EXHIBIT 36
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NATIONWIDE MUTUAL INSURANCE COMPANY
AND
ALLIED MUTUAL INSURANCE COMPANY
DATED AS OF JUNE 3, 1998
TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS.................................. 1
Section 1.1 Definitions................................................. 1
ARTICLE II
THE MERGER................................... 11
Section 2.1 The Merger.................................................. 11
Section 2.2 Closing..................................................... 12
Section 2.3 Effective Time.............................................. 12
Section 2.4 Articles of Incorporation and By-Laws of the Surviving
Company..................................................... 13
Section 2.5 Board of Directors and Officers............................. 13
Section 2.6 Effect of Merger on Allied Members.......................... 13
Section 2.7 Policyholder Dividend....................................... 13
ARTICLE III
RELATED MATTERS.............................. 14
Section 3.1 Member Approvals............................................ 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED.................. 15
Section 4.1 Organization and Qualification.............................. 15
Section 4.2 Capitalization of Allied Subsidiaries....................... 16
Section 4.3 Authority Relative to this Agreement........................ 17
Section 4.4 No Violation; Governmental Filings.......................... 17
Section 4.5 SAP Statements.............................................. 18
Section 4.6 Reserves.................................................... 19
Section 4.7 Absence of Certain Changes or Events........................ 19
Section 4.8 No Undisclosed Liabilities.................................. 20
Section 4.9 Litigation.................................................. 20
Section 4.10 Compliance with Law......................................... 20
Section 4.11 Assets...................................................... 21
Section 4.12 Environmental Matters....................................... 22
Section 4.13 Contracts................................................... 23
Section 4.14 Insurance Issued by Allied.................................. 25
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Section 4.15 Cancellations............................................... 27
Section 4.16 Operations Insurance........................................ 27
Section 4.17 Taxes and Tax Returns....................................... 27
Section 4.18 Employees and Benefit Plans................................. 29
Section 4.19 Intellectual Property....................................... 29
Section 4.20 Rating Agencies............................................. 29
Section 4.21 Investment Company.......................................... 29
Section 4.22 Brokers or Finders.......................................... 30
Section 4.23 No Other Representations or Warranties...................... 30
Section 4.24 Limitation on Nationwide's Representations.................. 30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE............... 30
Section 5.1 Organization and Qualification.............................. 30
Section 5.2 Authority Relative to this Agreement........................ 31
Section 5.3 No Violation; Government Filings............................ 31
Section 5.4 SAP Statements.............................................. 32
Section 5.5 GAAP Statements............................................. 33
Section 5.6 Absence of Certain Changes or Events........................ 33
Section 5.7 No Undisclosed Liabilities.................................. 34
Section 5.8 Litigation.................................................. 34
Section 5.9 Compliance with Law......................................... 34
Section 5.10 Insurance Issued by Nationwide Insurers..................... 35
ARTICLE VI
CERTAIN COVENANTS................................ 35
Section 6.1 Allied Conduct of Business Pending the Merger............... 35
Section 6.2 Nationwide Conduct of Business Pending the Merger........... 40
Section 6.3 Reasonable Efforts.......................................... 41
Section 6.4 Access and Information...................................... 42
Section 6.5 Notice of Proceedings....................................... 42
Section 6.6 Notification of Certain Other Matters....................... 42
Section 6.7 Indemnification............................................. 43
Section 6.8 Transfer Taxes.............................................. 44
Section 6.9 Acquisition Proposals....................................... 44
Section 6.10 Litigation.................................................. 45
Section 6.11 HSR Act..................................................... 45
Section 6.12 Tax Treatment............................................... 45
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ARTICLE VII
CONDITIONS................................... 45
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.. 45
Section 7.2 Conditions to Obligation of Allied to Effect the Merger..... 46
Section 7.3 Conditions to Obligation of Nationwide to Effect the Merger. 46
Section 7.4 Frustration of Closing Conditions........................... 47
ARTICLE VIII
TERMINATION.................................. 47
Section 8.1 Termination................................................. 47
Section 8.2 Effect of Termination....................................... 48
ARTICLE IX
MISCELLANEOUS................................ 49
Section 9.1 Survival of Representations and Warranties.................. 49
Section 9.2 Fees and Expenses........................................... 49
Section 9.3 Notices..................................................... 49
Section 9.4 Amendments.................................................. 51
Section 9.5 Extension; Waiver........................................... 51
Section 9.6 Publicity................................................... 51
Section 9.7 Headings.................................................... 52
Section 9.8 Nonassignability............................................ 52
Section 9.9 Beneficiaries............................................... 52
Section 9.10 Duplicates; Counterparts.................................... 52
Section 9.11 Governing Law; Jurisdiction................................. 52
Section 9.12 Entire Agreement............................................ 52
Section 9.13 Severability................................................ 52
Section 9.14 Specific Performance........................................ 53
Section 9.15 Survival of Certain Covenants............................... 53
Section 9.16 Counting.................................................... 53
Section 9.17 Service of Process.......................................... 53
Section 9.18 Interpretation.............................................. 53
Section 9.19 Schedules................................................... 54
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and between
NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company
("Nationwide"), and ALLIED MUTUAL INSURANCE COMPANY, an Iowa mutual insurance
company ("Allied") (Nationwide and Allied being hereinafter sometimes
collectively referred to as the "parties").
