as of the date of the filing of the original petition who have allegedly been
harmed by higher premiums and/or lower dividends as a result of the "de facto
demutualization" of ALLIED Mutual. The claims that purport to be brought as
class claims assert, among other things, (i) that the defendants were
responsible for the "de facto demutualization" of ALLIED Mutual and that those
actions wrongfully deprived the class of their ownership rights and interests in
ALLIED Mutual's surplus and net worth without proper compensation; (ii) that
this allegedly wrongful demutualization constituted a conversion of ALLIED
Mutual's surplus for the benefit of the Company and its shareholders, including
the individual defendants; and (iii) that the individual defendants breached
fiduciary duties owed to ALLIED Mutual and intentionally interfered with ALLIED
Mutual's business and contractual relationships.
The Amended Petition further asserts that as a result of the
foregoing, ALLIED Mutual and the ALLIED Mutual policyholders have suffered
damages in excess of $500 million. The Amended Petition requests an accounting
of the assets allegedly wrongfully transferred to the Company and compensation
to ALLIED Mutual for the value of such assets, for the seizure of corporate
opportunities and for the "de facto
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demutualization" of ALLIED Mutual. The Amended Petition also asks for certain
other relief, including, among other things, removal of the directors of ALLIED
Mutual, attorneys' fees and costs, equitable relief and interest, restitution
for any assets wrongfully transferred or conveyed and the distribution to ALLIED
Mutual policyholders of surplus in excess of what is required to be retained in
connection with any recovery by ALLIED Mutual from the defendants.
On June 11, 1998, Rieff filed an amended motion seeking to enjoin the
defendant directors of ALLIED Mutual from considering, negotiating or approving
any transaction on behalf of ALLIED Mutual with Nationwide or any third party
because of alleged conflicts of interest of the members of the ALLIED Mutual
Board of Directors. That motion was heard by the Iowa District Court on July 16,
1998, and was denied by the Court on July 17, 1998.
On June 24, 1998, the defendants filed motions to dismiss the Amended
Petition, asserting, among other things, that (i) policyholders of a mutual
insurance company lack standing to maintain a derivative action; (ii) the
Amended Petition fails to state a claim upon which relief can be granted as to
the Company; (iii) the bulk of the claims in the Amended Petition are barred by
the applicable statute of limitations; (iv) the derivative claims in the Amended
Petition may not be brought as direct or class claims; and (v) the class claims
are barred by the applicable statute of limitations. The motions to dismiss have
been fully briefed, and oral argument will be heard in October or November,
1998.
This suit is in its preliminary stages and the Company cannot assess
its merits at this time.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase of the Company by
Nationwide in accordance with statutory accounting practices, whereby the
purchase price will be allocated based upon the historic statutory book values
of the admitted assets acquired and the statutory liabilities assumed by
Nationwide with the excess being recorded as goodwill.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material federal income tax
consequences of the Merger to stockholders of the Company. This summary does not
purport to discuss all income tax consequences of the Merger that may be
relevant to particular stockholders in light of their individual circumstances
or to certain types of stockholders subject to special treatment, such as life
insurance companies, tax-exempt organizations and financial institutions,
persons who are not citizens or residents of the United States or who are
foreign corporations, and stockholders who acquired stock through the exercise
of Company stock options or otherwise as compensation.
The receipt of cash in exchange for Common Shares pursuant to the
Merger, or pursuant to the exercise of dissenter's appraisal rights, will be a
taxable transaction for federal income tax purposes under the Code, and may also
be a taxable transaction under applicable state, local or foreign income or
other tax laws. Generally, for federal income tax purposes, a stockholder will
recognize gain or loss equal to the difference between the amount of cash
received by the stockholder pursuant to the Merger, or exercise of dissenter's
appraisal rights, and the aggregate tax basis in the Common Shares sold by the
stockholder, or with respect to which dissenter's rights are exercised, as the
case may be. Gain or loss will be calculated separately for each block of Common
Shares tendered and purchased pursuant to the Merger, or with respect to which
dissenter's appraisal rights are exercised, as the case may be.
If Common Shares are held by a stockholder as capital assets, gain or
loss recognized by the stockholder will be capital gain or loss, which will be
long-term capital gain or loss if the stockholder's holding period for the
Common Shares exceeds twelve months. Under present law, long-term capital gains
recognized by an individual stockholder will generally be taxed at a maximum
federal marginal tax rate of 20%, and long-term capital gains recognized by a
corporate stockholder will be taxed at a maximum federal marginal tax rate of
35%. In addition, under present law the ability to use capital losses to offset
ordinary income is limited. Stockholders should consult their tax advisors
regarding the applicable rate of taxation and their ability to use capital
losses against ordinary income.
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A stockholder that surrenders Common Shares pursuant to the Merger
(or pursuant to the exercise of dissenter's rights) may be subject to backup
withholding unless the stockholder provides its taxpayer identification number
("TIN") and certifies that such number is correct or properly certifies that it
is awaiting a TIN, or unless an exemption applies. A stockholder that does not
furnish its TIN may be subject to a penalty imposed by the IRS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT CONSTITUTE
TAX ADVICE. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICABILITY AND EFFECT
OF THE ALTERNATIVE MINIMUM TAX AND OF ANY STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS) OF THE MERGER.
EFFECT OF THE MERGER ON THE COMPANY'S STOCKHOLDERS
Consummation of the Merger is contingent upon, among other things,
approval of the Merger by the holders of Common Shares and Preferred Shares.
After the Effective Date, the current holders of Common Shares (other than
Nationwide and Acquisition Sub) will cease to be stockholders of the Company.
Although the Preferred Shares will not be affected by the Merger, ALLIED Mutual,
the sole holder of such Preferred Shares, merged with and into Nationwide (the
"ALLIED Mutual Merger") effective October 1, 1998. Therefore, as a result of the
Merger and the ALLIED Mutual Merger, the entire equity interest in the Company
will be owned by Nationwide and the Company's current stockholders will no
longer have any equity interest in the Company and will no longer share in
future earnings and growth of the Company, the risks associated with achieving
any such earnings and growth, or the potential to realize greater value for
their shares of stock through divestitures, strategic acquisitions or other
corporate opportunities that may be pursued by the Company in the future.
Instead, each current holder of the Common Shares (other than Nationwide and
Acquisition Sub) will have only the right to receive the Merger Consideration or
to seek appraisal rights as described under "--Dissenting Stockholders' Rights"
below.
DISSENTING STOCKHOLDERS' RIGHTS
The following discussion is not a complete statement of the law
pertaining to dissenters' rights under the IBCA and is qualified in its entirety
by reference to the full text of Sections 490.1301 through 490.1331 of the IBCA
setting forth the rights of stockholders who object to the Merger. Dissenting
stockholders wishing to exercise such dissenters' rights or to preserve their
rights to do so should review the following discussion and the provisions of
Sections 490.1301 through 490.1331 of the IBCA with counsel. A copy of the
relevant sections of the IBCA is attached to this Information Statement as Annex
II and is incorporated herein by reference. The failure of a dissenting
stockholder to comply in a timely and proper manner with the procedures set
forth in the IBCA will result in its loss of dissenters' rights with respect to
the Merger.
Sections 490.1301 through 490.1331 of the IBCA set forth the rights
of stockholders of the Company who object to the Merger. Any holder of Common
Shares who does not vote in favor of the Merger (including any such holder who
abstains from voting) and who objects to the Merger may, if the Merger is
consummated, obtain payment, in cash, for the fair market value of such holder's
shares by complying with the requirements of Sections 490.1301 through 490.1331
of the IBCA. "Fair Value" is defined in the IBCA as "the value of the Shares
immediately before the effectuation of the corporate action to which dissenters
object, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable." Holders of Common
Shares are not eligible to exercise their dissenters' rights unless they are
stockholders on the Record Date and have not voted in favor of the Merger.
Before the taking of the vote on the Merger at the Special Meeting,
each dissenting stockholder must file with the Company a written objection to
the Merger stating that the stockholder intends to demand payment in respect of
the shares of any class held by it if the Merger is consummated. A written
objection must be filed with the Company by holders of Common Shares who wish to
dissent even if they vote against the Merger. Such written objections should be
addressed to: Sally J. Malloy, Corporate Secretary, ALLIED Group, Inc., 701
Fifth Avenue, Des Moines, Iowa 50391-2000.
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Within ten days after the Special Meeting, the Company must provide
written notice (the "Dissenters' Notice") to each dissenting stockholder that
the Merger has been authorized. To exercise dissenters' rights, each dissenting
stockholder must, within the time period specified in the Dissenters' Notice
that the Merger has become effective, mail a written demand for payment for such
dissenting stockholder's Common Shares. Such written demands should be sent to:
Sally J. Malloy, Corporate Secretary, ALLIED Group, Inc., 701 Fifth Avenue, Des
Moines, Iowa 50391-2000. Subject to the following paragraph, at the Effective
Time or upon receipt of a payment demand, whichever occurs later, the Company
must pay to each dissenting stockholder the estimated fair value for such
dissenting stockholder's shares, plus accrued interest.
In the event that the Company and any dissenting stockholder are
unable to agree as to fair value, the Company must pay the amount demanded
unless within 60 days the Company commences a court proceeding in the district
court of Polk County, Iowa, demanding a determination of the value of the shares
of all dissenting stockholders who have not agreed with the Company as to the
fair value of their shares. All dissenting stockholders, whether or not
residents of the State of Iowa, will be parties to any court proceeding that is
commenced by the Company.
A negative vote on the Merger does not constitute a "written
objection" to be filed by a dissenting stockholder. A dissenting stockholder's
abstention from voting on the Merger or failure to vote on the Merger will not
constitute a waiver of such stockholder's rights under Sections 490.1301 through
490.1331 of the IBCA, provided that a written objection has been properly filed.
A vote in favor of the Merger will constitute a waiver of such stockholder's
dissenters' rights, however, even if a written objection has been filed.
A dissenting stockholder's objections to the Merger or demand for
payment for its shares may be made by facsimile transmission, provided such
facsimile is confirmed by a written objection or demand, as the case may be,
sent by certified or registered mail to the address specified above within 24
hours after transmission of the facsimile. Facsimile communications should be
addressed to: Sally J. Malloy, Corporate Secretary, ALLIED Group, Inc., 701
Fifth Avenue, Des Moines, Iowa 50391-2000, and the appropriate facsimile
connection is to (515) 280-4399.
For a discussion of the Federal income tax consequences of receipt of
payment for shares upon exercise of dissenters' rights, see "THE MERGER --
Certain United States Federal Income Tax Consequences."
THE MERGER AGREEMENT
The following is a summary of the terms and conditions of the Merger
Agreement. Any references to the Merger Agreement set forth below or included
elsewhere in this Information Statement are qualified in their entirety by
reference to the Merger Agreement (attached hereto as Annex I), which is
incorporated herein by reference. Terms that are not otherwise defined in this
summary shall have the meanings set forth in the Merger Agreement. Stockholders
are strongly advised to read the Merger Agreement in its entirety prior to
voting.
THE OFFER
In the Merger Agreement, Nationwide agreed, subject to certain
conditions, and among other things, to amend the Offer to increase the purchase
price offered from $47 per Common Share to $48.25 per Common Share net to the
seller in cash without interest. The Offer expired on September 30, 1998. Having
been satisfied that the Minimum Condition, the Insurance Regulatory Condition,
and the other Conditions to the Offer had been met, Acquisition Sub timely
accepted for payment, and paid for, all Common Shares validly tendered and not
withdrawn pursuant to the Offer.
THE MERGER
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The Merger Agreement provides that, following the satisfaction or
waiver of the conditions set forth therein, Acquisition Sub will be merged with
and into the Company, with the Company continuing as the Surviving Corporation,
and each Common Share then outstanding (other than Common Shares then owned by
Nationwide or Acquisition Sub, Common Shares held as treasury shares by the
Company and Dissenting Shares, as defined below) will, by virtue of the Merger
and without any action by the holder thereof, be converted into the right to
receive $48.25 per Common Share, net to the seller in cash, without interest
thereon, upon the surrender of the Certificate formerly representing such Common
Shares.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions set forth in the Merger 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. The parties to the Merger
Agreement agreed to use reasonable best efforts to assure that the filings
contemplated by the Merger Agreement are made, and the Effective Time occurs, as
soon as practicable.
EXCHANGE OF CERTIFICATES AND PAYMENT OF MERGER CONSIDERATION
Nationwide has selected _____________ as the Paying Agent, with whom
it shall cause Acquisition Sub to deposit, for the benefit of the holders of
Common Shares, cash in an amount equal to the aggregate Merger Consideration.
The Merger Agreement provides that, 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. 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 the Company, 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 surrendered, each
Certificate representing Common Shares (other than a Certificate representing
Common Shares to be cancelled 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 interest.
The Merger Agreement further provides that, 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, 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.
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The Merger Consideration paid upon the surrender for exchange of
Certificates representing Common Shares shall be deemed to have been issued and
paid in full satisfaction of all rights pertaining to the Common Shares
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 the Company on such Common Shares in accordance with the Merger
Agreement or prior to the date of the Merger Agreement and which remain unpaid
as of the Effective Time. Any portion of the Payment Fund that 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 the Merger requirements 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
the Common Shares.
None of Nationwide, Acquisition 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.
DISSENTING STOCKHOLDERS' RIGHTS
The Merger Agreement provides that any 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 has not withdrawn such demand or
otherwise forfeited appraisal rights ("Dissenting Shares") will not be converted
into or represent the right to receive the Merger Consideration. Such
shareholders shall be entitled to receive payment of the appraised value of such
Common Shares held by them in accordance with the Sections 490.1301 through
490.1331 of the IBCA, 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 the IBCA
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 of the Certificate or
Certificates that formerly evidenced such Common Shares. The Company has agreed
to give Nationwide prompt notice of any demands of appraisal received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the IBCA and received by the Company, and Nationwide has the right to
participate in all negotiations and proceedings with respect to such demands.
The Company has further agreed that, prior to the Effective Time, it 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.
The procedures for exercising rights of appraisal are set forth above
under "THE MERGER-- Dissenting Stockholders' Rights." In addition, a copy of
Sections 490.1301 through 490.1331, inclusive, of the IBCA is attached hereto as
Annex II.
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
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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 Acquisition 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, 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
Common 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 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 ALLIED Group Benefit Plan 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
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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) 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 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 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 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
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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.
STOCKHOLDER APPROVAL
Because Nationwide and Acquisition Sub control more than 50% of the
votes represented by the Shares, there is no need to solicit proxies from other
Company stockholders. Accordingly, this Information Statement has been prepared
in lieu of a proxy statement.
ACCESS TO INFORMATION
Pursuant to the Merger Agreement, subject to applicable law, the
Company (a) shall afford to Nationwide's and Acquisition 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 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 Acquisition 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 Acquisition Sub may
reasonably request. Unless otherwise required by law, Nationwide and Acquisition
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, Acquisition Sub or their
Representatives. In the event of the termination of the Merger Agreement for any
reason, Nationwide will, and will cause Acquisition Sub and their respective
Representatives to, return to the Company all copies of written information
furnished by the Company or its Representatives to Nationwide, Acquisition Sub
or their Representatives and destroy all memoranda, notes and other writings
prepared by Nationwide, Acquisition Sub or their Representatives based upon or
including the information furnished by the Company or any of its Representatives
to Nationwide, Acquisition Sub or their Representatives (and Nationwide will
certify to the Company that such destruction has occurred) and neither
Nationwide nor Acquisition Sub shall use any such information
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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 agreed 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
agreed to use their reasonable best efforts to coordinate and cooperate during
the regulatory approval process.
CERTAIN LITIGATION
Nationwide agreed to 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.
BOARD OF DIRECTORS; CORPORATE GOVERNANCE
The Merger Agreement provides that, promptly upon acceptance for
payment of the Common Shares by Acquisition Sub pursuant to the Offer,
Acquisition Sub shall be entitled to designate such number of directors on the
Board of Directors of the Company as will give Acquisition 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 Acquisition 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 Acquisition Sub a majority of such directors or committee, and the
Company shall, at such time, cause Acquisition 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 obtained the resignations of _______________,
______________ and ______________ effective October ___, 1998, and elected the
Acquisition Sub Designees (other than Mr. Andersen, who was already a member of
the Board) to the Board. See Information Statement Pursuant to Section 14(f) of
the Securities Exchange Act of 1934 and Rule 14F-1 Thereunder filed by the
Company on June 12, 1998.
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TREATMENT OF STOCK OPTIONS; CERTAIN BENEFITS; INDEMNIFICATION AND INSURANCE
The Merger Agreement provides certain rights to officers, employees and
former employees of the Company with respect to the exercise and vesting of
stock options, the continuation of compensation and benefits, and the
maintenance of indemnification rights and insurance coverage. See "THE
MERGER--ALLIED Group Stock Options," "THE MERGER--Continuation of ALLIED Group
benefits," and "THE MERGER--Indemnification and Insurance."
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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 OF THE MERGER AGREEMENT
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 the
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Company: (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 Common
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 Acquisition 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 Common 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.
The Company will pay a $30 million termination fee in immediately
available funds by wire transfer to an account designated by Nationwide
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. In
the event of a termination by Nationwide for a willful breach of a
representation or warranty, the Company shall pay Nationwide $10 million.
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.
40
<PAGE> 45
41
<PAGE> 46
PLANS FOR THE COMPANY
In connection with the Offer, Nationwide and Acquisition Sub have
reviewed, on the basis of publicly available information, various business
strategies that they might consider in the event that Nationwide acquires
control of the Company. Nationwide intends to expand the Company's business and
utilize the Company's infrastructure and capabilities to improve the performance
of Nationwide's existing property/casualty operations. Nationwide believes the
acquisition will provide immediate benefits from improved geographic
distribution of risk, resulting in more stable underwriting results and lower
reinsurance costs. In addition, Nationwide intends to capitalize on the
Company's independent agency distribution, agency interface technology and
commercial underwriting and product management expertise. Nationwide expects to
identify significant business opportunities between the Company's Western
Heritage Insurance Company subsidiary and Scottsdale Insurance Company,
Nationwide's excess/surplus lines subsidiary, and between the Company's and
Nationwide's agribusiness insurance operations. Nationwide believes that, in the
aggregate, the Merger will result in increased growth and investment in the
Company and its operations. Except as indicated in this Information Statement
and based upon publicly available information, neither Nationwide nor
Acquisition Sub has any present plans or proposals which relate to or would
result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries,
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business.
GOING PRIVATE TRANSACTIONS
The SEC has adopted Rule 13e-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which is applicable to certain "going
private" transactions. Acquisition Sub does not believe that Rule 13e-3 will be
applicable to the Merger unless the Merger is consummated after September 30,
1999, one year after the expiration of the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
fairness of the Merger and the consideration offered to minority stockholders in
such transaction be filed with the SEC and disclosed to stockholders prior to
the consummation of the Merger.
DIVIDENDS AND DISTRIBUTIONS
The Merger Agreement provides that the Company shall not declare, set
aside, or pay any dividend or other distribution with respect to the Common
Shares or the Preferred Shares (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 the Company's capital stock. The Merger Agreement
further provides that 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.
42
<PAGE> 47
CERTAIN INFORMATION WITH RESPECT TO THE COMPANY'S STOCK
The Common Shares are quoted on the New York Stock Exchange ("NYSE")
under the symbol GRP. The last reported sale price of the Common Shares on June
3, 1998 (the last full trading day prior to the public announcement of the
execution of the Merger Agreement) on the NYSE was $46 3/16 per Common Share.
The last reported sale price of the Common Shares on September 28, 1998 was
$48 1/8. The Preferred Shares, all of which are held by Nationwide, are not
publicly traded.
The following table sets forth, for the periods indicated, the high
and low sales prices per Common Share and the amount of cash dividends paid per
Common Share.
