<PAGE> 1
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
CHECK THE APPROPRIATE BOX:
[X] PRELIMINARY INFORMATION STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14C-5(D)(2)).
[ ] DEFINITIVE INFORMATION STATEMENT
ALLIED LIFE FINANCIAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] NO FEE REQUIRED
[X] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14C-5(G) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
COMMON STOCK, WITHOUT PAR VALUE
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
774,776 SHARES OF COMMON STOCK, WITHOUT PAR VALUE
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED PURSUANT TO
EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING FEE IS
CALCULATED AND STATE HOW IT WAS DETERMINED):
$30.00 PER SHARE
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
$23,243,280
(5) TOTAL FEE PAID:
$4,648.66
[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE
0-11(a)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PREVIOUSLY
PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
<PAGE> 2
[LOGO OF ALLIED LIFE FINANCIAL CORPORATION]
ALLIED LIFE FINANCIAL CORPORATION
701 Fifth Ave., Dept. 2003
Des Moines, IA 50391-2003
October [ ], 1998
To Our Stockholders:
You are cordially invited to attend a special meeting (the "Special
Meeting") of the stockholders of ALLIED Life Financial Corporation (the
"Company"), to be held on October 30, 1998 at 9:00 a.m., local time, at the
Company's offices, located at 701 Fifth Avenue, Des Moines, Iowa 50391-2003.
At the Special Meeting, those of you who are holders of the Company's
common stock, without par value (the "Common Shares") and the Company's 6.75%
Series Preferred Stock without par value (the "6.75% Preferred Shares" or the
"Preferred Shares" and together with the Common Shares, the "Shares"), at the
close of business on October 9, 1998 will be entitled to consider and vote upon
a proposal to approve and adopt an Agreement and Plan of Merger, dated as of
June 3, 1998, as amended as of August 31, 1998 (as so amended, the "Merger
Agreement"), by and among the Company, Nationwide Mutual Insurance Company, an
Ohio mutual insurance company ("Nationwide"), and Nationwide Life Acquisition
Corporation, an Ohio corporation and a wholly owned subsidiary of Nationwide
("Acquisition Sub"). Pursuant to the Merger Agreement, Acquisition Sub will be
merged with and into the Company (the "Merger"), with the Company surviving the
Merger as a subsidiary of Nationwide. In the Merger, each Common Share
outstanding on the effective date of the Merger (the "Effective Date") (other
than Common Shares held by stockholders who perfect their appraisal rights under
Iowa law, Common Shares then held by Acquisition Sub or Nationwide and Common
Shares held in the Company's treasury) will be converted into the right to
receive $30.00 per share in cash, without interest. The 6.75% Preferred Shares
will not be converted into the right to receive cash as part of the Merger.
Details of the Merger and other important information are set forth in the
enclosed Information Statement, which you are urged to read carefully.
As previously communicated in the Solicitation/Recommendation Statement
on Schedule 14D-9, mailed to stockholders in June of this year, your Board of
Directors believes that the Merger is in the best interests of the Company and
its stockholders. In arriving at its decision to recommend the Merger, the Board
of Directors carefully reviewed and considered the terms and conditions of the
Merger Agreement and the factors described in the enclosed Information
Statement.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition of the Company by Nationwide. On June 10, 1998,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding Common Shares at a price of $30.00 per Common Share. Pursuant to the
Offer, which expired at 5:00 p.m., New York City time, on September 30, 1998
(the "Expiration Date"), Acquisition Sub acquired approximately ___% of the
outstanding Common Shares. In addition, pursuant to the completion of the merger
of ALLIED Mutual Insurance Company ("ALLIED Mutual") with and into Nationwide on
October 1, 1998, Nationwide owns approximately ___% of the outstanding Common
Shares and 100% of the 6.75% Preferred Shares. As a result of the purchase by
Acquisition Sub of Common Shares in the Offer and the merger of ALLIED Mutual
with and into Nationwide, as of the Record Date Nationwide and Acquisition Sub
will own ___% of the outstanding Common Shares and 100% of the 6.75% Preferred
Shares, representing approximately ___% of the voting power of all outstanding
securities of the Company.
Nationwide and Acquisition Sub have agreed to vote all Common Shares
acquired in the Offer in favor of the Merger. Approval of the Merger Agreement
requires the affirmative vote of the holders of a majority of the voting power
of the outstanding Common Shares and 6.75% Preferred Shares voting together as a
class. Accordingly,
2
<PAGE> 3
Nationwide and Acquisition Sub will have sufficient voting power at the Special
Meeting to approve the Merger Agreement without the vote of any other
stockholder of the Company.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
Sincerely,
SAMUEL J. WELLS
President
3
<PAGE> 4
ALLIED LIFE FINANCIAL CORPORATION
701 FIFTH AVENUE
DES MOINES, IOWA 50391-2003
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 30, 1998
Notice is hereby given that a special meeting (the "Special Meeting")
of stockholders of ALLIED Life Financial Corporation (the "Company") will be
held on October 30, 1998 at 9:00 a.m., local time, at the Company's offices,
located at 701 Fifth Avenue, Des Moines, Iowa 50391-2003, to consider and act
upon the following:
1. The approval of an Agreement and Plan of Merger, dated as of June 3,
1998 as amended as of August 31, 1998 (as so amended, the "Merger Agreement"),
by and among the Company, Nationwide Mutual Insurance Company, an Ohio mutual
insurance company ("Nationwide"), and Nationwide Life Acquisition Corporation,
an Ohio corporation and a wholly owned subsidiary of Nationwide ("Acquisition
Sub"), pursuant to which Acquisition Sub will be merged with and into the
Company (the "Merger"), with the Company surviving the Merger as a subsidiary of
Nationwide. In the Merger, each share of the Company's common stock without par
value (the "Common Shares") outstanding on the effective date of the Merger (the
"Effective Date") (other than Common Shares held by stockholders who perfect
their appraisal rights under Iowa law, Common Shares then held by Nationwide and
Common Shares held in the Company's treasury) will be converted into the right
to receive $30.00 per share in cash, without interest. The Company's 6.75%
Series Preferred Stock with no par value (the "6.75% Preferred Shares") will
not, however, be converted into the right to receive cash as part of the Merger.
Details of the Merger and other important information are set forth in the
enclosed Information Statement, which you are urged to read carefully.
2. The transaction of such other business as may properly come before
the Special Meeting and any adjournment thereof. The Company's Board of
Directors is not aware of, and does not intend to raise, any other matters to be
considered at the Special Meeting.
Reference is hereby made to the accompanying Information Statement for
more complete information concerning the matters to be acted upon at the Special
Meeting.
Only holders of record of Common Shares and 6.75% Preferred Shares
(except as indicated below) at the close of business on October 9, 1998 (the
"Record Date") are entitled to vote at the Special Meeting on the approval and
adoption of the Merger Agreement, including the consummation of the transactions
contemplated thereby.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition of the Company by Nationwide. On June 10, 1998,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding Common Shares at a price of $30.00 per Common Share. Pursuant to the
Offer, which expired at 5:00 p.m., New York City time, on September 30, 1998
(the "Expiration Date"), Acquisition Sub acquired approximately ___% of the
outstanding Common Shares. In addition, pursuant to the completion of the merger
of ALLIED Mutual Insurance Company ("ALLIED Mutual") with and into Nationwide on
October 1, 1998, Nationwide owns approximately ___% of the outstanding Common
Shares and 100% of the 6.75% Preferred Shares. As a result of the purchase by
Acquisition Sub of Common Shares via the Offer and the merger of ALLIED Mutual
with and into Nationwide, it is anticipated that as of the Record Date
Nationwide and Acquisition Sub will own ___% of the outstanding Common Shares
and 100% of the 6.75% Preferred Shares, representing approximately ___% of the
voting power of all outstanding securities of ALLIED Life.
Nationwide and Acquisition Sub have agreed to vote all Common Shares
acquired in the Offer in favor of the Merger. Approval of the Merger Agreement
requires the affirmative vote of the holders of a majority of the voting power
of the outstanding Common Shares and 6.75% Preferred Shares voting together as a
class. Accordingly, Nationwide and Acquisition Sub will have sufficient voting
power at the Special Meeting to approve the Merger Agreement without the vote of
any other stockholder of the Company.
4
<PAGE> 5
Pursuant to Section 490.1321 of the Iowa Business Corporation Act (the
"IBCA"), if the Merger Agreement is approved by a majority of the voting power
of the holders of Common Shares and Preferred Shares at the Special Meeting and
the Merger is effected by the Company, any stockholder (i) who files with the
Company, before the taking of the vote on the approval of the Merger Agreement,
written objection to the Merger stating that such stockholder intends to demand
payment for such stockholder's shares if the Merger is consummated, and (ii) in
the case of holders of Common Shares, whose shares are not voted in favor of the
Merger Agreement (including any holder of Common Shares who abstains, which
abstention will be treated as a "no" vote for purposes of determining whether
the Merger Agreement has been adopted or approved), may have the right to demand
in writing from the Company, within ___ days after the date of mailing to such
stockholder of notice in writing that the Merger has been authorized at a
shareholders' meeting effective, payment for such stockholder's shares and an
appraisal of the value thereof. The Company and any such stockholder shall in
such cases have the rights and duties and shall follow the procedures set forth
in Sections 490.1301 to 490.1331, inclusive, of the IBCA.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
By order of the Board of Directors
Sally J. Malloy
Secretary
October [ ], 1998
Des Moines, Iowa
5
<PAGE> 6
ALLIED LIFE FINANCIAL CORPORATION
701 FIFTH AVENUE, Dept. 2003
DES MOINES, IOWA 50391-2003
INFORMATION STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 30, 1998
INTRODUCTION
This Information Statement is being furnished on behalf of the Board of
Directors (the "Board") of ALLIED Life Financial Corporation, an Iowa
corporation (the "Company"), to holders as of the Record Date (as defined below)
of common stock with no par value (the "Common Shares") and 6.75% Series
Preferred Stock, without par value (the "6.75% Preferred Shares" or the
"Preferred Shares"), of the Company, in connection with a special meeting (the
"Special Meeting") of stockholders of the Company to be held on October 30, 1998
at the Company's offices, located at 701 Fifth Avenue, Des Moines, Iowa
50391-2003, at 9:00 a.m., local time. The date on which this Information
Statement is first being mailed or given to stockholders is on or about October
9, 1998.
At the Special Meeting, holders of Common Shares and Preferred Shares
(collectively the "Shares") will be entitled to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger dated as of June
3, 1998 as amended as of August 31, 1998 (as so amended, the "Merger Agreement")
by and among the Company, Nationwide Mutual Insurance Company, an Ohio mutual
insurance company ("Nationwide"), and Nationwide Life Financial Corporation, an
Ohio corporation and a wholly owned subsidiary of Nationwide ("Acquisition
Sub"). Pursuant to the Merger Agreement, Acquisition Sub will be merged with and
into the Company (the "Merger"), with the Company surviving the Merger (the
"Surviving Company" or the "Surviving Corporation") as a subsidiary of
Nationwide. In the Merger, each Common Share outstanding on the effective date
of the Merger (the "Effective Date" or the "Effective Time") (other than Common
Shares held by stockholders who perfect their appraisal rights under Iowa law,
Common Shares then held by Nationwide and Common Shares held in the Company's
treasury) will be converted into the right to receive $30.00 per Common Share in
cash, without interest (the "Offer Price" or the "Merger Consideration"). The
6.75% Preferred Shares will not be converted into the right to receive cash as
part of the Merger.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition of the Company by Nationwide. On June 10, 1998,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding Common Shares at a price of $30.00 per Common Share. Pursuant to the
Offer, which expired at 5:00 p.m., New York City time, on September 30, 1998
(the "Expiration Date"), Acquisition Sub acquired approximately ___% of the
outstanding Common Shares. In addition, pursuant to the completion of the merger
of ALLIED Mutual Insurance Company ("ALLIED Mutual") with and into Nationwide on
October 1, 1998, Nationwide owns approximately ___% of the outstanding Common
Shares and 100% of the 6.75% Preferred Shares. As a result of the purchase by
Acquisition Sub of Common Shares in the Offer and the merger of ALLIED Mutual
with and into Nationwide, it is anticipated that as of the Record Date
Nationwide and Acquisition Sub will own ___% of the outstanding Common Shares
and 100% of the 6.75% Preferred Shares, representing approximately ___% of the
voting power of all outstanding securities of ALLIED Life.
Nationwide and Acquisition Sub have agreed to vote all Common Shares
and all 6.75% Preferred Shares owned by them in favor of the Merger. Approval of
the Merger Agreement requires the affirmative vote of the holders of a majority
of the voting power of the outstanding Common Shares and 6.75% Preferred Shares
voting together as a class. Accordingly, Nationwide and Acquisition Sub will
have sufficient voting power at the Special Meeting to approve the Merger
Agreement without the vote of any other stockholder of the Company.
6
<PAGE> 7
Only holders of record of Common Shares or Preferred Shares at the close of
business on October 9, 1998 (the "Record Date") are entitled to vote at the
Special Meeting on the approval and adoption of the Merger Agreement, including
the consummation of the transactions contemplated thereby.
No person has been authorized to give any information or to make any
representation other than those contained in this Information Statement in
connection with the matters to be acted upon at the Special Meeting and, if
given or made, such information or representation must not be relied upon as
having been authorized by the Company or any other person. All information
pertaining to Nationwide and Acquisition Sub contained in this Information
Statement has been supplied by Nationwide.
THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT HAS NOT BEEN
PASSED UPON BY THE SECURITIES AND EXCHANGE COMMISSION OR BY THE INSURANCE
DEPARTMENT OF ANY STATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
All information contained in this Information Statement with respect to
the Company has been supplied by the Company and all information with respect to
Nationwide has been supplied by Nationwide.
The date of this Information Statement is [ ], 1998.
7
<PAGE> 8
TABLE OF CONTENTS
Page
----
SUMMARY
THE SPECIAL MEETING
Time, Date and Place of the Special Meeting ...................
Matters to be Considered at the Special Meeting ...............
Voting and Record Date ........................................
THE MERGER
The Company ...................................................
Nationwide and Acquisition Sub ................................
Background and Reasons for the Merger .........................
Reasons for the Board's Approval of the Merger Agreement ......
Opinion of Fox-Pitt, Kelton....................................
Interests of Certain Persons in the Merger ....................
Certain Regulatory Matters ....................................
Litigation ....................................................
Accounting Treatment ..........................................
Certain United States Federal Income Tax Consequences .........
Effect of the Merger on the Company's Stockholders ............
Exchange of Certificates and Payment of Merger Consideration ..
Dissenting Stockholders' Rights ...............................
THE MERGER AGREEMENT
The Offer .....................................................
The Merger ....................................................
Effective Time of the Merger ..................................
Dissenting Stockholders' Rights ...............................
Representations and Warranties ................................
Covenants of the Company ......................................
Prohibition on Solicitation ...................................
Stockholder Approval; Preparation of Proxy Statement ..........
Access to Information .........................................
Reasonable Efforts ............................................
Board of Directors; Corporate Governance ......................
Treatment of Stock Options; Certain Benefits ..................
Indemnification and Insurance .................................
Conditions to the Merger ......................................
Termination ...................................................
Fees and Expenses .............................................
Amendment .....................................................
Shareholder Agreement .........................................
Plans for the Company .........................................
Going Private Transactions ....................................
Dividends and Distributions ...................................
CERTAIN INFORMATION WITH RESPECT TO THE COMPANY'S STOCK ............
SELECTED CONSOLIDATED FINANCIAL DATA ...............................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......
EXPERTS.............................................................
OTHER MATTERS ......................................................
Annex I Agreement and Plan of Merger
Annex II Sections 490.1301 through 490.1331 of the Iowa Business Corporation
Act
Annex III Opinion of Fox-Pitt, Kelton Inc.
AVAILABLE INFORMATION
---------------------
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files with the Commission reports, proxy statements and other
information. Such reports, proxy statements and other information filed with the
Commission by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Suite 1300,
Seven World Trade Center, New York, New York 10048, and Room 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago Illinois 60661. The Commission
maintains an Internet site on the World Wide Web containing reports, proxy and
information statements and other information filed electronically by the Company
with the Commission. The address of the World Wide Web site maintained by the
Commission is http://www.sec.gov. The Company's Common Stock is listed on the
Nasdaq Stock Market (the "Nasdaq") and such reports, proxy statements and other
information concerning the Company also are available for inspection and copying
at the offices of the Nasdaq 1735 K Street, N.W., Washington, DC 20005. Reports,
proxy statements and other information concerning the Company are available from
the Company without charge, upon written or oral request to Jeffrey Roling,
ALLIED Life Financial Corporation, 701 Fifth Avenue, Dept. 2003, Des Moines, IA
50391-2003, telephone (515) 280-4375.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
This Information Statement incorporates by reference documents relating to
the Company that are not presented herein or delivered herewith. Such documents,
excluding exhibits unless specifically incorporated therein, are available,
without charge to any person, including beneficial owners of Common Stock to
whom this Information Statement is delivered, upon written or oral request, to
Jeffrey Roling, ALLIED Life Financial Corporation, 701 Fifth Avenue, Dept.
2003, Des Moines, IA 50391-2003, telephone (515) 280-4375. In order to ensure
timely delivery of the documents prior to the Special Meeting, any request
should be made by October 25, 1998.
The following documents filed with the Commission by the Company under the
Exchange Act are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998.
(c) Current Reports on Form 8-K dated January 5, 1998, January 29, 1998,
April 13, 1998, June 3, 1998 and June 4, 1998.
(d) The description of the Company's Common Stock set forth in Item 1 of
the Company's Registration Statement on Form 8-A, dated September 16,
1993 and any amendment or report filed for the purpose of updating
such description.
(e) The Company's definitive Proxy Statement relating to its 1998 Annual
Meeting of Shareholders held on May 5, 1998.
(f) The Company's Solicitation/Recommendation Statement on Schedule 14D-9
and the amendments thereto (the "Schedule 14D-9").
Such incorporation by reference shall not be deemed to incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and until the date of the
Special Meeting shall be deemed to be incorporated by reference herein and made
a part hereof from the date any such document is filed. The information
relating to the Company contained in this Information Statement does not
purport to be complete and should be read together with the information in the
documents incorporated by reference herein. Any statement contained herein or
in a document incorporated herein by reference shall be deemed to be modified
or superseded for purposes hereof to the extent that a subsequent statement
contained herein or in any other subsequently filed document incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part hereof.
Any statements contained in this Information Statement involving matters
of opinion, whether or not expressly so stated, are intended as such and not as
representations of fact.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SHARES OF COMPANY COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS INFORMATION STATEMENT NOR ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO
SHALL IMPLY OR CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR IN THE INFORMATION SET FORTH HEREIN SUBSEQUENT TO THE
DATE HEREOF.
<PAGE> 9
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in public filings and releases by
the Company, contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future,
premiums earned, investment income, mortality and persistency, market trends in
the insurance industry and various business trends. Forward-looking statements
may be made by management orally or in writing including, but not limited to,
the Management's Discussion and Analysis of Financial Condition and Results of
Operations section and other sections of the Company's filings with the
Commission under the Exchange Act and the Securities Act of 1933 (the
"Securities Act").
Actual results and trends in the future may differ materially depending
on a variety of factors including, but not limited to, changes in interest
rates, loss ratios, actuarial results, the Company's successful execution of
internal operating plans, changes in the market for the Company's products,
regulatory uncertainties and legal proceedings. Future results will also be
dependent upon the ability of the Company to continue to penetrate existing and
new markets. Many of these factors are described in greater detail in the
Company's filings with the Commission under the Exchange Act and the Securities
Act referenced herein under "Incorporation of Certain Documents by Reference".
SUMMARY
The following is a summary of certain information contained in this
Information Statement. This summary is not intended to be a complete statement
of all information, facts or materials relevant to the matters to be voted upon
at the Special Meeting and is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Information Statement, the
Annexes hereto and the documents referred to herein. Stockholders are urged to
read this Information Statement and the Annexes hereto in their entirety. All
references to the "Company" include the Company and its subsidiaries unless
otherwise indicated by the context.
THE SPECIAL MEETING
Time, Date and Place of the
Special Meeting....................... The Special Meeting will be held at the
Company's offices, located at 701 Fifth
Avenue, Des Moines, IA 50391-2003 on
October 30, 1998, at 9:00 a.m., local
time.
Matters To Be Considered at
The Special Meeting................... The purpose of the Special Meeting is to
consider and vote upon a proposal to
approve and adopt the Merger Agreement,
including the consummation of the
transactions contemplated thereby. See
"THE MERGER" and "THE MERGER AGREEMENT."
Record Date; Shares Entitled to Vote.. Only holders of record of Common Shares
or 6.75% Preferred Shares on the Record
Date are entitled to vote at the Special
Meeting on the approval and adoption of
the Merger Agreement, including the
consummation of the transactions
contemplated thereby. See "THE SPECIAL
MEETING--Voting and Record Date."
Required Vote......................... The affirmative vote of the holders of
at least a majority of the voting power
of the Common Shares and 6.75% Preferred
Shares outstanding on the Record Date,
voting together as a single class, are
required to approve the Merger
Agreement. Abstentions shall be treated
as "no" votes for purposes of
determining whether the Merger has been
approved. Nationwide and Acquisition Sub
will have sufficient voting power at the
Special Meeting to approve the Merger
Agreement without the vote of any other
stockholder of the Company. See "THE
SPECIAL MEETING--Voting and Record
Date--Approval of the Merger."
THE MERGER
The Company........................... The Company, an Iowa corporation, is
primarily involved in the business of
underwriting, marketing and distributing
a select portfolio of life insurance and
annuity products to individuals through
its subsidiaries. The address of the
Company's principal executive offices is
701 Fifth Avenue, Des Moines, IA
50391-2003, and its telephone number is
(515) 280-4211. See "THE MERGER--The
Company."
Nationwide and Acquisition
Sub................................... Nationwide, an Ohio mutual insurance
company, is the lead company in the
Nationwide Insurance Enterprise, an
insurance and financial services
organization. Together with its
affiliates, Nationwide comprises the
sixth largest property and casualty
insurance group and the fourth largest
9
<PAGE> 10
automobile insurance group in the United
States. Acquisition Sub, a wholly owned
subsidiary of Nationwide, was organized
to acquire the Company and has not
conducted any unrelated activities since
its organization. The address of the
principal executive offices of
Nationwide and Acquisition Sub is One
Nationwide Plaza, Columbus, OH 43215,
and their telephone number is (614)
249-7111. See "THE MERGER--Nationwide
and Acquisition Sub."
Background and Reasons for
The Merger............................ The Offer and Merger represent the
culmination of a series of negotiations
between Nationwide and the Company that
began in January 1998 at Nationwide's
initiative. See "THE MERGER--Background
and Reasons for the Merger." Nationwide
intends to expand the Company's business
and utilize the Company's infrastructure
and capabilities to improve the
performance of Nationwide's existing
life insurance and annuity operations.
See "THE MERGER AGREEMENT--Plans for the
Company."
Board of Directors Approval
Of the Merger Agreement............... The Board has determined that the terms
of the Merger are fair to and in the
best interests of the Company and its
stockholders and has unanimously
approved the Merger Agreement and the
consummation of the transactions
contemplated thereby. The Board's
decision to enter into the Merger
Agreement was based upon its evaluation
of a number of factors discussed in
detail below, including the opinion of
the Company's financial advisor. See
"THE MERGER--Background and Reasons for
the Merger," "--Reasons for the Board's
Approval of the Merger Agreement" and
"--Opinion of Fox-Pitt, Kelton."
Opinion of Financial Advisor.......... Fox-Pitt, Kelton Inc. has rendered a
written opinion dated June 3, 1998 to
the Board to the effect that, in its
opinion, subject to the matters set
forth in its opinion, the consideration
to be received by the stockholders
pursuant to the Merger is fair to such
stockholders (other than ALLIED Mutual
and its affiliates) from a financial
point of view. See "THE MERGER--Opinion
of Fox-Pitt, Kelton." A copy of such
opinion, which sets forth the
assumptions made, the matters considered
and the limits of Fox-Pitt, Kelton
Inc.'s review, is attached to this
Information Statement as Annex III and
should be read in its entirety.
Interests of Certain Persons
In the Merger......................... Nationwide as successor-in-interest to
ALLIED Mutual, and certain of the
directors and officers of the Company
occupy roles or have interests which
could be potentially in conflict with
their roles with respect to the Company,
and/or have interests different from or
potentially in conflict with the
interests of Company stockholders. Such
potential conflicts derive from shared
management, severance arrangements,
participation in the Company's Employee
Stock Ownership Plan, entitlement to
certain Company stock options,
entitlement to continued Company
benefits, and protection through
indemnification and insurance. See "THE
MERGER--Interests of Certain Persons in
the Merger" and "THE MERGER
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AGREEMENT--Treatment of Stock Options;
Certain Benefits; Indemnification and
Insurance."
Certain Regulatory Matters............ The Offer and Merger are subject to
certain state regulatory approvals. In
its Findings of Fact and Conclusions of
Law dated September 11, 1998, the Iowa
Commissioner of Insurance approved
Nationwide's acquisition of the Company.
To the extent other states may require
that notice be given to, or approval be
obtained from, the insurance department
of such state, the Company believes that
the Merger can be effected in accordance
with applicable laws and that no
material delay in consummating the
Merger will result therefrom. See "THE
MERGER--Certain Regulatory Matters."
Accounting Treatment.................. The Merger will be accounted for by
Nationwide as a purchase of the Company
under statutory accounting practices.
See "THE MERGER--Accounting Treatment."
Certain United States
Federal Income Tax
Requirements.......................... The receipt of cash by holders of Common
Shares pursuant to the Merger or upon
the exercise of dissenters' rights will
be a taxable transaction for Federal
income tax purposes and may also be a
taxable transaction under applicable
state, local, foreign or other tax laws.
All stockholders should consult their
own tax advisors as to the particular
tax consequences of the Merger to them,
including the applicability and effect
of the alternative minimum tax and of
any state, local and foreign tax laws.
See "THE MERGER--Federal Income Tax
Consequences."
Effect of the Merger on
The Company's Stockholders............ As a result of the Merger, the entire
equity interest in the Company will be
owned by Nationwide and the Company's
current stockholders will no longer have
any equity interest in the Company. See
"THE MERGER--Effect of the Merger on the
Company's Stockholders."
Dissenting Stockholders' Rights....... Stockholders who comply with Sections
490.1301 through 490.1331 of the Iowa
Business Corporation Act ("IBCA") are
entitled to appraisal rights. Failure to
adhere strictly to those statutory
requirements may result in the loss of
appraisal rights. Holders of Common
Shares who exercise such rights will not
be entitled to receive the Merger
Consideration (as defined herein), but
may demand payment for their Common
Shares in writing. Disagreements between
the Company and dissenting stockholders
as to fair value will be resolved in a
court proceeding, as provided in the
IBCA. See "THE MERGER--Dissenting
Stockholders' Rights," "THE MERGER
AGREEMENT--Dissenting Stockholders'
Rights" and Annex II to this Information
Statement.
THE MERGER AGREEMENT
The Merger............................ Pursuant to the terms of the Merger
Agreement, following the satisfaction or
waiver of the conditions to the Merger
(see "THE MERGER AGREEMENT--Conditions
to the
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<PAGE> 12
Merger"), Acquisition Sub will be merged
with and into the Company, and each then
outstanding Common Share (other than
Common Shares held directly by
stockholders who perfect their appraisal
rights under Iowa law, Common Shares
then held by Nationwide and Common
Shares held in the Company's treasury)
will be converted into the right to
receive $30.00 per Common Share in cash,
without interest (the "Merger
Consideration"). See "THE MERGER
AGREEMENT--The Merger."
Effective Time of the Merger.......... The Effective Time of the Merger will be
the last to occur of (a) the filing of
the Certificate of Merger with the Ohio
Secretary of State, (b) the filing of
the Articles of Merger as required by
Iowa law and the recording in the
offices of the register of deeds of the
counties in the State of Iowa in which
the principal offices of Nationwide and
the Company are located and (c) such
later time as the parties designate in
such filings. The parties to the Merger
Agreement agreed to use all reasonable
efforts to assure that the Effective
Time occurs as soon as practicable. See
"THE MERGER AGREEMENT--Effective Time of
the Merger.
Exchange of Certificates
And Payment of Merger
Consideration......................... Pursuant to the Merger Agreement,
Nationwide shall make available on a
timely basis to _______________ (the
"Paying Agent") funds necessary to pay
the holders of Common Shares entitled
thereto. Payment of the Merger
Consideration will be made by the Paying
Agent after it receives certificates
representing Common Shares and other
required documents that will be
furnished to stockholders by the Paying
Agent. See "THE MERGER
AGREEMENT--Exchange of Certificates and
Payment of Merger Consideration."
Conditions to the Merger.............. The consummation of the Merger is
subject to the prior approval of the
Merger Agreement by the holders of
Common Shares and 6.75% Preferred Shares
and the satisfaction or waiver of
certain other customary closing
conditions. Acquisition Sub has
sufficient voting power to approve the
Merger Agreement without the vote of any
other stockholder of the Company. See
"THE MERGER AGREEMENT--Conditions to the
Merger."
Termination of the Merger
Agreement............................. Notwithstanding approval of the Merger
Agreement and the transactions
contemplated thereby by the stockholders
of the Company, the Merger Agreement may
be terminated and the Merger abandoned
at any time prior to the Effective Time:
(a) by mutual consent of Nationwide and
the Company; (b) by Nationwide if the
Company Board withdraws its
recommendation to the Company's
shareholders to approve the Merger; (c)
by Nationwide or the Company if
consummation of the Merger is barred by
a permanent injunction which is final
and non-appealable; or (d) by Nationwide
or the Company under certain
circumstances involving breaches of or
defaults under the Merger
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<PAGE> 13
Agreement. See "THE MERGER
AGREEMENT--Termination of the Merger
Agreement."
Fees and Expenses..................... The Merger Agreement provides that, if
the Merger is not consummated, all costs
and expenses incurred in connection with
the Merger Agreement and the
transactions contemplated thereby shall
be paid by the party incurring such
costs or expenses, except for expenses
incurred in connection with the
printing, mailing and solicitation of
proxies and all filing fees and related
expenses which shall be borne equally by
Nationwide and the Company. The Company
will pay a $3 million termination fee if
Nationwide terminated the Merger
Agreement (i) following a withdrawal by
the Board of its recommendation that the
shareholders approve the Merger
Agreement, or (ii) by virtue of an
uncured breach of covenant by the
Company. Moreover, the Company shall pay
a termination fee 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 its
subsidiaries or shareholders publicly
announces, enters into a letter of
intent relating to, enters into a
definitive agreement providing for, or
consummates, a transaction, which as
announced, or as provided in such letter
or agreement or as consummated, provides
for or relates to the disposition of a
controlling interest in 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. See
"THE MERGER AGREEMENT--Fees and
Expenses."
Stock Options......................... Effective as of the Effective Time, each
option to acquire Common Shares
outstanding under any of the Company's
incentive plans and similar
arrangements, whether or not then
exercisable or vested, will become fully
exercisable and vested and the holder
thereof shall be entitled to receive
consideration in the amount of the
excess of the Merger Consideration over
the exercise price of such option. See
"THE MERGER AGREEMENT--Treatment of
Stock Options; Certain Benefits."
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<PAGE> 14
MARKET PRICES OF THE
COMMON SHARES......................... The Common Shares are quoted on the
Nasdaq Stock Market ("Nasdaq") under the
symbol "ALFC". The last reported closing
price of the Common Shares on June 2,
1998 (the last trading day prior to the
public announcement of the execution of
the Merger Agreement) on the Nasdaq was
$26 per Common Share and on September
28, 1998 was $29 1/2 per Common Share.