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied deem it advisable and in the best interests of the
policyholders of their respective companies to effect the Merger of Allied with
and into Nationwide (the "Merger") upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied have approved the Merger and this Agreement; and
WHEREAS, Nationwide and Allied desire to make certain representations,
warranties, covenants and agreements in connection with such Merger; and
WHEREAS, the parties intend that the Merger qualify, for federal
income tax purposes, as a reorganization under Section 368(a) of the Code (as
defined in Section 1.1 hereof); and
WHEREAS, concurrently with the execution of this Agreement, Nationwide
is also entering into agreements with respect to the acquisition of Allied Group
(as defined in Section 1.1 hereof) and Allied Life (as defined in Section 1.1
hereof); and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein,
Nationwide and Allied, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following
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words or phrases have the following meanings:
"Acquisition Proposal" shall mean any bona fide proposal or offer,
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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
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
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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
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all Exhibits.
"Allied" shall have the meaning set forth in the preamble to this
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Agreement.
"Allied Disclosure Schedule" shall mean the disclosure schedule
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delivered by Allied to Nationwide, dated the date hereof.
"Allied Group" shall mean Allied Group, Inc., an Iowa corporation.
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"Allied Group SEC Documents" shall mean all reports, proxy statements,
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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
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corporation.
"Allied Life SEC Documents" shall mean all reports, proxy statements,
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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
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3.1(c) hereof.
"Allied Real Property" shall mean any real property in which Allied or
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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
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4.5(d) hereof.
"Allied Subsidiary" or "Allied Subsidiaries" shall mean the
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Subsidiaries of Allied and, without limiting the generality of the foregoing,
shall include any Affiliate or Subsidiary of Allied as to which Allied or an
Allied Subsidiary has guaranteed any obligations or owns any interest; provided
that neither Allied Group nor Allied Life (nor any of their respective
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Subsidiaries) shall be included within the definition of Allied Subsidiary.
References in this Agreement to Subsidiaries of Allied shall mean all of the
Allied Subsidiaries.
"Annual Statements" shall mean, with respect to any Person, the annual
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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
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States Department of Justice.
"Articles of Merger" shall mean the articles of merger in such form as
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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
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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,
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activities and affairs of such Person.
"Business Day" shall mean any day other than Saturday, Sunday or any
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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,
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Compensation, and Liability Information System.
"Certificate of Merger" shall mean a certificate of merger in such
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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.
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"Closing Agreement" shall mean a written and legally binding agreement
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with a taxing authority relating to Taxes.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, or
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any
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successor law, and the rules and regulations issued by the IRS pursuant to the
Code or any successor law.
"Computer Software" shall mean any and all computer software
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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
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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)
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hereof.
"Contract" shall mean any written contract, agreement, commitment,
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indenture, note, bond, mortgage, license, lease or assignment.
"Effective Time" shall have the meaning set forth in Section 2.3
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hereof.
"Environmental Claim" shall mean any investigation, notice of
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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
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statute, rule, regulation, order, code, directive or ordinance and any binding
judicial or administrative
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interpretation thereof or requirements thereunder pertaining to: (A) the
regulation and protection of human health and safety and the outdoor
environment; (B) the protection or use of surface water and ground water; (C)
the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal, remediation or handling of, or exposure to, any Hazardous
Substances; or (D) pollution (including any release into air, land, surface
water and ground water); and includes without limitation the following federal
statutes (and their implementing regulations and the analogous state statutes
and regulations): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984; and the Federal Water Pollution Control Act of 1972,
as amended by the Clean Water Act of 1977.
"Environmental Permit" shall mean any permit, license, variance,
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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
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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
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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
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successor agency.
"Financial Statements" shall mean balance sheets, statements of income
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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
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principles.
"GAAP Financial Statements" shall mean Financial Statements prepared
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in accordance with GAAP.
"Governmental Approvals" shall mean the Consents or Filings identified
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or described in the Allied Disclosure Schedule.
"Governmental Entity" shall mean any (i) nation, state, county, city,
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town, village,
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district, or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign or other government; (iii) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or (iv) body exercising,
or entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature, including any
arbitral tribunal.
"Hazardous Substances" shall mean chemicals, products, compounds, by-
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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 Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
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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.
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"Insurance Contract" shall mean any Contract of insurance, including,
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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
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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
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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
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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
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loans, collateral loans and all other instruments of indebtedness, stocks,
partnership or joint venture
6
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
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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
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of Iowa.
"Iowa Commissioner" shall mean the Commissioner of Insurance of the
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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
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State of Iowa.
"IRS" shall mean the United States Internal Revenue Service or any
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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
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actual knowledge of the following individuals: Xxxx X. Xxxxx, Xxxxxxx X.
Xxxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxx and Xxxxxx X.
Citrelli; and (ii) as to Nationwide or any Nationwide Subsidiary, the actual
knowledge of Dimon X. XxXxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxxxx, Xx. and W. Xxxxxx Xxxxx.
"Law" shall mean any applicable Order, constitution, law, ordinance,
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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
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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,
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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
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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,
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liabilities and judgments, including, but not limited to, court costs and
attorneys' fees.
"Material Adverse Effect" shall mean a material adverse effect on the
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business, assets, liabilities, results of operations or financial condition of
any party or any of its Subsidiaries, taken as a whole, or on the ability of
such party to consummate the transactions contemplated by this Agreement,
provided, however, that, the effects of changes that are gener ally applicable
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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,
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further, that any adverse effect on a party and its Subsidiaries re sulting from
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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
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hereof.
"Meeting Notices" shall have the meaning set forth in Section 3.1(b)
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hereof.
"Member" shall mean, as to Nationwide, each policyholder of Nationwide
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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
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Agreement.
"NAIC" shall mean the National Association of Insurance Commissioners.
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"Nationwide" shall have the meaning set forth in the preamble to this
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Agreement.
"Nationwide GAAP Financial Statements" shall have the meaning set
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forth in Section 5.5 hereof.