<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1996:
First Quarter......................... 19 2/3 15 9/16 0.09 3/4
Second Quarter........................ 19 1/3 15 49/64 0.09 3/4
Third Quarter......................... 19 7/32 14 57/64 0.09 3/4
Fourth Quarter........................ 22 5/32 16 57/64 0.10
1997:
First Quarter......................... 25 3/4 20 2/3 0.11 1/3
Second Quarter........................ 27 1/2 22 5/32 0.11 1/3
Third Quarter......................... 35 51/64 25 5/32 0.11 1/3
Fourth Quarter........................ 33 53/64 26 1/4 0.12
1998:
First Quarter......................... 32 3/4 26 0.13
Second Quarter........................ 46 13/16 25 0.13
Third Quarter (through September 28).. 48 1/8 46 11/16 0.13
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial information presented below under the captions
"Income Statement Data" and "Balance Sheet Data" for, and as of, each of the
years in the five-year period ended December 31, 1997, has been derived from the
consolidated financial statements of ALLIED Group, Inc. and subsidiaries, which
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The selected financial information presented below
for, and as of, the six-month periods ended June 30, 1998 and 1997 has been
derived from the unaudited consolidated financial statements of ALLIED Group,
Inc. and subsidiaries. Results for interim periods include all adjustments,
consisting only of normal recurring adjustments, which management considers
necessary for the fair presentation of the results for such periods; however,
they are not necessarily indicative of results for the full year. This
information should be read in conjunction with the Company's consolidated
financial statements, the related notes, and the independent auditors report
thereon incorporated herein by reference.
<TABLE>
<CAPTION>
At or for the Six Months Ended
June 30,
------------------------------------
1998 1997
----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Income Statement Data
Premiums earned
Personal $ 189,346 $ 170,559
Commercial 84,371 80,846
----------- -----------
Total property-casualty 273,717 251,405
Excess & Surplus Lines 16,883 16,338
----------- -----------
Total 290,600 267,743
Investment income 26,869 25,526
Realized investment gains 328 ---
Other income 35,206 29,182
----------- -----------
Total revenues 353,003 322,451
Losses and expenses 312,629 277,989
----------- -----------
Income from continuing operations before
income taxes and minority interest 40,374 44,462
Income taxes 11,364 12,638
----------- -----------
29,010 31,824
Minority interest in net income
of consolidated subsidiary 261 227
----------- -----------
Net income $ 28,749 $ 31,597
=========== ===========
Diluted earnings per share
Net income $ 0.88 $ 0.97
=========== ===========
Realized investment gain $ 0.01 $ ---
=========== ===========
Balance Sheet Data
Total investments $ 926,733 $ 851,106
Total assets $ 1,299,637 $ 1,140,504
Notes payable $ 107,189 $ 50,944
Guarantee of ESOP obligations $ 20,530 $ 24,180
Shares outstanding (in thousands)
Preferred shares 1,827 1,827
Common shares 30,119 20,299
Other Data
Book value per share $ 13.97 $ 12.30
Closing stock price per share $ 46.81 $ 25.33
Property-casualty wind
and hail losses $ 0.69 $ 0.33
Dividends paid $ 0.26 $ 0.23
Return on average book
value per share 14.4% 16.5%
Pretax investment yield 5.8% 6.1%
Effective tax rate 28.15% 28.42%
Cash dividends to closing
stock price 1.1% 1.8%
Closing stock price to
earnings ratio 26.6 13.1
Property-casualty statutory
combined ratio 97.6 93.8
</TABLE>
<TABLE>
<CAPTION>
At or for the year ended December 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Premiums earned
Personal $ 350,231 $ 311,511 $ 279,908 $ 252,916 $ 225,594
Commercial 164,072 154,700 145,930 133,816 118,728
----------- ----------- ----------- ----------- -----------
Total property-casualty 514,303 466,211 425,838 386,732 344,322
Excess & Surplus Lines 33,294 27,314 29,661 25,786 24,014
----------- ----------- ----------- ----------- -----------
Total 547,597 493,525 455,499 412,518 368,336
Investment income 51,124 49,222 47,242 41,070 39,030
Realized investment gains 391 49 505 2,888 1,396
Other income 65,570 53,558 49,519 50,888 73,680
----------- ----------- ----------- ----------- -----------
Total revenues 664,682 596,354 552,765 507,364 482,442
Losses and expenses 572,770 525,043 478,917 440,665 425,685
----------- ----------- ----------- ----------- -----------
Income from continuing operations
before income taxes and
minority interest 91,912 71,311 73,848 66,699 56,757
Income taxes 25,973 20,227 21,471 19,074 16,835
----------- ----------- ----------- ----------- -----------
65,939 51,084 52,377 47,625 39,922
Minority interest in net income
of consolidated subsidiary 503 --- --- --- ---
----------- ----------- ----------- ----------- -----------
Net income $ 65,436 $ 51,084 $ 52,377 $ 47,625 $ 39,922
=========== =========== =========== =========== ===========
Diluted earnings per share
Net income $ 2.01 $ 1.51 $ 1.54 $ 1.40 $ 1.17
=========== =========== =========== =========== ===========
Realized investment gain $ .01 $ --- $ .01 $ .06 $ .02
=========== =========== =========== =========== ===========
Balance Sheet Data
Total investments $ 908,244 $ 819,645 $ 772,299 $ 655,906 $ 606,511
Total assets $ 1,201,233 $ 1,077,659 $ 1,010,598 $ 892,751 $ 855,525
Notes payable $ 56,938 $ 34,094 $ 39,465 $ 43,541 $ 82,459
Guarantee of ESOP obligations $ 22,380 $ 24,370 $ 26,270 $ 28,150 $ 29,500
Shares outstanding (in thousands)
Preferred shares 1,827 1,827 4,820 4,981 5,070
Common shares 30,532 20,383 9,445 9,000 9,026
Other Data
Book value per share $ 13.44 $ 11.59 $ 10.77 $ 8.75 $ 7.99
Closing stock price per share $ 28.63 $ 21.75 $ 16.00 $ 11.00 $ 11.67
Property-casualty wind
and hail losses $ .59 $ .82 $ .60 $ .51 $ .40
Dividends paid $ .46 $ .39 $ .30 $ .27 $ .23
Return on average book
value per share 16.3% 13.7% 15.9% 16.8% 16.1%
Pretax investment yield 6.0% 6.3% 6.6% 6.5% 7.1%
Effective tax rate 28.3% 28.4% 29.1% 28.6% 29.7%
Cash dividends to closing
stock price 1.6% 1.8% 1.9% 2.4% 1.9%
Closing stock price to
earnings ratio 14.2 14.4 10.4 7.9 10.0
Property-casualty statutory
combined ratio 94.4 97.7 95.7 97.1 99.3
</TABLE>
43
<PAGE> 48
<PAGE> 49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the stockholders known to management to be
the beneficial owners of the Preferred Shares and more than 5% of the
outstanding Common Shares as of October 9, 1998.
<TABLE>
<CAPTION>
Percent of
Name and Address Amount and Nature Percent Total Voting
Title of Class of Beneficial Owner of Beneficial Ownership of Class Securities
- -------------- ------------------- ----------------------- -------- ----------
<S> <C> <C> <C> <C>
6-3/4% Preferred Nationwide Mutual 1,827,222 shares 100% 16.8%
Stock Insurance Company(1)
One Nationwide Plaza
Columbus, OH 43215
Common Stock Nationwide Mutual _________ shares _____ _____
Insurance Company
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
- -----------
(1) The Company and Nationwide, as successor in interest to ALLIED Mutual,
are parties to a Stock Rights Agreement which expires in 2005. Under
the Stock Rights Agreement, Nationwide is entitled to nominate and the
Company is required to use its best efforts to cause the election or
retention of a number of members of the Company's Board of Directors in
proportion to Nationwide's percentage ownership of the total number of
shares of the Company's voting stock outstanding at the time of
nomination. In addition, the Company is required to elect to its
Executive Committee at least one Company director who has been
nominated by Nationwide but who is not an officer or employee of
Nationwide, and the Company must limit the number of directors serving
on the Executive Committee to five at any time. The Stock Rights
Agreement restricts the ability of Nationwide to grant proxies to other
than affiliated individuals and to solicit other stockholders of the
Company. Nationwide also is prohibited from initiating or accepting a
tender offer for Common Shares except under certain conditions.
Nationwide has incidental registration rights and three demand
registration rights with respect to the Preferred Shares.
44
<PAGE> 50
The table below sets forth information provided by the individuals
named therein as to the amount of the Company's Common Stock beneficially owned
by the directors and executive officers of the Company, individually, and the
directors and executive officers as a group, all as of September 1, 1998. The
issued and outstanding Common Shares and Preferred Shares as of September 1,
1998 were 30,172,534 shares and 1,827,222 shares, respectively.
<TABLE>
<CAPTION>
Amount and Nature of Percent Voting
Name of Beneficial Owner Beneficial Ownership (1) of Class (1) Percentage
------------------------ ------------------------ ------------ ----------
<S> <C> <C> <C> <C>
John E. Evans 366,766 1.2% 1.0%
James W. Callison 26,715 * *
Harold S. Carpenter 83,329 (4) * *
Charles I. Colby 23,249 (5) * *
Harold S. Evans 47,994 (6) * *
Richard O. Jacobson 6,083 * *
John P. Taylor 22,705 * *
William E. Timmons 14,050 * *
Donald S. Willis 31,130 * *
Douglas L. Andersen 239,679 (2)(3) * *
Stephen S. Rasmussen 102,850 (2)(3) * *
Jamie H. Shaffer 196,925 (2)(3) * *
Steve A. Biggi 62,199 (2)(3) * *
Scott E. Reddig 1,346 * *
All directors and
executive officers
as a group (24 persons) 1,606,457 (2)(3)(4)(5)(6) 5.4% 4.5%
</TABLE>
- -----------
(1) Except as noted, all persons have sole voting and investment power with
respect to the shares reported; asterisks indicate ownership of less
than 1%.
(2) Includes the following number of shares that are also reported as
beneficially owned by the ESOP Trustee: Mr. Andersen, 56,301 shares;
Mr. Rasmussen, 29,961 shares; Mr. Shaffer, 58,161 shares; Mr. Biggi,
14,086 shares; Mr. Reddig, 1,244 shares; and all executives as a group
348,329 shares. Allocated shares are voted by the ESOP Trustee in
accordance with the direction of the ESOP participant. Generally,
unallocated shares and allocated shares as to which no direction is
made by the participant are voted by the ESOP Trustee in the same
percentage as the allocated shares as to which directions are received
by the ESOP Trustee.
(3) Includes the following number of shares which the following persons
have the right to acquire within 60 days of September 1, 1998 pursuant
to stock options granted under the ALLIED Group, Inc. Restated and
Amended Stock Option Plan. ALLIED Group, Inc. Nonqualified Stock Option
Plan, and ALLIED Group, Inc. Long-Term Management Incentive Plan:
Mr. Andersen, 62,624; Mr. Rasmussen, 13,688; Mr. Shaffer, 23,436;
Mr. Biggi, 0; Mr. Reddig, 0; All officers, 201,348.
45
<PAGE> 51
47,623 shares; Mr. Rasmussen, 13,688 shares; Mr. Shaffer, 23,436
shares; Mr. Biggi, 7,308 shares; and all executive officers as a group,
244,363 shares.
(4) Includes 57,375 shares of Common Stock owned by Superior Gas and
Chemical, Inc.
(5) Includes 15,750 shares of Common Stock owned by Charles I. Colby & Ruth
Colby Trust #1, Ruth Colby Trust A, and Charles I. Colby and Ruth Colby
Family Trust, each of which Charles I. Colby is Trustee and
Beneficiary.
(6) Includes 34,266 shares of Common Stock owned by the Bethany Foundation,
a nonprofit corporation, of which Harold S. Evans is President.
EXPERTS
The consolidated financial statements of ALLIED Group, Inc. and
subsidiaries as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
OTHER MATTERS
The Board knows of no business which will be presented for
consideration at the Special Meeting other than that described above.
Dated: October , 1998
By Order of the Board of Directors,
Sally J. Malloy
Secretary
46
<PAGE> 52
ANNEX I
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> 53
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> 54
(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> 55
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> 56
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> 57
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
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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.
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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.
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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.
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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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its reasonable best efforts to hold the Shareholders Meeting as soon as
practicable after the date hereof.
Section 3.3 Filings; Other Action. As promptly as practicable,
(i) Allied, Nationwide and Sub shall make all filings and submissions under the
HSR Act, (ii) Nationwide shall make all filings required by the insurance
regulatory authorities in Iowa and Ohio and deliver notices and consents to
jurisdiction to such state insurance departments, each as reasonably may be
required to be made in connection with this Agreement and the transactions
contemplated hereby, and (iii) Allied and Nationwide shall cooperate in all
reasonable respects with each other in (A) determining if other filings are
required to be made prior to the Effective Time with, or if other material
consents, approvals, permits, notices or authorizations are required to be
obtained prior to the Effective Time from any Governmental Entity in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (B) timely making all such filings, giving
all such notices, and timely seeking all such consents, approvals, permits,
notices or authorizations as required by applicable law. In connection with the
foregoing, Allied will provide Nationwide, and Nationwide will provide Allied,
with copies of correspondence, filings or communications (or memoranda setting
forth the substance thereof) between such party or any of its representatives,
on the one hand, and any Governmental Entity or members of their respective
staffs, on the other hand, with respect to this Agreement and the transactions
contemplated hereby. Each of Nationwide and Allied acknowledge that certain
actions may be necessary with respect to the foregoing in making notifications
and obtaining clearances, consents, approvals, waivers or similar third party
actions which are material to the consummation of the transactions contemplated
hereby, and each of Nationwide and Allied agree to take such action as is
reasonably necessary to complete such notifications and obtain such clearances,
approvals, waivers or third party actions.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Allied represents and warrants to Nationwide and Sub as follows:
Section 4.1 Organization and Qualification.
(a) Allied is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Iowa and has full corporate
power, authority and legal right to conduct its Business as it is currently
being conducted. Allied is duly qualified to do business, and is in good
standing, in the jurisdictions where the nature of its business or the ownership
or leasing of its properties makes such qualification necessary, except where
the failure to be so qualified or in good standing would not, individually or in
the aggregate, have a Material Adverse Effect. Each of the Allied Subsidiaries
is listed in the Allied Disclosure Schedule.
(b) Each Allied Insurer is listed in the Allied Disclosure
Schedule. Each Allied Insurer (i) possesses an Insurance License in each
jurisdiction in which such Allied Insurer is required to possess an Insurance
License and (ii) is duly authorized in its jurisdiction of incorporation and
each other applicable jurisdiction to write each line of business reported as
being written in the Allied SAP Statements for 1997. All such Insurance
Licenses, including, but not limited to, authorizations to transact reinsurance,
are listed and described in the Allied Disclosure Schedule and are in full force
and effect without amendment, limitation or restriction, other than as described
in the Allied Disclosure Schedule, and neither Allied nor any Allied Insurer has
Knowledge of any event, inquiry or Proceeding which is reasonably likely to lead
to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such Insurance License.
(c) Copies of the articles of incorporation and by-laws of Allied
have heretofore been delivered to Nationwide and copies of the articles of
incorporation and by-laws (or other constitutive documents) of each of the
Allied Subsidiaries have heretofore been delivered to Nationwide, and such
copies are accurate and complete as of the date hereof.
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Allied does not have any other constitutive documents, other than its articles
of incorporation and by-laws.
(d) Except for the Allied Subsidiaries, Allied does not directly
or indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
that directly or indirectly conducts any activity which is material to Allied.
Section 4.2 Capitalization of Allied. The authorized capital
stock of Allied consists of 25,000,000 Common Shares and 7,500,000 Preferred
Shares. At the close of business on June 2, 1998 (i) 4,420,974 Common Shares
were issued and outstanding; (ii) no Common Shares were held as treasury stock;
(iii) no Common Shares were held by Allied Subsidiaries; (iv) 193,686 Common
Shares were reserved for issuance upon the exercise of issued options to
purchase Common Shares; and (v) 2,330,772 6.75% Series Preferred Shares were
issued and outstanding and 104,726 Series A ESOP Preferred Shares were issued
and outstanding. All outstanding shares of capital stock of Allied are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. No bonds, debentures, notes or other indebtedness of Allied
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which the shareholders of Allied may
vote are issued or outstanding. The Allied Disclosure Schedule sets forth the
following information with respect to each Employee Option and Restricted Stock
award which has been forfeited by an eligible employee: (x) the name of the
recipient, (y) the number of Common Shares subject to such Employee Option and
Restricted Stock award, and (z) the applicable exercise price for each Employee
Option. Except as set forth above or in the Allied Disclosure Schedule, Allied
does not have any outstanding option, warrant, subscription or other right,
agreement or commitment which either obligates Allied to issue, sell or
transfer, repurchase, redeem or otherwise issue, acquire or vote any shares of
capital stock of Allied, or which restricts the transfer of Common Shares.
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Section 4.3 Subsidiaries.
(a) The Allied Disclosure Schedule sets forth the name of each
Subsidiary and the state or jurisdiction of its incorporation and indicates
which Allied Subsidiaries are insurance companies. Each Allied Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the corporate power and
authority and all necessary government approvals to own, lease and operate its
properties and to carry on its Business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority or necessary governmental approvals would not individually or in
the aggregate have a Material Adverse Effect. Each Allied Subsidiary is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not individually or in the aggregate have a Material
Adverse Effect. Except as disclosed in the Allied Disclosure Schedule, each of
the Allied Subsidiaries that is an insurance company is (a) duly licensed or
authorized as an insurance company in its jurisdiction of incorporation and (b)
duly licensed or authorized as an insurance company and in good standing in each
other jurisdiction where it is required to be so licensed or authorized as set
forth in Schedule T to the most recent Annual Statement. The Allied subsidiaries
(other than the Allied Subsidiaries), if considered as a whole, would not
constitute a "significant subsidiary" within the meaning of Rule 1-02 of
Regulation S-X adopted pursuant to the regulations promulgated by the SEC.
(b) The Allied Disclosure Schedule sets forth, as to each Allied
Subsidiary, its authorized capital stock and the number of its issued and
outstanding shares of capital stock. Allied is, directly or indirectly, the
record and beneficial owner of all of the outstanding shares of capital stock of
each of the Allied Subsidiaries, and no capital stock of any Allied Subsidiary
is or may become required to be issued by reason of any options,
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warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock of any Subsidiary, and there are
no contracts, commitments, understandings or arrangements by which Allied or any
Allied Subsidiary is or may be bound to issue, redeem, purchase or sell
additional shares of capital stock of any Allied Subsidiary or securities
convertible into or exchangeable or exercisable for any such shares. All of such
shares so owned by Allied are validly issued, fully paid and nonassessable and
are owned by it or by another wholly-owned Allied Subsidiary thereof free and
clear of all liens, claims, encumbrances, restraints on alienation, or any other
restrictions with respect to the transferability or assignability thereof (other
than restrictions on transfer imposed by federal or state securities laws).
Section 4.4 Authority Relative to this Agreement.
(a) Allied has full corporate power, authority and legal right to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved and
authorized by the Board of Directors of Allied. Except for any required approval
of this Agreement by the shareholders of Allied, no other corporate proceedings
on the part of Allied are necessary to authorize this Agreement and the
transactions contemplated hereby. The affirmative vote of at least the majority
of the votes entitled to be cast by shareholders of Allied present or
represented by properly executed proxy at the meeting called pursuant to Section
3.2 hereof, if required, is the only vote of shareholders of Allied necessary to
approve this Agreement and the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and
delivered by Allied and (assuming this Agreement is a legal, valid and binding
obligation of Nationwide) constitutes a legal, valid and binding agreement of
Allied enforceable against Allied in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer,
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reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(c) Based upon the recommendation of the Coordinating Committee
of the Board of Directors of Allied (the "Special Committee") appointed by the
Board of Directors of Allied in connection with the Merger, the Board of
Directors of Allied (i) has declared that this Agreement, the Offer, the Merger
and the other transactions contemplated hereby and thereby are, as of the date
hereof, advisable and in the best interests of Allied, (ii) has authorized,
approved and adopted this Agreement, the Offer, the Merger and the other
transactions contemplated hereby and thereby, and (iii) has received the opinion
of the Special Committee's financial advisor, Fox-Pitt, Kelton Inc., to the
effect that the consideration to be received by the shareholders in the Offer
and Merger, taken together, is fair to such shareholders from a financial point
of view. It is agreed and understood that such opinion is for the benefit of the
Special Committee and Allied's Board of Directors and may not be relied on by
Nationwide.
