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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ALLIED LIFE FINANCIAL CORPORATION
(Name of Subject Company)
ALLIED LIFE FINANCIAL CORPORATION
(Name of Person(s) Filing Statement)
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Common Stock, No Par Value
(Title of Class of Securities)
019 246 107
(CUSIP Number of Class of Securities)
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WENDELL P. CROSSER
Vice President and Treasurer
ALLIED Life Financial Corporation
701 Fifth Avenue
Des Moines, Iowa 50391-2003
(515) 280-4211
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With copies to:
<TABLE>
<S> <C>
GEORGE T. OLESON, ESQ. RICHARD G. CLEMENS, ESQ.
Vice President and Corporate Counsel Sidley & Austin
ALLIED Life Financial Corporation One First National Plaza
701 Fifth Avenue Chicago, Illinois 60603
Des Moines, Iowa 50391-2003 (312) 853-7000
(515) 280-4211
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is ALLIED Life Financial Corporation, an
Iowa corporation (the "Company"). The address of the principal executive offices
of the Company is 701 Fifth Avenue, Des Moines, Iowa 50391-2003. The title of
the class of equity securities to which this Statement relates is the common
stock, no par value, of the Company ("Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Statement") relates to the tender offer by Nationwide Life Acquisition
Corporation (the "Purchaser"), an Ohio corporation and a wholly owned subsidiary
of Nationwide Mutual Insurance Company, an Ohio mutual insurance company
("Parent"), to purchase all outstanding Shares at a purchase price of $30 per
share (the "Offer Price"), net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated June 10, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together with the Offer to Purchase and any amendments or
supplements thereto constitute the "Offer"). The Offer is disclosed in the
Tender Offer Statement on Schedule 14D-1 dated June 10, 1998 (the "Schedule
14D-1"), as filed by Parent and Purchaser with the Securities and Exchange
Commission (the "SEC"). The Schedule 14D-1 states that the address of the
principal executive offices of each of Parent and Purchaser is One Nationwide
Plaza, Columbus, Ohio 43215.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger dated as of June 3, 1998 (the "Merger Agreement"), among Parent,
Purchaser and the Company. Pursuant to the Merger Agreement, following the
consummation of the Offer, upon the satisfaction or waiver of certain
conditions, Purchaser will be merged (the "Merger") with and into the Company,
with the Company surviving the Merger (as such, the "Surviving Corporation") as
a wholly owned subsidiary of Parent. In the Merger, each Share outstanding
immediately prior to the effective time (the "Effective Time") of the Merger
(other than Shares held as treasury shares by the Company and Shares held by
stockholders, if any, who are entitled to and who properly exercise appraisal
rights under the Iowa Business Corporation Act (the "Iowa Corporation Act") with
respect to their Shares) will, by virtue of the Merger and without any action by
the holder thereof, be converted into the right to receive $30 per Share (or any
higher price paid per Share in the Offer), net to the record holder thereof, in
cash, without interest thereon (the "Merger Consideration"), upon surrender of
the certificate formerly representing such Share.
ALLIED Mutual Insurance Company, an Iowa mutual insurance company ("ALLIED
Mutual"), has entered into a Shareholder Agreement with Parent (the "Shareholder
Agreement") pursuant to which ALLIED Mutual has agreed, among other things, that
at any meeting of stockholders of the Company called to vote upon the Merger and
the Merger Agreement, it will vote Shares held by it and shares of 6.75% Series
Preferred Stock, no par value, of the Company (the "6.75% Preferred"), held by
it, in favor of the Merger and against alternative transactions. ALLIED Mutual
has also agreed that it will not dispose of any Shares or shares of 6.75%
Preferred held by it. At the close of business on June 2, 1998, ALLIED Mutual
owned all of the 2,330,772 shares of 6.75% Series Preferred then outstanding and
1,521,006 Shares. Each Share and each share of 6.75% Preferred is entitled to
one vote. The affirmative vote of the holders of a majority of the outstanding
Shares, outstanding shares of 6.75% Preferred and outstanding shares of Series A
ESOP Convertible Preferred Stock, no par value, of the Company, voting together
as one class, will be required in order to approve the Merger and the Merger
Agreement. At the close of business on June 2, 1998, the Shares and shares of
6.75% Preferred held by ALLIED Mutual represented approximately 56% of the total
voting securities issued by the Company. Accordingly, it is expected that any
required stockholder approval will be received.
The Merger Agreement and the Shareholder Agreement are more fully described
below in Item 3. Copies of the Merger Agreement and the Shareholder Agreement
are filed as Exhibits hereto and are incorporated herein by reference in their
entirety. Copies of the press releases issued by the Company on June 3, 1998 and
June 4, 1998 are filed as Exhibits hereto and each is incorporated herein by
reference in its entirety.
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As used herein, the phrase "ALLIED" refers to the Company, ALLIED Mutual
and ALLIED Group, Inc., an Iowa corporation ("ALLIED Group"), collectively.
Unless otherwise noted, capitalized terms used in this Statement without
definition shall have the respective meanings assigned to such terms in the
Merger Agreement.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above, which information is
incorporated herein by reference.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and certain of its directors and executive officers are described in
Annex C hereto which is incorporated herein by reference, and under the sections
captioned "Voting Securities and Principal Stockholders," "Directors and
Executive Officers -- Compensation of the Members of the Board of Directors and
the Director Purchase Plan," "Board Compensation Committee Report on Executive
Compensation," "Compensation of Executive Officers" and "Certain Transactions
and Relationships -- Other Arrangements and Transactions" contained in Annex B
hereto and each such section is incorporated herein by reference.
Certain other contracts, agreements, arrangements and understandings
between the Company and its affiliates are described under the section captioned
"Certain Transactions and Relationships" contained in Annex B hereto and such
section is incorporated herein by reference.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
This summary is qualified in its entirety by reference to the Merger Agreement,
a copy of which is filed as an Exhibit hereto and which is incorporated herein
by reference.
The Offer. In the Merger Agreement, Purchaser has agreed, among other
things, to offer $30 per Share, net to the seller in cash, without interest
thereon, subject to the conditions set forth below under the caption "-- Certain
Conditions of the Offer." The Merger Agreement provides that, without the
consent of the Company, Purchaser shall not (a) reduce the number of Shares
sought in the Offer, (b) reduce the Offer Price to a price less than $30 per
Share, (c) amend or add to the conditions set forth below under the caption "--
Certain Conditions of the Offer," (d) except as provided in the next paragraph,
extend the Offer, (e) change the form of consideration payable in the Offer, (f)
waive the Minimum Condition (as defined below) or the Insurance Regulatory
Condition (as defined below) without the Company's consent or (g) amend any
other term of the Offer in any manner adverse to the holders of the Shares.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (a) extend the Offer, if at the scheduled or extended expiration date
of the Offer, any of the conditions to Purchaser's obligation to purchase the
Shares are not satisfied or waived, until such time as such conditions are
satisfied or waived, (b) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC applicable to the Offer and
(c) extend the Offer for any reason on one or more occasions for an aggregate
period of not more than 10 business days (for all such extensions) pursuant to
this clause (c) beyond the latest expiration date that would otherwise be
permitted under clause (a) or (b) of this sentence. Subject to the terms and
conditions of the Offer and the Merger Agreement, Purchaser agreed, and Parent
agreed to cause Purchaser, to accept for payment, and pay for, all Shares
validly tendered and not withdrawn pursuant to the Offer that Purchaser becomes
obligated to accept for payment, and pay for, pursuant to the Offer as soon as
practicable after the expiration of the Offer.
Certain Conditions of the Offer. Notwithstanding any other provision of the
Offer, Purchaser is not required to accept for payment, or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), (relating
to Purchaser's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares not theretofore
accepted for payment or paid for (i) unless (a) there are validly tendered and
not properly withdrawn prior to the expiration of the Offer at least 2,000,000
Shares (the
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"Minimum Condition"), and (b) all insurance regulatory approvals necessary for
Parent and Purchaser's acquisition of control of the Company and its
subsidiaries are obtained on terms and conditions reasonably satisfactory to
Parent (the "Insurance Regulatory Condition") and any waiting period applicable
to the consummation of the Offer and the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") has not 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 Shares are accepted for payment
(whether or not any other Shares shall theretofore have been accepted for
payment or paid for pursuant to the Offer) any of the following conditions
exists:
(a) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, or (iii) a commencement
of a war, armed hostilities or other international or national calamity
directly involving the United States which has a material adverse effect on
the general economic conditions in the United States;
(b) any statute, rule, regulation, 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
the Merger Agreement, by any state, federal or foreign government or
governmental authority or court or governmental agency of competent
jurisdiction that (i) prohibits the consummation of the Offer or the Merger
or (ii) imposes material limitations on the ability of Purchaser
effectively to exercise full rights of ownership with respect to the
Shares, including, without limitation, the right to vote any Shares
purchased by it on all matters properly presented to the stockholders of
the Company; provided that the Parent and Purchaser shall have used their
best efforts to have any such decree, order or injunction vacated or
reversed;
(c) the Company shall have entered into an agreement obligating the
Company to enter into an Acquisition Transaction with a person other than
Parent, Purchaser or an affiliate of either;
(d) (i) the Company shall have breached or failed to perform in any
material respect any of its material obligations covenants or agreements
under the Merger Agreement or (ii) there shall have occurred, on the part
of the Company, a breach of any representation or warranty contained in the
Merger Agreement as of the date of the Merger 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 Merger Agreement)
which, in either case, if not cured would reasonably be expected to have a
Material Adverse Effect (as defined below) 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 Parent to the Company of such breach and
(y) the time of satisfaction of all conditions to the Offer not related to
such breach; provided, however, that certain representations relating to
the Company's capitalization and authority to enter into the Merger
Agreement shall be true as of the consummation of the Offer.
(e) the Board of Directors of the Company shall have withdrawn its
recommendation or modified its recommendation in a manner adverse to Parent
or Purchaser;
(f) the failure to obtain any governmental approvals or third party
consents, 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 Parent (the "Mutual Merger") shall not have
been obtained on terms and conditions reasonably satisfactory to Parent;
(h) the requisite vote of ALLIED Mutual policyholders in support of
the Mutual Merger shall not have been obtained; and
(i) the nominees of Parent to the Board of Directors of ALLIED Mutual
pursuant to the Mutual Merger shall not have been duly elected or appointed
so as to constitute a majority of the directors on the Board of Directors
of ALLIED Mutual.
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The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser 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 Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
As used in the Merger Agreement, "Material Adverse Effect" means a material
adverse effect on the business, results of operations or financial condition of
any party or any subsidiary of any party (including, after the Merger, the
Surviving Corporation), or of such party and its subsidiaries taken as a whole,
or the ability of such party to consummate the transactions contemplated by the
Merger Agreement.
The Merger. The Merger Agreement provides that, following the satisfaction
or waiver of the conditions set forth therein, Purchaser will be merged with and
into the Company, with the Company continuing as the Surviving Corporation, and
each Share then outstanding (other than Shares held as treasury shares by the
Company and Shares held by stockholders, if any, who are entitled to and who
properly exercise appraisal rights under the Iowa Corporation Act with respect
to their Shares) will, by virtue of the Merger and without any action by the
holder thereof, be converted into the right to receive $30 per Share, net to the
seller in cash, without interest thereon, upon the surrender of the certificate
formerly representing such Shares.
Representations and Warranties. The Merger Agreement contains
representations and warranties by the Company with respect to, among other
things, the organization, qualification and capitalization of the Company, the
subsidiaries of the Company, the authority of the Company relative to the Merger
Agreement, the absence of violations of law, required governmental filings, the
statutory financial statements and other financial statements of the Company's
insurance company subsidiaries and their actuarial reserves, the SEC filings of
the Company, the absence of certain changes or events and of any undisclosed
liabilities, the inapplicability of state takeover statutes, compliance with
applicable law, the assets of the Company, environmental matters, contracts of
the Company, taxes and tax returns, benefit plans, labor relations and
employment, intellectual property, properties, insurance issued by the Company
and its subsidiaries, cancellations, operations insurance, 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 Parent
and Purchaser with respect to, among other things, their organization and
qualification, their authority relative to the Merger Agreement, the absence of
violations of law and required governmental filings.
Covenants of the Company. In the Merger Agreement, the Company covenanted
and agreed that, among other things, during the period from the date of the
Merger Agreement until the Effective Time, unless Parent otherwise agrees in
writing, or except as otherwise contemplated in the Merger Agreement, (a) the
Company and its subsidiaries shall conduct their business only in the ordinary
course of business and in the same manner as conducted since December 31, 1997,
and shall use all reasonable efforts to preserve its services to and
relationships with policyholders, insurers, agents, sales and distribution
organizations, underwriters, investment customers, brokers, suppliers and all
others so as not to impair its ongoing business in any material respect; (b) the
Company and its subsidiaries shall not make a change in their dividend,
underwriting, pricing, claims, risk retention, investment or reinsurance
practices or polices in any material respect, and shall notify Parent of any
material transactions involving a purchase or sale; (c) the Company and its
subsidiaries shall not make any material change in their accounting practices,
including changes in respect to establishment of reserves for unearned premiums,
losses, loss adjustment expenses, or depreciation or amortization policies or
rates; (d) the Company shall not, and shall not permit any subsidiary to, (i)
amend its charter or by-laws (unless contemplated by the Merger Agreement), (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
the Company and the 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,
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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 Parent, enter into any partnership, joint venture or profit sharing
contract, (vi) enter into any contract limiting the ability of the Company or of
any 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 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
contemplated by the Merger Agreement, or (x) modify any contract with respect to
the subjects of the foregoing clauses; (e) the Company shall not permit any
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
subsidiary, or otherwise take any actions that would alter certain information
delivered to Parent in connection with the execution of the Merger Agreement
other than in the ordinary course of business consistent with existing
agreements and arrangements; (f) subject to certain exceptions, the Company
shall not, and shall not permit any 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 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 the Merger 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 subsidiaries
or any other person; (g) other than in the ordinary course of business
consistent with past practice, the Company shall not, and shall not permit any
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 (as defined
in the Merger Agreement)) which in one or a series of related transactions
exceed $500,000 or which in the aggregate for the Company and its subsidiaries
taken as a whole exceed $2,500,000, except for expenditures relating to the
Merger Agreement and the consummation of the transactions contemplated hereby,
and expenditures required to be made pursuant to existing contracts to which the
Company or any subsidiary is a party; (h) other than in the ordinary course of
business consistent with past practice or in connection with the redemption of
outstanding guaranteed investment contracts in the exercise of the Company's
reasonable judgment, the Company shall not, and shall not permit any 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) the Company and its
subsidiaries shall not sell, lease, mortgage 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 the Company or of its subsidiaries taken
as a whole, and, in the case of Liens (as defined in the Merger Agreement), for
Permitted Liens (as defined in the Merger Agreement) 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 the
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Company or its subsidiaries, and described in clauses (i) and (ii), and the
Company shall furnish to Parent a monthly report, in detail reasonably
acceptable to Parent, 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 the Company or its
subsidiaries, (j) the Company and its subsidiaries agree that they shall not,
other than pursuant to the operation of separate accounts involved in real
estate in the ordinary course, 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 the Company nor its
subsidiaries shall take any action, other than in the exercise of reasonable
business judgment and following discussion with Parent, 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 the Company or any of its subsidiaries in an amount of
$10,000,000 or more; (k) other than in the ordinary course of business, the
Company shall not permit any of its subsidiaries to, enter into, waive, or amend
any material contract which would involve the payment by the Company or any
subsidiary of $500,000 or more; (l) other than in the ordinary course of
business, the Company shall not, and shall not permit any subsidiary to settle
or compromise any claim in any action, proceeding or investigation which could
result in an expenditure for the Company or its subsidiaries in excess of
$1,000,000; (m) the Company shall not, and shall not permit any subsidiary to,
purchase or otherwise acquire, (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 the National Association of
Insurance Commissioners 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 (as
defined in the Merger Agreement) in excess of $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)
the Company shall not, and shall not permit any of its subsidiaries to, enter
into any new, or materially amend any existing, reinsurance contract or
arrangements, except in accordance with existing reinsurance agreements or in
the ordinary course of business; (o) the Company shall, and shall cause each of
its subsidiaries 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) the Company shall deliver to Parent as promptly
as practicable after preparation thereof, but in no event later than the date of
filing with respect to unaudited or audited, SAP Statements (as defined in the
Merger Agreement) for the Company and each of its subsidiaries filed by or on
behalf of the Company or such subsidiary after the date of the Merger Agreement;
(q) the Company shall inform Parent regarding the progress of any material
claim, action, suit litigation, proceeding, arbitration, investigation, audit or
controversy relating to taxes; (r) neither the Company nor any subsidiary shall
(i) make or rescind any material express or deemed election relating to taxes,
(ii) make a request for a Tax Ruling (as defined in the Merger Agreement) or
enter into a Closing Agreement (as defined in the Merger 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; (s) neither the Company nor
any of its subsidiaries shall declare, set aside or pay any dividends or
distributions in respect of any capital stock of any subsidiary (except as
consistent with past practices) or redeem, purchase or otherwise acquire any of
such subsidiary's stock; (t) subject to certain exceptions, neither the Company
nor any 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 subsidiary which settlement will not have
a material adverse effect; (u) neither the Company nor any subsidiary shall do
any other act which would cause any representation or warranty of the Company or
any subsidiary to be or become untrue in any material respect unless required by
applicable law; and (v) neither the Company nor any subsidiary shall agree, in
writing or otherwise, to take any of the actions prohibited by the foregoing
clauses (a) through (u).
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Acquisition Proposals. Pursuant to the Merger Agreement, the Company
agreed, subject to certain exceptions, to not, and to not permit or cause any of
its subsidiaries or any of the officers or directors of it or any of 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, the Company or any of
its Significant Subsidiaries (as defined in Regulation S-X promulgated by the
SEC), or an 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 any of its subsidiaries to and shall direct it and its subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its subsidiaries) to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, 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 after 180 days from the date of the Merger
Agreement if the Merger shall not by such date have been approved by the
requisite vote of the Company's stockholders or (iii) at any time after one year
from the date of the Merger Agreement if the Merger shall not by such date have
been approved by the Commissioner of Insurance of the State of Iowa (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 dated as of May 28, 1998 among Parent,
Purchaser and the Company; (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 stockholders 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
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 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 stockholders. The
Company agreed to cease and cause to be terminated any then existing activities,
discussions or negotiations with any parties conducted prior to the date of the
Merger Agreement with respect to any of the foregoing. The Company agreed that
it will take the necessary steps to promptly inform the individuals or entities
referred to in the first sentence of this paragraph of the obligations
undertaken in the Merger Agreement and described in this section. The Company
agreed to notify Parent 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 Parent 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.
Stockholder Approval; Preparation of Proxy Statement. The Merger Agreement
provides that as soon as practicable following the purchase of the Shares
pursuant to the Offer, the Company shall prepare and file with the SEC a Proxy
Statement, if required by applicable law. The Company will use its reasonable
best efforts to cause such Proxy Statement to be mailed to its stockholders as
promptly as practicable.
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<PAGE> 9
Subject to the fiduciary obligations of the Board of Directors of the
Company described above, the Merger Agreement provides that the Company will
take all actions necessary in accordance with applicable law and its Articles of
Incorporation and By-laws to convene a meeting, if required by applicable law,
of its stockholders (the "Shareholders Meeting") to consider and vote upon the
approval of the Merger Agreement and the Merger. Subject to the fiduciary
obligations of the Board of Directors of the Company, as described above, the
Merger Agreement further provides that the Company will, through its Board of
Directors, recommend to its shareholders approval of the Merger Agreement and
the Merger. Without limiting the generality of the foregoing, the Company has
agreed that the obligations described in the first sentence of this paragraph
will not be affected by (i) the commencement, public proposal, public disclosure
or communication to the Company of any Acquisition Proposal or (ii) the
withdrawal or modification by the Board of Directors of the Company of its
approval of the Merger Agreement or the Merger. The Company agreed to use all
reasonable efforts to hold the Shareholders Meeting as soon as practicable after
the date of the Merger Agreement.
Access to Information. Pursuant to the Merger Agreement, subject to
applicable law, the Company agreed (a) to afford to Parent's and Purchaser'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, to furnish promptly to Parent and Purchaser all such
information concerning its business, assets and personnel or those of any of its
affiliates, in either clause (a) or (b), as Parent or Purchaser may reasonably
request. Information provided by the Company shall be kept confidential by
Parent and Purchaser and shall not be disclosed unless such information (i) was
known to Parent or Purchaser or was in their possession prior to the date of the
Merger Agreement and was not identified by the Company as being confidential,
(ii) is or becomes generally available to the public other than by unauthorized
disclosure by Parent or Purchaser, (iii) becomes available to Parent or
Purchaser from a third party authorized to make such disclosure, (iv) is
independently developed by Parent or Purchaser, or (v) is required to be
disclosed by law or by court order.
Reasonable Efforts. Each of the parties to the Merger Agreement has agreed
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 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 Parent, be conducted jointly by Parent and the Company on a basis
that is satisfactory to both the Company and Parent. The Company has granted
Parent the right to decide for purposes of the insurance regulatory hearings
whether to submit regulatory applications for the Company, ALLIED Group 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 Group and ALLIED Mutual. Both the Company and Parent have agreed
to use their reasonable best efforts to coordinate and cooperate during the
regulatory approval process.
Board of Directors; Corporate Governance. Promptly upon acceptance for
payment of the Shares by Purchaser pursuant to the Offer, Purchaser shall be
entitled to designate such number of directors on the Board of Directors of the
Company as will give Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, a majority of such directors, and the Company shall, at such time,
cause Purchaser's designees
8
<PAGE> 10
to be so elected by its existing Board of Directors and each subsidiary of the
Company and each committee of the Board of Directors of the Company and each
such subsidiary as will give Purchaser a majority of such directors or
committee, and the Company shall, at such time, cause Purchaser's designees to
be so elected. Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election. In connection with
the foregoing, the Company will promptly, at the option of Parent, either
increase the size of its Board of Directors or obtain the resignation of such
number of its current directors as is necessary to enable Purchaser's designees
to be elected or appointed to the Company's Board of Directors.
Treatment of Stock Options; Certain Benefits. The Company agreed to take
all necessary action so that, as of the Effective Time, (i) each outstanding
employee or director stock option (the "Options") to purchase Shares granted
under the Company's Stock Option Plan (the "Option Plan"), whether or not then
exercisable or vested, will become fully exercisable and vested, (ii) each
Option that is then outstanding will be cancelled and (iii) in consideration of
such cancellation, the Company (or, at Parent's option, Purchaser) will 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). The Company agreed to use all commercially reasonable efforts to ensure
that (i) no consent of any holder of an Option is required to effect the
transactions contemplated by the section of the Merger Agreement described in
this paragraph and (ii) 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.
Indemnification and Insurance. From and after the Effective Time, Parent
agreed to indemnify and hold harmless each present and former director and
officer of the Company, (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 the
Company would have been permitted under Iowa law and its charter or by-laws in
effect on the date of the Merger Agreement to indemnify such person (and Parent
agreed to advance expenses 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).
The Surviving Corporation is obligated to maintain the Company's existing
directors' and officers' liability insurance ("D&O Insurance") or D&O Insurance
that is substantially comparable to the Company'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 is obligated to 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 is obligated to 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.
Conditions to the Merger. The respective obligation of each party to the
Merger Agreement to effect the Merger is subject to the satisfaction, prior to
the closing of the transactions contemplated by the Merger Agreement, of the
following conditions: (a) 2,000,000 Shares shall have been purchased pursuant to
the Offer; (b) if required by applicable law, the Merger Agreement and the
Merger shall have been approved and adopted by the requisite votes of the
respective shareholders of the Company at the Shareholders Meeting
9
<PAGE> 11
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,
subject to specified exceptions, 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 Company
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 (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 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.
Conditions to Obligation of the Company to Effect the Merger. The
obligations of the Company to effect the Merger are 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 the Company, but only to the extent permitted by law:
(a) Parent 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 the Merger Agreement at or prior to the Effective Time; (b) the
representations and warranties of Parent contained in the Merger 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 the Company 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 Parent as to
the satisfaction of this condition.
Conditions to Obligation of Parent to Effect the Merger. The obligations of
Parent to effect the Merger are 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 Parent, but only to the extent permitted by law: (a) the Company 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
the Merger Agreement at or prior to the Effective Time; and (b) the
representations and warranties of the Company contained in the Merger 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
Parent shall have received a certificate dated as of the Effective Time by any
Vice President of the Company as to the satisfaction of this condition.
Notification of Certain Other Matters. Pursuant to the Merger Agreement,
Purchaser and the Company agreed to 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
its subsidiaries subsequent to the date of the Merger Agreement and prior to the
Effective Time, under any material contract to which such party or any of its
subsidiaries is a party or by which such party or any of its 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
its 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
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<PAGE> 12
execution of the Merger Agreement or the consummation of the transactions
contemplated thereby, 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 the Merger Agreement or the
transactions contemplated thereby; and (e) any matter arising after the date of
the Merger Agreement or discovered which, if existing or known at the date of
the Merger Agreement, would have been required to be disclosed by Parent or the
Company, 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 of the Merger Agreement, unless
the other party so agrees in writing.
In furtherance of the foregoing, to the fullest extent permitted under
applicable law, Parent and the Company agreed to provide each 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 the Merger Agreement or the transactions
contemplated thereby, including, but not limited to, in respect of the
governmental approvals, in each case at least three business days prior to
dispatch of written materials (or, to the extent written materials are not
involved, prior to initiation) and Parent and the Company agreed not to 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 can not be unreasonably withheld or delayed.
Termination. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the stockholders of Parent or of the Company: (a) by
mutual consent of Parent and the Company; (b) by Parent if the Board of
Directors of the Company withdraws its recommendation to the Company's
stockholders to approve the Merger; (c) by Parent or the Company if consummation
of the Merger is barred by a permanent injunction which is final and non-
appealable; (d) by the Company if, prior to the purchase of Shares pursuant to
the Offer, there is an Acquisition Proposal which the Board of Directors of the
Company determines represents a more favorable transaction to the Company and
its stockholders 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 would be 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 Parent or
Parent's failure to comply in any material respect with any of its covenants or
agreements, or if any representation or warranty of Parent or Purchaser 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 Parent; (f) by Parent 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 Parent or by the Company, if Shares shall
not have been purchased pursuant to the Offer by December 31, 1998 (the
"Termination Date"), provided that such right to terminate the Merger Agreement
shall not be available to a party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of the failure of such purchase to occur
by such date.
Fees and Expenses. The Merger Agreement provides that, if the Merger is
not consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such costs or expenses, except for expenses incurred in connection
with the printing, mailing and solicitation of proxies from stockholders and all
filing fees and related expenses which shall be borne equally by Parent and the
Company.
Notwithstanding the foregoing provisions, as described under "--
Acquisition Proposals", above, if prior to the purchase of Shares pursuant to
the Offer, there is an Acquisition Proposal which the Board of Directors
determines represents a more favorable transaction to the Company and its
stockholders than the transactions contemplated by the Merger Agreement, and if
the Board of Directors of the Company, after consultation
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<PAGE> 13
with outside counsel, shall have determined that failure to terminate the Merger
Agreement is reasonably likely to be inconsistent with the fiduciary duties of
the Board of Directors under applicable law, the Company may terminate the
Merger Agreement. If the Company so elects to terminate the Merger Agreement,
the Company must, immediately prior to any such termination, pay a termination
fee in an amount equal to all of the expenses incurred by Parent in connection
with the Merger Agreement, the negotiations leading to its execution, the
examination and investigation of the Company, the preparation and negotiation of
the Merger 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
$3,000,000 in cash (the "Termination Payment"), immediately upon such
termination, in same-day funds; provided, that Parent shall not be in material
breach of its obligations under the Merger Agreement. Moreover, the Company must
make a Termination Payment if the Closing does not occur either (i) due to the
Company'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, the Company or
any subsidiary or affiliate of the Company or any of their respective
stockholders 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 the Company or the sale, transfer or other distribution of assets
constituting a majority (measured by fair market value) of the consolidated
assets of the Company.
The Company must also make a Termination Payment following the termination
of the Merger Agreement by Parent (i) following a withdrawal by the Board of
Directors of its recommendation that the stockholders 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
representation or warranty by the Company or (b) the Company's failure to comply
in any material respect with any of its covenants or agreements.
Assignment. The Merger Agreement can not be assigned by any party thereto
by operation of law or otherwise without the prior written consent of the other
parties thereto.
Publicity. Parent, Purchaser and the Company agreed (i) not to, and to
cause their affiliates not to, issue or cause the publication of any press
release or other announcement to any person with respect to the Merger Agreement
or the transactions contemplated thereby without the consent of the other party;
provided, however, that nothing contained in the Merger Agreement (a) limits the
right of each of the parties thereto 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) prohibits either party thereto (or its affiliates) from
initiating communications with, and making presentations to, any rating agency
or governmental entity relating to the transactions contemplated thereby if such
party gives prior notice thereof to the other party or (c) prohibits Parent or
the Company 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 the Merger Agreement,
prior to the time of such communication, (ii) to cooperate fully with each other
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 to the
Merger Agreement with the purpose of effectuating the Merger in the best
interests of the respective stockholders of Parent and the Company and (iii) to
promptly notify each other 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 the Merger Agreement or
the transactions contemplated thereby.
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 Parent or 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.
Any amendment, modification or material waiver of the Merger Agreement shall be
subject to approval of the Superintendent of Insurance of
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<PAGE> 14
the State of Ohio and the Commissioner of Insurance of the State of Iowa. The
Merger Agreement may not be amended, modified or supplemented except by written
agreement of the parties thereto.
SHAREHOLDER AGREEMENT
The following is a summary of certain provisions of the Shareholder
Agreement. This summary is qualified in its entirety by reference to the
Shareholder Agreement, a copy of which is filed as an Exhibit hereto and which
is incorporated herein by reference.
