1
Exhibit (g)(6)
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NATIONWIDE MUTUAL INSURANCE COMPANY
AND
ALLIED MUTUAL INSURANCE COMPANY
DATED AS OF JUNE 3, 1998
2
TABLE OF CONTENTS
-----------------
PAGE
----
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
i
3
PAGE
----
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
ii
4
PAGE
----
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
iii
5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and
between NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company
("Nationwide"), and ALLIED MUTUAL INSURANCE COMPANY, an Iowa mutual insurance
company ("Allied") (Nationwide and Allied being hereinafter sometimes
collectively referred to as the "parties").
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied deem it advisable and in the best interests of the
policyholders of their respective companies to effect the Merger of Allied with
and into Nationwide (the "Merger") upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the Board of Directors of Nationwide and the Board of
Directors of Allied have approved the Merger and this Agreement; and
WHEREAS, Nationwide and Allied desire to make certain
representations, warranties, covenants and agreements in connection with such
Merger; and
WHEREAS, the parties intend that the Merger qualify, for
federal income tax purposes, as a reorganization under Section 368(a) of the
Code (as defined in Section 1.1 hereof); and
WHEREAS, concurrently with the execution of this Agreement,
Nationwide is also entering into agreements with respect to the acquisition of
Allied Group (as defined in Section 1.1 hereof) and Allied Life (as defined in
Section 1.1 hereof); and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein,
Nationwide and Allied, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. When used in this Agreement, the
following words or phrases have the following meanings:
"ACQUISITION PROPOSAL" shall mean any bona fide proposal or
offer, whether in writing or otherwise, from any Person other than a party
hereto or any affiliates thereof (a "Third Party") to acquire a party or all or
a material portion of the assets of a party and its Subsidiaries, taken as
whole, pursuant to a merger, consolidation, conversion, demutualization,
reorganization
6
or other method of business combination, sale of assets or similar transaction
with respect to such party, including any single or multi-step transaction or
series of related transactions, which is structured to permit such Third Party
to acquire a party or a material portion of the assets of a party and its
Subsidiaries, taken as a whole.
"AFFILIATE" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act; provided that, for purposes of this Agreement none of Allied
Group, Allied Life and any Subsidiary thereof shall be considered an Affiliate
of Allied.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including all Exhibits.
"ALLIED" shall have the meaning set forth in the preamble to
this Agreement.
"ALLIED DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Allied to Nationwide, dated the date hereof.
"ALLIED GROUP" shall mean Allied Group, Inc., an Iowa
corporation.
"ALLIED GROUP SEC DOCUMENTS" shall mean all reports, proxy
statements, forms, and other documents required to be filed by Allied Group with
the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
"ALLIED LIFE" shall mean Allied Life Financial Corporation, an
Iowa corporation.
"ALLIED LIFE SEC DOCUMENTS" shall mean all reports, proxy
statements, forms, and other documents required to be filed by Allied Life with
the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
"ALLIED PROXY STATEMENT" shall have the meaning set forth in
Section 3.1(c) hereof.
"ALLIED REAL PROPERTY" shall mean any real property in which
Allied or any of its Affiliates holds a Lien or owns an interest, or in the
management of which Allied or an Affiliate of Allied actively participates.
"ALLIED SAP STATEMENTS" shall have the meaning set forth in
Section 4.5(d) hereof.
"ALLIED SUBSIDIARY" or "ALLIED SUBSIDIARIES" shall mean the
Subsidiaries of Allied and, without limiting the generality of the foregoing,
shall include any Affiliate or Subsidiary of Allied as to which Allied or an
Allied Subsidiary has guaranteed any obligations or owns any interest; provided
that neither Allied Group nor Allied Life (nor any of their respective
2
7
Subsidiaries) shall be included within the definition of Allied Subsidiary.
References in this Agreement to Subsidiaries of Allied shall mean all of the
Allied Subsidiaries.
"ANNUAL STATEMENTS" shall mean, with respect to any Person,
the annual statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
"ANTITRUST DIVISION" shall mean the Antitrust Division of the
United States Department of Justice.