See "CERTAIN INFORMATION WITH RESPECT TO
THE COMPANY'S STOCK."
14
<PAGE> 15
15
<PAGE> 16
THE SPECIAL MEETING
TIME, DATE AND PLACE OF THE SPECIAL MEETING
This Information Statement is being furnished to the holders of record
on the Record Date of Common Shares and 6.75% Preferred Shares in connection
with the Special Meeting to be held on October 30, 1998 at 10:00 a.m., local
time, at the Company's office, located at 701 Fifth Avenue, Des Moines, Iowa
50391-2003.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the holders of Common Shares and 6.75%
Preferred Shares will be entitled to consider and vote upon a proposal to
approve the Merger Agreement, including the consummation of the transactions
contemplated thereby. In addition, the holders of Common Shares and 6.75%
Preferred Shares will be entitled to consider and vote upon such other business
as may properly come before the meeting.
VOTING AND RECORD DATE
Approval of the Merger
The Board has fixed the close of business on October 9, 1998 as the
Record Date for the determination of stockholders entitled to notice of and to
vote at the Special Meeting. Accordingly, only holders of record of Common
Shares and 6.75% Preferred Shares at the close of business on October 9, 1998
are entitled to vote at the Special Meeting on the approval of the Merger
Agreement. As of the Record Date, there were ________ Common Shares and
_____________ 6.75% Preferred Shares issued and outstanding and entitled to vote
on the approval of the Merger Agreement.
Each holder of record of Common Shares on the Record Date is entitled
to cast one vote per share, exercisable in person or by a properly executed
proxy, with respect to the approval and adoption of the Merger Agreement. As of
the Record Date, the Common Shares were held by ______________ stockholders.
Each holder of record of 6.75% Preferred Shares on the Record Date is
entitled to cast one (1) vote per share, exercisable in person or by properly
executed proxy, with respect to the approval and adoption of the Merger
Agreement. As of the Record Date, the only holder of 6.75% Preferred Shares will
be Nationwide. As of the Record Date, Nationwide and Acquisition Sub will own
approximately ___% of the outstanding Common Shares and 100% of the 6.75%
Preferred Shares, representing approximately ___% of the voting power of all
outstanding securities of ALLIED Life. See "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding Common Shares entitled to vote is necessary to
constitute a quorum at the Special Meeting with respect to the proposal to
approve the Merger Agreement. Under the laws of the State of Iowa and the
Company's Articles of Incorporation, the affirmative votes of the holders of at
least a majority of all votes entitled to be cast by holders of Common Shares
and 6.75% Preferred Shares issued and outstanding on the Record Date, voting
together as a single class, are required to approve the Merger Agreement. It is
anticipated that Nationwide and Acquisition Sub will own Common Shares and 6.75%
Preferred Shares having sufficient voting power at the Special Meeting to
approve the Merger Agreement without the vote of any other stockholder of the
Company.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
The Board does not know of any matters, other than as described in the
Notice of Special Meeting attached to this Information Statement, which are to
come before the Special Meeting.
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<PAGE> 17
THE MERGER
THE COMPANY
The Company is an Iowa corporation with its principal executive offices
located at 701 Fifth Avenue, Des Moines, Iowa 50391-2003. Through its
subsidiaries, the company underwrites, markets and distributes a select
portfolio of life insurance and annuity products to individuals who live
primarily in rural and suburban areas of the United States. The Company has
approximately 126 employees.
NATIONWIDE AND ACQUISITION SUB
Acquisition Sub, an Ohio corporation and a wholly owned subsidiary of
Nationwide, was organized in 1998 to acquire the Company and has not conducted
any unrelated activities since its organization. All outstanding shares of
capital stock of Acquisition Sub are owned by Nationwide. The principal
executive offices of Acquisition Sub are located at the principal executive
offices of Nationwide.
Nationwide is an Ohio mutual insurance company with its principal
executive offices located at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is the controlling company of the Nationwide Insurance Enterprise, an
insurance and financial services organization (the "Enterprise"). In 1997,
Nationwide had $5.1 billion of net written premium. Nationwide is a party to the
Nationwide Intercompany Pooling Agreement (the "Nationwide Pooling Agreement")
with 12 other property and casualty insurance companies within the Enterprise
which provides that Nationwide shares in a specified percentage of the combined
underwriting results and dividends to policyowners incurred by such companies
(the "Nationwide Pool"). The insurance companies comprising the Nationwide Pool
were the sixth largest property and casualty insurance group and were the fourth
largest automobile insurance group in the United States, with approximately $8.4
billion in total net written premium at December 31, 1997 and approximately a
3.3% market share. The principal lines of business of the Nationwide Pool based
on net written premium for the year ended December 31, 1997 were personal auto
(approximately 53.9%), commercial operations (approximately 29.4%) and
homeowners (approximately 12.9%).
Nationwide was originally chartered in the State of Ohio in 1925 as the
Farm Bureau Mutual Automobile Insurance Company and it adopted its present name
in 1955. At December 31, 1997, the Enterprise employed approximately 28,000
employees and Nationwide had more than 4,300 exclusive career agents who market
the Enterprise's core property and casualty products, individual life insurance
and annuity products, as well as other financial services.
BACKGROUND AND REASONS FOR THE MERGER
The Offer and Merger represent the culmination of a series of
negotiations between Nationwide and the Company that began in January 1998 at
Nationwide's initiative. On January 26, 1998, John E. Evans, Chairman of the
Company, received a telephone call from Dimon R. McFerson, Chairman and Chief
Executive Officer of the Nationwide Insurance Enterprise. In the call, Mr.
McFerson expressed Nationwide's interest in a possible transaction with the
Company, ALLIED Mutual Insurance Company ("ALLIED Mutual") and ALLIED Group,
Inc. ("ALLIED Group," collectively with the Company and ALLIED Mutual,
"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 the Company met with representatives of Nationwide to discuss
Nationwide's interest in acquiring each of the Company, ALLIED Mutual and ALLIED
Group. After the January 28, 1998 meeting, Nationwide provided a draft
confidentiality agreement to Mr. Andersen which did not include customary
standstill provisions.
On February 6, 1998, Mr. McFerson and Mr. Andersen engaged in further
discussions by telephone regarding Nationwide's interest in acquiring the
Company, ALLIED Mutual and ALLIED Group. Mr. McFerson requested that the
Company, ALLIED Mutual and ALLIED Group agree to deal exclusively with
Nationwide. Mr. Andersen informed Mr. McFerson that the ALLIED companies would
not agree to
17
<PAGE> 18
deal exclusively with Nationwide, expressed concerns about the absence of an
acceptable confidentiality agreement and other elements of Nationwide's proposal
and stated that Nationwide's proposal could not be considered formally until it
was received in writing by the Company, ALLIED Mutual and ALLIED Group. On
February 10, 1998, ALLIED Group provided to Nationwide its own form of
confidentiality agreement, executed by ALLIED Group, which included a customary
standstill provision.
Also, on February 10, 1998, Nationwide sent draft merger agreements to
ALLIED Group, which provided for a transaction whereby Nationwide's wholly-owned
subsidiaries would acquire the Company and ALLIED Group and Nationwide 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 Common Shares for $30 per share, subject to various conditions,
including that the acquisitions 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 Nationwide of termination fees,
totaling $75 million in the aggregate, plus expenses of Nationwide in the event
of the termination of the merger agreements under certain circumstances.
On February 17, 1998, at a joint meeting of the Boards of Directors of
the Company, ALLIED Mutual and ALLIED Group, Nationwide's proposal and proposed
merger agreements were discussed. Following the joint Boards meeting, a special
meeting of the Board of Directors of the Company (the "Board") was convened. At
that meeting it was noted that Nationwide's proposal was contingent on the
consummation of transactions with all three ALLIED companies. The Board noted
that Nationwide's proposal included an exclusivity provision which restricted
the ability of the Company to discuss possible other acquisition proposals. The
Board also noted that Nationwide 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
Nationwide 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 Nationwide.
On February 19, 1998, at a special joint meeting of the Executive
Committees of the Company, ALLIED Mutual and ALLIED Group, Mr. Andersen was
authorized to advise Mr. McFerson that Nationwide's proposal had been rejected.
On February 19, 1998, Nationwide sent to ALLIED Group a form of
confidentiality agreement, signed on behalf of Nationwide and Nationwide Group
Acquisition Corporation, an Ohio corporation and a wholly owned subsidiary of
Nationwide, 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 Nationwide's proposal as
presented.
Later on February 20, 1998, Nationwide sent to ALLIED Group a letter
indicating that Nationwide 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
Nationwide wished to re-initiate contact with ALLIED. Mr. Evans indicated that
Nationwide should speak with Mr. Andersen, but requested that Nationwide delay
contacting Mr. Andersen for 30 days.
On May 18, 1998, Nationwide announced its intention to commence a
tender offer for all the shares of ALLIED Group common stock (the "ALLIED Group
Offer"). On May 19, 1998, Nationwide commenced the ALLIED Group Offer. Also on
May 18 and 19, 1998, Nationwide announced an offer to merge with ALLIED Mutual,
which owns a controlling interest in the Company.
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<PAGE> 19
On May 22, 1998, the Company retained Sidley & Austin to act as its
outside legal advisor in connection with the events relating to Nationwide's
possible acquisition of the Company.
On May 27, 1998, the Coordinating Committee of the Board (the
"Coordinating Committee") was given authority to act as the Special Committee
of the Board (the "Special Committee") in connection with the events relating
to Nationwide'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 Nationwide'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 Nationwide and to discuss employment and severance issues.
On May 28, 1998, Nationwide entered into a separate confidentiality
agreement with each of the Company, ALLIED Mutual and ALLIED Group.
From May 28 through May 31, 1998, Credit Suisse First Boston
Corporation, the investment banking firm retained by Nationwide, Fox-Pitt,
Kelton and the financial advisors to each of ALLIED Mutual and ALLIED Group
discussed the various potential transactions involving Nationwide 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 Corporation and the financial
advisors of ALLIED Group and ALLIED Mutual in order to explore a global
transaction with Nationwide, 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 Nationwide and discussed certain legal issues
relating to the Joint Marketing Agreement and other matters.
On the morning of June 2, 1998, Nationwide 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 Nationwide commenced in the afternoon of June 2. On the evening of June 2,
the Board met again to consider the potential transaction with Nationwide. After
being briefed by Sidley & Austin, the Board discussed terms and conditions under
which it would consider entering into an agreement in principle with Nationwide.
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 Nationwide
if an offer were received from Nationwide 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
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<PAGE> 20
transaction with Nationwide 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 Nationwide 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 Nationwide 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 Nationwide and its counsel. On the evening of
June 3, 1998 after having satisfactorily resolved all issues, the Company,
Nationwide and the Acquisition Sub executed the Merger Agreement.
Also on June 3, 1998, Nationwide, Nationwide Group Acquisition
Corporation (a wholly-owned subsidiary of Nationwide) and ALLIED Group Financial
Corporation entered into an Agreement and Plan of Merger, providing for the
merger of Nationwide Group Acquisition Corporation with and into ALLIED Group,
with ALLIED Group being the surviving corporation (the "ALLIED Group Merger").
In the ALLIED Group Merger, the holders of the outstanding shares of common
stock of ALLIED Group (other than Nationwide, as successor-in-interest to ALLIED
Mutual and holders exercising dissenters' rights of appraisal) will receive
$48.25 per share in cash without interest.
REASONS FOR THE BOARD'S APPROVAL OF THE MERGER AGREEMENT
The Board, at a meeting held on June 3, 1998, acting on the unanimous
recommendation of a committee of the Board (the "Unaffiliated Committee")
consisting of the two (2) directors who are not employed by the Company or
affiliated with ALLIED Mutual or ALLIED Group, and who serve as members of the
Coordinating Committee of the Board, adopted resolution (i) adopting the Merger
Agreement and approving the Offer and the Merger, (ii) determining the terms of
the Offer and the Merger are fair to, and in the best interest 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 Common
Shares by Acquisition Sub pursuant to the Offer and the other transactions
contemplated by the Merger Agreement.
In reaching its conclusions described above, the Board considered a
number of factors, including, without limitation, 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 price per Common Share pursuant to the Offer
Price to the historical market prices of the Shares.
(4) The fact that the $30 per Common 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 Common 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 Common 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 Common Shares
by Nationwide for $30 per Common Share).
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<PAGE> 21
(5) The presentation of Fox-Pitt, Kelton Inc. 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 Common Shares in connection with
the Offer and the Merger was fair, from a financial point of view, to the
holders of Common 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 III 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
Nationwide'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
Nationwide'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 and
the potential for adversarial relationships between the parties thereto in the
event that Nationwide 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
Nationwide at a price of $30 per Common Share.
(11) The ability of Nationwide 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.
(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 Common 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 Nationwide
three business days notice of the terms of such proposal and pays Nationwide a
fee of $3,000,000 plus an amount sufficient to reimburse Nationwide for certain
of its expenses incurred in connection with the Merger Agreement.
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<PAGE> 22
OPINION OF FOX-PITT, KELTON
In its role as financial advisor to the Company, Fox-Pitt, Kelton, Inc.
("Fox-Pitt, Kelton") was retained by the Coordinating Committee of the Board of
Directors of the Company (the "Committee") to render its opinion to the
Committee as to the fairness, from a financial point of view, of the
consideration to be received by the holders of the Company's Common Shares
(other than Nationwide and its affiliates) in the Offer and the Merger, taken
together, pursuant to the Merger Agreement. At the meeting of the Company Board
held on June 3, 1998, Fox-Pitt, Kelton delivered its opinion orally to the
effect that, based upon and subject to various considerations and assumptions
set forth in such opinion, as of such date, the consideration to be received by
the holders of the Company's Common Shares in the Offer and the Merger, taken
together, was fair from a financial point of view to such holders (other than
ALLIED Mutual and its affiliates). Such opinion was later confirmed in writing
as of such date.
THE FULL TEXT OF THE WRITTEN OPINION OF FOX-PITT, KELTON, DATED JUNE 3,
1998, WHICH SETS FORTH THE PROCEDURES FOLLOWED, THE MATTERS CONSIDERED, THE
SCOPE OF THE REVIEW AND THE ASSUMPTIONS IN CONNECTION WITH SUCH OPINION, IS
ATTACHED HERETO AS ANNEX III TO THIS INFORMATION STATEMENT AND IS INCORPORATED
HEREIN BY REFERENCE. STOCKHOLDERS OF THE COMPANY ARE URGED TO, AND SHOULD, READ
SUCH OPINION IN ITS ENTIRETY.
In arriving at its opinion, Fox-Pitt, Kelton (a) reviewed and analyzed
certain publicly available financial statements for the Company and Nationwide
and financial information made available by the management of the Company; (b)
analyzed certain internal financial statements, including financial projections,
and other financial and operating data prepared by the management of the
Company; (c) discussed the past, present and future operations, financial
condition and prospects of the Company with the senior management of the
Company; (d) compared the financial performance and condition of the Company
with that of certain other comparable publicly traded companies; (e) reviewed
and discussed with the senior management of the Company 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; (g)
reviewed the Merger Agreement dated June 3, 1998; and (h) performed such other
analyses as they deemed appropriate.
Fox-Pitt, Kelton 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 did
not assume any responsibility for independent verification of such information.
Fox-Pitt, Kelton did not assume any responsibility for independent valuation of
the assets and liabilities of the Company. With respect to the financial
projections, Fox-Pitt, Kelton assumed that they had been reasonably prepared by
the management of the Company on bases reflecting the best currently available
estimates and judgment of the future financial performance of the Company.
Fox-Pitt, Kelton expresses 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 existed and could be evaluated on June 2, 1998.
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 the Company and may trade equity securities of the Company
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. Fox-Pitt, Kelton acted as financial advisor to the Company in
connection with the Merger, received a fee of $100,000 in connection with its
engagement as financial advisor and received an additional fee of $475,000 upon
rendering its opinion in connection with the Merger.
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<PAGE> 23
INTERESTS OF CERTAIN PERSONS IN THE MERGER OR IN OPPOSITION TO MATTERS TO BE
ACTED UPON
No director of the Company has informed the Company of an intention to
oppose the Merger or any other action to be taken at the Special Meeting.
Stockholders should be aware that the executive officers and directors
of the Company have interests in the Merger that are in addition to or different
from the interests of stockholders of the Company generally. These interests are
discussed below.
General. In considering the recommendation of the Company Board with
respect to the Merger, Company stockholders should be aware that certain of the
directors and officers of the Company (i) occupy roles or have interests with
respect to other ALLIED Companies, including ALLIED Group, which could be
potentially in conflict with their roles with respect to the Company, and/or
(ii) have interests different from or potentially in conflict with the interests
of Company stockholders.
The Company Board. John E. Evans, Harold S. Evans and James W. Callison
are also directors of ALLIED Group. Robert J. Woodward, Richard D. Crabtree,
Joseph J. Gasper, Dimon R. McFerson, Robert A. Oakley, members of the Board, are
also directors of Nationwide. These individuals together with Samuel J. Wells,
who is currently President of the Company, are serving as the designees of
Acquisition Sub (the "Acquisition Sub Designees"). As a result of these
overlapping directorships, among other things, there may be a number of
potential conflicts of interest among the Company, ALLIED Mutual and ALLIED
Group. Additionally, Company stockholders should be aware that Nationwide, as
successor to the interests of ALLIED Mutual by virtue of the merger of ALLIED
Mutual with and into Nationwide with Nationwide continuing as the surviving
corporation, and certain of the directors of the Company serving as designees of
Acquisition Sub pursuant to rights granted under the Merger Agreement (i) occupy
roles or have interests with respect to other ALLIED companies and or with
Nationwide and its subsidiaries which could be potentially in conflict with
their roles with respect to the Company, and/or (ii) have interests different
from or potentially in conflict with the interests of Company stockholders.
Shared Management and Employees. Pursuant to the Intercompany Operating
Agreement among the Company, Nationwide, as successor in interest to ALLIED
Mutual, ALLIED Group and each of their respective subsidiaries (the "IOA"),
ALLIED Group leases to Nationwide, as successor in interest to ALLIED Mutual and
the former ALLIED Mutual subsidiaries the employees utilized in their operations
for a fee and reimbursement of personnel costs based on certain allocation
methods. In addition, certain executive officers of the Company hold
corresponding positions with Nationwide, as successor in interest to ALLIED
Mutual. Accordingly, such officers may have interests in the Merger arising from
their relationship with Nationwide. Additional information concerning the
benefits that various members of the Company's management are expected to
receive pursuant to the Merger Agreement is presented in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, initially filed with
the Securities and Exchange Commission ("SEC") on June 10, 1998 (the "Schedule
14D-9"), as amended, the Company's Information Statement on Schedule 14F-1,
filed with the SEC on June 10, 1998, and the exhibits to each such filing.
Intercompany Operating Agreement. The Company and its subsidiaries are
parties to the IOA with ALLIED Group, Nationwide, as successor in interest to
ALLIED Mutual, and each of their respective subsidiaries. The following summary
of the IOA is qualified in its entirety by reference to the full text of the
IOA and the amendments thereto, copies of which are filed as Exhibits 10.16,
10.3 and 10.15 to the Company's Registration Statement on Form S-1, Registration
No. 33-68928 (the "Form S-1"), Exhibit 10.19 to the Company's Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1994, and Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the Year Ended December 31, 1994. The
IOA provides for the sharing of employees, office space, agency forces, data
processing, and other services and facilities. The IOA extends through December
31, 2004 and continues thereafter subject to any party providing two years
notice that such party intends to cease participation.
ALLIED Group leases to Nationwide, as successor in interest to ALLIED
Mutual, and the former ALLIED Mutual subsidiaries (except for the Company) the
employees utilized in their operations for a fee and reimbursement of personnel
costs based on certain allocation methods. ALLIED Group is obligated to provide
the entire requirements for employees to Nationwide, as successor in interest to
ALLIED Mutual, and the former ALLIED Mutual subsidiaries (other than the
Company), but Nationwide, as successor in interest to ALLIED Mutual, reserves
the right to hire employees independently rather than leasing them from ALLIED
Group. ALLIED Group has the right to determine the compensation and benefits of
all leased employees. However, if ALLIED Group wishes to adopt or amend any
employee benefit plan or program and pass on the increased costs thereof with
respect to employees leased by Nationwide, as successor in interest to ALLIED
Mutual, it must obtain the approval of Nationwide, as successor in interest to
ALLIED Mutual (or a joint Compensation Committee consisting of directors of the
Company and Nationwide). The IOA contains a covenant not to compete that binds
each of the Company, ALLIED Group, and Nationwide, as successor in interest to
ALLIED Mutual, not to engage in a business that competes with the products or
markets of any other party or such party's subsidiaries for the term of the IOA
and five years thereafter.
Any disputes regarding the use of occupancy or facilities or the terms
on which property is leased or used are to be referred to the Coordinating
Committee, consisting of two directors of each of the Company, Nationwide, as
successor in interest to ALLIED Mutual, and ALLIED Group, for resolution.
Decisions of the Coordinating Committee must be unanimous and are binding on the
parties. If an issue is not resolved by the Coordinating Committee, it will be
submitted to arbitration. In such arbitration, each party to the dispute selects
one arbitrator, and if such dispute involves only two parties, such arbitrators
select third arbitrator.
During 1997, ALLIED Group received revenues of $2.6 million for
employees leased to ALLIED Mutual and certain of ALLIED Mutual's subsidiaries,
substantially all of which represented cost reimbursement. The IOA also provides
for the leasing by Nationwide, as successor in interest to ALLIED Mutual, to
ALLIED Group of substantially all of the office space utilized by ALLIED Group
and the provision of data processing services by the ALLIED Group to Nationwide,
as successor in interest to ALLIED Mutual, and its subsidiaries. ALLIED Group
paid to ALLIED Mutual rent expense for office space of $3.6 million for the year
ended December 31, 1997. Nationwide, as successor in interest to ALLIED Mutual,
the Company, and ALLIED Group share agency forces as well as other services and
facilities.
Management Information Services Agreement
The Company, Nationwide, as successor in interest to ALLIED Mutual,
ALLIED Group, and other affiliated companies are parties to a Management
Information Services Agreement ("MIS Agreement") with AMCO, whereby AMCO
provides certain computer services, printing, equipment leasing, and mail and
communication services to affiliates on a fee basis. The following summary of
the MIS Agreement is qualified in its entirety by reference to the full text of
the MIS Agreement and the amendments thereto, copies of which are filed as
Exhibits 17 and 18 to the Schedule 14D-9. The agreement terminates on December
31, 2004 and has an extension provision similar to that in the IOA described
above. Any disputes under this agreement are to be referred to the Coordinating
Committee for resolution. Decisions of the Coordinating Committee must be
unanimous and are binding on the parties. If an issue is not resolved by the
Coordinating Committee, it will be submitted to arbitrators for resolution. For
the year 1997, amounts paid to AMCO and certain subsidiaries of the ALLIED Group
by ALLIED Mutual, the Company and their subsidiaries under the MIS Agreement
were $2.5 million.
In the event of a change of control of the Company, either ALLIED Group
or Nationwide, as successor in interest to ALLIED Mutual, may, in its sole
discretion at any time after such change of control, (i) terminate the MIS
Agreement and IOA upon six months' notice to the Company, (ii) extend the term
of the MIS Agreement and IOA for up to 10 additional years beyond December 31,
2004 upon six months' notice to the Company, or (iii) allow the agreements to
continue in effect. A change of control is any event whereby a person, group or
entity unaffiliated with the Company or Nationwide, as successor in interest to
ALLIED Mutual, acquires the ownership of 50% or more of the voting stock of the
Company. In the event of a change of control of ALLIED Group, Nationwide, as
successor in interest to ALLIED Mutual, may, in its sole discretion at any time
after such change of control, (i) terminate the MIS Agreement and IOA upon six
months' notice, (ii) extend the term of both agreements for up to 10 additional
years beyond December 31, 2004 upon six months' notice to the Company, AMCO,
ALLIED Property and Casualty and Depositors, or (iii) allow the agreements to
continue in effect. The Company enjoys the same rights with respect to the MIS
Agreement and the IOA in the event of a change of control of ALLIED Group. A
change of control is any event whereby a person, group or entity unaffiliated
with ALLIED Group or Nationwide, as successor in interest to ALLIED Mutual,
acquires the ownership of 50% or more of the voting stock of the Company.
Joint Marketing Agreement
AMCO, ALLIED Property and Casualty, and Depositors are parties to the
ALLIED Group Joint Marketing Agreement ("JMA") with Nationwide, as successor in
interest to ALLIED Mutual, and ALLIED Life Insurance Company ("ALIC"). The
following summary of the JMA is qualified in its entirety by reference to the
full text of the JMA and the amendments thereto, copies of which are filed as
Exhibits 19 and 20 to the Schedule 14D-9. The JMA requires Nationwide, as
successor in interest to ALLIED Mutual, and the Company's property-casualty
subsidiaries to promote to their customers and agents the sale of the products
of ALIC. The JMA provides for payment by ALIC to AMCO (as pool administrator for
the property-casualty companies) of an annual access fee of $100,000 plus an
annual new production incentive fee ("NPIF"), calculated based on the percentage
increase from the preceding year's production credit premiums for ALIC produced
by the independent property-casualty agencies representing Nationwide, as
successor in interest to ALLIED Mutual, AMCO, ALLIED Property and Casualty, and
Depositors ("ALLIED agencies"). The annual NPIF is not payable unless production
credit premiums increase by at least 10% over the prior year and is capped at an
increase of 25% over the prior year. For the year ended December 31, 1997, the
fee incurred by ALIC under the JMA totaled $100,000. The JMA also provides for
joint systems development, including joint data bases of customers and agents,
multiple account billing systems, marketing plans and promotions, and other
systems to be developed. Development costs are to be allocated on a mutually
agreeable basis reflecting projected and actual utilization of the systems.
The JMA continues to the year 2008 and continues thereafter subject to
termination on two years notice given by any party. The JMA contains a
non-compete provision structured along product lines which are applicable during
the term of the JMA and for a period of ten years thereafter. The non-compete
provision prevents Nationwide, as successor in interest to ALLIED Mutual, and
the property-casualty subsidiaries of ALLIED Group, directly or indirectly
through any subsidiary, affiliate, joint venture or partnership from selling
life insurance or annuities in the states where ALIC now sells these life
products (or on termination of the JMA, any states where the life insurance and
annuity products are sold by ALIC). Nationwide, as successor in interest to
ALLIED Mutual, and the property-casualty subsidiaries, which are not licensed to
sell life insurance or annuity products, do not operate in all the states in
which ALIC operates. The JMA non-compete provision also prevents ALIC from
offering property-casualty products in states in which Nationwide, as successor
in interest to ALLIED Mutual, and the property-casualty subsidiaries of the
ALLIED Group now operate. In the event of a change of control of ALIC or the
Company (whenever ownership of 50% or more of the voting stock is acquired by a
nonaffiliated party), ALLIED Group, Nationwide, as successor in interest to
ALLIED Mutual, or any of ALLIED Group's property-casualty subsidiaries may (i)
terminate it upon six months' notice; (ii) extend the term for up to ten
additional years beyond 2008; or (iii) allow the JMA to continue in effect
without change. Those three rights are also given to ALIC in the event of a
change of control of ALLIED Group, any of its property-casualty subsidiaries or
Nationwide, as successor in interest to ALLIED Mutual. Pursuant to the ALLIED
Life Merger Agreement, however, the Company has agreed that prior to the
termination of the ALLIED Life Merger Agreement, the Company will not invoke
against ALLIED Group or any of its affiliates any of the covenants not to
compete or agreements not to compete contained in the IOA and JMA. Disputes are
to be resolved by the Coordinating Committee. Decisions of the Coordinating
Committee must be unanimous and are binding on the parties. If the Coordinating
Committee fails to resolve an issue, it would be submitted to arbitration. In
such arbitration, one arbitrator will be appointed jointly by Nationwide, as
successor in interest to ALLIED Mutual, and the ALLIED Group's property-casualty
subsidiaries and a second arbitrator will be appointed by the Company. Both
arbitrators so selected will jointly select a third arbitrator.
Other Arrangements and Transactions
The Company and Nationwide, as successor in interest to ALLIED Mutual,
are parties to a Stock Rights Agreement which expires in 2008. Under the Stock
Rights Agreement, Nationwide, as successor in interest to Nationwide, as
successor in interest to ALLIED Mutual, is entitled to nominate and the Company
is required to use its best efforts to cause the election or retention of a
number of members of the Company's Board of Directors in proportion to
Nationwide, as successor in interest to ALLIED Mutual's, percentage ownership of
the total number of shares of the Company's voting stock outstanding at the time
of nomination. In addition, the Company is required to elect to its Executive
Committee at least one Company director who has been nominated by Nationwide, as
successor in interest to ALLIED Mutual, but who is not an officer or employee of
Nationwide, as successor in interest to ALLIED Mutual, and the Company must
limit the number of directors serving on the Executive Committee to five at any
time. The Stock Rights Agreement restricts the ability of Nationwide, as
successor in interest to ALLIED Mutual, to grant proxies to other than
affiliated individuals and to solicit other stockholders of the Company.
Nationwide, as successor in interest to ALLIED Mutual shall also be prohibited
from initiating or accepting a tender offer for shares of Common Stock except
under certain conditions. The Company has a right of first refusal with respect
to any sale by Nationwide, as successor in interest to 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. Nationwide, as successor in interest to ALLIED Mutual, has incidental
registration rights and three demand registration rights with respect to the
6.75% Preferred and Common Stock owned by Nationwide, as successor in interest
to ALLIED MUTUAL. The preceding summary of the Stock Rights Agreement is
qualified in its entirety by reference to the full extent of the Stock Rights
Agreement and the amendment thereto, copies of which are filed as Exhibit 14 to
the Form S-1.
The Company and its affiliates pool their excess cash into a short-term
investment fund pursuant to the Intercompany Cash Concentration Fund Agreement.
The fund, administered by AID Finance Services, Inc. (an affiliate of the
Company), also issues short-term loans (30 days or less) to affiliated companies
in accordance with the current intercompany borrowing policy. At December 31,
1997, $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. The Company
and its affiliates pay to AID Finance Services, Inc. a management fee (5 basis
points of invested assets) which is offset against investment income. Interest
earned by the Company and its subsidiaries from the fund during 1997 was
$477,000. Interest expense paid to AID Finance Services, Inc. during 1997
amounted to $241,420 from affiliates. The preceding summary of the Intercompany
Cash Concentration Fund Agreement is qualified in its entirety by reference to
the full text of the Intercompany Cash Concentration Fund Agreement, a copy of
which is filed as Exhibit 26 to the Schedule 14D-9.
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 expenses of $241,420 from affiliates.
ALLIED Group paid premiums to the Company for term life insurance on
the ALLIED Group's employee group in the amount of $468,000 in 1997.
On January 2, 1997, State Street Bank and Trust Company, as the ESOP
Trustee, purchased for the ESOP Trust 19,143 shares of Common Stock from the
Company for $17.50 per share.
During the year ended December 31, 1997, ALLIED Mutual, the Company and
its subsidiaries paid $1 million in fees and media costs to J.D. Evans &
Associates, of which Julie Evans (daughter of John E. Evans) is a stockholder.
During 1997, directors and executive officers of the Company purchased
insurance or obtained residential mortgages from the Company or its subsidiaries
on terms comparable to those offered in the normal course of business to
nonaffiliated customers. In addition, corporations of which the Company
directors are executive officers purchased insurance from the Company's
subsidiaries and ALLIED Mutual in the ordinary course of business during 1997.
Severance Pay Plan. On May 30, 1998, the Compensation Committee of the
Board (the "Compensation Committee"), following publication of the ALLIED Group
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 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"), which is
qualified in its entirety by reference to the full text of such Plan, a copy of
which is filed as Exhibit 21 to the Schedule 14D-9 filed by ALLIED Life with the
SEC on June 10, 1998 (the "Schedule 14D-9" which term hereinafter includes the
amendments and exhibits thereto) 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 Agreement. 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 employees of the Company.