In the Shareholder Agreement, ALLIED Mutual agreed (i) not to sell,
transfer, pledge, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale, transfer,
pledge, assignment or other disposition of, the Shares or shares of 6.75%
Preferred held by ALLIED Mutual (collectively, the "Securities") to any person
other than Parent or Parent's designee and (ii) not to enter into any voting
arrangement, whether by proxy, voting agreement, voting, trust, power-of-
attorney or otherwise, with respect to the Securities.
ALLIED Mutual agreed not to, and agreed not to permit any investment
banker, financial adviser, attorney, accountant or other representative or agent
of ALLIED Mutual to, directly or indirectly (i) solicit, initiate or knowingly
encourage (including by way of furnishing information), or knowingly facilitate
any inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal or (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal.
At any meeting of stockholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger and the Merger Agreement is sought, ALLIED
Mutual agreed to, including by initiating a written consent solicitation if
requested by Parent, vote (or cause to be voted) ALLIED Mutual's Securities in
favor of the Merger, the adoption of the Merger Agreement and the approval of
the other transactions contemplated by the Merger Agreement. At any meeting of
stockholders of the Company or at any adjournment thereof or in any other
circumstances upon which ALLIED Mutual's vote, consent or other approval is
sought, ALLIED Mutual agreed to vote (or cause to be voted) ALLIED Mutual's
Securities against (i) any merger (other than the Merger), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any other
Acquisition Proposal (collectively, "Alternative Transactions") or (ii) any
amendment of the Company's Certificate of Incorporation or by-laws or other
proposal or transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement including any consent to
the treatment of any Securities in or in connection with such transaction
(collectively, "Frustrating Transactions").
ALLIED Mutual irrevocably granted to, and appointed, an individual
designated by Parent as ALLIED Mutual's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of ALLIED Mutual,
to vote ALLIED Mutual's Securities, or grant a consent or approval in respect of
such Securities, at any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote, consent
or other approval is sought, (i) in favor of the Merger, the adoption by the
Company of the Merger Agreement and the approval of the other transactions
contemplated by the Merger Agreement and (ii) against any Alternative
Transaction or Frustrating Transaction.
ALLIED Mutual represented that any proxies given previously in respect to
its Securities are revoked, and that the proxy given in the Shareholder
Agreement is coupled with an interest and irrevocable.
The Shareholder Agreement explicitly states that it does not prohibit
ALLIED Mutual from providing information in response to an unsolicited
Acquisition Proposal, engaging in negotiations regarding an unsolicited
Acquisition Proposal or recommending an unsolicited Acquisition Proposal to its
policyholders.
ALLIED Mutual made certain representations and warranties regarding it
authority to enter into the Shareholder Agreement, its ownership of the
Securities, broker's fees and Parent's reliance.
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<PAGE> 15
Parent made certain representations and warranties regarding its authority
to enter into the Shareholder Agreement and compliance with securities laws.
The Shareholder Agreement terminates on the occurrence of the earlier of
(i) the termination of the Merger Agreement (unless the Merger Agreement is
terminated by the Board of Directors of the Company by reason of its receipt of
an Acquisition Proposal which represents a more favorable transaction to the
Company and its stockholders) or (ii) the termination of the ALLIED Mutual
Merger Agreement.
THE ALLIED MUTUAL MERGER AGREEMENT
ALLIED Mutual has entered into an Agreement and Plan of Merger (the "ALLIED
Mutual Merger Agreement") dated as of June 3, 1998 with Parent. The ALLIED
Mutual Merger Agreement provides for the merger of ALLIED Mutual with and into
Parent. The ALLIED Mutual Merger Agreement contemplates that, immediately prior
to the consummation of the merger contemplated thereby, ALLIED Mutual would make
an extraordinary distribution of $110 million in cash to ALLIED Mutual's
policyholders. While the consummation of the transactions contemplated by the
ALLIED Mutual Merger Agreement is not a condition to the consummation of the
transactions contemplated by the Merger Agreement, the consummation of the Offer
is subject to the satisfaction of several conditions relating to the ALLIED
Mutual Merger Agreement and described herein in subparagraphs (g), (h) and (i)
under the caption "The Merger Agreement -- Certain Conditions of the Offer." A
copy of the ALLIED Mutual Merger Agreement is filed as an Exhibit hereto and is
incorporated herein by reference in its entirety.
THE ALLIED GROUP MERGER AGREEMENT
ALLIED Group has entered into an Agreement and Plan of Merger (the "ALLIED
Group Merger Agreement") dated as of June 3, 1998 with Parent and Nationwide
Group Acquisition Corporation, an Ohio corporation and a wholly owned subsidiary
of Parent ("Nationwide Group Sub"), pursuant to which Parent has agreed to
acquire the common stock of ALLIED Group at a price of $48.25 per share. The
acquisition of ALLIED Group by Parent will be structured as a tender offer by
Parent for the ALLIED Group common stock followed by a merger of ALLIED Group
with and into Nationwide Group Sub, with ALLIED Group surviving such merger as a
wholly owned subsidiary of Parent. ALLIED Mutual has entered into a shareholder
agreement with Parent relating to the ALLIED Group transaction pursuant to which
ALLIED Mutual has agreed, among other things, to tender the shares of ALLIED
Group common stock held by it into the ALLIED Group tender offer, and that at
any meeting of stockholders of ALLIED Group called to vote upon the ALLIED Group
transaction, it will vote all ALLIED Group voting securities held by it in favor
of the transaction with Parent and against alternative transactions. ALLIED
Mutual has also agreed that it will not dispose of the securities of ALLIED
Group held by it. The consummation of the transactions contemplated by the
ALLIED Mutual Merger Agreement is not a condition to the consummation of the
transactions contemplated by the Merger Agreement. A copy of the ALLIED Group
Merger Agreement (including the agreement with ALLIED Mutual described in this
paragraph) is filed as an Exhibit hereto and is incorporated herein by reference
in its entirety.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors of the Company (the "Board"), at a meeting held
on June 3, 1998, acting on the unanimous recommendation of a committee of the
Board (the "Special Committee") consisting of the two directors who are not
employed by the Company or affiliated with ALLIED Mutual or ALLIED Group and who
serve as the members of the Coordinating Committee of the Board, adopted
resolutions (i) adopting the Merger Agreement and approving the Offer and the
Merger, (ii) determining that the terms of the Offer and the Merger are fair to,
and in the best interests of, the Company and its stockholders, (iii)
recommending that the Company's stockholders accept the Offer, tender their
Shares pursuant to the Offer and (if required) approve the Merger Agreement and
the Merger and (iv) approving the acquisition of Shares by Purchaser pursuant to
the Offer and the other transactions contemplated by the Merger Agreement. A
copy of the Company's letter to stockholders dated June 10, 1998 is filed as an
Exhibit hereto and is incorporated herein by reference.
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<PAGE> 16
(b) In reaching the determinations described in paragraph (a) above, the
Board considered a number of factors, including the following:
(1) The current and historical financial condition and results of
operations of the Company.
(2) The projected financial condition, results of operations,
prospects and strategic objectives of the Company, as well as the risks
involved in achieving those prospects and objectives.
(3) The relationship of the Offer Price to the historical market
prices of the Shares.
(4) The fact that the $30 per Share to be received by the Company's
public stockholders in both the Offer and the Merger represents a premium
of 25.7% over the closing market price of $23.875 per Share on May 15, 1998
(the last trading day prior to the commencement by Nationwide of its tender
offer for the ALLIED Group common stock) and a premium of 15.4% over the
closing market price of $26.00 per Share on June 2, 1998 (the last trading
day prior to the Company's announcement that the Board was willing to
recommend, subject to certain limitations, the acquisition of the
outstanding Shares by Nationwide for $30 per Share).
(5) The presentation of Fox-Pitt, Kelton Inc. ("Fox-Pitt, Kelton") to
the Special Committee and the Board at their meetings on June 3, 1998 as to
various financial matters deemed relevant to their consideration and the
opinion dated June 3, 1998, of Fox-Pitt, Kelton to the Special Committee
that as of such date and based upon and subject to various considerations
and assumptions set forth therein, the consideration to be received by the
holders of Shares in connection with the Offer and the Merger was fair,
from a financial point of view, to the holders of Shares (other than ALLIED
Mutual). A copy of the opinion rendered by Fox-Pitt, Kelton to the Special
Committee, setting forth the procedures followed, the matters considered,
the scope of the review undertaken and the assumptions made by Fox-Pitt,
Kelton in arriving at its opinion, is attached hereto as Annex A and
incorporated herein by reference. THE COMPANY'S STOCKHOLDERS ARE URGED TO
READ THIS OPINION IN ITS ENTIRETY.
(6) The likelihood that the Merger will be consummated in view of the
Shareholder Agreement and the experience, reputation and financial
condition of Nationwide.
(7) The fact that Duff & Phelps Credit Rating Co. had placed the
Company's claims paying ability rating on "Rating Watch -- Uncertain" in
response to Parent's unsolicited proposal to acquire ALLIED Group and
ALLIED Mutual due to the failure to include the Company in such proposal
resulting in general uncertainty as to the future role of the Company in
either the ALLIED Group's or Parent's organization.
(8) The operating relationships between the Company and each of ALLIED
Mutual and ALLIED Group, in particular the Joint Marketing Agreement,
Intercompany Operating Agreement, Management Information Services Agreement
(each of which is described in Annex B) and the potential for adversarial
relationships between the parties thereto in the event that Parent acquired
control of ALLIED Mutual or ALLIED Group without entering into a formal
acquisition agreement with the Company.
(9) The effect of the Merger on policyholders of ALLIED Life Insurance
Company and other constituencies.
(10) The fact that ALLIED Mutual endorsed the acquisition of the
Company by Parent at a price of $30 per Share.
(11) The ability of Parent to consummate a business combination with
the Company without regard to the Merger Agreement in the event of the
consummation of the transactions contemplated by the ALLIED Mutual Merger
Agreement.
(12) The recommendation of the Special Committee with respect to the
proposed transaction.
(13) The recommendation of the Company's management with respect to
the proposed transaction.
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<PAGE> 17
(14) 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
stockholders as those of the Offer and the Merger.
(15) The terms and conditions of the Merger Agreement and the course
of the negotiations resulting in the execution thereof; including the
ability of the Company to terminate the Merger Agreement under certain
conditions if prior to the purchase of Shares pursuant to the Offer, there
is a proposal for the acquisition of the Company which the Board determines
represents a more favorable transaction to the Company and its stockholders
than the transactions contemplated by the Merger Agreement, so long as the
Company gives Parent three business days notice of the terms of such
proposal and pays Parent a fee of $3,000,000 plus an amount sufficient to
reimburse Parent for certain of its expenses incurred in connection with
the Merger Agreement.
Background. 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 Nationwide Insurance Enterprise. In the call, Mr. McFerson expressed
Nationwide's interest in a possible transaction with ALLIED.
On January 28, 1998, at the request of Mr. McFerson, Mr. Evans, Douglas L.
Andersen, President and Chief Executive Officer of ALLIED Group, and other
representatives of ALLIED Group met with representatives of Parent to discuss
Parent's interest in acquiring ALLIED Group, ALLIED Mutual and the Company.
After the January 28, 1998 meeting, Parent 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 Parent's interest in acquiring ALLIED Group,
ALLIED Mutual and the Company. Mr. McFerson requested that ALLIED Group, ALLIED
Mutual and the Company agree to deal exclusively with Parent. Mr. Andersen
informed Mr. McFerson that the ALLIED companies would not agree to deal
exclusively with Parent, expressed concerns about the absence of an acceptable
confidentiality agreement and other elements of Parent's proposal and stated
that Parent's proposal could not be considered formally until it was received in
writing by ALLIED Group, ALLIED Mutual and the Company. On February 10, 1998,
ALLIED Group provided to Parent its own form of confidentiality agreement,
executed by ALLIED Group, which included a customary standstill provision.
Also, on February 10, 1998, Parent sent draft merger agreements to ALLIED
Group, which provided for a transaction whereby Parent's wholly owned
subsidiaries would acquire ALLIED Group and the Company and Parent would merge
with ALLIED Mutual. The draft merger agreements provided for the purchase of the
shares of ALLIED Group common stock for $47 per share and the purchase of all
outstanding Shares for $30 per share, subject to various conditions, including
that the acquisition of all three ALLIED companies close simultaneously. The
draft merger agreement with ALLIED Mutual provided for no distribution to ALLIED
Mutual's policyholders. Each of the merger agreements included provisions
requiring payment to Parent of termination fees, totaling $75 million in the
aggregate, plus expenses of Parent in the event of the termination of the merger
agreement under certain circumstances.
On February 17, 1998, at a joint meeting of the Boards of Directors of
ALLIED Group, ALLIED Mutual and the Company, Parent's proposal and proposed
merger agreements were discussed. Following the joint Board meeting, a special
meeting of the Board of Directors of the Company was convened. At that meeting
it was noted that Parent's proposal was contingent on the consummation of
transactions with all three ALLIED companies. The Board noted that Parent's
proposal included an exclusivity provision which restricted the ability of the
Company to discuss possible other acquisition proposals. The Board also noted
that Parent had refused 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
noted that the substantial termination fees proposed by Parent presented
additional risk to the Company. The Board determined that the proposal was not
in the best interests of the Company and determined that the proposal should be
rejected. The Board approved the appointment of Sidley & Austin to provide legal
counsel to the Company in connection with any negotiations that might occur with
Parent.
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<PAGE> 18
On February 19, 1998, at a special joint meeting of the Executive
Committees of ALLIED Group, ALLIED Mutual and the Company, Mr. Andersen was
authorized to advise Mr. McFerson that Parent's proposal had been rejected.
On February 19, 1998, Parent sent to ALLIED Group a form of confidentiality
agreement, signed on behalf of Parent and Nationwide Group Sub, which again did
not contain the standstill provision and certain other items that ALLIED Group
had proposed.
On February 20, 1998, Mr. Andersen informed Mr. McFerson via telephone that
the respective Boards of ALLIED had rejected Parent's proposal as presented.
Later on February 20, 1998, Parent sent to ALLIED Group a letter indicating
that Parent was withdrawing the executed confidentiality agreement that it had
sent to ALLIED Group on February 19, 1998.
On May 4, 1998, Mr. McFerson telephoned Mr. Evans to express that Parent
wished to re-initiate contact with ALLIED. Mr. Evans indicated that Parent
should speak with Mr. Andersen, but requested that Parent delay contacting Mr.
Andersen for 30 days.
On May 18, 1998, Mr. McFerson made an unannounced visit to ALLIED Group's
Des Moines, Iowa offices and asked to see Mr. Andersen. However, Mr. Andersen
and other executive officers of ALLIED Group were out of the country. Members of
ALLIED Group's legal department met with Mr. McFerson, who stated that the
purpose of his visit was to announce a tender offer for all the shares of ALLIED
Group common stock. Mr. McFerson delivered three letters, two of which were
addressed to ALLIED Mutual and one of which was addressed to ALLIED Group, which
letters were also publicly released by Parent, communicating the substance of
its offer.
Also, on May 18, 1998, Parent and Nationwide Group Sub filed a complaint
against ALLIED Group and its directors in the United States District Court for
the Southern District of Iowa seeking, among other things, an order compelling
the ALLIED Group Board to approve the ALLIED Group tender offer and the proposed
merger for purposes of Section 490.1110 (the "Business Combination Statute") of
the Iowa Corporation Act.
Later on May 18, 1998, ALLIED Group issued a press release stating that its
Board would review the ALLIED Group tender offer and requesting shareholders not
to tender their ALLIED Group shares until they had been advised of the position
of the ALLIED Group Board with respect to the tender offer.
On May 22, 1998, the Company retained Sidley & Austin to act as its outside
legal advisor in connection with the events relating to Parent's possible
acquisition of the Company.
On May 27, 1998, the Company's Coordinating Committee was given authority
to act as the Special Committee in connection with the events relating to
Parent's possible acquisition of the Company. The Special Committee met to
consider the need to retain an investment banking firm to provide financial
advisory services relating to Parent's tender offer for ALLIED Group and
proposed acquisition of the ALLIED companies. The Special Committee retained the
investment banking firm of Fox-Pitt, Kelton.
Also on May 27, 1998, the Special Committee again met to continue
discussions about Parent and to discuss employment and severance issues.
On May 28, 1998, Parent entered into a separate confidentiality agreement
with each of the Company, ALLIED Mutual and ALLIED Group. The confidentiality
agreement between the Company and Parent is filed as an Exhibit hereto.
From May 28 through May 31, 1998, Credit Suisse First Boston Corporation,
the investment banking firm retained by Parent, Fox-Pitt, Kelton and the
financial advisors to each of ALLIED Mutual and ALLIED Group discussed the
various potential transactions involving Parent and the ALLIED companies.
On May 30, 1998, the Special Committee reconvened to discuss valuation and
strategies relating to a potential transaction. At this meeting, representatives
of Fox-Pitt, Kelton addressed the climate for mergers and acquisitions in the
insurance industry, including takeover premiums. Following such discussion, the
Special Committee directed Fox-Pitt, Kelton to continue discussions with Credit
Suisse First Boston
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<PAGE> 19
Corporation and the financial advisors of ALLIED Group and ALLIED Mutual in
order to explore a global transaction with Parent, and, if appropriate, to
discuss certain aspects of the results of its valuation of the Company with the
financial advisors of ALLIED Group and ALLIED Mutual.
On May 30, 1998, at a joint meeting of the Compensation Committees of each
ALLIED company, the Compensation Committee of the Company resolved to amend
certain of the Company's employee benefit plans and severance plans and to adopt
certain new employee benefit plans and severance plans. On June 2, 1998, the
Board ratified such resolutions.
During the evening of May 31, 1998, a representative of Sidley & Austin
telephoned a representative of Parent and discussed certain legal issues
relating to the Joint Marketing Agreement and other matters.
On the morning of June 2, 1998, Parent delivered an initial draft of a
merger agreement which, among other things, provided for a $30 per Share
purchase price, an unspecified minimum tender offer condition and a termination
fee payable by the Company under specified conditions of $5 million. After
reviewing this initial draft, a representative of Sidley & Austin reviewed
various aspects of such initial draft with a member of the Special Committee.
Negotiations between representatives of the Company and representatives of
Parent commenced in the afternoon of June 2. On the evening of June 2, the Board
met again to consider the potential transaction with Parent. After being briefed
by Sidley & Austin, the Board discussed terms and conditions under which it
would consider entering into an agreement in principle with Parent. Upon
conclusion of such discussion and upon the recommendation of the Special
Committee, the Board authorized the proper officers of the Company to execute
and deliver on behalf of the Company an agreement in principle with Parent if an
offer were received from Parent which included the terms and conditions
discussed.
Later in the evening on June 2, 1998, the Special Committee directed that a
press release be issued prior to the commencement of trading on June 3, 1998
stating that the Board was prepared to recommend a transaction with Parent on
the terms and conditions discussed at the Board meetings on June 2, 1998.
On June 3, 1998, representatives of Sidley & Austin continued negotiations
with representatives of Parent with respect to various provisions of the
proposed merger agreement. Although the transaction documents remained
incomplete in certain immaterial respects, the Board and the Special Committee
each met again to hear further reports from management and its financial and
legal advisors as to the status of the proposed transaction. After briefing the
Board as to the terms, conditions and legal effect of the proposed merger
agreement and the directors' fiduciary duties relating thereto, counsel noted,
among other things, that the proposed merger agreement provided (i) for a cash
tender offer by Parent for all of the Shares at a purchase price of $30 per
Share, (ii) for a reduction of the termination fee to $3 million from the
originally proposed $5 million; (iii) that the tender offer will be followed by
a second-stage merger and (iv) that the proposed merger agreement and all
transactions contemplated thereby will be subject to regulatory approval of the
Iowa Insurance Commission. Counsel also described the progress of the
negotiations and the few remaining issues to be determined, indicating that it
believed the few remaining issues in the merger agreement could be
satisfactorily resolved upon further negotiation. The Special Committee and the
Board then heard a presentation from representatives of Fox-Pitt, Kelton who
reviewed the negotiation process to date and summarized the key financial terms
of the Offer. Fox-Pitt, Kelton delivered its oral fairness opinion (subsequently
confirmed in writing) to the Special Committee. Upon conclusion of this
presentation, the Special Committee recommended and the Board approved the
merger agreement in the form presented to the Board subject to such final
revisions as management might approve in connection with further negotiations.
The Board approved the Offer and the Merger and determined that the Merger is
advisable and that the terms of the Offer and the Merger are fair to and in the
best interests of the Company and its stockholders. The Board also adopted a
resolution recommending that the Company's stockholders accept the Offer and (if
required) approve the Merger Agreement and the Merger. Representatives of
management and Sidley & Austin continued to discuss the provisions of the
proposed merger agreement with Parent and its counsel. On the evening of June 3,
1998 after having satisfactorily resolved all issues, the Company, Parent and
the Purchaser executed the Merger Agreement.
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<PAGE> 20
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter, dated May 28, 1998, the Special Committee
retained Fox-Pitt, Kelton to render financial advisory services to the
Coordinating Committee of the Company in its capacity as the Special Committee
in connection with the potential acquisition of all or a portion of the
Company's outstanding shares (a "Transaction") and such other matters as may be
agreed upon by the Company and Fox-Pitt, Kelton. The Company agreed to pay
Fox-Pitt, Kelton: (i) an initial advisory fee of $100,000, payable immediately
(the "Advisory Fee); (ii) a fee of $475,000 (the "Opinion Fee"), which became
payable upon delivery by Fox-Pitt, Kelton of its fairness opinion to the Special
Committee as described herein; (iii) a fee of $125,000 which will become payable
upon the delivery of each of any additional fairness opinions that may be
delivered by Fox-Pitt, Kelton upon the request of the Special Committee, other
than an updated or supplemental fairness opinion; and (iv) a final fee (the
"Termination Fee") of $150,000 that would have been payable under certain
circumstances if the Opinion Fee had not become payable.
The Company has also agreed to reimburse Fox-Pitt, Kelton for its
reasonable out-of-pocket expenses, including reasonable fees and expenses of
counsel, and to indemnify Fox-Pitt, Kelton and certain related persons against
certain liabilities in connection with their engagement including liabilities
under the federal securities laws.
The Special Committee retained Fox-Pitt, Kelton based on its experience in
the valuation of insurance company securities in connection with acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for various other purposes and on
its reputation as a specialist in the securities of insurance companies and its
experience in, and knowledge of, the valuation of such enterprises.
In the normal course of its business, Fox-Pitt, Kelton provides research
coverage on ALLIED Life and may trade equity securities of ALLIED Life and
Nationwide Financial Services, Inc. for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Except as described above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any other person to make
solicitations or recommendations to security holders on its behalf with respect
to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth below in this Item 6(a), there have been no
transactions in the Shares during the past 60 days by the Company or, to the
knowledge of the Company, by any executive officer, director, affiliate or
subsidiary of the Company.
On April 25, 1998 the Company sold 9 Shares to the Company's Dividend
Reinvestment Plan (the "DRIP") at a price of $24.00 per Share in connection with
a lump sum purchase made in accordance with the terms of the DRIP.
On April 30, 1998 the Company sold 119 Shares to the Company's Employee
Stock Purchase Plan (the "ESPP") at a price of $20.40 per Share in a regular
on-going transaction made in accordance with the terms of the ESPP. Messrs.
Bejcek and Ross acquired 7.3529 and 9.8039 of such Shares, respectively, each
such acquisition constituting a regular on-going acquisition.
On May 6, 1998, Mr. Milligan purchased 550 Shares at a price of $24.50 per
Share.
On May 25, 1998 the Company sold 6 Shares to the DRIP at a price of $26.875
per Share in connection with a lump sum purchase made in accordance with the
terms of the DRIP.
On May 30, 1998 the Company sold 105 Shares to the ESPP at a price of
$22.6313 per Share in a regular on-going transaction made in accordance with the
terms of the ESPP. Messrs. Bejcek and Ross acquired 13.256 and 8.8373 of such
Shares, respectively, each such acquisition constituting a regular on-going
acquisition.
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<PAGE> 21
(b) To the knowledge of the Company, the executive officers and directors
of the Company presently intend to tender Shares pursuant to the Offer. To the
knowledge of the Company, ALLIED Mutual does not presently intend to tender
Shares pursuant to the Offer. To the knowledge of the Company, no subsidiary of
the Company owns Shares. The Company has no knowledge as to the intentions of
any other affiliate of the Company. The foregoing statement does not include any
Shares over which, or with respect to which, any such executive officer,
director or affiliate acts in a fiduciary or representative capacity or is
subject to the instructions of a third party with respect to such decision to
tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in: (i) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth in this Statement, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
the first paragraph of Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Insurance Law Matters.
The Company, which is incorporated in Iowa, directly or through its
subsidiaries, owns one life insurance company domiciled in Iowa. Accordingly,
the acquisition of Shares pursuant to the Offer may require filings with, and
approvals of, state insurance regulatory authorities (the "Insurance
Commissioner") under the respective insurance codes (the "Insurance Code") of
Iowa as well as Ohio, the domiciliary state of Parent.
The Insurance Code of Iowa and the rules that have been promulgated
thereunder each contain provisions applicable to the acquisition of "control" of
a domestic insurer, including a presumption of control that arises from the
ownership of ten percent (10%) or more of the voting securities of a domestic
insurer or of a person that controls a domestic insurer. Generally, any person
seeking to acquire voting securities, such as the Shares, in an amount that
would result in such person controlling, directly or indirectly, a domestic
insurer must, together with any person ultimately controlling such person, file
with the Insurance Commissioner certain information concerning the acquisition
of control (generally known as a "Form A") and send a copy of each Form A to the
domestic insurer.
In Iowa, the Form A filing triggers public hearing requirements and
commences statutory periods within which decisions must be rendered approving or
disapproving the acquisition of control of the Company by Parent and Purchaser.
The periods within which hearings must be commenced or decisions rendered
generally do not begin until the relevant Insurance Commissioner has deemed the
Form A filing complete. The Insurance Commissioner has discretion to request
that additional information be furnished before it deems the Form A filing
complete. The Insurance Code provides certain statutory standards for the
approval or the disapproval of the acquisition of control of the Company.
However, the Insurance Code also permits the Insurance Commissioner discretion
in determining whether such standards have been met.
The Insurance Commissioner has discretion to request that Parent and
Purchaser furnish additional information before the Insurance Commissioner deems
the Form A filing complete. The Iowa Insurance Code provides that a public
hearing must be commenced within thirty (30) days after the Form A is filed and
that the relevant Insurance Commissioner must make the determination within
thirty (30) days after the conclusion of such hearing.
The Iowa Insurance Code generally requires the Insurance Commissioner to
approve the application for the acquisition of control unless the Insurance
Commissioner determines, after a public hearing, that such
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application should be disapproved on one or more prescribed regulatory grounds.
The Iowa Insurance Code also contains provisions providing generally for
judicial review of an Insurance Commissioner's order.
The Company currently expects that the Form A hearing in Iowa will be held
at the end of July 1998.
Pending Litigation
On December 31, 1997, a complaint was filed by Mary M. Rieff, a
policyholder of ALLIED Mutual, in the Iowa District Court in and for Polk County
Iowa, against ALLIED Group and certain other individuals who are or were
officers and/or directors of ALLIED Mutual and ALLIED Group. The Company is not
a party to this proceeding. The complaint, an alleged policyholder derivative
action brought on behalf of ALLIED Mutual, asserts, among other things, (a) 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; (b) that this allegedly wrongful demutualization began on or about
January 1, 1985 and was accomplished through transfers of ALLIED Mutual's assets
to ALLIED Group and to the individual defendants for inadequate consideration;
(c) 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 (d)
that the defendants improperly transferred substantial ownership of and control
over ALLIED Group and ALLIED Mutual's insurance business. The complaint further
asserts that as a result of the foregoing, ALLIED Mutual and its policyholders
have suffered damages in excess of $500 million. The complaint requests an
accounting of the assets allegedly wrongfully transferred to ALLIED Group and
compensation to ALLIED Mutual for the value of such assets, for the seizure of
corporate opportunities, and for the de facto demutualization of ALLIED Mutual.
The complaint also asks for certain other relief, including attorneys' fees and
costs, equitable relief and interest, and restitution for any assets wrongfully
transferred or conveyed.
On June 1, 1998, a motion was filed by Mary M. Rieff seeking to enjoin the
defendant directors of ALLIED Mutual from considering, negotiating or approving
any transaction on behalf of ALLIED Mutual with Parent or any third party
because of alleged conflicts of interest of the members of the Board of
Directors of ALLIED Mutual.
On June 4, 1998, the complaint was amended to include a class action
component.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1. Confidentiality Agreement dated as of May 28, 1998 among
Parent, Purchaser and the Company.
Exhibit 2. Agreement and Plan of Merger dated as of June 3, 1998 among
Parent, Purchaser and the Company (incorporated by reference
to Exhibit 37 to the Solicitation/Recommendation Statement
on Schedule 14D-9/A filed by ALLIED Group with the SEC on
June 4, 1998 (the "ALLIED Group 14D-9/A").
Exhibit 3. Shareholder Agreement dated as of June 3, 1998 between
Parent and ALLIED Mutual.
Exhibit 4. Agreement and Plan of Merger dated as of June 3, 1998
between Parent and ALLIED Mutual (incorporated by reference
to Exhibit 36 to the ALLIED Group 14D-9/A).
Exhibit 5. Agreement and Plan of Merger dated as of June 3, 1998 among
Parent, Nationwide Group Sub and ALLIED Group (incorporated
by reference to Exhibit 35 to the ALLIED Group 14D-9/A).
Exhibit 6. The ALLIED Group Joint Marketing Agreement ("Joint Marketing
Agreement"), dated August 30, 1993, by and between ALLIED
Life Insurance Company, ALLIED Mutual, AMCO Insurance
Company, ALLIED Property and Casualty Insurance Company, and
Depositors Insurance Company (incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement on Form
S-1, Registration No. 33-68928 (the "S-1")).
</TABLE>
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<TABLE>
<S> <C>
Exhibit 7. First Amendment to Joint Marketing Agreement, dated November
1, 1993 (incorporated by reference to Exhibit 10.16 to the
S-1).