"ARTICLES OF MERGER" shall mean the articles of merger in such
form as required by, and executed and acknowledged in accordance with the
relevant provisions of the Iowa Insurance Law.
"ASSETS" shall mean, as to a Person, all rights, titles,
franchises and interests in and to every species of property, real, personal and
mixed, and choses in action thereunto belonging, including, but not limited to,
Environmental Permits, Investment Assets, Intellectual Property, Contracts,
Licenses, privileges and all other assets whatsoever, tangible or intangible, of
such Person.
"BUSINESS" shall mean, as to a Person, the business,
operations, activities and affairs of such Person.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or any other day in which commercial banks in Des Moines, Iowa or Columbus, Ohio
are required to or permitted to be closed.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"CERTIFICATE OF MERGER" shall mean a certificate of merger in
such form as required by, and executed and acknowledged in accordance with,
Section 1701.81 of the Ohio Revised Code.
"CLOSING" shall have the meaning set forth in Section 2.2
hereof.
"CLOSING AGREEMENT" shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
"CLOSING DATE" shall have the meaning set forth in Section 2.2
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any
3
8
successor law, and the rules and regulations issued by the IRS pursuant to the
Code or any successor law.
"COMPUTER SOFTWARE" shall mean any and all computer software
consisting of sets of statements or instructions to be used, directly or
indirectly, in a computer, including, but not limited to, the following: (i) all
source code, object code and natural language code therefor and all component
modules thereof, (ii) all versions thereof, (iii) all screen displays and
designs thereof and (iv) all user, technical, training and other documentation
relating to any of the foregoing.
"CONFIDENTIAL INFORMATION" shall mean all information about a
party furnished by a party or its Representatives to the other party or its
Representatives, whether furnished before or after the date hereof, regardless
of the manner in which it is furnished, together with all analyses,
compilations, studies or other documents prepared by the other party or its
Representatives which reflect or are generated from such information.
Confidential Information does not include, however, information about a party
which (a) is or becomes generally available to the public other than as a result
of a disclosure by the other party or its Representatives, (b) was available to
the other party on a nonconfidential basis prior to its disclosure by the party
supplying the information or its Representatives or (c) becomes available to the
other party on a nonconfidential basis from a Person who is not otherwise bound
by a confidentiality agreement with respect to the information, or is not
otherwise prohibited from transmitting the information to the other party.
"CONSENT OR FILING" shall have the meaning set forth in
Section 4.4(b) hereof.
"CONTRACT" shall mean any written contract, agreement,
commitment, indenture, note, bond, mortgage, license, lease or assignment.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.3 hereof.
"ENVIRONMENTAL CLAIM" shall mean any investigation, notice of
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising: (A) pursuant to, or in
connection with, an actual or alleged violation of any Environmental Law; (B) in
connection with any Hazardous Substances or actual or alleged activity
associated with any Hazardous Substances; (C) from any abatement, removal,
remedial, corrective or other response action in connection with any Hazardous
Substances, Environmental Law or other order or directive of any federal, state
or local governmental authority; or (D) from any actual or alleged damage,
injury, threat or harm to health, safety, natural resources or the environment.
Environmental Claim shall not include claims for coverage by an insured.
"ENVIRONMENTAL LAW" shall mean any applicable local, state or
federal statute, rule, regulation, order, code, directive or ordinance and any
binding judicial or administrative
4
9
interpretation thereof or requirements thereunder pertaining to: (A) the
regulation and protection of human health and safety and the outdoor
environment; (B) the protection or use of surface water and ground water; (C)
the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal, remediation or handling of, or exposure to, any Hazardous
Substances; or (D) pollution (including any release into air, land, surface
water and ground water); and includes without limitation the following federal
statutes (and their implementing regulations and the analogous state statutes
and regulations): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984; and the Federal Water Pollution Control Act of 1972,
as amended by the Clean Water Act of 1977.
"ENVIRONMENTAL PERMIT" shall mean any permit, license,
variance, certificate, consent, letter, clearance, closure, exemption,
authorization, decision or action or approval required to be obtained from any
federal, state or local governmental authority with jurisdiction over and
pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor Act and the rules and regulations
thereunder or under any successor Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any successor law, and the rules and regulations of the SEC
promulgated thereunder or under any successor law.