Section 4.5 No Violation; Governmental Filings.
(a) Except as set forth in the Allied Disclosure Schedule, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not (i) constitute a breach or
violation of or default under the articles of incorporation or the by-laws (or
similar organizational documents) of Allied or of any of the Allied
Subsidiaries, (ii) violate, conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien upon
any of the Assets of Allied or of any of the Allied Subsidiaries under any of
the terms, conditions or provisions of any Contract to which Allied or any such
Allied Subsidiary is a party or to which it or any of its Assets may be subject
or (iii) constitute a breach or violation of or default under any Environmental
Permit, Law or License to which Allied or any of the Allied Subsidiaries is
subject, other
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than, in the case of clauses (ii) and (iii), events or other matters that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.
(b) Except for (i) the Governmental Approvals set forth in the
Allied Disclosure Schedule, (ii) the filing of this Agreement with and the
approval of such by the Iowa Commissioner and Iowa Attorney General under the
Iowa Insurance Law and such other applications, registrations, declarations,
filings, authorizations, Orders, consents and approvals as may be required under
the Laws of other jurisdictions listed in the Allied Disclosure Schedule, (iii)
the approval of this Agreement by the Members of Allied, if required by the Iowa
Commissioner, as contemplated by Section 3.2 hereof, (iv) the filings required
under the HSR Act and the expiration or other termination of any waiting period
applicable to the Merger under such act, (v) the filings pursuant to Section 2.3
hereof, (vi) the filing of appropriate documents with and such consents as may
be required under the Investment Company Act and the Investment Advisors Act,
(vii) the filing with the SEC of (x) a proxy statement relating to the approval
by the shareholders of Allied of the Merger (the "Proxy Statement"), and (y)
such reports under the Exchange Act, as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (viii) the filing
of the certificate of merger with the Iowa Secretary of State and appropriate
documents with the relevant authorities of other states in which Allied is
qualified to do business and (ix) any consent or filing that is disclosed in the
Allied Disclosure Schedule or that would not otherwise be required to be
disclosed pursuant to Section 4.5(a) hereof, no consent, approval, permit,
notice, Order or authorization of, or registration, application, declaration or
filing with (each a "Consent or Filing") any Person is required with respect to
Allied or any Allied Subsidiary in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
except for such Consents or Filings the failure of which to make or obtain would
not, individually or in the aggregate, prevent or be a material impediment to
the consummation of the transactions contemplated hereby or have a Material
Adverse Effect.
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Section 4.6 SAP Statements. Allied has previously delivered to
Nationwide true and complete copies of the following:
(a) the Annual Statements for each Allied Insurer as of and for
the years ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statements for each Allied Insurer as of and
for the calendar quarter ended March 31, 1998;
(c) any supplemental or separate statutory annual statements or
quarterly statements for each Allied Insurer for any of the periods ended
December 31, 1995, 1996 or 1997 or March 31, 1998, that are filed with any
insurance Governmental Entity and that differ from the Annual Statements or the
Quarterly Statements described in Section 4.6(a) or (b) hereto; and
(d) the audited SAP balance sheets of each Allied Insurer as of
December 31, 1995, 1996 and 1997 and the related audited summary of operations
and statements of change in capital and surplus and cash flow of such Allied
Insurer for each such years, together with the notes related thereto and the
reports thereon of KPMG Peat Marwick, LLP (collectively with the items described
in Section 4.6(a), (b) and (c), the "Allied SAP Statements").
Since December 31, 1997, each Allied Insurer has filed all SAP
Statements required to be filed with or submitted to the appropriate regulatory
authorities, except for such filings or submissions, the failure to so file or
submit is not individually or in the aggregate, reasonably likely to have a
Material Adverse Effect.
Each Allied SAP Statement complied (and, as to SAP Statements
filed after the date of this Agreement, will comply) in all material respects
with all applicable Laws when so filed, and all material deficiencies with
respect to any such Allied SAP Statement, of which Allied has Knowledge, have
been cured or corrected. Each Allied SAP Statement
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(and the notes related thereto) referred to in Section 4.6(a), (b), and (d)
hereof was prepared (and, as to SAP Statements filed after the date of this
Agreement, will be prepared) in accordance with SAP and presents (and, as to SAP
Statements filed after the date of this Agreement, will present) fairly the
financial position of the respective Allied Insurers as of the respective dates
thereof and the related summaries of operations and changes in capital and
surplus and cash flow of the respective Allied Insurers for the respective
periods covered thereby. To the Knowledge of Allied, each Allied SAP Statement
(including the notes related thereto) referred to in Section 4.6(c) hereof was
prepared (or, in the case of similar SAP Statements filed after the date of this
Agreement, will be prepared) in accordance with the statutory accounting
practices required by the insurance Governmental Entity in the jurisdiction in
which such statement was (or will be) filed.
Section 4.7 GAAP Statements. Except as set forth in the Allied
Disclosure Schedule, Allied has previously delivered to Nationwide true and
complete copies of the (i) audited GAAP Financial Statements for each of the
Allied Subsidiaries, other than Allied Insurers, for the years ended December
31, 1995, 1996 and 1997 and (ii) unaudited GAAP Financial Statements for each of
the Allied Subsidiaries, other than Allied Insurers, for the three months ended
March 31, 1998 (collectively, the "Allied GAAP Financial Statements"). Each
Allied GAAP Financial Statement was prepared in accordance with GAAP (except, in
the case of such unaudited GAAP Financial Statements, for the absence of notes)
and presents fairly the financial position of the Allied Subsidiaries as to
which such Allied GAAP Financial Statements have been provided as of the
respective dates thereof and the related results of operations and cash flow and
shareholders' interest of such Allied Subsidiaries for the respective periods
covered thereby.
Section 4.8 Reserves. The aggregate actuarial reserves and other
actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of each Allied Insurer as established or reflected in its December 31,
1997 Annual Statement or in the March 31, 1998 Quarterly Statement, (the "Allied
1998 Quarterly Statement") of such
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Allied Insurer: (a)(i) were determined in accordance with generally accepted
actuarial standards consistently applied, (ii) were fairly stated in accordance
with sound actuarial principles and (iii) were based on actuarial assumptions
that are in accordance with or more conservative than those specified in the
related Insurance Contracts; (b) met the requirements of the insurance Laws of
such Allied Insurer's state of domicile and all other applicable jurisdictions;
(c) included provision for all actuarial reserves and related statement items
which ought to be established and (d) were, in the reasonable judgment of
Allied, adequate at such date (under generally accepted actuarial standards
consistently applied) to cover the total amount of all reasonably anticipated
matured and unmatured Liabilities of such Allied Insurer under all outstanding
Insurance Contracts pursuant to which such Allied Insurer has any Liability. To
the Knowledge of Allied, the actuarial opinion delivered to its Board of
Directors with respect to the 1997 Annual Statement exhibits 8, 9, 10 and 11 of
Allied is true, complete and accurate in all material respects. Each of the
Allied Insurers owns Assets that qualify as admitted assets under applicable
insurance Laws in an amount at least equal to the sum of its statutory reserves
and other similar amounts.
Section 4.9 SEC Documents. Allied has timely filed all required
reports, schedules, forms, statements and other documents with the SEC since
January, 1998 (such reports, schedules, forms, statements and other documents
are hereinafter referred to as the "SEC Documents"). As of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Allied included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP
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applied on a consistent basis during the periods presented (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present, in
all material respects, the consolidated financial position of Allied and its
consolidated Allied Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited interim financial statements, to normal year-end audit
adjustments) in accordance with GAAP.
Section 4.10 Absence of Certain Changes or Events. Except as set
forth in the Allied Disclosure Schedule, since December 31, 1997, each of Allied
and the Allied Subsidiaries has conducted its Business only in the ordinary
course of business, consistent with past practice, and there has not occurred
(i) a Material Adverse Effect, or any event or events which, individually or in
the aggregate, are reasonably likely to have a Material Adverse Effect; (ii)
except as required by GAAP or SAP, any material change by Allied in accounting
principles, practices or methods; (iii) any material addition, or any
development involving a prospective material addition, to Allied's consolidated
reserves for future policy benefits or other policy claims and benefits other
than as a result of ordinary sales activities or otherwise in the ordinary
course of business; or (iv) except as required by GAAP or SAP, any material
change in the accounting, actuarial, investment, reserving, underwriting or
claims administration policies, practices, procedures, methods, assumptions or
principles of Allied. Except as set forth in the Allied Disclosure Schedule,
since December 31, 1997, there has not been any increase in the compensation
payable or that could become payable by Allied or any of the Allied Subsidiaries
to officers or key employees or any amendment of any of the compensation and
benefit plans other than increases or amendments in the ordinary course.
Section 4.11 No Undisclosed Liabilities. Except as disclosed in
the Financial Statements delivered to Nationwide pursuant to Sections 4.6 and
4.7 hereof or as set forth in the Allied Disclosure Schedule, neither Allied nor
any of the Allied Subsidiaries has any Liabilities, other than Liabilities
arising since the date of the applicable Financial
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Statement in the ordinary course of business and consistent with past practice
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
Section 4.12 Takeover Statutes. Allied has taken or will take all
actions necessary such that no restrictive provision of any "fair price,"
"moratorium," "control share acquisition," "interested shareholder" or other
similar anti-takeover statute or regulation (including, without limitation,
section 490.1110 of the Iowa Corporation Law) (each a "Takeover Statute") or
restrictive provision of any applicable anti-takeover provision in the charter
or by-laws of Allied is, or at the Effective Time will be, applicable to Allied,
Nationwide, the Common Shares, the Offer, the Merger or any other transactions
contemplated by this Agreement.
Section 4.13 Compliance with Law.
(a) Except as set forth in the Allied Disclosure Schedule,
neither Allied nor any Allied Subsidiary is in violation (or, with notice or
lapse of time or both, would be in violation) of any term or provision of any
Law applicable to it or any of its Assets, the violation of which is,
individually or in the aggregate with all other such violations, reasonably
likely to have a Material Adverse Effect. Allied has delivered to Nationwide all
reports (including, but not limited to, draft reports) of examinations of the
affairs of each Allied Insurer (including, but not limited to, market conduct
examinations) issued by insurance Governmental Entities for any period ending on
a date on or after January 1, 1992; except as set forth in the Allied Disclosure
Schedule, all deficiencies or violations in such reports for any prior period
have been resolved. Except as set forth in the Allied Disclosure Schedule, all
outstanding Insurance Contracts issued or assumed by any Allied Insurer are, to
the extent required by Law, on forms and at rates approved by the insurance
regulatory authorities of the jurisdictions where issued or have been filed with
and not objected to by such authorities within the periods provided for
objection.
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(b) Except as set forth in the Allied Disclosure Schedule,
neither Allied nor any Allied Subsidiary is a party to any Contract with or
other undertaking to, or is subject to any Order by, or is a recipient of any
supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) currently materially adversely affects or is
reasonably likely to have a Material Adverse Effect, or (ii) has been received
since January 1, 1993 and relates to its reserve adequacy or its marketing,
sales, trade or underwriting practices or policies, nor, to the Knowledge of
Allied or of any of the Allied Subsidiaries, has Allied or any of the Allied
Subsidiaries been notified in writing by any Governmental Entity that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such Order, Contract, undertaking, letter or other
written communication.
(c) Allied has implemented procedures and programs which are
reasonably designed to provide assurance that each of Allied, the Allied
Insurers and their respective agents and employees are in compliance in all
material respects with all applicable Laws, including, but not limited to,
advertising, licensing and sales Laws. Allied has previously provided Nationwide
with a true, complete and correct copy of Allied's compliance program and
procedures and, except as previously disclosed to Nationwide, Allied has no
Knowledge of any noncompliance therewith in any material respect.
(d) Allied, each Allied Subsidiary and each other Affiliate of
Allied which is required, and each of their officers, independent contractors,
subagents, consultants and employees who are required by reason of the nature of
their employment by Allied, an Allied Subsidiary or such Affiliate, to be
registered or appointed as an investment advisor, investment adviser
representative, broker-dealer agent, broker-dealer, registered representative,
sales person, insurance agent or insurance producer, commodity trading adviser,
commodity pool operator or real estate broker or salesman with the SEC or the
securities commission or insurance department of any state or any
self-regulatory body or other Governmental Entity or any insurer, is duly
registered or appointed as such and such registration or appointment is in full
force and effect, except where the failure to be
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registered or to have such registration in full force and effect is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect. Except as set forth in the Allied Disclosure Schedule, to the Knowledge
of Allied, none of Allied or any of such other Persons has been enjoined,
indicted, convicted or made the subject of any consent decree or administrative
order on account of any material violation of applicable Law in connection with
such Person's actions in any of the foregoing capacities or, to the Knowledge of
Allied, any enforcement or disciplinary proceeding alleging any such violation
since January 1, 1993. Allied and each Allied Subsidiary which is a
broker/dealer Subsidiary have filed all forms, reports, statements and other
documents required by Law to be filed by them with the SEC, all other reports
(periodic or otherwise) and registration statements, including, without
limitation, reports in connection with sales of variable annuity or variable
life contracts, and all amendments and supplements to all such reports and
registration statements, and all such forms, reports, statements and other
documents did not at the time they were filed (at the time they became effective
and so long as they remain effective in case of registration statements and
amendments thereto) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
Section 4.14 Assets.
(a) Except as set forth in the Allied Disclosure Schedule and
except for Assets disposed of since March 31, 1998 in the ordinary course of
business and consistent with past practice: (i) each of Allied and the Allied
Subsidiaries has good title to all Assets that are disclosed or otherwise
reflected in its March 31, 1998 Quarterly Statement or unaudited GAAP Financial
Statements for the three months ended March 31, 1998, as the case may be, and
all Assets acquired thereafter, and all such Assets are owned by such Persons,
free and clear of all Liens, other than Permitted Liens, and the bonds, notes,
debentures and other evidences of indebtedness that constitute Investment
Assets, disclosed or otherwise reflected in its March 31, 1998 Quarterly
Statement or unaudited GAAP Financial Statements for the three months ended
March 31, 1998, as the case may be, or acquired
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thereafter, are, to the Knowledge of each of Allied and the Allied Subsidiaries,
as of the date of this Agreement, in all material respects collectible in
accordance with the terms of the Investment Assets and the documents relating
thereto; (ii)(A) Allied and each Allied Subsidiary owns good and indefeasible,
marketable fee simple title to, or has a valid leasehold interest in, all real
property used in the conduct of its Business or of a type which would be
required to be specifically disclosed by an Allied Insurer in Schedule A of its
Annual Statement, free and clear of all Liens, other than Permitted Liens; (B)
in the aggregate all real property, other than unimproved land, is, in all
material respects, in working condition, without need for repair and suitable
for its current uses; (C) no improvement on any such real property owned or
leased by Allied or any Allied Subsidiary encroaches upon any real property of
another Person without an appurtenant easement or other legal right allowing
such encroachment, nor encroaches over any applicable set back lines without the
benefit of non-conforming use status, a variance or adequate insurance insuring
against any Liability due to the attempted enforceability of the Law creating
such set back line, the result of which encroachments, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect; and (D)
Allied and each Allied Subsidiary owns, leases or, in all material respects, has
the valid right to use adequate means of ingress and egress to, from and over
all such real property; (iii) Allied and each Allied Subsidiary owns good and
indefeasible title to, or has a valid leasehold interest in or has a valid right
under Contract to use, all personal property that is material to the conduct of
its Business, free and clear of all Liens other than Permitted Liens, and, in
the aggregate, all such personal property is, in all material respects, in good
operating condition and repair, ordinary wear and tear excepted, and is, in all
material respects, suitable and adequate for its current uses; and (iv) Allied
and each Allied Subsidiary has the right to use free and clear of any royalty or
other payment obligations, claims of infringement or alleged infringement or
other Liens, other than Permitted Liens and other than contractual agreements
with respect to licensing and maintenance fees, all Intellectual Property that
is material to the conduct of its Business, all of which (other than related
documentation, manuals, training materials and policy forms), as of the date of
this Agreement, is listed in the Allied Disclosure Schedule; and neither Allied
nor any Allied Subsidiary is in material
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conflict with or violation or infringement of, nor has Allied or any Allied
Subsidiary received any notice of any such conflict with or violation or
infringement of, any asserted rights of any other Person with respect to any
Intellectual Property, including, without limitation, the Intellectual Property
listed in the Allied Disclosure Schedule.
(b) No sales or brokerage commission or fee or other compensation
is or will be payable in connection with any Allied Real Property as a result of
the consummation of the transactions contemplated hereby.
Section 4.15 Environmental Matters.
(a) Except as set forth in the Allied Disclosure Schedule, each
of Allied and the Allied Subsidiaries and, to the Knowledge of each of Allied
and the Allied Subsidiaries, all Allied Real Property (including all owners or
operators thereof) is in substantial compliance in all material respects with
all applicable Environmental Laws, which compliance includes, but is not limited
to, the possession of all Environmental Permits required under Environmental
Laws and compliance with the material terms and conditions thereof, other than
such Allied Real Property in respect of which the failure to comply with
applicable Environmental Laws is not reasonably likely (i) to have a Material
Adverse Effect or (ii) to result in costs of further investigation, clean-up and
related oversight, fines, penalties and third party claims exceeding $250,000 in
any individual case and $2,000,000 in the aggregate during the five-year period
commencing on the date hereof. Except as set forth in the Allied Disclosure
Schedule, neither Allied nor any Allied Subsidiary has received, nor do they
have Knowledge of, any communication (written or oral), whether from a
Governmental Entity, citizens' group, employee or otherwise, that alleges that
Allied or any Allied Subsidiary or any Allied Real Property (including any owner
or operator thereof) is not in such compliance, and, to the Knowledge of each of
Allied and of the Allied Subsidiaries, there are no circumstances that are
reasonably likely to prevent or interfere with such compliance in the future.
Neither Allied nor any Allied Subsidiary has been notified by, nor do they have
Knowledge of any notification by, any Governmental Entity that any such
Environmental Permit will be modified, suspended or
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revoked or cannot be renewed or transferred in the ordinary course of business
consistent with past practice or in connection with the Merger.
(b) Except as set forth in the Allied Disclosure Schedule, there
is no Environmental Claim pending or, to the Knowledge of each of Allied and of
the Allied Subsidiaries, threatened against Allied, any Allied Subsidiary, any
Allied Real Property (including any owner or operator thereof) or any Person
whose Liability for any Environmental Claims Allied or any Allied Subsidiary has
or may have retained or assumed either contractually or by operation of Law and
there are no facts existing on the date hereof which are reasonably likely to
result in any such Environmental Claim.
(c) To the Knowledge of each of Allied and of the Allied
Subsidiaries, there have been no releases, spills, leaks or discharges of
Hazardous Substances at, from or to any Allied Real Property (other than those
properties set forth in the Allied Disclosure Schedule) or any other property
which required or is reasonably likely to require Allied or any Allied
Subsidiary to undertake investigation, abatement, removal, remedial, corrective
or other response action pursuant to applicable Environmental Laws. None of the
Allied Real Property (i) is listed or proposed for listing on any list
maintained by any Governmental Entity of sites that may require investigation,
abatement, removal, remedial, corrective or other response action, including,
but not limited to, the CERCLIS or the NPL, (ii) other than those properties set
forth in the Allied Disclosure Schedule, is the subject of any investigation,
abatement, removal, remedial, corrective or other response action, or (iii) is
subject to any restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(d) Except as set forth in the Allied Disclosure Schedule, no
Hazardous Substances were manufactured, generated, stored, treated, transported
from or otherwise managed at any Allied Real Property, nor were Hazardous
Substances from any Allied Real Property disposed of at any other property.