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<PAGE> 24
Each Severance Agreement, the form of which was filed as an Exhibit
to the Schedule 14D-9, 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 (2) 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 (12) months following the termination of
employment (or until the employee becomes eligible for benefits under a new
employer). For a small number of employees, the benefit would be a lump sum
severance payment equal to two times annual base salary plus the employee's
highest bonus over the preceding two (2) years and benefit continuation for
twelve (12) months following the termination of employment (or until the
employee becomes eligible for benefits under a new employer). In the event that
such severance payments would subject the employee to an excise tax imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the amount of the severance otherwise payable will generally be reduced
to avoid the imposition of such excise tax.
The Company entered into Severance Agreements that provide for a
severance payment equal to two times the employee's base salary plus the higher
bonus over the preceding two years with each of Messrs.
Samuel J. Wells and Wendell P. Crosser.
The Company entered into Severance Agreements that provide for a
severance payment equal to the employee's base salary plus the 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 with
two (2) other employees, who are not executive officers.
The Company has calculated that the maximum aggregate lump sum that
could be payable pursuant to all of the Severance Agreements described above
(including non-executive officers), assuming termination of each of these
individuals, is approximately $1,700,000.
Amendment to ALLIED Life Employee Stock Ownership Plan. On June 2,
1998, the Board, acting upon the recommendation of the Compensation Committee,
amended the Company's Employee Stock Ownership Plan (the "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 Exhibit 20
to the Schedule 14D-9.
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
24
<PAGE> 25
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.
As a result of the purchase by Acquisition Sub of Common Shares in the
Offer, a Change of Control shall be deemed to have occurred for purposes of the
vesting and allocation provisions of the ESOP.
Amendment to John Evans Consulting Agreement. The consulting agreement
between the Company, ALLIED Mutual, ALLIED Group and John Evans, which is
described in the Schedule 14D-9, was amended on March 24, 1998 to provide for a
decrease in the annual compensation payable to Mr. Evans from $180,000 to
$120,000. Such annual compensation is consideration for consulting services
rendered by Mr. Evans and is prorated among the Company, Nationwide, as
successor in interest to ALLIED Mutual, and ALLIED Group. The consulting
agreement and the amendments thereto are filed as Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, Exhibit 10.37
to the Company's Annual Report on Form 10-K for the year ended December 31,
1996, Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, and Exhibit 10.47 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996.
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.
Treatment of Stock Options; Certain Benefits. The Company has taken all
necessary action so that, effective as of the Effective Time, (i) each
outstanding employee or director stock option (the "Options") to purchase Common
Shares granted under the ALLIED Life Financial Corporation Executive Stock
Option Plan and the ALLIED Life Financial Corporation Long-Term Management
Incentive Plan (the "Option Plans"), whether or not then exercisable or vested,
will become fully exercisable and vested, (ii) cause each Option that is then
outstanding to be cancelled and (iii) in consideration of such cancellation
cause the Company (or, at Nationwide's option, Acquisition Sub) to pay to such
holders of Options an amount in respect thereof equal to the product of (A) the
excess, if any, of the Merger Consideration over the exercise price of each such
Option and (B) the number of Common Shares previously subject to the Option
immediately prior to its cancellation (such payment to be net of withholding
taxes). The Company has agreed to use all commercially reasonable efforts to
ensure that (a) no consent of any holder of an Option is required to effect the
transactions contemplated by Section 2.11 of the Merger Agreement and (b)
following the Effective Time, no Option or any other option, warrant or right
will give any person any right to acquire any securities of the Surviving
Corporation.
Indemnification and Insurance. From and after the Effective Time,
Nationwide 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 (as defined in the Merger Agreement)) 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 June 3, 1998 to indemnify
such Person (as defined in the Merger Agreement) (and Nationwide has 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 (as determined in the Merger Agreement)
shall 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 in excess of 200%
of the last annual premium paid prior to June 3, 1998 (such last annual
premium being hereinafter referred to as the "Current Premium"); provided,
however, that if the then existing D&O Insurance or substantially comparable D&O
Insurance cannot be acquired during the two-year period for not in excess of
200% of the Current Premium, then the Surviving Corporation will obtain as much
D&O Insurance as can be obtained for the remainder of such period for a premium
not in excess (on an annualized basis) of 200% of the Current Premium. If the
D&O Insurance is terminated prior to the end of the sixth anniversary of the
Effective Time, the Surviving Corporation will purchase extended reporting
coverage under D&O Insurance covering claims made during the remainder of such
period with respect to acts which occurred prior to the Effective Time.
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CERTAIN REGULATORY MATTERS
Iowa Approval. The acquisition of control of an Iowa domestic insurer
domiciled in Iowa, such as the Company, requires the approval of the
Commissioner of the Iowa Department of Insurance (the "Iowa Commissioner") under
Section 521A.3 of the Iowa Insurance Law. Section 521A.3 of the Iowa Insurance
Law provides that when a person or entity enters into an agreement to merge with
or otherwise to acquire control of a domestic insurer, the person or entity
shall file with the Iowa Commissioner a statement containing certain specified
information set forth in Section 521A.3(2) of the Iowa Insurance Law (the "Form
A"). The Form A filing must also be sent to the domestic insurer and the
domestic insurer must provide its stockholders with a summary of the information
contained in the Form A. Nationwide filed its Form A concerning the acquisition
of the Company with the Iowa Commissioner on May 19, 1998, and filed amendments
to such Form A filing on July 2, 1998 and July 22, 1998. A summary of the
information contained in the Form A filing (as amended) was also circulated to
the Company's stockholders.
A hearing to consider the Merger was held before the Iowa Commissioner
on July 29, 1998, and then adjourned and reconvened on August 31, 1998. In its
Findings of Fact and Conclusions of Law dated September 11, 1998, the Iowa
Commissioner formally approved Nationwide's acquisition of the Company.
Other Insurance Regulatory Approvals. Certain other states may require
that notice be given to, or approval be obtained from, the insurance department
of such state. The Company and Nationwide have agreed to use reasonable efforts
to file any required notices or otherwise to take such actions as are necessary
to obtain any required approvals or to comply with applicable requirements in
connection with the Merger under such laws. Based upon available information,
the Company and Nationwide believe that the Merger can be effected in accordance
with such laws and that no material delay in consummating the Merger will result
therefrom.
Antitrust. The Antitrust Division of the U.S. Department of Justice
(the "Antitrust Division") and the Federal Trade Commission (the "FTC")
frequently scrutinizes the legality under the antitrust laws of transactions
such as Acquisition Sub's proposed acquisition of the Company. At any time
before or after Acquisition Sub's acquisition of Common Shares pursuant to the
Offer, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking the
divestiture of Common Shares acquired by Acquisition Sub or the divestiture of
substantial assets of the Company or its subsidiaries or Nationwide or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer or the Merger on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
LITIGATION
On December 31, 1997, a petition was filed by Mary M. Rieff ("Rieff"),
an ALLIED Mutual policyholder, in the Iowa District Court in and for Polk
County, Iowa, against ALLIED Group and certain other individuals who are or were
officers and/or directors of ALLIED Mutual and/or ALLIED Group. The Company is
not a party to this proceeding. Rieff filed an amended petition (the "Amended
Petition") on or about June 11, 1998. The Iowa District Court has granted
Nationwide's motion to intervene as a party defendant in this action.
The Amended Petition, an alleged policyholder derivative and class
action, asserts, among other things, (i) that the defendants were responsible
for the inappropriate transfer of ALLIED Mutual's corporate assets, the seizure
of certain corporate opportunities and the implementation of an improper "de
facto demutualization" without informing or compensating policyholders or
receiving the appropriate approval from regulatory authorities; (ii) that this
allegedly wrongful demutualization began on or about January 1, 1985 and was
accomplished through transfers of ALLIED Mutual's assets to ALLIED Group and to
the individual defendants for inadequate consideration; (iii) that the
individual defendants breached fiduciary duties owed to ALLIED Mutual, wasted
its corporate assets and intentionally interfered with its contracts,
prospective business advantage and business relationships; and (iv) that the
defendants improperly transferred substantial ownership of and control over
ALLIED Group and ALLIED Mutual's
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insurance business. These claims were brought on behalf of ALLIED Mutual, which
is named as a nominal defendant.
The Amended Petition also asserts claims on behalf of a class of ALLIED
Mutual policyholders who have allegedly been deprived of their property by the
"de facto demutualization" of ALLIED Mutual. The class that Rieff seeks consists
of: (i) all ALLIED Mutual policyholders who held ALLIED Mutual policies on or
about February 18, 1993; and (ii) all current ALLIED Mutual policyholders as of
the date of the filing of the original petition who have allegedly been harmed
by higher premiums and/or lower dividends as a result of the "de facto
demutualization" of ALLIED Mutual. The claims that purport to be brought as
class claims assert, among other things, (i) that the defendants were
responsible for the "de facto demutualization" of ALLIED Mutual and that those
actions wrongfully deprived the class of their ownership rights and interests in
ALLIED Mutual's surplus and net worth without proper compensation; (ii) that
this allegedly wrongful demutualization constituted a conversion of ALLIED
Mutual's surplus for the benefit of ALLIED Group and its shareholders, including
the individual defendants; and (iii) that the individual defendants breached
fiduciary duties owed to ALLIED Mutual and intentionally interfered with ALLIED
Mutual's business and contractual relationships.
The Amended Petition further asserts that as a result of the foregoing,
ALLIED Mutual and the ALLIED Mutual members have suffered damages in
excess of $500 million. The Amended Petition 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
Amended Petition also asks for certain other relief, including, among other
things, removal of the directors of ALLIED Mutual, attorneys' fees and costs,
equitable relief and interest, restitution for any assets wrongfully transferred
or conveyed and the distribution to ALLIED Mutual policyholders of surplus in
excess of what is required to be retained in connection with any recovery by
ALLIED Mutual from the defendants.
On June 11, 1998, Rieff filed an amended motion seeking to enjoin the
defendant directors of ALLIED Mutual from considering, negotiating or approving
any transaction on behalf of ALLIED Mutual with Nationwide or any third party
because of alleged conflicts of interest of the members of the ALLIED Mutual
Board of Directors. That motion was heard by the Iowa District Court on July 16,
1998, and was denied by the Court on July 17, 1998.
On June 24, 1998, the defendants filed motions to dismiss the Amended
Petition, asserting, among other things, that (i) members of a mutual
insurance company lack standing to maintain a derivative action; (ii) the
Amended Petition fails to state a claim upon which relief can be granted as to
ALLIED Group; (iii) the bulk of the claims in the Amended Petition are barred by
the applicable statute of limitations; (iv) the derivative claims in the Amended
Petition may not be brought as direct or class claims; and (v) the class claims
are barred by the applicable statute of limitations. The motions to dismiss have
been fully briefed, and oral argument was heard on September 28, 1998.
This suit is in its preliminary stages and the Company cannot assess
its merits at this time.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase of the Company by
Nationwide in accordance with statutory accounting practices, whereby the
purchase price will be allocated based upon the historic statutory book values
of the admitted assets acquired and the statutory liabilities assumed by
Nationwide with the excess being recorded as goodwill.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material federal income tax consequences
of the Merger to stockholders of the Company. This summary does not purport to
discuss all income tax consequences of the Merger that may be relevant to
particular stockholders in light of their individual circumstances or to certain
types of stockholders subject to special treatment, such as life insurance
companies, tax-exempt organizations and financial institutions, persons who are
not citizens or residents of the United States or
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who are foreign corporations, and stockholders who acquired stock through the
exercise of Company stock options or otherwise as compensation.
The receipt of cash in exchange for Common Shares pursuant to the
Merger, or pursuant to the exercise of dissenters' appraisal rights, will be a
taxable transaction for federal income tax purposes under the Code, and may also
be a taxable transaction under applicable state, local or foreign income or
other tax laws. Generally, for federal income tax purposes, a stockholder will
recognize gain or loss equal to the difference between the amount of cash
received by the stockholder pursuant to the Merger, or exercise of dissenters'
appraisal rights, and the aggregate tax basis in the Common Shares sold by the
stockholder, or with respect to which dissenters' rights are exercised, as the
case may be. Gain or loss will be calculated separately for each block of Common
Shares tendered and purchased pursuant to the Merger, or with respect to which
dissenters' appraisal rights are exercised, as the case may be.
If Common Shares are held by a stockholder as capital assets, gain or
loss recognized by the stockholder will be capital gain or loss, which will be
long-term capital gain or loss if the stockholder's holding period for the
Common Shares exceeds twelve months. Under present law, long-term capital gains
recognized by an individual stockholder will generally be taxed at a maximum
federal marginal tax rate of 20%, and long-term capital gains recognized by a
corporate stockholder will be taxed at a maximum federal marginal tax rate of
35%. In addition, under present law the ability to use capital losses to offset
ordinary income is limited. Stockholders should consult their tax advisors
regarding the applicable rate of taxation and their ability to use capital
losses against ordinary income.
A stockholder that surrenders Common Shares pursuant to the Merger (or
pursuant to the exercise of dissenter's rights) may be subject to backup
withholding unless the stockholder provides its taxpayer identification number
("TIN") and certifies that such number is correct or properly certifies that it
is awaiting a TIN, or unless an exemption applies. A stockholder that does not
furnish its TIN may be subject to a penalty imposed by the IRS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT CONSTITUTE
TAX ADVICE. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICABILITY AND EFFECT
OF THE ALTERNATIVE MINIMUM TAX AND OF ANY STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS) OF THE MERGER.
EFFECT OF THE MERGER ON THE COMPANY'S STOCKHOLDERS
Consummation of the Merger is contingent upon, among other things,
approval of the Merger by the holders of Common Shares and 6.75% Preferred
Shares. In the Merger, each Common Share outstanding on the Effective Date
(other than Common Shares held by Stockholders who perfect their appraisal
rights under Iowa Law, Common Shares then held by Nationwide and Common Shares
held in the Company's treasury) will be converted into the right to receive cash
as part of the Merger. Therefore, as a result of the Merger, the entire equity
interest in the Company will be owned by Nationwide and the Company's current
stockholders will no longer have any equity interest in the Company and will no
longer share in future earnings and growth of the Company, the risks associated
with achieving any such earnings and growth, or the potential to realize greater
value for their shares of stock through divestitures, strategic acquisitions or
other corporate opportunities that may be pursued by the Company in the future.
Instead, each current holder of the Common Shares will have only the right to
receive the Merger Consideration or to seek appraisal rights as described under
"--Dissenting Stockholders' Rights" below.
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EXCHANGE OF CERTIFICATES AND PAYMENT OF MERGER CONSIDERATION
Nationwide has selected as the Paying Agent, with whom it
shall cause Acquisition Sub to deposit, for the benefit of the holders of
Common Shares, cash in an aggregate amount equal to the aggregate Merger
Consideration (the "Payment Fund"). The Merger Agreement provides that, upon
surrender to the Paying Agent of a certificate representing Common Shares for
cancellation, together with a letter of transmittal and such other customary
documents as may be required by the instructions to the letter of transmittal
(collectively, the "Certificate") and acceptance thereof by the Paying Agent,
the holder of such Certificate shall be entitled to receive in exchange therefor
the amount of cash into which the number of Common Shares previously represented
by such Certificate shall have been converted. The Paying Agent shall accept
such Certificate upon compliance with such reasonable terms and conditions as
the Paying Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. If the Merger Consideration (or any portion
thereof) is to be delivered to any person other than the person in whose name
the Certificate representing Common Shares surrendered in exchange therefor is
registered on the record books of the Company, it shall be a condition to such
exchange that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment of such consideration to a person other than the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such tax has been paid or is not
applicable. After the Effective Time, there shall be no further transfer on the
records of the Company or its transfer agent of any Certificate representing
Common Shares and if any such Certificate is presented to the Company for
transfer, it shall be cancelled against delivery of the Merger Consideration as
hereinabove provided. Until surrendered, each Certificate representing Common
Shares (other than a Certificate representing Common Shares to be cancelled),
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration, without any interest
therein.
The Merger Agreement further provides that, promptly after the
Effective Time (but in no event more than five business days thereafter),
Nationwide shall require the Paying Agent to mail to each record holder of
Certificates that immediately prior to the Effective Time represented Common
Shares which have been converted, a letter of transmittal (which shall specify
that delivery shall be effective, and risk of loss and title shall pass, only
upon proper delivery of Certificates representing Common Shares to the Paying
Agent and shall be in such form and have such provisions as Nationwide
reasonably may specify) and instructions for use in surrendering such
Certificates and receiving the Merger Consideration to which such holder shall
be entitled.
The Merger Consideration paid upon the surrender for exchange of
Certificates representing Common Shares shall be deemed to have been issued and
paid in full satisfaction of all rights pertaining to the Common Shares
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared by the Company on such Common Shares in accordance with the terms of
the Merger Agreement or prior to the date of the Merger Agreement and which
remain unpaid as of the Effective Time. Any portion of the Payment Fund that
remains undistributed to the holders of the Certificates representing Common
Shares for 120 days after the Effective Time shall be delivered to Nationwide
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upon demand, and any holders of Common Shares who have not theretofore complied
with the Merger Agreement requirements shall thereafter look only to Nationwide
and only as general creditors thereof for payment, without interest, of their
claim for any Merger Consideration with respect to their Common Shares.
None of Nationwide, Acquisition Sub, the Surviving Corporation or the
Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates representing Common Shares shall not have been surrendered
prior to seven years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration in respect of such Certificate
would otherwise escheat to or become the property of any Governmental Entity),
any such cash, shares, dividends or distributions payable in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation free and clear of all claims or interest
of any person previously entitled thereto.
DISSENTING STOCKHOLDERS' RIGHTS
The following discussion is not a complete statement of the law
pertaining to dissenters' rights under the IBCA and is qualified in its entirety
by reference to the full text of Sections 490.1301 through 490.1331 of the IBCA
setting forth the rights of stockholders who object to the Merger. Dissenting
stockholders wishing to exercise such dissenters' rights or to preserve their
rights to do so should review the following discussion and the provisions of
Sections 490.1301 through 490.1331 of the IBCA with counsel. A copy of the
relevant sections of the IBCA is attached to this Information Statement as Annex
II and is incorporated herein by reference. The failure of a dissenting
stockholder to comply in a timely and proper manner with the procedures set
forth in the IBCA will result in its loss of dissenters' rights with respect to
the Merger.
Sections 490.1301 through 490.1331 of the IBCA set forth the rights of
stockholders of the Company who object to the Merger. Any holder of Common
Shares who does not vote in favor of the Merger (including any such holder who
abstains from voting) and who objects to the Merger may, if the Merger is
consummated, obtain payment, in cash, for the fair market value of such holder's
shares by complying with the requirements of Sections 490.1301 through 490.1331
of the IBCA. "Fair Value" is defined in the IBCA as "the value of the Shares
immediately before the effectuation of the corporate action to which dissenters
object, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable." Holders of Common
Shares are not eligible to exercise their dissenters' rights unless they are
stockholders on the Record Date and have not voted in favor of the Merger.
Before the taking of the vote on the Merger at the Special Meeting,
each dissenting stockholder must file with the Company a written objection to
the Merger stating that the stockholder intends to demand payment in respect of
the shares of any class held by it if the Merger is consummated. A written
objection must be filed with the Company by holders of Common Shares who wish to
dissent even if they vote against the Merger. Such written objections should be
addressed to: Sally J. Malloy, Corporate Secretary, ALLIED Life Financial
Corporation., 701 Fifth Avenue, Department 2003, Des Moines, Iowa 50391-2003.
Within ten days after the Special Meeting, the Company must provide
written notice (the "Dissenters' Notice") to each dissenting stockholder that
the Merger has been authorized. To exercise dissenters' rights, each dissenting
stockholder must, no sooner than 30 nor later than 60 days after the Dissenters'
Notice was delivered by the Company, mail a written demand for payment for such
dissenting stockholder's Common Shares. Such written demands should be sent to:
Sally J. Malloy, Corporate Secretary, ALLIED Life Financial Corporation., 701
Fifth Avenue, Department 2003, Des Moines, Iowa 50391-2003. Subject to the
following paragraph, at the Effective Time or upon receipt of a payment demand,
whichever occurs later, the Company must pay to each dissenting stockholder the
estimated fair value for such dissenting stockholder's shares, plus accrued
interest.
In the event that the Company and any dissenting stockholder are unable
to agree as to fair value, the Company must pay the amount demanded unless
within 60 days the Company commences a court proceeding in the district court of
Polk County, Iowa, demanding a determination of the value of the shares
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of all dissenting stockholders who have not agreed with the Company as to the
fair value of their shares. All dissenting stockholders, whether or not
residents of the State of Iowa, will be parties to any court proceeding that is
commenced by the Company.
A negative vote on the Merger does not constitute a "written objection"
to be filed by a dissenting stockholder. A dissenting stockholder's abstention
from voting on the Merger or failure to vote on the merger will not constitute a
waiver of such stockholder's rights under Sections 490-1301 through 490.1331 of
the IBCA, provided that a written objection has been properly filed before the
Merger is effected. A vote in favor of the Merger will constitute a waiver of
such stockholder's dissenters' rights, however, even if a written objection has
been filed.
A dissenting stockholder's objections to the Merger or demand for
payment for its shares may be made by facsimile transmission, provided such
facsimile is confirmed by a written objection or demand, as the case may be,
sent by certified or registered mail to the address specified above within 24
hours after transmission of the facsimile. Facsimile communications should be
addressed to: Sally J. Malloy, Corporate Secretary, ALLIED Life Financial
Corporation., 701 Fifth Avenue, Department 2003, Des Moines, Iowa 50391-2003
and the appropriate facsimile connection is to (515) 280-4399.
For a discussion of the Federal income tax consequences of receipt of
payment for shares upon exercise of dissenters' rights, see "THE MERGER--Certain
United States Federal Income Tax Consequences."
THE MERGER AGREEMENT
The following is a summary of the terms and conditions of the Merger
Agreement. Any references to the Merger Agreement set forth below or included
elsewhere in this Information Statement are qualified in their entirety by
reference to the Merger Agreement (attached hereto as Annex I), which is
incorporated herein by reference. Terms that are not otherwise defined in this
summary shall have the meanings set forth in the Merger Agreement. Stockholders
are strongly advised to read the Merger Agreement in its entirety prior to
voting.
THE OFFER
In the Merger Agreement, Nationwide agreed, subject to certain
conditions, and among other things, to offer $30.00 per Common Share, net to the
seller in cash without interest. The Offer expired at 5:00 p.m., New York City
time, on September 30, 1998. Having been satisfied that the Minimum Condition
(as defined in the Offer), the Insurance Regulatory Condition (as defined in the
Offer), and other certain conditions with respect to the Offer had been met,
Acquisition Sub timely accepted for payment, and paid for, all Common Shares
validly tendered and not withdrawn pursuant to the Offer.
THE MERGER
The Merger Agreement provides that, following the satisfaction or
waiver of the conditions set forth therein, Acquisition Sub will be merged with
and into the Company, with the Company continuing as the surviving corporation,
and each Common Share then outstanding (other than Common Shares then owned by
Nationwide or Acquisition Sub, Common Shares held as treasury shares by the
Company and Dissenting Shares) will, by virtue of the Merger and without any
action by the holder thereof, be converted into the right to receive $30.00 per
Common Share, net to the seller in cash, without interest thereon, upon the
surrender to the Paying Agent of a certificate representing Common Shares, for
cancellation, together with a letter of transmittal and such other customary
documents as may be required by the instructions to the letter of transmittal
(collectively, the "Certificate") of the Certificate formerly representing such
Common Shares.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions set forth in the Merger Agreement, the Merger
shall become effective (the "Effective Time") upon the last to occur of (a) the
filing of the Certificate of Merger with the Ohio Secretary of State, (b) the
filing of the Articles of Merger as required by Iowa law and the recording in
the offices of the register of deeds of the counties in the State of Iowa in
which the principal offices of
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Nationwide and the Company are located and (c) such later time as the parties
designate in such filings. The parties to the Merger Agreement agreed to use all
reasonable efforts to assure that the filings contemplated by the Merger
Agreement are made, and the Effective Time occurs, as soon as practicable.
DISSENTING STOCKHOLDERS' RIGHTS
The Merger Agreement provides that any Common Shares outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
properly in writing appraisal for such Common Shares in accordance with Sections
490.1301 through 490.1331 of the IBCA and who has not withdrawn such demand or
otherwise forfeited appraisal rights ("Dissenting Shares") will not be converted
into or represent the right to receive the Merger Consideration. Such
shareholders shall be entitled to receive payment of the appraised value of such
Common Shares held by them in accordance with the IBCA, except that all
Dissenting Shares held by shareholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Common Shares held by them under the IBCA shall thereupon be deemed to have been
converted into and to have become exchangeable, as of the Effective Time, for
the right to receive, without any interest thereon, the Merger Consideration,
upon surrender of the Certificate or Certificates that formerly evidenced such
Common Shares. The Company has agreed to give Nationwide prompt notice of any
demands of appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the IBCA and received by the Company,
and Nationwide shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company has further agreed that,
prior to the Effective Time, it shall not, except with the prior written consent
of Nationwide, make any payment with respect to any demands for appraisal, or
settle or offer to settle, any such demands.
The procedures for exercising rights of appraisal are set forth above
under "THE MERGER--Dissenting Stockholders' Rights." In addition, a copy of
Sections 490.1301 through 490.1331, inclusive, of the IBCA is attached hereto as
Annex II.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties by the
Company with respect to, among other things, the organization, qualification and
capitalization of the Company, the subsidiaries of the Company, the authority of
the Company relative to the Merger Agreement, the absence of violations of law,
required governmental filings, the statutory financial statements 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, insurance issued by ALLIED
Insurers, cancellations, operations insurance, the properties of the Company,
intellectual property, transactions with affiliates, voting requirements
applicable to the Merger and the status of the Company's subsidiaries as
regulated investment companies.
The Merger Agreement also contains representations and warranties of
Nationwide and Acquisition Sub with respect to, among other things, their
organization and qualification, their authority relative to the Merger
Agreement, the absence of violations of law and required governmental filings.
COVENANTS OF THE COMPANY
In the Merger Agreement, the Company has covenanted and agreed that,
among other things, during the period from the date of the Merger Agreement
until the Effective Time, unless Nationwide shall otherwise agree in writing, or
except as otherwise contemplated in the Merger Agreement, (a) the Company and
its subsidiaries shall conduct their business only in the ordinary course of
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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 to
not 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 Nationwide of any material transactions
involving a purchase or sale (excluding investment transactions in the ordinary
course of business consistent with past practice, but including transactions
involving the securitization of assets or of any subsidiary and transactions
involving derivative securities); (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 hereby), (ii) incur any individual Liability or
series of related Liabilities in excess of $1,000,000 other than in the ordinary
course of business consistent with past practice, (iii) incur any indebtedness
for money borrowed in the aggregate for 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, consolidation, demutualization, acquisition,
redomestication, sale of all or a substantial portion of its assets, bulk or
assumption reinsurance arrangement or other similar reorganization, arrangement
or business combination, (v) prior to notifying Nationwide, enter into any
partnership, joint venture or profit sharing Contract, (vi) enter into any
Contract limiting the ability of 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 hereby,
or (x) modify any Contract with respect to the subject 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 the information set forth in the ALLIED Disclosure
Schedule other than in the ordinary course of business consistent with existing
agreements and arrangements; (f) except (x) as set forth in the ALLIED
Disclosure Schedule, (y) in the ordinary course of business consistent with past
practice, or (z) as required by the terms of agreements or plans already in
effect, applicable Law or as envisioned in the Statement of Operating
Principles, 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
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of any products or services or group of products or services (other than with
respect to Investment Assets) which in one or a series of related transactions
exceed $500,000 or which in the aggregate for the Company and the ALLIED
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, which Contracts are
set forth in the ALLIED Disclosure Schedule; (h) other than in the ordinary
course of business consistent with past practice or in connection with the
redemption of outstanding guaranteed investment contracts in the exercise of 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 (i) 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, for Permitted Liens
and Liens not individually in excess of $500,000 and not aggregating in excess
of $2,000,000 or (ii) restructure, amend, modify or otherwise affect any
Investment Asset or any Contract relating thereto which is material to the
financial condition of the Company or its subsidiaries, and described in clauses
(i) and (ii), only in accordance with the statement of investment policy set
forth in the Company Disclosure Statement; and the Company shall furnish to
Nationwide a monthly report, in detail reasonably acceptable to Nationwide, of
all such transactions or other changes (other than changes in market values or
ordinary course changes such as interest payments, maturities, etc.) affecting
Investment Assets of the Company or its subsidiaries which took place since the
last such report; (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 Nationwide, which results,
individually or in the aggregate, in (i) the realization of any gross capital
loss or losses in an amount of $10,000,000 or more or (ii) an adverse impact on
the surplus of the Company or its subsidiary in an amount of $10,000,000 or
more; (k) other than in the ordinary course of business consistent with past
practice, or as required by applicable regulations, the Company shall not permit
any Company subsidiary 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 consistent with past
practice, 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, except pursuant to a contract in effect on the
date of the Merger Agreement, (i) any controlling equity interest in any Person
(other than Investment Assets), (ii) any non-publicly traded securities in
excess of $5,000,000 per transaction or $5,000,000 per issuer or credit, (iii)
any investments in fixed income securities rated in NAIC Class 4, 5 or 6
non-publicly traded equity securities or Assets required to be shown on Schedule
BA of a Person's Annual Statement in excess of $5,000,000 per 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 and consistent with past practices; (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 Nationwide 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 for each Company insurer filed by or on behalf of
such Company Insurer after the date hereof; (q) reserved; (r) the Company shall
inform Nationwide regarding the progress of any material claim, action, suit
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes; (s) neither the Company nor any subsidiary shall (i)
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make or rescind any material express or deemed election relating to taxes, (ii)
make a request for a Tax Ruling or enter into a Closing Agreement, settlement or
compromise with respect to any material Tax matter or (iii) with respect to any
material Tax matter, change any of its methods of reporting income or deductions
for federal income Tax purposes from those employed in the preparation of its
federal income Tax return for the taxable year ending December 31, 1997, except
as may be required by law; (t) neither the Company nor its subsidiaries shall
declare, set aside or pay any dividends or distributions (whether in cash, stock
or property) 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 Capital stock; (u) except as provided in the Company
Disclosure Schedule, 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; (v)
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 (w)
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 (w).
PROHIBITION ON SOLICITATION
Pursuant to the Merger Agreement, the Company has agreed that, subject
to certain exceptions, it will not, and will not permit or cause any of its
subsidiaries or any of the officers or directors of it or its subsidiaries to,
and shall direct its and its subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its subsidiaries) not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation or
similar transaction involving, or any purchase of 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) other than as
set forth in the Company Disclosure Letter, or any other business combination
(any such proposal or offer, an "Acquisition Proposal").
The Merger Agreement further provides that the Company will not, and
will not permit or cause any of its subsidiaries or any of the officers and
directors of it or its subsidiaries to, and shall direct its and its
subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, whether made before or after the
date of the Merger Agreement, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal; provided, however, that nothing
contained in the Merger Agreement shall prevent the Company or its Board of
Directors from (i) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal or (ii) at any time 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 shareholders 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
Nationwide, Acquisition Sub and the Company (the "Confidentiality Agreement");
(B) engaging in any negotiations or discussions with any Person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such an
Acquisition Proposal to the shareholders of 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
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account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and would, if consummated, result in a more favorable
transaction than the transaction contemplated by the Merger Agreement, taking
into account the long-term prospects and interests of the Company and its
shareholders. The Company will immediately 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 hereof of the
obligations undertaken in this paragraph and under the Merger Agreement. The
Company will notify Nationwide immediately if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with, any of
its representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers and
thereafter shall keep Nationwide informed, on a current basis, on the status and
terms of any such proposals or offers and the status of any such negotiations or
discussions.