"FTC" shall mean the United States Federal Trade Commission or
any successor agency.
"FINANCIAL STATEMENTS" shall mean balance sheets, statements
of income and statements of cash flows, including, but not limited to, all
notes, schedules, exhibits and other attachments thereto, whether consolidated,
combined or separate or audited or unaudited or prepared in accordance with SAP
or GAAP.
"GAAP" shall mean United States generally accepted accounting
principles.
"GAAP FINANCIAL STATEMENTS" shall mean Financial Statements
prepared in accordance with GAAP.
"GOVERNMENTAL APPROVALS" shall mean the Consents or Filings
identified or described in the Allied Disclosure Schedule.
"GOVERNMENTAL ENTITY" shall mean any (i) nation, state,
county, city, town, village,
5
10
district, or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign or other government; (iii) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or (iv) body exercising,
or entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature, including any
arbitral tribunal.
"HAZARDOUS SUBSTANCES" shall mean chemicals, products,
compounds, by-products, pollutants, contaminants, hazardous wastes or toxic or
hazardous substances regulated under any Environmental Law, including, but not
limited to, asbestos or asbestos-containing materials, polychlorinated
biphenyls, pesticides and oils, petroleum and petroleum products.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, or any successor law, and the rules and
regulations promulgated thereunder or under any successor law.
"INDEMNITEES" shall have the meaning set forth in Section 6.7
hereof.
"INSURANCE CONTRACT" shall mean any Contract of insurance,
including, but not limited to, reinsurance contracts, variable annuity and fixed
annuity contracts or products, life insurance contracts, and funding agreements.
"INSURANCE LICENSE" shall mean any License granted by a
Governmental Entity to transact an insurance or reinsurance business, issue
fixed or variable annuity contracts or products, or issue life insurance
contracts.
"INTELLECTUAL PROPERTY" shall mean: trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, good will associated with the foregoing and
registrations in any extension, modification or renewal of any such registration
or application; inventions, discoveries and ideas, whether patentable or not in
any jurisdiction; patents, applications for patents (including but not limited
to divisions, continuations, continuations in part and renewal applications),
and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not in any jurisdiction, and any renewals
or extensions thereof; and any similar intellectual property or proprietary
rights; provided, that Intellectual Property shall include Computer Software.
"INVESTMENT ADVISERS ACT" shall mean the Investment Advisers
Act of 1940, as amended, or any successor law, and the rules and regulations of
the SEC promulgated thereunder or under any successor law.
"INVESTMENT ASSETS" shall mean bonds, notes, debentures,
mortgage loans, collateral loans and all other instruments of indebtedness,
stocks, partnership or joint venture
6
11
interests and all other equity interests (including, but not limited to, equity
interests in Subsidiaries or other Affiliates), real estate and leasehold and
other interests therein, certificates issued by or interests in trusts, cash on
hand and on deposit, personal property and interests therein and all other
assets acquired for investment purposes.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act
of 1940, as amended, or any successor law, and the rules and regulations of the
SEC promulgated thereunder or under any successor law.
"IOWA ATTORNEY GENERAL" shall mean the Attorney General of the
State of Iowa.
"IOWA COMMISSIONER" shall mean the Commissioner of Insurance
of the State of Iowa.
"IOWA INSURANCE LAW" shall mean Chapters 505 through 523I of
the Iowa Code, as amended, and the rules and regulations promulgated thereunder.
"IOWA SECRETARY OF STATE" shall mean the Secretary of State of
the State of Iowa.
"IRS" shall mean the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE" shall mean, (i) as to Allied or any Allied
Subsidiary, the actual knowledge of the following individuals: 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, principle of common law, rule, regulation, statute, treaty, judgment
enacted, promulgated, issued, enforced or entered by any Governmental Entity.