Exhibit 8. Amended and Restated ALLIED Group Intercompany Operating
Agreement (the Intercompany Operating Agreement), dated
August 25, 1993, by and among ALLIED Mutual, ALLIED Group,
the Company and certain of their subsidiaries (incorporated
by reference to Exhibit 10.3 to the S-1).
Exhibit 9. First Amendment, dated November 1, 1993, to Intercompany
Operating Agreement (incorporated by reference to Exhibit
10.15 to the S-1).
Exhibit 10. Second Amendment, dated May 16, 1994, to Intercompany
Operating Agreement (incorporated by reference to Exhibit
10.19 to the Company's Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1994).
Exhibit 11. Third Amendment, dated December 15, 1994, to Intercompany
Operating Agreement (incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
Year Ended December 31, 1994).
Exhibit 12. Amended and Restated Management Information Services
Agreement ("Management Information Services Agreement"),
dated January 24, 1997 (to be effective March 1, 1996), by
and among AMCO Insurance Company, ALLIED Group Information
Systems, Inc., ALLIED Mutual, ALLIED Group, ALLIED General
Agency Company, ALLIED Group Mortgage Company, ALLIED Group
Leasing Corporation, the Company, ALLIED Life Insurance
Company, ALLIED Life Brokerage Agency, ALLIED Group Merchant
Banking Corporation, ALLIED Group Insurance Marketing
Company, The Freedom Group, Inc., and Midwest Printing
Services, Ltd. (incorporated by reference to Exhibit 10.39
to the Company's Annual Report on Form 10-K for the Year
Ended December 31, 1996).
Exhibit 13. First Amendment, dated February 24, 1997, to Management
Information Services Agreement (incorporated by reference to
Exhibit 10.40 to the Company's Annual Report on Form 10-K
for the Year Ended December 31, 1996).
Exhibit 14. Stock Rights Agreement, dated August 25, 1993, by and
between ALLIED Mutual and the Company (incorporated by
reference to Exhibit 10.17 to the S-1).
Exhibit 15. Consulting Agreement (the "Consulting Agreement"), dated
December 14, 1994 by and between John E. Evans and ALLIED
Group, ALLIED Mutual and the Company (incorporated by
reference to Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the Year Ended December 31, 1994).
Exhibit 16. First Amendment to Consulting Agreement, dated December 18,
1996 (incorporated by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-K for the Year Ended
December 31, 1996).
Exhibit 17. Second Amendment to Consulting Agreement, dated May 13, 1997
(incorporated by reference to Exhibit 10.42 to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997).
Exhibit 18. Third Amendment to Consulting Agreement, dated March 24,
1998 (incorporated by reference to Exhibit 10.47 to the
Company's Quarterly Report on Form 10-Q for the Quarter
Ended March 31, 1998).
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C>
Exhibit 19. Intercompany Cash Concentration Fund Agreement, effective as
of April 24, 1995, by and among AID Finance Services, Inc.
ALLIED Mutual, ALLIED Group, AMCO Insurance Company, ALLIED
Property and Casualty Insurance Company, Depositors
Insurance Company, Western Heritage Insurance Company,
ALLIED Group Leasing Corporation, ALLIED Group Information
Systems, Inc., Midwest Printing Services, Ltd., The Freedom
Group, Inc., ALLIED General Agency Company, the Company,
ALLIED Life Insurance Company, ALLIED Group Merchant Banking
Corporation, ALLIED Life Brokerage Agency, Inc., ALLIED
Group Insurance Marketing Company and ALLIED Group Medical
Plan Trust (incorporated by reference to Exhibit 10.30 to
the Company's Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1995).
Exhibit 20. Second Amendment, dated June 2, 1998, to the Company's
Employee Stock Ownership Plan.
Exhibit 21. Severance Pay Plan.
Exhibit 22. Key Employee Employment Protection Agreement between the
Company and Samuel J. Wells.
Exhibit 23. Key Employee Employment Protection Agreement between the
Company and Wendell P. Crosser.
Exhibit 24. Form of Key Employee Employment Protection Agreement.
Exhibit 25. Amendment to the Company's Short Term Management Incentive
Plan dated June 2, 1998.
Exhibit 26. Company Retention Bonus Plan.
Exhibit 27. Company Press Release dated June 3, 1998.
Exhibit 28. Company Press Release dated June 4, 1998.
Exhibit 29. Engagement Letter dated May 28, 1998 between the
Coordinating Committee and Fox-Pitt, Kelton.
Exhibit 30. Opinion of Fox-Pitt, Kelton dated June 3, 1998 (included as
Annex A to this Schedule 14D-9 and included in copies mailed
to stockholders of the Company).
Exhibit 31. Information Statement pursuant to Section 14(f) of the
Exchange Act (included as Annex B to this Schedule 14D-9 and
included in copies mailed to stockholders of the Company).
Exhibit 32. Form of letter to stockholders of the Company dated June 10,
1998 (included in copies mailed to stockholders of the
Company).
</TABLE>
23
<PAGE> 25
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
ALLIED Life Financial Corporation
By: WENDELL P. CROSSER
------------------------------------
Wendell P. Crosser
Vice President and Treasurer
Dated: June 10, 1998
24
<PAGE> 26
ANNEX A
[FOX-PITT, KELTON INC. LOGO]
June 3, 1998
Coordinating Committee of the Board of Directors
ALLIED Life Financial Corporation
701 Fifth Avenue
Des Moines, Iowa 50391
Gentlemen:
Fox-Pitt, Kelton Inc. ("Fox-Pitt, Kelton") understands that ALLIED Life
Financial Corporation ("ALLIED Life"), Nationwide Mutual Insurance Company
("Nationwide") and Nationwide Life Acquisition Corporation, a wholly-owned
subsidiary of Nationwide ("Sub") propose to enter into an Agreement and Plan of
Merger dated June 3, 1998 (the "Merger Agreement"). Pursuant to the Merger
Agreement and subject to certain exceptions set forth therein, Nationwide and
Sub shall make a tender offer to purchase all outstanding shares of common
stock, no par value, of ALLIED Life (the "ALLIED Life Common Stock"), pursuant
to which Sub shall pay $30.00 per share in cash for each share accepted (the
"Consideration"). The Merger Agreement further provides that following
completion of the tender offer Sub will merge (the "Merger") into ALLIED Life
and each outstanding share of ALLIED Life Common Stock will be converted into
the right to receive the Consideration. The terms and conditions of the Merger
are more fully set forth in the Merger Agreement.
You have asked for Fox-Pitt, Kelton's opinion as to whether the Consideration is
fair, from a financial point of view, to the holders (other than ALLIED Mutual)
of ALLIED Life Common Stock. In arriving at the opinion set forth below,
Fox-Pitt, Kelton has, among other things:
(a) reviewed and analyzed certain publicly available financial
statements for ALLIED Life and Nationwide and financial information made
available to us by the management of ALLIED Life;
(b) analyzed certain internal financial statements, including
financial projections, and other financial and operating data prepared by
the management of ALLIED Life;
(c) discussed the past, present and future operations, financial
condition and prospects of ALLIED Life with the senior management of ALLIED
Life;
(d) compared the financial performance and condition of ALLIED Life
with that of certain other comparable publicly traded companies;
(e) reviewed and discussed with the senior management of ALLIED Life
the strategic objectives of the Merger and certain other benefits of the
Merger;
(f) reviewed the financial terms, to the extent publicly available, of
certain merger and acquisition transactions comparable, in whole or in
part, to the Merger;
A-1
<PAGE> 27
Coordinating Committee of the Board of Directors
ALLIED Life Financial Corporation
June 3, 1998
Page 2
(g) reviewed the Merger Agreement dated June 3, 1998; and
(h) performed such other analyses as we have deemed appropriate.
Fox-Pitt, Kelton has assumed and relied upon, without independent verification,
the accuracy and completeness of all of the financial and other information it
has reviewed for the purposes of providing this opinion, and we have not assumed
any responsibility for independent verification of such information. Fox-Pitt,
Kelton has not assumed any responsibility for independent valuation of the
assets and liabilities of ALLIED Life. With respect to the financial
projections, Fox-Pitt, Kelton has assumed that they have been reasonably
prepared by the management of ALLIED Life on bases reflecting the best currently
available estimates and judgment of the future financial performance of ALLIED
Life. We express no view as to such projections or the assumptions on which they
are based. Fox-Pitt, Kelton's opinion is based upon economic, market and other
conditions as they exist and can be evaluated on June 2, 1998.
In connection with the preparation of this opinion, we were not authorized by
the Coordinating Committee to solicit, nor have we solicited, third party
indications of interest for the acquisition of all or part of ALLIED Life. We
understand that ALLIED Mutual owns a controlling interest in ALLIED Life.
In the normal course of its investment banking business, Fox-Pitt, Kelton is
regularly engaged in the valuation of insurance company securities in connection
with acquisitions, negotiated underwritings, secondary distributions of listed
and unlisted securities, private placements and valuations for various other
purposes. As specialists in the securities of insurance companies, Fox-Pitt,
Kelton has experience in, and knowledge of, the valuation of such enterprises.
In the normal course of its business, Fox-Pitt, Kelton provides research
coverage on ALLIED Life and may trade equity securities of ALLIED Life and
Nationwide Financial Services, Inc. for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. We have acted as financial advisor to ALLIED Life in connection
with this Merger, have received a fee in connection with our engagement as
financial advisor and will receive an additional fee upon rendering our opinion
in connection with the Merger.
It is understood that this letter is for the information of the Coordinating
Committee of the Board of Directors of ALLIED Life and may not be used for any
other purpose without our prior written consent.
Based upon and subject to the foregoing, Fox-Pitt, Kelton is of the opinion on
the date hereof that the Consideration is fair, from a financial point of view,
to the holders (other than ALLIED Mutual) of ALLIED Life Common Stock.
Very truly yours,
/s/ FOX-PITT, KELTON INC.
----------------------
FOX-PITT, KELTON INC.
A-2
<PAGE> 28
ANNEX B
ALLIED LIFE FINANCIAL CORPORATION
701 FIFTH AVENUE
DES MOINES, IOWA 50391-2003
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 10, 1998, to
the holders of Common Stock, no par value ("Common Stock" or "Shares"), of
ALLIED Life Financial Corporation, an Iowa corporation (the "Company"), as part
of the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"). The Schedule 14D-9 relates to the tender offer by Nationwide
Life Acquisition Corporation (the "Purchaser"), an Ohio corporation and a wholly
owned subsidiary of Nationwide Mutual Insurance Company, an Ohio corporation
("Parent") to purchase all outstanding Shares. Capitalized terms used and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
This Information Statement is being distributed in connection with the possible
election of persons designated by Parent and Purchaser to a majority of the
seats on the Board of Directors of the Company (the "Board").
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 thereunder.
Holders of Shares are urged to read this Information Statement carefully, but
are not, however, required to take any action.
The information contained in this Information Statement concerning Parent,
Purchaser and the Designees (as hereinafter defined) has been furnished to the
Company by Parent and Purchaser and the Company assumes no responsibility for
the accuracy, completeness or fairness of such information.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
At the close of business on June 2, 1998 the outstanding securities of the
Company consisted of 4,424,174 shares, 2,330,772 shares of 6.75% Preferred, and
101,526 shares of ESOP Preferred. Each share of Common Stock, 6.75% Preferred,
and ESOP Preferred is entitled to one vote on each matter submitted at a
stockholder meeting. Except as required by applicable law, the Common Stock,
6.75% Preferred, and ESOP Preferred (collectively, the "Stock") vote together on
all matters (including the election of directors) as one class.
As of the close of business on June 2, 1998, the following are the only
stockholders known to management who may be deemed to beneficially own more than
5% of any class of the Company's voting securities:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT PERCENT OF TOTAL
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS VOTING SECURITIES
-------------- ------------------- ----------------------- -------- -----------------
<S> <C> <C> <C> <C>
Preferred Stock
6.75% Preferred....... Allied Mutual 2,330,772 shares(2) 95.8% 34.0%
Insurance Company(1)
701 Fifth Avenue
Des Moines, IA 50391-2003
ESOP Preferred........ State Street Bank and Trust 101,526 shares(3) 4.2% 1.5%
Company, Trustee of The ALLIED
Life Financial Corporation
Employee Stock Ownership Trust
200 Newport Avenue
North Quincy, MA 02171
</TABLE>
B-1
<PAGE> 29
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT PERCENT OF TOTAL
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS VOTING SECURITIES
-------------- ------------------- ----------------------- -------- -----------------
<S> <C> <C> <C> <C>
Common Stock............ ALLIED Mutual 1,521,006 shares 35.9% 22.2%
Insurance Company(1)
701 Fifth Avenue
Des Moines, IA 50391-2000
Fenimore Asset Management, Inc. 548,650 shares(4) 12.9% 8.0%
118 North Grand Street
P.O. Box 310
Cobleskill, NY 12043
Brinson Partners, Inc. 382,600 shares(5) 9.0% 5.6%
209 South LaSalle
Chicago, IL 60604-1295
Franklin Advisory Services, Inc. 257,500 shares(6) 6.1% 3.8%
777 Mariners Island Blvd.
San Mateo, CA 94404
Royce & Associates, Inc. 249,650 shares(7) 5.9% 3.6%
1414 Avenue of the Americas
New York, NY 10019
Royce Management Company 38,000 shares(7) 0.9% 0.6%
1414 Avenue of the Americas
New York, NY 10019
</TABLE>
- -------------------------
(1) The Company and ALLIED Mutual Insurance Company ("ALLIED Mutual") are
parties to a Stock Rights Agreement which expires in 2008. Under the Stock
Rights Agreement, 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
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 ALLIED Mutual but who is not an
officer or employee of 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 ALLIED Mutual to grant
proxies to other than affiliated individuals and to solicit other
stockholders of the Company. ALLIED Mutual also is prohibited from
initiating or accepting a tender offer for shares of the Common Stock except
under certain conditions. The Company has a right of first refusal with
respect to any sale by ALLIED Mutual of the Common Stock, subject to certain
exceptions, including a distribution of such stock to the public in a
registered public offering or an offering pursuant to Rule 144. ALLIED
Mutual has incidental registration rights and three demand registration
rights with respect to the 6.75% Preferred and Common Stock owned by ALLIED
Mutual. For a further description of the relationship between ALLIED Mutual
and the Company, see "Certain Transactions and Relationships."
(2) The 6.75% Preferred is voting stock so long as it is held by ALLIED Mutual.
(3) Shares reported as owned by the ESOP Trustee are also reported as
beneficially owned by the executive officers. Allocated shares are voted by
the ESOP Trustee in accordance with the direction of the ESOP participants.
Generally, unallocated shares and allocated shares as to which no direction
is made by the participants are voted by the ESOP Trustee in the same
percentage as the allocated shares as to which directions are received by
the ESOP Trustee.
(4) Fenimore Asset Management, Inc., an investment adviser, filed a Schedule 13G
jointly with Thomas O. Putnam with the SEC on February 12, 1998 indicating
shared voting and dispositive power for 548,650 shares, beneficially owned
as of December 31, 1997.
(5) Brinson Partners, Inc., an investment adviser, together with its parent
holding companies Brinson Holdings, Inc., SBC Holding (USA), Inc., and Swiss
Bank Corporation, filed a Schedule 13G with the
B-2
<PAGE> 30
SEC on February 10, 1998 indicating shared voting and dispositive power for
382,600 shares, beneficially owned as of December 31, 1997.
(6) Franklin Advisory Services, Inc., an investment advisor, filed a Schedule
13G with the SEC on January 26, 1998, indicating sole voting power for
116,000 shares and sole dispositive power for 257,500 shares, beneficially
owned as of December 31, 1997. Also filing the Schedule 13G were the parent
holding company, Franklin Resources, Inc., and the principal shareholders of
the parent holding company, Charles B. Johnson and Rupert H. Johnson, Jr.
(7) Royce Associates, Inc. ("Royce") and Royce Management Company ("RMC") filed
a Schedule 13G with the SEC on February 5, 1998 indicating sole voting and
dispositive power for 249,650 and 39,000 shares, respectively beneficially
owned as of December 31, 1997. As members of a group with Royce and RMC,
Charles M. Royce also filed a Schedule 13G with the SEC but disclaimed
beneficial ownership of such shares held by Royce and RMC.
RIGHT TO DESIGNATE DIRECTORS
The Merger Agreement provides that promptly upon the acceptance for payment
of Shares by Purchaser pursuant to the Offer, Purchaser will be entitled to
designate such number of directors on the Board (the "Designees") as will give
Purchaser, subject to compliance with Section 14(f) of the Exchange Act, a
majority of such directors, and the Company is obligated, at such time, to cause
the Designees to be so elected by the then existing Board. The Merger Agreement
also provides that if the Designees are elected to the Board, until the
Effective Time, the Board must have at least two directors who are directors on
the date of the Merger Agreement and who are not officers of the Company or
directors of ALLIED Mutual (the "Independent Directors"), provided that, in such
event, if the number of Independent Directors is reduced below two for any
reason whatsoever, the remaining Independent Director will designate a person to
fill such vacancy who will be deemed to be an Independent Director for purposes
of the Merger Agreement or, if no Independent Directors then remain, the other
directors will designate two persons to fill such vacancies who may not be
officers or affiliates of the Company or any of its subsidiaries, or officers or
affiliates of Nationwide or any of its subsidiaries, and such persons will be
deemed to be Independent Directors for purposes of the Merger Agreement.
Subject to applicable law, the Company is obligated to take all action
requested by Parent necessary to effect any election described above. In
connection with the foregoing, the Company has agreed that it will promptly, at
the option of Parent, either increase the size of the Board and/or obtain the
resignation of such number of its current directors as is necessary to enable
the Designees to be elected or appointed to the Board.
Following the election or appointment of the Designees pursuant to the
terms of the Merger Agreement and prior to the Effective Time, the affirmative
vote of a majority of the Independent Directors then in office is required for
the Company to (i) amend or terminate the Merger Agreement, (ii) exercise or
waive any of its rights or remedies under the Merger Agreement or (iii) extend
the time for performance of Parent's and Purchaser's respective obligations
under the Merger Agreement.
INFORMATION WITH RESPECT TO DESIGNEES
Set forth below is the name, age, business address, principal occupation or
employment and five year employment history of the persons who will, together
with Mr. Samuel J. Wells (subject to the terms of the Merger Agreement described
above), be the Designees. Such information is being furnished by Parent and
Purchaser. Unless otherwise indicated, the business address of all persons
listed below is Nationwide Mutual Insurance Company, One Nationwide Plaza,
Columbus, Ohio 43215. Unless otherwise indicated, all persons listed below are
citizens of the United States of America. Information with respect to Mr. Wells
appears herein under the caption "-- Directors and Executive Officers."
RICHARD D. CRABTREE, age 57, has been a Director of Parent since April
1996. Mr. Crabtree has served as President and Chief Operating Officer of Parent
since April 1996. Mr. Crabtree served as Executive Vice President of
Property/Casualty Operations of Parent from April 1995 to April 1996. He served
as Senior Vice
B-3
<PAGE> 31
President of Property and Casualty Operations of Parent from May 1994 to April
1995. He served as Senior Vice President of State Operations of Parent from
September 1993 to May 1994. He served as a Vice President Regional Manager of
Parent from December 1985 to September 1993.
JOSEPH J. GASPER, age 54, has been President and Chief Operating Officer of
Nationwide Financial Services, Inc., a wholly owned subsidiary of Parent, since
December 1996 and a director of Nationwide Financial Services, Inc. since
November 1996. Mr. Gasper has been President and Chief Operating Officer of
Nationwide Life Insurance Company and director since April 1996. Previously, he
was Executive Vice President -- Property/Casualty Operations of Nationwide
Mutual Insurance Company from April 1995 to April 1996. He was Senior Vice
President -- Property/Casualty Operations of Nationwide Mutual Insurance Company
from September 1993 to April 1995. Prior to that time, Mr. Gasper held numerous
positions within the Nationwide Insurance Enterprise. Mr. Gasper has been with
the Nationwide Insurance Enterprise for 31 years.
DIMON R. MCFERSON, age 61, has been a Director of Parent since April 1988.
Mr. McFerson has served as the Chairman and Chief Executive Officer --
Nationwide Insurance Enterprise of Parent since April 1996, and was President
and Chief Executive Officer of Parent from December 1992 to April 1996. He
served as Director and Chief Executive Officer from December 1992 to November
1993, Director and President and Chief Executive Officer -- Nationwide Insurance
Enterprise from November 1993 to April 1996, and Director and Chairman and Chief
Executive Officer -- Nationwide Insurance Enterprise from April 1996 to present
for the Nationwide Life Insurance Company and Nationwide Life and Annuity
Insurance Company.
ROBERT A. OAKLEY, age 51, has served as Executive Vice President -- Chief
Financial Officer of Parent since April 1995. Mr. Oakley served as Senior Vice
President -- Chief Financial Officer of Parent from October 1993 to April 1995.
From November 1984 to October 1993, Mr. Oakley served as Vice President and
Corporate Controller of Parent.
ROBERT J. WOODWARD, JR., age 56, has served as Executive Vice President --
Chief Investment Officer of Parent since August 1995. From March 1991 to August
1995, Mr. Woodward served as Senior Vice President -- Fixed Income Investments
of Parent.
It is expected that the Designees may assume office at any time following
the purchase by Purchaser of Shares pursuant to the Offer and that upon assuming
office, the Designees will thereafter constitute at least a majority of the
Board. Parent has informed the Company that, to its knowledge, none of the
Designees (other than Mr. Wells) beneficially owns any equity securities, or
rights to acquire any equity securities of the Company, or has been involved in
any transactions with the Company or any of its directors, executive officers or
affiliates that are required to be disclosed pursuant to the rules of the SEC.
DIRECTORS AND EXECUTIVE OFFICERS
The Company presently has five directors. The Company's articles of
incorporation and bylaws provide for a Board of Directors of not less than three
nor more than twenty-one members. The exact number of directors within such
limits is fixed by the Board of Directors. The Board has set the current number
of directors at five. The terms of the Board members are staggered with each
member serving a three-year term. Executive officers of the Company are elected
annually by the Board of Directors of the Company, and in some cases, by a
subsidiary of the Company. Several persons whose activities are significant to
the business of the Company are executive officers of the Company's
subsidiaries. The Company's subsidiaries are ALLIED Life Insurance Company
("ALLIED Life"), ALLIED Life Brokerage Agency, Inc., and ALLIED Group Merchant
Banking Corporation.
CURRENT DIRECTOR WHOSE TERM EXPIRES IN 1999
JOHN E. EVANS, age 70, has been Chairman of the Board and a Director of the
Company since 1993. He has been a director and Chairman of ALLIED Life since
1970, serving as President from 1965 to 1988. Mr. Evans has served as Chairman
of the Board of ALLIED Group since 1975, President of ALLIED Group from 1975 to
1994, and has been a director of ALLIED Mutual since 1961. Mr. Evans also serves
on the Board of
B-4
<PAGE> 32
Directors of other affiliates of the Company. Mr. Evans is a brother of Harold
S. Evans, a Director of the Company. Pursuant to the Stock Rights Agreement and
the Consulting Agreement with Mr. Evans, he was nominated by ALLIED Mutual to
serve as a Director of the Company.
CURRENT DIRECTORS WHOSE TERMS EXPIRES IN 2000
HAROLD S. EVANS, age 65, has been a Director of the Company since 1993 and
a director of ALLIED Life since 1965. He has been a director of ALLIED Group
since 1974 and a director of ALLIED Mutual since 1965, and he is also a member
of the Board of Directors of certain other affiliates of the Company. He was
employed by Aluminum Company of America beginning in 1955, serving as a Group
Vice President-International until his retirement in 1989. Mr. Evans is a
brother of John E. Evans, Chairman of the Board and a Director of the Company.
Pursuant to the Stock Rights Agreement, Mr. Evans was nominated by ALLIED Mutual
to serve as a Director of the Company.
GEORGE D. MILLIGAN, age 41, has been a Director of the Company and ALLIED
Life since 1993. For the past five years, Mr. Milligan has been President of The
Graham Group, Inc., a Des Moines, Iowa based real estate development and
property management company with activities in other areas, including property
acquisition and sales, general contracting, and investments.
CURRENT DIRECTORS WHOSE TERMS EXPIRE IN 2001
JAMES W. CALLISON, age 71, has been a Director of the Company since 1993
and a director of ALLIED Life since 1973. He has been a director of ALLIED
Mutual since 1972 and a director of ALLIED Group since 1974. He is also a member
of the Board of Directors of certain other affiliates of the Company. Mr.
Callison has been employed by Midwest Wheel Companies since 1948, serving as
Chairman of the Board since January 1998 and as President from 1970 to 1997.
DENNIS H. KELLY, JR., age 71, has been a Director of the Company and ALLIED
Life since 1993. From 1958 to 1990, he practiced internal medicine in Des
Moines, Iowa. He has been retired since 1990.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1997, there were five meetings of the Board of Directors. All
directors attended more than seventy-five percent of the aggregate committee and
Board meetings during 1997.
The Board has established Executive, Audit, Investment, Compensation, and
Coordinating Committees. The Company does not have a standing nominating
committee, and the functions that are normally performed by such a committee are
carried out by the Executive Committee. The Executive Committee will consider
nominees recommended by stockholders. Such recommendations for nominees for
election at the 1999 Annual Meeting should be submitted in writing to the
Executive Committee in care of the Secretary of the Company, 701 Fifth Avenue,
Des Moines, Iowa 50391-2003, no later than February 4, 1999.
The Executive Committee members are John E. Evans, James W. Callison, and
Harold S. Evans. The Executive Committee has the authority, with certain
exceptions, to exercise the powers of the full Board of Directors. The Board of
Directors reviews and approves the minutes of all meetings of the Executive
Committee. The Executive Committee met two times in 1997.
The Audit Committee members consist of outside directors Dennis H. Kelly,
Jr. and George D. Milligan. The Committee selects and retains the Company's
independent certified public accountants and approves the staffing and budgets
of the internal audit department. Both the internal auditors and the independent
certified public accountants periodically meet with the Audit Committee and have
access to the members of the Committee. The Audit Committee met two times in
1997.
The Investment Committee is a committee authorized to direct and approve
investment activities of the Company. The members of the Investment Committee
are John E. Evans, Harold S. Evans, and James W. Callison. The Investment
Committee met eight times in 1997.
B-5
<PAGE> 33
The Compensation Committee of the Board has the authority to establish all
compensation and benefits for all of the executive officers and employees of the
Company and its subsidiaries. The members of the Compensation Committee, Harold
S. Evans and James W. Callison, met four times in 1997.
The Coordinating Committee is a committee responsible for matters involving
actual or potential conflicts of interest if and when they arise, between the
Company, ALLIED Mutual, and ALLIED Group. The Company committee members, Dennis
H. Kelly, Jr. and George D. Milligan, are outside directors of the Company who
are not also members of the Board of Directors of ALLIED Mutual or ALLIED Group.
The Coordinating Committee did not meet in 1997.
COMPENSATION OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE DIRECTOR PURCHASE
PLAN
Directors who are not officers or employees of the Company received an
annual retainer in 1997 of $20,000 plus expenses incurred in attending Board
meetings. Directors were also paid $1,000 per Board meeting and $750 per
committee meeting. Directors who are executive officers of the Company do not
receive any fees in addition to their remuneration as officers. The annual
retainer is split among the Company, ALLIED Mutual, and ALLIED Group for James
W. Callison, Harold S. Evans, and John E. Evans (each of whom are also directors
of ALLIED Mutual and ALLIED Group), and many of the meeting fees are also split
for these three individuals in the event the companies have meetings on the same
day. In addition, George D. Milligan receives from the Company $750 per
committee meeting for sitting as a Company representative and nonvoting member
of the ALLIED Mutual Contributions Committee.
The Company's directors who are not employees or officers of the Company
may elect to receive all or a portion of their director fees in the form of
Common Stock obtained under the ALLIED Life Financial Corporation Outside
Director Stock Purchase Plan ("Director Purchase Plan"). Under the Director
Purchase Plan, a participant may not purchase Common Stock with a fair market
value of more than $25,000 per calendar year. The price per share paid to the
Company is 100% of the fair market value of shares of Common Stock. The director
fees that are withheld are applied to 85% of the price per share, with the
remainder being paid proportionally by the Company, its subsidiaries, ALLIED
Mutual, and/or the majority-owned subsidiaries of ALLIED Mutual to whom the
participant's director fees are allocated. A participant may not dispose of the
Common Stock purchased under the Director Purchase Plan for a period of one year
from the purchase date. An Administrative Committee composed of employees of the
Company or its subsidiaries administers the Director Purchase Plan. During 1997,
the following directors participated in the Director Purchase Plan purchasing
the number of shares and receiving the dollar value of discount for all shares
purchased as indicated: James W. Callison, 880 shares, $2,697; John E. Evans,
816 shares, $2,498; George D. Milligan, 1,262 shares, $3,747.
John E. Evans has a Consulting Agreement with the Company, ALLIED Mutual,
and ALLIED Group pursuant to which he performs certain consulting services for
the companies until such agreement is terminated by Mr. Evans or the companies.
Mr. Evans is to be paid an annual fee which is to be prorated among the Company,
ALLIED Mutual, and ALLIED Group. The annual fee was $250,000 for the first six
months of 1997 and $180,000 for the latter six months. The Company's portion of
the fee for 1997 was $12,082. ALLIED Mutual agreed to nominate Mr. Evans for
re-election to the Board of Directors of the Company in accordance with ALLIED
Mutual's nomination rights under the Stock Rights Agreement between ALLIED
Mutual and the Company. The Consulting Agreement 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.
EXECUTIVE OFFICERS
The following are the executive officers of the Company and its
subsidiaries as of June 10, 1998.
SAMUEL J. WELLS, age 51, has been President of the Company since 1993 and
President of ALLIED Life since 1988. Previously, he was Vice President and
General Manager of Farm Progress Insurance Services, Inc. a subsidiary of
Capital Cities/ABC Inc., where he had been employed since 1984. Farm Progress
Insurance Services, Inc. has had a relationship with ALLIED Life as an
independent marketing organization since 1984.