STOCKHOLDER APPROVAL
Because Nationwide and Acquisition Sub control more than 50% of the
votes represented by the Shares, there is no need to solicit proxies from other
Company shareholders. Accordingly, this Information Statement has been prepared
in lieu of a proxy statement.
ACCESS TO INFORMATION
Pursuant to the Merger Agreement, subject to applicable law, the
Company shall (a) afford to Nationwide's and Acquisition Sub's accountants,
legal counsel and other advisors ("Representatives") full access during normal
business hours through the period immediately prior to the Effective Time to all
of its and the ALLIED Subsidiaries' (as defined in the Agreement) assets, books,
contracts, commitments and records (including, but not limited to, Tax Returns),
and (b) during such period, the Company shall furnish promptly to Nationwide and
Acquisition Sub all such information concerning its business, assets and
personnel or those of any of its Affiliates, in either clause (a) or (b), as
Nationwide or Acquisition Sub may reasonably request. Information provided by
the Company shall be kept confidential by Nationwide and Acquisition Sub and
shall not be disclosed
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unless such information (1) was known to Nationwide or Acquisition Sub or was in
their possession prior to the date of the Merger Agreement and was not
identified by the Company as being confidential, (2) is or becomes generally
available to the public other than by unauthorized disclosure by Nationwide or
Acquisition Sub, (3) becomes available to Nationwide or Acquisition Sub from a
third party authorized to make such disclosure, (4) is independently developed
by Nationwide or Acquisition Sub, or (5) is required to be disclosed by law or
by court order.
REASONABLE EFFORTS
Each of the parties to the Merger Agreement 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 certain other
documents referred to in the Merger Agreement, (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 and (vi) the defending of any Legal Proceedings challenging the Merger
Agreement or the consummation of the transactions contemplated thereby, the
defense of which shall, at the request of either the Company or Nationwide, be
conducted jointly by Nationwide and the Company on a basis that is satisfactory
to both the Company and Nationwide. The Company grants Nationwide the right to
decide for purposes of the Form A 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 process concurrently or separately for each of the Company, ALLIED
Group and ALLIED Mutual. Both the Company and Nationwide agreed to use all
reasonable efforts to coordinate and cooperate during the regulatory approval
process.
BOARD OF DIRECTORS; CORPORATE GOVERNANCE
The Merger Agreement provides that, promptly upon acceptance for
payment of the Common Shares by Acquisition Sub pursuant to the Offer,
Acquisition Sub shall be entitled to designate such number of directors on the
Board of Directors of the Company as will give Acquisition Sub, subject to
compliance with Section 14(f) of the Exchange Act, a majority of such directors,
and the Company shall, at such time, cause Acquisition Sub's designees to be so
elected by its existing Board of Directors and each Subsidiary of the Company
and each committee of the Board of Directors of the Company and each such
Subsidiary as will give Acquisition Sub a majority of such directors or
committee, and the Company shall, at such time, cause Acquisition Sub's
designees to be so elected. Subject to applicable law, the Company shall take
all action requested by Nationwide necessary to effect any such election. In
connection with the foregoing, the Company anticipates that at least a majority
of the Board will submit resignations on or after October 1, 1998, and that
contemporaneously the Acquisition Sub Designees (other than Mr. Andersen, who
was already a member of the Board) will occupy a majority of the Board.
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See Information Statement Pursuant to Section 14(f) of the Securities Exchange
Act of 1934 and Rule 14F-1 thereunder filed by the Company on June 10, 1998.
TREATMENT OF STOCK OPTIONS; CERTAIN BENEFITS
The Company has taken all necessary action so that, effective as of the
Effective Time, (i) each outstanding employee or director stock option (the
"Options") to purchase Common Shares granted under the ALLIED Life Financial
Corporation Executive Stock Option Plan and the ALLIED Life Financial
Corporation Long-Term Management Incentive Plan (the "Option Plans"), whether or
not then exercisable or vested, will become fully exercisable and vested, (ii)
each Option that is then outstanding to be cancelled and (iii) in consideration
of such cancellation the Company (or, at Nationwide's option, Acquisition Sub)
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 Common Shares previously subject
to the Option immediately prior to its cancellation (such payment to be net of
withholding taxes). The Company has agreed to use all commercially reasonable
efforts to ensure that (a) no consent of any holder of an Option is required to
effect the transactions contemplated by Section 2.11 of the Merger Agreement and
(b) following the Effective Time, no Option or any other option, warrant or
right will give any person any right to acquire any securities of the Surviving
Corporation.
INDEMNIFICATION AND INSURANCE
From and after the Effective Time, Nationwide agrees that it will
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
hereof to indemnify such Person (and Nationwide has 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 shall 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 will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
200% of the Current Premium. If the D&O Insurance is terminated prior to the end
of the sixth anniversary of the Effective Time, the Surviving Corporation will
purchase extended reporting coverage under D&O Insurance covering claims made
during the remainder of such period with respect to acts which occurred prior to
the Effective Time.
CONDITIONS TO THE MERGER
The respective obligation of each party to the Merger Agreement to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time, of the following conditions: (a) 2,000,000 Common Shares shall
have been purchased pursuant to the Offer; (b) if required by applicable law,
the Merger Agreement and the Merger shall have been approved and adopted by the
requisite vote of
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the respective stockholders of the Company at the Shareholders Meeting called
for such purpose; and (c) the waiting period applicable to the consummation of
the Merger under the Hart-Scott Rodino Antitrust Improvements Act of 1976 shall
have expired or been terminated and, other than the filings provided for in
subclauses (a) and (b) of the second sentence of Section 2.3 of the Merger
Agreement, 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, 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.
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 Nationwide or of ALLIED: (a) by mutual consent of
Nationwide and the Company; (b) by Nationwide if the Board withdraws its
recommendation to the Company's stockholders to approve the Merger; (c) by
Nationwide or the Company if consummation of the Merger is barred by a permanent
injunction which is final and non-appealable; (d) by the Company if, prior to
the purchase of Common Shares pursuant to the Offer, there is an Acquisition
Proposal which the Board determines represents a more favorable transaction to
the Company and its stockholders than the transactions contemplated by the
Merger Agreement, and if the Board, after consultation with outside counsel,
shall have determined that failure to terminate the Merger Agreement is
reasonably likely to be inconsistent with the fiduciary duties of the Board of
the Company under applicable Law and the Company has given Nationwide three
business days notice of the terms of such Acquisition Proposal and has paid
Nationwide the fee contemplated by Section 8.2(b) of the Merger Agreement; (e)
by the Company prior to the completion of the Offer, upon a material breach of
any representation or warranty of Nationwide or Nationwide's failure to comply
in any material respect with any of its covenants or agreements, or if any
representation or warranty of Nationwide or Acquisition Sub shall be or become
untrue in any material respect, which breach or failure to comply or untruth is
not curable or, if curable, is not cured within 30 business days after written
notice thereof has been given to Nationwide; (f) by Nationwide prior to the
completion of the Offer, upon (i) a material breach of any representation or
warranty of the Company or if any representation or warranty of ALLIED shall be
or become untrue in any material respect, which breach or failure to comply or
untruth is not curable or, if curable, is not cured within 30 business days
after written notice thereof has been given to the Company, or (ii) the
Company's failure to comply in any material respect with any of its covenants or
agreements (materiality being construed in light of the transactions
contemplated by the Merger Agreement); or (g) by Nationwide or by the Company,
if Common Shares shall not have been purchased pursuant to the Offer by December
31, 1998 provided that such right to terminate the Merger Agreement shall not be
available to a party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of the failure of such purchase to occur by such
date.
FEES AND EXPENSES
The Merger Agreement provides that, if the Merger is not consummated,
all costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party incurring such
costs or expenses, except for expenses incurred in connection with the printing,
mailing and solicitation of proxies from shareholders and all filing fees and
related expenses which shall be borne equally by Nationwide and the Company.
Notwithstanding the foregoing provisions, as described under
"Prohibition on Solicitation", above, if prior to the purchase of Common 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, after consultation with outside counsel, shall have determined
that failure to terminate the Merger Agreement is reasonably likely to be
inconsistent with the fiduciary duties of the Board under applicable Law, the
Company may terminate the Merger Agreement. If the Company so elects to
terminate the Merger Agreement, the Company shall, immediately prior to any such
termination, pay a termination fee in an amount equal to all of the expenses
incurred by Nationwide in connection with this Merger Agreement, the
negotiations leading to its execution, the examination and investigation of the
Company, the preparations 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 million in cash (the "Termination
Payment") as liquidated damages and not as a penalty, immediately upon such
termination, in same-day funds, provided that Nationwide shall not be in
material breach of its obligations under the Merger Agreement. Moreover, the
Company shall pay the 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 shareholders publicly announces, enters into a letter of intent
relating to, enters into a definitive agreement providing for, or consummates, a
transaction, which, as announced, or as provided in such letter or agreement or
as consummated, provides for or relates to the disposition of a controlling
interest in 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 will also pay a termination fee following the termination
of the Merger Agreement by Nationwide (i) following a withdrawal by the Board 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.
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 stockholders of
Nationwide or of the Company, but after such
39
<PAGE> 40
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 Ohio Superintendent and the
Iowa Commissioner. The Merger Agreement may not be amended, modified or
supplemented except by written agreement of the parties thereto.
40
<PAGE> 41
PLANS FOR THE COMPANY
Nationwide believes that, in the aggregate, the Merger will result in
increased growth and investment in the Company and its operations. Except as
indicated in this Information Statement and based upon publicly available
information, neither Nationwide nor Acquisition Sub has any present plans or
proposals which relate to or would result in an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries, a sale or transfer of a material amount of
assets of the Company or any of its subsidiaries or any material change in the
Company's capitalization or dividend policy or any other material changes in the
Company's corporate structure or business.
GOING PRIVATE TRANSACTIONS
The SEC has adopted Rule 13e-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which is applicable to certain "going
private" transactions. Acquisition Sub does not believe that Rule 13e-3 will be
applicable to the Merger unless the Merger is consummated after September 30,
1999, one year after the expiration of the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
fairness of the Merger and the consideration offered to minority stockholders in
such transaction be filed with the SEC and disclosed to stockholders prior to
the consummation of the Merger.
41
<PAGE> 42
DIVIDENDS AND DISTRIBUTIONS
The Merger Agreement provides that the Company shall not make any
change in its dividend practices or policies. The Merger Agreement further
provides that in the event that the Company changes the number of Common
Shares issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision or other similar
transaction, the Merger Consideration shall be equally adjusted.
CERTAIN INFORMATION WITH RESPECT TO THE COMPANY'S STOCK
The Common Shares are quoted on the Nasdaq under the symbol "ALFC".
The Preferred Shares, all of which are held by Nationwide, are not publicly
traded.
The following table sets forth, for the periods indicated, the high
and low sales prices per Common Share and the amount of cash dividends paid per
Common Share.
<TABLE>
<CAPTION> CASH
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1996:
First Quarter............................................. 18 1/4 16 1/2 0.05
Second Quarter............................................ 21 1/2 15 0.05
Third Quarter............................................. 20 151/4 0.05
Fourth Quarter............................................ 18 3/4 15 3/4 0.06
1997:
First Quarter............................................. 19 17 0.06
Second Quarter............................................ 20 15 3/4 0.06
Third Quarter............................................. 23 3/4 18 3/4 0.06
Fourth Quarter............................................ 24 19 3/4 0.06
1998:
First Quarter............................................. 22 1/2 21 0.07
Second Quarter............................................ 29 22 0.07
Third Quarter (through September 28, 1998)................ 28 7/16 29 1/2 0.07
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial information presented below under the captions "Income
Statement Data" and "Balance Sheet Data" for, and as of, each of the years in
the five-year period ended December 31, 1997, has been derived from the
consolidated financial statements of ALLIED Life Financial Corporation and
subsidiaries, which financial statements have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The selected financial
information presented below for, and as of, the six-month periods ended June 30,
1998 and 1997 has been derived from the unaudited consolidated financial
statements of ALLIED Life Financial Corporation and subsidiaries. Results for
interim periods include all adjustments, consisting only of normal recurring
adjustments, which management considers necessary for the fair presentation of
the results for such periods; however, they are not necessarily indicative of
results for the full year. This information should be read in conjunction with
the Company's consolidated financial statements, the notes, and the independent
auditors report thereon incorporated herein by reference.
42
<PAGE> 43
<TABLE>
<CAPTION>
At or for the
Six Months
Ended
June 30, At or for the year ended December 31,
1998 1997 1997 1996 1995 1994 1993
Income Statement Data (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Total insurance revenues $ 19,535 $ 16,762 $ 34,142 $ 31,350 $ 29,934 $ 25,393 $20,822
Investment income 27,630 25,525 52,197 48,182 45,411 38,136 33,243
Realized investment gains
(losses) 514 (253) 2,354 122 (722) (724) 2,154
Other income 797 662 1,559 1,056 688 648 277
Total revenues 48,476 42,706 90,252 80,710 75,311 63,453 56,496
Benefits and expenses
Policyholder benefits 28,940 25,062 51,392 47,988 46,063 37,359 32,870
Amortization of deferred policy
acquisition costs (1) 5,353 4,713 11,097 10,595 5,941 5,136 5,347
Commissions 2,712 1,884 4,232 3,316 2,725 2,627 2,390
Operating expenses (2) 7,288 3,839 7,832 6,801 6,313 5,715 4,966
Total benefits and expenses 44,293 35,498 74,553 68,700 61,042 50,837 45,573
Income before income taxes 4,183 7,208 15,699 12,010 14,269 12,616 10,923
Income taxes 1,715 2,402 5,226 3,937 4,557 4,059 3,739
Net income (1)(2) $ 2,468 $ 4,806 $ 10,473 $ 8,073 $ 9,712 $ 8,557 $ 7,184
Net income applicable to
common stock (1)(2) 1,621 4,014 $ 8,862 $ 6,567 $ 8,304 $ 7,239 $ 5,930
Diluted earnings per share (1)(2) 0.36 0.87 1.94 1.39 1.75 1.57 1.67
Dividends paid per common share $ 0.14 $ 0.12 $ 0.25 $ 0.21 $ 0.17 $ 0.13 $ 0.03
Weighted average number of
shares outstanding
(in thousands) 4,558 4,612 4,572 4,712 4,732 4,612 3,546
Balance Sheet Data
Assets $ 956,270 $ 965,053 $ 904,457 $ 835,600 $ 759,947 $ 643,340 $532,588
Preferred stock 27,238 25,620 26,336 24,586 22,871 21,341 19,028
Stockholders' equity $ 117,984 $ 108,620 $ 114,157 $ 99,942 $ 101,682 $ 76,027 $ 74,368
Preferred shares outstanding
(in thousands) 2,469 2,324 2,393 2,238 2,087 1,948 1,754
Common shares outstanding
(in thousands) 4,438 4,369 4,398 4,497 4,633 4,586 4,572
Other Data
Death benefits per share $ 0.57 $ 0.46 $ 0.91 $ 0.81 $ 0.81 $ 0.68 $ 0.72
Book value per share 18.05 16.91 17.84 16.16 15.01 13.42 11.98
Statutory capital and surplus 50,169 47,053 51,275 46,544 45,504 47,413 42,403
Life insurance in force 9,711,480 9,383,764 9,629,640 8,959,314 8,114,516 7,242,737 5,915,558
Annuity account balances $ 537,960 $ 484,569 $ 514,908 $ 467,505 $ 412,216 $ 343,390 $271,385
<FN>
(1) The 1996 amounts include an additional $2.8 million ($1.9 million or $0.40
per share net of income taxes) charge relating to unlocking adjustments to
deferred policy acquisitions costs.
(2) The 1998 amounts include a $2.0 million ($1.3 million or $0.29 per share net
of income taxes) charge relating to a litigation reserve and $955,000 ($921,000
or $0.20 per share net of income taxes) for expenses related to the proposed
merger with Nationwide.
</TABLE>
<PAGE> 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the stockholders known to management to be
the beneficial owners of the Preferred Shares and more than 5% of the
outstanding Common Shares as of October 9, 1998.
<TABLE>
<CAPTION>
Percent of
Name and Address Amount and Nature Percent Total Voting
Title of Class of Beneficial Owner of Beneficial Ownership of Class Securities
- -------------- ------------------- ----------------------- -------- ----------
<S> <C> <C> <C> <C>
6-3/4% Preferred Nationwide Mutual 2,330,772 shares 100% 16.8%
Stock Insurance Company(1)
One Nationwide Plaza
Columbus, OH 43215
Common Stock Nationwide Mutual _________ shares _____ _____
Insurance Company
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
- -----------
(1) The Company and Nationwide, as successor in interest to ALLIED Mutual,
are parties to a Stock Rights Agreement which expires in 2008. Under
the Stock Rights Agreement, Nationwide is entitled to nominate and the
Company is required to use its best efforts to cause the election or
retention of a number of members of the Company's Board of Directors in
proportion to Nationwide's percentage ownership of the total number of
shares of the Company's voting stock outstanding at the time of
nomination. In addition, the Company is required to elect to its
Executive Committee at least one Company director who has been
nominated by Nationwide but who is not an officer or employee of
Nationwide, and the Company must limit the number of directors serving
on the Executive Committee to five at any time. The Stock Rights
Agreement restricts the ability of Nationwide to grant proxies to other
than affiliated individuals and to solicit other stockholders of the
Company. Nationwide also is prohibited from initiating or accepting a
tender offer for Common Shares except under certain conditions. The
Company has a right of first referral with respect to any sale by
Nationwide of the Common Shares, subject to certain exceptions,
including distribution of such shares to the public in a registered
public offering or an offering pursuant to Rule 144. Nationwide has
incidental registration rights and three demand registration rights
with respect to the Preferred Shares.
The table below sets forth information provided by the individuals
named therein as to the amount of the Company's Common Stock and ESOP Preferred
beneficially owned by the directors and executive officers of the Company,
individually, and the directors and executive officers as a group, all as of
September 1, 1998. The issued and outstanding Common Stock, Series A ESOP
Convertible Preferred Stock with no par value and 6.75% Preferred as of
September 1, 1998 were 4,403,172 shares, 112,863 shares and 2,882,060 shares,
respectively.
<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- 5,764 5,764 -0- * *
Harold S. Evans -0- 15,456 15,456 -0- * *
John E. Evans -0- 30,568 30,568 -0- * *
Dennis H. Kelly, Jr. -0- 12,096 12,096 -0- * *
George D. Milligan -0- 7,360 4,360 -0- * *
Samuel J. Wells 10,047 62,405(3) 72,452(3) * 1.8% *
Wendell P. Crosser 8,209 10,269(3) 18,478(3) * * *
Donald J. Iverson 1,519 1,266(3) 2,785(3) * * *
Joseph P. Ross 314 450 791 * * *
All Directors and
Executive Officers
as a Group (13 persons) 22,903 146,365 169,268(3) * 4.4% 3.2%
</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 September 1, 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, 8,766 shares; Mr. Crosser, 9,640
shares; Mr. Iverson, 998 shares; and all executive officers as a
group, 19,590 shares.
EXPERTS
The consolidated financial statements of ALLIED Life Financial Corporation and
subsidiaries as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, have been incorporated by reference
herein upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
OTHER MATTERS
The Board knows of no business which will be presented for consideration
at the Special Meeting other than that described above.
Dated: October , 1998
By Order of the Board of Directors,
Sally J. Malloy
Secretary
<PAGE> 45
ANNEX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and
between NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company
("Nationwide"), and ALLIED MUTUAL INSURANCE COMPANY, an Iowa mutual insurance
company ("Allied") (Nationwide and Allied being hereinafter sometimes
collectively referred to as the "parties").
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied deem it advisable and in the best interests of the
policyholders of their respective companies to effect the Merger of Allied with
and into Nationwide (the "Merger") upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied have approved the Merger and this Agreement; and
WHEREAS, Nationwide and Allied desire to make certain
representations, warranties, covenants and agreements in connection with such
Merger; and
WHEREAS, the parties intend that the Merger qualify, for
federal income tax purposes, as a reorganization under Section 368(a) of the
Code (as defined in Section 1.1 hereof); and
WHEREAS, concurrently with the execution of this Agreement,
Nationwide is also entering into agreements with respect to the acquisition of
Allied Group (as defined in Section 1.1 hereof) and Allied Life (as defined in
Section 1.1 hereof); and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein,
Nationwide and Allied, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. When used in this Agreement, the
following words or phrases have the following meanings:
"ACQUISITION PROPOSAL" shall mean any bona fide proposal or
offer, whether in writing or otherwise, from any Person other than a party
hereto or any affiliates thereof (a "Third Party") to acquire a party or all or
a material portion of the assets of a party and its Subsidiaries, taken as
whole, pursuant to a merger, consolidation, conversion, demutualization,
reorganization
<PAGE> 46
or other method of business combination, sale of assets or similar transaction
with respect to such party, including any single or multi-step transaction or
series of related transactions, which is structured to permit such Third Party
to acquire a party or a material portion of the assets of a party and its
Subsidiaries, taken as a whole.
"AFFILIATE" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act; provided that, for purposes of this Agreement none of Allied
Group, Allied Life and any Subsidiary thereof shall be considered an Affiliate
of Allied.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including all Exhibits.
"ALLIED" shall have the meaning set forth in the preamble to
this Agreement.
"ALLIED DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Allied to Nationwide, dated the date hereof.
"ALLIED GROUP" shall mean Allied Group, Inc., an Iowa
corporation.
"ALLIED GROUP SEC DOCUMENTS" shall mean all reports, proxy
statements, forms, and other documents required to be filed by Allied Group with
the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
"ALLIED LIFE" shall mean Allied Life Financial Corporation, an
Iowa corporation.
"ALLIED LIFE SEC DOCUMENTS" shall mean all reports, proxy
statements, forms, and other documents required to be filed by Allied Life with
the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
"ALLIED PROXY STATEMENT" shall have the meaning set forth in
Section 3.1(c) hereof.
"ALLIED REAL PROPERTY" shall mean any real property in which
Allied or any of its Affiliates holds a Lien or owns an interest, or in the
management of which Allied or an Affiliate of Allied actively participates.
"ALLIED SAP STATEMENTS" shall have the meaning set forth in
Section 4.5(d) hereof.
"ALLIED SUBSIDIARY" or "ALLIED SUBSIDIARIES" shall mean the
Subsidiaries of Allied and, without limiting the generality of the foregoing,
shall include any Affiliate or Subsidiary of Allied as to which Allied or an
Allied Subsidiary has guaranteed any obligations or owns any interest; provided
that neither Allied Group nor Allied Life (nor any of their respective
2
<PAGE> 47
Subsidiaries) shall be included within the definition of Allied Subsidiary.
References in this Agreement to Subsidiaries of Allied shall mean all of the
Allied Subsidiaries.
"ANNUAL STATEMENTS" shall mean, with respect to any Person,
the annual statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
"ANTITRUST DIVISION" shall mean the Antitrust Division of the
United States Department of Justice.
"ARTICLES OF MERGER" shall mean the articles of merger in such
form as required by, and executed and acknowledged in accordance with the
relevant provisions of the Iowa Insurance Law.
"ASSETS" shall mean, as to a Person, all rights, titles,
franchises and interests in and to every species of property, real, personal and
mixed, and choses in action thereunto belonging, including, but not limited to,
Environmental Permits, Investment Assets, Intellectual Property, Contracts,
Licenses, privileges and all other assets whatsoever, tangible or intangible, of
such Person.
"BUSINESS" shall mean, as to a Person, the business,
operations, activities and affairs of such Person.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or any other day in which commercial banks in Des Moines, Iowa or Columbus, Ohio
are required to or permitted to be closed.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"CERTIFICATE OF MERGER" shall mean a certificate of merger in
such form as required by, and executed and acknowledged in accordance with,
Section 1701.81 of the Ohio Revised Code.
"CLOSING" shall have the meaning set forth in Section 2.2
hereof.
"CLOSING AGREEMENT" shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
"CLOSING DATE" shall have the meaning set forth in Section 2.2
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any
3
<PAGE> 48
successor law, and the rules and regulations issued by the IRS pursuant to the
Code or any successor law.
"COMPUTER SOFTWARE" shall mean any and all computer software
consisting of sets of statements or instructions to be used, directly or
indirectly, in a computer, including, but not limited to, the following: (i) all
source code, object code and natural language code therefor and all component
modules thereof, (ii) all versions thereof, (iii) all screen displays and
designs thereof and (iv) all user, technical, training and other documentation
relating to any of the foregoing.
"CONFIDENTIAL INFORMATION" shall mean all information about a
party furnished by a party or its Representatives to the other party or its
Representatives, whether furnished before or after the date hereof, regardless
of the manner in which it is furnished, together with all analyses,
compilations, studies or other documents prepared by the other party or its
Representatives which reflect or are generated from such information.
Confidential Information does not include, however, information about a party
which (a) is or becomes generally available to the public other than as a result
of a disclosure by the other party or its Representatives, (b) was available to
the other party on a nonconfidential basis prior to its disclosure by the party
supplying the information or its Representatives or (c) becomes available to the
other party on a nonconfidential basis from a Person who is not otherwise bound
by a confidentiality agreement with respect to the information, or is not
otherwise prohibited from transmitting the information to the other party.
"CONSENT OR FILING" shall have the meaning set forth in
Section 4.4(b) hereof.
"CONTRACT" shall mean any written contract, agreement,
commitment, indenture, note, bond, mortgage, license, lease or assignment.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.3 hereof.
"ENVIRONMENTAL CLAIM" shall mean any investigation, notice of
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising: (A) pursuant to, or in
connection with, an actual or alleged violation of any Environmental Law; (B) in
connection with any Hazardous Substances or actual or alleged activity
associated with any Hazardous Substances; (C) from any abatement, removal,
remedial, corrective or other response action in connection with any Hazardous
Substances, Environmental Law or other order or directive of any federal, state
or local governmental authority; or (D) from any actual or alleged damage,
injury, threat or harm to health, safety, natural resources or the environment.
Environmental Claim shall not include claims for coverage by an insured.
"ENVIRONMENTAL LAW" shall mean any applicable local, state or
federal statute, rule, regulation, order, code, directive or ordinance and any
binding judicial or administrative
4
<PAGE> 49
interpretation thereof or requirements thereunder pertaining to: (A) the
regulation and protection of human health and safety and the outdoor
environment; (B) the protection or use of surface water and ground water; (C)
the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal, remediation or handling of, or exposure to, any Hazardous
Substances; or (D) pollution (including any release into air, land, surface
water and ground water); and includes without limitation the following federal
statutes (and their implementing regulations and the analogous state statutes
and regulations): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984; and the Federal Water Pollution Control Act of 1972,
as amended by the Clean Water Act of 1977.
"ENVIRONMENTAL PERMIT" shall mean any permit, license,
variance, certificate, consent, letter, clearance, closure, exemption,
authorization, decision or action or approval required to be obtained from any
federal, state or local governmental authority with jurisdiction over and
pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor Act and the rules and regulations
thereunder or under any successor Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any successor law, and the rules and regulations of the SEC
promulgated thereunder or under any successor law.
"FTC" shall mean the United States Federal Trade Commission or
any successor agency.
"FINANCIAL STATEMENTS" shall mean balance sheets, statements
of income and statements of cash flows, including, but not limited to, all
notes, schedules, exhibits and other attachments thereto, whether consolidated,
combined or separate or audited or unaudited or prepared in accordance with SAP
or GAAP.
"GAAP" shall mean United States generally accepted accounting
principles.
"GAAP FINANCIAL STATEMENTS" shall mean Financial Statements
prepared in accordance with GAAP.
"GOVERNMENTAL APPROVALS" shall mean the Consents or Filings
identified or described in the Allied Disclosure Schedule.
"GOVERNMENTAL ENTITY" shall mean any (i) nation, state,
county, city, town, village,
5
<PAGE> 50
district, or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign or other government; (iii) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or (iv) body exercising,
or entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature, including any
arbitral tribunal.
"HAZARDOUS SUBSTANCES" shall mean chemicals, products,
compounds, by-products, pollutants, contaminants, hazardous wastes or toxic or
hazardous substances regulated under any Environmental Law, including, but not
limited to, asbestos or asbestos-containing materials, polychlorinated
biphenyls, pesticides and oils, petroleum and petroleum products.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or any successor law, and the rules and
regulations promulgated thereunder or under any successor law.
"INDEMNITEES" shall have the meaning set forth in Section 6.7
hereof.
"INSURANCE CONTRACT" shall mean any Contract of insurance,
including, but not limited to, reinsurance contracts, variable annuity and fixed
annuity contracts or products, life insurance contracts, and funding agreements.
"INSURANCE LICENSE" shall mean any License granted by a
Governmental Entity to transact an insurance or reinsurance business, issue
fixed or variable annuity contracts or products, or issue life insurance
contracts.
"INTELLECTUAL PROPERTY" shall mean: trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, good will associated with the foregoing and
registrations in any extension, modification or renewal of any such registration
or application; inventions, discoveries and ideas, whether patentable or not in
any jurisdiction; patents, applications for patents (including but not limited
to divisions, continuations, continuations in part and renewal applications),
and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not in any jurisdiction, and any renewals
or extensions thereof; and any similar intellectual property or proprietary
rights; provided, that Intellectual Property shall include Computer Software.
"INVESTMENT ADVISERS ACT" shall mean the Investment Advisers
Act of 1940, as amended, or any successor law, and the rules and regulations of
the SEC promulgated thereunder or under any successor law.
"INVESTMENT ASSETS" shall mean bonds, notes, debentures,
mortgage loans, collateral loans and all other instruments of indebtedness,
stocks, partnership or joint venture
6
<PAGE> 51
interests and all other equity interests (including, but not limited to, equity
interests in Subsidiaries or other Affiliates), real estate and leasehold and
other interests therein, certificates issued by or interests in trusts, cash on
hand and on deposit, personal property and interests therein and all other
assets acquired for investment purposes.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act
of 1940, as amended, or any successor law, and the rules and regulations of the
SEC promulgated thereunder or under any successor law.
"IOWA ATTORNEY GENERAL" shall mean the Attorney General of the
State of Iowa.
"IOWA COMMISSIONER" shall mean the Commissioner of Insurance
of the State of Iowa.
"IOWA INSURANCE LAW" shall mean Chapters 505 through 523I of
the Iowa Code, as amended, and the rules and regulations promulgated thereunder.
"IOWA SECRETARY OF STATE" shall mean the Secretary of State of
the State of Iowa.
"IRS" shall mean the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE" shall mean, (i) as to Allied or any Allied
Subsidiary, the actual knowledge of the following individuals: John E. Evans,
Douglas L. Andersen, Jamie H. Shaffer, Stephen S. Rasmussen, George T. Oleson
and Cheryl M. Citrelli; and (ii) as to Nationwide or any Nationwide Subsidiary,
the actual knowledge of Dimon R. McFerson, Richard D. Crabtree, Robert A.
Oakley, Robert J. Woodward, Jr. and W. Sidney Druen.
"LAW" shall mean any applicable Order, constitution, law,
ordinance, principle of common law, rule, regulation, statute, treaty, judgment
enacted, promulgated, issued, enforced or entered by any Governmental Entity.
"LIABILITY" shall mean a liability, obligation, claim or cause
of action (of any kind or nature whatsoever, whether absolute, accrued,
contingent or other, and whether known or unknown), including, but not limited
to, any liability, obligation, claim or cause of action arising pursuant to or
as a result of an Insurance Contract or pursuant to any Environmental Claim.
"LICENSE" shall mean a license, certificate of authority,
franchise, permit or other authorization to transact an activity or business,
whether granted by a Governmental Entity or by any other Person.