"Nationwide Insurer" shall mean Nationwide and each Nationwide
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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
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Section 3.1(d) hereof.
"Nationwide SAP Statements" shall have the meaning set forth in
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Section 5.4(d) hereof.
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"Nationwide Subsidiaries" shall mean the Subsidiaries of Nationwide.
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"Notices" shall have the meaning set forth in Section 9.3 hereof.
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"NPL" shall mean the National Priority List.
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"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
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the State of Ohio.
"Order" shall mean an order, writ, ruling, decision, award, verdict,
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judgment, directive, injunction or decree of any arbitrator or Governmental
Entity.
"Permitted Liens" shall mean, as to a party hereto, (a) those Liens
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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,
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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
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2.7 hereof.
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"Pooling Agreement" shall mean that certain January 1, 1993 Pooling
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Agreement, as amended, between Allied and Allied Group.
"Proceedings" shall mean any action, arbitration, audit, hearing,
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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)
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hereof.
"Quarterly Statements" shall mean, with respect to any Person, the
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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
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"Rating Agencies" shall have the meaning set forth in Section 4.19
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hereof.
"Representative" shall mean, with respect to any Person, such Person's
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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
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and prescribed or permitted by the applicable insurance regulatory body applied
on a consistent basis.
"SAP Statements" shall mean Annual Statements and Quarterly
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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
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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
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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
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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
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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
11
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 Xxxxxx & Coff, 00 X. Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000, 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.
12
Section 2.4 Articles of Incorporation and By-Laws of the Surviving
------------------------------------------------------
Company. Following the Effective Time, the Articles of Incorporation of
-------
Nationwide, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Company until thereafter changed or
amended as provided therein or by Law. The Amended and Restated Code of By-Laws
of Nationwide, as in effect immediately prior to the Effective Time, shall be
the Amended and Restated Code of By-Laws of the Surviving Company until
thereafter changed or amended as provided therein, by the Articles of
Incorporation of the Surviving Company or by Law. A copy of Nationwide's
Articles of Incorporation and Amended and Restated Code of By-Laws, as in effect
on the date hereof, has been made available to Allied.
Section 2.5 Board of Directors and Officers. The directors of
-------------------------------
Nationwide immediately prior to the Effective Time shall be the directors of the
Surviving Company immediately following the Effective Time, each of such
directors to hold office, subject to the applicable provisions of the Articles
of Incorporation and Amended and Restated Code of By-Laws of the Surviving
Company, until his or her successor is duly elected and qualified, or his or her
earlier death, resignation or removal. The officers of Nationwide immediately
prior to the Effective Time shall be the officers of the Surviving Company at
and immediately following the Effective Time, each of such officers to hold
their respective offices, subject to the applicable provisions of the Articles
of Incorporation and Amended and Restated Code of By-Laws of the Surviving
Company, until his or her successor is duly elected and qualified, or his or her
earlier death, resignation or removal in accordance with the Articles of
Incorporation and Amended and Restated Code of By-Laws of the Surviving Company.
Section 2.6 Effect of Merger on Allied Members. From and after the
----------------------------------
Effective Time, the policyholders of Allied will become policyholders of
Nationwide or a Nationwide Insurer, in full satisfaction of all rights
pertaining to the policies of Allied. In addition, each policyholder of Allied
will be granted a certificate of membership, substantially in the form attached
hereto as Exhibit A.
Section 2.7 Policyholder Dividend. Prior to the Closing Date, Allied
---------------------
shall declare an extraordinary dividend to its policyholders in the amount of
$110 million (the "Policyholder Dividend") and the Policyholder Dividend shall
be payable on or about the Closing Date. The allocation of the Policyholder
Dividend among Allied's policyholders shall be determined in accordance with the
ratio which the net earned premiums that an Allied policyholder has properly and
timely paid to Allied on insurance policies in effect during the three years
immediately preceding the date hereof bears to the total earned premiums
received by Allied from its policyholders during that three-year period.
13
ARTICLE III
RELATED MATTERS
Section 3.1 Member Approvals.
----------------
(a) Nationwide and Allied shall each take all actions necessary in
accordance with applicable Law and its articles of incorporation and by-laws to
convene a meeting of its Members as promptly as practicable to consider and vote
upon this Agreement. Nationwide and Allied shall jointly determine a mutually
satisfactory means of satisfying the notice, meeting and other Member approval
requirements of applicable Law. Subject to their duties under applicable Law,
each of the Board of Directors of Nationwide and the Board of Directors of
Allied shall recommend that the Members of its respective company vote in favor
of this Agreement and each of Nationwide and Allied shall use its best efforts
to solicit proxies or ballots, as the case may be, from its Members in favor of
this Agreement and shall take all other actions reasonably necessary or
advisable to secure the votes of its Members which are required in order to
approve this Agreement and effect the Merger. Notwithstanding anything in this
Agreement to the contrary, the Board of Directors of Allied may withdraw, modify
or change its recommendation that its Members vote in favor of this Agreement to
the extent that (A) such Board of Directors determines in good faith that a
third party has submitted to Allied an Acquisition Proposal which is a Superior
Proposal, or (B) such Board of Directors determines in good faith that the
failure to withdraw, modify or change such recommendation is reasonably likely
to result in a breach of such Board of Director's fiduciary duties under
applicable Law.