B-6
<PAGE> 34
Prior to that, Mr. Wells was with Farm Bureau of Michigan and Volunteer State
Life Insurance Company of Chattanooga, Tennessee.
WENDELL P. CROSSER, age 38, has been Vice President and Treasurer of the
Company and ALLIED Life since 1993. Previously, he had been Assistant Vice
President of ALLIED Group, Inc. since 1990 and held various accounting positions
with ALLIED Group, Inc. since being employed there in 1987. From 1981 to 1987,
Mr. Crosser was employed by KPMG Peat Marwick LLP. Mr. Crosser is a Certified
Public Accountant.
DONALD J. IVERSON, age 42, has been Vice President and Chief Actuary of
ALLIED Life since 1995. Mr. Iverson joined the Company as a financial actuary in
1993 and was previously Vice President and Actuary with Employers Modern Life
Company from 1990 to 1993. Prior to 1990, he was First Vice President and
Actuary for Integrated Resources Life Insurance Company and Second Vice
President and Product Actuary for General American Life Insurance Company. Mr.
Iverson is a Fellow of the Society of Actuaries and a Member of the American
Academy of Actuaries.
JOSEPH P. ROSS, age 35, has been Vice President, Marketing of ALLIED Life
since 1996. Previously, he was Vice President with Life Partners Group in
Englewood, Colorado, where he held various positions since 1991. Prior to that
he was with Merrill Lynch Life Agency, Northbrook, Illinois, Insurance
Associates, Inc., Dyersville, Iowa, and Independent Agent Center, Dyersville,
Iowa.
E. ROBERT BEJCEK, age 52, has been Vice President of ALLIED Life since
1997. Previously, he was Vice President with U.S. Life/All American Life
Insurance Company from 1991 to 1997. Prior to that, Mr. Bejcek was Regional
Director for Kemper Life Insurance Company.
WILLIAM D. WHITSELL, age 34, has been Vice President of Underwriting of
ALLIED Life since 1996. Previously he was the Chief Underwriter with Life USA
Insurance Company from 1991 to 1995 and held various underwriting positions with
ITT Life Insurance Company prior to 1991.
GEORGE T. OLESON, age 50, has been Vice President of the Company, ALLIED
Life, ALLIED Group, Inc., and ALLIED Mutual since 1997. Previously, Mr. Oleson
was Secretary of such companies since 1993. He also serves as Corporate Counsel
for the Company and ALLIED Group and their affiliates.
B-7
<PAGE> 35
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on June 2, 1998, the directors, the executive
officers named in the Summary Compensation Table, and the directors and
executive officers as a group beneficially owned shares of the ESOP Preferred
and Common Stock as set forth below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(1)
-------------------------------------- -------------------------------
ESOP COMMON COMBINED PREFERRED COMMON COMBINED
NAME OF BENEFICIAL OWNER PREFERRED(2) STOCK CLASSES STOCK STOCK CLASSES
- ------------------------ ------------ ------ -------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
James W. Callison............... -0- 5,368 5,368 -0- * *
Harold S. Evans................. -0- 15,456 15,456 -0- * *
John E. Evans................... -0- 30,258 30,258 -0- * *
Dennis H. Kelly, Jr. ........... -0- 12,096 12,096 -0- * *
George D. Milligan.............. -0- 7,639 7,639 -0- * *
Samuel J. Wells................. 10,047 76,927(3) 86,974(3) * 1.7% 1.3%
Wendell P. Crosser.............. 8,209 30,174(3) 38,383(3) * * *
Donald J. Iverson............... 1,519 1,415(3) 2,934(3) * * *
Joseph P. Ross.................. 341 434 775 * * *
All Directors and Executive
Officers as a Group (12
persons)...................... 20,626 180,506(3) 201,132(3) * 4.1% 2.9%
</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) Shares reported as beneficially owned by executive officers are also
reported as owned by the ESOP Trustee. 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 June 2, 1998 pursuant to stock options
granted under the ALLIED Life Financial Corporation Long-Term Management
Incentive Plan and the Executive Stock Option Plan: Mr. Wells, 21,291
shares; Mr. Crosser, 19,902 shares; Mr. Iverson, 1,147 shares; and all
executive officers as a group, 42,557 shares.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") furnished the following report on executive
compensation which appeared in the Company's Proxy Statement dated March 14,
1998 for its Annual Meeting of Stockholders held on May 5, 1998. The report has
not been revised since that Proxy Statement was prepared.
The Compensation Committee is responsible for establishing and
administering the compensation policies which govern annual compensation, stock
ownership programs, and employee benefit programs for the executive officers as
well as other employees of the Company and its subsidiaries. Since the Company
is a holding company without operations, corporate performance and compensation
policies are highly dependent upon the operation of ALLIED Life, its principal
subsidiary.
COMPENSATION CRITERIA
In making compensation determinations, the Compensation Committee considers
and endeavors to attain the following goals:
1) attract and retain highly qualified and motivated executive officers
and employees.
B-8
<PAGE> 36
2) encourage and reward achievement of annual and long-term financial
goals and operating plans of the Company, and
3) encourage executive officers and employees to become stockholders
with interests aligned with those of other stockholders.
The Compensation Committee's policy with regard to the compensation of
executive officers is to meet the foregoing goals through a combination of base
salary, annual bonus, stock ownership, and other benefits with a particular
focus on encouraging executive officers to attain individual performance goals
that are designed to favorably impact overall Company performance.
COMPENSATION COMPONENTS
The basic components of compensation for executive officers, including
those individuals listed in the Summary Compensation Table, are in four areas:
Base Salary: The Compensation Committee sets salary ranges annually which
are intended to reflect the median level of base pay for comparable positions at
companies of similar size and complexity. The Compensation Committee reviews
salary survey data provided by independent survey consultants including an
annual survey provided by the Life Office Management Association, an industry
trade association whose survey covers a wide cross-section of stock and mutual
life insurance companies. Based on the scope and responsibility of the position
in the survey compared to the scope and responsibility of the position at the
Company, the Compensation Committee determines whether the officer's salary
range should be set at, above, or below the median level of the industry. To
determine the level of a specific salary within its range, the Compensation
Committee considers management input regarding the officer's length of service
in the position, experience, and management skills in handling short and long
range issues. In addition, the Compensation Committee reviews the officer's
performance during the prior year measured against predetermined corporate and
individual plans and objectives approved by the Board.
Annual Bonus: The Compensation Committee believes that a significant
portion of management's annual cash compensation should be variable ("at risk")
and tied to the Company's financial results. The Short Term Management Incentive
Compensation Plan (the "Short Term Plan") is administered by the Compensation
Committee which annually establishes goals for diluted operating earnings per
share ("EPS") and growth. Depending upon attainment of Short Term Plan goals for
1997, participants may receive a bonus amount equal to 3-19% of base salary if
the minimum EPS goal is attained, and up to 8-75% of base salary if both EPS and
growth goals are maximized. Growth is measured as the percentage increase in
GAAP insurance revenues (excluding single premium annuities with life
contingencies) plus 2% of first year annuity premiums. The goals are established
annually by the Compensation Committee. Goals are set to significantly exceed
expected growth performance of the industry. The potential total award is
weighted so that 75% of the award may come from attainment of EPS goal and 25%
from attainment of the growth goal. No incentive for growth is given if the
minimum EPS target is not met. The Compensation Committee may use its discretion
to modify a portion of a participant's award, either upward or downward, based
on management's recommendation of the participant's contribution to the
achievement of goals. The annual bonus for marketing executives of the Company
is dependent upon the attainment of growth goals.
Stock Ownership: The Compensation Committee believes that a fundamental
goal of executive compensation is to encourage and create opportunities for
long-term executive stock ownership. Stock ownership guidelines for officers
were established by the Compensation Committee in 1994. Over a period of ten
years, the following ownership levels of Company Common Stock should be
attained:
<TABLE>
<S> <C>
President 50,000 - 75,000 shares
Key Vice Presidents 20,000 - 35,000 shares
Other Vice Presidents 5,000 - 10,000 shares
</TABLE>
The Long-Term Management Incentive Plan (the "Long-Term Plan") provides for
the award of stock options (nonqualified and incentive stock options), stock
appreciation rights ("SARs"), and shares of
B-9
<PAGE> 37
restricted stock. The Compensation Committee encourages ownership of Company
stock through the grant of options to participants in the Long-Term Plan. In
determining who will participate and the amount of awards, the Compensation
Committee selects key management employees, and based on their position, salary,
performance, and previous grants, the Compensation Committee determines the
amount of awards to be given to each participant. Generally, the amount
increases with the level of position. The Compensation Committee intends to make
grants on an annual basis and establish a vesting schedule at each grant date.
The 1997 option grants vest in 33 1/3% increments on the third, fourth, and
fifth anniversary of the grant date. In 1997, 38,000 options were awarded to
nine executive officers, and 108,202 shares remain available for award under the
Long-Term Plan. Under the Executive Stock Option Plan, 31,167 shares remain
available for future grants.
Employee Benefits: The Company offers benefit plans such as vacation,
medical, life and disability insurance to executive officers on the same basis
as offered to all employees. In keeping with the Company's commitment to align
employee interests with those of stockholders, employees may acquire shares of
stock through the Employee Stock Purchase Plan ("ESPP"), and all eligible
employees are allocated shares through the Employee Stock Ownership Plan
("ESOP"). The ESPP allows employees to purchase stock at 85% of its fair market
value, and the ESOP is discussed in note 5 to the Summary Compensation Table in
this Proxy Statement. Executive officers are eligible for these programs on the
same basis as other employees.
PRESIDENT'S COMPENSATION
The rules of the Securities and Exchange Commission require a discussion of
the CEO compensation. Since the Company does not have an elected CEO, this
Report will focus on the compensation of the President who acts in a similar
capacity. The compensation of the President includes the above four components.
In addition to the subjective considerations of Mr. Wells' leadership and
effectiveness in dealing with major corporate challenges and opportunities, the
Compensation Committee considers the financial performance of the Company and
the performance of the stock price in determining his total compensation. In
1997, the Compensation Committee increased Mr. Wells' base salary by 8% based on
the Compensation Committee's assessment of his performance. Mr. Wells will not
receive an annual bonus award for 1997. In March of 1997, the Compensation
Committee granted to Mr. Wells 9,000 shares subject to option under the
Long-Term Plan.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code (the "Code") generally limits
to $1 million per individual per year the federal income tax deduction for
compensation paid by a publicly-held company to the company's chief executive
officer and its other four highest paid executive officers. Compensation that
qualifies as performance-based compensation for purposes of Section 162(m) is
not subject to the $1 million deduction limitation. Options and stock
appreciation rights granted under the Long-Term Plan and options granted under
the Executive Stock Option Plan satisfy the requirements for performance-based
compensation. The Compensation Committee presently does not intend to seek to
qualify other components of the Company's incentive compensation for executive
officers as performance-based compensation under Section 162(m) of the Code,
such as the Short Term Plan. However, the Compensation Committee currently does
not anticipate that any executive officer will be paid compensation from the
Company in excess of $1 million in any year (including amounts that do not
qualify as performance-based compensation under the Code), and accordingly the
Compensation Committee anticipates that all amounts paid as executive
compensation will be deductible by the Company for federal income tax purposes.
COMPENSATION COMMITTEE
James W. Callison
Harold S. Evans
B-10
<PAGE> 38
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative stockholder return (assuming
reinvestment of dividends) to the holders of Common Stock, a broad equity market
index (Index for NASDAQ Stock Market), and a peer group index (Index for NASDAQ
Insurance Stocks), during the period beginning November 17, 1993 (date Company
went public) and ending December 31, 1997. The stock performance graph assumes
$100 was invested on November 17, 1993. The lines represent monthly index levels
derived from compounded daily returns that include all dividends. The indexes
are reweighted daily, using the market capitalization on the previous trading
day. If the monthly interval (based on the fiscal year end) is not a trading
day, the preceding trading day is used.
<TABLE>
<CAPTION>
NASDAQ
Stock Market NASDAQ
Measurement Period (U.S. Insurance
(Fiscal Year Covered) Company Companies) Stocks
<S> <C> <C> <C>
11-17-93 100.0 100.0 100.0
12-31-93 100.2 102.0 99.3
12-30-94 113.1 99.7 94.1
12-29-95 145.4 141.0 133.6
12-31-96 142.0 173.5 152.3
12-31-97 179.8 212.8 223.5
</TABLE>
B-11
<PAGE> 39
COMPENSATION OF EXECUTIVE OFFICERS
All employees of the Company and its subsidiaries are employed by ALLIED
Life. For the years indicated, the following table shows the compensation earned
by Samuel J. Wells (President of the Company) and the most highly compensated
executive officers of the Company earning more than $100,000 in annual salary
and bonus for services rendered in all capacities to the Company and its
subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS(3) OPTIONS/SARS COMPENSATION($)
--------------------------- ---- --------- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Wells................... 1997 $192,305 -0- -0- 9,000(4) $11,200
President of the Company 1996 184,536 -0- $10,400 4,700 10,500
and ALLIED Life 1995 168,847 $61,547 19,200 4,700 10,500
Wendell P. Crosser................ 1997 126,882 -0- -0- 7,500(4) 8,928
Vice President and 1996 119,709 -0- 6,100 2,850 10,500
Treasurer of the Company 1995 108,961 37,364 11,120 2,850 10,500
and ALLIED Life
Donald J. Iverson................. 1997 107,885 -0- -0- 6,000(4) 6,470
Vice President of the Company 1996 104,124 -0- -0- 16,100 7,578
and Vice President and 1995 95,446 22,269 -0- 875 6,114
Chief Actuary of ALLIED Life
Joseph P. Ross(6)................. 1997 100,516 4,000 -0- 5,000(4) 7,451
Vice President, Marketing 1996 45,297 35,181 -0- -0- -0-
of ALLIED Life 1995 -0- -0- -0- -0- -0-
</TABLE>
- -------------------------
(1) Includes 401(k) deferred compensation pursuant to the ALLIED Life Savings
and Investment Plan.
(2) Amounts shown were earned in the year indicated but paid in the following
year. Payments were made pursuant to the ALLIED Life Financial Corporation
Short Term Management Incentive Compensation Plan, the Management Employee
Incentive Plan, Vice President Sales Plan, and/or Regional Vice President
Plan.
(3) Awards of restricted stock were made to satisfy obligations under the
Long-term Management Incentive Compensation Plan (also known as the
Performance Unit Plan) which was discontinued in 1994. For the three-year
performance period ending in 1995 and 1996, shares of restricted stock were
awarded to satisfy prorated cash awards to which the participants were
entitled. The restricted stock vests 25% per year beginning the second year
after the award. Dividends are paid on the restricted stock awarded to
participants. The number and value of the aggregate restricted stock
holdings as of December 31, 1997 are as follows (using a market value of
$21.875 per share): Mr. Wells, 1,533 shares valued at $33,534; Mr. Crosser,
897 shares valued at $19,622. Mr. Iverson and Mr. Ross became employees of
ALLIED Life subsequent to the eligibility period and therefore did not
receive any restricted stock awards.
(4) See "Option/SAR Grants in Last Fiscal Year" for a description of the terms
and conditions of the option grants.
(5) Amounts are deferred compensation and reflect contributions made by the
Company under the Employee Stock Ownership Plan ("ESOP"), which is a defined
contribution retirement plan covering all eligible Company employees. The
amount of employer contribution is based on a percentage of annual pay
(capped at $160,000) and calculated as follows: less than 6 years of
service, 6% of pay; 6 years but less than 11 years, 7% of pay; 11 years but
less than 21 years, 8% of pay; and for 21 years or more, 9% of pay.
(6) Mr. Ross became an employee of ALLIED Life on June 10, 1996.
B-12
<PAGE> 40
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table summarizes certain information regarding options and
SARs granted during 1997 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ---------------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Wells...... 9,000 options(1) 24% $18.00 3/21/2007 $101,881 $258,186
Wendell P. Crosser... 7,500 options(1) 20% $18.00 3/21/2007 $ 84,901 $215,155
Donald J. Iverson.... 6,000 options(1) 16% $18.00 3/21/2007 $ 67,921 $172,124
Joseph P. Ross....... 5,000 options(2) 13% $23.125 10/21/2007 $ 72,716 $184,276
</TABLE>
- -------------------------
(1) These options will vest and become exercisable as follows: 33 1/3% as of
3-21-2000; 66 2/3% as of 3-21-2001; and 100% as of 3-21-2002.
(2) These options will vest and become exercisable as follows: 33 1/3% as of
10-21-2000; 66 2/3% as of 10-21-2001; and 100% as of 10-21-2002.
(3) These amounts represent assumed rates of stock price appreciation of 5% and
10% which are specified in applicable federal securities regulations. The
actual value, if any, an executive may realize depends on the market value
of the Common Stock at a future date. There is no assurance that the value
realized by an executive officer will be at or near the value set forth in
the table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table summarizes certain information regarding options
exercised during 1997 and presents the value of unexercised options and SARs
held at December 31, 1997. The SARs entitle the participant to receive payment
from the Company solely in cash.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END AT FY-END(1)
---------------------- -------------------------
SHARES ACQUIRED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE VALUE REALIZED(1) UNEXERCISABLE (U) UNEXERCISABLE (U)
---- --------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Samuel J. Wells...... 20,766 $139,170/$3,369 SARs 17,766(E)/37,343(U) $175,439(E)/$274,812(U)
Wendell P. Crosser... 1,250 $ 8,805/$1,132 SARs 17,766(E)/22,798(U) $175,493(E)/$155,900(U)
Donald J. Iverson.... -0- -0- 1,689(E)/21,286(U) $ 7,504(E)/$ 89,203(U)
Joseph P. Ross....... -0- -0- -0-(E)/ 5,000(U) -0-(E)/ -0-(U)
</TABLE>
- -------------------------
(1) Values are calculated by determining the difference between the fair market
value of the Common Stock and the exercise price of the options and SARs on
the exercise date or at fiscal year end, as appropriate. The fair market
value (average of the high and low as reported on NASDAQ) as of December 31,
1997 was $21.875 per share.
B-13
<PAGE> 41
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity securities file reports of ownership
and changes in ownership with the SEC. Officers, directors, and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based on a review of the reports, during
the fiscal year ended December 31, 1997, all Section 16(a) filing requirements
applicable to its officers, directors, and greater than 10% beneficial owners
were complied with.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
JOINT MARKETING AGREEMENT
ALLIED Life is a party to the ALLIED Group Joint Marketing Agreement
("JMA") with ALLIED Mutual and the property-casualty subsidiaries of ALLIED
Group. The JMA requires ALLIED Mutual and the ALLIED Group property-casualty
subsidiaries to promote to their customers and agents the sale of the products
of ALLIED Life. The JMA provides for payment by ALLIED Life to AMCO Insurance
Company (as pool administrator for the property-casualty affiliates) 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 ALLIED Life produced by the independent
property-casualty agencies representing the property-casualty affiliates of
ALLIED Group and ALLIED Mutual ("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. 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. For the year ended December 31, 1997, the fees and expenses incurred by
ALLIED Life under the JMA totaled $100,000.
The JMA continues to the year 2008 and continues thereafter subject to
termination on two years notice given by any party. The JMA contains non-compete
provisions structured along product lines which are applicable during the term
of the JMA and for a period of ten years thereafter. Such non-compete provisions
prevent ALLIED Mutual and the property-casualty companies of ALLIED Group from
selling life insurance or annuities in the states where ALLIED Life now sells
these life products (or on termination of the JMA, any states where the life
insurance and annuity products are sold by ALLIED Life). ALLIED Mutual and the
property-casualty companies, which are not licensed to sell life insurance or
annuity products, do not operate in all the states in which ALLIED Life
operates. The JMA non-compete also prevents ALLIED Life from offering
property-casualty products in states in which ALLIED Mutual and the
property-casualty companies of ALLIED Group now operate.
In the event of a change of control of the Company or ALLIED Life (whenever
ownership of 50% or more of the voting stock is acquired by an unaffiliated
party), ALLIED Mutual or the ALLIED Group 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 the Company or ALLIED Life
in the event of a change in control of ALLIED Group or any of its
property-casualty subsidiaries. Disputes are to be resolved by a Coordinating
Committee made up of the two members of each of the coordinating committees of
the Company, ALLIED Group and ALLIED Mutual. 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
arbitration, one arbitrator will be appointed jointly by ALLIED Mutual and the
property-casualty insurance affiliates and a second arbitrator will be appointed
by the Company. Both arbitrators so selected will jointly select a third
arbitrator.
B-14
<PAGE> 42
INTERCOMPANY OPERATING AGREEMENT
The Company and its subsidiaries are parties to the Intercompany Operating
Agreement ("IOA") with ALLIED Group, ALLIED Mutual, and each of their respective
subsidiaries. The IOA provides for the sharing of office space, marketing
services, 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.
In the event of a change of control (whenever ownership of 50% or more of the
voting stock of the Company or ALLIED Group is acquired by a nonaffiliated
party) of the Company or ALLIED Group, the other party or ALLIED Mutual may (i)
terminate it upon six months notice; (ii) extend the term for up to ten
additional years beyond 2004; or (iii) allow the IOA to continue in effect
without change. The IOA contains a covenant not to compete that binds each of
the Company, ALLIED Group and 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 or occupancy of facilities or the terms on which property is
leased or used 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 arbitration. In such arbitration, each party to the dispute selects
one arbitrator, and if such dispute involves only two parties, such arbitrators
select a third arbitrator.
Rental expense for office space allocated to the Company by ALLIED Mutual
amounted to $225,984 for the year ended December 31, 1997. ALLIED Life receives
certain services from the human resources department of ALLIED Group, which
include but are not limited to maintaining employment documents, administering
payroll and employee benefits, keeping related records, placing employees and
providing termination counseling and processing. For such services, ALLIED Life
pays a fee to ALLIED Group based upon a percentage of the Company's gross
payroll. Also included in this fee is an amount that represents ALLIED Life's
share of the net periodic post-retirement benefit cost for the ALLIED Group
medical plan. The fee incurred by ALLIED Life totaled $161,842 for the year
ended December 31, 1997.
MANAGEMENT INFORMATION SERVICES AGREEMENT
The Company, ALLIED Life, and other affiliated companies are parties to a
Management Information Services Agreement ("MIS") with AMCO Insurance Company
("AMCO"), which is a wholly-owned subsidiary of ALLIED Group. Under the terms of
the MIS, AMCO provides certain computer services, printing, equipment leasing,
and mail and communication services to ALLIED Life on a fee basis. The annual
fee is subject to renegotiation throughout the term of the MIS. The MIS
terminates on December 31, 2004 and has an extension provision and a change of
control provision similar to that in the IOA described above. Any disputes under
the MIS 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 arbitration. In such arbitration, each party to the dispute selects
a party arbitrator (and if such dispute involves only two parties, such
arbitrators select a third arbitrator), provided that if there are more than
three parties to a dispute, each of ALLIED Mutual, ALLIED Group and the Company
appoints an arbitrator. For the year ended December 31, 1997, the fees incurred
by the Company, ALLIED Life, and their subsidiaries under the MIS totaled
$644,867.
OTHER ARRANGEMENTS AND TRANSACTIONS
The Company and ALLIED Mutual are parties to a Stock Rights Agreement,
which is described in note 1 to the table in "Voting Securities and Principal
Stockholders." The Company and John E. Evans, Chairman and a Director, are
parties to a Consulting Agreement which is described under "Compensation of the
Members of the Board of Directors and the Director Purchase Plan."
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. The Company and
its affiliates pay to AID
B-15
<PAGE> 43
Finance Services, Inc. a management fee (5 basis points of invested assets)
which is offset against investment income. At December 31, 1997, $3,468,759 was
invested in the fund, which is carried as a short-term investment. Interest
earned from the fund during 1997 was $77,594.
ALLIED Life earned premiums from ALLIED Group for term life insurance on
its employee group in the amount of $468,222 in 1997.
The Company and its subsidiaries have from time to time borrowed funds from
affiliates as needed on an arms length basis. The Company has entered into
various note payable agreements with ALLIED Mutual. At December 31, 1997, the
outstanding balance of the notes payable was $3,567,722. In 1997, the Company
incurred interest expense of $241,420 from affiliates.
On January 2, 1997, State Street Bank and Trust Company, as ESOP Trustee,
purchased 19,143 shares of ESOP Preferred from the Company for $17.50 per share.
During 1997, directors and executive officers of the Company purchased life
insurance or annuities from the Company's subsidiaries on terms comparable to
those offered in the normal course of business to nonaffiliated customers.
B-16
<PAGE> 44
ANNEX C
ITEM 3(B)
Amendment to Employee Stock Ownership Plan
On June 2, 1998, the Board of Directors of the Company, acting upon the
recommendation of the Compensation Committee of the Board (the "Compensation
Committee"), amended the Company's 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). The amendment also provides that in the event of a Change in
Control, the Company will make an Employer Contribution (as defined in the ESOP)
to the ESOP in the form of cash equal to the value of the Minimum Required
Allocation Amount (as defined in the ESOP) for the then current Plan Year (as
defined in the ESOP) to be allocated as of the date of such Change in Control to
all participants who are eligible Participants (within the meaning of the ESOP)
as of such date. The amendment to the ESOP is filed as an Exhibit hereto and is
incorporated by reference herein.
For purposes of the foregoing, a "Change in Control" is deemed to have
occurred upon the first to occur of the following:
(i) Any person or entity, other than the Company, a subsidiary of the
Company, or any employee benefit plan of the Company or its subsidiaries,
becomes the direct or indirect beneficial owner of the Company's securities
having 20 percent or more of the combined voting power of the then
outstanding securities of the Company (other than as a result of an
issuance of securities initiated by the Company in the ordinary course of
business and other than ALLIED Mutual so long as no change in control of
ALLIED Mutual within the meaning of Iowa Code Section 521A has occurred);
or
(ii) As the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, less
than 80% of the combined voting power of the then outstanding securities of
the Company or any successor corporation or entity entitled to vote
generally in the election of directors of the Company or such other
corporation or entity after such transaction, are held in the aggregate by
holders of the Company's securities entitled to vote generally in the
election of directors of the Company immediately prior to such
transactions; or
(iii) 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.
Stock Option Plans
On May 30, 1998, the Compensation Committee, seeking to provide parallel
treatment of employee stock options upon a change in control, determined that it
would interpret the Company's Executive Stock Option Plan (the "Option Plan") in
the same manner as the Company's Long-Term Management Incentive Plan with
respect to a change in control. On June 2, 1998, the Board of Directors approved
and ratified the action of the Compensation Committee.
Stock Option Grants
On March 10, 1998 Messrs. Wells, Crosser, Iverson and Whitsell received
options to purchases Shares as follows: Mr. Wells, 10,000 Shares; Mr. Crosser,
8,000 Shares; Mr. Iverson, 6,000 Shares; and Mr. Whitsell, 4,000 Shares. Each
such option has an exercise price of $21.8203 per Share and will become
exercisable in three equal annual increments commencing with the third
anniversary of the date of grant.
<PAGE> 45
Severance Pay Plan
On May 30, 1998, the Compensation Committee, following publication of the
ALLIED Group tender 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. On
June 2, 1998, the Board of Directors approved and ratified the actions of the
Compensation Committee. The following is a summary of the Company's Severance
Pay Plan (the "Severance Pay Plan"). This summary is qualified in its entirety
by reference to the full text of the Severance Pay Plan, a copy of which is
filed as an Exhibit hereto and is incorporated herein by reference.
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 year, or portion thereof, of employment, subject to adjustment
as set forth in the Severance Pay Plan, and continuation of health benefits for
approximately the same period as is used to calculate the lump sum payment.
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 as the consistent failure to function as
required by Company standards. In the event an employee's employment terminates
for any reason and the plan 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, whose
employment has been adversely affected, or who resign with the Company's
approval following a change in control. The enhanced benefits consist of an
additional lump sum payment equal to employee's base salary for a period equal
to the greater of three 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.
Severance Agreements
In connection with the adoption of the Severance Pay Plan the Compensation
Committee also approved the entry by the Company into separate severance
agreements (the "Severance Agreements") with executive officers and certain
other employees of the Company.
Each Severance Agreement, the form of which is filed as an Exhibit hereto
and is incorporated herein by reference, generally provides that in the event of
any involuntary termination 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, 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 twelve 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 preceding two years and benefit continuation for
twelve months following the termination of employment (or until the employee
becomes eligible for benefits under 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 amount of the
severance otherwise payable will generally be reduced to avoid the imposition of
such excise tax.
C-2
<PAGE> 46
The Company entered into Severance Agreements that provide for a severance
payment equal to two times the employee's base salary and higher bonus over the
preceding two years with each of Messrs. Samuel J. Wells and Wendell P. Crosser.
The Company has entered into Severance Agreements that provide for a
severance payment equal to the employee's base salary and higher bonus over the
preceding two years with each of Messrs. Donald J. Iverson, E. Robert Bejcek and
William D. Whitsell. The Company has also entered into such agreements to with
two other employees, who are not executive officers.
Amendment to Short Term Management Incentive Plan
On June 2, 1998, the Company's Short Term Management Incentive Plan was
amended to provide that in the event of a change of ownership or control, the
bonus to be paid to participants for the year in which such change in ownership
or control occurred shall be the Goal Level Bonus (as provided in the Short Term
Management Incentive Plan) regardless of the actual level of growth or earnings
per share.
Retention Bonus Plan
On June 2, 1998 the Board approved the Company's Retention Bonus Plan
pursuant to which each employee of the Company (excluding any officer of the
Company or ALLIED Life) who remains in the Company's employ through November 30,
1998 will receive a bonus in an amount equal to such employee's bi-weekly base
salary, to be paid as soon as practicable after November 30, 1998, but not later
than December 15, 1998.
C-3
<PAGE> 1
EXHIBIT 1
CONFIDENTIALITY AGREEMENT
This Agreement is entered by and among Allied Life Financial Corporation
("Allied Life"), Nationwide Mutual Insurance Company and Nationwide Group
Acquisition Corporation (collectively, "Nationwide"), as of May 28, 1998.