"LIEN" shall mean a lien, mortgage, hypothecation, deed of
trust, deed to secure debt, pledge, security interest, charge, claim, levy or
other encumbrance of any kind.
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"LOSSES" shall mean all losses, claims, damages, costs,
expenses, liabilities and judgments, including, but not limited to, court costs
and attorneys' fees.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, assets, liabilities, results of operations or financial
condition of any party or any of its Subsidiaries, taken as a whole, or on the
ability of such party to consummate the transactions contemplated by this
Agreement, provided, HOWEVER, that, the effects of changes that are generally
applicable to (i) the insurance industry and the markets for insurance and
insurance-related products and the other industries and markets in which a party
and its Subsidiaries operate or (ii) the United States securities markets shall
be excluded from the determination of a Material Adverse Effect; and PROVIDED,
FURTHER, that any adverse effect on a party and its Subsidiaries resulting from
the announcement of Nationwide's proposal to acquire Allied, the execution of
this Agreement and the announcement of this Agreement and the transactions
contemplated hereby shall also be excluded from the determination of a Material
Adverse Effect.
"MAXIMUM PREMIUM" shall have the meaning set forth in Section
6.7 hereof.
"MEETING NOTICES" shall have the meaning set forth in Section
3.1(b) hereof.
"MEMBER" shall mean, as to Nationwide, each policyholder of
Nationwide entitled to vote upon this Agreement as provided in Section 3941.07
of the Ohio Insurance Law, and, as to Allied, each policyholder who is a member
as provided in Section 515.15 of the Iowa Insurance Law.
"MERGER" shall have the meaning set forth in the preamble to
this Agreement.
"NAIC" shall mean the National Association of Insurance
Commissioners.
"NATIONWIDE" shall have the meaning set forth in the preamble
to this Agreement.
"NATIONWIDE GAAP FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 5.5 hereof.
"NATIONWIDE INSURER" shall mean Nationwide and each Nationwide
Subsidiary that transacts or is authorized to transact property and casualty
insurance or reinsurance business.
"NATIONWIDE PROXY STATEMENT" shall have the meaning set forth
in Section 3.1(d) hereof.
"NATIONWIDE SAP STATEMENTS" shall have the meaning set forth
in Section 5.4(d) hereof.
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"NATIONWIDE SUBSIDIARIES" shall mean the Subsidiaries of
Nationwide.
"NOTICES" shall have the meaning set forth in Section 9.3
hereof.
"NPL" shall mean the National Priority List.
"OHIO INSURANCE LAW" shall mean Title 39 of the Ohio Revised
Code, as amended, and the rules and regulations promulgated thereunder.
"OHIO SUPERINTENDENT" shall mean the Superintendent of
Insurance of the State of Ohio.
"ORDER" shall mean an order, writ, ruling, decision, award,
verdict, judgment, directive, injunction or decree of any arbitrator or
Governmental Entity.
"PERMITTED LIENS" shall mean, as to a party hereto, (a) those
Liens set forth in the Nationwide Disclosure Schedule or the Allied Disclosure
Schedule, or otherwise approved in writing by the other party, (b) any Lien that
is set forth in the public records or in title reports or title insurance
binders that have been made available to the other party relating to any
interest in the real property set forth in the Nationwide Disclosure Schedule or
the Allied Disclosure Schedule, (c) Liens for water and sewer charges and
current Taxes not yet due and payable or being contested in good faith, (d)
Liens arising from securities lending activities undertaken in the ordinary
course of business of a Person, (e) mortgages or security interests shown in any
of the party's SAP Statements or any of the party's GAAP Statements as securing
specified liabilities or obligations, (f) mortgages or security interests
incurred in connection with the purchase of property or assets in the ordinary
course of business after the date of any of the party's SAP Statements or any of
the party's GAAP Statements (such mortgages and security interests being limited
to the property or assets so acquired), (g) minor imperfections of title, if
any, none of which is substantial in amount or materially detracts from the
value or impairs the use of the property subject thereto, (h) zoning laws and
other land use restrictions that do not materially impair the present or
anticipated use of the property subject thereto, (i) other Liens (including, but
not limited to, mechanic's, courier's, worker's, repairer's, materialman's,
warehouseman's and other similar Liens) arising or incurred in the ordinary
course of business as would not, individually or in the aggregate, materially
adversely affect the value of, or materially adversely interfere with the use
of, the property subject thereto, and (j) Liens arising or resulting from any
action taken by the other party hereto or any of its respective Subsidiaries
(but not including the execution, delivery or performance of this Agreement or
the Merger).
"PERSON" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, trust, joint venture, labor union, estate, unincorporated organization
or other entity.
"POLICYHOLDER DIVIDEND" shall have the meaning set forth in
Section 2.7 hereof.
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"POOLING AGREEMENT" shall mean that certain January 1, 1993
Pooling Agreement, as amended, between Allied and Allied Group.
"PROCEEDINGS" shall mean any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Entity, other than
any of the foregoing which relate to claims made pursuant to any Insurance
Contract.
"PROXY STATEMENTS" shall have the meaning set forth in Section
3.1(d) hereof.
"QUARTERLY STATEMENTS" shall mean, with respect to any Person,
the quarterly statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
"RABBI TRUST" shall have the meaning set forth in Section 4.17
hereof
"RATING AGENCIES" shall have the meaning set forth in Section
4.19 hereof.
"REPRESENTATIVE" shall mean, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, accountant, legal counsel, agent,
representative or expert retained by or acting on behalf of such Person or its
Subsidiaries).
"SAP" shall mean statutory accounting practices prescribed by
the NAIC and prescribed or permitted by the applicable insurance regulatory body
applied on a consistent basis.
"SAP STATEMENTS" shall mean Annual Statements and Quarterly
Statements.
"SEC" shall mean the United States Securities and Exchange
Commission or any successor agency.
"SUBSIDIARY" of a Person shall mean an Affiliate of such
Person more than fifty percent of any class of voting stock (or of any other
form of voting equity interest in the case of a Person that is not a
corporation) of which is beneficially owned by the Person directly or indirectly
through one or more other Persons.
"SUPERIOR PROPOSAL" shall mean an Acquisition Proposal which,
if accepted by a party, is reasonably capable of being consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and which, if consummated, would be reasonably
likely, in the view of the board of directors of the party which is the subject
to the Acquisition Proposal, to result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and
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interests of such party and its Members.
"SURVIVING COMPANY" shall have the meaning set forth in
Section 2.1 hereof.
"TAX" shall mean any federal, state, county, local or foreign
taxes, charges, fees, levies or other assessments, including all net income,
gross income, premiums, sales and use, ad valorem, transfer, gains, profits,
windfall profits, excise, franchise, real and personal property, gross receipts,
capital stock, production, business and occupation, employment, disability,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes, other taxes or similar charges of any kind whatsoever imposed by any
Governmental Entity and includes any interest and penalties (civil or criminal)
on or additions to any such taxes.
"TAX RETURN" shall mean a report, return, statement or other
information required under any applicable Law to be filed or provided to any
taxing authority with respect to Taxes including, where permitted or required,
combined or consolidated returns for any group of entities that includes
Nationwide or any Nationwide Subsidiary on the one hand, or Allied or any Allied
Subsidiary on the other hand and any unitary or similar return, information
return, claim for refund, amended return or declaration of estimated Tax.
"TAX RULING" shall mean a written ruling of a taxing authority
relating to Taxes.
"THIRD PARTY" shall have the meaning set forth in Section 1.1
hereof.
"THIRD PARTY ADMINISTRATOR" shall mean any third party
administrator of either Nationwide or Allied.
"TREASURY REGULATION" shall mean the regulations promulgated
by the U.S. Department of the Treasury pursuant to the Code.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER. Upon the terms of this Agreement and
subject to the satisfaction of the conditions set forth herein, at the Effective
Time Allied shall be merged with and into Nationwide in accordance with the
applicable provisions of the Laws of the States of Ohio and Section 521.12 et.
seq. of the Iowa Insurance Law and the separate corporate existence of Allied
shall thereupon cease, and Nationwide, which shall be the surviving company
(hereinafter sometimes referred to as the "Surviving Company"), shall continue
its corporate existence under the Law of the State of Ohio under the name
"Nationwide Mutual Insurance Company." The Merger shall have the effects
provided in Section 3941.42 of the Ohio Insurance Law and Section 521.12 of the
Iowa Insurance Law, and, from and after the Effective Time, the
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Surviving Company shall possess all the rights, authority, privileges,
immunities, powers, licenses, permits and franchises, or a public or private
nature, of Allied, and shall be subject to all the duties, liabilities and
obligations of Allied, and all the rights, authority, privileges, immunities,
powers, licences, permits and franchises of Allied, and all property, real,
personal and mixed, and all debts due to Allied on whatever account and all
other choses in action and every other interest of or belonging to Allied shall
vest in the Surviving Company; and all property, rights, authority, privileges,
immunities, powers, licenses, permits and franchises and every other interest
shall be thereafter the property of the Surviving Company as they were of
Allied; and the title to any real estate or any interest therein, vested by deed
or otherwise in Allied, shall not revert or be in any way impaired by reason of
the Merger; but all rights of creditors and all liens upon any property of
Allied shall be preserved unimpaired; and all debts, duties, liabilities and
obligations of Allied shall thenceforth attach to the Surviving Company, and may
be enforced against it to the same extent as if said debts, duties, liabilities
and obligations had been incurred or contracted by it.
Section 2.2 CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1, and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the closing of the Merger (the "Closing")
will take place at 10:00 a.m., New York City time, on the second business day
following the date on which the last of the conditions set forth in Article VII
shall be fulfilled or waived in accordance with this Agreement (the "Closing
Date"), at the offices of Holleb & Coff, 55 E. Monroe Street, Chicago, Illinois
60603, unless another date, time or place is agreed to in writing by the parties
hereto.
Section 2.3 EFFECTIVE TIME. As soon as is practicable
following the execution of this Agreement, the parties shall cause this
Agreement to be provided to the Ohio Superintendent in accordance with Section
3941.38(A) of the Ohio Insurance Law and the regulations promulgated thereunder,
and to the Iowa Commissioner in accordance with Section 521A.3 of the Iowa
Insurance Law and the regulations promulgated thereunder and the Iowa
Commissioner and the Iowa Attorney General in accordance with Section 521.12 of
the Iowa Insurance Law, in each case together with all other documents as may be
required by applicable Law. Subject to the conditions set forth in Article VII
of this Agreement, on the Closing Date, the parties shall cause a Certificate of
Merger to be filed with the Ohio Secretary of State and the Articles of Merger
shall be filed with the Iowa Secretary of State, and the Merger shall become
effective (the "Effective Time") upon the last to occur of (a) the filing of the
Certificate of Merger with the Ohio Secretary of State, (b) the filing of the
Articles of Merger with the Iowa Secretary of State, and (c) such later time as
the parties may agree to designate in such filings; PROVIDED, HOWEVER, the
Effective Time shall not be more than one year from the date of approval of the
Merger by the Ohio Superintendent or 31 days after the filing and recording of
the Articles of Merger as described herein. Upon the terms and subject to the
conditions of this Agreement, the parties hereto will use all reasonable efforts
to assure that the filings contemplated hereby are made, and the Effective Time
occurs, as soon as is practicable.
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Section 2.4 ARTICLES OF INCORPORATION AND BY-LAWS OF THE
SURVIVING COMPANY. Following the Effective Time, the Articles of Incorporation
of Nationwide, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Company until thereafter changed
or amended as provided therein or by Law. The Amended and Restated Code of
By-Laws of Nationwide, as in effect immediately prior to the Effective Time,
shall be the Amended and Restated Code of By-Laws of the Surviving Company until
thereafter changed or amended as provided therein, by the Articles of
Incorporation of the Surviving Company or by Law. A copy of Nationwide's
Articles of Incorporation and Amended and Restated Code of By-Laws, as in effect
on the date hereof, has been made available to Allied.
Section 2.5 BOARD OF DIRECTORS AND OFFICERS. The directors of
Nationwide immediately prior to the Effective Time shall be the directors of the
Surviving Company immediately following the Effective Time, each of such
directors to hold office, subject to the applicable provisions of the Articles
of Incorporation and Amended and Restated Code of By-Laws of the Surviving
Company, until his or her successor is duly elected and qualified, or his or her
earlier death, resignation or removal. The officers of Nationwide immediately
prior to the Effective Time shall be the officers of the Surviving Company at
and immediately following the Effective Time, each of such officers to hold
their respective offices, subject to the applicable provisions of the Articles
of Incorporation and Amended and Restated Code of By-Laws of the Surviving
Company, until his or her successor is duly elected and qualified, or his or her
earlier death, resignation or removal in accordance with the Articles of
Incorporation and Amended and Restated Code of By-Laws of the Surviving Company.
Section 2.6 EFFECT OF MERGER ON ALLIED MEMBERS. From and after
the Effective Time, the policyholders of Allied will become policyholders of
Nationwide or a Nationwide Insurer, in full satisfaction of all rights
pertaining to the policies of Allied. In addition, each policyholder of Allied
will be granted a certificate of membership, substantially in the form attached
hereto as Exhibit A.
Section 2.7 POLICYHOLDER DIVIDEND. Prior to the Closing Date,
Allied shall declare an extraordinary dividend to its policyholders in the
amount of $110 million (the "Policyholder Dividend") and the Policyholder
Dividend shall be payable on or about the Closing Date. The allocation of the
Policyholder Dividend among Allied's policyholders shall be determined in
accordance with the ratio which the net earned premiums that an Allied
policyholder has properly and timely paid to Allied on insurance policies in
effect during the three years immediately preceding the date hereof bears to the
total earned premiums received by Allied from its policyholders during that
three-year period.
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ARTICLE III
RELATED MATTERS
Section 3.1 MEMBER APPROVALS.
(a) Nationwide and Allied shall each take all actions
necessary in accordance with applicable Law and its articles of incorporation
and by-laws to convene a meeting of its Members as promptly as practicable to
consider and vote upon this Agreement. Nationwide and Allied shall jointly
determine a mutually satisfactory means of satisfying the notice, meeting and
other Member approval requirements of applicable Law. Subject to their duties
under applicable Law, each of the Board of Directors of Nationwide and the Board
of Directors of Allied shall recommend that the Members of its respective
company vote in favor of this Agreement and each of Nationwide and Allied shall
use its best efforts to solicit proxies or ballots, as the case may be, from its
Members in favor of this Agreement and shall take all other actions reasonably
necessary or advisable to secure the votes of its Members which are required in
order to approve this Agreement and effect the Merger. Notwithstanding anything
in this Agreement to the contrary, the Board of Directors of Allied may
withdraw, modify or change its recommendation that its Members vote in favor of
this Agreement to the extent that (A) such Board of Directors determines in good
faith that a third party has submitted to Allied an Acquisition Proposal which
is a Superior Proposal, or (B) such Board of Directors determines in good faith
that the failure to withdraw, modify or change such recommendation is reasonably
likely to result in a breach of such Board of Director's fiduciary duties under
applicable Law.
(b) As soon as practicable after the date hereof, Nationwide
and Allied shall each prepare, and each of Nationwide and Allied shall use its
best efforts to have the Ohio Superintendent and the Iowa Commissioner approve,
their respective notices of meetings (the "Meeting Notices") setting forth the
time, place and purpose of the Members' meetings called for the purpose of
approving the Merger, which Meeting Notices shall include a copy of this
Agreement and a summary thereof, if required. Promptly after receipt of approval
by the Ohio Superintendent and the Iowa Commissioner of the applicable Meeting
Notice, (i) Nationwide shall, as soon as practicable after the date hereof,
comply with the provisions of Section 3941.37 of the Ohio Insurance Law, (ii)
Allied shall, as soon as practicable after the date hereof, comply with the
provisions of Section 521.12 et. seq. of the Iowa Insurance Law, and (iii) both
parties shall promptly comply with all other applicable Laws with respect to the
publication or mailing to their respective Members of the applicable Meeting
Notice.
(c) As soon as practicable after the date hereof, Allied
shall prepare a proxy or information statement (together with all amendments,
schedules, and exhibits thereto, the "Allied Proxy Statement") relating to the
solicitation of its Members' approval of the Merger, and shall use its best
efforts to respond promptly to any comments made by any Governmental Entity with
respect to the Allied Proxy Statement and to cause the Allied Proxy Statement to
be mailed to its Members.
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(d) If required, as soon as practicable after the date
hereof, Nationwide shall prepare a proxy or information statement (together with
all amendments, schedules, and exhibits thereto, the "Nationwide Proxy
Statement") relating to the solicitation of its Members' approval of the Merger,
and shall use its best efforts to respond promptly to any comments made by any
Governmental Entity with respect to the Nationwide Proxy Statement and to cause
the Nationwide Proxy Statement to be mailed to its Members. The Allied Proxy
Statement and the Nationwide Proxy Statement are collectively referred to herein
as the "Proxy Statements."
(e) Nationwide and Allied shall furnish all information
concerning it as is reasonably requested to be included in the Meeting Notices
and the Proxy Statements. Each of Allied and Nationwide agrees that the written
information provided by it specifically for inclusion in any Meeting Notice or
the Proxy Statements will not, at the time such Meeting Notice and/or the Proxy
Statements are published or mailed to the Members of each of Allied and
Nationwide and on the date of the meeting relating thereto, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Allied represents and warrants to Nationwide as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION.
(a) Allied is a mutual insurance company duly organized,
validly existing and in good standing under the Laws of the State of Iowa and
has the requisite corporate power and authority to conduct its Business as it is
currently being conducted. Each of the Allied Subsidiaries is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation and has the requisite power and authority to conduct
its Business as it is currently being conducted. Each of Allied and of the
Allied Subsidiaries is duly qualified to do business, and is in good standing,
in the respective jurisdictions where the nature of its business makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect. Each of the Allied Subsidiaries is listed in the
Allied Disclosure Schedule.
(b) Allied (i) possesses an Insurance License in each
jurisdiction in which Allied is required to possess an Insurance License and
(ii) is duly authorized in its jurisdiction of incorporation and each other
applicable jurisdiction to write each line of business
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reported as being written in the Allied SAP Statements. All such Insurance
Licenses, including, but not limited to, authorizations to transact reinsurance
are in full force and effect without amendment, limitation or restriction, other
than as described in the Allied Disclosure Schedule, and Allied has no Knowledge
of any event, inquiry or Proceeding which is reasonably likely to lead to the
revocation, amendment, failure to renew, limitation, suspension or restriction
of any such Insurance License.
(c) Copies of the Articles of Incorporation and By-laws of
Allied have heretofore been made available to Nationwide and copies of the
Articles of Incorporation and By-laws (and other comparable organizational
documents, if any) of each of the Allied Subsidiaries have heretofore been made
available to Nationwide, and such copies are accurate and complete as of the
date hereof.
(d) Allied does not directly or indirectly beneficially own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
that directly or indirectly conducts any activity which is material to Allied,
other than (i) the Allied Subsidiaries, (ii) as disclosed on the Allied
Disclosure Schedule and (iii) investments in publicly traded securities
constituting less than five percent of the outstanding equity of the issuing
entity.
Section 4.2 CAPITALIZATION OF ALLIED SUBSIDIARIES. All of the
outstanding shares of capital stock (or of any other form of equity interest in
the case of an Allied Subsidiary that is not a corporation) of each of the
Allied Subsidiaries have been validly issued and are fully paid and, except as
set forth in the Allied Disclosure Schedule, are owned by either Allied or
another of the Allied Subsidiaries, free and clear of all Liens. Except as set
forth in the Allied Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, calls, rights, convertible securities, obligations to make
capital contributions or advances, or voting trust arrangements, shareholders'
agreements or other agreements, commitments or undertakings of any character to
which Allied or any Allied Subsidiary is a party or by which any of them is
bound relating to the issued or unissued capital stock (or of any other form of
equity interest in the case of an Allied Subsidiary that is not a corporation)
of any of the Allied Subsidiaries or securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of such capital stock
(or of any other form of equity interest in the case of an Allied Subsidiary
that is not a corporation), which obligates Allied or any such Allied Subsidiary
to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered or sold, any such capital stock (or any such other form of equity
interest in the case of an Allied Subsidiary that is not a corporation) or other
securities or obligating Allied or any of the Allied Subsidiaries to issue,
grant, extend or enter into any such subscription, option, warrant, call, right,
security, contribution, advance, arrangement, agreement, commitment or
undertaking. The name and percentage (if less than 100%) of outstanding capital
stock (or of any other form of equity interest in the case of an Allied
Subsidiary that is not a corporation) owned, directly or indirectly, by Allied
are set forth in the Allied Disclosure Schedule with respect to each Allied
Subsidiary.
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Section 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Allied has the requisite corporate power and authority
to execute and deliver this Agreement and, subject to approval of this Agreement
by the Board and Members of Allied, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Allied and the
consummation by Allied of the transactions contemplated hereby have been duly
approved and authorized by the Board of Directors of Allied. Except for the
approval of this Agreement by the Members of Allied, no other corporate
proceedings on the part of Allied are necessary to authorize this Agreement and
the transactions contemplated hereby. The requisite affirmative vote of Members
of Allied at the meeting called pursuant to Section 3.1(a) hereof is the only
vote of Members of Allied necessary to approve and adopt this Agreement and the
transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and
delivered by Allied and (assuming this Agreement is a valid and binding
obligation of Nationwide) constitutes a valid and binding agreement of Allied
enforceable against Allied in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar Laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) The Board of Directors of Allied has received the
opinion of Allied's financial advisor, Donaldson, Lufkin & Jenrette Securities
Corporation, to the effect that the aggregate consideration to be received by
the policyholders of Allied pursuant to this Agreement is fair to such
policyholders, as a group, from a financial point of view. It is agreed and
understood that such opinion is for the benefit of Allied's Board of Directors
and may not be relied upon by Nationwide or any Members or Affiliates thereof.
Section 4.4 NO VIOLATION; GOVERNMENTAL FILINGS.
(a) Except as set forth in the Allied Disclosure Schedule,
the execution, delivery and performance of this Agreement by Allied and the
consummation by Allied of the transactions contemplated hereby will not (i)
constitute a breach or violation of or default under the articles of
incorporation or the by-laws (or similar organizational documents) of Allied or
of any of the Allied Subsidiaries, (ii) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the Assets of Allied or of any of the Allied Subsidiaries
under, any of the terms, conditions or provisions of any Contract to which
Allied or any Allied Subsidiary is a party or to which it or any of its Assets
may be subject or (iii) constitute a breach or violation
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of or default under any Environmental Permit, Law or License to which Allied or
any of the Allied Subsidiaries is subject, other than, in the case of clauses
(ii) and (iii), for any such breaches, violations, conflicts, terminations,
defaults, accelerations or Liens that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
(b) Except for (i) the Governmental Approvals set forth in
the Allied Disclosure Schedule, (ii) the submission of this Agreement with and
the approval of the Merger by the Iowa Commissioner and the Iowa Attorney
General under the Iowa Insurance Law and such other applications, registrations,
declarations, filings, authorizations, Orders, consents and approvals as may be
required under the Laws of other jurisdictions, (iii) the approval of the
Meeting Notice, as contemplated by Section 3.1(b) hereof, (iv) the approval of
this Agreement by the Members of Allied, as contemplated by Section 3.1(a)
hereof, (v) the filings required under the HSR Act and the expiration or earlier
termination of any waiting period applicable to the Merger under such Act, (vi)
the filings pursuant to Section 2.3 hereof, (vii) the filing of appropriate
documents with and such consents as may be required under the Investment Company
Act and the Investment Advisers Act, (viii) any consent or filing that is
disclosed in the Allied Disclosure Schedule or that would not otherwise be
required to be disclosed pursuant to Section 4.4(a) hereof, (ix) such Consents
and Filings as may be required by any applicable state securities or "blue sky"
Laws, and (x) such other such Consents or Filings the failure of which to make
or obtain would not, individually or in the aggregate, be reasonably likely to
prevent or be a material impediment to the consummation of the transactions
contemplated hereby or be reasonably likely to have a Material Adverse Effect,
no consent, approval, permit, notice, Order or authorization of, or
registration, application, declaration or filing with (each a "Consent or
Filing") any Person is required with respect to Allied or any Allied Subsidiary
in connection with the execution and delivery of this Agreement by Allied and
the consummation by Allied of the transactions contemplated hereby.
Section 4.5 SAP STATEMENTS. Allied has previously made
available to Nationwide true and complete copies of the following:
(a) the Annual Statements for Allied as of and for the years
ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statement for Allied as of and for the
calendar quarter ended March 31, 1998;
(c) any supplemental or separate statutory annual statements
or quarterly statements for Allied for any of the periods ended December 31,
1995, 1996 or 1997 or March 31, 1998 that are filed with any insurance
Governmental Entity and that differ from the Annual Statements or the Quarterly
Statements described in Section 4.5(a) or (b) hereto; and
(d) the audited SAP balance sheets of Allied as of December
31, 1995, 1996 and 1997 and the related audited summary of operations and
statements of change in capital
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and surplus and cash flows of Allied for each such years, together with the
notes related thereto and the reports thereon of KPMG Peat Marwick, LLP
(collectively with the items described in Section 4.5(a), (b) and (c), the
"Allied SAP Statements").
Since December 31, 1997, Allied has filed all SAP Statements
required to be filed with or submitted to the appropriate regulatory
authorities, except for such filings or submissions, the failure to so file or
submit is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect.
Each Allied SAP Statement complied (and, as to SAP Statements
filed after the date of this Agreement, will comply) in all material respects
with all applicable Laws when so filed, and all material deficiencies with
respect to any such Allied SAP Statement, of which Allied has Knowledge, have
been cured or corrected. Each Allied SAP Statement (and the notes related
thereto) referred to in Section 4.5(a), (b), and (d) hereof was prepared (and,
as to SAP Statements filed after the date of this Agreement, will be prepared)
in accordance with SAP and presents (and, as to SAP Statements filed after the
date of this Agreement, will present) fairly, in all material respects, the
financial position of Allied as of the respective dates thereof and the related
summaries of operations and changes in capital and surplus and cash flows of
Allied for the respective periods covered thereby. To the Knowledge of Allied,
each Allied SAP Statement (including the notes related thereto) referred to in
Section 4.5(c) hereof was prepared (or, in the case of similar SAP Statements
filed after the date of this Agreement, will be prepared) in accordance with the
statutory accounting practices required by the insurance Governmental Entity in
the jurisdiction in which such statement was (or will be) filed.
Section 4.6 RESERVES. The aggregate actuarial reserves and
other actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of Allied as established or reflected in its December 31, 1997 Annual
Statement or in the March 31, 1998 Quarterly Statement (the "Allied 1998
Quarterly Statement"): (a)(i) were determined in accordance with generally
accepted actuarial standards consistently applied, (ii) were fairly stated, in
all material respects, in accordance with sound actuarial principles and (iii)
were based on actuarial assumptions that are in accordance with or are more
conservative than those specified in the related Insurance Contracts; and (b)
complied with, in all material respects, the requirements of the Iowa Insurance
Law and all other applicable jurisdictions. Allied owns Assets that qualify as
admitted assets under applicable insurance Laws in an amount at least equal to
the sum of its statutory reserves and other similar amounts.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth in the Allied Disclosure Schedule or as disclosed in the Allied SAP
Statements, since December 31, 1997, each of Allied and the Allied Subsidiaries
has conducted its Business only in the ordinary course of business, consistent
with past practice, and there has not occurred (i) a Material Adverse Effect, or
any event or events which, individually or in the aggregate, are reasonably
likely to have a Material Adverse Effect; (ii) except as required by SAP or
applicable Law, any material change by Allied in its accounting principles,
practices or methods; (iii) any material
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addition or, to the Knowledge of Allied, any development involving a prospective
material addition to Allied's consolidated reserves for future policy benefits
or other policy claims and benefits other than as a result of activities and
events in the ordinary course of business; or (iv) except as required by SAP or
applicable Law, any material change in the accounting, actuarial, investment,
reserving, underwriting or claims administration policies, practices,
procedures, methods, assumptions or principles of Allied. Except as set forth in
the Allied Disclosure Schedule, since December 31, 1997, there has not been any
increase in the compensation payable or that could become payable by Allied or
any of the Allied Subsidiaries to officers or key employees or any amendment of
any of the compensation and benefit plans other than increases or amendments in
the ordinary course or as required by applicable Law.
Section 4.8 NO UNDISCLOSED LIABILITIES. Except as disclosed in
the Allied SAP Statements or as set forth in the Allied Disclosure Schedule,
neither Allied nor any of the Allied Subsidiaries has any Liabilities required
by SAP to be set forth on a balance sheet of Allied or any Allied Subsidiaries,
other than Liabilities arising since the date of the applicable Financial
Statement in the ordinary course of business and consistent with past practice
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
Section 4.9 LITIGATION. Except (i) as set forth in the Allied
Disclosure Schedule or as disclosed in the Allied SAP Statements and (ii) for
any Proceeding which is not reasonably likely to give rise to a Liability in
excess of $250,000, there are no Proceedings pending or, to the Knowledge of
Allied or any of the Allied Subsidiaries, threatened against Allied or any
Allied Subsidiary before any Governmental Entity or arbitrator which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect. Neither Allied nor any Allied Subsidiary is subject to any
Order, except for Orders which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
Section 4.10 COMPLIANCE WITH LAW.
(a) Except as set forth in the Allied Disclosure Schedule,
to the Knowledge of Allied, neither Allied nor any Allied Subsidiary is in
violation (or, with notice or lapse of time or both, would be in violation) of
any term or provision of any Law applicable to it or any of its Assets, the
violation of which is, individually or in the aggregate with all other such
violations, reasonably likely to have a Material Adverse Effect. Allied has made
available to Nationwide all reports (including draft reports) of examinations of
the affairs of Allied (including market conduct examinations) issued by
insurance Governmental Entities for any period ending on a date on or after
January 1, 1993; except as set forth in the Allied Disclosure Schedule, all
deficiencies or violations in such reports for any prior period have been
resolved. Except as set forth in the Allied Disclosure Schedule, all outstanding
Insurance Contracts issued or assumed by Allied are, to the extent required by
Law, on forms and at rates approved by the insurance regulatory authorities of
the jurisdictions where issued or have been filed with and not objected to by
such authorities within the periods provided for objection, except where a
Material Adverse Effect would not result.
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(b) Except as set forth in the Allied Disclosure Schedule,
neither Allied nor any Allied Subsidiary is a party to any Contract with or
other undertaking to, or is subject to any Order by, or is a recipient of any
supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) is reasonably likely to have a Material Adverse
Effect, or (ii) has been received since January 1, 1993 and relates to its
reserve adequacy or its marketing, sales, trade or underwriting practices or
policies and which is reasonably likely to be materially adverse to Allied, nor,
to the Knowledge of Allied, has Allied or any of the Allied Subsidiaries been
notified in writing by any Governmental Entity that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such Order, Contract, undertaking, letter or other written communication.
(c) Allied has implemented procedures and programs which are
designed to provide reasonable assurance that Allied and its agents and
employees are in compliance in all material respects with all applicable Laws,
including, but not limited to, advertising, licensing and sales Laws, except
where noncompliance would not be reasonably likely to have a Material Adverse
Effect.
Section 4.11 ASSETS.