(b) As soon as practicable after the date hereof, Nationwide and
Allied shall each prepare, and each of Nationwide and Allied shall use its best
efforts to have the Ohio Superintendent and the Iowa Commissioner approve, their
respective notices of meetings (the "Meeting Notices") setting forth the time,
place and purpose of the Members' meetings called for the purpose of approving
the Merger, which Meeting Notices shall include a copy of this Agreement and a
summary thereof, if required. Promptly after receipt of approval by the Ohio
Superintendent and the Iowa Commissioner of the applicable Meeting Notice, (i)
Nationwide shall, as soon as practicable after the date hereof, comply with the
provisions of Section 3941.37 of the Ohio Insurance Law, (ii) Allied shall, as
soon as practicable after the date hereof, comply with the provisions of Section
521.12 et. seq. of the Iowa Insurance Law, and (iii) both parties shall promptly
comply with all other applicable Laws with respect to the publication or mailing
to their respective Members of the applicable Meeting Notice.
(c) As soon as practicable after the date hereof, Allied shall prepare
a proxy or information statement (together with all amendments, schedules, and
exhibits thereto, the "Allied Proxy Statement") relating to the solicitation of
its Members' approval of the Merger, and shall use its best efforts to respond
promptly to any comments made by any Governmental Entity with respect to the
Allied Proxy Statement and to cause the Allied Proxy Statement to be mailed to
its Members.
14
(d) If required, as soon as practicable after the date hereof,
Nationwide shall prepare a proxy or information statement (together with all
amendments, schedules, and exhibits thereto, the "Nationwide Proxy Statement")
relating to the solicitation of its Members' approval of the Merger, and shall
use its best efforts to respond promptly to any comments made by any
Governmental Entity with respect to the Nationwide Proxy Statement and to cause
the Nationwide Proxy Statement to be mailed to its Members. The Allied Proxy
Statement and the Nationwide Proxy Statement are collectively referred to herein
as the "Proxy Statements."
(e) Nationwide and Allied shall furnish all information concerning it
as is reasonably requested to be included in the Meeting Notices and the Proxy
Statements. Each of Allied and Nationwide agrees that the written information
provided by it specifically for inclu sion in any Meeting Notice or the Proxy
Statements will not, at the time such Meeting Notice and/or the Proxy Statements
are published or mailed to the Members of each of Allied and Nationwide and on
the date of the meeting relating thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Allied represents and warrants to Nationwide as follows:
Section 4.1 Organization and Qualification.
------------------------------
(a) Allied is a mutual insurance company duly organized, validly
existing and in good standing under the Laws of the State of Iowa and has the
requisite corporate power and authority to conduct its Business as it is
currently being conducted. Each of the Allied Subsidiaries is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation and has the requisite power and authority to conduct
its Business as it is currently being conducted. Each of Allied and of the
Allied Subsidiaries is duly qualified to do business, and is in good standing,
in the respective jurisdictions where the nature of its business makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect. Each of the Allied Subsidiaries is listed in
the Allied Disclosure Schedule.
(b) Allied (i) possesses an Insurance License in each jurisdiction in
which Allied is required to possess an Insurance License and (ii) is duly
authorized in its jurisdiction of incorporation and each other applicable
jurisdiction to write each line of business
15
reported as being written in the Allied SAP Statements. All such Insurance
Licenses, including, but not limited to, authorizations to transact reinsurance
are in full force and effect without amendment, limitation or restriction, other
than as described in the Allied Disclosure Schedule, and Allied has no Knowledge
of any event, inquiry or Proceeding which is reasonably likely to lead to the
revocation, amendment, failure to renew, limitation, suspension or restriction
of any such Insurance License.
(c) Copies of the Articles of Incorporation and By-laws of Allied have
heretofore been made available to Nationwide and copies of the Articles of
Incorporation and By-laws (and other comparable organizational documents, if
any) of each of the Allied Subsidiaries have heretofore been made available to
Nationwide, and such copies are accurate and complete as of the date hereof.
(d) Allied does not directly or indirectly beneficially own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity that directly or
indirectly conducts any activity which is material to Allied, other than (i) the
Allied Subsidiaries, (ii) as disclosed on the Allied Disclosure Schedule and
(iii) investments in publicly traded securities constituting less than five
percent of the outstanding equity of the issuing entity.
Section 4.2 Capitalization of Allied Subsidiaries. All of the
-------------------------------------
outstanding shares of capital stock (or of any other form of equity interest in
the case of an Allied Subsidiary that is not a corporation) of each of the
Allied Subsidiaries have been validly issued and are fully paid and, except as
set forth in the Allied Disclosure Schedule, are owned by either Allied or
another of the Allied Subsidiaries, free and clear of all Liens. Except as set
forth in the Allied Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, calls, rights, convertible securities, obligations to make
capital contributions or advances, or voting trust arrangements, shareholders'
agreements or other agreements, commitments or undertakings of any character to
which Allied or any Allied Subsidiary is a party or by which any of them is
bound relating to the issued or unissued capital stock (or of any other form of
equity interest in the case of an Allied Subsidiary that is not a corporation)
of any of the Allied Subsidiaries or securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of such capital stock
(or of any other form of equity interest in the case of an Allied Subsidiary
that is not a corporation), which obligates Allied or any such Allied Subsidiary
to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered or sold, any such capital stock (or any such other form of equity
interest in the case of an Allied Subsidiary that is not a corporation) or other
securities or obligating Allied or any of the Allied Subsidiaries to issue,
grant, extend or enter into any such subscription, option, warrant, call, right,
security, contribution, advance, arrangement, agreement, commitment or
undertaking. The name and percentage (if less than 100%) of outstanding capital
stock (or of any other form of equity interest in the case of an Allied
Subsidiary that is not a corporation) owned, directly or indirectly, by Allied
are set forth in the Allied Disclosure Schedule with respect to each Allied
Subsidiary.
