SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 TENDER OFFER STATEMENT (AMENDMENT NO. 4) PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ALLIED GROUP, INC. (NAME OF SUBJECT COMPANY) NATIONWIDE GROUP ACQUISITION CORPORATION NATIONWIDE MUTUAL INSURANCE COMPANY (Bidders) COMMON STOCK, NO PAR VALUE (Title of Class of Securities) 019220102 (CUSIP Number of Class of Securities) W. SIDNEY DRUEN SENIOR VICE PRESIDENT AND GENERAL COUNSEL NATIONWIDE MUTUAL INSURANCE COMPANY ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43215 TELEPHONE: (614) 249-7111 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) WITH A COPY TO: ERIC M. FOGEL, ESQ. HAROLD W. NATIONS, ESQ. HOLLEB & COFF 55 E. MONROE STREET, SUITE 4100 CHICAGO, ILLINOIS 60603 TELEPHONE: (312) 807-4600 This Statement amends and supplements the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed with the Securities and Exchange Commission on May 19, 1998 by Nationwide Group Acquisition Corporation, an Ohio corporation and a wholly owned subsidiary of Nationwide Mutual Insurance Company, an Ohio mutual insurance company, to purchase all outstanding shares of common stock, no par value (the "Common Shares"), of Allied Group, Inc., an Iowa corporation, at a price of $47.00 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated May 19, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal. Capitalized terms used and not defined herein shall have the meanings assigned such terms in the Offer to Purchase and the Schedule 14D-1. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS (a)(27) Press release dated June 4, 1998 (g)(5) Agreement and Plan of Merger by and among Nationwide Mutual Insurance Company, Nationwide Group Acquisition Corporation and Allied Group, Inc. dated as of June 3, 1998 SIGNATURE After due inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: June 4, 1998 NATIONWIDE MUTUAL INSURANCE COMPANY By: /s/ David A. Diamond ---------------------------------------------------- Name: David A. Diamond Title: Vice President - Enterprise Controller NATIONWIDE GROUP ACQUISITION CORPORATION By: /s/ Mark B. Koogler ---------------------------------------------------- Name: Mark B. Koogler Title: Vice President - Associate General Counsel Exhibit (a)(27) NEWS FROM NATIONWIDE INSURANCE CONTACTS: For Nationwide Insurance For Allied Group John C. Millen Media: Donna Smith Nationwide Insurance (515) 280-4891 (614) 249-6348 Investors: Paul Curran (515) 280-4644 Vince Duffy Joele Frank/Dan Katcher Powell Tate Abernathy MacGregor Frank (212) 521-5215 (212) 371-5999 NATIONWIDE AND ALLIED ENTER INTO DEFINITIVE AGREEMENTS TO SELL ALLIED GROUP TO NATIONWIDE AND TO MERGE ALLIED MUTUAL INTO NATIONWIDE Columbus, Ohio and Des Moines, Iowa, June 4, 1998 -- Nationwide Mutual Insurance Company and Allied Group, Inc. (NYSE:GRP) announced today that they have entered into a definitive agreement providing for the acquisition of all of the shares of Allied Group by Nationwide at a price of $48.25 per share. In connection with the definitive agreement, the Board of Directors of Allied Group has recommended acceptance of Nationwide's cash tender offer by the shareholders of Allied Group. The transaction will have a total value of approximately $1.5 billion. In addition, the Allied Mutual Insurance Company Board of Directors has entered into a definitive agreement providing for the merger of Allied Mutual into Nationwide Mutual Insurance Company. The agreement provides that Allied Mutual policyholders' interests would be converted into rights as policyholders of Nationwide, becoming part of a combined national company of unquestioned financial strength with a broad range of products and services. Allied Mutual policyholders will also receive an extraordinary dividend of $110 million in cash. Nationwide will also pay $30 a share for the approximately 2.8 million shares of Allied Life Financial Corporation that are publicly held. The transaction, which will be financed from internal resources, will augment one of the country's largest diversified insurance and financial services organizations and a Fortune 500 company. The combined companies will rank as the country's 4th largest auto insurer and 4th largest homeowners insurer. Dimon R. McFerson, Nationwide's Chairman and Chief Executive Officer, said, "Nationwide is extremely pleased to be partnering with Allied. This transaction ensures continued strong growth for Nationwide and Allied. "This new team will benefit from am expanded geographical reach that will feature a strong, diversified distribution network of Nationwide career agents and Allied's independent agents," McFerson said. "We look forward to working with Allied's skilled management and capable employees. All have worked hard to make Allied one of the premier performers in the property-casualty business in recent years." McFerson said that Douglas L. Andersen, President and Chief Executive Officer of Allied Group, had agreed to continue in those roles and that Nationwide planned no changes in Allied's management. "We consider the management team to be one of the prime assets in this transaction", he said. Mr. Andersen said, "In Nationwide we have found a partner with unparalleled financial strength who is committed to all our constituencies. Employees and agents will be part of a larger organization that is able to provide policyholders of both Allied and Nationwide access to a broader range of products and services than either company could provide on its own. We are confident that this transaction will provide many new outlets for both companies, create significant growth opportunities for employees and agents and benefit the communities we serve. We look forward to a rapid completion of the transaction and to working with Nationwide to ensure the smoothest transition possible. And finally, we are extremely pleased that our stockholders, policyholders and employees will receive outstanding value for their Allied investment." Allied employees who are participants in the company's Employee Stock Ownership Plan (ESOP) will benefit from a tripling of their stock account's value both as a result of the Nationwide tender offer of $48.25 per share and an earnings allocation of the unallocated portion of the ESOP after payment of the ESOP's debt with the proceeds from the tender offer. Nationwide is fully vesting all participants in the Allied ESOP. McFerson underscored Nationwide's long-term commitment to Des Moines and the cities where Allied has regional operations: Denver, Colorado; Lincoln, Nebraska and Santa Rosa, California. "Our Farmland Insurance operation has been headquartered in Des Moines since 1982 and we are pleased to be expanding our involvement there. When we announced the tender offer, we pledged to maintain the current level of employment of the Allied operations and our plan to add 400 new jobs in the Des Moines area during the next four years." The dealer manager and financial advisor to Nationwide for the offers is Credit Suisse First Boston. Georgeson & Company Inc. is the information agent. For more information call 1-800-223-2064 or visit our web site at georgeson.com. Nationwide's law firm for the transaction is Holleb & Coff of Chicago. The offers for Allied Group and Allied Life are being made through wholly owned subsidiaries of Nationwide. Allied Group's financial advisor is Morgan Stanley & Co. Incorporated. Allied Group is represented by the law firm of Debevoise & Plimpton. The Allied Group and Allied Mutual mergers are subject to insurance regulatory approvals in Iowa, Ohio, Arizona and any other states that may assert jurisdiction; and all required clearances under the Hart-Scott-Rodino Antitrust Improvements Act. The Allied Mutual merger is also subject to policyholders approval for both Allied Mutual and Nationwide Mutual. # Exhibit (g)(5) AGREEMENT AND PLAN OF MERGER BY AND AMONG NATIONWIDE MUTUAL INSURANCE COMPANY NATIONWIDE GROUP ACQUISITION CORPORATION AND ALLIED GROUP, INC. DATED AS OF JUNE 3, 1998 TABLE OF CONTENTS Page ---- ARTICLE I THE OFFER..................................................................................2 Section 1.1 The Offer..................................................................................2 Section 1.2 Allied Actions.............................................................................4 Section 1.3 Directors..................................................................................6 ARTICLE II THE MERGER.................................................................................7 Section 2.1 The Merger.................................................................................7 Section 2.2 Closing....................................................................................7 Section 2.3 Effective Time.............................................................................8 Section 2.4 Articles of Incorporation and By-Laws of the Surviving Corporation.........................8 Section 2.5 Board of Directors and Officers............................................................9 Section 2.6 Effect of Merger on Sub Capital Stock......................................................9 Section 2.7 Conversion of Allied Stock.................................................................9 Section 2.8 Exchange of Certificates and Related Matters..............................................10 Section 2.9 Dissenting Shares.........................................................................12 Section 2.10 Adjustments to Prevent Dilution..........................................................13 Section 2.11 Allied Employee Stock Options, Restricted Stock, etc.....................................13 ARTICLE III ADDITIONAL AGREEMENTS.....................................................................14 Section 3.1 Preparation of Proxy Statement; Information Supplied......................................14 Section 3.2 Meeting of Shareholders...................................................................14 Section 3.3 Filings; Other Action.....................................................................15 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ALLIED..................................................16 Section 4.1 Organization and Qualification............................................................16 Section 4.2 Capitalization of Allied..................................................................17 Section 4.3 Subsidiaries..............................................................................17 Section 4.4 Authority Relative to this Agreement......................................................18 Section 4.5 No Violation; Governmental Filings........................................................19 Section 4.6 SAP Statements............................................................................20 Section 4.7 [Intentionally left blank.]...............................................................22 Section 4.8 Reserves..................................................................................22 Section 4.9 SEC Documents.............................................................................22 Section 4.10 Absence of Certain Changes or Events.....................................................23 Section 4.11 No Undisclosed Liabilities...............................................................23 Section 4.12 Takeover Statutes........................................................................23 Section 4.13 Compliance with Law......................................................................24 Section 4.14 Assets...................................................................................24 Section 4.15 Environmental Matters....................................................................25 Section 4.16 Contracts................................................................................26 Section 4.17 [Intentionally Left Blank]...............................................................27 Section 4.18 Taxes and Tax Returns....................................................................27 