"LIABILITY" shall mean a liability, obligation, claim or cause
of action (of any kind or nature whatsoever, whether absolute, accrued,
contingent or other, and whether known or unknown), including, but not limited
to, any liability, obligation, claim or cause of action arising pursuant to or
as a result of an Insurance Contract or pursuant to any Environmental Claim.
"LICENSE" shall mean a license, certificate of authority,
franchise, permit or other authorization to transact an activity or business,
whether granted by a Governmental Entity or by any other Person.
"LIEN" shall mean a lien, mortgage, hypothecation, deed of
trust, deed to secure debt, pledge, security interest, charge, claim, levy or
other encumbrance of any kind.
7
12
"LOSSES" shall mean all losses, claims, damages, costs,
expenses, liabilities and judgments, including, but not limited to, court costs
and attorneys' fees.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, assets, liabilities, results of operations or financial
condition of any party or any of its Subsidiaries, taken as a whole, or on the
ability of such party to consummate the transactions contemplated by this
Agreement, provided, HOWEVER, that, the effects of changes that are generally
applicable to (i) the insurance industry and the markets for insurance and
insurance-related products and the other industries and markets in which a party
and its Subsidiaries operate or (ii) the United States securities markets shall
be excluded from the determination of a Material Adverse Effect; and PROVIDED,
FURTHER, that any adverse effect on a party and its Subsidiaries resulting from
the announcement of Nationwide's proposal to acquire Allied, the execution of
this Agreement and the announcement of this Agreement and the transactions
contemplated hereby shall also be excluded from the determination of a Material
Adverse Effect.
"MAXIMUM PREMIUM" shall have the meaning set forth in Section
6.7 hereof.
"MEETING NOTICES" shall have the meaning set forth in Section
3.1(b) hereof.
"MEMBER" shall mean, as to Nationwide, each policyholder of
Nationwide entitled to vote upon this Agreement as provided in Section 3941.07
of the Ohio Insurance Law, and, as to Allied, each policyholder who is a member
as provided in Section 515.15 of the Iowa Insurance Law.
"MERGER" shall have the meaning set forth in the preamble to
this Agreement.
"NAIC" shall mean the National Association of Insurance
Commissioners.
"NATIONWIDE" shall have the meaning set forth in the preamble
to this Agreement.
"NATIONWIDE GAAP FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 5.5 hereof.
"NATIONWIDE INSURER" shall mean Nationwide and each Nationwide
Subsidiary that transacts or is authorized to transact property and casualty
insurance or reinsurance business.
"NATIONWIDE PROXY STATEMENT" shall have the meaning set forth
in Section 3.1(d) hereof.
"NATIONWIDE SAP STATEMENTS" shall have the meaning set forth
in Section 5.4(d) hereof.
8
13
"NATIONWIDE SUBSIDIARIES" shall mean the Subsidiaries of
Nationwide.
"NOTICES" shall have the meaning set forth in Section 9.3
hereof.
"NPL" shall mean the National Priority List.
"OHIO INSURANCE LAW" shall mean Title 39 of the Ohio Revised
Code, as amended, and the rules and regulations promulgated thereunder.
"OHIO SUPERINTENDENT" shall mean the Superintendent of
Insurance of the State of Ohio.
"ORDER" shall mean an order, writ, ruling, decision, award,
verdict, judgment, directive, injunction or decree of any arbitrator or
Governmental Entity.
"PERMITTED LIENS" shall mean, as to a party hereto, (a) those
Liens set forth in the Nationwide Disclosure Schedule or the Allied Disclosure
Schedule, or otherwise approved in writing by the other party, (b) any Lien that
is set forth in the public records or in title reports or title insurance
binders that have been made available to the other party relating to any
interest in the real property set forth in the Nationwide Disclosure Schedule or
the Allied Disclosure Schedule, (c) Liens for water and sewer charges and
current Taxes not yet due and payable or being contested in good faith, (d)
Liens arising from securities lending activities undertaken in the ordinary
course of business of a Person, (e) mortgages or security interests shown in any
of the party's SAP Statements or any of the party's GAAP Statements as securing
specified liabilities or obligations, (f) mortgages or security interests
incurred in connection with the purchase of property or assets in the ordinary
course of business after the date of any of the party's SAP Statements or any of
the party's GAAP Statements (such mortgages and security interests being limited
to the property or assets so acquired), (g) minor imperfections of title, if
any, none of which is substantial in amount or materially detracts from the
value or impairs the use of the property subject thereto, (h) zoning laws and
other land use restrictions that do not materially impair the present or
anticipated use of the property subject thereto, (i) other Liens (including, but
not limited to, mechanic's, courier's, worker's, repairer's, materialman's,
warehouseman's and other similar Liens) arising or incurred in the ordinary
course of business as would not, individually or in the aggregate, materially
adversely affect the value of, or materially adversely interfere with the use
of, the property subject thereto, and (j) Liens arising or resulting from any
action taken by the other party hereto or any of its respective Subsidiaries
(but not including the execution, delivery or performance of this Agreement or
the Merger).