16
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, Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation,
to the effect that the aggregate consideration to be received by the
policyholders of Allied pursuant to this Agreement is fair to such
policyholders, as a group, from a financial point of view. It is agreed and
understood that such opinion is for the benefit of Allied's Board of Directors
and may not be relied upon by Nationwide or any Members or Affiliates thereof.
Section 4.4 No Violation; Governmental Filings.
----------------------------------
(a) Except as set forth in the Allied Disclosure Schedule, the
execution, delivery and performance of this Agreement by Allied and the
consummation by Allied of the transactions contemplated hereby will not (i)
constitute a breach or violation of or default under the articles of
incorporation or the by-laws (or similar organizational documents) of Allied or
of any of the Allied Subsidiaries, (ii) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the Assets of Allied or of any of the Allied Subsidiaries
under, any of the terms, conditions or provisions of any Contract to which
Allied or any Allied Subsidiary is a party or to which it or any of its Assets
may be subject or (iii) constitute a breach or violation
17
of or default under any Environmental Permit, Law or License to which Allied or
any of the Allied Subsidiaries is subject, other than, in the case of clauses
(ii) and (iii), for any such breaches, violations, conflicts, terminations,
defaults, accelerations or Liens that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
(b) Except for (i) the Governmental Approvals set forth in the Allied
Disclosure Schedule, (ii) the submission of this Agreement with and the approval
of the Merger by the Iowa Commissioner and the Iowa Attorney General under the
Iowa Insurance Law and such other applications, registrations, declarations,
filings, authorizations, Orders, consents and approvals as may be required under
the Laws of other jurisdictions, (iii) the approval of the Meeting Notice, as
contemplated by Section 3.1(b) hereof, (iv) the approval of this Agreement by
the Members of Allied, as contemplated by Section 3.1(a) hereof, (v) the filings
required under the HSR Act and the expiration or earlier termination of any
waiting period applicable to the Merger under such Act, (vi) the filings
pursuant to Section 2.3 hereof, (vii) the filing of appropriate documents with
and such consents as may be required under the Investment Company Act and the
Investment Advisers Act, (viii) any consent or filing that is disclosed in the
Allied Disclosure Schedule or that would not otherwise be required to be
disclosed pursuant to Section 4.4(a) hereof, (ix) such Consents and Filings as
may be required by any applicable state securities or "blue sky" Laws, and (x)
such other such Consents or Filings the failure of which to make or obtain would
not, individually or in the aggregate, be reasonably likely to prevent or be a
material impediment to the consummation of the transactions contemplated hereby
or be reasonably likely to have a Material Adverse Effect, no consent, approval,
permit, notice, Order or authorization of, or registration, application,
declaration or filing with (each a "Consent or Filing") any Person is required
with respect to Allied or any Allied Subsidiary in connection with the execution
and delivery of this Agreement by Allied and the consummation by Allied of the
transactions contemplated hereby.
Section 4.5 SAP Statements. Allied has previously made available
--------------
to Nationwide true and complete copies of the following:
(a) the Annual Statements for Allied as of and for the years
ended December 31, 1995, 1996 and 1997;
(b) the Quarterly Statement for Allied as of and for the calendar
quarter ended March 31, 1998;
(c) any supplemental or separate statutory annual statements or
quarterly statements for Allied for any of the periods ended December 31, 1995,
1996 or 1997 or March 31, 1998 that are filed with any insurance Governmental
Entity and that differ from the Annual Statements or the Quarterly Statements
described in Section 4.5(a) or (b) hereto; and
(d) the audited SAP balance sheets of Allied as of December 31, 1995,
1996 and 1997 and the related audited summary of operations and statements of
change in capital
18
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 0000
Xxxxxxxxx Xxxxxxxxx"): (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
19
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.
20
(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.
21
Section 4.12 Environmental Matters.
---------------------
(a) Except as set forth in the Allied Disclosure Schedule, each of
Allied and the Allied Subsidiaries and, to the Knowledge of Allied, all Allied
Real Property (including all owners or operators thereof) is in substantial
compliance in all material respects with all applicable Environmental Laws,
which compliance includes, but is not limited to, the possession of all
Environmental Permits required under Environmental Laws and compliance with the
terms and conditions thereof, other than such Allied Real Property in respect of
which the failure to comply with applicable Environmental Laws is not reasonably
likely to have a Material Adverse Effect. Except as set forth in the Allied
Disclosure Schedule, to the Knowledge of Allied, neither Allied nor any Allied
Subsidiary has received any written communication whether from a Governmental
Entity, citizens' group, employee or otherwise, that alleges that Allied or any
Allied Subsidiary or any Allied Real Property (including any owner or operator
thereof) is not in such compliance, and, to the Knowledge of Allied, there are
no circumstances that are reasonably likely to prevent or interfere with such
compliance in the future, except to the extent that such noncompliance is not
reasonably likely to have a Material Adverse Effect. To the Knowledge of
Allied, neither Allied nor any Allied Subsidiary has been notified in writing by
any Governmental Entity that any such Environmental Permit will be modified,
suspended or revoked or cannot be renewed or transferred in the ordinary course
of business consistent with past practice or in connection with the Merger,
except where any such modification, suspension or revocation or the failure to
be renewed or transferred is not reasonably likely to have a Material Adverse
Effect.
(b) Except as set forth in the Allied Disclosure Schedule, there is no
Environmental Claim pending or, to the Knowledge of Allied, threatened against
Allied, any Allied Subsidiary, any Allied Real Property (including any owner or
operator thereof) or any Person whose Liability for any Environmental Claims
Allied or any Allied Subsidiary has retained or assumed either contractually or
by operation of Law that is reasonably likely to have a Material Adverse Effect.