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(e) To the Knowledge of each of Allied and the Allied
Subsidiaries, there are no conditions or circumstances concerning or related to
the Business or operations of Allied or such Allied Subsidiaries or at any
Allied Real Property, which are reasonably likely to pose a risk to the
environment, natural resources or the health and safety of any Person.
(f) Except as set forth in the Allied Disclosure Schedule, there
is no Allied Real Property or formerly owned Allied Real Property that was, or
is, subject to notification and/or disclosure requirements pursuant to state
property transfer statutes.
(g) Except as set forth in the Allied Disclosure Schedule, there
are no underground storage tanks or surface impoundments that ever existed, or
currently exist, upon, in or under any Allied Real Property.
Section 4.16 Contracts. The Allied Disclosure Schedule contains a
true and complete list of all the following Contracts (true and complete copies
of all such written Contracts having been made available to Nationwide),
currently in force, to which Allied or any Allied Subsidiary is a party or by
which any Assets of Allied or any Allied Subsidiary are or may be bound, as such
Contracts may have been amended to the date hereof:
(a) all employment, consultation, retirement, termination,
sign-on, buy-out or other Contracts with any present or former officer,
director, trustee, employee, agent, broker or independent contractor of Allied
or any Allied Subsidiary (including, but not limited to, loans or advances to
any such Person or any Affiliate of such Person) providing for annual
compensation of $100,000 or more or for compensation over the term of the
Contract, and any renewal thereof, of $200,000 or more (including, but not
limited to, base salary, bonus and incentive payments and other payments or
fees, whether or not any portion thereof is deferred);
(b) all Contracts (other than, with respect to Investment Assets,
Contracts containing customary restrictions on the ability to own or operate
competing real property
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in a specified geographic area) with any Person including, but not limited to,
any Governmental Entity, containing any provision or covenant (i) limiting the
ability of Allied or any Allied Subsidiary to engage in any line of business, to
compete with any Person, to do business with any Person or in any location or to
employ any Person or (ii) limiting the ability of any Person to compete with or
obtain products or services from Allied or any Allied Subsidiary, which, in the
case of any such Contract described in clauses (i) and (ii) is, individually or
together with other such Contracts, reasonably likely to have a Material Adverse
Effect;
(c) all Contracts relating to the borrowing of money in excess of
$1,000,000 by Allied or any Allied Subsidiary or the direct or indirect
guarantee by Allied or any Allied Subsidiary of any obligation of any Person for
borrowed money or other financial obligation of any Person in excess of
$1,000,000 (other than indebtedness in respect of Investment Assets), or any
other Liability of Allied or any Allied Subsidiary in respect of indebtedness
for borrowed money or other financial obligation of any Person in excess of
$1,000,000 (other than indebtedness in respect of Investment Assets), including,
but not limited to, any Contract relating to or containing provisions with
respect to (i) the maintenance of compensating balances that are not terminable
by Allied or any Allied Subsidiary without penalty upon not more than ninety
(90) days' notice, (ii) any lines of credit or similar facilities, (iii) the
payment for property, products or services of any other Person even if such
property, products or services are not conveyed, delivered or rendered or (iv)
any obligation to satisfy any financial obligation or covenants, including, but
not limited to, take-or-pay, keep-well, make-whole or maintenance of working
capital, capital or earnings levels or financial ratios or to satisfy similar
requirements;
(d) all Contracts (other than Insurance Contracts and other
Contracts entered into in the ordinary course of business) with any Person
containing any provision or covenant relating to the indemnification or holding
harmless by Allied or any Allied Subsidiary of any Person which is reasonably
likely to result in a Liability to Allied or any of the Allied Subsidiaries of
$1,000,000 or more;
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(e) all leases or subleases of real property used in the conduct
of the Business of Allied or any Allied Subsidiary and all other leases,
subleases or rental or use Contracts providing for annual rental payments to be
paid by or on behalf of Allied or any Allied Subsidiary, involving, in the case
of each of the foregoing, annual payments in excess of $250,000;
(f) all Contracts relating to the future disposition (including,
but not limited to, restrictions on transfer or rights of first refusal) or
acquisition of any interest in any business enterprise, and all Contracts
relating to the future disposition of a material portion of the Assets of Allied
or any Allied Subsidiary other than in each case any Investment Asset or
interest in any business enterprise or Assets to be acquired or disposed of in
the ordinary course of business;
(g) all investment advisory Contracts with any investment company
registered under the Investment Company Act or with any investment advisory
client;
(h) all Insurance Contracts which constitute Contracts for
reinsurance, and any Contract pursuant to which any Allied Insurer receives or
has received surplus relief including, with respect to each such Contract, the
ceding and assuming Person, the business reinsured and the amount of the
Liability reinsured;
(i) all other Contracts (other than (i) Insurance Contracts, (ii)
Contracts relating to Investment Assets entered into in the ordinary course of
business, (iii) employment Contracts that are not otherwise required to be set
forth in the Allied Disclosure Schedule, (iv) Contracts solely between members
of the Allied Group and (v) other Contracts which are expressly excluded under
any other subsection of this Section 4.14) that involve or are reasonably likely
to involve the payment pursuant to the terms of such Contracts by or to Allied
of $500,000 or more, or that are otherwise material to Allied and the Allied
Subsidiaries taken as a whole;
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(j) list of all Contracts between any Allied Insurer and any
Person involving agency Contracts and marketing relationships, which
relationships have a value over $250,000 per year;
(k) all Contracts or arrangements (including, but not limited to,
those relating to allocations of expenses, personnel, services or facilities)
between or among any Allied Insurer and any Subsidiary or Affiliate of Allied
(including, but not limited to, other Allied Insurers); and
(l) all outstanding proxies (other than routine proxies in
connection with annual meetings), powers of attorney or similar delegations of
authority of Allied or any Allied Subsidiary to an unrelated Person, other than
those entered into in the ordinary course of business in connection with
Investment Assets.
The Allied Disclosure Schedule also contains a listing of all
Third Party Administrators of Allied and the Allied Subsidiaries. All Contracts
the terms of which provide that the Merger will give rise to a severance
Liability for Allied, any Allied Subsidiary or the Surviving Corporation have
previously been disclosed to Nationwide.
Each of the Contracts listed in the Allied Disclosure Schedule is
in full force and effect and constitutes a legal, valid and binding obligation
of each of Allied and the Allied Subsidiaries to the extent that it is a party
thereto, and, to the Knowledge of Allied, of each other Person that is a party
thereto. Except as set forth in the Allied Disclosure Schedule, neither Allied
nor any Allied Subsidiary is, and, to the Knowledge of Allied, no other party to
such Contract is, in material violation, breach or default of any such Contract
or, with or without notice or lapse of time or both, would be in material
violation, breach or default of any such Contract, except for any violation,
breach or default which, individually or in the aggregate, is not reasonably
likely to have a Material Adverse Effect. Except as set forth in the Allied
Disclosure Schedule, to the knowledge of Allied, no such Contract contains
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any provision providing that any party thereto other than Allied or any Allied
Subsidiary may terminate such Contract by reason of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.17 Insurance Issued by Allied Insurers. Except as set forth
in the Allied Disclosure Schedule:
(a) All material contracts, arrangements, treaties and agreements to
which any Allied Insurer is a party with respect to reinsurance applicable to
insurance in force on the date of this Agreement, and all material contracts,
arrangements, treaties and agreements under which any such Allied Insurer has
any obligation to cede insurance, are valid, binding and in full force and
effect in accordance with their terms. To the best Knowledge of any such Allied
Insurer, no Allied Insurer is, and no other party thereto is, in material
default of any provision thereof and no such material agreement contains any
provision providing that the other party thereto may terminate the same by
reason of the transactions contemplated by this Agreement or any other provision
which would be altered or otherwise become applicable by reason of such
transactions;
(b) Each insurance policy or certificate form, as well as any related
application form, written advertising material and rate or rule currently
marketed by each Allied Insurer, the use or issuance of which requires filing or
approval, has been appropriately filed, and if required, approved by the
insurance regulatory authorities of any state in which such policies and forms
are required to be filed. To the knowledge of each Allied Insurer, all such
policies and certificates, forms, applications, advertising materials and rates
or rules are in compliance in all material respects with all applicable Laws and
regulations;
(c) Since December 31, 1997 no form of Insurance Contract written by
any Allied Insurer has been amended in any material respect and, except with
respect to new states and new products, no sales of Insurance Contracts using
any new forms have been
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commenced other than changes to forms which are not, in the aggregate, material
to any Allied Insurer;
(d) Since January 1, 1994 all claims and benefits claimed by any Person
under any Insurance Contract of any Allied Insurer have or will have in all
material respects been paid (or provision for payment thereof has been made) in
accordance with the terms of the Contracts under which they arose, and such
payments were not delinquent and were paid (or will be paid) without fines or
penalties, except for any such claims or claim for benefits of less than
$250,000 for which the affected Allied Insurer reasonably believes there is a
reasonable basis to contest payment and is taking (or is preparing to take) such
action;
(e) Except as set forth in the SAP Statements referred to in Section
4.6, no provision in any policy in force gives policyholders the right to
receive dividends or distributions on their policies (other than accruals of
interest on cash values or as claim benefits) or otherwise share in the
benefits, revenue or profits of any Allied Insurer, provided that the practice
in certain instances of making premium refunds based upon policyholder loss
experience shall not violate the representation contained in this sentence.
Except as paid in the ordinary course of business, no Allied Insurer is liable
to pay commissions upon the renewal of any insurance policy nor is it a party to
any agreement providing for the collection of insurance premiums payable to any
Allied Insurer by any other Person;
(f) Reserved.
(g) Allied has provided Nationwide with a copy of all investment
policies and procedures for Allied and each Allied Insurer;
(h) To the Knowledge of Allied: (i) all amounts recoverable under
reinsurance, coinsurance or other similar Contracts to which any Allied Insurer
is a party (including, but not limited to, amounts based on paid and unpaid
Losses) are fully collectible, (ii) each
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insurance agent or broker, at the time such agent or broker wrote, sold or
produced business for any Allied Insurer, was duly licensed as an insurance
agent or broker (for the type of business written, sold or produced by such
insurance agent or broker) in the particular jurisdiction in which such agent or
broker wrote, sold or produced such business for any Allied Insurer, and (iii)
no such insurance agent or broker violated (or with notice or lapse of time or
both would have violated) any term or provision of any Law or Order applicable
to any aspect (including, but not limited to, the marketing, writing, sale or
production) of the Business of any Allied Insurer;
(i) Neither Allied nor any Subsidiary of Allied is in violation of Law
in which the potential liability exceeds $25,000 regarding the Insurance
Contracts;
(j) Except as set forth in the Allied Disclosure Schedule, no Allied
Subsidiary is engaged is any activity that would require registration as an
investment company, broker-dealer, investment advisor or fund administrator
under any state or Federal Law, including the Exchange Act, the Investment
Company Act and the Investment Advisers Act. Neither Allied nor any Allied
Subsidiary maintains or manages any open-end management investment company or
portfolio;
(k) Neither Allied nor any Allied Subsidiary is engaged in the business
of serving as a custodian or transfer agent;
(l) To the Knowledge of Allied, no Rating Agency has imposed any
conditions on retaining any rating assigned to Allied or any Allied Insurer or
as of the date hereof is reviewing any such rating for a potential downgrade;
and
(m) Each Allied Insurer has duly and validly filed or caused to be
filed all material reports, statements, documents, registrations, filings or
submissions that were required by applicable Laws to be filed; all such filings
complied with all applicable Laws in all material respects when filed, and no
material deficiencies have been asserted with
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respect to any such filings which have not been satisfied. All outstanding
insurance policies, annuity contracts and assumption certificates issued by any
Allied Insurer and now in force are, to the extent required under applicable
Laws, on forms approved by the insurance regulatory authority of the
jurisdiction where issued and utilize premium rates which if required to be
filed with or approved by insurance regulatory authorities have been so filed or
approved, except where such premium rates would not have a Material Adverse
Effect, and the premiums charged conform thereto, except where the failure to
conform would not have a Material Adverse Effect; and
(n) Except as set forth in the Allied Disclosure Schedule, and with
respect to all insurance issued:
(i) No outstanding insurance policy or annuity contract issued
or assumed by any Allied Insurer entitles the holder thereof or any
other Person to receive dividends, distributions or other benefits
based on the revenues or earnings of any Allied Insurer or any other
individual, partnership, firm, corporation, association, trust,
unincorporated organization, governmental authority or other entity, as
well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act;
(ii) To Allied's and each of Allied Insurers Knowledge, no
other party to any reinsurance, coinsurance or other similar agreement
with any of the Allied Insurers is in default thereunder, except for
such defaults that would not reasonably be expected to have a Material
Adverse Effect; and
(iii) The Insurance Contracts of each Allied Insurer meet all
the applicable definitions of the Code and ERISA, and the regulations
and rulings thereunder, necessary to qualify for the tax and other
benefits intended and promised to contractholders, including, but not
limited to, treatment as life
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insurance contracts or annuity contracts under Sections 7702 and 72 of
the Code, respectively.
Section 4.18 Cancellations. Except as set forth in the Allied
Disclosure Schedule, since December 31, 1997 no Person or group of Persons
acting in concert writing, selling or producing insurance business, which in the
aggregate accounted for one and one-half percent (1.5%) or more of the gross
premium income of Allied for the year ended December 31, 1997, has terminated or
substantially reduced, or threatened to terminate or substantially reduce, its
relationship with any Allied Insurer. Except as set forth in the Allied
Disclosure Schedule, to the Knowledge of Allied, since December 31, 1997, no
policyholder or group of policyholders acting in concert has withdrawn or given
notice of its intent to withdraw, or threatened to withdraw, funds under any
Insurance Contract to which an Allied Insurer is a party in excess of one and
one-half percent (1.5%) or more of the insurance reserves of Allied at December
31, 1997.
Section 4.19 Operations Insurance. The Allied Disclosure Schedule
contains a true, complete and correct list of all liability, property, workers
compensation, directors and officers liability, and other similar Insurance
Contracts that insure the Business or properties of Allied or any Allied
Subsidiary or affect or relate to the ownership, use, or operations of any
Assets of Allied or any Allied Subsidiary and that have been issued to Allied or
any Allied Subsidiary (including, but not limited to, the names and addresses of
the insurers, the expiration dates thereof, any deductible amounts in respect
thereof, and the annual premiums and payment terms thereof) and a description of
all claims thereunder or, to the Knowledge of Allied or of any of the Allied
Subsidiaries, any events which have occurred and may be covered thereunder, in
either case in excess of $100,000 per incident since January 1, 1993 through the
date hereof. All such insurance is in full force and effect and, to the
Knowledge of Allied, is with financially sound and reputable insurers. To the
Knowledge of Allied or any of the Allied Subsidiaries, all notices of reportable
incidents with respect to such insurance occurring during the last five years
have been given in writing to appropriate carriers on a basis sufficiently
timely to preserve the right of
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recovery of such insurance. Except as set forth in the Allied Disclosure
Schedule, to the Knowledge of Allied or of any of the Allied Subsidiaries, no
party to any Insurance Contract has stated an intent or threatened to terminate
or materially increase the premium in respect of any such Insurance Contract.
Section 4.20 Taxes and Tax Returns. Except as set forth in the Allied
Disclosure Schedule:
(a) All Tax Returns required under applicable Law to be filed with or
provided to any Person by Allied or any Allied Subsidiary have been (and, as to
Tax Returns not filed as of the date hereof, will be) timely filed or provided
in the manner prescribed by Law and such Tax Returns were (and, as to Tax
Returns not filed as of the date hereof, will be) true, complete and correct,
and all taxes shown due on such Tax Returns have been timely paid, together with
any interest and penalties then due;
(b) Allied and each Allied Subsidiary have within the time and in the
manner prescribed by Law paid (and until the Effective Time will pay within the
time and in the manner prescribed by Law) all Taxes due and payable except for
those contested in good faith and for which adequate reserves have been taken.
No claim has ever been made by an authority in a jurisdiction where Allied or
any Allied Subsidiary does not file Tax Returns that such Person may be subject
to Taxation by that jurisdiction;
(c) Allied and each Allied Subsidiary have established (and until the
Effective Time will maintain) on their books and records (i) reserves adequate
to pay all Taxes not yet due and payable and all deficiencies asserted, proposed
or threatened against Allied or any Allied Subsidiary and (ii) reserves for
deferred Taxes, in each case, in accordance with GAAP. No differences exist
between the amounts of the book basis and the Tax basis of any Assets (net of
liabilities) of Allied or any Allied Subsidiary that are not accounted for by an
accrual on the books for federal income Tax purposes;
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(d) There are no Tax Liens upon the Assets of Allied or any Allied
Subsidiary except Liens for Taxes not yet due;
(e) Allied and each Allied Subsidiary have materially complied (and
until the Effective Time will materially comply) with all applicable Laws
relating to information reporting or to the withholding of Taxes (including, but
not limited to, information reporting and withholding of Taxes pursuant to
Sections 1441, 1442, 3402, 3405, 3406, 6041, 6041A, 6042 6047, 6049, 6051 and
6052 of the Code or similar provisions under any state, local or foreign Laws)
and have, within the time and in the manner prescribed by Law, paid all amounts
required to be so withheld and paid over under all applicable Laws;
(f) Neither Allied nor any Allied Subsidiary has requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed;
(g) Neither Allied nor any Allied Subsidiary has executed any
outstanding waivers, extensions or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Tax Returns. The
statute of limitations for the assessment of all Taxes has expired for all
applicable Tax Returns of Allied and each Allied Subsidiary or those Tax Returns
have been examined by the appropriate Taxing authorities for all periods through
1993, and no deficiency for any Taxes has been proposed, asserted or assessed
against Allied or any Allied Subsidiary that has not been resolved and paid in
full;
(h) No outstanding deficiencies, assessments or written proposals for
the assessment of any Taxes have been proposed, asserted or assessed against
Allied or any of the Allied Subsidiaries;
(i) No audits or other administrative proceedings or court proceedings
are presently pending with regard to any Taxes or Tax Returns of Allied or any
Allied Subsidiary. Neither Allied nor any Allied Subsidiary has any Knowledge of
any
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threatened action, audit or administrative or court proceeding with respect to
any such Taxes or Tax Returns. Further, to the best of the Knowledge of Allied
and each Allied Subsidiary, no state of facts exists or has existed which would
constitute grounds for the assessment of any liability for Taxes with respect to
the periods which have not been audited by the IRS or other Taxing authority;
(j) No power of attorney currently in force has been granted by Allied
or any Allied Subsidiary with respect to any matter relating to Taxes;
(k) Neither Allied nor any Allied Subsidiary has received a Tax Ruling
(as defined below) or entered into a Closing Agreement (as defined below) with
any Taxing authority that would have a continuing adverse effect after the
Effective Time. "Tax Ruling" shall mean a written ruling of a Taxing authority
relating to Taxes. "Closing Agreement" shall mean a written and legally binding
agreement with a Taxing authority relating to Taxes;
(l) Allied and each Allied Subsidiary have made available (or, in the
case of Tax Returns not filed as of the date hereof or not immediately
available, will make available) to Nationwide complete and accurate copies of
(i) all Tax Returns, and any amendments thereto, filed by or on behalf of Allied
and each Allied Subsidiary for all Taxable years since 1994 and (ii) all audit
reports received from any Taxing authority relating to any Tax Return filed by
Allied or any Allied Subsidiary;
(m) Neither Allied nor any Allied Subsidiary is a party to any Tax
allocation or sharing agreement with any Person. In addition, neither Allied nor
any Allied Subsidiary has any liability for Taxes of any Person other than
Allied or an Allied Subsidiary under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign Law), as a transferee or
successor, by Contract or otherwise;
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(n) Neither Allied nor any Allied Subsidiary except Allied Life
Insurance Company is subject to Taxation under Part 1 of Subchapter L of the
Code;
(o) Neither Allied nor any Allied Subsidiary is a party to any Contract
or arrangement that, separately or in the aggregate, could, by reason of the
transactions contemplated by this Agreement, give rise to the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code;
(p) Except as set forth in the Allied Disclosure Schedule, no election
under Section 338 of the Code (or any predecessor provisions) has been made by
or with respect to Allied or any Allied Subsidiary or any of their respective
assets or properties;
(q) No property of Allied or any Allied Subsidiary is property that (i)
Allied or any Allied Subsidiary or any party to this transaction is or will be
required to treat as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Code (as in effect prior to its amendment by the Tax
Reform Act of 1986) or (ii) is subject to the "alternative depreciation system"
described in Section 168 of the Code;
(r) Neither Allied nor any Allied Subsidiary is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method as disclosed on IRS Form 3115 (copies of
which are available to be reviewed by Nationwide) initiated by Allied or any
Allied Subsidiary and neither Allied nor any Allied Subsidiary has proposed any
such adjustment or change in accounting method;
(s) All transactions that are likely to give rise to an understatement
of federal income Tax (within the meaning of Section 6661 of the Code for Tax
Returns filed on or before December 31, 1989, and within the meaning of Section
6662 of the Code for Tax Returns filed after December 31, 1989) have been
adequately disclosed (or, with respect to Tax Returns not yet filed as of the
date hereof, will be adequately disclosed) on the Tax
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Returns in accordance with Section 6661(b)(2)(B) of the Code for Tax Returns
filed on or prior to December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns filed after December 31, 1989;
(t) All net operating loss carryovers available to offset future income
of Allied and the Allied Subsidiaries have been disclosed in the Allied
Disclosure Schedule. The Allied Disclosure Schedule discloses the amount of and
year of expiration of each net operating loss carryover, and such net operating
loss carryovers are not subject to any limitations or disallowances, including
but not limited to Sections 382, 269 and 482;
(u) All Tax credit carryovers available to offset future Tax liability
of Allied and the Allied Subsidiaries have been disclosed in the Allied
Disclosure Schedule. The Allied Disclosure Schedule discloses the amount of and
year of expiration of each Tax credit carryover, and such Tax credit carryovers
are not subject to any limitation or reduction;
(v) Allied is not and has not been a United States real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(w) No indebtedness of Allied or any Allied Subsidiary is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code;
(x) Neither Allied nor any Allied Subsidiary has filed (or will file
prior to the Effective Time) a consent pursuant to Section 341(f) of the Code or
has agreed to have Section 341(f)(2) of the Code apply to any disposition of a
"subsection (f) asset" (as that term is defined in Section 341(f)(4) of the
Code) owned by Allied or any Allied Subsidiary;
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(y) Neither Allied nor any Allied Subsidiary has engaged in any
intercompany transactions within the meaning of Treasury Regulation Section
1.1502-13 or Temporary Treasury Regulation Section 1.1502-13T for which any
income or gain will remain unrecognized as of the date hereof and no "excess
loss accounts" exist with respect to the stock of any Allied Subsidiary, within
the meaning of Treasury Regulation Section 1.1502-19, as of the date hereof;
(z) Neither Allied nor any Allied Subsidiary has entered into a records
retention agreement with any taxing authority;
(aa) Neither Allied nor any Allied Subsidiary has invested in any low
income housing tax credit project for which a tax credit pursuant to Section 42
was available to either Allied or any Allied Subsidiary and such Tax credit was
so taken by Allied or any Allied Subsidiary; and
(bb) Neither Allied nor any Allied Subsidiary owns any interest in any
partnership or limited liability company, which interest has a negative capital
account.