RECITALS
WHEREAS, on May 19, 1998, Nationwide made a tender offer for all of the
Common Stock of Allied Group at $47 per share;
WHEREAS, on May 18, 1998, Nationwide filed a lawsuit against Allied Group,
Inc., ("Allied Group") Allied Mutual Insurance Company and their directors, in
the United States District Court for the Southern District of Iowa, under Case
No. 4-98-CV-10280 (the "Litigation");
WHEREAS, the parties to this Agreement, their agents and representatives
plan to meet on one or more occasions on or before June 2, 1998, (the "Meeting")
to discuss resolving the Litigation and the terms upon which a possible
transaction between the parties can take place on a consensual basis and in
order to do so they have entered into this Agreement to facilitate those
discussions;
WITNESSETH
NOW, THEREFORE, it is hereby agreed as follows:
1. Subject to the parties' rights to enforce this Agreement, nothing said
or written by anyone at the Meeting shall be discoverable or admissible in the
Litigation or in any court, administrative or arbitration proceeding to which
the parties hereto are parties.
<PAGE> 2
2. Subject to any legal obligations they may have, including those under
federal and state securities laws, the parties hereto will forever keep
confidential and not disclose to any third party the existence of the Meeting
(unless and until the existence of the Meeting has previously been disclosed
pursuant to applicable legal requirements), any offer, terms of any offer,
rejections of any offer, or discussions regarding the economics or the structure
of any proposed transaction discussed at the Meeting, except that the parties
hereto may disclose such information to their directors, officers, employees,
agents, representatives, attorneys, accountants, and financial advisors who need
to know such information for the purpose of evaluating a transaction between
Nationwide and Allied Life, so long as each recipient of this information, (a)
is informed by the party disclosing it of the confidential nature of such
information and (b) expressly agrees to treat such information confidentially in
accordance with this Agreement.
3. If any of the parties hereto becomes (or it is reasonably likely that
any of the parties hereto shall become) legally compelled to disclose any
information that is required to be kept confidential under this Agreement,
prompt notice of such fact shall be given to the other parties, so that any
appropriate legal action may be taken to protect the confidentiality of such
information.
4. Without prejudice to any other rights or remedies that any party
hereto may have under this Agreement, each party acknowledges and agrees that
damages would not be an adequate remedy for any breach of this Agreement and any
party hereto shall be entitled to
<PAGE> 3
the remedies of injunction, specific performance and other equitable relief
for any threatened or actual breach of this Agreement.
5. If any provision of this Agreement shall be held to be
unenforceable, it shall not affect the enforceability of the remainder
of this Agreement.
6. This Agreement constitutes the entire agreement between the
parties hereto regarding the subject matter hereof. This Agreement may be
changed only by a written agreement signed by the parties hereto.
7. This Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to the conflicts
of law principles thereof.
ALLIED LIFE FINANCIAL CORPORATION
Date: 5-28-98 By: /s/ Samuel J. Wells
---------------------------
Its: President
NATIONWIDE MUTUAL INSURANCE COMPANY
Date: 5-28-98 By: /s/ Mark B. Koogler
--------------------------
Its: Vice President
Associate General Counsel
NATIONWIDE GROUP ACQUISITION
CORPORATION
Date: 5-28-98 By: /s/ Mark B. Koogler
---------------------------
Its: Vice President
Associate General Counsel
3
<PAGE> 1
EXHIBIT 3
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of June 3, 1998, between
Nationwide Mutual Insurance Company, an Ohio mutual insurance company
("Nationwide"), and Allied Mutual Insurance Company, an Iowa mutual insurance
company (the "Securityholder").
WHEREAS, Nationwide, Nationwide Life Acquisition Corporation,
an Ohio corporation and wholly-owned subsidiary of Nationwide ("Sub"), and
Allied Life Financial Corporation, an Iowa corporation (the "Company"), propose
to enter into an Agreement and Plan of Merger, dated the date hereof (as the
same may be amended or supplemented, the "Merger Agreement"), which provides for
a cash tender offer by Sub (as such tender offer may hereafter be amended from
time to time, the "Offer") to purchase all shares of common stock, no par value,
of the Company (the "Common Shares") and, following the consummation of the
Offer, the merger of Sub with the Company (the "Merger");
WHEREAS, the Securityholder is the record and beneficial owner
of the number of (i) Common Shares, and (ii) shares of 6.75% Series Preferred
Stock, no par value, of the Company and (collectively, the "Preferred Shares")
set forth on Schedule A hereto; such securities, as they may be adjusted by
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company, together with securities that may be acquired after the date
hereof by the Securityholder, including Common Shares issuable upon the exercise
of options to purchase Common Shares (as the same may be adjusted as aforesaid),
being collectively referred to herein as the "Securities"; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Nationwide has requested that the Securityholder enter into
this Agreement (capitalized terms not otherwise defined herein shall have the
meanings set forth in the Merger Agreement);
NOW, THEREFORE, to induce Nationwide to enter into, and in
consideration of it entering into, the Merger Agreement, and in consideration of
the premises and the representations, warranties and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
<PAGE> 2
1. Covenants of the Securityholder. The Securityholder agrees
as follows:
(a) The Securityholder shall not, except as contemplated by
the terms of this Agreement, (i) sell, transfer, pledge, assign or otherwise
dispose of, or enter into any Contract (as defined below), option or other
arrangement (including any profit sharing arrangement) or understanding with
respect to the sale, transfer, pledge, assignment or other disposition of, the
Securities to any person, or (ii) enter into any voting arrangement, whether by
proxy, voting agreement, voting trust, power-of-attorney or otherwise, with
respect to the Securities.
(b) The Securityholder shall not, nor shall the Securityholder
permit any investment banker, financial adviser, attorney, accountant or other
representative or agent of the Securityholder to, directly or indirectly (i)
solicit, initiate or knowingly encourage (including by way of furnishing
information), or knowingly facilitate any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal.
(c) At any meeting of shareholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment thereof or
in any other circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger and the Merger
Agreement is sought, the Securityholder shall, including by initiating a written
consent solicitation if requested by Nationwide, vote (or cause to be voted)
such Securityholder's Securities in favor of the Merger, the adoption of the
Merger Agreement and the approval of the other transactions contemplated by the
Merger Agreement. At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Securityholder's vote, consent or other approval is sought, the Securityholder
shall vote (or cause to be voted) the Securityholder's Securities against (i)
any merger (other than the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company or any other Acquisition Proposal
(collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Certificate of Incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify, the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement including any consent to the treatment of
any Securities in or in connection with such transaction (collectively,
"Frustrating Transactions").
2
<PAGE> 3
2. Grant of Irrevocable Proxy Coupled with an Interest;
Appointment of Proxy.
(a) Subject to governmental approvals, the Securityholder
hereby irrevocably grants to, and appoints, any individual who shall be
designated by Nationwide as the Securityholder's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Securityholder, to vote the Securityholder's Securities, or grant a consent or
approval in respect of such Securities, at any meeting of shareholders of the
Company or at any adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, (i) in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement, and (ii) against any
Alternative Transaction or Frustrating Transaction.
(b) The Securityholder represents that any proxies heretofore
given in respect of the Securityholder's Securities are not irrevocable, and
that any such proxies are hereby revoked.
(c) THE SECURITYHOLDER HEREBY AFFIRMS THAT THE PROXY SET FORTH
IN THIS SECTION 2 IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE UNTIL SUCH TIME
AS THIS AGREEMENT TERMINATES IN ACCORDANCE WITH ITS TERMS. The Securityholder
hereby further affirms that the irrevocable proxy is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Securityholder under this
Agreement. The Securityholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
3. Acquisition Proposals.
Notwithstanding anything to the contrary contained in this
Agreement, during any period of time that the Securityholder is not prohibited
by the Agreement and Plan of Merger, dated as of the date hereof, by and between
Securityholder and Nationwide (the "Allied Mutual Merger Agreement") from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending an Acquisition Proposal
to the policyholders of the Securityholder, the Securityholder's obligations
under Sections 1 and 2 of this Agreement shall be
3
<PAGE> 4
deemed inoperative. For purposes of this Section 3, "Acquisition Proposal" shall
have the meaning ascribed thereto in the Allied Mutual Merger Agreement.
4. Representations and Warranties of the Securityholder. The
Securityholder hereby represents and warrants to Nationwide as follows:
(a) Authority. The Securityholder has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Securityholder. This Agreement has been duly
executed and delivered by the Securityholder and, assuming this Agreement
constitutes a valid and binding obligation of Nationwide, constitutes a valid
and binding obligation of the Securityholder enforceable against the
Securityholder in accordance with its terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except for the informational filings with
the Securities and Exchange Commission and except for any state insurance
department approvals or filings, neither the execution, delivery or performance
of this Agreement by the Securityholder nor the consummation by the
Securityholder of the transactions contemplated hereby will (i) require any
filing with, or permit, authorization, consent or approval (collectively,
"Governmental Approvals") of, any federal, state, local or municipal foreign or
other government or subdivision, branch, department or agency thereof or any
governmental or quasi-governmental authority of any nature, including any court
or other tribunal, (a "Governmental Entity"), except where the failure to obtain
any such Governmental Approvals would not be reasonably likely to adversely
affect the transactions contemplated hereby, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, or give rise to any right of termination, amendment, cancellation
or acceleration under, or result in the creation of any lien upon any of the
properties or assets of the Securityholder under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license, permit,
concession, franchise, contract, agreement or other instrument or obligation (a
"Contract") to which the Securityholder is a party or by which the
Securityholder or any of the Securityholder's properties or assets,
including the Securityholder's Securities, may be bound, except for such
violations, breaches, defaults, rights of termination, amendment, cancellation
and acceleration and liens which would not be reasonably likely to adversely
affect the transactions contemplated hereby or (iii) violate any
4
<PAGE> 5
judgment, order, writ, preliminary or permanent injunction or decree (an
"Order") or any statute, law, ordinance, rule or regulation of any Governmental
Entity (a "Law") applicable to the Securityholder or any of the Securityholder's
properties or assets, including the Securityholder's Securities, except for such
violations which would not be reasonably likely to adversely affect the
transactions contemplated hereby.
(b) The Securities. The Securityholder's Securities and the
certificates representing such Securities are now, and at all times during the
term hereof will be, held by such Securityholder, or by a nominee or custodian
for the benefit of such Securityholder, and the Securityholder has good and
marketable title to such Securities, free and-clear of any liens, proxies,
voting trusts or agreements, understandings or arrangements, except for any such
liens or proxies arising hereunder and the agreements made hereby. The
Securityholder owns of record or beneficially no securities of the Company, or
any options, warrants or rights exercisable for securities of the Company, other
than such Securityholder's Securities, as set forth on Schedule A hereto.
(c) Brokers. Except as provided in the Allied Mutual Merger
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commis sion in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Securityholder.
(d) Merger Agreement. The Securityholder understands and
acknowledges that Nationwide is entering into the Merger Agreement in reliance
upon the Securityholder's execution and delivery of this Agreement.
5. Representations and Warranties of Nationwide. Nationwide
hereby represents and warrants to the Securityholder as follows:
(a) Authority. Nationwide has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Nationwide and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Nationwide. This Agreement has been duly executed and delivered
by Nationwide and, assuming this Agreement constitutes a valid and binding
obligation of the Securityholder, constitutes a valid and binding obligation of
Nationwide enforceable in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in
5
<PAGE> 6
effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) Securities Act. The Securities will be acquired in
compliance with, and Nationwide will not offer to sell or otherwise dispose of
any Securities so acquired by it in violation of any of, the Securities Exchange
Act of 1934, as amended, or the registration requirements of the Securities Act
of 1933, as amended.
6. Further Assurances. Except as otherwise provided in Section
3, the Securityholder will, from time to time, execute and deliver, or cause to
be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Nationwide may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to vest the power to vote the
Securityholder's Securities as contemplated by Section 2. Nationwide agrees to
use its best efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed with respect to
the transactions contemplated by this Agreement.
7. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate on the earlier of (x) the termination
of the Merger Agreement (except pursuant to Section 8.1(d) of the Merger
Agreement in which case this Agreement shall continue in effect) of in
accordance with its terms and (y) the termination of the Allied Mutual Merger
Agreement. Nothing in this Section 7 shall relieve any party from liability for
willful breach of this Agreement.
8. General Provisions.
(a) Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns.
(b) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(c) Notice. All notices, consents, requests, approvals,
authorizations and other communications (collectively, "Notices") required or
6
<PAGE> 7
permitted to be given hereunder by one party to another shall only be effective
if in writing. All Notices shall be sent (i) by registered or certified mail
(with return receipt requested), postage prepaid, or (ii) by Federal Express,
U.S. Post Office Express Mail, Airborne or similar overnight courier which
delivers, if requested, only upon signed receipt of the addressee (with such
signed receipt being requested), or (iii) by facsimile transmission, and
addressed or transmitted as follows or at such other address or facsimile
number, and to the attention of such other person, as the parties shall give
notice as herein provided:
If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President -- Enterprise
Controller
Facsimile: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler, Vice President and Associate
General Counsel
Roger A. Craig, Counsel
Facsimile: (614) 249-7254
and
if to the Securityholder, to:
Allied Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50391-2000
Attention: John E. Evans, Chairman of the Board
Douglas L. Andersen, President and
Chief Executive Officer
Facsimile No.: 515-280-4399
7
<PAGE> 8
with copies to:
Nyemaster, Goode, Voigts, West, Hansell & O'Brien
A Professional Corporation
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309-3899
Attention: Mark C. Dickinson, Esq.
Facsimile No.: 515-283-3108
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Jeffrey W. Tindell, Esq.
Facsimile No.: 212-451-7321
A Notice shall be effective upon receipt and shall be deemed to be received, if
sent by registered or certified mail, U.S. Post Office Express Mail, Federal
Express, Airborne or similar overnight courier, on the date of receipt by the
recipient as shown on the return receipt card, or if sent by facsimile, upon
receipt by the sender of an acknowledgment or transmission report generated by
the machine from which the facsimile was sent indicating that the facsimile was
sent in its entirety to the recipient's facsimile number; provided that if a
Notice is received by facsimile on a day which is not a Business Day, or after
5:00 p.m. on any Business Day at the addressee's location, such Notice shall be
deemed to be received by the recipient at 9:00 a.m. on the first Business Day
thereafter. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no Notice was given shall be deemed to be
receipt of the Notice as of the date of such rejection, refusal or inability to
deliver.
(d) Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement. The plural of
any defined term shall have a
8
<PAGE> 9
meaning correlative to such defined term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning. A reference to any party
to this Agreement or any other agreement or document shall include such party's
successors and permitted assigns. A reference to any legislation or to any
provision of any legislation shall include any modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto. For purposes of
this Agreement, "Person" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, trust, joint venture, labor union, estate, unincorporated organization
or other entity.
(e) Counterparts. This Agreement shall be executed in
duplicate and may be executed in counterparts each of which shall be deemed to
constitute an original and constitute one and the same instrument. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier
shall be as effective as delivery of a manually executed counterpart of this
Agreement. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
(f) Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(g) No Third-Party Beneficiaries. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
(h) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Iowa without regard to any
conflicts or choice of law provisions thereof or of any other jurisdiction.
(i) Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this
9
<PAGE> 10
Agreement in a court of the United States. This being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
10
<PAGE> 11
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: /s/ Mark B. Koogler
----------------------------------------
Name: Mark B. Koogler
Title: Vice President and Associate General
Counsel
ALLIED MUTUAL INSURANCE
COMPANY
By: /s/ George T. Oleson
----------------------------------------
Name: George T. Oleson
Title: Vice President and Corporate Counsel
11
<PAGE> 12
SCHEDULE A
<TABLE>
<CAPTION>
Common Preferred
------- ---------
Name and Address Shares Shares Warrants Options
---------------- ------ ------ -------- ---------
<S> <C> <C> <C> <C>
Allied Mutual Insurance Company 1,521,006 2,292,093 - -
</TABLE>
12
<PAGE> 1
EXHIBIT 20
AMENDMENT TO ALLIED LIFE FINANCIAL CORPORATION EMPLOYEE STOCK
OWNERSHIP PLAN
June 2, 1998
WHEREAS, Nationwide Mutual Insurance Company ("Nationwide")
announced a tender offer to purchase all outstanding shares of the ALLIED
Group, Inc. Common Stock, with the expectation that ALLIED Life Financial
Corporation (the "Company") will ultimately be merged with Nationwide in a
Change in Control;
WHEREAS, the Company believes that current employees should be
rewarded for their continued and long service to the Company;
WHEREAS, the Company recognizes the need to retain current
employees until the Nationwide tender offer is resolved;
BE IT RESOLVED, that the ALLIED Life Financial Corporation
Employee Stock Ownership Plan shall be amended as set forth in the attached
Second Amendment to the Plan.
<PAGE> 2
Second Amendment to
The ALLIED Life Financial Corporation Employee Stock Ownership
Plan ("Plan")
By virtue and in exercise of the amending power reserved to ALLIED Life
Financial Corporation (the "Company") pursuant to subsection 12.1 of the Plan,
and pursuant to resolutions to amend adopted June 2, 1998, the Plan is hereby
amended as set forth below, effective as of June 2, 1998.
1. Section 1 shall be amended by inserting a new subsection 1.15 and
amending the old subsection 1.15 to be subsection 1.16:
1.15 Change in Control
A "Change in Control" shall be deemed to have occurred upon the first
to occur of the following:
(i) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Act"), other than the Company, a subsidiary of the
Company, or any employee benefit plan of the Company or its
subsidiaries, becomes the direct or indirect beneficial owner of
the Company's securities having 20 percent or more of the combined
voting power of the Company (other than as a result of an issuance
of securities initiated by the Company in the ordinary course of
business and other than ALLIED Mutual Insurance Company so long as
no change in control of ALLIED Mutual within the meaning of Iowa
Code Section 521A has occurred); or
- 1 -
<PAGE> 3
(ii) As the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination
of the foregoing transactions, less than 80% of the
combined voting power of the then outstanding securities
of the Company or any successor corporation or entity
entitled to vote generally in the election of directors
of the Company or such other corporation or entity after
such transaction, are held in the aggregate by holders of
the Company's securities entitled to vote generally in
the election of directors of the Company immediately
prior to such transactions; or
(iii) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the
Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the
election or the nomination for election by the Company's
stockholders, of each director of the Company first
elected during such period was (a) approved by a vote of
at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of any such period or (b) was made pursuant to
the Stock Rights Agreement between the Company and ALLIED
Mutual.
2. Section 6 shall be amended by adding at the end
thereof a new subsection 6.11 to read as follows:
6.11 Allocation in the Event of a Change in Control.
Notwithstanding anything herein to the contrary, in the event of
a Change in Control, the Employer shall make an Employer
Contribution in the form of cash on the date of the Change in
Control which shall be allocated as of the date of the Change in
Control to all Participants who are eligible Participants as of
such date (including each employee who has satisfied the
requirements of subsection 2.1 as of the date of
-2-
<PAGE> 4
the Change in Control). The Contribution shall be equal in value to the
Minimum Required Allocation Amount for the Plan Year in which the Change in
Control occurs calculated in accordance with subsection 6.4(a), except as set
forth herein.
(a) For purposes of this subsection 6.11, Years of Service shall have the
meaning provided in subsection 3.3 and shall be determined as of the
date of the Change in Control; provided, however, that if an eligible
Participant incurs five consecutive One Year Periods of Severance, then
his number of Years of Service, if any, accrued prior to such break shall
be disregarded for purposes of this subsection.
(b) For purposes of this subsection 6.11, Compensation shall have the meaning
provided in subsection 6.6, except that the Participant's Compensation
for the Plan Year to the date of the Change in Control shall be annualized
from that date for the remainder of the Plan Year.
(c) For purposes of this subsection 6.11, the term "eligible Participant"
shall mean any Participant who is employed by an Employer during the Plan
Year in which the Change in Control occurs exclusively on a regular full
time basis, and is employed by an Employer or a Related Company on the
date of Change in Control. The term "eligible Participant" also includes
any Participant who died or retired (within meaning of paragraphs(a), (b),
(c) or (d) of the subsection 8.3) during the Plan Year in which the Change
in Control occurs. Finally, the term "eligible Participant" includes any
Participant who is not employed on a regular full time basis during the
Plan Year in which the Change in Control occurs, but who satisfies the
remaining requirements of this paragraph (c); provided that such
Participant completes a period of service during such Plan Year equal to
(A) times (B), where (A) is 1,000 Hours of Service, and (B) is a fraction,
the numerator of which is the number of days in the Plan Year to the date
of Change in Control and the denominator of which is 365.
-3-
<PAGE> 5
3. Section 8.2 shall be amended by adding at the end thereof the
following:
Finally, each Participant who is employed by an Employer or a Related
Company as of the date of a Change in Control shall be fully vested
in his Account as of such date.
4. Section 1.2 shall be amended by replacing the word "and" after
the term "8.3" with a comma and inserting after the term "6.7," the following:
"and eligible Participant under subsection 6.11,".
5. Appendix A shall be amended by inserting after the term "Board of
Directors" the following: "1.15 -- Change in Control".
- 4 -
<PAGE> 1
EXHIBIT 21
ALLIED LIFE FINANCIAL CORPORATION SEVERANCE PAY PLAN
ARTICLE I
PURPOSE OF THE PLAN
The ALLIED Life Financial Corporation Severance Pay Plan (the
"Plan") has been established by ALLIED Life Financial Corporation (the
"Company"), effective as of June 3, 1998, to provide for the payment of
severance pay and/or pay in lieu of notice under certain circumstances. This
Plan supersedes any and all previous severance practices and policies of the
Company and its subsidiaries and affiliates with respect to which the Plan is
extended.
ARTICLE II
DEFINITIONS
"ADMINISTRATOR" means the Vice President, Human Resources, of
the Company.
"AWARD" has the meaning specified in Article VI.
"BASE SALARY" means the Employee's base rate of pay in effect
on the date the Employee's employment terminates.
"BENEFICIAL OWNER" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means, with respect to the termination of an Eligible
Employee's employment with an Employer, termination (or deemed termination)
because the Eligible Employee has consistently failed to function as required by
Employer standards. In the event an Eligible 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
Eligible Employee shall be deemed to have been terminated for Cause.
"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
<PAGE> 2
the same proportions as their ownership of stock of
the Company, or (c) ALLIED Mutual Insurance Company,
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, 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 shareowners of the
Company approve a plan of the shareowners of the
Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition
by the Company of all or substantially all the
Company's assets.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to an Eligible Employee, if the Eligible Employee is
part of a purchasing group which consummates the Change-in-Control transaction.
The Eligible Employee shall be deemed "part of a purchasing group" for purposes
of the preceding sentence if the Eligible Employee is an equity participant in
the purchasing company or group (except for (i) passive ownership of less than
three percent (3%) of the stock of the purchasing company or group which is
otherwise not significant, as determined prior to the Change in Control by a
majority of the nonemployee continuing Directors).
"DIRECTOR" means a member of the Board.
"EFFECTIVE DATE" means June 3, 1998.
"ELIGIBLE EMPLOYEE" means an Employee who has been employed by
an Employer for at least six months and designated as eligible for benefits
hereunder by the Administrator. Part-time employees generally will not receive
benefits under the Plan.
2
<PAGE> 3
"ELIGIBLE TERMINATION OF EMPLOYMENT" means the involuntary
termination or resignation with the approval of an Employer of an Eligible
Employee's employment. Notwithstanding the foregoing, an Eligible Employee shall
not be deemed to have incurred an Eligible Termination of Employment if the
Eligible Employee's termination results from his (a) death, (b) termination for
Cause, or (c) transfer of employment to an affiliate or successor of an
Employer.
"EMPLOYEE" means any individual who is regularly employed by
an Employer, but not including a consultant, an independent contractor or any
member of the Board of Directors of an Employer who is not otherwise an Employee
of an Employer.
"EMPLOYER" means the Company and each of its subsidiaries.
"PLAN" means this ALLIED Life Financial Corporation Severance
Pay Plan.
"PLAN YEAR " means for the first plan year, June 3, 1998 to
December 31, 1998, and the calendar year for each year thereafter.
"YEAR OF SERVICE" means each year, or portion thereof, during
which an Eligible Employee worked for one or more Employers.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator, who shall
have full authority, consistent with the Plan, to administer the Plan, including
authority to interpret, construe and apply any provisions of the Plan. The
Administrator shall have the further authority to extend the coverage of the
Plan to Company subsidiaries and other affiliates. The decisions of the
Administrator shall be final and binding on all parties.
The Administrator shall be the Plan Administrator for purposes
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Administrator shall be the named fiduciary of the Plan for purposes of
ERISA.
The Administrator may delegate to any person, committee or
entity any of his or her respective duties hereunder and the decisions of any
such person with respect to such delegated matters shall be final and binding in
accordance with the first paragraph of this section. This section shall
constitute the Plan's procedures for the allocation of responsibilities for the
operation and administration of the Plan (within the meaning of Section 405(c)
of ERISA).
ARTICLE IV
SEVERANCE BENEFIT CONDITIONS
An Eligible Employee's receipt of Severance Benefits pursuant
to Article V shall be subject to the following conditions precedent:
3
<PAGE> 4
1. Such Eligible Employee must have experienced an Eligible
Termination of Employment; and
2. Such additional conditions as the Administrator shall
impose on the payment of benefits including, but not limited to,
the execution of a release, an agreement not to use or disclose
confidential information of an Employer, repayment of any debts or
obligations owed to the Company and/or the offset of any benefits
payable under another plan or program of an Employer.
If additional conditions are imposed pursuant to paragraph 2,
they shall be set forth in a writing, signed by the Administrator or his or her
delegate, and delivered to the Employee.
ARTICLE V
SEVERANCE BENEFITS
Each Eligible Employee who satisfies the benefit conditions
described in Article IV shall receive a lump sum payment in an amount equal to
one week's Base Salary for each Year of Service or such greater or lesser amount
as determined by the Administrator in his or her sole discretion (the "Severance
Benefits"). In determining the amount of any Plan benefit, the administrator can
take into account any factors he or she deems relevant including, but not
limited to, the conditions imposed pursuant to Article IV on the receipt of such
benefit, the Employee's performance and/or the circumstances of the Employee's
termination.
The amount of the benefit payment, and any additional
conditions thereto, shall be determined by the Administrator and shall be
specified in a writing signed by the Administrator or the Administrator's
delegate (an "Award"). An Employee shall not have the right to any benefits
except as specified in an Award. If an Employee is not designated in such an
Award, he or she shall not be an Eligible Employee.
Each Eligible Employee who receives an Award for Severance
Benefits described in this Article V shall also be entitled to Employer-provided
continuation of health benefits to the extent that the Eligible Employee
received such benefits while employed ("Benefit Continuation"). The Eligible
Employee shall be entitled to such Benefit Continuation for a number of months
equal to such Eligible Employee's Years of Service divided by four rounded to
the next highest whole number; for example, an Eligible Employee with less than
four Years of Service would receive one month of Benefit Continuation and an
Eligible Employee with between four and eight Years of Service would receive two
months of Benefit Continuation. Any Benefit Continuation provided hereunder
would be treated as fulfilling the Employer's COBRA requirements and in no case
would Benefit Continuation exceed the maximum time period under COBRA.
Notwithstanding the foregoing, the Eligible Employee shall not be entitled to
any Benefit Continuation as of the date comparable health and welfare benefits
are made available to such Eligible Employee by a new employer or other person
or entity that has retained such Eligible Employee to provide services.
4
<PAGE> 5
ARTICLE VI
ENHANCED BENEFITS CONDITIONS
An Eligible Employee's receipt of Enhanced Benefits pursuant
to Article VII shall be subject to the following conditions precedent:
1. During the period commencing on a Change in Control and
ending on the first anniversary of such Change in Control, such
Eligible Employee:
(i) is terminated by his or her Employer without
Cause;
(ii) terminates employment following a material
diminution in responsibilities;
(iii) terminates employment following a reduction
in base pay or bonus or other incentive
compensation opportunity;
(iv) terminates employment following a relocation
without his or her consent to an office more
than 25 miles from his or her current
location; or
(v) voluntarily terminates employment with the
consent of the Company, and
2. The execution of a general release in a form reasonably
acceptable to his or her Employer and the Company.
Such Enhanced Benefits shall be in addition to, rather than in
lieu of, any benefits to which the Eligible Employee may become entitled
pursuant to any other provisions of this Plan.
ARTICLE VII
ENHANCED BENEFITS
Enhanced Benefits shall consist of (a) an additional lump sum
equal to the Eligible Employee's Base Salary for a period commencing on the
effective date of his or her termination and ending on the later of the three
month anniversary of such termination or the first anniversary of the Change in
Control (such period, the "Enhanced Benefit Period"), (b) Benefit Continuation
for the Enhanced Benefit Period, provided that such Benefit Continuation shall
cease on the date comparable health benefits are made available to such Eligible
Employee by a new employer or other person or entity that has retained such
Eligible Employee to provide services and (c) outplacement services appropriate
to the Eligible Employee's length of service and position (as determined by the
Plan Administrator in his or her own discretion).
5
<PAGE> 6
ARTICLE VIII
AMENDMENT AND TERMINATION
The Plan may be modified or amended from time to time in any
manner by action of the Board. The Plan may be discontinued on any date by the
Board. Notwithstanding the foregoing, the Plan may not be modified, amended or
terminated for one year following a Change in Control.
ARTICLE IX
CLAIMS PROCEDURE
An Employee whose employment with an Employer is involuntarily
terminated or who resigns with the approval of an Employer and who does not
receive an Award can make a written claim. If an Employee who makes such a claim
is denied benefits for any reason, the Employee will be notified in writing
within 90 days after the claim is submitted or will receive a written notice
within that period of time stating an additional 90 days is needed to rule upon
the claim. In that case, the Employee will receive a written notice within 180
days. The notification will:
1. Indicate the reasons for the denial and cite the specific
plan provisions upon which the denial is based; and
2. Describe any additional information that may be needed for
approval of the Employee's application and explain the review
procedure.