"PERSON" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, trust, joint venture, labor union, estate, unincorporated organization
or other entity.
"POLICYHOLDER DIVIDEND" shall have the meaning set forth in
Section 2.7 hereof.
9
14
"POOLING AGREEMENT" shall mean that certain January 1, 1993
Pooling Agreement, as amended, between Allied and Allied Group.
"PROCEEDINGS" shall mean any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Entity, other than
any of the foregoing which relate to claims made pursuant to any Insurance
Contract.
"PROXY STATEMENTS" shall have the meaning set forth in Section
3.1(d) hereof.
"QUARTERLY STATEMENTS" shall mean, with respect to any Person,
the quarterly statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
"RABBI TRUST" shall have the meaning set forth in Section 4.17
hereof
"RATING AGENCIES" shall have the meaning set forth in Section
4.19 hereof.
"REPRESENTATIVE" shall mean, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, accountant, legal counsel, agent,
representative or expert retained by or acting on behalf of such Person or its
Subsidiaries).
"SAP" shall mean statutory accounting practices prescribed by
the NAIC and prescribed or permitted by the applicable insurance regulatory body
applied on a consistent basis.
"SAP STATEMENTS" shall mean Annual Statements and Quarterly
Statements.
"SEC" shall mean the United States Securities and Exchange
Commission or any successor agency.
"SUBSIDIARY" of a Person shall mean an Affiliate of such
Person more than fifty percent of any class of voting stock (or of any other
form of voting equity interest in the case of a Person that is not a
corporation) of which is beneficially owned by the Person directly or indirectly
through one or more other Persons.
"SUPERIOR PROPOSAL" shall mean an Acquisition Proposal which,
if accepted by a party, is reasonably capable of being consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and which, if consummated, would be reasonably
likely, in the view of the board of directors of the party which is the subject
to the Acquisition Proposal, to result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and
10
15
interests of such party and its Members.
"SURVIVING COMPANY" shall have the meaning set forth in
Section 2.1 hereof.
"TAX" shall mean any federal, state, county, local or foreign
taxes, charges, fees, levies or other assessments, including all net income,
gross income, premiums, sales and use, ad valorem, transfer, gains, profits,
windfall profits, excise, franchise, real and personal property, gross receipts,
capital stock, production, business and occupation, employment, disability,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes, other taxes or similar charges of any kind whatsoever imposed by any
Governmental Entity and includes any interest and penalties (civil or criminal)
on or additions to any such taxes.
"TAX RETURN" shall mean a report, return, statement or other
information required under any applicable Law to be filed or provided to any
taxing authority with respect to Taxes including, where permitted or required,
combined or consolidated returns for any group of entities that includes
Nationwide or any Nationwide Subsidiary on the one hand, or Allied or any Allied
Subsidiary on the other hand and any unitary or similar return, information
return, claim for refund, amended return or declaration of estimated Tax.
"TAX RULING" shall mean a written ruling of a taxing authority
relating to Taxes.
"THIRD PARTY" shall have the meaning set forth in Section 1.1
hereof.
"THIRD PARTY ADMINISTRATOR" shall mean any third party
administrator of either Nationwide or Allied.