Section 4.19 Benefit Plans............................................................................28 Section 4.20 Labor Relations and Employment...........................................................31 Section 4.21 Intellectual Property....................................................................31 Section 4.22 Transactions with Affiliates.............................................................32 Section 4.23 Voting Requirements......................................................................32 Section 4.24 Investment Company.......................................................................32 i ARTICLE V REPRESENTATIONS AND WARRANTIES OF NATIONWIDE AND SUB...................................................................................33 Section 5.1 Organization and Qualification............................................................33 Section 5.2 Authority Relative to this Agreement......................................................33 Section 5.3 No Violation..............................................................................34 Section 5.4 Litigation................................................................................35 Section 5.5 Financial Ability to Perform..............................................................35 ARTICLE VI CERTAIN COVENANTS.........................................................................35 Section 6.1 Allied Conduct of Business Pending the Merger.............................................35 Section 6.2 Disposition of Litigation.................................................................38 Section 6.3 Reasonable Best Efforts...................................................................38 Section 6.4 Intentionally Left Blank..................................................................38 Section 6.5 Access and Information....................................................................39 Section 6.6 Notice of Proceedings.....................................................................40 Section 6.7 Notification of Certain Other Matters.....................................................40 Section 6.8 Indemnification...........................................................................41 Section 6.9 [Intentionally Omitted.]..................................................................43 Section 6.10 Acquisition Proposals....................................................................43 Section 6.11 Maintenance of Benefits..................................................................44 ARTICLE VII CONDITIONS................................................................................45 Section 7.1 Conditions to Each Party's Obligation to Effect the Merger................................45 ARTICLE VIII TERMINATION...............................................................................46 Section 8.1 Termination...............................................................................46 Section 8.2 Effect of Termination.....................................................................47 ARTICLE IX MISCELLANEOUS.............................................................................48 Section 9.1 Survival of Representations and Warranties................................................48 Section 9.2 Fees and Expenses.........................................................................48 Section 9.3 Notices...................................................................................48 Section 9.4 Amendments................................................................................49 Section 9.5 No Waiver.................................................................................49 Section 9.6 Brokers...................................................................................50 Section 9.7 Publicity.................................................................................50 Section 9.8 Headings..................................................................................51 Section 9.9 Nonassignability..........................................................................51 Section 9.10 Beneficiaries............................................................................51 Section 9.11 Duplicates; Counterparts.................................................................51 Section 9.12 Governing Law; Jurisdiction..............................................................51 Section 9.13 Entire Agreement.........................................................................51 Section 9.14 Severability.............................................................................52 Section 9.15 Specific Performance.....................................................................52 Section 9.16 Survival of Certain Covenants............................................................52 Section 9.17 Counting.................................................................................52 Section 10.1 Definitions..............................................................................52 ii EXHIBITS Exhibit A Conditions of the Offer Exhibit B Shareholder Agreement iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of June 3, 1998 by and among NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company ("Nationwide"), NATIONWIDE GROUP ACQUISITION CORPORATION, an Ohio corporation and a wholly-owned subsidiary of Nationwide ("Sub") and ALLIED GROUP, INC., an Iowa corporation ("Allied") (hereinafter sometimes collectively referred to as the "parties"). WHEREAS, Sub has outstanding an offer (the "Existing Offer," and as amended, the "Offer") to purchase all of the outstanding shares of common stock, no par value, of Allied (the "Common Shares"), at a purchase price of $47 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated May 19, 1998, and in the related letter of transmittal; WHEREAS, in consideration of Allied's entering into this Agreement, Nationwide is willing to cause Sub to increase the price to be paid pursuant to the Offer to $48.25 per Common