(c) To the Knowledge of Allied, there have been no releases, spills,
leaks or discharges of Hazardous Substances at, from or to any Allied Real
Property (other than those properties set forth in the Allied Disclosure
Schedule) or any other property which is reasonably likely to require Allied or
any Allied Subsidiary to undertake investigation, abatement, removal, remedial,
corrective or other response action pursuant to applicable Environmental Laws
which investigation, abatement, removal, remediation, corrective or other
response action is reasonably likely to result in a Material Adverse Effect. To
the Knowledge of Allied, none of the Allied Real Property (i) is listed or
proposed for listing on any list maintained by any Governmental Entity of sites
that may require investigation, abatement, removal, remedial, corrective or
other response action pursuant to applicable Environmental Laws, including, but
not limited to, the CERCLIS or the NPL or (ii) other than those properties set
forth in the Allied Disclosure Schedule, is the subject of any investigation,
abatement,
22
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,
23
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;
24
(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
25
$500,000 for which Allied reasonably believes there is a reasonable basis to
contest payment and is taking (or is preparing to take) such action;
(d) Except as set forth in the SAP Statements referred to in Section
4.5 and except as provided by applicable Law, no provision in any policy in
force gives policyholders the right to receive dividends or distributions on
their policies (other than accruals of interest on cash values or as claim
benefits) or otherwise share in the benefits, revenue or profits of Allied,
provided that the practice in certain instances of making dividends based upon
policyholder loss experience or favorable earnings experience shall not violate
the representation contained in this sentence. Except as incurred in the
ordinary course of business, Allied is not liable to pay commissions upon the
renewal of any insurance policy nor is it a party to any agreement providing for
the collection of insurance premiums payable to Allied by any other Person;
(e) Allied has made available to Nationwide a copy of all written
investment policies and procedures for Allied;
(f) Except as set forth in the Allied Disclosure Schedule, no Allied
Subsidiary is engaged in any activity that would require registration by Allied
or any Allied Subsidiary as an investment company, broker-dealer, investment
advisor or fund administrator under any state or Federal Law, including the
Exchange Act, the Investment Company Act and the Investment Advisers Act.
Neither Allied nor any Allied Subsidiary maintains or manages any open-end
management investment company or portfolio;
(g) Neither Allied nor any Allied Subsidiary is engaged in the
business of serving as a custodian or transfer agent;
(h) Allied has duly and validly filed or caused to be filed all
material reports, statements, documents, registrations, filings or submissions
that were required by applicable insurance Laws to be filed, except where the
failure to make any such filing would not be reasonably likely to have a
Material Adverse Effect; all such filings complied with all applicable Laws in
all material respects when filed, and no material deficiencies have been
asserted with respect to any such filings which have not been satisfied in all
material respects. All outstanding insurance policies, annuity contracts and
assumption certificates issued by Allied and now in force are, to the extent
required under applicable Laws, on forms approved by the insurance regulatory
authority of the jurisdiction where issued and utilize premium rates which if
required to be filed with or approved by insurance regulatory authorities have
been so filed or approved, except where the failure to file or obtain the
approval of such premium rates would not be reasonably likely to have a Material
Adverse Effect, and the premiums charged conform thereto, except where the
failure to conform would not have a Material Adverse Effect;
(i) To Allied's Knowledge, no other party to any reinsurance,
coinsurance or other similar agreement with Allied is in default thereunder,
except for such
26
defaults that would not reasonably be expected to have a Material Adverse
Effect.
(j) To Allied's Knowledge, (i) each insurance agent or broker, at the
time such agent or broker wrote, sold or produced business for Allied, was duly
licensed as an insurance agent or broker (for the type of business written, sold
or produced by such insurance agent or broker) in the particular jurisdiction in
which such agent or broker wrote, sold or produced such business for Allied, and
(ii) no such insurance agent or broker violated (or with notice or lapse of time
or both would have violated) any term or provision of any Law or Order
applicable to any aspect (including, but not limited to, the marketing, writing,
sale or production) of the Business of Allied.
Section 4.15 Cancellations. Except as set forth in the Allied
-------------
Disclosure Schedule, between December 31, 1997 and the date of this Agreement,
no Person or group of Persons acting in concert writing, selling or producing
insurance business, which in the aggregate accounted for one percent (1%) or
more of the gross premium income of Allied for the year ended December 31, 1997,
has terminated or substantially reduced, or threatened to terminate or
substantially reduce, its relationship with Allied.
Section 4.16 Operations Insurance. Allied has made available to
--------------------
Nationwide copies of all liability, property, workers compensation, directors
and officers liability, and other similar Insurance Contracts that insure the
Business or properties of Allied or any Allied Subsidiary or affect or relate to
the ownership, use, or operations of any Assets of Allied or any Allied
Subsidiary and that have been issued to Allied or any Allied Subsidiary. To the
Knowledge of Allied, all such insurance is in full force and effect and is with
financially sound and reputable insurers. To the Knowledge of Allied or any of
the Allied Subsidiaries, all notices of reportable incidents with respect to
such insurance occurring during the last five years have been given in writing
to appropriate carriers on a basis sufficiently timely to preserve the right of
recovery of such insurance, except where the failure for such incident to be
covered by insurance would not be reasonably likely to have a Material Adverse
Effect. Except as set forth in the Allied Disclosure Schedule, to the Knowledge
of Allied or of any of the Allied Subsidiaries, no party to any Insurance
Contract has stated an intent or threatened to terminate or materially increase
the premium in respect of any such Insurance Contract.