"TREASURY REGULATION" shall mean the regulations promulgated
by the U.S. Department of the Treasury pursuant to the Code.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER. Upon the terms of this Agreement and
subject to the satisfaction of the conditions set forth herein, at the Effective
Time Allied shall be merged with and into Nationwide in accordance with the
applicable provisions of the Laws of the States of Ohio and Section 521.12 et.
seq. of the Iowa Insurance Law and the separate corporate existence of Allied
shall thereupon cease, and Nationwide, which shall be the surviving company
(hereinafter sometimes referred to as the "Surviving Company"), shall continue
its corporate existence under the Law of the State of Ohio under the name
"Nationwide Mutual Insurance Company." The Merger shall have the effects
provided in Section 3941.42 of the Ohio Insurance Law and Section 521.12 of the
Iowa Insurance Law, and, from and after the Effective Time, the
11
16
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
17
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
18
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
19
(d) If required, as soon as practicable after the date
hereof, Nationwide shall prepare a proxy or information statement (together with
all amendments, schedules, and exhibits thereto, the "Nationwide Proxy
Statement") relating to the solicitation of its Members' approval of the Merger,
and shall use its best efforts to respond promptly to any comments made by any
Governmental Entity with respect to the Nationwide Proxy Statement and to cause
the Nationwide Proxy Statement to be mailed to its Members. The Allied Proxy
Statement and the Nationwide Proxy Statement are collectively referred to herein
as the "Proxy Statements."
(e) Nationwide and Allied shall furnish all information
concerning it as is reasonably requested to be included in the Meeting Notices
and the Proxy Statements. Each of Allied and Nationwide agrees that the written
information provided by it specifically for inclusion in any Meeting Notice or
the Proxy Statements will not, at the time such Meeting Notice and/or the Proxy
Statements are published or mailed to the Members of each of Allied and
Nationwide and on the date of the meeting relating thereto, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIED
Allied represents and warrants to Nationwide as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION.
(a) Allied is a mutual insurance company duly organized,
validly existing and in good standing under the Laws of the State of Iowa and
has the requisite corporate power and authority to conduct its Business as it is
currently being conducted. Each of the Allied Subsidiaries is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation and has the requisite power and authority to conduct
its Business as it is currently being conducted. Each of Allied and of the
Allied Subsidiaries is duly qualified to do business, and is in good standing,
in the respective jurisdictions where the nature of its business makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect. Each of the Allied Subsidiaries is listed in the
Allied Disclosure Schedule.
(b) Allied (i) possesses an Insurance License in each
jurisdiction in which Allied is required to possess an Insurance License and
(ii) is duly authorized in its jurisdiction of incorporation and each other
applicable jurisdiction to write each line of business
15
20
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
21
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
22
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
23
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
24
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
25
(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
26
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
27
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
28
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
29
(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
30
$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
31
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
32
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
33
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
34
otherwise deemed under applicable law to control an "investment advisor" as such
term is defined in Section 2(a)(20) of the 1940 Act, whether or not registered
under the Investment Advisers Act of 1940, as amended. Neither Allied nor any of
its Subsidiaries is an "investment company" as defined under the 1940 Act, and
neither Allied nor any of its Subsidiaries sponsors any Person that is such an
investment company.
Section 4.22 BROKERS OR FINDERS. No broker, investment banker,
financial advisor or other Person other than Allied's financial advisor,
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, whose fees and expenses
shall be paid by Allied in accordance with Allied's agreement with such firm,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Allied.
Section 4.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except
for the representations and warranties contained in this Agreement, neither
Allied nor any other Person makes any other express or implied representation or
warranty on behalf of Allied including, without limitation, any financial
information, whether historical or projected, delivered or made available to
Nationwide or its Representatives.
Section 4.24 LIMITATION ON NATIONWIDE'S REPRESENTATIONS.