An Employee can request a review of the denial within 90 days
after the time he or she receives the denial notice. The written request should
be sent to:
The Compensation Committee of the Board of Directors
ALLIED Life Financial Corporation
701 5th Ave.
Des Moines, IA 50391-2000
Within 60 days after receiving the written appeal, the claims
committee will notify the Employee in writing of its final decision, unless the
claims committee notifies the claimant in writing that special circumstances
require an extension (for no more than a single additional 60- day period), in
which case the claims committee will render its written decision within 120 days
after receiving the written appeal. This decision must contain specific reasons
and references to the plan provisions on which the denial is based.
6
<PAGE> 7
ARTICLE X
GENERAL PROVISIONS
A. NO ASSIGNMENT BY PARTICIPANTS. Each Eligible Employee's
rights hereunder are personal, and no Eligible Employee may assign or transfer
any part of his or her rights or duties hereunder, or any benefits due to him or
her hereunder, to any other person.
B. GOVERNING LAW. The Plan shall, in all respects, be governed
by, and construed and enforced in accordance with, the laws of the State of Iowa
without reference to the principles of conflicts of law, except to the extent
preempted by ERISA.
C. PAYROLL AND WITHHOLDING TAXES. An Employer may withhold
from any amounts payable to an Eligible Employee hereunder, or from any other
amounts payable to any Eligible Employee, all federal, state, city or other
taxes that an Employer may reasonably determine are required to be withheld in
connection with the benefits provided hereunder pursuant to my applicable law or
regulation.
D. FUNDING. The Plan shall be unfunded. Benefits under the
Plan shall be paid from the general assets of the Employer from which the
Employee terminates employment.
E. CONSTRUCTION OF THE PLAN. The titles to Articles and
Sections are for general information only and the Plan is not to be construed by
reference thereto. The masculine pronoun includes the feminine and the singular
form includes the plural wherever such usage would apply.
F. NO WAIVER. An Employee's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed a waiver of
such provision or any other provision of this Agreement. A waiver of any
provision of this Agreement shall not be deemed a waiver of any other provision,
and any waiver of any default in any such provision shall not be deemed a waiver
of any later default thereof or of any other provision.
IN WITNESS WHEREOF, the Company has caused this plan document
to be executed by its duly authorized officer, as of the 3rd day of June, 1998.
ALLIED Life Financial Corporation
By: /s/ Sam Wells
---------------------
Title: President
7
<PAGE> 1
EXHIBIT 22
KEY EMPLOYEE EMPLOYMENT PROTECTION AGREEMENT
THIS AGREEMENT between ALLIED Life Financial Corporation, an
Iowa corporation (the "Company"), and Sam Wells (the "Employee"), dated as of
this 2nd day of June, 1998.
W I T N E S S E T H:
WHEREAS, the Employee holds a position of significant
importance with the Company;
WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in ownership or
control of the Company, continuity of management will be essential to its
ability to evaluate and respond to such situation in the best interests of
shareholders;
WHEREAS, the Company understands that any such situation will
present significant concerns for the Employee with respect to his financial and
job security;
WHEREAS, the Company desires to assure itself of the
Employee's services during the period in which it is confronting such a
situation, and to provide the Employee certain financial assurances to enable
the Employee to perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to his personal
circumstances;
WHEREAS, to achieve these objectives, the Company and the
Employee desire to enter into an agreement providing the Company and the
Employee with certain rights and obligations upon the occurrence of a Change of
Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company and
the Employee as follows:
1. Operation of Agreement. (a) Effective Date. The effective
date of this Agreement shall be the date on which a Change of Control occurs
(the "Change of Control Date"), provided that, except as provided in Section
1(b), if the Employee is not employed by the Company on the Change of Control
Date, this Agreement shall be void and without effect.
<PAGE> 2
(b) Termination of Employment Following a
Potential Change of Control. Notwithstanding Section l(a), if (i) the Employee's
employment is terminated by the Company without Cause (as defined in Section 2)
after the occurrence of a Potential Change of Control and prior to the
occurrence of a Change of Control and (ii) a Change of Control occurs within one
year of such termination, the Employee shall be deemed, solely for purposes of
determining his rights under this Agreement, to have remained employed until the
date such Change of Control occurs and to have been terminated by the Company
without Cause immediately after this Agreement becomes effective.
(c) Termination of Employment following Death or
Disability. This Agreement shall terminate automatically upon
the Employee's death or termination due to Disability (as defined
in Section 2).
2. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean the
happening of any of the following:
(i) Any person or entity, including a "group"
as defined in Section 13(d)(3)of the Securities Exchange Act of 1934,
as amended (the "Act"), other than the Company, a subsidiary of the
Company, or any employee benefit plan of the Company or its
subsidiaries, becomes the direct or indirect beneficial owner of the
Company's securities having 20 percent or more of the combined voting
power of the then outstanding securities of the Company (other than as
a result of an issuance of securities initiated by the Company in the
ordinary course of business); or
(ii) As the result of, or in connection with,
any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination
of the foregoing transactions, less than 80% of the combined voting
power of the then outstanding securities of the Company or any
successor corporation or entity entitled to vote generally in the
election of directors of the Company or such other corporation or
entity after such transaction, are held in the aggregate by holders of
the Company's securities entitled to vote generally in the election of
directors of the Company immediately prior to such transactions; or
(iii) During any period of two consecutive
years, individuals who at the beginning of any such period
constitute the Board of Directors cease for any reason to constitute at
least a majority thereof, unless the election,
2
<PAGE> 3
or the nomination for election by the Company's stockholders, of each
director of the Company first elected during such period was (a)
approved by a vote of at least two-thirds of the directors of the
Company then still in office who were directors of the Company at the
beginning of any such period or was made pursuant to the Stock Rights
Agreement between the Company and ALLIED Mutual.
(b) Potential Change of Control. For the
purposes of this Agreement, a "Potential Change of Control" shall mean the
happening of any of the following:
(i) any person commences a tender offer,
which if consummated would result in such person being the beneficial
owner of at least 20% of the Company's voting securities;
(ii) proxies for the election of directors
of the Company are solicited by anyone other than the Company;
or
(iii) the execution by the Company of an
agreement, the consummation of which would result in a
Change of Control of the Company;
(iv) the acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other than the
Company, a wholly-owned subsidiary thereof or any employee benefit plan
of the Company or its subsidiaries (including any trustee of such plan
acting as such trustee)) of securities of the Company representing 10
percent or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of Directors of a
resolution to the effort that a Potential Change of Control of the
Company has occurred for purposes of this Agreement; or
(v) any person files an application with the
Commissioner of Insurance for the State of Iowa pursuant to Iowa Code
ss. 521A.3 with respect to the Company or ALLIED Life Insurance Company
or any direct or indirect controlling shareholder of the Company.
(c) Cause. For the purposes of this Agreement,
"Cause" means (i) the Employee's conviction or plea of nolo contendere to a
felony; (ii) an act or acts of dishonesty or gross misconduct on the Employee's
part which result or are intended to result in material damage to the Company's
business
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<PAGE> 4
or reputation; or (iii) repeated material violations by the Employee of his
position, authority, duties, obligations or responsibilities as in effect at the
Change of Control Date, which violations are demonstrably willful and deliberate
on the Employee's part and which result in material damage to the Company's
business or reputation.
(d) Good Reason. "Good Reason" means the
occurrence of any of the following, without the express written consent of the
Employee, after the occurrence of a Potential Change of Control or a Change of
Control:
(i) (A) the assignment to the Employee of
any duties inconsistent in any material adverse respect with the
Employee's position, authority or responsibilities as in effect at the
Change of Control Date, or (B) any other material adverse change in
Employee's authority or responsibilities;
(ii) any failure by the Company, other than
an insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof given by the Employee, to
provide the Employee with (A) an annual base salary, as it may be
increased from time to time (the "Base Salary"), which is at least
equal to the Base Salary paid to the Employee immediately prior to the
Change of Control Date, or (B) incentive compensation opportunities at
a level which is at least equal to the level of incentive compensation
opportunities made available to the Employee immediately prior to the
Change of Control Date;
(iii) the failure by the Company to permit
the Employee (and, to the extent applicable, his dependents) to
participate in or be covered under all pension, retirement, deferred
compensation, savings, medical, dental, health, disability, group life,
accidental death and travel accident insurance plans and programs of
the Company and its affiliated companies at a level that is
commensurate with the Employee's participation in such plans
immediately prior to the Change of Control Date (or, if more favorable
to the Employee, at the level made available to the Employee or other
similarly situated officers at any time thereafter);
(iv) the Company's requiring the Employee to
be based at any office or location more than 25 miles from that
location at which he performed his services for the Company immediately
prior to the Change of Control, except for travel reasonably required
in the performance of the Employee's responsibilities; or
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(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 5.
In no event shall the mere occurrence of a Change of Control, absent any further
impact on the Employee, be deemed to constitute Good Reason.
(e) Disability. For purposes of this Agreement,
"Disability" shall mean the Employee's inability to perform the duties of his
position, as determined in accordance with the policies and procedures
applicable with respect to the Company's long-term disability plan, as in effect
immediately prior to the Change of Control Date.
(f) Notice of Termination. Any termination by
the Company for Cause or by the Employee for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 6(d). For purposes of this Agreement, a "Notice of Termination" means: a
written notice given, in the case of a termination for Cause, within 10 business
days of the Company's having actual knowledge of the events giving rise to such
termination, and in the case of a termination for Good Reason, within 90 days of
the later to occur of (x) the Change of Control Date or (y) the Employees having
actual knowledge of the events giving rise to such termination, and which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date
shall be not more than 30 days after the giving of such notice). The failure by
the Employee to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of The
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
(g) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the case of a termination
for which a Notice of Termination is required, the date of receipt of such
Notice of Termination or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which the Employee's
employment terminates.
3. Employment Protection Benefits. (a) Basic
Benefits. If on or before the second anniversary of the Change
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of Control Date (x) the Company terminates the Employee's employment for any
reason other than for Cause or Disability or (y) the Employee voluntarily
terminates his employment for Good Reason, then the Company shall pay the
Employee the following amounts:
(i) the Employee's Base Salary earned
through the Date of Termination (the "Earned Salary");
(ii) a cash amount (the "Severance Amount")
equal to the product of two and the sum of
(A) the Employee's annual Base Salary; and
(B) the higher of the annual bonuses payable to
the Employee in respect of either of the two
fiscal years ended immediately preceding the
fiscal year in which the Change of Control
occurs; and
(iii) any vested amounts or benefits owing
to the Employee under the Company's otherwise applicable employee
benefit plans and programs, including any compensation previously
deferred by the Employee (together with any accrued earnings thereon)
and not yet paid by the Company and any accrued vacation pay not yet
paid by the Company (the "Accrued Obligations").
The Earned Salary and Severance Amount shall be paid in a single lump sum as
soon as practicable, but in no event more than ten business days (or at such
earlier date required by law) following the Employee's Date of Termination.
Accrued Obligations shall be paid in accordance with the terms of the applicable
plan, program or arrangement.
In addition to the other benefits provided in this
Section, on the Change of Control Date, the Employee shall, subject to the
provisions of Section 3(e)(iii), become fully vested in any and all outstanding
stock options granted to Employee for shares of common stock of the Company or
to the extent that such options are not vested, shall receive a lump-sum cash
payment equal to the spread of all non-vested, forfeited options as of the date
such options are forfeited.
(b) Continuation of Benefits. If the Employee
receives the Severance Amount described in this Section 3, the Employee (and, to
the extent applicable, his dependents) shall be entitled, after the Date of
Termination until the earlier of (x) the first anniversary of his Date of
Termination (the "End Date")
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or (y) the date the Employee becomes eligible for comparable benefits under a
similar plan, policy or program of a subsequent employer, to continue
participation in all of the Company's employee and Employee welfare and fringe
benefit plans (the "Benefit Plans") as were generally provided to the Employee
in accordance with the Company's policies and practices immediately prior to the
Change of Control Date. To the extent any such benefits cannot be provided under
the terms of the applicable plan, policy or program, the Company shall provide a
comparable benefit under another plan or from the Company's general assets. The
Employee's participation in the Benefit Plans will be on the same terms and
conditions that would have applied had the Employee continued to be employed by
the Company through the End Date.
(c) Indemnification. The Company shall
indemnify the Employee and hold the Employee harmless from and against
any claim, loss or cause of action arising from or out of the Employee's
performance as an officer, director or employee of the Company or any of its
subsidiaries or in any other capacity, including any fiduciary capacity, in
which the Employee serves at the request of the Company to the maximum extent
permitted by applicable law and the Company's Certificate of Incorporation and
By-Laws (the "Governing Documents"), provided that in no event shall the
protection afforded to the Employee hereunder be less than that afforded under
the Governing Documents as in effect immediately prior to the Change of Control
Date.
(d) Discharge of the Company's Obligations.
Except as expressly provided in Section 4, the Severance Amount and the other
amounts payable and benefits provided in respect of the Employee pursuant to
this Section 3 following termination of his employment shall be in full and
complete satisfaction of the Employee's rights under this Agreement and any
other claims he may have in respect of his employment by the Company or any of
its subsidiaries. Such amounts shall constitute liquidated damages with respect
to any and all such rights and claims and, upon the Employee's receipt of such
amounts, the Company shall be released and discharged from any and all liability
to the Employee in connection with this Agreement or otherwise in connection
with the Employee's employment with the Company and its subsidiaries. Without
limiting the generality of the foregoing, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others whether by reason of the
subsequent employment of the Employee or otherwise. Nothing in this Section
3(d),
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however, shall in any way limit the Company's obligations to the Employee
pursuant to Section 3(c) hereof.
(e) Limit on Payments by the Company.
(i) Application of Section 3(e). In the
event that any amount or benefit paid or distributed to the Employee pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to the Employee by the Company or any affiliated company
(collectively, the "Covered Payments"), would be an "excess parachute payment"
as defined in Section 280G of the Code and would thereby subject the Employee to
the tax (the "Excise Tax") imposed under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the provisions of this Section 3(e)
shall apply to determine the amounts payable to Employee pursuant to this
Agreement.
(ii) Calculation of Benefits. Immediately
following delivery of any Notice of Termination, the Company shall notify the
Employee of the aggregate present value of all termination benefits to which he
would be entitled under this Agreement and any other plan, program or
arrangement as of the projected Date of Termination, together with the projected
maximum payments, determined as of such projected Date of Termination that could
be paid without the Employee being subject to the Excise Tax.
(iii) Imposition of Payment Cap. If (x) the
aggregate value of all compensation payments or benefits to be paid or provided
to the Employee under this Agreement and any other plan, agreement or
arrangement with the Company exceeds the amount which can be paid to the
Employee without the Employee incurring an Excise Tax and (y) the Employee would
receive a greater net after-tax amount (taking into account all applicable taxes
payable by the Employee, including any Excise Tax) by applying the limitation
contained in this Section 3(e)(iii), then the amounts payable to the Employee
under this Section 3 shall be reduced (but not below zero) to the maximum amount
which may be paid hereunder without the Employee becoming subject to such an
Excise Tax (such reduced payments to be referred to as the "Payment Cap"). In
the event the Employee receives reduced payments and benefits hereunder,
Employee shall have the right to designate which of the payments and benefits
otherwise provided for in this Agreement that he or she will receive in
connection with the application of the Payment Cap. In addition, the Employee
may elect, by written notice to the Company delivered not later than the Change
of Control Date, that, in lieu of limiting the benefits payable hereunder (or,
if required to avoid an Excise Tax without regard to the payments made
hereunder), the
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"Requisite Portion" (as defined below) of the stock options held by the Employee
which are not then exercisable shall not become exercisable by reason of the
Change of Control, but rather shall become exercisable in accordance with their
original terms. The Requisite Portion shall mean the portion of all such stock
options pertaining to the least number of shares necessary to avoid the
imposition of an Excise Tax (taking into account the potential payment of
severance benefits hereunder); it being understood that the portion of the
options which would become exercisable at the last date after the Change of
Control shall be first taken into account to satisfy this requirement, with such
other portions of other options, in reverse order of exercise date, applied
thereunder until a sufficient number of options have not been accelerated to
avoid the imposition of an Excise Tax.
(iv) Application of Section 280G. For
purposes of determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section
280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under
Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of
the Company's independent certified public
accountants appointed prior to the Effective Date
or tax counsel selected by such accountants (the
"Accountants"), the Company has a reasonable basis
to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute
payments" or represent reasonable compensation for
personal services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount," or such "parachute
payments" are otherwise not subject to such Excise
Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the
Accountants in accordance with the principles of
Section 280G of the Code.
(v) Applicable Tax Rates. For purposes of
determining whether the Employee would receive a greater net after-tax benefit
were the amounts payable under this Agreement
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reduced in accordance with Section 3(e)(iii), the Employee shall
be deemed to pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the
calendar year in which the first amounts are to be
paid hereunder, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for such
calendar year, net of the maximum reduction in
Federal incomes taxes which could be obtained from
the deduction of such state or local taxes if paid in
such year,
provided, however, that the Employee may request that such determination be made
based on his individual tax circumstances, which shall govern such determination
so long as the Employee provides to the Accountants such information and
documents as the Accountants shall reasonably request to determine such
individual circumstances.
(vi) Adjustments in Respect of the Payment
Cap. If the Employee receives reduced payments and benefits under this Section
3(e) (or this Section 3(e) is determined not to be applicable to the Employee
because the Accountants conclude that Employee is not subject to any Excise Tax)
and it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding (a "Final Determination") that,
notwithstanding the good faith of the Employee and the Company in applying the
terms of this Agreement, the aggregate "parachute payments" within the meaning
of Section 280G of the Code paid to the Employee or for his benefit are in an
amount that would result in the Employee being subject to an Excise Tax and the
Employee would still be subject to the Payment Cap under the provisions of
Section 3(e)(iii), then the amount equal to such excess parachute payments shall
be deemed for all purposes to be a loan to the Employee made on the date of
receipt of such excess payments, which the Employee shall have an obligation to
repay to the Company on demand, together with interest on such amount at the
applicable Federal rate (as defined in Section 1274(d) of the Code) from the
date of the payment hereunder to the date of repayment by the Employee. If this
Section 3(e) is not applied to reduce The Employee's entitlements under this
Section 3 because the Accountants determine that the Employee would not receive
a greater net after-tax benefit by applying this Section 3(e) and it is
established pursuant to a Final Determination that, notwithstanding the good
faith of the Employee and the Company in applying the terms of this Agreement,
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the Employee would have received a greater net after-tax benefit by subjecting
his payments and benefits hereunder to the Payment Cap, then the aggregate
"parachute payments" paid to the Employee or for his benefit in excess of the
Payment Cap shall be deemed for all purposes a loan to the Employee made on the
date of receipt of such excess payments, which the Employee shall have an
obligation to repay to the Company on demand, together with interest on such
amount at the applicable Federal rate (as defined in Section 1274(d) of the
Code) from the date of the payment hereunder to the date of repayment by the
Employee. If the Employee receives reduced payments and benefits by reason of
this Section 3(e) and it is established pursuant to a Final Determination that
the Employee could have received a greater amount without exceeding the Payment
Cap, then the Company shall promptly thereafter pay the Employee the aggregate
additional amount which could have been paid without exceeding the Payment Cap,
together with interest on such amount at the applicable Federal rate (as defined
in Section 1274(d) of the Code) from the original payment due date to the date
of actual payment by the Company.
4. Legal Fees and Expenses. If the Employee asserts any claim
in any contest (whether initiated by the Employee or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Employee's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorney's fees, on a
quarterly basis, upon presentation of proof of such expenses, provided that the
Employee shall reimburse the Company for such amounts, plus simple interest
thereon at the 90-day United States Treasury Bill rate as in effect from time to
time, compounded annually, if the arbitrator shall find that the Employee did
not have a good faith basis to assert or defend the claim in question.
5. Successors. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors. The Company shall require
any successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place. This Agreement is
personal to the Employee and is not assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
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6. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then outstanding
securities of such corporation or other entity entitled to vote generally in the
election of directors or managers.
7. Company's Option to Fix Expiration Date. The Company shall
have the right prior to the Change of Control Date, in its sole discretion,
pursuant to unanimous action by the Board, to determine an expiration date for
this Agreement, which expiration date shall not become effective until the date
fixed by the Board for such expiration date, which date shall be at least 180
days after notice thereof is given by the Company to the Employee in accordance
with Section 6(d); provided, however, that no such action shall be taken by the
Board prior to January 1, 1999 or following a Potential Change of Control until,
in the opinion of the Board, any such proposal or offer has been abandoned or
terminated; and provided further, that in no event shall the Board fix an
expiration date pursuant to this Section on and after the Change of Control
Date.
8. No Waiver. The Employee's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed a waiver of
such provision or any other provision of this Agreement. A waiver of any
provision of this Agreement shall not be deemed a waiver of any other provision,
and any waiver of any default in any such provision shall not be deemed a waiver
of any later default thereof or of any other provision.
9. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Iowa,
applied without reference to principles of conflict of laws.
(b) Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be resolved by binding
arbitration. The arbitration shall be held in Des Moines, Iowa, and except to
the extent inconsistent with this Agreement, shall be conducted in accordance
with the Expedited Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of law or equity.
The arbitrator shall be acceptable to both the Company and the Employee. If the
parties cannot agree on an acceptable arbitrator, the dispute shall be heard by
a panel of three arbitrators, one appointed by
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each of the parties and the third appointed by the other two arbitrators.
(c) Entire Agreement. Upon the Change of
Control Date, this Agreement shall constitute the entire agreement between the
parties hereto with respect to the matters referred to herein. Notwithstanding
anything else to the contrary, this Agreement is not intended to replace
or supersede any other written agreement with the Employee, but rather is
intended solely to provide the Employee with additional rights and obligations
upon a Change of Control which may supplement rather than replace any rights or
obligations the Employee may have pursuant to any written agreement with the
Company which is in effect on such Change of Control Date. There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives. In the
event any provision of this Agreement is invalid or unenforceable, the validity
and enforceability of the remaining provisions hereof shall not be affected.
The Employee acknowledges that he is entering into this Agreement of his own
free will and accord, and with no duress, that he has read this Agreement and
that he understands it and its legal consequences.
(d) Notices. All notices and other
communications hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Employee: at the home address of the Employee noted
on the records of the Company
If to the Company: ALLIED Life Financial Corporation
701 5th Avenue
Des Moines, Iowa 50391-2000
Attn.: Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer and Employee has hereunto set his
hand as of the day and year first above written.
ALLIED LIFE FINANCIAL
CORPORATION
By /s/ Wendell P. Crosser
---------------------------------
Name: Wendell P. Crosser
Title: Vice President and Treasuer
WITNESSED:
/s/ Kathleen A. Brannan
- -----------------------
/s/ Sam Wells
----------------------------------
Sam Wells
WITNESSED:
/s/ William D. Whitsell
- -----------------------
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EXHIBIT 23
KEY EMPLOYEE EMPLOYMENT PROTECTION AGREEMENT
THIS AGREEMENT between ALLIED Life Financial Corporation, an
Iowa corporation (the "Company"), and Wendell P. Crosser (the "Employee"), dated
as of this 2nd day of June, 1998.
W I T N E S S E T H:
WHEREAS, the Employee holds a position of significant
importance with the Company;
WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in ownership or
control of the Company, continuity of management will be essential to its
ability to evaluate and respond to such situation in the best interests of
shareholders;
WHEREAS, the Company understands that any such situation will
present significant concerns for the Employee with respect to his financial and
job security;
WHEREAS, the Company desires to assure itself of the
Employee's services during the period in which it is confronting such a
situation, and to provide the Employee certain financial assurances to enable
the Employee to perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to his personal
circumstances;
WHEREAS, to achieve these objectives, the Company and the
Employee desire to enter into an agreement providing the Company and the
Employee with certain rights and obligations upon the occurrence of a Change of
Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company and
the Employee as follows:
1. Operation of Agreement. (a) Effective Date. The effective
date of this Agreement shall be the date on which a Change of Control occurs
(the "Change of Control Date"), provided that, except as provided in Section
1(b), if the Employee is not employed by the Company on the Change of Control
Date, this Agreement shall be void and without effect.
<PAGE> 2
(b) Termination of Employment Following a
Potential Change of Control. Notwithstanding Section l(a), if (i) the Employee's
employment is terminated by the Company without Cause (as defined in Section 2)
after the occurrence of a Potential Change of Control and prior to the
occurrence of a Change of Control and (ii) a Change of Control occurs within one
year of such termination, the Employee shall be deemed, solely for purposes of
determining his rights under this Agreement, to have remained employed until the
date such Change of Control occurs and to have been terminated by the Company
without Cause immediately after this Agreement becomes effective.
(c) Termination of Employment following Death or
Disability. This Agreement shall terminate automatically upon
the Employee's death or termination due to Disability (as defined
in Section 2).
2. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean the
happening of any of the following:
(i) Any person or entity, including a "group"
as defined in Section 13(d)(3)of the Securities Exchange Act of 1934,
as amended (the "Act"), other than the Company, a subsidiary of the
Company, or any employee benefit plan of the Company or its
subsidiaries, becomes the direct or indirect beneficial owner of the
Company's securities having 20 percent or more of the combined voting
power of the then outstanding securities of the Company (other than as
a result of an issuance of securities initiated by the Company in the
ordinary course of business); or
(ii) As the result of, or in connection with,
any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination
of the foregoing transactions, less than 80% of the combined voting
power of the then outstanding securities of the Company or any
successor corporation or entity entitled to vote generally in the
election of directors of the Company or such other corporation or
entity after such transaction, are held in the aggregate by holders of
the Company's securities entitled to vote generally in the election of
directors of the Company immediately prior to such transactions; or
(iii) During any period of two consecutive
years, individuals who at the beginning of any such period constitute
the Board of Directors cease for any reason to
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constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of each director
of the Company first elected during such period was (a) approved by a
vote of at least two-thirds of the directors of the Company then still
in office who were directors of the Company at the beginning of any
such period or was made pursuant to the Stock Rights Agreement between
the Company and ALLIED Mutual.
(b) Potential Change of Control. For the
purposes of this Agreement, a "Potential Change of Control" shall mean the
happening of any of the following:
(i) any person commences a tender offer,
which if consummated would result in such person being the beneficial
owner of at least 20% of the Company's voting securities;
(ii) proxies for the election of directors
of the Company are solicited by anyone other than the Company; or
(iii) the execution by the Company of an
agreement, the consummation of which would result in a Change of
Control of the Company;
(iv) the acquisition of beneficial
ownership, directly or indirectly, by any entity, person or group
(other than the Company, a wholly-owned subsidiary thereof or any
employee benefit plan of the Company or its subsidiaries (including any
trustee of such plan acting as such trustee)) of securities of the
Company representing 10 percent or more of the combined voting power of
the Company's outstanding securities and the adoption by the Board of
Directors of a resolution to the effort that a Potential Change of
Control of the Company has occurred for purposes of this Agreement; or
(v) any person files an application with the
Commissioner of Insurance for the State of Iowa pursuant to Iowa Code
ss. 521A.3 with respect to the Company or ALLIED Life Insurance Company
or any direct or indirect controlling shareholder of the Company.
(c) Cause. For the purposes of this Agreement,
"Cause" means (i) the Employee's conviction or plea of nolo contendere to a
felony; (ii) an act or acts of dishonesty or gross misconduct on the Employee's
part which result or are intended to result in material damage to the Company's
business
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or reputation; or (iii) repeated material violations by the Employee of his
position, authority, duties, obligations or responsibilities as in effect at the
Change of Control Date, which violations are demonstrably willful and deliberate
on the Employee's part and which result in material damage to the Company's
business or reputation.
(d) Good Reason. "Good Reason" means the
occurrence of any of the following, without the express written consent of the
Employee, after the occurrence of a Potential Change of Control or a Change of
Control:
(i) (A) the assignment to the Employee of
any duties inconsistent in any material adverse respect with the
Employee's position, authority or responsibilities as in effect at the
Change of Control Date, or (B) any other material adverse change in
Employee's authority or responsibilities;
(ii) any failure by the Company, other than
an insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof given by the Employee, to
provide the Employee with (A) an annual base salary, as it may be
increased from time to time (the "Base Salary"), which is at least
equal to the Base Salary paid to the Employee immediately prior to the
Change of Control Date, or (B) incentive compensation opportunities at
a level which is at least equal to the level of incentive compensation
opportunities made available to the Employee immediately prior to the
Change of Control Date;
(iii) the failure by the Company to permit
the Employee (and, to the extent applicable, his dependents) to
participate in or be covered under all pension, retirement, deferred
compensation, savings, medical, dental, health, disability, group life,
accidental death and travel accident insurance plans and programs of
the Company and its affiliated companies at a level that is
commensurate with the Employee's participation in such plans
immediately prior to the Change of Control Date (or, if more favorable
to the Employee, at the level made available to the Employee or other
similarly situated officers at any time thereafter);
(iv) the Company's requiring the Employee to
be based at any office or location more than 25 miles from that
location at which he performed his services for the Company immediately
prior to the Change of Control, except for travel reasonably required
in the performance of the Employee's responsibilities; or
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(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 5.
In no event shall the mere occurrence of a Change of Control, absent any further
impact on the Employee, be deemed to constitute Good Reason.
(e) Disability. For purposes of this Agreement,
"Disability" shall mean the Employee's inability to perform the duties of his
position, as determined in accordance with the policies and procedures
applicable with respect to the Company's long-term disability plan, as in effect
immediately prior to the Change of Control Date.
(f) Notice of Termination. Any termination by
the Company for Cause or by the Employee for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 6(d). For purposes of this Agreement, a "Notice of Termination" means: a
written notice given, in the case of a termination for Cause, within 10 business
days of the Company's having actual knowledge of the events giving rise to such
termination, and in the case of a termination for Good Reason, within 90 days of
the later to occur of (x) the Change of Control Date or (y) the Employees having
actual knowledge of the events giving rise to such termination, and which (I)
indicates the specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date
shall be not more than 30 days after the giving of such notice). The failure by
the Employee to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of The
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
(g) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (I) in the case of a termination
for which a Notice of Termination is required, the date of receipt of such
Notice of Termination or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which the Employee's
employment terminates.