Section 4.17 Taxes and Tax Returns. Except as set forth in the
---------------------
Allied Disclosure Schedule:
(a) All income Tax Returns and all other material Tax Returns required
under applicable Law to be filed with or provided to any Person by Allied or any
Allied Subsidiary have been (and, as to Tax Returns not filed as of the date
hereof, will be) timely filed and such Tax Returns were true, complete and
correct in all material respects;
(b) Allied and each Allied Subsidiary have within the time and in the
manner prescribed by Law paid all material Taxes due and payable except for
those contested
27
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
28
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 Xxxx X. Xxxxx and Xxxxx X. Xxxxxxxxxxx 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 Xxxxx'x 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
29
otherwise deemed under applicable law to control an "investment advisor" as such
term is defined in Section 2(a)(20) of the 1940 Act, whether or not registered
under the Investment Advisers Act of 1940, as amended. Neither Allied nor any
of its Subsidiaries is an "investment company" as defined under the 1940 Act,
and neither Allied nor any of its Subsidiaries sponsors any Person that is such
an investment company.
Section 4.22 Brokers or Finders. No broker, investment banker,
------------------
financial advi sor or other Person other than Allied's financial advisor,
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, whose fees and expenses
shall be paid by Allied in accordance with Allied's agree ment with such firm,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Allied.
Section 4.23 No Other Representations or Warranties. Except for
--------------------------------------
the representations and warranties contained in this Agreement, neither Allied
nor any other Person makes any other express or implied representation or
warranty on behalf of Allied including, without limitation, any financial
information, whether historical or projected, delivered or made available to
Nationwide or its Representatives.
Section 4.24 Limitation on Nationwide's Representations. Allied
------------------------------------------
acknowledges that in entering into this Agreement it has not relied on any
representations or warranties of Nationwide or on any materials given to or made
available to Allied or its Representatives by Nationwide or its Representatives
other than the representations and warranties of Nationwide set forth in this
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
Nationwide represents and warrants to Allied as follows:
Section 5.1 Organization and Qualification. Nationwide is a mutual
------------------------------
insurance company duly organized, validly existing and in good standing under
the Laws of the State of Ohio and has the requisite corporate power and
authority to conduct its Business as it is currently being conducted. Each of
the Nationwide Subsidiaries is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or formation
and has the requisite corporate power and authority to conduct its Business as
it is currently being conducted. Each of Nationwide and the Nationwide
Subsidiaries is duly qualified to do business, and is in good standing, in the
respective jurisdictions where the character of its Assets owned or leased or
the nature of its Business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. Nationwide
possesses an Insurance License in Iowa and in
30
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
31
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
32
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
33
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
34
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
35
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
36
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
37
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
38
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
39
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;
40
(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.
41
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.
42
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
43
the Maximum Premium.
(d) In the event that Nationwide or any of its successors or assigns
(i) consolidates with or merges into any other Person and is not the continuing
or surviving corpora tion or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any Person, then, and in each such case, proper provision shall be made so that
the successors and assigns of Nationwide assume the obligations set forth in
this Section 6.7.
(e) The provisions of this Section 6.7 shall survive the consummation
of the Merger at the Effective Time and are intended to be for the benefit of,
and shall be en forceable by, each Indemnitee, his or her heirs and his or her
representatives and are in addition to, and not in substitution for, any other
rights to indemnification or contribution that any such Person may have under
the articles of incorporation or by-laws of the Surviving Company or any of its
Subsidiaries, under any contract, under applicable Law or otherwise.
Section 6.8 Transfer Taxes. The Surviving Company shall pay or
--------------
cause to be paid any real property transfer and similar Taxes to which the
Allied policyholders may be subject as a result of the Merger and the
transactions contemplated hereby, and the Surviving Company shall file or cause
to be filed all Tax Returns relating to such transfer Taxes which are due.
Section 6.9 Acquisition Proposals. Allied will not, and will not
---------------------
permit or cause any of its Subsidiaries or any of the officers or directors of
it or its Subsidiaries to, and shall direct its and its Subsidiaries'
Representatives not to, directly or indirectly, initiate, solicit, knowingly
encourage or otherwise knowingly facilitate the making of any Acquisition
Proposal. Allied will not, and will not permit or cause any of its Subsidiaries
or any of the officers and directors of it or its Subsidiaries to and shall
direct its and its Subsidiaries' employees, agents and Representatives not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, whether made before or after the date of
this Agreement, or otherwise knowingly facilitate any effort or attempt to make
or implement an Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent Allied or its Board of Directors from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such an Acquisition
Proposal to the Members of Allied, if and only to the extent that, (i) in each
such case referred to in clause (A), (B) or (C) above, the Board of Directors of
Allied determines in good faith that the failure to take such action is
reasonably likely to result in a breach of such Board's fiduciary duties under,
or otherwise violate, applicable Law; and (ii) in each case referred to in
clause (B) or (C) above, the Board of Directors of Allied determines in good
faith that such Acquisition Proposal may be a Superior Proposal. Allied will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations
44
with any parties conducted heretofore with respect to any of the foregoing.
Allied agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.9.
Section 6.10 Litigation. From and after the date hereof and until
----------
the Effective Time, Nationwide shall cease, in any and all respects, the
prosecution of any pending litigation against Allied or any Affiliates thereof.
Immediately following the Effective Time, Nationwide shall dismiss, with
prejudice, any and all litigation brought by Nationwide against Allied or any
Affiliates thereof.
Section 6.11 HSR Act. Nationwide and Allied shall take all actions
-------
necessary to file as soon as practicable after the date hereof all
notifications, filings and other documents required under the HSR Act, and to
respond as promptly as practicable to any inquiries received from the FTC, the
Antitrust Division and any other Governmental Entity for additional informa
tion or documentation and to respond as promptly as practicable to all inquiries
and requests received from any State Attorney General or other Governmental
Entity in connection therewith.