Allied acknowledges that in entering into this Agreement it has not relied on
any representations or warranties of Nationwide or on any materials given to or
made available to Allied or its Representatives by Nationwide or its
Representatives other than the representations and warranties of Nationwide set
forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
Nationwide represents and warrants to Allied as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Nationwide is a
mutual insurance company duly organized, validly existing and in good standing
under the Laws of the State of Ohio and has the requisite corporate power and
authority to conduct its Business as it is currently being conducted. Each of
the Nationwide Subsidiaries is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or formation
and has the requisite corporate power and authority to conduct its Business as
it is currently being conducted. Each of Nationwide and the Nationwide
Subsidiaries is duly qualified to do business, and is in good standing, in the
respective jurisdictions where the character of its Assets owned or leased or
the nature of its Business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. Nationwide
possesses an Insurance License in Iowa and in
30
35
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
36
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
37
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
38
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
39
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
40
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
41
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
42
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
43
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
44
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
45
(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
46
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
47
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
48
the Maximum Premium.
(d) In the event that Nationwide or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Nationwide assume
the obligations set forth in this Section 6.7.
(e) The provisions of this Section 6.7 shall survive
the consummation of the Merger at the Effective Time and are intended to be for
the benefit of, and shall be enforceable by, each Indemnitee, his or her heirs
and his or her representatives and are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such Person
may have under the articles of incorporation or by-laws of the Surviving Company
or any of its Subsidiaries, under any contract, under applicable Law or
otherwise.
Section 6.8 TRANSFER TAXES. The Surviving Company shall pay or
cause to be paid any real property transfer and similar Taxes to which the
Allied policyholders may be subject as a result of the Merger and the
transactions contemplated hereby, and the Surviving Company shall file or cause
to be filed all Tax Returns relating to such transfer Taxes which are due.
Section 6.9 ACQUISITION PROPOSALS. Allied will not, and will
not permit or cause any of its Subsidiaries or any of the officers or directors
of it or its Subsidiaries to, and shall direct its and its Subsidiaries'
Representatives not to, directly or indirectly, initiate, solicit, knowingly
encourage or otherwise knowingly facilitate the making of any Acquisition
Proposal. Allied will not, and will not permit or cause any of its Subsidiaries
or any of the officers and directors of it or its Subsidiaries to and shall
direct its and its Subsidiaries' employees, agents and Representatives not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, whether made before or after the date of
this Agreement, or otherwise knowingly facilitate any effort or attempt to make
or implement an Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent Allied or its Board of Directors from (A)
providing information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal; (B) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such an Acquisition
Proposal to the Members of Allied, if and only to the extent that, (i) in each
such case referred to in clause (A), (B) or (C) above, the Board of Directors of
Allied determines in good faith that the failure to take such action is
reasonably likely to result in a breach of such Board's fiduciary duties under,
or otherwise violate, applicable Law; and (ii) in each case referred to in
clause (B) or (C) above, the Board of Directors of Allied determines in good
faith that such Acquisition Proposal may be a Superior Proposal. Allied will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations
44
49
with any parties conducted heretofore with respect to any of the foregoing.
Allied agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.9.
Section 6.10 LITIGATION. From and after the date hereof and
until the Effective Time, Nationwide shall cease, in any and all respects, the
prosecution of any pending litigation against Allied or any Affiliates thereof.
Immediately following the Effective Time, Nationwide shall dismiss, with
prejudice, any and all litigation brought by Nationwide against Allied or any
Affiliates thereof.
Section 6.11 HSR ACT. Nationwide and Allied shall take all
actions necessary to file as soon as practicable after the date hereof all
notifications, filings and other documents required under the HSR Act, and to
respond as promptly as practicable to any inquiries received from the FTC, the
Antitrust Division and any other Governmental Entity for additional information
or documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection therewith.
Section 6.12 TAX TREATMENT. The parties intend the Merger to
qualify as a reorganization under Section 368(a) of the Code; each party and
its affiliates shall use its best efforts to cause the Merger to so qualify.
Each of the parties agrees that neither it nor any of its Affiliates shall take
any action, including any transfer or other disposition of assets or any
interest in Allied after the Closing, that would cause the Merger not to qualify
as a reorganization under Section 368(a) of the Code. Nationwide shall report
the Merger for income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and any comparable state or local tax statute.