3. Employment Protection Benefits. (a) Basic
Benefits. If on or before the second anniversary of the Change
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<PAGE> 6
of Control Date (x) the Company terminates the Employee's employment for any
reason other than for Cause or Disability or (y) the Employee voluntarily
terminates his employment for Good Reason, then the Company shall pay the
Employee the following amounts:
(i) the Employee's Base Salary earned through
the Date of Termination (the "Earned Salary");
(ii) a cash amount (the "Severance Amount")
equal to the product of two and the sum of
(A) the Employee's annual Base Salary; and
(B) the higher of the annual bonuses payable to
the Employee in respect of either of the two
fiscal years ended immediately preceding the
fiscal year in which the Change of Control
occurs; and
(iii) any vested amounts or benefits owing to
the Employee under the Company's otherwise applicable employee benefit
plans and programs, including any compensation previously deferred by
the Employee (together with any accrued earnings thereon) and not yet
paid by the Company and any accrued vacation pay not yet paid by the
Company (the "Accrued Obligations").
The Earned Salary and Severance Amount shall be paid in a single lump sum as
soon as practicable, but in no event more than ten business days (or at such
earlier date required by law) following the Employee's Date of Termination.
Accrued Obligations shall be paid in accordance with the terms of the applicable
plan, program or arrangement.
In addition to the other benefits provided in this
Section, on the Change of Control Date, the Employee shall, subject to the
provisions of Section 3(e)(iii), become fully vested in any and all outstanding
stock options granted to Employee for shares of common stock of the Company or
to the extent that such options are not vested, shall receive a lump-sum cash
payment equal to the spread of all non-vested, forfeited options as of the date
such options are forfeited.
(b) Continuation of Benefits. If the Employee
receives the Severance Amount described in this Section 3, the Employee (and, to
the extent applicable, his dependents) shall be entitled, after the Date of
Termination until the earlier of (x) the first anniversary of his Date of
Termination (the "End Date")
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<PAGE> 7
or (y) the date the Employee becomes eligible for comparable benefits under a
similar plan, policy or program of a subsequent employer, to continue
participation in all of the Company's employee and Employee welfare and fringe
benefit plans (the "Benefit Plans") as were generally provided to the Employee
in accordance with the Company's policies and practices immediately prior to the
Change of Control Date. To the extent any such benefits cannot be provided under
the terms of the applicable plan, policy or program, the Company shall provide a
comparable benefit under another plan or from the Company's general assets. The
Employee's participation in the Benefit Plans will be on the same terms and
conditions that would have applied had the Employee continued to be employed by
the Company through the End Date.
(c) Indemnification. The Company shall
indemnify the Employee and hold the Employee harmless from and against any
claim, loss or cause of action arising from or out of the Employee's
performance as an officer, director or employee of the Company or any of its
subsidiaries or in any other capacity, including any fiduciary capacity, in
which the Employee serves at the request of the Company to the maximum extent
permitted by applicable law and the Company's Certificate of Incorporation and
By-Laws (the "Governing Documents"), provided that in no event shall the
protection afforded to the Employee hereunder be less than that afforded under
the Governing Documents as in effect immediately prior to the Change of Control
Date.
(d) Discharge of the Company's Obligations.
Except as expressly provided in Section 4, the Severance Amount and the other
amounts payable and benefits provided in respect of the Employee pursuant to
this Section 3 following termination of his employment shall be in full and
complete satisfaction of the Employee's rights under this Agreement and any
other claims he may have in respect of his employment by the Company or any of
its subsidiaries. Such amounts shall constitute liquidated damages with respect
to any and all such rights and claims and, upon the Employee's receipt of such
amounts, the Company shall be released and discharged from any and all liability
to the Employee in connection with this Agreement or otherwise in connection
with the Employee's employment with the Company and its subsidiaries. Without
limiting the generality of the foregoing, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others whether by reason of the
subsequent employment of the Employee or otherwise. Nothing in this Section
3(d),
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<PAGE> 8
however, shall in any way limit the Company's obligations to the Employee
pursuant to Section 3(c) hereof.
(e) Limit on Payments by the Company.
(i) Application of Section 3(e). In the
event that any amount or benefit paid or distributed to the Employee pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to the Employee by the Company or any affiliated company
(collectively, the "Covered Payments"), would be an "excess parachute payment"
as defined in Section 280G of the Code and would thereby subject the Employee to
the tax (the "Excise Tax") imposed under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the provisions of this Section 3(e)
shall apply to determine the amounts payable to Employee pursuant to this
Agreement.
(ii) Calculation of Benefits. Immediately
following delivery of any Notice of Termination, the Company shall notify the
Employee of the aggregate present value of all termination benefits to which he
would be entitled under this Agreement and any other plan, program or
arrangement as of the projected Date of Termination, together with the projected
maximum payments, determined as of such projected Date of Termination that could
be paid without the Employee being subject to the Excise Tax.
(iii) Imposition of Payment Cap. If (x) the
aggregate value of all compensation payments or benefits to be paid or provided
to the Employee under this Agreement and any other plan, agreement or
arrangement with the Company exceeds the amount which can be paid to the
Employee without the Employee incurring an Excise Tax and (y) the Employee would
receive a greater net after-tax amount (taking into account all applicable taxes
payable by the Employee, including any Excise Tax) by applying the limitation
contained in this Section 3(e)(iii), then the amounts payable to the Employee
under this Section 3 shall be reduced (but not below zero) to the maximum amount
which may be paid hereunder without the Employee becoming subject to such an
Excise Tax (such reduced payments to be referred to as the "Payment Cap"). In
the event the Employee receives reduced payments and benefits hereunder,
Employee shall have the right to designate which of the payments and benefits
otherwise provided for in this Agreement that he or she will receive in
connection with the application of the Payment Cap. In addition, the Employee
may elect, by written notice to the Company delivered not later than the Change
of Control Date, that, in lieu of limiting the benefits payable hereunder (or,
if required to avoid an Excise Tax without regard to the payments made
hereunder), the
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<PAGE> 9
"Requisite Portion" (as defined below) of the stock options held by the Employee
which are not then exercisable shall not become exercisable by reason of the
Change of Control, but rather shall become exercisable in accordance with their
original terms. The Requisite Portion shall mean the portion of all such stock
options pertaining to the least number of shares necessary to avoid the
imposition of an Excise Tax (taking into account the potential payment of
severance benefits hereunder); it being understood that the portion of the
options which would become exercisable at the last date after the Change of
Control shall be first taken into account to satisfy this requirement, with such
other portions of other options, in reverse order of exercise date, applied
thereunder until a sufficient number of options have not been accelerated to
avoid the imposition of an Excise Tax.
(iv) Application of Section 280G. For
purposes of determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section
280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under
Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of
the Company's independent certified public
accountants appointed prior to the Effective Date
or tax counsel selected by such accountants (the
"Accountants"), the Company has a reasonable basis
to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute
payments" or represent reasonable compensation for
personal services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount," or such "parachute
payments" are otherwise not subject to such Excise
Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the
Accountants in accordance with the principles of
Section 280G of the Code.
(v) Applicable Tax Rates. For purposes of
determining whether the Employee would receive a greater net after-tax benefit
were the amounts payable under this Agreement
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<PAGE> 10
reduced in accordance with Section 3(e)(iii), the Employee shall
be deemed to pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the
calendar year in which the first amounts are to be
paid hereunder, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for such
calendar year, net of the maximum reduction in
Federal incomes taxes which could be obtained from
the deduction of such state or local taxes if paid in
such year,
provided, however, that the Employee may request that such determination be made
based on his individual tax circumstances, which shall govern such determination
so long as the Employee provides to the Accountants such information and
documents as the Accountants shall reasonably request to determine such
individual circumstances.
(vi) Adjustments in Respect of the
Payment Cap. If the Employee receives reduced payments and benefits under this
Section 3(e) (or this Section 3(e) is determined not to be applicable to the
Employee because the Accountants conclude that Employee is not subject to any
Excise Tax) and it is established pursuant to a final determination of a court
or an Internal Revenue Service proceeding (a "Final Determination") that,
notwithstanding the good faith of the Employee and the Company in applying the
terms of this Agreement, the aggregate "parachute payments" within the meaning
of Section 280G of the Code paid to the Employee or for his benefit are in an
amount that would result in the Employee being subject to an Excise Tax and the
Employee would still be subject to the Payment Cap under the provisions of
Section 3(e)(iii), then the amount equal to such excess parachute payments
shall be deemed for all purposes to be a loan to the Employee made on the date
of receipt of such excess payments, which the Employee shall have an obligation
to repay to the Company on demand, together with interest on such amount at the
applicable Federal rate (as defined in Section 1274(d) of the Code) from the
date of the payment hereunder to the date of repayment by the Employee. If this
Section 3(e) is not applied to reduce The Employee's entitlements under this
Section 3 because the Accountants determine that the Employee would not receive
a greater net after-tax benefit by applying this Section 3(e) and it is
established pursuant to a Final Determination that, notwithstanding the good
faith of the Employee and the Company in applying the terms of this Agreement,
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<PAGE> 11
the Employee would have received a greater net after-tax benefit by subjecting
his payments and benefits hereunder to the Payment Cap, then the aggregate
"parachute payments" paid to the Employee or for his benefit in excess of the
Payment Cap shall be deemed for all purposes a loan to the Employee made on the
date of receipt of such excess payments, which the Employee shall have an
obligation to repay to the Company on demand, together with interest on such
amount at the applicable Federal rate (as defined in Section 1274(d) of the
Code) from the date of the payment hereunder to the date of repayment by the
Employee. If the Employee receives reduced payments and benefits by reason of
this Section 3(e) and it is established pursuant to a Final Determination that
the Employee could have received a greater amount without exceeding the Payment
Cap, then the Company shall promptly thereafter pay the Employee the aggregate
additional amount which could have been paid without exceeding the Payment Cap,
together with interest on such amount at the applicable Federal rate (as defined
in Section 1274(d) of the Code) from the original payment due date to the date
of actual payment by the Company.
4. Legal Fees and Expenses. If the Employee asserts any claim
in any contest (whether initiated by the Employee or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Employee's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorney's fees, on a
quarterly basis, upon presentation of proof of such expenses, provided that the
Employee shall reimburse the Company for such amounts, plus simple interest
thereon at the 90-day United States Treasury Bill rate as in effect from time to
time, compounded annually, if the arbitrator shall find that the Employee did
not have a good faith basis to assert or defend the claim in question.
5. Successors. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors. The Company shall require
any successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place. This Agreement is
personal to the Employee and is not assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
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6. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then outstanding
securities of such corporation or other entity entitled to vote generally in the
election of directors or managers.
7. Company's Option to Fix Expiration Date. The Company shall
have the right prior to the Change of Control Date, in its sole discretion,
pursuant to unanimous action by the Board, to determine an expiration date for
this Agreement, which expiration date shall not become effective until the date
fixed by the Board for such expiration date, which date shall be at least 180
days after notice thereof is given by the Company to the Employee in accordance
with Section 6(d); provided, however, that no such action shall be taken by the
Board prior to January 1, 1999 or following a Potential Change of Control
until, in the opinion of the Board, any such proposal or offer has been
abandoned or terminated; and provided further, that in no event shall the Board
fix an expiration date pursuant to this Section on and after the Change of
Control Date.
8. No Waiver. The Employee's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed a waiver of
such provision or any other provision of this Agreement. A waiver of any
provision of this Agreement shall not be deemed a waiver of any other provision,
and any waiver of any default in any such provision shall not be deemed a waiver
of any later default thereof or of any other provision.
9. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Iowa,
applied without reference to principles of conflict of laws.
(b) Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be resolved by binding
arbitration. The arbitration shall be held in Des Moines, Iowa, and except to
the extent inconsistent with this Agreement, shall be conducted in accordance
with the Expedited Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of law or equity.
The arbitrator shall be acceptable to both the Company and the Employee. If the
parties cannot agree on an acceptable arbitrator, the dispute shall be heard by
a panel of three arbitrators, one appointed by
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each of the parties and the third appointed by the other two arbitrators.
(c) Entire Agreement. Upon the Change of Control
Date, this Agreement shall constitute the entire agreement between the parties
hereto with respect to the matters referred to herein. Notwithstanding anything
else to the contrary, this Agreement is not intended to replace or supersede any
other written agreement with the Employee, but rather is intended solely to
provide the Employee with additional rights and obligations upon a Change of
Control which may supplement rather than replace any rights or obligations the
Employee may have pursuant to any written agreement with the Company which is in
effect on such Change of Control Date. There are no promises, representations,
inducements or statements between the parties other than those that are
expressly contained herein. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. In the event any provision of
this Agreement is invalid or unenforceable, the validity and enforceability of
the remaining provisions hereof shall not be affected. The Employee acknowledges
that he is entering into this Agreement of his own free will and accord, and
with no duress, that he has read this Agreement and that he understands it and
its legal consequences.
(d) Notices. All notices and other
communications hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Employee: at the home address of the Employee noted
on the records of the Company
If to the Company: ALLIED Life Financial Corporation
701 5th Avenue
Des Moines, Iowa 50391-2000
Attn.: Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer and Employee has hereunto set his
hand as of the day and year first above written.
ALLIED LIFE FINANCIAL
CORPORATION
By /s/ Sam Wells
-------------------------------
Name: Sam Wells
Title: President
WITNESSED:
/s/ Kathleen A. Brannan
- -----------------------
/s/ Wendell P. Crosser
---------------------------------
Wendell P. Crosser
WITNESSED:
/s/ William D. Whitsell
- -----------------------
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EXHIBIT 24
KEY EMPLOYEE EMPLOYMENT PROTECTION AGREEMENT
THIS AGREEMENT between ALLIED Life Financial Corporation, an
Iowa corporation (the "Company"), and _______________ (the "Employee"), dated as
of this ____ day of June, 1998.
W I T N E S S E T H:
WHEREAS, the Employee holds a position of significant
importance with the Company;
WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in ownership or
control of the Company, continuity of management will be essential to its
ability to evaluate and respond to such situation in the best interests of
shareholders;
WHEREAS, the Company understands that any such situation will
present significant concerns for the Employee with respect to his financial and
job security;
WHEREAS, the Company desires to assure itself of the
Employee's services during the period in which it is confronting such a
situation, and to provide the Employee certain financial assurances to enable
the Employee to perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to his personal
circumstances;
WHEREAS, to achieve these objectives, the Company and the
Employee desire to enter into an agreement providing the Company and the
Employee with certain rights and obligations upon the occurrence of a Change of
Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company and
the Employee as follows:
1. Operation of Agreement. (a) Effective Date. The effective
date of this Agreement shall be the date on which a Change of Control occurs
(the "Change of Control Date"), provided that, except as provided in Section
1(b), if the Employee is not employed by the Company on the Change of Control
Date, this Agreement shall be void and without effect.
<PAGE> 2
(b) Termination of Employment Following a
Potential Change of Control. Notwithstanding Section l(a), if (i) the Employee's
employment is terminated by the Company without Cause (as defined in Section 2)
after the occurrence of a Potential Change of Control and prior to the
occurrence of a Change of Control and (ii) a Change of Control occurs within one
year of such termination, the Employee shall be deemed, solely for purposes of
determining his rights under this Agreement, to have remained employed until the
date such Change of Control occurs and to have been terminated by the Company
without Cause immediately after this Agreement becomes effective.
(c) Termination of Employment following Death or
Disability. This Agreement shall terminate automatically upon
the Employee's death or termination due to Disability (as defined
in Section 2).
2. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean the
happening of any of the following:
(i) Any person or entity, including a "group"
as defined in Section 13(d)(3)of the Securities Exchange Act of 1934,
as amended (the "Act"), other than the Company, a subsidiary of the
Company, or any employee benefit plan of the Company or its
subsidiaries, becomes the direct or indirect beneficial owner of the
Company's securities having 20 percent or more of the combined voting
power of the then outstanding securities of the Company (other than as
a result of an issuance of securities initiated by the Company in the
ordinary course of business); or
(ii) As the result of, or in connection with,
any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination
of the foregoing transactions, less than 80% of the combined voting
power of the then outstanding securities of the Company or any
successor corporation or entity entitled to vote generally in the
election of directors of the Company or such other corporation or
entity after such transaction, are held in the aggregate by holders of
the Company's securities entitled to vote generally in the election of
directors of the Company immediately prior to such transactions; or
(iii) During any period of two consecutive
years, individuals who at the beginning of any such period
constitute the Board of Directors cease for any reason to
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<PAGE> 3
constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of each director
of the Company first elected during such period was (a) approved by a
vote of at least two-thirds of the directors of the Company then still
in office who were directors of the Company at the beginning of any
such period or was made pursuant to the Stock Rights Agreement between
the Company and ALLIED Mutual.
(b) Potential Change of Control. For the
purposes of this Agreement, a "Potential Change of Control" shall mean the
happening of any of the following:
(i) any person commences a tender offer,
which if consummated would result in such person being the beneficial
owner of at least 20% of the Company's voting securities;
(ii) proxies for the election of directors of
the Company are solicited by anyone other than the Company;
or
(iii) the execution by the Company of an
agreement, the consummation of which would result in a
Change of Control of the Company;
(iv) the acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other than the
Company, a wholly-owned subsidiary thereof or any employee benefit plan
of the Company or its subsidiaries (including any trustee of such plan
acting as such trustee)) of securities of the Company representing 10
percent or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of Directors of a
resolution to the effort that a Potential Change of Control of the
Company has occurred for purposes of this Agreement; or
(v) any person files an application with the
Commissioner of Insurance for the State of Iowa pursuant to Iowa Code
ss. 521A.3 with respect to the Company or ALLIED Life Insurance Company
or any direct or indirect controlling shareholder of the Company.
(c) Cause. For the purposes of this Agreement,
"Cause" means (i) the Employee's conviction or plea of nolo contendere to a
felony; (ii) an act or acts of dishonesty or gross misconduct on the Employee's
part which result or are intended to result in material damage to the Company's
business
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<PAGE> 4
or reputation; or (iii) repeated material violations by the Employee of his
position, authority, duties, obligations or responsibilities as in effect at the
Change of Control Date, which violations are demonstrably willful and deliberate
on the Employee's part and which result in material damage to the Company's
business or reputation.
(d) Good Reason. "Good Reason" means the
occurrence of any of the following, without the express written consent of the
Employee, after the occurrence of a Potential Change of Control or a Change of
Control:
(i) (A) the assignment to the Employee of any
duties inconsistent in any material adverse respect with the Employee's
position, authority or responsibilities as in effect at the Change of
Control Date, or (B) any other material adverse change in Employee's
authority or responsibilities;
(ii) any failure by the Company, other than
an insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof given by the Employee, to
provide the Employee with (A) an annual base salary, as it may be
increased from time to time (the "Base Salary"), which is at least
equal to the Base Salary paid to the Employee immediately prior to the
Change of Control Date, or (B) incentive compensation opportunities at
a level which is at least equal to the level of incentive compensation
opportunities made available to the Employee immediately prior to the
Change of Control Date;
(iii) the failure by the Company to permit
the Employee (and, to the extent applicable, his dependents) to
participate in or be covered under all pension, retirement, deferred
compensation, savings, medical, dental, health, disability, group life,
accidental death and travel accident insurance plans and programs of
the Company and its affiliated companies at a level that is
commensurate with the Employee's participation in such plans
immediately prior to the Change of Control Date (or, if more favorable
to the Employee, at the level made available to the Employee or other
similarly situated officers at any time thereafter);
(iv) the Company's requiring the Employee to
be based at any office or location more than 25 miles from that
location at which he performed his services for the Company immediately
prior to the Change of Control, except for travel reasonably required
in the performance of the Employee's responsibilities; or
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<PAGE> 5
(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 5.
In no event shall the mere occurrence of a Change of Control, absent any further
impact on the Employee, be deemed to constitute Good Reason.
(e) Disability. For purposes of this Agreement,
"Disability" shall mean the Employee's inability to perform the duties of his
position, as determined in accordance with the policies and procedures
applicable with respect to the Company's long-term disability plan, as in effect
immediately prior to the Change of Control Date.
(f) Notice of Termination. Any termination by
the Company for Cause or by the Employee for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 6(d). For purposes of this Agreement, a "Notice of Termination" means: a
written notice given, in the case of a termination for Cause, within 10 business
days of the Company's having actual knowledge of the events giving rise to such
termination, and in the case of a termination for Good Reason, within 90 days of
the later to occur of (x) the Change of Control Date or (y) the Employees having
actual knowledge of the events giving rise to such termination, and which (I)
indicates the specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date
shall be not more than 30 days after the giving of such notice). The failure by
the Employee to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of The
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
(g) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (I) in the case of a termination
for which a Notice of Termination is required, the date of receipt of such
Notice of Termination or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which the Employee's
employment terminates.
3. Employment Protection Benefits. (a) Basic Benefits.
If on or before the second anniversary of the Change
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of Control Date (x) the Company terminates the Employee's employment for any
reason other than for Cause or Disability or (y) the Employee voluntarily
terminates his employment for Good Reason, then the Company shall pay the
Employee the following amounts:
(i) the Employee's Base Salary earned through
the Date of Termination (the "Earned Salary");
(ii) a cash amount (the "Severance Amount")
equal to the sum of
(A) the Employee's annual Base Salary; and
(B) the higher of the annual bonuses payable to
the Employee in respect of either of the two
fiscal years ended immediately preceding the
fiscal year in which the Change of Control
occurs; and
(iii) any vested amounts or benefits owing to
the Employee under the Company's otherwise applicable employee benefit
plans and programs, including any compensation previously deferred by
the Employee (together with any accrued earnings thereon) and not yet
paid by the Company and any accrued vacation pay not yet paid by the
Company (the "Accrued Obligations").
The Earned Salary and Severance Amount shall be paid in a single lump sum as
soon as practicable, but in no event more than ten business days (or at such
earlier date required by law) following the Employee's Date of Termination.
Accrued Obligations shall be paid in accordance with the terms of the applicable
plan, program or arrangement.
In addition to the other benefits provided in this
Section, on the Change of Control Date, the Employee shall, subject to the
provisions of Section 3(e)(iii), become fully vested in any and all outstanding
stock options granted to Employee for shares of common stock of the Company or
to the extent that such options are not vested, shall receive a lump-sum cash
payment equal to the spread of all non-vested, forfeited options as of the date
such options are forfeited.
(b) Continuation of Benefits. If the Employee
receives the Severance Amount described in this Section 3, the Employee (and, to
the extent applicable, his dependents) shall be entitled, after the Date of
Termination until the earlier of (x) the first anniversary of his Date of
Termination (the "End Date")
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<PAGE> 7
or (y) the date the Employee becomes eligible for comparable benefits under a
similar plan, policy or program of a subsequent employer, to continue
participation in all of the Company's employee and Employee welfare and fringe
benefit plans (the "Benefit Plans") as were generally provided to the Employee
in accordance with the Company's policies and practices immediately prior to the
Change of Control Date. To the extent any such benefits cannot be provided under
the terms of the applicable plan, policy or program, the Company shall provide a
comparable benefit under another plan or from the Company's general assets. The
Employee's participation in the Benefit Plans will be on the same terms and
conditions that would have applied had the Employee continued to be employed by
the Company through the End Date.
(c) Indemnification. The Company shall indemnify
the Employee and hold the Employee harmless from and against any claim, loss or
cause of action arising from or out of the Employee's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which the Employee serves at the
request of the Company to the maximum extent permitted by applicable law and the
Company's Certificate of Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to the Employee
hereunder be less than that afforded under the Governing Documents as in effect
immediately prior to the Change of Control Date.
(d) Discharge of the Company's Obligations.
Except as expressly provided in Section 4, the Severance Amount and the other
amounts payable and benefits provided in respect of the Employee pursuant to
this Section 3 following termination of his employment shall be in full and
complete satisfaction of the Employee's rights under this Agreement and any
other claims he may have in respect of his employment by the Company or any of
its subsidiaries. Such amounts shall constitute liquidated damages with respect
to any and all such rights and claims and, upon the Employee's receipt of such
amounts, the Company shall be released and discharged from any and all liability
to the Employee in connection with this Agreement or otherwise in connection
with the Employee's employment with the Company and its subsidiaries. Without
limiting the generality of the foregoing, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others whether by reason of the
subsequent employment of the Employee or otherwise. Nothing in this Section
3(d),
7
<PAGE> 8
however, shall in any way limit the Company's obligations to the Employee
pursuant to Section 3(c) hereof.
(e) Limit on Payments by the Company.
(i) Application of Section 3(e). In the
event that any amount or benefit paid or distributed to the Employee pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to the Employee by the Company or any affiliated company
(collectively, the "Covered Payments"), would be an "excess parachute payment"
as defined in Section 280G of the Code and would thereby subject the Employee to
the tax (the "Excise Tax") imposed under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the provisions of this Section 3(e)
shall apply to determine the amounts payable to Employee pursuant to this
Agreement.
(ii) Calculation of Benefits. Immediately
following delivery of any Notice of Termination, the Company shall notify the
Employee of the aggregate present value of all termination benefits to which he
would be entitled under this Agreement and any other plan, program or
arrangement as of the projected Date of Termination, together with the projected
maximum payments, determined as of such projected Date of Termination that could
be paid without the Employee being subject to the Excise Tax.
(iii) Imposition of Payment Cap. If (x) the
aggregate value of all compensation payments or benefits to be paid or provided
to the Employee under this Agreement and any other plan, agreement or
arrangement with the Company exceeds the amount which can be paid to the
Employee without the Employee incurring an Excise Tax and (y) the Employee would
receive a greater net after-tax amount (taking into account all applicable taxes
payable by the Employee, including any Excise Tax) by applying the limitation
contained in this Section 3(e)(iii), then the amounts payable to the Employee
under this Section 3 shall be reduced (but not below zero) to the maximum amount
which may be paid hereunder without the Employee becoming subject to such an
Excise Tax (such reduced payments to be referred to as the "Payment Cap"). In
the event the Employee receives reduced payments and benefits hereunder,
Employee shall have the right to designate which of the payments and benefits
otherwise provided for in this Agreement that he or she will receive in
connection with the application of the Payment Cap. In addition, the Employee
may elect, by written notice to the Company delivered not later than the Change
of Control Date, that, in lieu of limiting the benefits payable hereunder (or,
if required to avoid an Excise Tax without regard to the payments made
hereunder), the
8
<PAGE> 9
"Requisite Portion" (as defined below) of the stock options held by the Employee
which are not then exercisable shall not become exercisable by reason of the
Change of Control, but rather shall become exercisable in accordance with their
original terms. The Requisite Portion shall mean the portion of all such stock
options pertaining to the least number of shares necessary to avoid the
imposition of an Excise Tax (taking into account the potential payment of
severance benefits hereunder); it being understood that the portion of the
options which would become exercisable at the last date after the Change of
Control shall be first taken into account to satisfy this requirement, with such
other portions of other options, in reverse order of exercise date, applied
thereunder until a sufficient number of options have not been accelerated to
avoid the imposition of an Excise Tax.
(iv) Application of Section 280G. For
purposes of determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section
280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under
Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of
the Company's independent certified public
accountants appointed prior to the Effective Date
or tax counsel selected by such accountants (the
"Accountants"), the Company has a reasonable basis
to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute
payments" or represent reasonable compensation for
personal services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount," or such "parachute
payments" are otherwise not subject to such Excise
Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the
Accountants in accordance with the principles of
Section 280G of the Code.
(v) Applicable Tax Rates. For purposes of
determining whether the Employee would receive a greater net after-tax benefit
were the amounts payable under this Agreement
9
<PAGE> 10
reduced in accordance with Section 3(e)(iii), the Employee shall be deemed to
pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the
calendar year in which the first amounts are to be
paid hereunder, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for such
calendar year, net of the maximum reduction in
Federal incomes taxes which could be obtained from
the deduction of such state or local taxes if paid in
such year,
provided, however, that the Employee may request that such determination be made
based on his individual tax circumstances, which shall govern such determination
so long as the Employee provides to the Accountants such information and
documents as the Accountants shall reasonably request to determine such
individual circumstances.
(vi) Adjustments in Respect of the Payment
Cap. If the Employee receives reduced payments and benefits under this Section
3(e) (or this Section 3(e) is determined not to be applicable to the Employee
because the Accountants conclude that Employee is not subject to any Excise Tax)
and it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding (a "Final Determination") that,
notwithstanding the good faith of the Employee and the Company in applying the
terms of this Agreement, the aggregate "parachute payments" within the meaning
of Section 280G of the Code paid to the Employee or for his benefit are in an
amount that would result in the Employee being subject to an Excise Tax and the
Employee would still be subject to the Payment Cap under the provisions of
Section 3(e)(iii), then the amount equal to such excess parachute payments shall
be deemed for all purposes to be a loan to the Employee made on the date of
receipt of such excess payments, which the Employee shall have an obligation to
repay to the Company on demand, together with interest on such amount at the
applicable Federal rate (as defined in Section 1274(d) of the Code) from the
date of the payment hereunder to the date of repayment by the Employee. If this
Section 3(e) is not applied to reduce The Employee's entitlements under this
Section 3 because the Accountants determine that the Employee would not receive
a greater net after-tax benefit by applying this Section 3(e) and it is
established pursuant to a Final Determination that, notwithstanding the good
faith of the Employee and the Company in applying the terms of this Agreement,
10
<PAGE> 11
the Employee would have received a greater net after-tax benefit by subjecting
his payments and benefits hereunder to the Payment Cap, then the aggregate
"parachute payments" paid to the Employee or for his benefit in excess of the
Payment Cap shall be deemed for all purposes a loan to the Employee made on the
date of receipt of such excess payments, which the Employee shall have an
obligation to repay to the Company on demand, together with interest on such
amount at the applicable Federal rate (as defined in Section 1274(d) of the
Code) from the date of the payment hereunder to the date of repayment by the
Employee. If the Employee receives reduced payments and benefits by reason of
this Section 3(e) and it is established pursuant to a Final Determination that
the Employee could have received a greater amount without exceeding the Payment
Cap, then the Company shall promptly thereafter pay the Employee the aggregate
additional amount which could have been paid without exceeding the Payment Cap,
together with interest on such amount at the applicable Federal rate (as defined
in Section 1274(d) of the Code) from the original payment due date to the date
of actual payment by the Company.