Section 6.12 Tax Treatment. The parties intend the Merger to
-------------
qualify as a reor ganization under Section 368(a) of the Code; each party and
its affiliates shall use its best efforts to cause the Merger to so qualify.
Each of the parties agrees that neither it nor any of its Affiliates shall take
any action, including any transfer or other disposition of assets or any
interest in Allied after the Closing, that would cause the Merger not to qualify
as a reorganization under Section 368(a) of the Code. Nationwide shall report
the Merger for income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and any comparable state or local tax statute.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
------
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) this Agreement and the Merger shall have been approved and adopted
by the requisite votes of the respective Members of Nationwide and Allied at a
special meeting of the Members of Nationwide and Allied called for such purpose;
(b) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been earlier terminated and, other than
the filings provided for in subclauses (a) and (b) of the second sentence of
Section 2.3, all Governmental Approvals and other Consents or Filings which are
required to be obtained prior to the Effective
45
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:
46
(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
47
(e) by Allied if Nationwide (x) breaches or fails in any material
respect to perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties in any
material respect and such breach would have, or is reasonably likely to have, a
Material Adverse Effect on Nationwide, in each case such that the conditions set
forth in Section 7.1 or Section 7.2 would not be satisfied; provided, however,
-------- -------
that if any such breach is curable by Nationwide through the exercise of its
best efforts and for so long as Nationwide shall be so using its best efforts to
cure such breach, Allied may not terminate this Agreement pursuant to this
Section 8.1(e); or
(f) by Nationwide if Allied (x) breaches or fails in any material
respect to perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties in any
material respect and such breach would have, or is reasonably likely to have, a
Material Adverse Effect on Allied, in each case such that the conditions set
forth in Section 7.1 or Section 7.3 would not be satisfied; provided, however,
-------- -------
that if any such breach is curable by Allied through the exercise of its best
efforts and for so long as Allied shall be so using its best efforts to cure
such breach, Nationwide may not terminate this Agreement pursuant to this
Section 8.1(f); or
(g) by Allied, if the Board of Directors of Allied (or any committee
thereof) shall have withdrawn or modified or changed in a manner adverse to
Nationwide its ap proval or recommendation of this Agreement or the Merger in
order to approve and permit Allied to execute a definitive agreement with a
Third Party relating to an Superior Proposal; or
(h) by Nationwide, if the Board of Directors of Allied (or any
committee thereof) shall have withdrawn or modified or changed in a manner
adverse to Nationwide its approval or recommendation of this Agreement or the
Merger or shall have recommended an Superior Proposal, or Allied shall have
entered into a definitive agreement pro viding for an Superior Proposal with a
Third Party.
Section 8.2 Effect of Termination.
---------------------
In the event of the termination of this Agreement by either Nationwide
or Allied, as provided in Section 8.1, written notice thereof shall forthwith be
given to the other party specifying the provision hereof pursuant to which such
termination is made, this Agreement shall thereafter become void and there shall
be no Liability on the part of either party hereto against the other party
hereto, or on the part of its directors, officers, employees, policyholders,
shareholders or agents (or those of any of its Subsidiaries or Affiliates),
except that (i) any such termination shall be without prejudice to the rights of
either party hereto (or any of its Subsidiaries or Affiliates) arising out of
the willful breach by the other party of any covenant or agreement contained in
this Agreement, and (ii) with respect to Nationwide and Allied, the obli
gations pursuant to this Section 8.2, Section 6.4(b) and Section 9.2 shall
survive termination.
48
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
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Diamond, Vice President-Enterprise Controller
Facsimile No.: (000) 000-0000
with a copy to:
Nationwide Mutual Insurance Company
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Vice President and Associate General Counsel
Xxxxx X. Xxxxx, Counsel
Facsimile No.: (000) 000-0000
49
with a copy to:
Xxxxxx & Coff
00 X. Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Allied, to:
Allied Mutual Insurance Company
000 Xxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
Attention: Xxxx X. Xxxxx, Chairman of the Board
Xxxxxxx X. Xxxxxxxx, President and Chief Executive Officer
Facsimile No.: 000-000-0000
with copies to:
Nyemaster, Goode, Voigts, West, Xxxxxxx & X'Xxxxx
A Professional Corporation
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Facsimile No.: 000-000-0000
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
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
50
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
51
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
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
to any particular provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Agreement unless otherwise specified.
(d) The plural of any defined term shall have a meaning correlative to
such defined term, and words denoting any gender shall include all genders.
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
(f) A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(g) All references to "$" and dollars shall be deemed to refer to
United States currency unless otherwise specifically provided.
(h) The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such informa tion is to be made available.
Section 9.19 Schedules. The Allied Disclosure Schedule and the
---------
Nationwide Disclosure Schedule shall each be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein. Any matter disclosed pursuant to the Allied Disclosure
Schedule or the Nationwide Disclosure Schedule shall be deemed to be disclosed
for all purposes under this Agreement but such disclosure shall not be deemed to
be an admission or representation as to the materiality of the item so
disclosed.
54
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Nationwide and of Allied as of the
date first above written.
NATIONWIDE MUTUAL INSURANCE COMPANY
/s/ Xxxx X. Xxxxxxx
By------------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President and Associate General Counsel
ALLIED MUTUAL INSURANCE COMPANY
/s/ Xxxxxxx X. Xxxxxxxx
By------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
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.
IN WITNESS WHEREOF, Nationwide Mutual Insurance Company has caused this
Certificate of Assumption, Membership and Participation to be duly signed and
issued.
____________________ _________________________
Secretary President