(a) Except as set forth in the Allied Disclosure Schedule
and except for Assets disposed of since December 31, 1997 in the ordinary course
of business and consistent with past practice (i) Allied and each of the Allied
Subsidiaries owns all Assets that are disclosed or otherwise reflected in its
December 31, 1997 Annual Statement and all Assets acquired thereafter, and all
such Assets are owned by such Persons, free and clear of all Liens other than
Permitted Liens; (ii) (A) to Allied's Knowledge, Allied and each Allied
Subsidiary owns good and indefeasible, marketable fee simple title to, or has a
valid leasehold interest in, all real property used in the conduct of its
Business or of a type which would be required to be specifically disclosed by
Allied in Schedule A of its Annual Statement, free and clear of all Liens other
than Permitted Liens; and (B) in the aggregate, all real property, other than
unimproved land, is, in all material respects, suitable for its current uses;
(iii) Allied and each Allied Subsidiary owns, or has a valid leasehold interest
in or has a valid right under Contract to use, all personal property that is
presently used in and is material to the conduct of its Business, free and clear
of all Liens other than Permitted Liens; and (iv) Allied and each Allied
Subsidiary owns, free and clear of all Liens other than Permitted Liens, or is
licensed or otherwise possesses legally enforceable rights to use, all
Intellectual Property that is material to the conduct of its Business; and
neither Allied nor any Allied Subsidiary is in material conflict with or
material violation or material infringement of, nor has Allied or any Allied
Subsidiary received any written notice of any such conflict with or violation or
infringement of, any asserted rights of any other Person with respect to any
Intellectual Property, except for such conflicts and violations which would not
be reasonably likely to have a Material Adverse Effect.
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Section 4.12 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Allied Disclosure Schedule,
each of Allied and the Allied Subsidiaries and, to the Knowledge of Allied, all
Allied Real Property (including all owners or operators thereof) is in
substantial compliance in all material respects with all applicable
Environmental Laws, which compliance includes, but is not limited to, the
possession of all Environmental Permits required under Environmental Laws and
compliance with the terms and conditions thereof, other than such Allied Real
Property in respect of which the failure to comply with applicable Environmental
Laws is not reasonably likely to have a Material Adverse Effect. Except as set
forth in the Allied Disclosure Schedule, to the Knowledge of Allied, neither
Allied nor any Allied Subsidiary has received any written communication whether
from a Governmental Entity, citizens' group, employee or otherwise, that alleges
that Allied or any Allied Subsidiary or any Allied Real Property (including any
owner or operator thereof) is not in such compliance, and, to the Knowledge of
Allied, there are no circumstances that are reasonably likely to prevent or
interfere with such compliance in the future, except to the extent that such
noncompliance is not reasonably likely to have a Material Adverse Effect. To the
Knowledge of Allied, neither Allied nor any Allied Subsidiary has been notified
in writing by any Governmental Entity that any such Environmental Permit will be
modified, suspended or revoked or cannot be renewed or transferred in the
ordinary course of business consistent with past practice or in connection with
the Merger, except where any such modification, suspension or revocation or the
failure to be renewed or transferred is not reasonably likely to have a Material
Adverse Effect.
(b) Except as set forth in the Allied Disclosure Schedule,
there is no Environmental Claim pending or, to the Knowledge of Allied,
threatened against Allied, any Allied Subsidiary, any Allied Real Property
(including any owner or operator thereof) or any Person whose Liability for any
Environmental Claims Allied or any Allied Subsidiary has retained or assumed
either contractually or by operation of Law that is reasonably likely to have a
Material Adverse Effect.
(c) To the Knowledge of Allied, there have been no releases,
spills, leaks or discharges of Hazardous Substances at, from or to any Allied
Real Property (other than those properties set forth in the Allied Disclosure
Schedule) or any other property which is reasonably likely to require Allied or
any Allied Subsidiary to undertake investigation, abatement, removal, remedial,
corrective or other response action pursuant to applicable Environmental Laws
which investigation, abatement, removal, remediation, corrective or other
response action is reasonably likely to result in a Material Adverse Effect. To
the Knowledge of Allied, none of the Allied Real Property (i) is listed or
proposed for listing on any list maintained by any Governmental Entity of sites
that may require investigation, abatement, removal, remedial, corrective or
other response action pursuant to applicable Environmental Laws, including, but
not limited to, the CERCLIS or the NPL or (ii) other than those properties set
forth in the Allied Disclosure Schedule, is the subject of any investigation,
abatement,
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removal, remedial, corrective or other response action pursuant to applicable
Environmental Laws.
(d) Except as set forth in the Allied Disclosure Schedule,
to the Knowledge of Allied, no Hazardous Substances were manufactured,
generated, stored, treated, transported from or otherwise managed at any Allied
Real Property, nor were Hazardous Substances from any Allied Real Property
disposed of by Allied at any other property.
Section 4.13 CONTRACTS. Allied has made available to
Nationwide true and complete copies of the following Contracts, which are
currently in force, to which Allied or any Allied Subsidiary is a party or by
which any Assets of Allied or any Allied Subsidiary are or may be bound, as such
Contracts may have been amended to the date hereof:
(a) all employment, consultation, retirement, termination,
sign-on, buy-out or other Contracts with any present or former officer,
director, trustee, employee, agent, broker or independent contractor of Allied
or any Allied Subsidiary (including, but not limited to, loans or advances to
any such Person or any Affiliate of such Person) providing for annual
compensation of $100,000 or more or for compensation over the term of the
Contract, and any renewal thereof, of $200,000 or more (including, but not
limited to, base salary, bonus and incentive payments and other payments or
fees, whether or not any portion thereof is deferred);
(b) all Contracts (other than, with respect to Investment
Assets, Contracts containing customary restrictions on the ability to own or
operate competing real property in a specified geographic area) with any Person
including, but not limited to, any Governmental Entity, containing any provision
or covenant (i) limiting the ability of Allied or any Allied Subsidiary to
engage in any line of business, to compete with any Person, to do business with
any Person or in any location or to employ any Person or (ii) limiting the
ability of any Person to compete with or obtain products or services from Allied
or any Allied Subsidiary, which, in the case of any such Contract described in
clauses (i) and (ii) is, individually or together with other such Contracts,
reasonably likely to have a Material Adverse Effect;
(c) all Contracts relating to the borrowing of money in
excess of $1,000,000 by Allied or any Allied Subsidiary or the direct or
indirect guarantee by Allied or any Allied Subsidiary of any obligation of any
Person for borrowed money or other financial obligation of any Person in excess
of $1,000,000 (other than indebtedness in respect of Investment Assets), or any
other Liability of Allied or any Allied Subsidiary in respect of indebtedness
for borrowed money or other financial obligation of any Person in excess of
$1,000,000 (other than indebtedness in respect of Investment Assets), including,
but not limited to, any Contract relating to or containing provisions with
respect to (i) the maintenance of compensating balances that are not terminable
by Allied or any Allied Subsidiary without penalty upon not more than ninety
(90) days' notice, (ii) any lines of credit or similar facilities, (iii) the
payment for property, products or services of any other Person even if such
property,
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products or services are not conveyed, delivered or rendered or (iv) any
obligation to satisfy any financial obligation or covenants, including, but not
limited to, take-or-pay, keep-well, make-whole or maintenance of working
capital, capital or earnings levels or financial ratios or to satisfy similar
requirements;
(d) all Contracts (other than Insurance Contracts and other
Contracts entered into in the ordinary course of business) with any Person
containing any provision or covenant relating to the indemnification or holding
harmless by Allied or any Allied Subsidiary of any Person which is reasonably
likely to result in a Liability to Allied or any of the Allied Subsidiaries of
$1,000,000 or more;
(e) all leases or subleases of real property used in the
conduct of the Business of Allied or any Allied Subsidiary and all other leases,
subleases or rental or use Contracts providing for annual rental payments to be
paid by or on behalf of Allied or any Allied Subsidiary, involving, in the case
of each of the foregoing, annual payments in excess of $250,000;
(f) all Contracts relating to the future disposition
(including, but not limited to, restrictions on transfer or rights of first
refusal) or future acquisition of any interest in any business enterprise, and
all Contracts relating to the future disposition of a material portion of the
Assets of Allied or any Allied Subsidiary other than in each case any Investment
Asset or interest in any business enterprise or Assets to be acquired or
disposed of in the ordinary course of business;
(g) all Insurance Contracts (including, but not limited to,
any Contract pursuant to which Allied receives or has received surplus relief)
including, with respect to each such Contract, the ceding and assuming Person,
the business reinsured and the amount of the Liability reinsured;
(h) all other Contracts (other than (i) Insurance Contracts,
(ii) Contracts relating to Investment Assets entered into in the ordinary course
of business, (iii) employment Contracts that are not otherwise required to be
set forth in the Allied Disclosure Schedule, (iv) Contracts solely between
Allied or any Allied Subsidiary, on the one hand, and any Allied Subsidiary, on
the other hand, and (v) other Contracts which are expressly excluded under any
other subsection of this Section 4.14) that involve or are reasonably likely to
involve the payment pursuant to the terms of such Contracts by or to Allied of
$500,000 or more other than Contracts with insurance agents or brokers or the
termination of which is reasonably likely to have a Material Adverse Effect.
(i) all Contracts or arrangements (including, but not
limited to, those relating to allocations of expenses, personnel, services or
facilities) between or among Allied and any Subsidiary or Affiliate of Allied,
other than those Contracts disclosed in the Allied Life SEC Documents or the
Allied Group SEC Documents;
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(j) all outstanding proxies (other than routine proxies in
connection with annual meetings), powers of attorney or similar delegations of
authority of Allied or any Allied Subsidiary to an unrelated Person, other than
those entered into in the ordinary course of business in connection with
Investment Assets; and
(k) all Contracts the terms of which provide that the Merger
will give rise to a severance Liability for Allied, any Allied Subsidiary or the
Surviving Company.
Each of the Contracts made available pursuant to this Section
4.13 is in full force and effect and constitutes a valid and binding obligation
of each of Allied and the Allied Subsidiaries to the extent that it is a party
thereto. Except as set forth in the Allied Disclosure Schedule, neither Allied
nor any Allied Subsidiary is in material violation, breach or default of any
such Contract or, with or without notice or lapse of time or both, would be in
material violation, breach or default of any such Contract, except for any
violation, breach or default which, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect.
Section 4.14 INSURANCE ISSUED BY ALLIED. Except as set forth
in the Allied Disclosure Schedule:
(a) All material contracts, arrangements, treaties and
agreements to which Allied is a party with respect to reinsurance applicable to
insurance in force on the date of this Agreement, and all material contracts,
arrangements, treaties and agreements under which Allied has any obligation to
cede insurance, are valid, binding and in full force and effect in accordance
with their terms. Allied is not in material default of any such material
contract, arrangement, treaty or agreement, except for any default which,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect.
(b) Each insurance policy or certificate form, as well as
any related application form, written advertising material and rate or rule
currently marketed by Allied, the use or issuance of which requires filing or
approval, has been appropriately filed, and if required, approved by the
insurance regulatory authorities of any state in which such policies and forms
are required to be filed, except where the failure to make any such filing or
receive any such approval would not be reasonably expected to have a Material
Adverse Effect. To the Knowledge of Allied, all such policies and certificates,
forms, applications, advertising materials and rates or rules are in compliance
in all material respects with all applicable Laws;
(c) Since January 1, 1994, all claims and benefits claimed
by any Person under any Insurance Contract of Allied have or will have in all
material respects been paid (or provision for payment thereof has been made) in
accordance with the terms of the Contracts under which they arose, and such
payments were not materially delinquent and were paid without fines or
penalties, except for any such claims or claim for benefits of less than
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$500,000 for which Allied reasonably believes there is a reasonable basis to
contest payment and is taking (or is preparing to take) such action;
(d) Except as set forth in the SAP Statements
referred to in Section 4.5 and except as provided by applicable Law, no
provision in any policy in force gives policyholders the right to receive
dividends or distributions on their policies (other than accruals of interest on
cash values or as claim benefits) or otherwise share in the benefits, revenue or
profits of Allied, provided that the practice in certain instances of making
dividends based upon policyholder loss experience or favorable earnings
experience shall not violate the representation contained in this sentence.
Except as incurred in the ordinary course of business, Allied is not liable to
pay commissions upon the renewal of any insurance policy nor is it a party to
any agreement providing for the collection of insurance premiums payable to
Allied by any other Person;
(e) Allied has made available to Nationwide a copy of
all written investment policies and procedures for Allied;
(f) Except as set forth in the Allied Disclosure
Schedule, no Allied Subsidiary is engaged in any activity that would require
registration by Allied or any Allied Subsidiary as an investment company,
broker-dealer, investment advisor or fund administrator under any state or
Federal Law, including the Exchange Act, the Investment Company Act and the
Investment Advisers Act. Neither Allied nor any Allied Subsidiary maintains or
manages any open-end management investment company or portfolio;
(g) Neither Allied nor any Allied Subsidiary is
engaged in the business of serving as a custodian or transfer agent;
(h) Allied has duly and validly filed or caused to be
filed all material reports, statements, documents, registrations, filings or
submissions that were required by applicable insurance Laws to be filed, except
where the failure to make any such filing would not be reasonably likely to have
a Material Adverse Effect; all such filings complied with all applicable Laws in
all material respects when filed, and no material deficiencies have been
asserted with respect to any such filings which have not been satisfied in all
material respects. All outstanding insurance policies, annuity contracts and
assumption certificates issued by Allied and now in force are, to the extent
required under applicable Laws, on forms approved by the insurance regulatory
authority of the jurisdiction where issued and utilize premium rates which if
required to be filed with or approved by insurance regulatory authorities have
been so filed or approved, except where the failure to file or obtain the
approval of such premium rates would not be reasonably likely to have a Material
Adverse Effect, and the premiums charged conform thereto, except where the
failure to conform would not have a Material Adverse Effect;
(i) To Allied's Knowledge, no other party to any
reinsurance, coinsurance or other similar agreement with Allied is in default
thereunder, except for such
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defaults that would not reasonably be expected to have a Material Adverse
Effect.
(j) To Allied's Knowledge, (i) each insurance agent
or broker, at the time such agent or broker wrote, sold or produced business for
Allied, was duly licensed as an insurance agent or broker (for the type of
business written, sold or produced by such insurance agent or broker) in the
particular jurisdiction in which such agent or broker wrote, sold or produced
such business for Allied, and (ii) no such insurance agent or broker violated
(or with notice or lapse of time or both would have violated) any term or
provision of any Law or Order applicable to any aspect (including, but not
limited to, the marketing, writing, sale or production) of the Business of
Allied.
Section 4.15 CANCELLATIONS. Except as set forth in the Allied
Disclosure Schedule, between December 31, 1997 and the date of this Agreement,
no Person or group of Persons acting in concert writing, selling or producing
insurance business, which in the aggregate accounted for one percent (1%) or
more of the gross premium income of Allied for the year ended December 31, 1997,
has terminated or substantially reduced, or threatened to terminate or
substantially reduce, its relationship with Allied.
Section 4.16 OPERATIONS INSURANCE. Allied has made available
to Nationwide copies of all liability, property, workers compensation, directors
and officers liability, and other similar Insurance Contracts that insure the
Business or properties of Allied or any Allied Subsidiary or affect or relate to
the ownership, use, or operations of any Assets of Allied or any Allied
Subsidiary and that have been issued to Allied or any Allied Subsidiary. To the
Knowledge of Allied, all such insurance is in full force and effect and is with
financially sound and reputable insurers. To the Knowledge of Allied or any of
the Allied Subsidiaries, all notices of reportable incidents with respect to
such insurance occurring during the last five years have been given in writing
to appropriate carriers on a basis sufficiently timely to preserve the right of
recovery of such insurance, except where the failure for such incident to be
covered by insurance would not be reasonably likely to have a Material Adverse
Effect. Except as set forth in the Allied Disclosure Schedule, to the Knowledge
of Allied or of any of the Allied Subsidiaries, no party to any Insurance
Contract has stated an intent or threatened to terminate or materially increase
the premium in respect of any such Insurance Contract.
Section 4.17 TAXES AND TAX RETURNS. Except as set forth in the
Allied Disclosure Schedule:
(a) All income Tax Returns and all other material Tax
Returns required under applicable Law to be filed with or provided to any Person
by Allied or any Allied Subsidiary have been (and, as to Tax Returns not filed
as of the date hereof, will be) timely filed and such Tax Returns were true,
complete and correct in all material respects;
(b) Allied and each Allied Subsidiary have within the
time and in the manner prescribed by Law paid all material Taxes due and payable
except for those contested
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in good faith and for which adequate reserves have been taken. To the Knowledge
of Allied, no claim has ever been made by an authority in a jurisdiction where
Allied or any Allied Subsidiary does not file Tax Returns that Allied or any
Allied Subsidiary may be subject to taxation by that jurisdiction, except where
any Taxes that would be owed to such jurisdiction would not be reasonably likely
to be material in amount;
(c) Allied and each Allied Subsidiary have
established (and until the Effective Time will maintain) on their books and
records (i) reserves adequate to pay all Taxes not yet due and payable and all
deficiencies asserted, proposed or threatened, in writing, against Allied or any
Allied Subsidiary and (ii) reserves for deferred Taxes, in each case, in
accordance with SAP or GAAP, as the case may be;
(d) Neither Allied nor any Allied Subsidiary has
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been filed;
(e) Neither Allied nor any Allied Subsidiary has
executed any waivers, extensions or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
(f) No outstanding deficiencies, assessments or
written proposals for the assessment of any Taxes have been proposed, asserted
or assessed in writing against Allied or any of the Allied Subsidiaries by any
taxing authority;
(g) No Proceedings are presently pending with regard
to any Taxes or Tax Returns of Allied or any Allied Subsidiary. Allied has no
Knowledge of any threatened Proceeding with respect to any such Taxes or Tax
Returns.
(h) No power of attorney currently in force has been
granted by Allied or any Allied Subsidiary with respect to any matter relating
to Taxes;
(i) Neither Allied nor any Allied Subsidiary has
received a Tax Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing adverse effect after the Effective Time;
(j) Allied and the Allied Subsidiaries have made
available to Nationwide complete and accurate copies of (i) all Federal income
Tax Returns, and any amendments thereto, filed by or on behalf of Allied and
each Allied Subsidiary for all taxable years since 1994 and (ii) all audit
reports received from any taxing authority relating to any Tax Return filed by
Allied or any Allied Subsidiary;
(k) None of Allied or any Allied Subsidiary is a
party to any Tax allocation or sharing agreement with any Person. None of Allied
or any Allied Subsidiary has
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any liability for Taxes of any Person other than Allied or an Allied Subsidiary
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law), as a transferee or successor, by Contract or otherwise;
(l) Neither Allied nor any Allied Subsidiary is a
party to any Contract or arrangement that, separately or in the aggregate,
could, by reason of the transactions contemplated by this Agreement, give rise
to the payment of any "excess parachute payment" within the meaning of Section
280G of the Code;
(m) Neither Allied nor any Allied Subsidiary has
taken any action or has any Knowledge of any fact or circumstance relating to
Allied or any Allied Subsidiary that is reasonably likely to adversely affect
the status of the Merger as a reorganization under Section 368 of the Code; and
(n) Neither Allied nor any Allied Subsidiary has
entered into a records retention agreement with any taxing authority.
Section 4.18 EMPLOYEES AND BENEFIT PLANS. During the last 5
full fiscal years, Allied has had no employees and no "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), and no "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), or any other similar or related
plan, program, arrangement or policy (written or oral), except (i) as set forth
in the Allied Disclosure Schedule and (ii) the Amendment and Settlement of
Excess Benefit Plan, dated February 13, 1990, and the Amended and Restated
Excess Benefit Plan Trust, dated as of March 1, 1990, created thereunder (the
"Rabbi Trust"), and of which John E.
Evans and James D. Kirkpatrick are participants.
Section 4.19 INTELLECTUAL PROPERTY. Allied and each Allied
Subsidiary owns or otherwise has rights to use, free and clear of all Liens, all
Intellectual Property used in their respective businesses as currently
conducted; and the consummation of this transaction will not result in the loss
of any rights. The use of the Intellectual Property will not infringe or
otherwise violate the rights of any Person and no Person is challenging,
infringing on or otherwise violating any right with respect to the Intellectual
Property.
Section 4.20 RATING AGENCIES. Except as disclosed in the
Allied Disclosure Schedule, since December 31, 1997, none of A.M. Best and
Company, Standard & Poor's Corporation or Moody's Investor Services, Inc.
(collectively, the "Rating Agencies") has, other than as a result of the
announcement of the Merger or the transactions contemplated hereby (a) imposed
conditions (financial or otherwise) on retaining any currently held rating
assigned to Allied or (b) indicated to Allied that it is considering the
downgrade of any rating assigned to Allied.
Section 4.21 INVESTMENT COMPANY. None of the Allied
Subsidiaries maintains any separate accounts. Neither Allied nor any of its
Subsidiaries conducts activities of or is
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otherwise deemed under applicable law to control an "investment advisor" as such
term is defined in Section 2(a)(20) of the 1940 Act, whether or not registered
under the Investment Advisers Act of 1940, as amended. Neither Allied nor any of
its Subsidiaries is an "investment company" as defined under the 1940 Act, and
neither Allied nor any of its Subsidiaries sponsors any Person that is such an
investment company.
Section 4.22 BROKERS OR FINDERS. No broker, investment banker,
financial advisor or other Person other than Allied's financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation, whose fees and expenses
shall be paid by Allied in accordance with Allied's agreement with such firm,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Allied.
Section 4.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except
for the representations and warranties contained in this Agreement, neither
Allied nor any other Person makes any other express or implied representation or
warranty on behalf of Allied including, without limitation, any financial
information, whether historical or projected, delivered or made available to
Nationwide or its Representatives.
Section 4.24 LIMITATION ON NATIONWIDE'S REPRESENTATIONS.
Allied acknowledges that in entering into this Agreement it has not relied on
any representations or warranties of Nationwide or on any materials given to or
made available to Allied or its Representatives by Nationwide or its
Representatives other than the representations and warranties of Nationwide set
forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
Nationwide represents and warrants to Allied as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Nationwide is a
mutual insurance company duly organized, validly existing and in good standing
under the Laws of the State of Ohio and has the requisite corporate power and
authority to conduct its Business as it is currently being conducted. Each of
the Nationwide Subsidiaries is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or formation
and has the requisite corporate power and authority to conduct its Business as
it is currently being conducted. Each of Nationwide and the Nationwide
Subsidiaries is duly qualified to do business, and is in good standing, in the
respective jurisdictions where the character of its Assets owned or leased or
the nature of its Business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. Nationwide
possesses an Insurance License in Iowa and in
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each jurisdiction in which Nationwide is required to possess an Insurance
License. All such Insurance Licenses, including, but not limited to,
authorizations to transact reinsurance, are in full force and effect without
amendment, limitation or restriction, and Nationwide does not have Knowledge of
any event, inquiry or Proceeding which is reasonably likely to lead to the
revocation, amendment, failure to renew, limitation, suspension or restriction
of any such Insurance License.
Section 5.2 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Nationwide has the requisite power and authority
to execute and deliver this Agreement and, subject to approval of this Agreement
by the Members of Nationwide, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved and authorized by the
Board of Directors of Nationwide. Except for the approval and adoption of this
Agreement by the Members of Nationwide, no other corporate proceedings on the
part of Nationwide are necessary to authorize this Agreement and the
transactions contemplated hereby. The affirmative vote of at least two-thirds of
the Members of Nationwide voting, in person or by properly executed proxy, at
the meeting called pursuant to Section 3.1 is the only vote of Members of
Nationwide necessary to approve and adopt this Agreement and the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Nationwide and (assuming this Agreement is a valid and binding
obligation of Allied) constitutes a valid and binding agreement of Nationwide
enforceable against Nationwide in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(c) The Board of Directors of Nationwide has received
the opinion of Nationwide's financial advisor, Credit Suisse First Boston
Corporation, to the effect that the Merger is fair to the policyholders of
Nationwide, taken as a group, from a financial point of view. It is agreed and
understood that such opinion is for the benefit of Nationwide's Board of
Directors and may not be relied on by Allied or any Members or Affiliates
thereof.
Section 5.3 NO VIOLATION; GOVERNMENT FILINGS.
(a) The execution, delivery and performance of this
Agreement by Nationwide and the consummation by Nationwide of the transactions
contemplated hereby will not (i) constitute a breach or violation of or default
under the articles of incorporation or the by-laws (or similar organizational
documents) of Nationwide or any Nationwide Subsidiary, (ii) violate, conflict
with, or result in a breach of any provisions of, or constitute a default (or an
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event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the Assets of Nationwide or any Nationwide
Subsidiary under, any of the terms, conditions or provisions of any Contract to
which Nationwide or any Nationwide Subsidiary is a party or to which it or any
of its Assets may be subject or (iii) constitute a breach or violation of or
default under any Environmental Permit, Law or License to which Nationwide or
any Nationwide Subsidiary is subject other than, in the case of clauses (ii) and
(iii), for any such breaches, violations, conflicts, terminations, defaults,
accelerations or Liens that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
(b) Except for (i) the approval of the Meeting Notice
by the Ohio Superintendent as contemplated by Section 3.1(b) hereof, (ii) the
approval of this Agreement by the Board of Nationwide as contemplated by Section
3.1(a) hereof, (iii) the filing of this Agreement with and the approval of such
by the Ohio Superintendent under the Ohio Insurance Law and the Iowa
Commissioner and the Iowa Attorney General under the Iowa Insurance Law and such
other applications, registrations, declarations, filings, authorizations,
Orders, consents and approvals as may be required under the Laws of other
jurisdictions, (iv) the filings required under the HSR Act and the expiration or
earlier termination of any waiting period applicable to the Merger under such
Act, (v) the filings pursuant to Section 2.3 hereof, (vi) the filing of
appropriate documents with and such consents as may be required under the
Investment Company Act and the Investment Advisers Act, (vii) such Consents and
Filings as may be required by any applicable state securities or "blue sky"
Laws, and (viii) such other such Consents or Filings the failure of which to
make or obtain would not, individually or in the aggregate, be reasonably likely
to prevent or be a material impediment to the consummation of the transactions
contemplated hereby or be reasonably likely to have a Material Adverse Effect.
No Consent or Filing of or with any Person is required with respect to
Nationwide or any Nationwide Subsidiary or any Nationwide Affiliate in
connection with the execution and delivery of this Agreement by Nationwide and
the consummation by Nationwide of the transactions contemplated hereby.
Section 5.4 SAP STATEMENTS. Nationwide has previously made
available to Allied true and complete copies of the following:
(a) the Annual Statements for each Nationwide Insurer
as of and for the years ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statements for each Nationwide
Insurer as of and for the calendar quarters ended March 31, 1998;
(c) any supplemental or separate statutory annual
statements or quarterly statements for each Nationwide Insurer for any of the
periods ended December 31, 1995, 1996 or 1997 or March 31, 1998 that are filed
with any insurance Governmental Entity and
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that differ from the Annual Statements or the Quarterly Statements described in
Section 5.4(a) or (b) hereto; and
(d) the audited SAP balance sheets of each Nationwide
Insurer as of December 31, 1995, 1996 and 1997 and the related audited summary
of operations and statements of change in capital and surplus and cash flow of
such Nationwide Insurer for each such year, together with the notes related
thereto and the reports thereon of KPMG Peat Marwick, LLP (collectively with the
items described in Section 5.4(a), (b) and (c), the "Nationwide SAP
Statements").
Each Nationwide SAP Statement complied (and, as to SAP
Statements filed after the date of this Agreement, will comply) in all material
respects with all applicable Laws when so filed, and all material deficiencies
with respect to any such Nationwide SAP Statement, of which Nationwide has
Knowledge, have been cured or corrected. Each Nationwide SAP Statement (and the
notes related thereto) referred to in Section 5.4(a), (b), and (d) hereof was
prepared (and, as to SAP Statements filed after the date of this Agreement, will
be prepared) in accordance with SAP and presents (and, as to SAP Statements
filed after the date of this Agreement, will present) fairly, in all material
respects, the financial position of the respective Nationwide Insurers as of the
respective dates thereof and the related summaries of operations and changes in
capital and surplus and cash flow of the respective Nationwide Insurers for the
respective periods covered thereby. To the Knowledge of Nationwide, each
Nationwide SAP Statement (including the notes related thereto) referred to in
Section 5.4(c) hereof was prepared (or, in the case of similar SAP Statements
filed after the date of this Agreement, will be prepared) in accordance with the
statutory accounting practices required by the insurance Governmental Entity in
the jurisdiction in which such statement was (or will be) filed.
Section 5.5 GAAP STATEMENTS. Nationwide has previously made
available to Allied true and complete copies of the (i) audited GAAP Financial
Statements for each of the Nationwide Subsidiaries, other than Nationwide
Insurers, for the years ended December 31, 1995, 1996 and 1997 and (ii)
unaudited GAAP Financial Statements for each of the Nationwide Subsidiaries,
other than Nationwide Insurers, for the three months ended March 31, 1998
(collectively, the "Nationwide GAAP Financial Statements"). Each Nationwide GAAP
Financial Statement was prepared in accordance with GAAP (except as may be
indicated in the notes thereto, or, in the case of unaudited financial
statements, subject to normal year-end audit adjustments and the absence of
notes to such financial statements) and presents fairly, in all material
respects, the financial position of the Nationwide Subsidiaries as to which such
Nationwide GAAP Financial Statements have been provided as of the respective
dates thereof and the related results of operations and cash flows of such
Nationwide Subsidiaries for the respective periods covered thereby (subject, in
the case of unaudited financial statements, to normal year-end audit adjustments
and the absence of notes to such financial statements).
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Nationwide GAAP Financial Statements or the Nationwide SAP
Statements, since December
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31, 1997, each of Nationwide and the Nationwide Subsidiaries has conducted its
Business only in the ordinary course of business, consistent with past practice,
and there has not occurred (i) a Material Adverse Effect, or any event or events
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect; (ii) except as required by SAP, GAAP or applicable Law,
any material change by Nationwide in its accounting principles, practices or
methods; or (iii) except as required by SAP, GAAP or applicable Law, any
material change in the accounting, actuarial, investment, reserving,
underwriting or claims administration policies, practices, procedures, methods,
assumptions or principles of Nationwide.
Section 5.7 NO UNDISCLOSED LIABILITIES. Except as disclosed in
the Nationwide GAAP Financial Statements or the Nationwide SAP Statements,
neither Nationwide nor any of the Nationwide Subsidiaries has any Liabilities
required by SAP or GAAP to be set forth on a balance sheet of Nationwide or any
Nationwide Subsidiaries, other than Liabilities arising since the date of the
applicable Financial Statement in the ordinary course of business and consistent
with past practice that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect.
Section 5.8 LITIGATION. Except as disclosed in the Nationwide
GAAP Financial Statements or the Nationwide SAP Statements, there are no
Proceedings pending or, to the Knowledge of Nationwide or any of the Nationwide
Subsidiaries, threatened against Nationwide or any Nationwide Subsidiary before
any Governmental Entity or arbitrator which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect. Neither Nationwide nor
any Nationwide Subsidiary is subject to any Order, except for Orders which,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
Section 5.9 COMPLIANCE WITH LAW.
(a) To the Knowledge of Nationwide, neither
Nationwide nor any Nationwide Subsidiary is in violation (or, with notice or
lapse of time or both, would be in violation) of any term or provision of any
Law applicable to it or any of its Assets, the violation of which is,
individually or in the aggregate with all other such violations, reasonably
likely to have a Material Adverse Effect. Nationwide has made available to
Allied a list of all reports (including, but not limited to, draft reports) of
examinations of the affairs of each Nationwide Insurer (including, but not
limited to, market conduct examinations) issued by insurance regulatory
authorities for any period ending on a date on or after January 1, 1993; all
material deficiencies or violations in such reports for any prior period have
been resolved. All outstanding Insurance Contracts issued or assumed by any
Nationwide Insurer are, to the extent required by Law, on forms and at rates
approved by the insurance regulatory authorities of the jurisdictions where
issued or have been filed with and not objected to by such authorities within
the periods provided for objection.