Section 4.21 Benefit Plans. The Allied Disclosure Schedule sets forth a
complete and correct list of all Benefit Plans (as defined below). Except as
disclosed in the Allied Disclosure Schedule:
(a) Each "employee pension benefit plan" (as defined in Section 3(2) of
the ERISA) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other
plan, program, arrangement or policy (written or oral) relating to bonuses,
deferred compensation, performance compensation, compensation, stock purchases,
stock options, stock appreciation, severance, salary continuation, vacation,
sick leave, holiday pay, fringe benefits, personnel policies, reimbursement
programs, incentives, insurance, welfare or other employee benefits, in each
case maintained or contributed to, or required to be
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maintained or contributed to, by Allied and the Allied Subsidiaries for the
benefit of any present or former officers, employees, agents, directors or
independent contractors of Allied or the Allied Subsidiaries (all the foregoing
being herein called "Benefit Plans") has been administered in accordance with
its terms and all applicable laws and regulations. All required contributions to
the Benefit Plans have been made. Allied, the Allied Subsidiaries and all the
Benefit Plans are in compliance with the applicable provisions of ERISA, the
Code, all other applicable laws and all applicable collective bargaining
agreements. Complete and correct copies of all current and prior documents,
including all amendments thereto, with respect to each Benefit Plan have been
delivered to Nationwide. Except as described in the Allied Disclosure Schedule,
copies of all summary plan descriptions, summaries of material modifications,
other communications concerning the Benefit Plans, and the three most recent
Forms 5500 for each Benefit Plan have also been delivered to Nationwide.
(b) None of Allied or any other person or entity that together with
Allied is treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code (each a "Commonly Controlled Entity") maintains, sponsors or
contributes to or within the past six years maintained, sponsored or contributed
to a Pension Plan covered by Title IV of ERISA (a "Title IV Plan").
(c) Neither Allied nor a Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has withdrawn from any multiemployer plan where such withdrawal has
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid.
(d) Except as described in the Allied Disclosure Schedule, there are no
pending or threatened claims (other than routine benefit claims), lawsuits or
arbitrations which have been asserted or instituted against any Benefit Plan,
any of the fiduciaries thereof or Allied or the Allied Subsidiaries with respect
to their duties under the Benefit Plans.
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(e) Neither Allied nor a Commonly Controlled Entity, nor any of their
respective employees or directors, nor any fiduciary, has engaged in any
transaction, including the execution and delivery of this Agreement and other
agreements, instruments and documents for which execution and delivery by Allied
is contemplated herein, in violation of Section 406(a) or (b) of ERISA or which
is a "prohibited transaction" (as defined in Section 4975(c)(i) of the Code) for
which no exemption exists under Section 408(b) of ERISA or Section 4975(d) of
the Code or for which no administrative exemption has been granted under Section
408(a) of ERISA.
(f) Except as set forth in the Allied Disclosure Schedule, the Benefit
Plans and their related trusts intended to qualify under Sections 401 and 501(a)
of the Code, respectively, received favorable determination letters from the IRS
and Allied believes such Plans and their related trusts continue to qualify and
operate as designed. Any voluntary employee benefit association which provides
benefits to current or former employees of Allied and the Allied Subsidiaries,
or their beneficiaries, received a favorable determination letter from the
Internal Revenue Service and Allied believes such associations continue to
qualify and operate as designed. Copies of all such determination letters have
been delivered to Nationwide. No such trust or voluntary employee beneficiary
association is subject to any excise tax or to taxation under Section 511 of the
Code.
(g) Allied and the Allied Subsidiaries have no liability (contingent or
otherwise) under Section 4069 of ERISA by reason of a transfer of any
underfunded pension plan.
(h) A complete and correct copy of the most recent actuarial report
(including for purposes of Financial Accounting Standards Board report nos. 87,
106 and 112) with respect to each Benefit Plan providing retiree medical or life
insurance coverage for employees of Allied and the Allied Subsidiaries have been
provided to Nationwide.
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Except as disclosed in the Allied Disclosure Schedule, no current employee of
Allied or the Allied Subsidiaries would be entitled if his or her employment
with Allied and the Allied Subsidiaries is terminated to any retiree medical or
insurance coverage.
(i) Except as disclosed in the Allied Disclosure Schedule any amount
that could be received as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of Allied or any of the
Allied Subsidiaries under any employment, severance or termination agreement,
other compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G of the Code).
(j) Except as disclosed in the Allied Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, as a result of such transactions or any
event occurring thereafter (i) result in any payment becoming due to any
employee (current, former or retired) of Allied and the Allied Subsidiaries,
(ii) increase any benefits under any Benefit Plan or (iii) result in the
acceleration of the time of payment of, vesting of or other rights with respect
to any such benefits.
(k) The Allied Disclosure Schedule sets forth the amounts accrued in
the financial statements of Allied for the amounts payable by Allied to any
person covered by the Benefit Plans as of December 31, 1997 and an accurate
computation based on the assumptions set forth therein of the amounts that will
be payable to any such person for periods thereafter under the Benefit Plans.
The financial statements of Allied include or will include proper accruals for
all applicable benefits and taxes with respect to the foregoing amounts.
(l) All group health plans of each Commonly Controlled Entity have been
operated in compliance with the requirements of Sections 162(k) (as in effect
immediately
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prior to the Technical and Miscellaneous Revenue Act of 1988), 4980B of the
Code, and 9801 et seq. of the Code to the extent such requirements are
applicable.
(m) There has been no act or omission by any Commonly Controlled Entity
that has given rise to or may give rise to fines, penalties, taxes, or related
charges under Section 502(c), (i) or (l), Section 4071 of ERISA or Chapter 43 of
the Code.
Section 4.22 Labor Relations and Employment.
(a) Except to the extent set forth in the Allied Disclosure Schedule,
(i) there is no labor strike, material labor dispute, slowdown, stoppage or
lockout actually pending, or to the Knowledge of Allied or of any of the Allied
Subsidiaries, threatened against or affecting Allied or any of the Allied
Subsidiaries, and since January 1, 1993 there has not been any such action; (ii)
to the Knowledge of Allied or of any of the Allied Subsidiaries, no union claims
to represent the employees of Allied or any of the Allied Subsidiaries, there
are no current union organizing activities among the employees of Allied or of
any of the Allied Subsidiaries and Allied has not received notice of any unfair
labor practice complaint or charge against it pending before the National Labor
Relations Board; (iii) neither Allied nor any of the Allied Subsidiaries is a
party to or is bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association, applicable to employees of Allied or of
any Allied Subsidiary; (iv) there are no written personnel policies, rules or
procedures applicable to employees of Allied or any of the Allied Subsidiaries,
other than those set forth in the Allied Disclosure Schedule; and (v) Allied is
in compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours except for claims
that could give rise to a liability of less than $25,000. The Allied Disclosure
Schedule sets forth all the employment agreements to which Allied or any Allied
Subsidiary is a party. Such agreements accurately set forth all compensation
which Allied or any Allied Subsidiary is legally obligated to pay each such
person. Except as set forth in the Allied Disclosure Schedule, no employee,
officer, director or independent contractor of Allied or any Allied Subsidiary
is entitled to any
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payment of money or other thing of value or will receive any rights with respect
to the capital stock of Allied as a result of this Agreement. Except as set
forth in the Allied Disclosure Schedule, none of the transactions contemplated
by this Agreement shall constitute a triggering event under any employment,
severance or termination agreement or other compensation arrangement or any plan
currently in effect which (either alone or upon the occurrence of any additional
or subsequent event) is reasonably likely to result in any payment,
acceleration, vesting or increase in benefits to any current or former officer,
employee, director or independent contractor of Allied or any Allied Subsidiary
and which would constitute an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(b) Since the enactment of the WARN Act, Allied has not effectuated (i)
a "plant closing" (as defined in the WARN Act) affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of Allied or any of the Allied Subsidiaries; or (ii) a "mass layoff"
(as defined in the WARN Act) affecting any site of employment or facility of
Allied; nor has Allied been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local Law. Except as set forth in the Allied Disclosure
Schedule, none of Allied's or any Allied Subsidiary's employees has suffered an
"employment loss" (as defined in the WARN Act) since December 31, 1997.
(c) Allied and each of the Allied Subsidiaries (i) has withheld all
amounts required by Law or by agreement to be withheld from the wages, salaries
and other payments to the employees, former employees, independent contractors,
directors and former directors of Allied and each of the Allied Subsidiaries,
(ii) is not liable for any arrears of wages or any Taxes or any penalty for
failure to comply with any of the foregoing, and (iii) is not liable for any
payment to any trust or other fund or to any Governmental Entity, with respect
to unemployment compensation benefits, social security or other benefits except,
in the cases of clauses (ii) and (iii) to the extent that any such
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violation or liability is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect.
Section 4.23 Reserved.
Section 4.24 Properties. Allied and each Allied Subsidiary has good
title to, or in the case of leased property has valid leasehold interests in,
all of their respective properties and assets (whether or not personal or
intangible) except for imperfections in title or interests which would not have
a Material Adverse Effect. None of the properties is subject to any Liens other
than Liens that are disclosed in the SAP Statements or in the GAAP Statements.
Section 4.25 Intellectual Property. Except as set forth in the Allied
Disclosure Schedule, Allied and each Allied Subsidiary owns or otherwise has
rights to use, free and clear of all Liens, all Intellectual Property used in
their respective businesses as currently conducted; and the consummation of this
transaction will not result in the loss of any rights. The use of the
Intellectual Property will not infringe or otherwise violate the rights of any
Person and no Person is challenging, infringing on or otherwise violating any
right with respect to the Intellectual Property.
Section 4.26 Transactions with Affiliates. Except as set forth in the
Allied Disclosure Schedule, the SAP Statements or the SEC Documents, neither
Allied nor any Allied Subsidiary has entered into any transaction with an
Affiliate in connection with which either Allied or an Allied Subsidiary has
continuing obligations, in the ordinary course of business or otherwise, which
is not on the terms at least as favorable to Allied or an Allied Subsidiary as
would have been applicable if such transaction had been entered into on an
arm's-length basis with an unaffiliated third party. Allied has not made or
declared any dividend or distribution that was disproportionate in favor of any
Affiliate.
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Section 4.27 Voting Requirements. The affirmative vote of the holders
of a majority of the outstanding Common Shares and outstanding Preferred Shares
voting together as one class and entitled to vote at the Shareholders Meeting is
the only vote of the holders of Allied's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement.
Section 4.28 Reserved.
Section 4.29 Investment Company. None of the Allied Subsidiaries
maintains any separate accounts. Neither Allied nor any of its Subsidiaries
conducts activities of or is otherwise deemed under applicable law to control an
"investment advisor" as such term is defined in Section 2(a)(20) of the 1940
Act, whether or not registered under the Investment Advisers Act of 1940, as
amended. Neither Allied nor any of its Subsidiaries is an "investment company"
as defined under the 1940 Act, and neither Allied nor any of its Subsidiaries
sponsors any Person that is such an investment company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE AND SUB
Nationwide and Sub jointly and severally represent and warrant to
Allied as follows:
Section 5.1 Organization and Qualification. Nationwide is a mutual
insurance company and Sub is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Ohio and has full corporate
power, authority and legal right to conduct its Business as it is currently
being conducted. Each of Nationwide and Sub is duly qualified to do business,
and is in good standing, in the respective jurisdictions where the character of
its Assets owned or leased or the nature of its Business makes such
qualification necessary, except for failures to be so qualified or in good
standing which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect. Nationwide possesses an Insurance License in
each jurisdiction in which Nationwide is required to possess an Insurance
License. All such Insurance Licenses, including, but not
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limited to, authorizations to transact reinsurance, are in full force and effect
without amendment, limitation or restriction, and Nationwide does not have
Knowledge of any event, inquiry or Proceeding which is reasonably likely to lead
to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such Insurance License.
Section 5.2 Authority Relative to this Agreement.
(a) Nationwide and Sub have full power, authority and legal right to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved and
authorized by the Board of Directors of Nationwide and by the Board of Directors
of Sub. No other corporate proceedings on the part of Nationwide or Sub are
necessary to authorize this Agreement and the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Nationwide and Sub and (assuming this Agreement is a legal, valid and binding
obligation of Allied) constitutes a legal, valid and binding agreement of
Nationwide and Sub enforceable against Nationwide and Sub in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
Section 5.3 No Violation.
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) constitute a
breach or violation of or default under the articles of incorporation or the
by-laws of Nationwide or under the articles of incorporation or the by-laws of
Sub, (ii) violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
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accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the Assets
of Nationwide, Sub or any Nationwide Subsidiary under, any of the terms,
conditions or provisions of any Contract to which Nationwide, Sub or any
Nationwide Subsidiary is a party or to which it or any of its Assets may be
subject or (iii) constitute a breach or violation of or default under any
Environmental Permit, Law or License to which Nationwide, Sub or any Nationwide
Subsidiary is subject other than, in the case of clauses (ii) and (iii), events
or other matters that are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect.
(b) Except for (i) the filing of this Agreement with and the approval
of such by the Ohio Superintendent under the Ohio Insurance Law and the Iowa
Commissioner under the Iowa Insurance Law, (ii) the filings required under the
HSR Act and the expiration or other termination of any waiting period applicable
to the Merger under such act, and (iii) any Consent or Filing that would not
otherwise be required to be disclosed pursuant to Section 5.3(a) hereof, no
Consent or Filing of or with any Person is required with respect to Nationwide,
Sub or any Nationwide Subsidiary or any Nationwide Affiliate in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for such Consents or Filings the
failure of which to make or obtain would not, individually or in the aggregate,
prevent or be a material impediment to the consummation of the transactions
contemplated hereby or have a Material Adverse Effect.