ARTICLE VII
CONDITIONS
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) this Agreement and the Merger shall have been
approved and adopted by the requisite votes of the respective Members of
Nationwide and Allied at a special meeting of the Members of Nationwide and
Allied called for such purpose;
(b) the waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been earlier terminated
and, other than the filings provided for in subclauses (a) and (b) of the second
sentence of Section 2.3, all Governmental Approvals and other Consents or
Filings which are required to be obtained prior to the Effective
45
50
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
51
(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
52
(e) by Allied if Nationwide (x) breaches or fails in
any material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have, or is reasonably likely to
have, a Material Adverse Effect on Nationwide, in each case such that the
conditions set forth in Section 7.1 or Section 7.2 would not be satisfied;
PROVIDED, HOWEVER, that if any such breach is curable by Nationwide through the
exercise of its best efforts and for so long as Nationwide shall be so using its
best efforts to cure such breach, Allied may not terminate this Agreement
pursuant to this Section 8.1(e); or
(f) by Nationwide if Allied (x) breaches or fails in
any material respect to perform or comply with any of its material covenants and
agreements contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have, or is reasonably likely to
have, a Material Adverse Effect on Allied, in each case such that the conditions
set forth in Section 7.1 or Section 7.3 would not be satisfied; PROVIDED,
HOWEVER, that if any such breach is curable by Allied through the exercise of
its best efforts and for so long as Allied shall be so using its best efforts to
cure such breach, Nationwide may not terminate this Agreement pursuant to this
Section 8.1(f); or
(g) by Allied, if the Board of Directors of Allied
(or any committee thereof) shall have withdrawn or modified or changed in a
manner adverse to Nationwide its approval or recommendation of this Agreement
or the Merger in order to approve and permit Allied to execute a definitive
agreement with a Third Party relating to an Superior Proposal; or
(h) by Nationwide, if the Board of Directors of
Allied (or any committee thereof) shall have withdrawn or modified or changed in
a manner adverse to Nationwide its approval or recommendation of this Agreement
or the Merger or shall have recommended an Superior Proposal, or Allied shall
have entered into a definitive agreement providing for an Superior Proposal
with a Third Party.
Section 8.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement by either
Nationwide or Allied, as provided in Section 8.1, written notice thereof shall
forthwith be given to the other party specifying the provision hereof pursuant
to which such termination is made, this Agreement shall thereafter become void
and there shall be no Liability on the part of either party hereto against the
other party hereto, or on the part of its directors, officers, employees,
policyholders, shareholders or agents (or those of any of its Subsidiaries or
Affiliates), except that (i) any such termination shall be without prejudice to
the rights of either party hereto (or any of its Subsidiaries or Affiliates)
arising out of the willful breach by the other party of any covenant or
agreement contained in this Agreement, and (ii) with respect to Nationwide and
Allied, the obligations pursuant to this Section 8.2, Section 6.4(b) and
Section 9.2 shall survive termination.
48
53
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
54
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
55
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
56
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
57
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
58
to any particular provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Agreement unless otherwise specified.
(d) The plural of any defined term shall have a
meaning correlative to such defined term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and permitted
assigns.
(f) A reference to any legislation or to any
provision of any legislation shall include any modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(g) All references to "$" and dollars shall be deemed
to refer to United States currency unless otherwise specifically provided.
(h) The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available.
Section 9.19 SCHEDULES. The Allied Disclosure Schedule and the
Nationwide Disclosure Schedule shall each be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein. Any matter disclosed pursuant to the Allied Disclosure Schedule
or the Nationwide Disclosure Schedule shall be deemed to be disclosed for all
purposes under this Agreement but such disclosure shall not be deemed to be an
admission or representation as to the materiality of the item so disclosed.
54
59
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Nationwide and of Allied as of the
date first above written.
NATIONWIDE MUTUAL INSURANCE COMPANY
By
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President and Associate General Counsel
ALLIED MUTUAL INSURANCE COMPANY
By
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
60
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.
61
IN WITNESS WHEREOF, Nationwide Mutual Insurance Company has caused this
Certificate of Assumption, Membership and Participation to be duly signed and
issued.
----------------------- ----------------------
Secretary President