(b) Neither Nationwide nor any Nationwide Subsidiary
is a party to any Contract with or other undertaking to, or is subject to any
Order by, or is a recipient of any
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supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) is reasonably likely to have a Material Adverse
Effect, or (ii) has been received since January 1, 1993 and relates to its
reserve adequacy or its marketing, sales, trade or underwriting practices or
policies which is materially adverse to Nationwide, nor, to the Knowledge of
Nationwide or of any of the Nationwide Subsidiaries, has Nationwide or any of
the Nationwide Subsidiaries been notified by any Governmental Entity that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such Order, Contract, undertaking, letter or other
written communication.
(c) Nationwide has implemented procedures and
programs which are designed to provide reasonable assurance that Nationwide and
its agents and employees are in compliance in all material respects with all
applicable Laws, including, but not limited to, advertising, licensing and sales
Laws, except where noncompliance would not be reasonably likely to have a
Material Adverse Effect.
Section 5.10 INSURANCE ISSUED BY NATIONWIDE INSURERS.
(a) Since January 1, 1994, all claims and benefits
claimed by any Person under any Nationwide Insurance Contract have or will have
in all material respects been paid (or provision for payment thereof has been
made) in accordance with the terms of the Contracts under which they arose, and
such payments were not materially delinquent and were paid without fines or
penalties, except for any such claims or claim for benefits of less than
$500,000 for which the affected Nationwide Insurer reasonably believes there is
a reasonable basis to contest payment and is taking (or is preparing to take)
such action; and
(b) to the Knowledge of Nationwide, (i) each
insurance agent or broker, at the time such agent or broker wrote, sold or
produced business for Nationwide, was duly licensed as an insurance agent or
broker (for the type of business written, sold or produced by such insurance
agent or broker) in the particular jurisdiction in which such agent or broker
wrote, sold or produced such business for Nationwide, and (ii) no such insurance
agent or broker violated (or with notice or lapse of time or both would have
violated) any term or provision of any Law or Order applicable to any aspect
(including, but not limited to, the marketing, writing, sale or production) of
the Business of Nationwide.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 ALLIED CONDUCT OF BUSINESS PENDING THE MERGER.
Allied covenants and agrees as to itself and the Allied Subsidiaries that, at
all times up to and including the Effective Time, unless Nationwide shall
otherwise consent in writing which consent shall not be unreasonably withheld
(Nationwide agreeing that it will use its best efforts to respond to any
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request received from Allied arising under this Article VI within 2 Business
Days, or sooner as circumstances may require, after receipt of such request), or
as otherwise expressly permitted or contemplated by this Agreement or as set
forth on the Allied Disclosure Schedule:
(a) Allied shall, and shall cause each Allied
Subsidiary to, conduct its Business only in the ordinary course and in
substantially the same manner as heretofore conducted since December 31, 1997,
and Allied and each Allied Subsidiary shall use all reasonable efforts to
preserve intact its present business organization and preserve its regular
services to, and maintain its relationships with, policyholders, insurers,
agents, sales and distribution organizations, underwriters, investment
customers, brokers, suppliers and all others having business dealings with it to
the end that its goodwill and ongoing Business shall not be impaired in any
material respect at the Effective Time;
(b) Except as contemplated by this Agreement, Allied
shall not, and shall not permit any Allied Subsidiary to, make or propose to
make any change in its dividend practices or policies or in its underwriting,
pricing, claims, risk retention, investment, reinsurance practices or policies
in any material respect; and Allied agrees that it will notify Nationwide and
provide Nationwide with information in reasonable detail regarding any material
transactions (excluding investment transactions in the ordinary course of
business consistent with past practice, but including transactions involving the
securitization of Assets of Allied or of any Allied Subsidiary and transactions
involving derivative securities), whether involving a purchase or sale, that it
or any Allied Subsidiary is seriously considering;
(c) Allied shall not make any material change in
accounting methods or practices, including without limitation any change with
respect to establishment of reserves for unearned premiums, losses (including
without limitation incurred but not reported losses) and loss adjustment
expenses, or any change in depreciation or amortization policies or rates
adopted by it, except as required by Law, GAAP or SAP;
(d) Allied shall not, and shall not permit any Allied
Subsidiary to, (i) amend its charter or by-laws (unless contemplated hereby),
(ii) incur any individual Liability or series of related Liabilities in excess
of $1,000,000 other than in the ordinary course of business consistent with past
practice, (iii) incur any indebtedness for money borrowed in the aggregate for
Allied and the Allied Subsidiaries in excess of $10,000,000 for any such
indebtedness having a maturity of 90 days or less or $1,000,000 for any such
indebtedness having a maturity of more than 90 days, (iii) agree to any Merger,
consolidation, demutualization, acquisition, redomestication, sale of all or a
substantial portion of its Assets, bulk or assumption reinsurance arrangement or
other similar reorganization, arrangement or business combination, (iv) prior to
notifying Nationwide, enter into any material partnership, joint venture or
profit sharing Contract, other than as envisioned by the Statement of Operating
Principles, (v) enter into any Contract limiting the ability of Allied or of any
Allied Subsidiary to engage in any Business, to compete with any Person, to do
business with any Person or in any location or to employ any Person or limiting
the ability of any Person to compete with such party
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or any of its Subsidiaries, (vi) enter into any Contract relating to the direct
or indirect guarantee of any obligation of any Person in respect of indebtedness
for borrowed money or other financial obligation of any Person other than in the
ordinary course of business consistent with past practice, (vii) enter into any
Contract that could materially and adversely affect the consummation of the
transactions contemplated hereby, (viii) violate any of its covenants under the
Pooling Agreement, or (ix) modify any Contract with respect to the subject of
any of the foregoing clauses;
(e) Allied shall not permit any Allied Subsidiary to
issue or sell any shares of or interests in, or rights of any kind to acquire
any shares of or interests in, or to receive any payment based on the value of,
the capital stock of or other equity interests in or any securities convertible
into shares of any capital stock of or other equity interests in any Allied
Subsidiary;
(f) Except (x) as set forth in the Allied Disclosure
Schedule, (y) in the ordinary course of business consistent with past practice,
or (z) as required by the terms of agreements or plans already in effect,
applicable Law or as envisioned in the Statement of Operating Principles, Allied
shall not, and shall not permit any Allied Subsidiary to (i) adopt or implement,
or commit to adopt or implement, or materially amend, any collective bargaining,
compensation, employment, consulting, pension, profit sharing, bonus, incentive,
group insurance, termination, retirement or other employee benefit Contract,
plan or policy, (ii) enter into or materially amend any severance Contract,
(iii) increase in any manner the compensation of, or enter into any Contract
relating to the borrowing of money by, its directors, officers or other
employees, except pursuant to the terms of agreements or plans as currently in
effect provided that in no event shall any such individual increase in annual
compensation exceed $400,000 per year, (iv) increase by more than 10% the
aggregate number of its employees, (v) pay or agree to pay any pension,
retirement allowance or other employee benefit not required by the current terms
of any existing plan, agreement or arrangement to any director, officer or other
employee, whether past or present, (vi) voluntarily recognize, or involuntarily
become subject to, any labor organization or any other Person as a collective
bargaining representative of one or more bargaining units comprising a material
number of employees, or (vii) other than obligations that arise by operation of
law or under the by-laws of a party as they exist on the date of this Agreement,
or as contemplated by this Agreement, enter into, adopt or increase any
indemnification or hold harmless arrangements with any directors, officers or
other employees or agents of such party or any of its Subsidiaries or any other
Person; provided that Allied may amend the terms of the Rabbi Trust to provide
for specified investment guidelines with respect to the assets of the Rabbi
Trust;
(g) Other than in the ordinary course of business
consistent with past practice, Allied shall not, and shall not permit any Allied
Subsidiary to, make any capital expenditures or expenditures or commitments for
expenditures for the purchase or lease of any products or services or group of
products or services (other than with respect to Investment Assets) which in one
or a series of related transactions exceed $1,000,000 or which in the
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aggregate for Allied and the Allied Subsidiaries taken as a whole exceed
$2,500,000, except for expenditures relating to this Agreement and the
consummation of the transactions contemplated hereby, and expenditures required
to be made pursuant to existing Contracts to which Allied or any Allied
Subsidiary is a party;
(h) Other than in the ordinary course of business
consistent with past practice or in connection with the redemption of
outstanding guaranteed investment contracts in the exercise of Allied's
reasonable judgment, Allied shall not, and shall not permit any Allied
Subsidiary to, waive any rights with a value in excess of $500,000 or any other
rights which are material to any Contract or make any payment, direct or
indirect, of any Liability in excess of $500,000 before the same comes due in
accordance with its terms, in each case, including, but not limited to, any
provision of any Insurance Contract to permit a cash-out thereof;
(i) Allied shall not, and shall not permit any Allied
Subsidiary to, other than pursuant to the operation of separate accounts in the
ordinary course of business, consistent with existing strategies, (i) sell,
lease, mortgage, encumber or otherwise grant any interest in or dispose of any
of its Assets which, individually or in the aggregate, are material to the
financial condition of Allied or of Allied and the Allied Subsidiaries taken as
a whole, and, in addition, in the case of Liens, for Permitted Liens and Liens
not individually in excess of $500,000 and not aggregating in excess of
$2,000,000 or (ii) restructure, amend, modify or otherwise affect any Investment
Asset or any Contract relating thereto which is material to the financial
condition of Allied or of Allied and the Allied Subsidiaries taken as a whole,
and, in either case described in clauses (i) and (ii), only in accordance with
the statement of investment policy set forth in the Allied Disclosure Schedule
attached hereto; and Allied shall furnish to Nationwide a monthly report, in
detail reasonably acceptable to Nationwide, of all such transactions or other
changes (other than changes in market values or ordinary course changes such as
interest payments, maturities, etc.) affecting Investment Assets of Allied or
any Allied Subsidiary which took place since the last such report;
(j) Allied agrees that it shall not, nor shall it
permit any Allied Subsidiary to, other than pursuant to the operation of
separate accounts involved in real estate in the ordinary course, consistent
with existing strategies, make any equity real estate investments (other than
through restructuring or foreclosure or pursuant to commitments existing at the
date hereof or to protect the value of existing investments in the exercise of
reasonable business judgment) and that neither Allied nor any Allied Subsidiary
shall take any action, other than in the exercise of reasonable business
judgment and following discussion with Nationwide, which results, individually
or in the aggregate, in (i) the realization of any gross capital loss or losses
in an amount of $10,000,000 or more or (ii) an adverse impact on the surplus of
Allied or of an Allied Subsidiary in an amount of $10,000,000 or more;
(k) Other than in the ordinary course of business
consistent with past practice, Allied shall not, and shall not permit any Allied
Subsidiary to, enter into any material Contract or amend or waive any material
provision of any material Contract which would
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involve the payment by Allied or any Allied Subsidiary of $1,000,000 or more;
(l) Other than in the ordinary course of business
consistent with past practice, Allied shall not, and shall not permit any Allied
Subsidiary to, settle or compromise any claim in any action, proceeding or
investigation which could result in an expenditure for Allied and the Allied
Subsidiaries in excess of $2,000,000;
(m) Allied shall not, and shall not permit any Allied
Subsidiary to, purchase or otherwise acquire, except pursuant to a Contract in
effect on the date of this Agreement, (i) any controlling equity interest in any
Person (other than Investment Assets), (ii) any non-publicly traded securities
in excess of $5,000,000 per transaction or $5,000,000 per issuer or credit,
(iii) any investments in fixed income securities rated in NAIC Class 4, 5 or 6,
non-publicly traded equity securities or Assets required to be shown on Schedule
BA of a Person's Annual Statement in excess of $5,000,000 per transaction or
$5,000,000 per issuer or credit, or (iv) any real property or mortgage
investments except in the ordinary course of managing the existing portfolio of
real property and mortgage investments, including foreclosing purchase money
mortgages, extensions and refinancings;
(n) Allied shall not, and shall not permit any Allied
Subsidiary to, enter into any new, or materially amend any existing, reinsurance
Contracts or arrangements, except in accordance with existing reinsurance
agreements or in the ordinary course of business and consistent with past
practice;
(o) Allied shall, and shall cause each Allied
Subsidiary to, maintain uninterrupted its existing insurance coverage of all
types in effect or procure substantially similar substitute insurance policies
with financially sound and reputable insurance companies in at least such
amounts and against such risks as are currently covered by such policies if such
coverage is available, except for insurance coverage the failure to so keep
would not have a Material Adverse Effect;
(p) Allied shall deliver to Nationwide as promptly as
practicable after preparation thereof, unaudited or audited, as the case may be,
SAP Statements filed by or on behalf of Allied after the date hereof;
(q) Allied shall not, nor shall Allied permit any
Allied Subsidiary to, take any actions that would be reasonably likely to
adversely affect the status of the Merger as a reorganization under Section 368
of the Code;
(r) Neither Allied nor any Allied Subsidiary shall
(i) make or rescind any material express or deemed election relating to Taxes,
(ii) make a request for a Tax Ruling or enter into a Closing Agreement,
settlement or compromise with respect to any material Tax matter or (iii) with
respect to any material Tax matter, change any of its methods of reporting
income or deductions for Federal income Tax purposes from those employed in the
preparation
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of its Federal income Tax Return for the Taxable year ending December 31, 1997,
except as may be required by Law;
(s) Other than in the ordinary course of Business and
consistent with past practice, neither Allied nor any Allied Subsidiary shall
declare, set aside or pay any dividends or distributions (whether in cash, stock
or property) in respect of any capital stock of any Allied Subsidiary or redeem,
purchase or otherwise acquire any of such Allied Subsidiary's capital stock;
(t) Neither Allied nor any Allied Subsidiary shall
settle pending or threatened litigation in an amount exceeding $1,000,000, other
than settlement of pending or threatened litigation with respect to claims
arising under contracts of insurance or reinsurance underwritten, ceded or
assumed by any Allied Subsidiary which settlement will not have a Material
Adverse Effect;
(u) Allied shall not amend any agreement with Allied
Group, Allied Life or any Subsidiaries thereof; and
(v) Neither Allied nor any Allied Subsidiary shall
agree, in writing or otherwise, to take any of the actions prohibited by the
foregoing clauses (a) through (u).
Section 6.2 NATIONWIDE CONDUCT OF BUSINESS PENDING THE MERGER.
Nationwide covenants and agrees that, at all times up to and including the
Effective Time, unless Allied shall otherwise consent in writing which consent
shall not be unreasonably withheld (Allied agreeing that it will use its best
efforts to respond to any request received from Nationwide arising under this
Article VI within 2 Business Days after the receipt of such request), or as
otherwise expressly permitted or contemplated by this Agreement:
(a) Nationwide shall use all reasonable efforts to
preserve intact its present business organization and preserve its regular
services to, and maintain its significant business relationships with,
policyholders, insureds, agents, underwriters, brokers, investment customers,
suppliers and all others having business dealings with it to the end that its
goodwill and ongoing Business shall not be impaired in any material respect;
(b) Nationwide shall not (i) amend its articles of
incorporation or by-laws in a manner which would be inconsistent with the
consummation of the transactions contemplated hereby, (ii) agree to any Merger
in which it is not the surviving entity or any consolidation, demutualization,
redomestication, sale of all or substantially all of its Assets or any other
similar reorganization, arrangement or business combination or (iii) enter into
or modify any Contract in a manner that will or is reasonably likely to
materially and adversely affect the consummation of the transactions
contemplated hereby;
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(c) Nationwide shall maintain uninterrupted its
existing insurance coverage of all types in effect or procure substantially
similar substitute insurance policies with financially sound and reputable
insurance companies in at least such amounts and against such risks as are
currently covered by such policies if such insurance coverage is available,
except for insurance coverage the failure to so keep in effect would not have a
Material Adverse Effect;
(d) Nationwide shall not, nor shall Nationwide permit
any Nationwide Subsidiary to, take any actions that would be reasonably likely
to adversely affect the status of the Merger as a reorganization under Section
368 of the Code; and
(e) Nationwide shall not agree, in writing or
otherwise, to take any of the actions prohibited by the foregoing clauses (a)
through (d).
Section 6.3 REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action to do, or cause to be done, and to
assist and cooperate with the other party hereto in doing or causing to be done,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement, including, but not limited to, (i) the actions set forth in Article
III hereof, (ii) the obtaining of all Governmental Approvals, and all other
necessary actions or nonactions, waivers, consents and approvals from all
appropriate Governmental Entities and other Persons and the making of all
necessary registrations and filings, (iii) the resolution of all organizational
and human resources issues relating to the transactions contemplated hereby,
(iv) the obtaining or making of all Consents, Environmental Permits, Filings or
Licenses necessary or desirable to ensure that the Business of the Surviving
Company may be conducted without disruption consistent with the past practice of
each of the parties and (v) the defending of any Proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby, the
defense of which shall, at the request of either Allied or Nationwide, be
conducted jointly by Nationwide and Allied on a basis that is reasonably
satisfactory to both Allied and Nationwide. Nothing set forth in this Section
6.3 shall limit or affect actions permitted to be taken pursuant to Section 6.9.
(b) Nationwide covenants that it will submit the Form
A regulatory applications for Allied, Allied Group and Allied Life
simultaneously, and will amend its current Form A filing for Allied Group to
include supplemental Form A filings for Allied and Allied Life, shall use its
reasonable best efforts to (i) conduct the regulatory hearing and approval
process concurrently for each of Allied, Allied Group and Allied Life, (ii) seek
concurrent regulatory approvals for Nationwide's transactions with each of
Allied, Allied Group and Allied Life, and (iii) conduct the regulatory approval
process in a manner so as to protect the policyholder interests of each of
Allied and Nationwide. Both Allied and Nationwide agree to use their respective
reasonable best efforts to coordinate and cooperate during the regulatory
approval process.
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Section 6.4 ACCESS AND INFORMATION.
(a) Subject to the terms of Section 6.4(b), each of
Nationwide and Allied shall (i) afford to the other and the Representatives of
the other, including environmental consultants, reasonable access during normal
business hours through the period commencing on the date hereof and continuing
until immediately prior to the Effective Time to all of its and its
Subsidiaries' Assets, books, Tax Returns, Contracts, commitments and records,
including for purposes of environmental assessments and other environmental due
diligence, and (ii) during such period, each of Nationwide and Allied shall
furnish promptly to the other all such information concerning its Business,
Assets and personnel or those of any of its Affiliates, in either clause (i) or
(ii), as the other may reasonably request.
(b) Unless otherwise agreed in writing by the
parties, each of the parties agree (a) except as required by law, to keep all
Confidential Information confidential and not to disclose or reveal any
Confidential Information to any person other than those Persons employed by it
or on its behalf who are actively and directly participating in the planning,
negotiation and implementation of the transactions contemplated hereby or who
otherwise need to know the Confidential Information and to cause those persons
to observe the terms of this Section 6.4(b) and (b) not to use the Confidential
Information for any purpose other than in connection with the planning,
negotiation and implementation of the transactions contemplated hereby. In the
event of the termination of this Agreement for any reason, each of the parties
agrees to return, and cause its Representatives to return, to the other all
copies of written Confidential Information relating to the other and to destroy
all memoranda, notes and other writings prepared based upon or including
Confidential Information supplied by the other party and neither party shall use
Confidential Information supplied by the other for any purpose.
Section 6.5 NOTICE OF PROCEEDINGS. Each of Nationwide and
Allied shall promptly notify the other of, and provide to the other all
information relating to, any Proceedings or investigations commenced or, to the
best of its Knowledge, threatened which relate to the execution of this
agreement or the consummation of the transactions contemplated hereby.
Section 6.6 NOTIFICATION OF CERTAIN OTHER MATTERS. Each party
shall promptly notify the other of any of the following events should any such
events occur subsequent to the date hereof:
(a) the receipt by such party of any written notice
from any Person alleging that the consent of such Person is or may be required
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby, and where the failure to obtain such a consent
is reasonably likely to have a Material Adverse Effect; and
(b) the receipt by such party of any written notice
from or to any Governmental Entity in connection with this Agreement or the
transactions contemplated hereby.
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In furtherance of the foregoing, to the fullest extent permitted under
applicable Law, each party shall make available to the other with copies (or, to
the extent written materials are not involved, oral notice) of proposed notices,
applications or any other communications to any Governmental Entity or rating
agency in connection with this Agreement or the transactions contemplated
hereby, including, but not limited to, in respect of the Governmental Approvals,
in each case at least three (3) Business Days prior to dispatch of written
materials (or, to the extent written materials are not involved, prior to
initiation) and neither Nationwide nor Allied will dispatch (or, to the extent
written materials are not involved, initiate) such notice, application or
communication without the prior consent of the other party, which consent shall
not be unreasonably withheld or delayed.
Section 6.7 INDEMNIFICATION.
(a) Nationwide agrees that all rights to
indemnification now existing in favor of any of the current or former employees,
directors, agents or officers of Allied or any of the Allied Subsidiaries (the
"Indemnitees"), with respect to any Losses (including, but not limited to,
Losses arising out of any litigation or threatened litigation) based on,
arising, in whole or in part, out of, or otherwise in respect of, any action
which is taken, or matter existing or occurring on or prior to the Effective
Time, as provided in Allied's articles of incorporation or by-laws or any
indemnification agreements by and between any of the Indemnitees and Allied or
otherwise existing to the fullest extent under Law on the date hereof shall
survive the Merger.
(b) From and after the Effective Time, Nationwide
agrees that it will indemnify and hold harmless each of the Indemnitees from and
against any and all Losses (including, but not limited to, Losses arising out of
any litigation or threatened litigation) based on, arising, in whole or in part,
out of, or otherwise in respect of, any action which is taken, or matter
existing or occurring on or prior to the Effective Time. Nothing contained
herein, however, shall require Nationwide to indemnify any Indemnitee if a court
of competent jurisdiction shall have determined that such indemnification is
unenforceable or void as a matter of public policy, and such determination shall
have become final and nonappealable.
(c) For a period of six years after the Effective
Time, Nationwide shall maintain in effect directors' and officers' liability
insurance covering those persons who are currently covered by Allied's
directors' and officers' liability insurance policy on terms (including the
amounts of coverage and the amounts of deductibles, if any) that are comparable
to the terms now applicable to directors and officers of Nationwide, or, if more
favorable to Allied's directors and officers, the terms now applicable to them
under Allied's current policies; provided, however, that in no event shall
Nationwide be required to expend in excess of the greater of 200% of the annual
premium currently paid by Allied for such coverage and the annual premium paid
by Nationwide for its current directors' and officers' liability insurance
coverage (the "Maximum Premium"); and provided further, that if the premium for
such coverage exceeds the Maximum Premium, Nationwide shall purchase a policy
with the greatest coverage available for
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the Maximum Premium.
(d) In the event that Nationwide or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Nationwide assume
the obligations set forth in this Section 6.7.
(e) The provisions of this Section 6.7 shall survive
the consummation of the Merger at the Effective Time and are intended to be for
the benefit of, and shall be enforceable by, each Indemnitee, his or her heirs
and his or her representatives and are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such Person
may have under the articles of incorporation or by-laws of the Surviving Company
or any of its Subsidiaries, under any contract, under applicable Law or
otherwise.
Section 6.8 TRANSFER TAXES. The Surviving Company shall pay or
cause to be paid any real property transfer and similar Taxes to which the
Allied policyholders may be subject as a result of the Merger and the
transactions contemplated hereby, and the Surviving Company shall file or cause
to be filed all Tax Returns relating to such transfer Taxes which are due.
Section 6.9 ACQUISITION PROPOSALS. Allied will not, and will
not permit or cause any of its Subsidiaries or any of the officers or directors
of it or its Subsidiaries to, and shall direct its and its Subsidiaries'
Representatives not to, directly or indirectly, initiate, solicit, knowingly
encourage or otherwise knowingly facilitate the making of any Acquisition
Proposal. Allied will not, and will not permit or cause any of its Subsidiaries
or any of the officers and directors of it or its Subsidiaries to and shall
direct its and its Subsidiaries' employees, agents and Representatives not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, whether made before or after the date of
this Agreement, or otherwise knowingly facilitate any effort or attempt to make
or implement an Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent Allied or its Board of Directors from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such an Acquisition
Proposal to the Members of Allied, if and only to the extent that, (i) in each
such case referred to in clause (A), (B) or (C) above, the Board of Directors of
Allied determines in good faith that the failure to take such action is
reasonably likely to result in a breach of such Board's fiduciary duties under,
or otherwise violate, applicable Law; and (ii) in each case referred to in
clause (B) or (C) above, the Board of Directors of Allied determines in good
faith that such Acquisition Proposal may be a Superior Proposal. Allied will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations
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with any parties conducted heretofore with respect to any of the foregoing.
Allied agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.9.
Section 6.10 LITIGATION. From and after the date hereof and
until the Effective Time, Nationwide shall cease, in any and all respects, the
prosecution of any pending litigation against Allied or any Affiliates thereof.
Immediately following the Effective Time, Nationwide shall dismiss, with
prejudice, any and all litigation brought by Nationwide against Allied or any
Affiliates thereof.
Section 6.11 HSR ACT. Nationwide and Allied shall take all
actions necessary to file as soon as practicable after the date hereof all
notifications, filings and other documents required under the HSR Act, and to
respond as promptly as practicable to any inquiries received from the FTC, the
Antitrust Division and any other Governmental Entity for additional information
or documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection therewith.
Section 6.12 TAX TREATMENT. The parties intend the Merger to
qualify as a reorganization under Section 368(a) of the Code; each party and
its affiliates shall use its best efforts to cause the Merger to so qualify.
Each of the parties agrees that neither it nor any of its Affiliates shall take
any action, including any transfer or other disposition of assets or any
interest in Allied after the Closing, that would cause the Merger not to qualify
as a reorganization under Section 368(a) of the Code. Nationwide shall report
the Merger for income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and any comparable state or local tax statute.
ARTICLE VII
CONDITIONS
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) this Agreement and the Merger shall have been
approved and adopted by the requisite votes of the respective Members of
Nationwide and Allied at a special meeting of the Members of Nationwide and
Allied called for such purpose;
(b) the waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been earlier terminated
and, other than the filings provided for in subclauses (a) and (b) of the second
sentence of Section 2.3, all Governmental Approvals and other Consents or
Filings which are required to be obtained prior to the Effective
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Time (other than those Governmental Approvals for which the failure to obtain
would not be reasonably likely to have a Material Adverse Effect) shall have
been obtained and not rescinded or adversely modified or limited or, if merely
required to be filed, such filings shall have been made and accepted, and all
waiting periods prescribed by applicable Law shall have expired or been
terminated in accordance with applicable Law; provided that no such Governmental
Approval or other Consent or Filing shall contain any conditions or limitations
that impose or seek to impose any limitation on the ability of the Surviving
Company and its Subsidiaries, taken as a whole, to conduct its Business or own
its Assets after the Effective Time in substantially the same manner as the
parties and their respective Subsidiaries presently conduct their Business or
own their Assets and which conditions and limitations would have a Material
Adverse Effect on the Surviving Company and its Subsidiaries, taken as a whole;
and
(c) no Order entered or Law promulgated or enacted by
any Governmental Entity shall be in effect which would prevent the consummation
of the Merger or any other material transactions completed hereby, and no
Proceeding brought by a Governmental Entity shall have been commenced and be
pending which seeks to restrain, enjoin, prevent, or materially delay or
restructure the Merger or any other material transactions contemplated hereby.
Section 7.2 CONDITIONS TO OBLIGATION OF ALLIED TO EFFECT THE
MERGER. The obligations of Allied to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, any one
or more of which may be waived by Allied, but only to the extent permitted by
Law and subject to Section 9.5 hereof:
(a) The representations and warranties of Nationwide
contained in this Agreement shall be true and correct on the date hereof and on
and as of the Closing Date as though made on the Closing Date (other than those
representations and warranties that expressly address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and correct as of such date or with respect to such period), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), does not have, and is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Nationwide; and
(b) Nationwide shall have performed and complied in
all material respects with all obligations, covenants and agreements required to
be performed and complied with by it under this Agreement at or prior to Closing
Date.
Section 7.3 CONDITIONS TO OBLIGATION OF NATIONWIDE TO EFFECT
THE MERGER. The obligations of Nationwide to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions,
any one or more of which may be waived by Nationwide, but only to the extent
permitted by Law and subject to Section 9.5 hereof:
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(a) The representations and warranties of Allied
contained in this Agreement shall be true and correct on the date hereof and on
and as of the Closing Date as though made on the Closing Date (other than those
representations and warranties that expressly address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and correct as of such date or with respect to such period), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), does not have, and is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Allied; and
(b) Allied shall have performed and complied in all
material respects with all obligations, covenants and agreements required to be
performed and complied with by it under this Agreement at or prior to the
Closing Date.
Section 7.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Allied
nor Nationwide may rely on the failure of any condition set forth in Section
7.1, 7.2 or 7.3, as the case may be, to be satisfied if such failure was caused
by such party's failure to use its best efforts to consummate the Merger and the
other transactions contemplated by this Agreement.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. This Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time, whether before or
after approval of the Merger by the Members of Nationwide or of Allied:
(a) by the mutual written agreement of the parties
hereto duly authorized by action taken by or on behalf of their respective
Boards of Directors; or
(b) by Nationwide or Allied if the Merger shall not
have occurred on or before June 30, 1999; or
(c) by Nationwide if the number of votes in favor of
this Agreement cast by the Members of Nationwide required for the consummation
of the Merger shall not have been obtained at the meeting of its Members or at
any adjournment thereof duly held for such purpose; or
(d) by Allied if the number of votes in favor of this
Agreement cast by the Members of Allied required for the consummation of the
Merger shall not have been obtained at the meeting of its Members or at any
adjournment thereof duly held for such purpose; or
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(e) by Allied if Nationwide (x) breaches or fails in
any material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have, or is reasonably likely to
have, a Material Adverse Effect on Nationwide, in each case such that the
conditions set forth in Section 7.1 or Section 7.2 would not be satisfied;
PROVIDED, HOWEVER, that if any such breach is curable by Nationwide through the
exercise of its best efforts and for so long as Nationwide shall be so using its
best efforts to cure such breach, Allied may not terminate this Agreement
pursuant to this Section 8.1(e); or
(f) by Nationwide if Allied (x) breaches or fails in
any material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have, or is reasonably likely to
have, a Material Adverse Effect on Allied, in each case such that the conditions
set forth in Section 7.1 or Section 7.3 would not be satisfied; PROVIDED,
HOWEVER, that if any such breach is curable by Allied through the exercise of
its best efforts and for so long as Allied shall be so using its best efforts to
cure such breach, Nationwide may not terminate this Agreement pursuant to this
Section 8.1(f); or
(g) by Allied, if the Board of Directors of Allied
(or any committee thereof) shall have withdrawn or modified or changed in a
manner adverse to Nationwide its approval or recommendation of this Agreement
or the Merger in order to approve and permit Allied to execute a definitive
agreement with a Third Party relating to an Superior Proposal; or
(h) by Nationwide, if the Board of Directors of
Allied (or any committee thereof) shall have withdrawn or modified or changed in
a manner adverse to Nationwide its approval or recommendation of this Agreement
or the Merger or shall have recommended an Superior Proposal, or Allied shall
have entered into a definitive agreement providing for an Superior Proposal
with a Third Party.
Section 8.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement by either
Nationwide or Allied, as provided in Section 8.1, written notice thereof shall
forthwith be given to the other party specifying the provision hereof pursuant
to which such termination is made, this Agreement shall thereafter become void
and there shall be no Liability on the part of either party hereto against the
other party hereto, or on the part of its directors, officers, employees,
policyholders, shareholders or agents (or those of any of its Subsidiaries or
Affiliates), except that (i) any such termination shall be without prejudice to
the rights of either party hereto (or any of its Subsidiaries or Affiliates)
arising out of the willful breach by the other party of any covenant or
agreement contained in this Agreement, and (ii) with respect to Nationwide and
Allied, the obligations pursuant to this Section 8.2, Section 6.4(b) and
Section 9.2 shall survive termination.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time or the termination of this Agreement.