4. Legal Fees and Expenses. If the Employee asserts any claim
in any contest (whether initiated by the Employee or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Employee's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorney's fees, on a
quarterly basis, upon presentation of proof of such expenses, provided that the
Employee shall reimburse the Company for such amounts, plus simple interest
thereon at the 90-day United States Treasury Bill rate as in effect from time to
time, compounded annually, if the arbitrator shall find that the Employee did
not have a good faith basis to assert or defend the claim in question.
5. Successors. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors. The Company shall require
any successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place. This Agreement is
personal to the Employee and is not assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
11
<PAGE> 12
6. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then outstanding
securities of such corporation or other entity entitled to vote generally in the
election of directors or managers.
7. Company's Option to Fix Expiration Date. The Company shall
have the right prior to the Change of Control Date, in its sole discretion,
pursuant to unanimous action by the Board, to determine an expiration date for
this Agreement, which expiration date shall not become effective until the date
fixed by the Board for such expiration date, which date shall be at least 180
days after notice thereof is given by the Company to the Employee in accordance
with Section 6(d); provided, however, that no such action shall be taken by the
Board prior to January 1, 1999 or following a Potential Change of Control until,
in the opinion of the Board, any such proposal or offer has been abandoned or
terminated; and provided further, that in no event shall the Board fix an
expiration date pursuant to this Section on and after the Change of Control
Date.
8. No Waiver. The Employee's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed a waiver of
such provision or any other provision of this Agreement. A waiver of any
provision of this Agreement shall not be deemed a waiver of any other provision,
and any waiver of any default in any such provision shall not be deemed a waiver
of any later default thereof or of any other provision.
9. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Iowa,
applied without reference to principles of conflict of laws.
(b) Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be resolved by binding
arbitration. The arbitration shall be held in Des Moines, Iowa, and except to
the extent inconsistent with this Agreement, shall be conducted in accordance
with the Expedited Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of law or equity.
The arbitrator shall be acceptable to both the Company and the Employee. If the
parties cannot agree on an acceptable arbitrator, the dispute shall be heard by
a panel of three arbitrators, one appointed by
12
<PAGE> 13
each of the parties and the third appointed by the other two arbitrators.
(c) Entire Agreement. Upon the Change of Control
Date, this Agreement shall constitute the entire agreement between the parties
hereto with respect to the matters referred to herein. Notwithstanding anything
else to the contrary, this Agreement is not intended to replace or supersede any
other written agreement with the Employee, but rather is intended solely to
provide the Employee with additional rights and obligations upon a Change of
Control which may supplement rather than replace any rights or obligations the
Employee may have pursuant to any written agreement with the Company which is in
effect on such Change of Control Date. There are no promises, representations,
inducements or statements between the parties other than those that are
expressly contained herein. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. In the event any provision of
this Agreement is invalid or unenforceable, the validity and enforceability of
the remaining provisions hereof shall not be affected. The Employee acknowledges
that he is entering into this Agreement of his own free will and accord, and
with no duress, that he has read this Agreement and that he understands it and
its legal consequences.
(d) Notices. All notices and other
communications hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Employee: at the home address of the Employee noted
on the records of the Company
If to the Company: ALLIED Life Financial Corporation
701 5th Avenue
Des Moines, Iowa 50391-2000
Attn.: Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
13
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer and Employee has hereunto set his
hand as of the day and year first above written.
ALLIED LIFE FINANCIAL
CORPORATION
By
-------------------
Name:
Title:
WITNESSED:
- ---------------------
---------------------
[Name]
WITNESSED:
- ---------------------
14
<PAGE> 1
EXHIBIT 25
AMENDMENT TO
ALLIED LIFE FINANCIAL CORPORATION
SHORT TERM MANAGEMENT INCENTIVE PLAN
Effective June 2, 1998, the Short Term Management Incentive Plan ("Plan") is
amended to provide for a new Section 15 as follows:
15. CHANGE OF CONTROL
In the event of a Change of Control, the Total Award to be paid to a
Participant under the Plan for the plan year in which such Change of Control
occurs shall be calculated assuming the Goal for Growth and the Goal for EPS
have been met. "Change of 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 ALFC, (b) a
corporation owned directly or indirectly by the shareholders of
ALFC in substantially the same proportions as their ownership
of stock of ALFC, or (c) ALLIED Mutual Insurance Company, is or
becomes the Beneficial Owner, directly or indirectly, of
securities of ALFC representing twenty percent (20%) or more of
the total voting power represented by ALFC'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 of
Directors of ALFC plus any new Director (a) whose election by
the Board of Directors or nomination for election by ALFC's
shareholders was approved by a vote of at least three-fifths
(3/5) of the Directors then still in office who either were
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 ALFC's shareholders was made
pursuant to the Stock Rights Agreement between ALFC and ALLIED
Mutual, cease for any reason to constitute a majority thereof;
or
(iii) The shareholders of ALFC approve a merger or consolidation of
ALFC with any other corporation, other than a merger or
consolidation which would result in the voting securities of
ALFC 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 ALFC or such surviving
entity outstanding immediately after such merger or
consolidation, or the shareowners of ALFC approve a plan of
complete liquidation of ALFC or an agreement for the sale or
disposition by ALFC of all or substantially all ALFC's assets.
1
<PAGE> 1
EXHIBIT 26
ALLIED LIFE FINANCIAL CORPORATION
RETENTION BONUS PLAN
1. Purpose. The purpose of the Retention Bonus Plan (the
"Plan") is to secure for ALLIED Life Financial Corporation (the "Company") the
continued services of its employees in light of the heightened possibility of a
change in control and the uncertainty which may arise among these employees,
which could result in their departure or distraction to the detriment of the
Company and its shareholders.
2. Retention Bonuses.Each employee (excluding any officer of
the Company or ALLIED Life Insurance Company) who remains in the Company's
employ through November 30, 1998 shall receive a bonus in an amount equal to
such employee's bi-weekly base salary, to be paid as soon as practicable after
November 30, 1998, but not later than December 15, 1998.
3. Administration. The Plan Administrator of this Plan will be
the senior officer of the Company responsible for Human Resources. The Plan
Administrator shall have full and complete authority to interpret this Plan and
to make all determinations hereunder relating to the participation and
eligibility of eligible employees for benefits, including, but not limited to,
making determinations as to eligibility for benefits, the amount of benefits
payable, the time at which benefits cease to be payable, and other comparable
issues.
4. Amendment. This Plan may not be terminated, modified or
amended in any manner that reduces the benefits or rights of any person who is
eligible to receive such benefits or has any such rights hereunder without the
express written consent of such person.
5. Continued Employment. Nothing contained in this Plan shall
give any employee the right to be retained in the employ of the Company or to
interfere with the right of the Company to discharge any employee at any time
for any reason.
6. Withholding. All amounts payable pursuant to the terms of
this Plan shall be subject to reduction for any and all applicable Federal,
State or local income or employment taxes or any other withholdings required to
be made therefrom at law.
Dated June 3, 1998
<PAGE> 1
EXHIBIT 27
ALLIED LIFE
[LOGO]
News Release-
FOR IMMEDIATE RELEASE CONTACT: Abernathy MacGregor Frank (212) 371-5999
Joele Frank/Dan Katcher
INTERNET ADDRESS: http://www.cfonews.com/alfc
ALLIED Life Financial Corporation Announces Intention To Recommend
Transaction With Nationwide
Des Moines, Iowa, June 3, 1998 --- ALLIED Life Financial Corporation (NASDAQ:
ALFC) announced that Nationwide Mutual Insurance Company ("Nationwide") has
publicly stated its willingness to acquire all of the outstanding shares of
common stock held by the public shareholders of ALLIED Life Financial
Corporation ("ALFC") for $30 per share in cash. ALFC's Board of Directors met
on June 2, 1998 and determined that it is in principle prepared to recommend
such a transaction subject to among other things, completion of definitive
documentation and various other conditions, including approval by the
respective Boards of each party, delivery of a fairness opinion by Fox-Pitt,
Kelton Inc., the financial advisor to the Coordinating Committee of the Board
which was appointed to review the transaction, regulatory approvals and
approval by ALFC's shareholders, if required. The transaction would likely be
structured as a tender offer of all of the outstanding shares of common stock
of ALFC, to be followed by a second-stage merger of a subsidiary of Nationwide
with and into ALFC.
The proposed transaction was recommended to the Board of ALFC by a committee of
directors who are not affiliated with ALLIED Group, Inc. or ALLIED Mutual
Insurance Company, the parent company of ALFC.
ALFC is a holding company that, through its principal subsidiary, ALLIED Life
Insurance Company, underwrites, markets, and distributes life insurance and
annuity products in the United States. Company financial information is on the
Internet at http://www.cfonews.com/alfc.
<PAGE> 1
EXHIBIT 28
ALLIED LIFE
[LOGO]
NEWS RELEASE-
FOR IMMEDIATE RELEASE CONTACT: Sam Wells (515) 280-4854
INTERNET ADDRESS: http://www.cfonews.com/alfc
ALLIED LIFE FINANCIAL CORPORATION
ANNOUNCES A MERGER WITH NATIONWIDE
Des Moines, Iowa, June 4, 1998 --- ALLIED Life Financial Corporation (NASDAQ:
ALFC) announced that it yesterday entered into an Agreement and Plan of Merger
to be acquired by Nationwide Mutual Insurance Company ("Nationwide") at a price
of $30 per share cash. The transaction is subject to regulatory approvals and
approval by the ALFC shareholders if required. The transaction is structured as
a tender offer for all of the outstanding shares of common stock of ALFC, to be
followed by a second-stage merger of a subsidiary of Nationwide with and into
ALFC.
The Agreement and Plan of Merger was recommended to the Board by a committee of
directors who are not affiliated with ALLIED Group, Inc. or ALLIED Mutual
Insurance Company, the parent company of ALFC.
ALFC is a holding company that, through its principal subsidiary, ALLIED Life
Insurance Company, underwrites, markets, and distributes life insurance and
annuity products in the United States. Company financial information is on the
Internet at http://www.cfonews.com/alfc.
--END--
<PAGE> 1
EXHIBIT 99.29
FOX-PITT, KELTON INC.
380 MADISON AVENUE
NEW YORK, NEW YORK 10017-2513
CORPORATE FINANCE DEPARTMENT TELEPHONE; 212-687-1105
FAX: 212-682-0779
TELEX: 645217
STRICTLY CONFIDENTIAL
May 28, 1998
The Coordinating Committee of the Board of Directors
ALLIED Life Financial Corporation
701 Fifth Avenue
Des Moines, Iowa 50391
Attention: Mr. George D. Milligan and Dr. Dennis H. Kelly, Jr., members of the
Coordinating Committee
Dear Sirs:
The Corporate Finance Department of Fox-Pitt, Kelton Inc. ("Fox-Pitt,
Kelton") is pleased to submit this letter (the "Agreement") confirming the
terms under which Fox-Pitt, Kelton will serve as exclusive financial advisor to
the coordinating committee of the Board of Directors (the "Coordinating
Committee") of ALLIED Life Financial Corporation ("ALLIED Life" or the
"Company") in connection with a potential acquisition of all or a portion of
the outstanding shares of ALLIED Life (the "Transaction").
In this letter, we have outlined our approach, timing and fees in performing
this work for you.
SCOPE OF WORK
Fox-Pitt, Kelton anticipates performing the following financial advisory
services and such other services as the Coordinating Committee may reasonably
request:
(BULLET) EVALUATION OF BUSINESS AND FINANCIAL PROSPECTS. Fox-Pitt, Kelton
will meet with the Company's management to discuss its historical financial
performance as well as its current and future business and financial prospects.
<PAGE> 2
Mr. George D. Milligan and Mr. Dennis H. Kelly, Jr.
May 28, 1998
Page 2
(BULLET) DETERMINATION OF RANGE OF VALUES. Utilizing several methodologies it
views as being appropriate, Fox-Pitt, Kelton will prepare an independent
valuation of the publicly-held shares of ALLIED Life and, if appropriate, the
6 3/4% preferred stock of the Company owned by ALLIED Mutual Insurance Company.
(BULLET) LIAISON WITH ALLIED MUTUAL INSURANCE COMPANY AND ALLIED GROUP, INC.
If requested by the Coordinating Committee, Fox-Pitt, Kelton will serve as a
liaison between the Coordinating Committee and the Boards of Directors (or
special committees) and outside advisors of ALLIED Mutual Insurance Company and
ALLIED Group, Inc., respectively, in connection with the tender offer by
Nationwide Mutual Co. for all of the outstanding shares of ALLIED Group, Inc.,
Nationwide Mutual Co.'s proposed merger with ALLIED Mutual Insurance Company
and any global solution relating to ALLIED Life, ALLIED Mutual Insurance
Company and ALLIED Group, Inc.
(BULLET) PROVISION OF FAIRNESS OPINION. If requested by the Coordinating
Committee, Fox-Pitt, Kelton will provide to the Coordinating Committee an
opinion as to the fairness of the Transaction, from a financial point of view,
to the public shareholders of ALLIED Life.
(BULLET) WORKING WITH OUTSIDE ADVISORS. Fox-Pitt, Kelton will work with the
outside financial, legal, actuarial and other advisors of the Company, ALLIED
Mutual Insurance Company and ALLIED Group, Inc. in connection with its role as
financial advisor to the Coordinating Committee.
Fox-Pitt, Kelton will render such other financial advisory and investment
banking services as may from time to time be reasonably requested of Fox-Pitt,
Kelton by the Coordinating Committee.
In performing its work, Fox-Pitt, Kelton will rely upon the assumption that the
information provided to it by ALLIED Life or other relevant parties or from
publicly available sources is complete and accurate in all material respects,
and Fox-Pitt, Kelton assumes that all such information has been prepared on a
reasonable basis. Fox-Pitt, Kelton will not assume any responsibility for the
independent verification of such
<PAGE> 3
Mr. George D. Milligan and Mr. Dennis H. Kelly, Jr.
May 28, 1998
Page 3
information, nor will it take any responsibility for the independent
verification of the valuation or appraisal of the assets and liabilities of
ALLIED Life. Fox-Pitt, Kelton shall maintain the confidentiality of non-public
information furnished to it by the Company until such time as the Company
authorizes the release of said information.
FOX-PITT, KELTON FEES
Fox-Pitt, Kelton's fees (collectively, the "Transaction Fee") for serving as the
Coordinating Committee's financial advisor with regard to a Transaction will be
as follows:
1. An initial, non-refundable advisory fee (the "Initial Advisory Fee") of
$100,000 payable upon the signing of this Agreement.
2. A subsequent financial advisory fee (the "Fairness Opinion Fee") of
$475,000 payable upon the delivery of an initial fairness opinion by
Fox-Pitt, Kelton to the Coordinating Committee in connection with a
Transaction, should such opinion be requested by the Coordinating
Committee.
3. Should additional fairness opinions be required of Fox-Pitt, Kelton by the
Coordinating Committee, other than an updated or supplemental fairness
opinion, an additional fee (the "Additional Fee") of $125,000 per fairness
opinion will be payable upon the rendering of such opinion or opinions.
4. Should the Transaction not be consummated or should this Agreement be
terminated for any reason or should the Coordinating Committee not request
a fairness opinion of Fox-Pitt, Kelton, the Company will pay to Fox-Pitt,
Kelton a fee of $150,000 (the "Termination Fee"). This fee would be
payable in addition to the Initial Advisory Fee.
5. Reimbursement for reasonable out-of-pocket expenses to include but not be
limited to: travel, printing and production, outside legal fees (not
exceeding $20,000, except with the written consent of the Company) and
disbursements and related charges associated with Fox-Pitt, Kelton's work
<PAGE> 4
Mr. Georges D. Milligan and Mr. Dennis H. Kelly, Jr.
May 28, 1998
Page 4
on the Company's behalf. These amounts will be payable to Fox-Pitt, Kelton
whether or not a Transaction is completed.
Periodically, with the Coordinating Committee's prior authorization, outside
experts such as accountants may be required, and ALLIED Life will be
responsible for their fees and related charges.
The Transaction Fee does not include the testimony of Fox-Pitt, Kelton
professionals before regulatory, judiciary or other related bodies relating to
the scope or findings of Fox-Pitt, Kelton's work as defined in this Agreement.
Any such testimony would be at Fox-Pitt, Kelton's normal hourly rate as set
forth in the attached Exhibit B.
ENGAGEMENT PERIOD
The engagement period (the "Engagement Period") for Fox-Pitt, Kelton to serve as
financial advisor shall begin upon the signing of this Agreement and shall
continue until this Agreement is terminated. The Engagement Period may be
terminated by either party hereto upon 30 days prior written notice to the other
party, unless mutually agreed upon by the parties, provided, however that,
(a) termination of Fox-Pitt, Kelton's engagement hereunder shall not affect the
Company's continuing obligation to indemnify Fox-Pitt, Kelton and certain
related persons as provided in Exhibit A; (b) If at any time prior to March 31,
1999, the Company receives a proposal regarding a Transaction (other than a
transaction with Nationwide Mutual Co.) or the Company proposes to enter into a
transaction (other than a transaction with Nationwide Mutual Co.), Fox-Pitt,
Kelton shall have the right to act as the Company's exclusive financial advisor
in connection therewith. In such event, Fox-Pitt, Kelton and the Company will,
in good faith, enter into an advisory agreement concerning such Transaction
containing terms and conditions that are usual and customary for similar
agreements entered into by Fox-Pitt, Kelton in connection with transactions
which are similar to the proposed Transaction; and (c) termination of Fox-Pitt,
Kelton's engagement hereunder shall not affect the Company's obligation to
reimburse the expenses accruing prior to such termination to the extent provided
for herein.
<PAGE> 5
Mr. George D. Milligan and Mr. Dennis H. Kelly, Jr.
May 28, 1998
Page 5
GENERAL MATTERS
ALLIED Life acknowledges and agrees that (a) Fox-Pitt, Kelton has been
retained as an independent contractor to act solely in the capacity described in
this Agreement and (b) all opinions and advice (written and oral) given by
Fox-Pitt, Kelton to the Coordinating Committee in connection with this
engagement are intended solely for the benefit and use of the Coordinating
Committee (including its attorneys and accountants) and, except when required by
law, may not be disclosed to any third party (except the Company's attorneys,
accountants, agents or representatives) or circulated or referred to publicly
without Fox-Pitt, Kelton's prior written consent. The Company acknowledges and
agrees that Fox-Pitt, Kelton has been retained to act as financial advisor to
the Coordinating Committee and its engagement hereunder is not on behalf of, nor
intended to create any relationship with or due to, any other person. This
Agreement may be amended only in writing and will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
executed in and to be performed in that state.
As you know, Fox-Pitt, Kelton is a full-service securities firm and as
such may from time to time effect transactions, for its own account or the
accounts of customers, and hold positions in securities or options on
securities of ALLIED Life, ALLIED Group, Inc. or any other entities that might
be involved in merger and acquisition discussions with the Company.
In connection with engagements such as this, it is Fox-Pitt, Kelton's
policy to receive certain customary indemnifications. The Company agrees to the
provisions in the attached Exhibit A, which is incorporated by reference into
this letter and made a part hereof.
Fox-Pitt, Kelton reserves the right to place a tombstone or any other type
of similar advertisement in relevant newspapers or magazines, such as The Wall
Street Journal, following the completion of a Transaction. We will review such
advertisement with you prior to publication.
<PAGE> 6
Mr. George D. Milligan and Mr. Dennis H. Kelly, Jr.
May 28, 1998
Page 6
Fox-Pitt, Kelton looks forward to working with the Coordinating Committee and
ALLIED Life on this important assignment. If the foregoing accurately reflects
the basis of our understanding, please countersign and return one of the two
signed copies.
Sincerely,
/s/Joseph P. Beebe
Joseph P. Beebe
Director
Agreed and Accepted by ALLIED Life Financial Corporation
By: /s/ Wendell P. Crosser
-------------------------------
Date: May 28, 1998
-------------------------------
<PAGE> 7
EXHIBIT A
INDEMNIFICATION AGREEMENT
ALLIED Life Financial Corporation ("ALLIED Life" or the "Company") will
indemnify and hold harmless Fox-Pitt, Kelton Inc. ("Fox-Pitt, Kelton") and its
affiliates and each of their respective directors, officers, employees, agents
and controlling persons (each of them being an "Indemnified Party") from and
against any and all losses, claims, damages, liabilities and expenses, joint or
several, and any action in respect thereof (including reasonable legal and other
fees and expenses incurred by Fox-Pitt, Kelton or any other Indemnified Party in
connection with investigating, preparing to defend or defending itself against
any such loss, claim, damage or liability) (collectively, "Damages"),
(i) related to or arising out of (A) oral or written information provided by the
Company, the Company's employees or other agents, which either the Company or
Fox-Pitt, Kelton provides to any persons, or (B) other action or failure to act
by the Company, the Company's employees or other agents or Fox-Pitt, Kelton at
the Company's request or with the Company's consent, or (ii) otherwise related
to or arising out of the engagement of Fox-Pitt, Kelton under the letter
agreement dated May 28, 1998 (the "Agreement") or any transaction or conduct in
connection therewith. ALLIED Life will reimburse each Indemnified Party for such
Damages as they are incurred.
ALLIED Life will not, however, be liable in any such case to the extent that any
such Damages described in clause (ii) above is found to have resulted solely
from bad faith, gross negligence or willful misconduct on the part of Fox-Pitt,
Kelton or such other Indemnified Party in discharging or failing to discharge
its obligations hereunder and such finding is made in a court of competent
jurisdiction. If multiple claims are brought against any Indemnified Party in
any action or proceeding, with respect to at least one of which indemnification
is permitted under applicable law and provided for under this Indemnification
Agreement, ALLIED Life agrees that any judgment or award shall be conclusively
deemed to be based on claims as to which indemnification is permitted and
provided for, except to the extent the judgment or award expressly states that
it, or any portion thereof, is based on a claim as to which indemnification is
not available.
Promptly after receipt by an Indemnified Party of actual notice of the
commencement of any such action or proceeding, such Indemnified Party will, if a
claim in respect thereof is to be made against ALLIED Life, notify ALLIED Life
in writing of the commencement thereof; provided, however, that the failure to
give
<PAGE> 8
Exhibit A
May 28, 1998
Page 2
such notice will not limit any Indemnified Party's right to indemnification
hereunder or otherwise relieve ALLIED Life for any liability it may have
hereunder or otherwise except and only to the extent that ALLIED Life is
materially prejudiced by such failure. If any such notice is given to ALLIED
Life, and regardless of whether or not ALLIED Life assumes the defense, ALLIED
Life will be entitled to participate in the defense of such action or proceeding
at its own expense. To the extent ALLIED Life wishes, it may assume such defense
to be conducted by counsel chosen by it and reasonably satisfactory to the
Indemnified Party. The Indemnified Party will, however, be entitled to employ
counsel separate from ALLIED Life (other than local counsel) and from any other
party in such action or proceeding (a) if the Indemnified Party shall have
concluded based on advice from its counsel that there may be one or more legal
defenses available to it which are different from or in addition to those
available to the Company, or (b) if ALLIED Life has been given notice of the
commencement of an action or proceeding and has failed promptly to assume the
defense thereof as herein provided. In the event the Indemnified Party is
entitled to employ outside counsel pursuant to the previous sentence and the
conduct of such Indemnified Party is not found to have resulted solely from bad
faith, gross negligence or willful misconduct, the fees and related charges of
such separate counsel will be paid by ALLIED Life. ALLIED Life will not (i)
without the Indemnified Party's prior written consent, which will not be
unreasonably withheld, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding in respect of
which indemnification or contribution could be sought under this Indemnification
Agreement (whether or not any Indemnified Party is an actual or potential party
to such claim, action or proceeding), unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party from all
liability arising out of such claim, action or proceeding, or (ii) be liable
under this Indemnification Agreement for any settlement of any such action
effected without its written consent (which shall not be unreasonably withheld),
but if settled with the consent of ALLIED Life or if there be a final judgment
in favor of the plaintiff in any such action in which the conduct of the
Indemnified Party is not found to have resulted solely from bad faith, gross
negligence or willful misconduct, ALLIED Life shall indemnify and hold harmless
each Indemnified Party from and against any Damages by reason of such settlement
or judgment.
ALLIED Life also agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to ALLIED Life
for or in connection with advice or
<PAGE> 9
Exhibit A
May 28, 1998
Page 3
services rendered by an Indemnified Party pursuant to the Agreement, except to
the extent that such liability arises solely from such Indemnified Party's bad
faith, gross negligence or willful misconduct.
If the indemnification of an Indemnified Party provided for in this
Indemnification Agreement is for any reason unavailable or insufficient to hold
it harmless, ALLIED Life agrees to contribute to the Damages for which such
indemnification is so held to be unavailable or insufficient in such proportion
as is appropriate to reflect (i) the relative benefits to ALLIED Life and its
shareholders, on the one hand, and to the Indemnified Party, on the other hand,
of the matters contemplated by this Indemnification Agreement or (ii) if the
allocation provided by the immediately preceding clause is not permitted by
applicable law, not only such relative benefits but also relative fault of
ALLIED Life, on the one hand, and the Indemnified Party, on the other hand, as
well as any other relevant equitable considerations; provided, however, that to
the extent permitted by applicable law, in no event will the Indemnified
Parties be required to contribute an aggregate amount in excess of the
aggregate fees and out-of-pocket expenses paid to Fox-Pitt, Kelton under the
Agreement. For purposes of this paragraph, the relative benefits to ALLIED Life
and its shareholders, on the one hand, and to the Indemnified Party on the
other hand, of the matters contemplated by this Indemnification Agreement shall
be deemed to be in the same proportion as the total value of the aggregate cash
consideration and value of securities or any other property payable,
exchangeable or transferable in any proposed or potential transactions and
benefits received by ALLIED Life bear to the fees paid to the Indemnified Party
under the Agreement. Relative fault shall be determined by reference to whether
the relevant untrue or alleged untrue statement or omission or alleged omission
relates to information supplied by ALLIED Life or an Indemnified Party, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. ALLIED Life and
Fox-Pitt, Kelton agree that it would not be just and equitable if contribution
pursuant to this Indemnification Agreement were to be determined by pro rata
allocation (even if the Indemnified Parties were treated as one person for such
purpose) or any other allocation method that does not take into account the
equitable considerations referred to above.
In the event that an Indemnified Party is requested or required to appear as a
witness or deponent or respond to document requests in
<PAGE> 10
Exhibit A
May 28, 1998
Page 4
any action brought by or on behalf of or against ALLIED Life or another related
party in which such Indemnified Party is not named as a defendant, ALLIED Life
will promptly upon request, and subject to the terms and conditions of this
Agreement, reimburse Fox-Pitt, Kelton and any Indemnified Party for all
expenses incurred by them in connection with such Indemnified Party's appearing
and preparing to appear as such a witness or deponent or responding to document
requests including without limitation, the fees and expenses of its counsel,
and will compensate Fox-Pitt, Kelton for the time of any professionals
appearing in such a proceeding or otherwise attending to such matters at
Fox-Pitt, Kelton's standard hourly rates in effect at that time.
The provisions of this Indemnification Agreement may be amended only in writing
and shall be governed by and construed in accordance with the laws of the State
of New York applicable to contracts executed in and to be performed in that
state.
Neither termination nor modification nor the completion of the engagement of
Fox-Pitt, Kelton under the Agreement shall affect the provisions hereof, which
shall survive any such termination, modification or completion and remain
operative and in full force and effect.
Agreed and Accepted by Fox-Pitt, Kelton Inc.
By: -----------------------------------------------
Date: -----------------------------------------------
Agreed and Accepted by ALLIED Life Financial Corporation
By: -----------------------------------------------
Date: -----------------------------------------------
<PAGE> 11
EXHIBIT B
Fox-Pitt, Kelton Inc.
Corporate Finance Department
Professional Hourly Rates*
Effective January 1, 1998
Managing Director $500
Director 400
Senior Vice President 300
Vice President 250
Associate 200
Senior Analyst 150
Analyst 100
* Rates are subject to change
<PAGE> 1
ALLIED LIFE LETTERHEAD
June 10, 1998
Dear Stockholder:
We are pleased to inform you that ALLIED Life Financial Corporation has
entered into an Agreement and Plan of Merger with Nationwide Mutual Insurance
Company pursuant to which a wholly owned subsidiary of Nationwide has commenced
a tender offer to purchase all of the outstanding shares of Common Stock of
ALLIED Life Financial Corporation for $30 per share in cash. The tender offer
will be followed by a merger in which the holders of any shares of Common Stock
not tendered pursuant to the tender offer will receive $30 per share in cash. As
a result of the merger, ALLIED Life Financial Corporation will become a wholly
owned subsidiary of Nationwide.
The Board of Directors of ALLIED Life Financial Corporation has determined
that the Nationwide merger is advisable and that the terms of tender offer and
the merger are fair to, and in the best interests of, ALLIED Life Financial
Corporation and its stockholders, and recommends that stockholders accept the
Nationwide offer and tender their shares of Common Stock pursuant to it and (if
required) approve the merger agreement and the merger.
The purchase of shares in the tender offer is subject to the satisfaction
of several conditions, including, among others, the receipt of all insurance
regulatory approvals necessary for Nationwide to obtain control of ALLIED Life
Financial Corporation.
Enclosed are the Nationwide Offer to Purchase dated June 10, 1998, Letter
of Transmittal and other related documents. These documents set forth the terms
and conditions of the tender offer. Attached is a copy of the Company's Schedule
14D-9, as filed with the Securities and Exchange Commission. The Schedule 14D-9
describes in more detail the reasons for the Board's conclusions and contains
other important information relating to the tender offer. We urge you to
consider this information carefully.
The Board of Directors and the management and employees of ALLIED Life
Financial Corporation thank you for your support.
Sincerely,
JOHN E. EVANS
John E. Evans
Chairman of the Board