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ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Allied Conduct of Business Pending the Merger. Allied
covenants and agrees as to itself and the Allied Subsidiaries that, at all times
up to and including the Effective Time, unless Nationwide shall otherwise
consent in writing (Nationwide agreeing that it will use its best efforts to
respond to any request received from Allied arising under this Article VI within
10 Business Days, or sooner as circumstances may require, after receipt of such
request), or as otherwise expressly permitted or contemplated by this Agreement:
(a) Subject to any applicable regulatory requirements, Allied shall,
and shall cause each Allied Subsidiary to, conduct its Business only in the
ordinary course and in substantially the same manner as heretofore conducted
since December 31, 1997 and in a manner which is not inconsistent with the
consummation of the transactions contemplated hereby, and Allied and each Allied
Subsidiary shall use all reasonable efforts to preserve intact its present
business organization and preserve its regular services to, and maintain its
relationships with policyholders, insurers, agents, sales and distribution
organizations, underwriters, investment customers, brokers, suppliers and all
others having business dealings with it to the end that its goodwill and ongoing
Business shall not be impaired in any material respect;
(b) Subject to any applicable regulatory requirements, Allied shall
not, and shall not permit any Allied Subsidiary to, make or propose to make any
change in its dividend practices or policies or in its underwriting, pricing,
claims, risk retention, investment, reinsurance practices or policies in any
material respect; and Allied agrees that it will notify Nationwide and provide
Nationwide with information in reasonable detail regarding any material
transactions (excluding investment transactions in the ordinary course of
business consistent with past practice, but including transactions involving the
securitization of Assets of Allied or of any Allied Subsidiary and transactions
involving
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derivative securities), whether involving a purchase or sale, that it or any
Allied Subsidiary is seriously considering;
(c) Allied shall not, and shall not permit any Allied Insurer to, make
any material change in accounting methods or practices, including without
limitation any change with respect to establishment of reserves for unearned
premiums, losses (including without limitation incurred but not reported losses)
and loss adjustment expenses, or any change in depreciation or amortization
policies or rates adopted by it, except as required by Law, GAAP or SAP;
(d) Allied shall not, and shall not permit any Allied Subsidiary to,
(i) amend its charter or by-laws (unless contemplated hereby), (ii) incur any
individual Liability or series of related Liabilities in excess of $1,000,000
other than in the ordinary course of business consistent with past practice,
(iii) incur any indebtedness for money borrowed in the aggregate for Allied and
the Allied Subsidiaries in excess of $10,000,000 for any such indebtedness
having a maturity of 90 days or less or $1,000,000 for any such indebtedness
having a maturity of more than 90 days, (iv) agree to any merger, consolidation,
demutualization, acquisition, redomestication, sale of all or a substantial
portion of its Assets, bulk or assumption reinsurance arrangement or other
similar reorganization, arrangement or business combination, (v) prior to
notifying Nationwide, enter into any partnership, joint venture or profit
sharing Contract, (vi) enter into any Contract limiting the ability of Allied or
of any Allied Subsidiary to engage in any Business, to compete with any Person,
to do business with any Person or in any location or to employ any Person or
limiting the ability of any Person to compete with such party or any of the
Allied Subsidiaries, (vii) enter into any Contract relating to the direct or
indirect guarantee of any obligation of any Person in respect of indebtedness
for borrowed money or other financial obligation of any Person other than in the
ordinary course of business consistent with past practice, (viii) incur any
material deterioration in its ability to maintain, access and update
policyholder records which deterioration is not reasonably reparable, (ix) enter
into any Contract that could materially and adversely affect the consummation of
the transactions
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contemplated hereby, or (x) modify any Contract with respect to the subject of
any of the foregoing clauses;
(e) Allied shall not permit any Allied Subsidiary to issue or sell any
shares of or interests in, or rights of any kind to acquire any shares of or
interests in, or to receive any payment based on the value of, the capital stock
of or other equity interests in or any securities convertible into shares of any
capital stock of or other equity interests in any Allied Subsidiary, or
otherwise take any actions that would alter the information set forth in the
Allied Disclosure Schedule other than in the ordinary course of business
consistent with existing agreements and arrangements;
(f) Except (x) as set forth in the Allied Disclosure Schedule, (y) in
the ordinary course of business consistent with past practice, or (z) as
required by the terms of agreements or plans already in effect, applicable Law
or as envisioned in the Statement of Operating Principles, Allied shall not, and
shall not permit any Allied Subsidiary to (i) adopt or implement, or commit to
adopt or implement, or materially amend, any collective bargaining,
compensation, employment, consulting, pension, profit sharing, bonus, incentive,
group insurance, termination, retirement or other employee benefit Contract,
plan or policy, (ii) enter into or materially amend any severance Contract,
(iii) increase in any manner the compensation of, or enter into any Contract
relating to the borrowing of money by, its directors, officers or other
employees, except pursuant to the terms of agreements or plans as currently in
effect and except for annual employee compensation increases made in the
ordinary course of business consistent with past practices; provided that in no
event shall any such individual increase in annual compensation exceed $400,000
per year, (iv) increase by more than 0.5% the aggregate number of its employees,
(v) pay or agree to pay any pension, retirement allowance or other employee
benefit not required by the current terms of any existing plan, agreement or
arrangement to any director, officer or other employee, whether past or present,
(vi) voluntarily recognize, or involuntarily become subject to, any labor
organization or any other Person as a collective bargaining representative of
one or more bargaining units comprising a material number of
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employees, or (vii) other than obligations that arise by operation of law or
under the by-laws of a party as they exist on the date of this Agreement, enter
into, adopt or increase any indemnification or hold harmless arrangements with
any directors, officers or other employees or agents of such party or any of the
Allied Subsidiaries or any other Person;
(g) Other than in the ordinary course of business consistent with past
practice, Allied shall not, and shall not permit any Allied Subsidiary to, make
any capital expenditures or expenditures or commitments for expenditures for the
purchase or lease of any products or services or group of products or services
(other than with respect to Investment Assets) which in one or a series of
related transactions exceed $500,000 or which in the aggregate for Allied and
the Allied Subsidiaries taken as a whole exceed $2,500,000, except for
expenditures relating to this Agreement and the consummation of the transactions
contemplated hereby, and expenditures required to be made pursuant to existing
Contracts to which Allied or any Allied Subsidiary is a party, which Contracts
are set forth in the Allied Disclosure Schedule;
(h) Other than in the ordinary course of business consistent with past
practice or in connection with the redemption of outstanding guaranteed
investment contracts in the exercise of Allied's reasonable judgment, Allied
shall not, and shall not permit any Allied Subsidiary to, waive any rights with
a value in excess of $100,000 or any other rights which are material to any
Contract or make any payment, direct or indirect, of any Liability in excess of
$100,000 before the same comes due in accordance with its terms, in each case,
including, but not limited to, any provision of any Insurance Contract to permit
a cash-out thereof;
(i) Allied shall not, and shall not permit any Allied Subsidiary to,
other than pursuant to the operation of separate accounts in the ordinary course
of business, consistent with existing strategies, (i) sell, lease, mortgage,
encumber or otherwise grant any interest in or dispose of any of its Assets
which, individually or in the aggregate, are material to the financial condition
of Allied or of Allied and the Allied Subsidiaries taken as a whole, and,
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in addition, in the case of Liens, for Permitted Liens and Liens not
individually in excess of $500,000 and not aggregating in excess of $2,000,000
or (ii) restructure, amend, modify or otherwise affect any Investment Asset or
any Contract relating thereto which is material to the financial condition of
Allied or of Allied and the Allied Subsidiaries taken as a whole, and, in either
case described in clauses (i) and (ii), only in accordance with the statement of
investment policy set forth in the Allied Disclosure Schedule attached hereto;
and Allied shall furnish to Nationwide a monthly report, in detail reasonably
acceptable to Nationwide, of all such transactions or other changes (other than
changes in market values or ordinary course changes such as interest payments,
maturities, etc.) affecting Investment Assets of Allied or any Allied Subsidiary
which took place since the last such report;
(j) Allied agrees that it shall not, nor shall it permit any Allied
Subsidiary to, other than pursuant to the operation of separate accounts
involved in real estate in the ordinary course, consistent with existing
strategies, make any equity real estate investments (other than through
restructuring or foreclosure or pursuant to commitments existing at the date
hereof or to protect the value of existing investments in the exercise of
reasonable business judgment) and that neither Allied nor any Allied Subsidiary
shall take any action, other than in the exercise of reasonable business
judgment and following discussion with Nationwide, which results, individually
or in the aggregate, in (i) the realization of any gross capital loss or losses
in an amount of $10,000,000 or more or (ii) an adverse impact on the surplus of
Allied or of an Allied Subsidiary in an amount of $10,000,000 or more;
(k) Other than in the ordinary course of business consistent with past
practice, or as required by applicable regulations, Allied shall not, and shall
not permit any Allied Subsidiary to, enter into any material Contract or amend
or waive any material provision of any material Contract which would involve the
payment by Allied or any Allied Subsidiary of $500,000 or more;
(l) Other than in the ordinary course of business consistent with past
practice, Allied shall not, and shall not permit any Allied Subsidiary to,
settle or compromise any
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claim in any action, proceeding or investigation which could result in an
expenditure for Allied and the Allied Subsidiaries in excess of $1,000,000;
(m) Allied shall not, and shall not permit any Allied Subsidiary to,
purchase or otherwise acquire, except pursuant to a Contract in effect on the
date of this Agreement, (i) any controlling equity interest in any Person (other
than Investment Assets), (ii) any non-publicly traded securities in excess of
$5,000,000 per transaction or $5,000,000 per issuer or credit, (iii) any
investments in fixed income securities rated in NAIC Class 4, 5 or 6,
non-publicly traded equity securities or Assets required to be shown on Schedule
BA of a Person's Annual Statement in excess of $5,000,000 per transaction or
$5,000,000 per issuer or credit, or (iv) any real property or mortgage
investments except in the ordinary course of managing the existing portfolio of
real property and mortgage investments, including foreclosing purchase money
mortgages, extensions and refinancings;
(n) Allied shall not, and shall not permit any Allied Subsidiary to,
enter into any new, or materially amend any existing, reinsurance Contracts or
arrangements, except in accordance with existing reinsurance agreements or in
the ordinary course of business and consistent with past practice;
(o) Allied shall, and shall cause each Allied Subsidiary to, maintain
uninterrupted its existing insurance coverage of all types in effect or procure
substantially similar substitute insurance policies with financially sound and
reputable insurance companies in at least such amounts and against such risks as
are currently covered by such policies if such coverage is available;
(p) Allied shall deliver to Nationwide as promptly as practicable after
preparation thereof, but in no event later than the date of filing with respect
to unaudited or audited, as the case may be, SAP Statements for each Allied
Insurer filed by or on behalf of such Allied Insurer after the date hereof;
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(q) Reserved.
(r) Allied shall inform Nationwide regarding the progress of any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes;
(s) Neither Allied nor any Allied Subsidiary shall (i) make or rescind
any material express or deemed election relating to Taxes, (ii) make a request
for a Tax Ruling or enter into a Closing Agreement, settlement or compromise
with respect to any material Tax matter or (iii) with respect to any material
Tax matter, change any of its methods of reporting income or deductions for
federal income Tax purposes from those employed in the preparation of its
federal income Tax Return for the Taxable year ending December 31, 1997, except
as may be required by Law;
(t) Neither Allied nor any Allied Subsidiary shall declare, set aside
or pay any dividends or distributions (whether in cash, stock or property) in
respect of any capital stock of any Allied Subsidiary (except as consistent with
past practices) or redeem, purchase or otherwise acquire any of such Allied
Subsidiary's capital stock;
(u) Except as provided in the Allied Disclosure Schedule, neither
Allied nor any Allied Subsidiary shall settle pending or threatened litigation
in an amount exceeding $1,000,000, other than settlement of pending or
threatened litigation with respect to claims arising under contracts of
insurance or reinsurance underwritten, ceded or assumed by any Allied Subsidiary
which settlement will not have a Material Adverse Effect;
(v) Neither Allied nor any Allied Subsidiary shall do any other act
which would cause any representation or warranty of Allied or any Allied
Subsidiary in this Agreement to be or become untrue in any material respect,
unless required by applicable law; and
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(w) Neither Allied nor any Allied Subsidiary shall agree, in writing or
otherwise, to take any of the actions prohibited by the foregoing clauses (a)
through (v).
Section 6.2 Reserved.
Section 6.3 Reasonable Efforts.
(a) Upon the terms and subject to the conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken all action, to do, or cause to be done, and to assist and cooperate
with the other party hereto in doing or causing to be done, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
including, but not limited to, (i) the actions set forth in Article III hereof,
(ii) the obtaining of all Governmental Approvals, and all other necessary
actions or nonactions, waivers, consents and approvals from all appropriate
Governmental Entities and other Persons and the making of all necessary
registrations and filings, (iii) the obtaining of the opinions and other
documents referred to in Article VII hereof, (iv) the resolution of all
organizational and human resources issues relating to the transactions
contemplated hereby, (v) the obtaining or making of all Consents, Environmental
Permits, Filings or Licenses necessary or desirable to ensure that the Business
of the Surviving Corporation may be conducted without disruption consistent with
the past practice of each of the Constituent Companies and (vi) the defending of
any Proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, the defense of which shall, at the request of
either Allied or Nationwide, be conducted jointly by Nationwide and Allied on a
basis that is satisfactory to both Allied and Nationwide.
(b) Allied hereby grants Nationwide the right to decide for purposes of
the Form A regulatory hearings whether to submit regulatory applications for
Allied, Allied Group and Allied Mutual concurrently or separately, and whether
to conduct the regulatory hearing and approval process concurrently or
separately for each of Allied, Allied Group
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and Allied Mutual. Both Allied and Nationwide agree to use their reasonable best
efforts to coordinate and cooperate during the regulatory approval process.
Section 6.4 Access and Information. Allied shall (a) afford to
Nationwide's and Sub's accountants, legal counsel and other advisors full access
during normal business hours through the period immediately prior to the
Effective Time to all of its and the Allied Subsidiaries' Assets, books,
Contracts, commitments and records (including, but not limited to, Tax Returns),
and (b) during such period, Allied shall furnish promptly to Nationwide and Sub
all such information concerning its Business, Assets and personnel or those of
any of its Affiliates, in either clause (a) or (b), as Nationwide or Sub may
reasonably request. Information provided by Allied shall be kept confidential by
Nationwide and Sub and shall not be disclosed unless such information (1) was
known to Nationwide or Sub or was in their possession prior to the date of this
Agreement and was not identified by Allied as being confidential, (2) is or
becomes generally available to the public other than by unauthorized disclosure
by Nationwide or Sub, (3) becomes available to Nationwide or Sub from a third
party authorized to make such disclosure, (4) is independently developed by
Nationwide or Sub, or (5) is required to be disclosed by law or by court order.
Section 6.5 Environmental Due Diligence. Allied shall cooperate with,
and provide, to the extent practicable, reasonable access to, Nationwide and
Nationwide's representatives for environmental assessments and other
environmental due diligence of each Allied Real Property as Nationwide, in its
sole discretion, deems necessary. Nationwide shall conduct the environmental
assessments or other due diligence in a commercially reasonable manner and shall
use reasonable efforts to minimize any interference with or impairment of the
regular conduct of Allied's Business.
Section 6.6 Notice of Proceedings. Each of Nationwide and Allied shall
promptly notify the other of, and provide to the other all information relating
to, any Proceedings or investigations commenced or, to the best of its
Knowledge, threatened
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against, relating to or involving or otherwise affecting Nationwide or Allied or
any of their respective Subsidiaries, as the case may be, which, if pending on
the date hereof, would have been required to have been disclosed in writing
pursuant to Section 4.10 hereof or which relate to the execution of this
Agreement or the consummation of the transactions contemplated hereby.
Section 6.7 Notification of Certain Other Matters. Each party shall
promptly notify the other of any change or other event which, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect including,
but not limited to, any of the following:
(a) any written notice of a default or event which, with notice or
lapse of time or both, would become a default, received by such party or any of
the Allied Subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time, under any material Contract to which such party or any of
the Allied Subsidiaries is a party or by which such party or any of the Allied
Subsidiaries or any of their respective Assets may be subject or bound;
(b) the occurrence of any event which, with notice or lapse of time or
both, is reasonably likely to result in a default under any material Contract to
which such party or any of the Allied Subsidiaries is a party;
(c) any written notice from or to any Person alleging that the consent
of such Person is or may be required in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby, and where
the failure to obtain such a consent is reasonably likely to have a Material
Adverse Effect;
(d) any written notice from or to any Governmental Entity in connection
with this Agreement or the transactions contemplated hereby; and
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(e) any matter hereafter arising or discovered which, if existing or
known at the date hereof, would have been required to be set forth or described
in the Nationwide Disclosure Schedule or the Allied Disclosure Schedule, as the
case may be; provided, however, that no such supplemental or amended disclosure
by any party shall be deemed to cure any breach of a representation or warranty
made as of the date hereof, unless the other party so agrees in writing.
In furtherance of the foregoing, to the fullest extent permitted under
applicable Law, each party shall provide the other with copies (or, to the
extent written materials are not involved, oral notice) of proposed notices,
applications or any other communications to any Governmental Entity or rating
agency in connection with this Agreement or the transactions contemplated
hereby, including, but not limited to, in respect of the Governmental Approvals,
in each case at least three (3) Business Days prior to dispatch of written
materials (or, to the extent written materials are not involved, prior to
initiation) and neither Nationwide nor Allied will dispatch (or, to the extent
written materials are not involved, initiate) such notice, application or
communication without the prior consent of the other party, which consent shall
not be unreasonably withheld or delayed.
Section 6.8 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Nationwide agrees that it will
indemnify and hold harmless each present and former director and officer of
Allied, (when acting in such capacity or as a member of the Special Committee)
determined as of the Effective Time (each, an Indemnitee and, collectively, the
"Indemnitees"), against any costs or expenses (including reasonable attorneys'
fees), judgements, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time,
including without limitation any and all shareholder lawsuits existing on the
date hereof, to the fullest extent that Allied would have been permitted under
Iowa law and its charter or by-laws in effect on the date hereof to indemnify
such Person (and Nationwide shall also advance expenses
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as incurred to the fullest extent permitted under applicable law provided the
Person to whom expenses are advanced provides a written affirmation of his or
her good faith belief that the standard of conduct necessary for indemnification
has been met, and an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification).
(b) The Surviving Corporation shall maintain Allied's existing
directors' and officers' liability insurance ("D&O Insurance") or D&O Insurance
that is substantially comparable to Allied's existing D&O Insurance for a period
of two years after the Effective Time so long as the annual premium therefor is
not excess of 200% of the last annual premium paid prior to the date hereof
(such last annual premium being hereinafter referred to as the "Current
Premium"); provided, however, that if the existing D&O Insurance or
substantially comparable D&O Insurance cannot be acquired during the two-year
period for not in excess of 200% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
200% of the Current Premium. If the D&O Insurance is terminated prior to the end
of the sixth anniversary of the Effective Time, the Surviving Corporation will
purchase extended reporting coverage under D&O Insurance covering claims made
during the remainder of such period with respect to acts which occurred prior to
the Effective Time.
Section 6.9 Intercompany Agreements. From the execution date of this
Agreement through the termination of this Agreement, Allied covenants as follows
with respect to certain intercompany agreements relating to Allied and its
affiliates:
(a) Allied covenants not to invoke against Allied Group, Inc. or any of
its affiliates ("Allied Group") any of the covenants not to compete or
agreements not to compete contained in (1) that certain Amended and Restated
Intercompany Operating Agreement dated August 25, 1993, as amended (the "IOA"),
and (2) that certain Allied Group Joint Marketing Agreement dated August 30,
1993, as amended (the "JMA"), respectively.
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(b) Allied covenants not to invoke against Allied Group any of the
change of control provisions contained in (1) the IOA, (2) the JMA, (3) that
certain Management Information Services Agreement dated December 31, 1986, as
amended, and (4) that certain Stock Rights Agreement dated August 25, 1993, as
amended, between Allied Mutual and Allied, that Allied may otherwise be entitled
to exercise as a result of the transactions contemplated by (i) this Agreement,
(ii) that certain Agreement and Plan of Merger by and among Nationwide,
Nationwide Group Acquisition Corporation and Allied Group, Inc. or (iii) that
certain Agreement and Plan of Merger by and between Nationwide and Allied
Mutual.
Section 6.10 Acquisition Proposals. Allied will not, and will not
permit or cause any of its Subsidiaries or any of the officers or directors of
it or its Subsidiaries to, and shall direct its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any purchase
of 15 percent or more of the assets or any equity securities of, Allied or any
of its Subsidiaries, or any other business combination (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"). Allied will
not, and will not permit or cause any of its Subsidiaries or any of the officers
and directors of it or its Subsidiaries to and shall direct its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, whether made before or after the
date of this Agreement, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that nothing contained in
this Agreement shall prevent Allied or its Board of Directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal or (ii) at any time after 180 days from the date hereof if the Merger
shall not by such date have
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been approved by the requisite vote of Allied's shareholders or (iii) at any
time after one year from the date hereof if the Merger shall not by such date
have been approved by the Iowa Commissioner (A) providing information in
response to a request therefor by a Person who has made an unsolicited bona fide
written Acquisition Proposal if the Board of Directors receives from the Person
so requesting such information an executed confidentiality agreement on terms
substantially equivalent to those contained in the Confidentiality Agreement;
(B) engaging in any negotiations or discussions with any Person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such an
Acquisition Proposal to the shareholders of Allied, if and only to the extent
that, (i) in each such case referred to in clause (A), (B) or (C) above, the
Board of Directors of Allied determines in good faith after consultation with
outside legal counsel that such action is necessary in order for its directors
to comply with their respective fiduciary duties under applicable law and (ii)
in each case referred to in clause (B) or (C) above, the Board of Directors of
Allied determines in good faith (after consultation with its financial advisor)
that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal and would, if consummated,
result in a more favorable transaction than the transaction contemplated by this
Agreement, taking into account the long-term prospects and interests of Allied
and its shareholders. Allied will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Allied agrees that it will take
the necessary steps to promptly inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 6.10
and under this Agreement. Allied will notify Nationwide immediately if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers and thereafter shall keep Nationwide
informed, on a current basis, on the status and terms of any such proposals or
offers and the status of any such negotiations or discussions.
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ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) 2,000,000 Common Shares shall have been purchased pursuant to the
Offer;
(b) if required by applicable Law, this Agreement and the Merger shall
have been approved and adopted by the requisite votes of the respective
shareholders of Allied at the Shareholders Meeting called for such purpose;
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and, other than the
filings provided for in subclauses (a) and (b) of the second sentence of Section
2.3, all Governmental Approvals and other Consents or Filings which the parties
have agreed are required to be obtained prior to the Effective Time shall have
been obtained and not rescinded or adversely modified or limited (as set forth
in the proviso below) or, if merely required to be filed, such filings shall
have been made and accepted, and all waiting periods prescribed by applicable
Law shall have expired or been terminated in accordance with applicable Law;
provided that no such Governmental Approval or other Consent or Filing shall
contain any conditions or limitations that compel or seek to compel the
Surviving Corporation to dispose of or to hold separately all or any material
portion of the Business or Assets of the parties and their respective
Subsidiaries taken as a whole or that impose or seek to impose any material
limitation on the ability of the Surviving Corporation and the Allied
Subsidiaries, taken as a whole, to conduct its Business or own its Assets after
the Effective Time in substantially the same manner as the parties and their
respective Subsidiaries presently conduct their Business or own their Assets;
and
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(d) no Order entered or Law promulgated or enacted by any Governmental
Entity shall be in effect which would prevent the consummation of the Merger or
any other material transactions completed hereby, and no Proceeding brought by a
Governmental Entity shall have been commenced and be pending which seeks to
restrain, enjoin, prevent, or materially delay or restructure the Merger or any
other material transactions contemplated hereby.