Section 9.2 FEES AND EXPENSES. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses, except for expenses incurred in connection with the
printing, mailing and solicitation of proxies from policyholders which shall be
borne by Nationwide and Allied in proportion to the number of Members thereof.
Section 9.3 NOTICES. All notices, consents, requests,
approvals, authorizations and other communications (collectively, "Notices")
required or permitted to be given hereunder by one party to another shall only
be effective if in writing. All Notices shall be sent (i) by registered or
certified mail (with return receipt requested), postage prepaid, or (ii) by
Federal Express, U.S. Post Office Express Mail, Airborne or similar overnight
courier which delivers, if requested, only upon signed receipt of the addressee
(with such signed receipt being requested), or (iii) by facsimile transmission,
and addressed or transmitted as follows or at such other address or facsimile
number, and to the attention of such other person, as the parties shall give
notice as herein provided:
If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President-Enterprise Controller
Facsimile No.: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler, Vice President and Associate General Counsel
Roger A. Craig, Counsel
Facsimile No.: (614) 249-7254
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with a copy to:
Holleb & Coff
55 E. Monroe
Chicago, Illinois 60603
Attention: Eric M. Fogel, Esq.
Facsimile No.: (312) 807-3900
If to Allied, to:
Allied Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50391-2000
Attention: John E. Evans, Chairman of the Board
Douglas L. Andersen, President and Chief Executive Officer
Facsimile No.: 515-280-4399
with copies to:
Nyemaster, Goode, Voigts, West, Hansell & O'Brien
A Professional Corporation
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309-3899
Attention: Mark C. Dickinson, Esq.
Facsimile No.: 515-283-3108
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Jeffrey W. Tindell, Esq.
Facsimile No.: 212-451-7321
A Notice shall be effective upon receipt and shall be deemed
to be received, if sent by registered or certified mail, U.S. Post Office
Express Mail, Federal Express, Airborne or similar overnight courier, on the
date of receipt by the recipient as shown on the return receipt card, or if sent
by facsimile, upon receipt by the sender of an acknowledgment or transmission
report generated by the machine from which the facsimile was sent indicating
that the facsimile was sent in its entirety to the recipient's facsimile number;
provided that if a Notice is received by facsimile on a day which is not a
Business Day, or after 5:00 p.m. on any Business Day at the addressee's
location, such Notice shall be deemed to be received by the recipient at 9:00
a.m. on the first Business Day thereafter. Rejection or other refusal to accept
or the inability to deliver
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because of changed address of which no Notice was given shall be deemed to be
receipt of the Notice as of the date of such rejection, refusal or inability to
deliver.
Section 9.4 AMENDMENTS. Subject to applicable Law, this
Agreement may be amended by the parties hereto at any time before or after the
approval of this Agreement by the Members of Nationwide or of Allied, but after
such approval no amendment or modification shall be made which in any way
materially adversely affects the rights of such Members without the further
approval of such Members. Any amendment, modification or material waiver of this
Agreement shall be subject to the approval of the Ohio Superintendent, the Iowa
Commissioner and the Iowa Attorney General. This Agreement may not be amended,
modified or supplemented except by written agreement of the parties hereto.
Section 9.5 EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any inaccuracies
in the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) except
as provided by Section 9.4, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. Nothing contained in
this Agreement shall cause the failure of either party to insist upon strict
compliance with any covenant, obligation, condition or agreement contained
herein to operate as a waiver of, or estoppel with respect to, any such
covenant, obligation, condition or agreement by the party entitled to the
benefit thereof.
Section 9.6 PUBLICITY. So long as this Agreement is in effect,
each of the parties hereto (i) shall not, and shall cause its Affiliates not to,
issue or cause the publication of any press release or other announcement to any
Person with respect to this Agreement or the transactions contemplated hereby
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed; PROVIDED, HOWEVER, that nothing contained in this Agreement
shall (A) limit the right of each of the parties hereto and their Affiliates to
make a legally required filing or communication, PROVIDED that, to the extent
possible, such party shall consult with the other party before making such
filing or communication, or responding to any communications initiated by any
non-affiliated Person, including, but not limited to, any rating agency or
Governmental Entity, (B)prohibit either party hereto (or its Affiliates) from
initiating communications with, and making presentations to, any rating agency
or Governmental Entity relating to the transactions contemplated hereby if such
party gives prior notice thereof to the other party hereto, or (C)prohibit
Nationwide or Allied or any of their respective Affiliates from communicating to
any third party information in any way relating to the Merger that has been made
known to the general public, other than in violation of this Agreement, prior to
the time of such communication, (ii) shall cooperate fully with the other party
hereto with respect to issuing or publishing any press release, or other
announcement or other written communication to any non-affiliated Person and
preparing written and oral communications to the employees and agents of each
party hereto with the purpose of effectuating the Merger in the best interests
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of the respective Members of Nationwide and Allied and (iii) shall promptly
notify the other party of any communications received from and responses
provided to non-affiliated Persons, in either case, with respect to this
Agreement or the transactions contemplated hereby.
Section 9.7 HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.8 NONASSIGNABILITY. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either
party hereto by operation of Law or otherwise without the prior written consent
of the other party hereto.
Section 9.9 BENEFICIARIES. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns, and nothing in this Agreement, expressed or implied, is intended to
confer upon any other Person (including, but not limited to, any policyholder,
shareholder or employee of Allied, Nationwide or their Subsidiaries) any rights
or remedies of any nature under or by reason of this Agreement, except as
expressly provided in Section 2.6, Section 2.7, Section 6.7, Section 6.8,
Section 6.10 and Section 6.12 hereof.
Section 9.10 DUPLICATES; COUNTERPARTS. This Agreement shall be
executed in duplicate and may be executed in counterparts, each of which shall
be deemed to constitute an original and constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Agreement. In proving this Agreement, it shall not be necessary to
produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
Section 9.11 GOVERNING LAW; JURISDICTION. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Iowa without regard to the conflict or choice of laws rules thereof or
of any other jurisdiction.
Section 9.12 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to
the subject matter hereof and thereof.
Section 9.13 SEVERABILITY. If any provisions hereof shall be
held invalid or unenforceable by any court of competent jurisdiction or as a
result of future legislative action, such holding or action shall be strictly
construed and shall not affect the validity or effect of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction or other authority declares that
any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court making such determination shall have the
52
<PAGE> 97
power to reduce the scope, duration, area or applicability of the term or
provision, to delete specific words or phrases, or to replace any invalid, void
or unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision; PROVIDED, HOWEVER, that the parties shall use
reasonable efforts, including, but not limited to, the amendment of this
Agreement, to ensure that this Agreement shall reflect as closely as practicable
the intent of the parties hereto.
Section 9.14 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other party hereto would be irreparably damaged
in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
each of the parties hereto agrees that each shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions thereof in any
action instituted in any court of the United States or any state thereof having
subject matter jurisdiction, in addition to any other remedy to which Nationwide
or Allied may be entitled, at law, in equity or pursuant to this Agreement.
Section 9.15 SURVIVAL OF CERTAIN COVENANTS. The provisions of
Section 2.6, Section 2.7, Section 6.7, Section 6.8, Section 6.9, Section 6.10
and Section 6.12 hereof shall survive the Effective Time.
Section 9.16 COUNTING. If the due date for any action to be
taken under this Agreement (including, but not limited to, the delivery of
notices) is not a Business Day, then such action shall be considered timely
taken if performed on or prior to the next Business Day following such due date.
Section 9.17 SERVICE OF PROCESS. Each party irrevocably
consents to the service of process in any action or proceeding by mailing copies
thereof by registered United States mail, postage prepaid, return receipt
requested, to its address as specified in or pursuant to Section 9.3 hereof.
However, the foregoing shall not limit the right of a party to effect service of
process on the other party by any other legally available method.
Section 9.18 INTERPRETATION.
(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation."
(c) The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not
53
<PAGE> 98
to any particular provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Agreement unless otherwise specified.
(d) The plural of any defined term shall have a
meaning correlative to such defined term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and permitted
assigns.
(f) A reference to any legislation or to any
provision of any legislation shall include any modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(g) All references to "$" and dollars shall be deemed
to refer to United States currency unless otherwise specifically provided.
(h) The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available.
Section 9.19 SCHEDULES. The Allied Disclosure Schedule and the
Nationwide Disclosure Schedule shall each be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein. Any matter disclosed pursuant to the Allied Disclosure Schedule
or the Nationwide Disclosure Schedule shall be deemed to be disclosed for all
purposes under this Agreement but such disclosure shall not be deemed to be an
admission or representation as to the materiality of the item so disclosed.
54
<PAGE> 99
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Nationwide and of Allied as of the
date first above written.
NATIONWIDE MUTUAL INSURANCE COMPANY
By /s/ Mark B. Koogler
----------------------------------------
Name: Mark B. Koogler
Title: Vice President and Associate General Counsel
ALLIED MUTUAL INSURANCE COMPANY
By /s/ Douglas L. Andersen
----------------------------------------
Name: Douglas L. Andersen
Title: President and Chief Executive Officer
<PAGE> 100
Exhibit A
NATIONWIDE MUTUAL INSURANCE COMPANY
CERTIFICATE OF ASSUMPTION, MEMBERSHIP
AND PARTICIPATION
You are hereby notified that Allied Mutual Insurance Company ("Allied")
has, effective as of ___________ (the "Effective Time"), merged (the "Merger")
with and into Nationwide Mutual Insurance Company ("Nationwide").
From and after the Effective Time, all references in your policy with
Allied are hereby changed to Nationwide. Nationwide has initially assumed all
rights and duties under your policy.
Nationwide is one insurance company in a large group of affiliated
insurance companies called the Nationwide Insurance Enterprise (the
"Enterprise"). Nationwide agrees that for as long as your policy remains
continuously in force (including renewals or replacements thereof) from and
after the Effective Time with an insurance company within the Enterprise that is
authorized to transact property and casualty insurance or reinsurance business:
A. Your policy shall have those voting rights within Nationwide as if
it were a policy issued by Nationwide, as and to the extent provided under the
Ohio Insurance Law and Nationwide's Articles of Incorporation;
B. Your policy shall have those rights in the event of the liquidation,
merger, consolidation, mutual holding company reorganization, demutualization or
similar extraordinary transaction of Nationwide as if your policy had been
continuously with Nationwide since the date of its initial issuance by Allied.
Such rights shall not be reduced by reason of any policyholder dividend paid in
respect of your policy in connection with the Merger.
This Certificate shall continue in effect as long as your policy has
been renewed or replaced, without a lapse in coverage, by any insurance company
within the Enterprise that is authorized to transact property and casualty
insurance or reinsurance business. This Certificate, as of the Effective Time,
forms a part of and should be attached to your policy.
<PAGE> 101
IN WITNESS WHEREOF, Nationwide Mutual Insurance Company has caused this
Certificate of Assumption, Membership and Participation to be duly signed and
issued.
----------------------- ----------------------
Secretary President
<PAGE> 102
Exhibit C
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of June 3, 1998, between
Nationwide Mutual Insurance Company, an Ohio mutual insurance company
("Nationwide"), and Allied Mutual Insurance Company, an Iowa mutual insurance
company (the "Securityholder").
WHEREAS, Nationwide, Nationwide Life Acquisition Corporation,
an Ohio corporation and wholly-owned subsidiary of Nationwide ("Sub"), and
Allied Life Financial Corporation, an Iowa corporation (the "Company"), propose
to enter into an Agreement and Plan of Merger, dated the date hereof (as the
same may be amended or supplemented, the "Merger Agreement"), which provides for
a cash tender offer by Sub (as such tender offer may hereafter be amended from
time to time, the "Offer") to purchase all shares of common stock, no par value,
of the Company (the "Common Shares") and, following the consummation of the
Offer, the merger of Sub with the Company (the "Merger");
WHEREAS, the Securityholder is the record and beneficial owner
of the number of (i) Common Shares, and (ii) shares of 6.75% Series Preferred
Stock, no par value, of the Company and (collectively, the "Preferred Shares")
set forth on Schedule A hereto; such securities, as they may be adjusted by
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company, together with securities that may be acquired after the date
hereof by the Securityholder, including Common Shares issuable upon the exercise
of options to purchase Common Shares (as the same may be adjusted as aforesaid),
being collectively referred to herein as the "Securities"; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Nationwide has requested that the Securityholder enter into
this Agreement (capitalized terms not otherwise defined herein shall have the
meanings set forth in the Merger Agreement);
NOW, THEREFORE, to induce Nationwide to enter into, and in
consideration of it entering into, the Merger Agreement, and in consideration of
the premises and the representations, warranties and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
<PAGE> 103
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
2
<PAGE> 104
the treatment of any Securities in or in connection with such transaction
(collectively, "Frustrating Transactions").
2. Grant of Irrevocable Proxy Coupled with an Interest;
Appointment of Proxy.
(a) Subject to governmental approvals, the Securityholder
hereby irrevocably grants to, and appoints, any individual who shall be
designated by Nationwide as the Securityholder's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Securityholder, to vote the Securityholder's Securities, or grant a consent or
approval in respect of such Securities, at any meeting of shareholders of the
Company or at any adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, (i) in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement, and (ii) against any
Alternative Transaction or Frustrating Transaction.
(b) The Securityholder represents that any proxies heretofore
given in respect of the Securityholder's Securities are not irrevocable, and
that any such proxies are hereby revoked.
(c) THE SECURITYHOLDER HEREBY AFFIRMS THAT THE PROXY SET FORTH
IN THIS SECTION 2 IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE UNTIL SUCH TIME
AS THIS AGREEMENT TERMINATES IN ACCORDANCE WITH ITS TERMS. The Securityholder
hereby further affirms that the irrevocable proxy is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Securityholder under this
Agreement. The Securityholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
3. Acquisition Proposals.
Notwithstanding anything to the contrary contained in this
Agreement, during any period of time that the Securityholder is not prohibited
by the Agreement and Plan of Merger, dated as of the date hereof, by and between
Securityholder and Nationwide (the "Allied Mutual Merger Agreement") from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written
3
<PAGE> 105
Acquisition Proposal; or (C) recommending an Acquisition Proposal to the policy
holders of the Securityholder, the Securityholder's obligations under Sections 1
and 2 of this Agreement shall be deemed inoperative. For purposes of this
Section 3, "Acquisition Proposal" shall have the meaning ascribed thereto in the
Allied Mutual Merger Agreement.
4. Representations and Warranties of the Securityholder. The
Securityholder hereby represents and warrants to Nationwide as follows:
(a) Authority. The Securityholder has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Securityholder. This Agreement has been duly
executed and delivered by the Securityholder and, assuming this Agreement
constitutes a valid and binding obligation of Nationwide, constitutes a valid
and binding obligation of the Securityholder enforceable against the
Securityholder in accordance with its terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except for the informational filings with
the Securities and Exchange Commission and except for any state insurance
department approvals or filings, neither the execution, delivery or performance
of this Agreement by the Securityholder nor the consummation by the
Securityholder of the transactions contemplated hereby will (i) require any
filing with, or permit, authorization, consent or approval (collectively,
"Governmental Approvals") of, any federal, state, local or municipal foreign or
other government or subdivision, branch, department or agency thereof or any
governmental or quasi-governmental authority of any nature, including any court
or other tribunal, (a "Governmental Entity"), except where the failure to obtain
any such Governmental Approvals would not be reasonably likely to adversely
affect the transactions contemplated hereby, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, or give rise to any right of termination, amendment, cancellation
or acceleration under, or result in the creation of any lien upon any of the
properties or assets of the Securityholder under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license, permit,
concession, franchise, contract, agreement or other instrument or obligation (a
"Contract") to which the Securityholder is a party or by which the
Securityholder or any of the
4
<PAGE> 106
Securityholder's properties or assets, including the Securityholder's
Securities, may be bound, except for such violations, breaches, defaults, rights
of termination, amendment, cancellation and acceleration and liens which would
not be reasonably likely to adversely affect the transactions contemplated
hereby or (iii) violate any judgment, order, writ, preliminary or permanent
injunction or decree (an "Order") or any statute, law, ordinance, rule or
regulation of any Governmental Entity (a "Law") applicable to the Securityholder
or any of the Securityholder's properties or assets, including the
Securityholder's Securities, except for such violations which would not be
reasonably likely to adversely affect the transactions contemplated hereby
(b) The Securities. The Securityholder's Securities and the
certificates representing such Securities are now, and at all times during the
term hereof will be, held by such Securityholder, or by a nominee or custodian
for the benefit of such Securityholder, and the Securityholder has good and
marketable title to such Securities, free and-clear of any liens, proxies,
voting trusts or agreements, understandings or arrangements, except for any such
liens or proxies arising hereunder and the agreements made hereby. The
Securityholder owns of record or beneficially no securities of the Company, or
any options, warrants or rights exercisable for securities of the Company, other
than such Securityholder's Securities, as set forth on Schedule A hereto.
(c) Brokers. Except as provided in the Allied Mutual Merger
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Securityholder.
(d) Merger Agreement. The Securityholder understands and
acknowledges that Nationwide is entering into the Merger Agreement in reliance
upon the Securityholder's execution and delivery of this Agreement.
5. Representations and Warranties of Nationwide. Nationwide
hereby represents and warrants to the Securityholder as follows:
(a) Authority. Nationwide has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Nationwide and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Nationwide.
5
<PAGE> 107
This Agreement has been duly executed and delivered by Nationwide and, assuming
this Agreement constitutes a valid and binding obligation of the Securityholder,
constitutes a valid and binding obligation of Nationwide enforceable in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) Securities Act. The Securities will be acquired in
compliance with, and Nationwide will not offer to sell or otherwise dispose of
any Securities so acquired by it in violation of any of, the Securities Exchange
Act of 1934, as amended, or the registration requirements of the Securities Act
of 1933, as amended.
6. Further Assurances. Except as otherwise provided in Section
3, the Securityholder will, from time to time, execute and deliver, or cause to
be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Nationwide may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to vest the power to vote the
Securityholder's Securities as contemplated by Section 2. Nationwide agrees to
use its best efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed with respect to
the transactions contemplated by this Agreement.
7. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate on the earlier of (x) the termination
of the Merger Agreement (except pursuant to Section 8.1(d) of the Merger
Agreement in which case this Agreement shall continue in effect) of in
accordance with its terms and (y) the termination of the Allied Mutual Merger
Agreement. Nothing in this Section 7 shall relieve any party from liability for
willful breach of this Agreement.
8. General Provisions.
(a) Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns.
6
<PAGE> 108
(b) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(c) Notice. All notices, consents, requests, approvals,
authorizations and other communications (collectively, "Notices") required or
permitted to be given hereunder by one party to another shall only be effective
if in writing. All Notices shall be sent (i) by registered or certified mail
(with return receipt requested), postage prepaid, or (ii) by Federal Express,
U.S. Post Office Express Mail, Airborne or similar overnight courier which
delivers, if requested, only upon signed receipt of the addressee (with such
signed receipt being requested), or (iii) by facsimile transmission, and
addressed or transmitted as follows or at such other address or facsimile
number, and to the attention of such other person, as the parties shall give
notice as herein provided:
If to Nationwide, to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: David A. Diamond, Vice President -- Enterprise
Controller
Facsimile: (614) 249-4462
with a copy to:
Nationwide Mutual Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attention: Mark B. Koogler, Vice President and Associate
General Counsel
Roger A. Craig, Counsel
Facsimile: (614) 249-7254
and
7
<PAGE> 109
if to the Securityholder, to:
Allied Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50391-2000
Attention: John E. Evans, Chairman of the Board
Douglas L. Andersen, President and Chief
Executive Officer
Facsimile No.: 515-280-4399
with copies to:
Nyemaster, Goode, Voigts, West, Hansell & O'Brien
A Professional Corporation
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309-3899
Attention: Mark C. Dickinson, Esq.
Facsimile No.: 515-283-3108
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Jeffrey W. Tindell, Esq.
Facsimile No.: 212-451-7321
A Notice shall be effective upon receipt and shall be deemed to be received, if
sent by registered or certified mail, U.S. Post Office Express Mail, Federal
Express, Airborne or similar overnight courier, on the date of receipt by the
recipient as shown on the return receipt card, or if sent by facsimile, upon
receipt by the sender of an acknowledgment or transmission report generated by
the machine from which the facsimile was sent indicating that the facsimile was
sent in its entirety to the recipient's facsimile number; provided that if a
Notice is received by facsimile on a day which is not a Business Day, or after
5:00 p.m. on any Business Day at the addressee's location, such Notice shall be
deemed to be received by the recipient at 9:00 a.m. on the first Business Day
thereafter. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no Notice was given shall
8
<PAGE> 110
be deemed to be receipt of the Notice as of the date of such rejection, refusal
or inability to deliver.
(d) Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement. The plural of
any defined term shall have a meaning correlative to such defined term, and
words denoting any gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a corresponding
meaning. A reference to any party to this Agreement or any other agreement or
document shall include such party's successors and permitted assigns. A
reference to any legislation or to any provision of any legislation shall
include any modification or re-enactment thereof, any legislative provision
substituted therefor and all regulations and statutory instruments issued
thereunder or pursuant thereto. For purposes of this Agreement, "Person" shall
mean an individual, corporation, partnership, association, joint stock company,
limited liability company, Governmental Entity, trust, joint venture, labor
union, estate, unincorporated organization or other entity.
(e) Counterparts. This Agreement shall be executed in
duplicate and may be executed in counterparts each of which shall be deemed to
constitute an original and constitute one and the same instrument. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier
shall be as effective as delivery of a manually executed counterpart of this
Agreement. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
(f) Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(g) No Third-Party Beneficiaries. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or
9
<PAGE> 111
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
(h) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Iowa without regard to any
conflicts or choice of law provisions thereof or of any other jurisdiction.
(i) Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States. This
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
10
<PAGE> 112
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> 113
<TABLE>
SCHEDULE A
<CAPTION>
Common Preferred
Name and Address Shares Shares Warrants Options
---------------- ------ ------ -------- -------
<S> <C> <C>
Allied Mutual Insurance Company 1,521,006 2,292,093 -- --
</TABLE>
12
<PAGE> 114
AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER, dated August 31, 1998 (the
"Amendment"), by and among NATIONWIDE LIFE INSURANCE COMPANY, an Ohio mutual
insurance company ("Nationwide"), NATIONWIDE LIFE ACQUISITION CORPORATION, an
Ohio corporation ("Sub") and ALLIED LIFE FINANCIAL CORPORATION, an Iowa
corporation ("Allied") (Nationwide, Sub and Allied being hereinafter sometimes
collectively referred to as the "parties").
WHEREAS, the parties entered into that certain AGREEMENT AND PLAN OF
MERGER, dated as of June 3, 1998 (the "Agreement"), which effected the Merger
of Sub with and into Allied following the purchase of common stock, no par
value, of Allied by Sub; and
WHEREAS, the parties believe it is in their respective best interests to
amend Section 2.4 of the Agreement.
NOW THEREFORE, in consideration of the premises and the promises and
agreements set forth herein, Nationwide, Sub and Allied, intending to be
legally bound hereby, agree as follows:
1. Section 2.4 Articles of Incorporation and By-Laws of the Surviving
Corporation, is amended and restated in its entirety as follows:
"Section 2.4 Articles of Incorporation and By-Laws of the Surviving
Corporation. Following the Effective Time, the Articles of Incorporation of
Allied, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by Law. The Amended and Restated
Code of By-Laws of Allied, as in
<PAGE> 115
effect immediately prior to the Effective Time, shall be the Amended
and Restated By-Laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by Law."
2. Exhibit B of the Agreement is hereby deleted in its entirety.
3. All other terms, provisions and conditions of the Agreement shall
remain unchanged and are hereby ratified and confirmed.
4. Nationwide, Sub and Allied hereby agree that this Amendment is a
valid and enforceable amendment and a modification of the Agreement and has
been executed by each of the parties as provided in Section 9.4 of the
Agreement, and each agrees that this Amendment has been authorized by all
necessary corporate action on the part of such party.
5. Duplicates; Counterparts. The Amendment 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 Amendment by telecopier
shall be as effective as delivery of a manually executed counterpart of this
Amendment. In proving this Amendment, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
6. Governing Law; Jurisdiction. This Amendment shall be governed by and
construed and enforced in accordance with the laws of the State of Iowa without
regard to the conflict or choice of laws rules thereof or of any other
jurisdiction.
7. Entire Agreement. The Agreement and the Amendment constitute the
entire agreement between the parties hereto and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to
the subject matter hereof and thereof.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by
the duly authorized officers of Nationwide, Sub and Allied as of the date first
above written.
NATIONWIDE MUTUAL INSURANCE COMPANY
By: /s/ Mark B. Koogler
-------------------------------------
Name: Mark B. Koogler
Title: Vice President and
Associate General Counsel
NATIONWIDE LIFE ACQUISITION COMPANY
By: /s/ Mark B. Koogler
-------------------------------------
Name: Mark B. Koogler
Title: Vice President and
Associate General Counsel
ALLIED LIFE FINANCIAL CORPORATION
By: /s/ Samuel J. Wells
-------------------------------------
Name: Samuel J. Wells
Title: President
<PAGE> 116
ANNEX II
Following is the text of the statutory appraisal right as set forth in
Sections 490.1301 through 490.1331 of the Iowa Business Corporation Act.
DIVISION XIII
DISSENTERS' RIGHTS
PART A
490.1301 DEFINITIONS FOR DIVISION XIII. In this division:
1. "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
2. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
3. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 490.1302 and who exercises that right when and in
the manner required by sections 490.1320 through 490.1328.
4. "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
5. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
6. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
7. "Shareholder" means the record shareholder or the beneficial
shareholder.
490.1302 SHAREHOLDERS' RIGHT TO DISSENT.
1. A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
a. Consummation of a plan of merger to which the corporation is a
party if either of the following apply;
(1) Shareholder approval is required for the merger by section
490.1103 or the articles of incorporation and the shareholder is
entitled to vote on the merger.
<PAGE> 117
(2) the corporation is a subsidiary that is merged with its
parent under section 490.1104.
b. Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
c. Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale.
d. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it does
any or all of the following:
(1) Alters or abolishes a preferential right of the shares.
(2) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares.
(3) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(4) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights.
(5) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under section 490.604.
(6) Extends, for the first time after being governed by this
chapter, the period of duration of a corporation organized under
chapter 491 or 496A and existing for a period of years on the day
preceding the date the corporation is first governed by this chapter.
e. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
2. A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter is not entitled to challenge the
corporate action creating the shareholder's entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the corporation.
490.1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
1. A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in that shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by
<PAGE> 118
any one person and notifies the corporation in writing of the name and address
of each person on whose behalf the shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are determined as if the
shares as to which the shareholder dissents and the shareholder's other shares
were registered in the names of different shareholders.
2. A beneficial shareholder may assert dissenters' rights as to shares
held on the shareholder's behalf only if the shareholder does both of the
following:
a. Submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights.
b. Does so with respect to all shares of which the shareholder is
the beneficial shareholder or over which that beneficial shareholder has
power to direct the vote.
PART B
490.1320 NOTICE OF DISSENTERS' RIGHTS.
1. If proposed corporate action creating dissenters' rights under section
490.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this part and be accompanied by a copy of this part.
2. If corporate action creating dissenters' rights under section 490.1302
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 490.1322.
490.1321 NOTICE OF INTENT TO DEMAND PAYMENT.
1. If proposed corporate action creating dissenters' rights under section
490.1302 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must do all of the following:
a. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effectuated.
b. Not vote the dissenting shareholder's shares in favor of the
proposed action.
2. A shareholder who does not satisfy the requirements of subsection 1 is
not entitled to payment for the shareholder's shares under this part.
490.1322 DISSENTERS' NOTICE.
1. If proposed corporate action creating dissenters' rights under section
490.1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders who satisfied the requirements
of section 490.1321.
<PAGE> 119
2. The dissenters' notice must be sent no later than ten days after the
proposed corporate action is authorized at a shareholders' meeting, or, if the
corporate action is taken without a vote of the shareholders, no later than ten
days after the corporate action is taken, and must do all of the following:
a. State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited.
b. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
c. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date.
d. Set a date by which the corporation must receive the payment
demand, which date shall not be fewer than thirty nor more than sixty days
after the date the dissenters' notice is delivered.
e. Be accompanied by a copy of this division. (Last amended by Ch.
211, L. '91, eff. 7-1-91.)
490.1323 DUTY TO DEMAND PAYMENT.
1. A shareholder sent a dissenter's notice described in section 490.1322
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenter's notice pursuant to section 490.1322, subsection 2, paragraph "c,"
and deposit the shareholder's certificates in accordance with the terms of the
notice.
2. The shareholder who demands payment and deposits the shareholder's
shares under subsection 1 retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
3. A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
division.
490.1324 SHARE RESTRICTIONS.
1. The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under section 490.1326.
2. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
<PAGE> 120
490.1325 PAYMENT.
1. Except as provided in section 490.1327, at the time the proposed
corporate action is taken, or upon receipt of a payment demand, whichever occurs
later, the corporation shall pay each dissenter who complied with section
490.1323 the amount the corporation estimates to be the fair value of the
dissenter's shares, plus accrued interest.
2. The payment must be accompanied by all of the following:
a. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year and the latest available interim financial statements, if any.
b. A statement of the corporation's estimate of the fair value of
the shares.
c. An explanation of how the interest was calculated.
d. A statement of the dissenter's right to demand payment under
section 490.1328.
e. A copy of this division. (Last amended by Ch. 211, L. '91, eff.
7-1-91.)
490.1326 FAILURE TO TAKE ACTION.
1. If the corporation does not take the proposed action within one
hundred eighty days after the date set for demanding payment and depositing
share certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertified shares.
2. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 490.1322 as if the corporate action was taken
without a vote of the shareholders and repeat the payment demand procedure.
(Last amended by Ch. 171, L. '91, eff. 7-1-91.)
490.1327 AFTER-ACQUIRED SHARES.
1. A corporation may elect to withhold payment required by section
490.1325 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action.
2. To the extent the corporation elects to withhold payment under
subsection 1, after taking the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated
and a statement of the dissenter's right to demand payment under section
490.1328.
<PAGE> 121
490.1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
1. A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due and demand payment of the dissenter's estimate, less any payment under
section 490.1325, or reject the corporation's offer under section 490.1327 and
demand payment of the fair value of the dissenter's shares and interest due, if
any of the following apply:
a. The dissenter believes that the amount paid under section
490.1325 or offered under section 490.1327 is less than the fair value of
the dissenter's shares or that the interest due is incorrectly calculated.
b. The corporation fails to make payment under section 490.1325
within sixty days after the date set for demanding payment.
c. The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertified shares within sixty days after the date set for
demanding payment.
2. A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection 1 within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART C
490.1330 COURT ACTION.
1. If a demand for payment under section 490.1328 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
2. The corporation shall commence the proceeding in the district court of
the country where a corporation's principal office or, if none in this state,
its registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the country in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign corporation
was located.
3. The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order
<PAGE> 122
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
5. Each dissenter made a party to the proceeding is entitled to judgment
for either of the following:
a. The amount, if any, by which the court finds the fair value of
the dissenter's shares, plus interest, exceeds the amount paid by the
corporation.
b. The fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under section 490.1327.
490.1331 COURT COSTS AND COUNSEL FEES.
1. The court in an appraisal proceeding commenced under section 490.1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 490.1328.
2. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable, for either of
the following:
a. Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of sections 490.1320 through 490.1328.
b. Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
<PAGE> 123
ANNEX III
FOX-PITT, KELTON INC.
380 MADISON AVENUE
NEW YORK, NEW YORK 10017-2513
CORPORATE FINANCE DEPARTMENT TELEPHONE: 212-687-1105
FAX: 212-662-0779
TELEX: 645217
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> 124
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, not 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