Section 7.2 Conditions to Obligation of Allied to Effect the Merger.
The obligations of Allied to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
one or more of which may be waived by Allied, but only to the extent permitted
by Law:
(a) Nationwide shall have performed and complied in all material
respects with all obligations, covenants and agreements required to be performed
and complied with by it under this Agreement at or prior to the Effective Time;
(b) The representations and warranties of Nationwide contained in this
Agreement shall be true and correct when made and at and as of the Effective
Time as if made at and as of such date and time, except to the extent that any
breaches of such representations and warranties, individually or in the
aggregate, have not resulted, or are not reasonably likely to result, in (i)
losses, damages or expenses in excess of $1,000,000 or (ii) a material adverse
effect on the financial condition of the Surviving Corporation, and Allied shall
have received a certificate dated as of the Effective Time of the Chairman and
Chief Executive Officer, the President or an Executive Vice President of
Nationwide as to the satisfaction of this condition.
Section 7.3 Conditions to Obligation of Nationwide to Effect the
Merger. The obligations of Nationwide to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
any one or more of which may be waived by Nationwide, but only to the extent
permitted by Law:
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(a) Allied shall have performed and complied in all material respects
with all obligations, covenants and agreements required to be performed and
complied with by it under this Agreement at or prior to the Effective Time; and
(b) The representations and warranties of Allied contained in this
Agreement shall be true and correct in all material respects when made and at
and as of the Effective Time as if made at and as of such date and time, except
to the extent that any breaches of such representations and warranties,
individually or in the aggregate, have not resulted, or are not reasonably
likely to result, in (i) losses, damages or expenses in excess of $1,000,000 or
(ii) a material adverse effect on the financial condition of the Surviving
Corporation, and Nationwide shall have received a certificate dated as of the
Effective Time by any Vice President of Allied as to the satisfaction of this
condition.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time, whether before or
after approval of the Merger by the shareholders of Nationwide or of Allied:
(a) by mutual consent of Nationwide and Allied;
(b) by Nationwide if the Board of Directors of Allied withdraws its
recommendation to the Allied shareholders to approve the Merger;
(c) by Nationwide or Allied if consummation of the Merger is barred by
a permanent injunction which is final and non-appealable;
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(d) by Allied, if, prior to the purchase of Shares pursuant to the
Offer, there is an Acquisition Proposal which the Board of Directors determines
represents a more favorable transaction to Allied and its shareholders than the
transactions contemplated by this Agreement, and if the Board of Directors,
after consultation with outside counsel, shall have determined that failure to
terminate the Agreement is reasonably likely to be inconsistent with the
fiduciary duties of the Board of Directors under applicable Law and Allied has
given Nationwide three business days notice of the terms of such Acquisition
Proposal and has paid Nationwide the fee contemplated by Section 8.2(b);
(e) by Allied prior to the completion of the Offer, upon a material
breach of any representation or warranty of Nationwide or Nationwide's failure
to comply in any material respect with any of its covenants or agreements, or if
any representation or warranty of Nationwide or Sub shall be or become untrue in
any material respect, which breach or failure to comply or untruth is not
curable or, if curable, is not cured within 30 business days after written
notice thereof has been given to Nationwide;
(f) by Nationwide prior to the completion of the Offer upon, (i) a
material breach of any representation or warranty of Allied or if any
representation or warranty of Allied shall be or become untrue in any material
respect, which breach or failure to comply or untruth is not curable or, if
curable, is not cured within 30 business days after written notice thereof has
been given to Allied, or (ii) Allied's failure to comply in any material respect
with any of its covenants or agreements (materiality being construed in light of
the transactions contemplated by this Agreement); or;
(g) by Nationwide or by Allied, if Common Shares shall not have been
purchased pursuant to the Offer by December 31, 1998, provided that the right to
terminate this Agreement pursuant to this clause (g) shall not be available to a
party whose failure to fulfill any obligation under this Agreement has been the
cause of the failure of such purchase to occur by such date.
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Section 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement by either
Nationwide or Allied, as provided above, this Agreement shall thereafter become
void and, except as provided in Section 8.2(b) and Section 9.2 hereof, there
shall be no Liability on the part of either party hereto against the other party
hereto, or on the part of its directors, officers, employees, shareholders or
agents (or those of any of the Allied Subsidiaries or Affiliates), except that
any such termination shall be without prejudice to the rights of either party
hereto (or any of the Allied Subsidiaries or Affiliates) arising out of the
willful breach by the other party (or any of the Allied Subsidiaries or
Affiliates) of any representation or warranty or any covenant or agreement
contained in this Agreement.
(b) In the event of termination of this Agreement by either Allied or
Nationwide pursuant to Section 8.1(b), (d), or (f), Allied shall pay Nationwide
an amount equal to all of the expenses incurred by Nationwide in connection with
this Agreement, the negotiations leading to its execution, the examination and
investigation of Allied, the preparation and negotiation of the Agreement and
related agreements, and in all other ways related to the Merger, including, but
not limited to, all fees and expenses incurred by investment bankers,
accountants, attorneys and other agents, plus the sum of $3 million in cash (the
"Termination Payment") as liquidated damages and not as a penalty, immediately
upon such termination, in same-day funds, provided that Nationwide shall not be
in material breach of its obligations under this Agreement. Moreover, Allied
shall pay the Termination Payment if the Closing does not occur either (i) due
to Allied's failure to satisfy a condition over which it has sole control prior
to December 31, 1998; or (ii) because prior to December 31, 1999, Allied or any
Subsidiary or Affiliate of Allied or any of their respective shareholders
publicly announces, enters into a letter of intent relating to, enters into a
definitive agreement providing for, or consummates, a transaction, which, as
announced, or as provided in such letter or agreement or as consummated,
provides for or relates to the disposition of a controlling interest in Allied
or the sale, transfer or other distribution of assets constituting a majority
(measured by fair market value) of the consolidated assets of Allied.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations and Warranties. None of the
representations, warranties and agreements in this Agreement shall survive the
Effective Time except as otherwise provided in this Agreement and except for the
agreements contained in Article II and Section 6.8, which shall survive until
expressly provided therein or, if not so expressly provided, indefinitely.
Section 9.2 Fees and Expenses. Subject to Section 8.2(b) hereof, if the
Merger is not consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses, except for expenses incurred in
connection with the printing, mailing and solicitation of proxies from
shareholders and all filing fees and related expenses which shall be borne
equally by Nationwide and Allied.
Section 9.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, upon receipt,
if mailed by registered or certified mail, postage prepaid, return receipt
requested, overnight delivery, confirmed facsimile transmission or hand
delivery, as follows:
(a) If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President-Enterprise Controller
Facsimile No.: (614) 249-4462
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with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler; Roger A. Craig
Facsimile No.: (614) 249-7254
(b) If to Allied, to:
Allied Life Financial Corporation
701 Fifth Avenue
Des Moines, Iowa 50391-2003
Attention: Samuel Wells
Facsimile No.: (515) 280-4776
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Richard G. Clemens, Esq.
Facsimile No.: (312) 853-7036
or to such other address as the Person to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.
Section 9.4 Amendments. This Agreement may be amended by the parties
hereto at any time before or after the approval of this Agreement by the
shareholders of Nationwide or of Allied, but after such approval no amendment or
modification shall be made which in any way materially adversely affects the
rights of such shareholders without the further approval of such shareholders.
Any amendment, modification or material waiver of this Agreement shall be
subject to the approval of the Ohio Superintendent and the Iowa Commissioner.
This Agreement may not be amended, modified or supplemented except by written
agreement of the parties hereto.
Section 9.5 No Waiver. Nothing contained in this Agreement shall cause
the failure of either party to insist upon strict compliance with any covenant,
obligation,
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condition or agreement contained herein to operate as a waiver of, or estoppel
with respect to, any such covenant, obligation, condition or agreement by the
party entitled to the benefit thereof.
Section 9.6 Brokers. Allied represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Allied, except for Allied's financial
advisor, Fox-Pitt, Kelton Inc., whose fees shall be paid by Allied. Nationwide
represents and warrants that no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Nationwide, except for Nationwide's financial advisor, Credit Suisse First
Boston, whose fees shall be paid by Nationwide.
Section 9.7 Publicity. So long as this Agreement is in effect, each of
the parties hereto (i) shall not, and shall cause its Affiliates not to, issue
or cause the publication of any press release or other announcement to any
Person with respect to this Agreement or the transactions contemplated hereby
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that nothing contained herein shall (A)
limit the right of each of the parties hereto and their Affiliates to make a
legally required filing or communication, provided that, to the extent possible,
such party shall consult with the other party before making such filing or
communication, or responding to any communications initiated by any
non-affiliated Person, including, but not limited to, any rating agency or
Governmental Entity, (B) prohibit either party hereto (or its Affiliates) from
initiating communications with, and making presentations to, any rating agency
or Governmental Entity relating to the transactions contemplated hereby if such
party gives prior notice thereof to the other party hereto, or (C) prohibit
Nationwide or Allied or any of their respective Affiliates from communicating to
any third party information in any way relating to the Merger that has been made
known to the general public, other than in violation of this Agreement, prior to
the time of such communication,
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(ii) shall cooperate fully with the other party hereto with respect to issuing
or publishing any press release, or other announcement or other written
communication to any non-affiliated Person and preparing written and oral
communications to the employees and agents of each party hereto with the purpose
of effectuating the Merger in the best interests of the respective shareholders
of Nationwide and Allied and (iii) shall promptly notify the other party of any
announcements which are made to affiliated Persons and any communications
received from and responses provided to non-affiliated Persons, in either case,
with respect to this Agreement or the transactions contemplated hereby.
Section 9.8 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.9 Nonassignability. This Agreement shall not be assigned by
either party hereto by operation of Law or otherwise without the prior written
consent of the other party hereto.
Section 9.10 Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their permitted assigns,
and nothing in this Agreement, expressed or implied, is intended to confer upon
any other Person (including, but not limited to, any policyholder or employee of
Allied, Nationwide or their Subsidiaries) any rights or remedies of any nature
under or by reason of this Agreement, except as expressly provided in Sections
6.8 hereof.
Section 9.11 Duplicates; Counterparts. This Agreement shall be executed
in duplicate and may be executed in counterparts each of which shall be deemed
to constitute an original and constitute one and the same instrument.
Section 9.12 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Ohio (except to the
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extent that the Iowa Insurance Law and the Iowa Corporation Law shall be held to
govern the terms of the Merger) without regard to its conflict of laws rules.
Each of the parties hereto submits to the jurisdiction of the state and federal
courts sitting in the City of Columbus, County of Franklin and State of Ohio, in
any action or proceeding arising out of or relating to this Agreement and all
claims in respect of any such action or proceeding may be heard or determined in
any such court.
Section 9.13 Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties hereto and
supersede all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof and thereof.
Section 9.14 Severability. If any provisions hereof shall be held
invalid or unenforceable by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly construed
and shall not affect the validity or effect of any other provision hereof;
provided, however, that the parties shall use reasonable efforts, including, but
not limited to, the amendment of this Agreement, to ensure that this Agreement
shall reflect as closely as practicable the intent of the parties hereto.
Section 9.15 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other party hereto would be irreparably damaged
in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
each of the parties hereto agrees that they each shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions thereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which Nationwide or Allied may be entitled, at law or in equity.
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Section 9.16 Survival of Certain Covenants. The provisions of Section
6.8 hereof shall survive the Effective Time.
Section 9.17 Counting. If the due date for any action to be taken under
this Agreement (including, but not limited to, the delivery of notices) is not a
Business Day, then such action shall be considered timely taken if performed on
or prior to the next Business Day following such due date.
ARTICLE X
DEFINITIONS
Section 10.1 Definitions. When used in this Agreement, the following
words or phrases have the following meanings:
"Acquisition Proposal" shall have the meaning set forth in Section 6.10
hereof.
"Affiliate" shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with another Person or beneficially owns or has the power to vote or
direct the vote of ten percent (10%) or more of the voting stock (or of any
other form of general partnership, limited partnership or voting equity interest
in the case of a Person that is not a corporation) of such other Person. For
purposes of this definition, "control", including the terms "controlling" and
"controlled", means the power to direct the management and policies of a Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee, partner or executor or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including all
Exhibits.
"Allied" shall have the meaning set forth in the preamble to this
Agreement.
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"Allied Disclosure Schedule" shall mean the disclosure schedule
delivered by Allied to Nationwide, dated the date hereof.
"Allied GAAP Financial Statements" shall have the meaning set forth in
Section 4.7 hereof.
"Allied Group" shall mean Allied and the Allied Subsidiaries.
"Allied Insurer" shall mean Allied and each Allied Subsidiary that
transacts or is authorized to transact an insurance or reinsurance business.
"Allied 1998 Quarterly Statement" shall have the meaning set forth in
Section 4.8 hereof.
"Allied Real Property" shall mean any real property in which Allied or
any of its Affiliates holds a Lien or owns an interest, or in the management of
which Allied or an Affiliate of Allied actively participates.
"Allied SAP Statements" shall have the meaning set forth in Section
4.6(d) hereof.
"Allied Subsidiary" or "Allied Subsidiaries" shall mean the
Subsidiaries of Allied and, without limiting the generality of the foregoing,
shall include any Subsidiary of Allied as to which Allied or an Allied
Subsidiary has guaranteed any obligations or owns any interest. References in
this Agreement to Subsidiaries of Allied shall include all of the Allied
Subsidiaries.
"Annual Statements" shall mean, with respect to any Person, the annual
statements of such Person filed with or submitted to the insurance regulatory
body in the jurisdiction in which such Person is domiciled on forms prescribed
or permitted by such regulatory body.
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"Articles of Merger" shall mean the articles of merger in such form as
required by, and executed and acknowledged in accordance, with the Iowa
Corporation Law and the Iowa Insurance Law.
"Assets" shall mean, as to a Person, all rights, titles, franchises and
interests in and to every species of property, real, personal and mixed, and
choses in action thereunto belonging, including, but not limited to,
Environmental Permits, Investment Assets, Intellectual Property, Contracts,
Licenses, privileges and all other assets whatsoever, tangible or intangible, of
such Person.
"Benefit Plans" shall have the meaning set forth in Section 4.21
hereof.
"Business" shall mean, as to a Person, the business, operations,
activities and affairs of such Person.
"Business Day" shall means any day other than Saturday, Sunday or any
other day in which commercial banks in Columbus, Ohio are required to or
permitted to be closed.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"Certificate of Merger" shall mean a certificate of merger in such form
as required by, and executed and acknowledged in accordance with, Section
1701.81 of the Ohio General Corporation Law.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Agreement" shall have the meaning set forth in Section 4.20(k)
hereof.
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"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commonly Controlled Entity" shall have the meaning set forth in
Section 4.21(b) hereof.
"Common Share" shall mean share of common stock, no par value, of
Allied.
"Computer Software" shall mean any and all computer software consisting
of sets of statements or instructions to be used, directly or indirectly, in a
computer, including, but not limited to, the following: (i) all source code,
object code and natural language code therefor and all component modules
thereof, (ii) all versions thereof, (iii) all screen displays and designs
thereof and (iv) all user, technical, training and other documentation relating
to any of the foregoing.
"Consent or Filing" shall have the meaning set forth in Section 4.5(b)
hereof.
"Contract" or "Contracts" shall mean a contract, agreement, commitment,
indenture, note, bond, mortgage, license, lease, assignment, arrangement or
understanding.
"Current Premium" shall have the meaning set forth in Section 6.8
hereof.
"D&O Insurance" shall have the meaning set forth in Section 6.8 hereof.
"Dissenting Shares" shall have the meaning set forth in Section 2.9
hereof.
"Effective Time" shall have the meaning set forth in Section 2.3
hereof.
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"Environmental Claim" shall mean any investigation, notice of
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising: (A) pursuant to, or in
connection with, an actual or alleged violation of any Environmental Law; (B) in
connection with any Hazardous Substances or actual or alleged activity
associated with any Hazardous Substances; (C) from any abatement, removal,
remedial, corrective or other response action in connection with any Hazardous
Substances, Environmental Law or other order or directive of any federal, state
or local governmental authority; or (D) from any actual or alleged damage,
injury, threat or harm to health, safety, natural resources or the environment.
Environmental Claim shall not include claims for coverage by an insured.
"Environmental Law" shall mean any local, state or federal statute,
rule, regulation, order, code, directive or ordinance and any binding judicial
or administrative interpretation thereof or requirements thereunder pertaining
to: (A) the regulation and protection of health, safety and the indoor or
outdoor environment; (B) the conservation, management, development, control
and/or use of land (including zoning laws and ordinances), natural resources and
wildlife; (C) the protection or use of surface water and ground water; (D) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, release, threatened release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Substances; or (E)
pollution (including any release into air, land, surface water and ground
water); and includes without limitation the following federal statutes (and
their implementing regulations and the analogous state statutes and
regulations): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984; the Federal Water Pollution Control Act of 1972, as
amended by the Clean Water Act of 1977.
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"Environmental Permit" shall mean any permit, license, variance,
certificate, consent, letter, clearance, closure, exemption, authorization,
decision or action or approval required to be obtained from any federal, state
or local governmental authority with jurisdiction over and pursuant to any
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Financial Statements" shall mean balance sheets, statements of income
and statements of cash flows, including, but not limited to, all notes,
schedules, exhibits and other attachments thereto, whether consolidated,
combined or separate or audited or unaudited or prepared in accordance with SAP
or GAAP.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"GAAP Financial Statements" shall mean Financial Statements prepared in
accordance with GAAP.
"Governmental Approvals" shall mean the Consents or Filings required to
be obtained from the Iowa Commissioner and the Ohio Superintendent.
"Governmental Entity" or "Governmental Entities" shall mean a court,
executive office, legislature, governmental agency, commission or
administrative, regulatory or self-regulatory authority or instrumentality,
domestic or foreign.
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"Hazardous Substances" shall mean chemicals, products, compounds,
by-products, pollutants, contaminants, hazardous wastes or toxic or hazardous
substances regulated under any Environmental Law, including, but not limited to,
asbestos or asbestos-containing materials, polychlorinated biphenyls, pesticides
and oils, petroleum and petroleum products.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnitees" shall have the meaning set forth in Section 6.8 hereof.
"Insurance Contract" shall mean any Contract of insurance, including,
but not limited to, reinsurance contracts, variable annuity and fixed annuity
contracts or products, life insurance contracts, and funding agreements.
"Insurance License" shall mean a License granted by a Governmental
Entity to transact an insurance or reinsurance business, issue fixed or variable
annuity contracts or products, or issue life insurance contracts.
"Intellectual Property" shall mean: trademarks, service marks, brand
names, certification marks, trade dress, assumed names, trade names and other
indications of origin, good will associated with the foregoing and registrations
in any extension, modification or renewal of any such registration or
application; inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including but not limited to
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not in any jurisdiction, and any renewals
or extensions thereof;
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and any similar intellectual property or proprietary rights; provided, that
Intellectual Property shall include Computer Software.
"Investment Advisers Act" shall mean the Investment Advisers Act of
1940, as amended, and the rules and regulations of the SEC promulgated
thereunder.
"Investment Assets" shall mean bonds, notes, debentures, mortgage
loans, collateral loans and all other instruments of indebtedness, stocks,
partnership or joint venture interests and all other equity interests
(including, but not limited to, equity interests in Subsidiaries or other
Affiliates), real estate and leasehold and other interests therein, certificates
issued by or interests in trusts, cash on hand and on deposit, personal property
and interests therein and all other assets acquired for investment purposes.
"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended, and the rules and regulations of the SEC promulgated thereunder.
"Iowa Attorney General" shall mean the Attorney General of the State of
Iowa.
"Iowa Commissioner" shall mean the Commissioner of Insurance of the
State of Iowa.
"Iowa Corporation Law" shall mean Chapters 490 and 491 of the Iowa
Code, as amended, and the rules and regulations promulgated thereunder.
"Iowa Insurance Law" shall mean Chapters 505 through 523I of the Iowa
Code, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service or any successor agency.
88
<PAGE> 140
"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
89
<PAGE> 141
(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> 144
"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> 145
personal property, gross receipts, capital stock, production, business and
occupation, employment, disability, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes, other taxes or similar charges of any
kind whatsoever imposed by any Governmental Entity, whether imposed directly on
a Person or resulting under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law), as a transferee or successor, by
Contract or otherwise and includes any interest and penalties (civil or
criminal) on or additions to any such taxes or in respect of a failure to comply
with any requirement relating to any Tax Return and any expenses incurred in
connection with the determination, settlement or litigation of any such tax
liability.
"Third Party Administrator" shall mean any third party administrator of
either Nationwide or Allied.
"Title IV Plan" shall have the meaning set forth in Section 4.21(b)
hereof.
"Treasury Regulation" shall mean the regulations promulgated by the
U.S. Department of the Treasury pursuant to the Code.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act of 1988, as amended.
"Welfare Plan" shall have the meaning set forth in Section 4.21(a)
hereof.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 146
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Nationwide, of Sub and of Allied as
of the date first above written.
NATIONWIDE MUTUAL INSURANCE
COMPANY
By: _________________________________
Name: David A. Diamond
Title: Vice President-Enterprise Controller
NATIONWIDE LIFE ACQUISITION CORPORATION
By: _________________________________
Name: David A. Diamond
Title: Vice President-Enterprise
Controller
ALLIED LIFE FINANCIAL CORPORATION
By: _________________________________
Name: Samuel J. Wells
Title: President
95
<PAGE> 147
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> 148
which has a material adverse effect on the general economic conditions
in the United States;
(b) any statute, rule, regulation, a temporary, preliminary or
permanent order or injunction shall be promulgated, enacted, entered,
enforced or deemed applicable to the Offer, the Merger or performance
under this Agreement, by any state, federal or foreign government or
governmental authority or court or governmental agency of competent
jurisdiction that (i) prohibits the consummation of the Offer or the
Merger or (ii) imposes material limitations on the ability of Sub
effectively to exercise full rights of ownership with respect to the
Common Shares, including, without limitation, the right to vote any
Common Shares purchased by it on all matters properly presented to the
stockholders of Allied; provided that the Nationwide and Sub shall have
used their best efforts to have any such decree, order or injunction
vacated or reversed;
(c) Allied shall have entered into an agreement obligating
Allied to enter into an Acquisition Transaction with a person other
than Nationwide, Sub or an affiliate of either;
(d) (i) Allied shall have breached or failed to perform in any
material respect any of its material obligations covenants or
agreements under the Agreement or (ii) there shall have occurred, on
the part of Allied, a breach of any representation or warranty
contained in the Agreement as of the date of the Agreement or at the
time of the consummation of the Offer (other than representations and
warranties made as of a specified date prior to the date of the
Agreement) which, in either case, if
Exhibit A-2
<PAGE> 149
not cured would reasonably be expected to have a Material Adverse
Effect and which is not curable or, if curable, is not cured with the
later of (x) 30 calendar days after written notice of such breach is
given by Nationwide to Allied of such breach and (y) the time of
satisfaction of all conditions to the Offer not related to such breach;
provided, however, that the representations contained in Sections 4.2
and 4.4 shall be true as of the consummation of the Offer.
(e) the Allied Board shall have withdrawn its recommendation
or modified its recommendation in a manner adverse to Nationwide or
Sub;
(f) the failure to obtain any Governmental Approvals or third
party Contracts, which failure, in the aggregate, would have a Material
Adverse Effect;
(g) Any insurance regulatory approval necessary for the merger
of Allied Mutual with and into Nationwide (the "Mutual Merger") shall
not have been obtained on terms and conditions reasonably satisfactory
to Nationwide;
(h) the requisite vote of Allied Mutual policyholders in
support of the mutual Merger shall not have been obtained; and
(i) the nominees of Nationwide to the Allied Mutual Board
pursuant to the Mutual Merger shall not have been duly elected or
appointed so as to constitute a majority of the directors on the Allied
Mutual Board.
The foregoing conditions are for the sole benefit of Sub and may be
asserted by Sub regardless of the circumstances giving rise to any such
condition or may be waived by Sub in whole or in part at any time and from time
to time in its sole discretion (subject to the terms of the Merger Agreement).
The failure by Sub at any time to exercise any of the
Exhibit A-3
<PAGE> 150
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> 151
Exhibit B
Nationwide Life Acquisition Corporation Articles
of Incorporation and Code of By-laws
Exhibit B-1
<PAGE> 152
Exhibit C
Shareholder Agreement
SHAREHOLDER AGREEMENT, dated as of June __, 1998, between Nationwide
Mutual Insurance Company, an Ohio mutual insurance company ("Nationwide"), and
Allied Mutual Insurance Company, an Iowa mutual insurance company (the
"Securityholder").
WHEREAS, Nationwide, Nationwide Life Acquisition Corporation, an Ohio
corporation and wholly-owned subsidiary of Nationwide ("Sub"), and Allied Life
Financial Corporation, an Iowa corporation (the "Company"), propose to enter
into an Agreement and Plan of Merger, dated the date hereof (as the same may be
amended or supplemented, the "Merger Agreement") providing for the merger of Sub
with the Company (the "Merger");
WHEREAS, the Securityholder is the record and beneficial owner of the
number of (i) shares of common stock, no par value, of the Company (the "Common
Shares"), and (ii) shares of 6.75% Series Preferred Stock, no par value, of the
Company (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 agree as follows:
1. Covenants of the Securityholder. The Securityholder agrees as
follows:
(a) The Securityholder shall not, except as contemplated by the terms
of this Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of,
or enter into any Contract (as defined below), option or other arrangement
(including any profit sharing arrangement) or understanding with respect to the
sale, transfer, pledge, assignment or other disposition of, the Securities to
any person other than Nationwide or Nationwide's designee, (ii) enter into any
voting arrangement, whether by proxy, voting agreement, voting trust,
power-of-attorney or otherwise, with respect to the Securities or (iii) take any
Exhibit C-1
<PAGE> 153
other action that would in any way restrict, limit or interfere with the
performance of its obligations hereunder or the transactions contemplated
hereby.
(b) Until the Merger is consummated or the Merger Agreement is
terminated, 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 encourage (including by way of furnishing information), or
take any other action designed or reasonably likely to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal (as defined in the Merger Agreement) or
(ii) participate in any discussions or negotiations regarding any Acquisition
Proposal. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by an investment banker,
financial advisor, attorney, accountant or other representative or agent of the
Securityholder shall be deemed to be a violation of this Section 1(b) by the
Securityholder.
(c) At any meeting of shareholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the Merger and the Merger Agreement is sought,
the Securityholder shall, including by initiating a written consent solicitation
if requested by Nationwide, vote (or cause to be voted) such Securityholder's
Securities in favor of the Merger, the adoption of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement. At any
meeting of shareholders of the Company or at any adjournment thereof or in any
other circumstances upon which the Securityholder's vote, consent or other
approval is sought, the Securityholder shall vote (or cause to be voted) the
Securityholder's Securities against (i) any merger agreement or merger (other
than the Merger Agreement and 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").
2. Grant of Irrevocable Proxy Coupled with an Interest; Appointment of
Proxy.
(a) 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 Preferred
Shares, or grant a consent or approval in respect of such Preferred Shares, 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
Exhibit C-2
<PAGE> 154
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 Preferred Shares are not irrevocable, and that
any such proxies are hereby revoked.
(c) The Securityholder hereby affirms that the proxy set forth in this
Section 2 is coupled with an interest and is irrevocable until such time as this
Agreement terminates in accordance with its terms. The Securityholder hereby
further affirms that the irrevocable proxy is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of the Securityholder under this Agreement.
The Securityholder hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 490.722 of the Iowa Corporation Act. Such irrevocable proxy shall be
valid until the termination of this Agreement in accordance with its terms.
3. Grant of Option. The Securityholder hereby grants to Nationwide an
option to purchase all of the Common Shares owned by the Securityholder at a
price of $30.00 per share, net to the Securityholder in cash, without interest
thereon (the "Option"). Such Option shall expire coterminus with the termination
of the Merger Agreement, unless extended by written agreement between Nationwide
and the Securityholder.
4. Representations and Warranties of the Securityholder. The
Securityholder hereby represents and warrants to Nationwide as follows:
(a) Authority. The Securityholder has all requisite 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 for the informational filings with the Securities and Exchange
Commission, 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 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"), (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
Exhibit C-3
<PAGE> 155
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 or (iii) violate any judgment,
order, writ, preliminary or permanent injunction or decree (an "Order") or any
statute, law, ordinance, rule or regulation of any Governmental Entity (a "Law")
applicable to the Securityholder or any of the Securityholder's properties or
assets, including the Securityholder's Securities.
(b) The Securities. The Securityholder's Securities and the
certificates representing such Securities are now, and at all times during the
term hereof will be, held by such Securityholder, or by a nominee or custodian
for the benefit of such Securityholder, and the Securityholder has good and
marketable title to such Securities, free and clear of any Liens, proxies,
voting trusts or agreements, understandings or arrangements, except for any such
Liens or proxies arising hereunder. The Securityholder owns of record or
beneficially no securities of the Company, or any options, warrants or rights
exercisable for securities of the Company, other than such Securityholder's
Securities, as set forth on Schedule A hereto.
(c) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the
Securityholder.
(d) Merger Agreement. The Securityholder understands and acknowledges
that Nationwide is entering into the Merger Agreement in reliance upon the
Securityholder's execution and delivery of this Agreement.
5. Board Approval. The Board of Directors of the Securityholder has
duly and validly authorized and approved by all necessary corporate action, this
Agreement, the Merger Agreement and the transactions contemplated hereby and
thereby, so that by the execution and delivery hereof no restrictive provision
of Section 490.1110 of the Iowa Corporation Act or restrictive provision of any
applicable anti-takeover provision in the Articles of Incorporation or by-laws
of the Company is, or at the closing of the transactions contemplated hereby
will be, applicable to the Company, Nationwide, the Securities, the Merger or
any other transaction contemplated by 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
Exhibit C-4
<PAGE> 156
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.
(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, or
the registration requirements of the Securities Act of 1933.
7. Further Assurances. The Securityholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further transfers, assignments, endorsements, consents and other instruments as
Nationwide may reasonably request for the purpose of effectively carrying out
the transactions contemplated by this Agreement and to vest the power to vote
the Securityholder's Securities as contemplated by Section 2. Nationwide agrees
to use reasonable 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. 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. 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.
9. Termination. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the first anniversary of the date of any
termination of the Merger Agreement in accordance with its terms. Nothing in
this Section 8 shall relieve any party from liability for willful breach of this
Agreement.
10. Stop Transfer. The Securityholder agrees with, and covenants to,
Nationwide that the Securityholder shall not register the transfer of any
certificate representing the Securityholder's Securities unless such transfer is
made in accordance with the terms of this Agreement.
11. General Provisions.
(a) Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
(b) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
Exhibit C-5
<PAGE> 157
(c) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President - Enterprise Controller
Facsimile: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler; Roger A. Craig
Facsimile: (614) 249-7254
and
(ii) 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
Facsimile: 515-280-4399
and
Allied Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50391-2000
Attention: Douglas L. Andersen, President and Chief Executive Officer
Facsimile: 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
Exhibit C-6
<PAGE> 158
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
(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".
(e) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(f) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) 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
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(g) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without regard to any applicable
conflicts of law.
(h) Publicity. Except as otherwise required by law, court process or
the rules of a national securities exchange or the Nasdaq National Market or as
contemplated or provided in the Merger Agreement, for so long as this Agreement
is in effect, neither the Securityholder nor Nationwide shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement or the Merger Agreement without
the consent of the other party, which consent shall not be unreasonably
withheld.
12. 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
Exhibit C-7
<PAGE> 159
to any claim or proceeding related to or arising out of this Agreement or any of
the transactions contemplated hereby.
THE SECURITYHOLDER AGREES THAT, IN CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING
ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO AND AGREES TO
VENUE IN SUCH COURTS. THE SECURITYHOLDER HEREBY APPOINTS THE SECRETARY OF THE
COMPANY AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING
SENTENCE ONLY. EACH PARTY HERETO WAIVES ANY RIGHT TO JURY TRIAL IN CONNECTION
WITH ANY SUCH SUIT OR PROCEEDING.
Exhibit C-8
<PAGE> 160
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: David A. Diamond
Title: Vice President - Enterprise Controller
ALLIED MUTUAL INSURANCE COMPANY
By:
Name:
Title:
Exhibit C-9
<PAGE> 161
SCHEDULE A
<TABLE>
<CAPTION>
Name and Address Common Shares 6.75% Preferred Stock
---------------- ------ ------ ---------------------
<S> <C> <C>
Allied Mutual Insurance Company 1,521,006 2,330,772
</TABLE>
Schedule A-1
<PAGE> 162
ANNEX II
Following is the text of the statutory appraisal right as set forth in
Sections 490.1301 through 490.1331 of the Iowa Business Corporation Act.
DIVISION XIII
DISSENTERS' RIGHTS
PART A
490.1301 DEFINITIONS FOR DIVISION XIII. In this division:
1. "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
2. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
3. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 490.1302 and who exercises that right when and in
the manner required by sections 490.1320 through 490.1328.
4. "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
5. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
6. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
7. "Shareholder" means the record shareholder or the beneficial
shareholder.
490.1302 SHAREHOLDERS' RIGHT TO DISSENT.
1. A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
a. Consummation of a plan of merger to which the corporation is a
party if either of the following apply;
(1) Shareholder approval is required for the merger by section
490.1103 or the articles of incorporation and the shareholder is
entitled to vote on the merger.
<PAGE> 163
(2) the corporation is a subsidiary that is merged with its
parent under section 490.1104.
b. Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
c. Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale.
d. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it does
any or all of the following:
(1) Alters or abolishes a preferential right of the shares.
(2) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares.
(3) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(4) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights.
(5) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under section 490.604.
(6) Extends, for the first time after being governed by this
chapter, the period of duration of a corporation organized under
chapter 491 or 496A and existing for a period of years on the day
preceding the date the corporation is first governed by this chapter.
e. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
2. A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter is not entitled to challenge the
corporate action creating the shareholder's entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the corporation.
490.1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
1. A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in that shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by
<PAGE> 164
any one person and notifies the corporation in writing of the name and address
of each person on whose behalf the shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are determined as if the
shares as to which the shareholder dissents and the shareholder's other shares
were registered in the names of different shareholders.
2. A beneficial shareholder may assert dissenters' rights as to shares
held on the shareholder's behalf only if the shareholder does both of the
following:
a. Submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights.
b. Does so with respect to all shares of which the shareholder is
the beneficial shareholder or over which that beneficial shareholder has
power to direct the vote.
PART B
490.1320 NOTICE OF DISSENTERS' RIGHTS.
1. If proposed corporate action creating dissenters' rights under section
490.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this part and be accompanied by a copy of this part.
2. If corporate action creating dissenters' rights under section 490.1302
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 490.1322.
490.1321 NOTICE OF INTENT TO DEMAND PAYMENT.
1. If proposed corporate action creating dissenters' rights under section
490.1302 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must do all of the following:
a. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effectuated.
b. Not vote the dissenting shareholder's shares in favor of the
proposed action.
2. A shareholder who does not satisfy the requirements of subsection 1 is
not entitled to payment for the shareholder's shares under this part.
490.1322 DISSENTERS' NOTICE.
1. If proposed corporate action creating dissenters' rights under section
490.1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders who satisfied the requirements
of section 490.1321.
<PAGE> 165
2. The dissenters' notice must be sent no later than ten days after the
proposed corporate action is authorized at a shareholders' meeting, or, if the
corporate action is taken without a vote of the shareholders, no later than ten
days after the corporate action is taken, and must do all of the following:
a. State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited.
b. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
c. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date.
d. Set a date by which the corporation must receive the payment
demand, which date shall not be fewer than thirty nor more than sixty days
after the date the dissenters' notice is delivered.
e. Be accompanied by a copy of this division. (Last amended by Ch.
211, L. '91, eff. 7-1-91.)
490.1323 DUTY TO DEMAND PAYMENT.
1. A shareholder sent a dissenter's notice described in section 490.1322
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenter's notice pursuant to section 490.1322, subsection 2, paragraph "c,"
and deposit the shareholder's certificates in accordance with the terms of the
notice.
2. The shareholder who demands payment and deposits the shareholder's
shares under subsection 1 retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
3. A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
division.
490.1324 SHARE RESTRICTIONS.
1. The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under section 490.1326.
2. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
<PAGE> 166
490.1325 PAYMENT.
1. Except as provided in section 490.1327, at the time the proposed
corporate action is taken, or upon receipt of a payment demand, whichever occurs
later, the corporation shall pay each dissenter who complied with section
490.1323 the amount the corporation estimates to be the fair value of the
dissenter's shares, plus accrued interest.
2. The payment must be accompanied by all of the following:
a. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year and the latest available interim financial statements, if any.
b. A statement of the corporation's estimate of the fair value of
the shares.
c. An explanation of how the interest was calculated.
d. A statement of the dissenter's right to demand payment under
section 490.1328.
e. A copy of this division. (Last amended by Ch. 211, L. '91, eff.
7-1-91.)
490.1326 FAILURE TO TAKE ACTION.
1. If the corporation does not take the proposed action within one
hundred eighty days after the date set for demanding payment and depositing
share certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertified shares.
2. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 490.1322 as if the corporate action was taken
without a vote of the shareholders and repeat the payment demand procedure.
(Last amended by Ch. 171, L. '91, eff. 7-1-91.)
490.1327 AFTER-ACQUIRED SHARES.
1. A corporation may elect to withhold payment required by section
490.1325 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action.
2. To the extent the corporation elects to withhold payment under
subsection 1, after taking the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated
and a statement of the dissenter's right to demand payment under section
490.1328.
<PAGE> 167
490.1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
1. A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due and demand payment of the dissenter's estimate, less any payment under
section 490.1325, or reject the corporation's offer under section 490.1327 and
demand payment of the fair value of the dissenter's shares and interest due, if
any of the following apply:
a. The dissenter believes that the amount paid under section
490.1325 or offered under section 490.1327 is less than the fair value of
the dissenter's shares or that the interest due is incorrectly calculated.
b. The corporation fails to make payment under section 490.1325
within sixty days after the date set for demanding payment.
c. The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertified shares within sixty days after the date set for
demanding payment.
2. A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection 1 within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART C
490.1330 COURT ACTION.
1. If a demand for payment under section 490.1328 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
2. The corporation shall commence the proceeding in the district court of
the country where a corporation's principal office or, if none in this state,
its registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the country in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign corporation
was located.
3. The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order
<PAGE> 168
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
5. Each dissenter made a party to the proceeding is entitled to judgment
for either of the following:
a. The amount, if any, by which the court finds the fair value of
the dissenter's shares, plus interest, exceeds the amount paid by the
corporation.
b. The fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under section 490.1327.
490.1331 COURT COSTS AND COUNSEL FEES.
1. The court in an appraisal proceeding commenced under section 490.1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 490.1328.
2. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable, for either of
the following:
a. Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of sections 490.1320 through 490.1328.
b. Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
<PAGE> 169
ANNEX III
[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, Iowa 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.
<PAGE> 170
[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
<PAGE> 171
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