Share, net to the seller in cash, without interest thereon (such amount being hereinafter referred to as the "Offer Price"); WHEREAS, the Board of Directors of Allied has (i) determined that the consideration to be paid for each Common Share in the Offer and in the Merger (as defined below) is fair to and in the best interests of the shareholders of Allied, (ii) approved this Agreement and the transactions contemplated hereby and (iii) resolved to recommend acceptance of the Offer and the Merger and approval of this Agreement by such shareholders; and WHEREAS, the Boards of Directors of Sub and Nationwide, as sole stockholder of Sub, have each approved the merger (the "Merger") of Sub with Allied in accordance with applicable law upon the terms and subject to the conditions set forth herein. WHEREAS, concurrently with the execution of this Agreement and as an inducement to Nationwide to enter into this Agreement, Nationwide, Sub and Allied Mutual Insurance Company ("Allied Mutual") are entering into a Shareholder Agreement (the "Shareholder Agreement"), attached hereto as Exhibit B, pursuant to which Allied Mutual has, among other things, agreed to grant an irrevocable proxy to Nationwide's designees providing (1) for the vote of all of the outstanding shares of 6-3/4% Series Preferred Stock, no par value, of Allied (the "Preferred Shares") and all of the Common Shares owned by Allied Mutual in favor of the Merger and the tender of all the Common Shares owned by Allied Mutual pursuant to the Offer and (2) for the vote of all such securities against any "Alternative Transaction" or "Frustrating Transaction" (as such terms are defined in the Shareholder Agreement); and the Shareholder Agreement has been approved by the Board of Directors of Allied; and WHEREAS, Nationwide, Sub and Allied desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Nationwide, Sub and Allied hereby agree as follows: ARTICLE I THE OFFER Section 1.1 The Offer. (a) Sub shall amend the Offer as soon as practicable after the date hereof to (i) increase the purchase price offered to the Offer Price, (ii) modify the conditions of the Offer to conform to the conditions or events set forth in Exhibit A hereto (the "Offer Conditions") and no others and (iii) to make such other amendments as are required to conform the Offer to this Agreement, it being understood that except for the foregoing amendments or as otherwise provided herein, the Offer shall be on the same terms and conditions as the Existing Offer. The obligation of Sub to, and of Nationwide to cause Sub to, accept for payment, and pay for, any Common Shares tendered pursuant to the Offer shall be subject to the Offer Conditions (any of which may be waived in whole or in part by Sub in its sole discretion, provided that, without the consent of Allied, Sub shall not waive the Minimum Condition or the Insurance Regulatory 2 Condition (as such terms are defined in Exhibit A) and to the terms and conditions of this Agreement. Without the consent of Allied, Sub shall not (i) reduce the number of Common Shares sought in the Offer, (ii) reduce the Offer Price, (iii) change or add to the Offer Conditions, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) amend any other term of the Offer in any manner adverse to the holders of the Common Shares. Notwithstanding the foregoing, Sub may, without the consent of Allied, (A) extend the Offer, if at the scheduled or extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer and (C) extend the Offer for any reason on one or more occasions for an aggregate period of not more than 10 Business Days (for all such extensions pursuant to this clause (C)) beyond the latest expiration date that would otherwise be permitted under clause (A) or (B) of this sentence. So long as this Agreement is in effect and the Offer Conditions have not been satisfied or waived, Sub shall, and Nationwide shall cause Sub to, cause the Offer not to expire. Subject to the terms and conditions of the Offer and this Agreement, Sub shall, and Nationwide shall cause Sub to, accept for payment, and pay for, all Common Shares validly tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) As soon as reasonably practicable after the date hereof, Sub shall amend its Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer that was originally filed with the SEC on May 19, 1998, and shall file such amendment with the SEC. The Schedule 14D-1 will contain a supplement to the Offer to Purchase dated May 19, 1998, and a revised form of the related letter of transmittal (which Schedule 14D-1, Offer to Purchase and other documents, as amended and supplemented, together with any further amendments or supplements thereto, are referred to herein collectively as the "Offer Documents"), which shall be mailed to the holders of Common Shares. Nationwide and Sub represent and agree that the Offer Documents complied (and, as amended from time to time, shall comply) in all material respects with the Exchange Act and the rules and regulations promulgated thereunder and the Offer Documents, on the date first published, sent or given to Allied's shareholders, shall not 3 contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no covenant is made by Nationwide or Sub with respect to information supplied by Allied or any of its shareholders specifically for inclusion or incorporation by reference in the Offer Documents. Nationwide, Sub and Allied each agrees promptly to correct any information provided by it for use in the Offer Documents that shall have become false or misleading in any material respect, and Nationwide and Sub further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Common Shares, in each case as and to the extent required by applicable federal securities laws. Allied and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-1 prior to its filing with the SEC or dissemination to shareholders of Allied. Nationwide and Sub agree to provide Allied and its counsel with copies of any comments Nationwide, Sub or their counsel may receive from the SEC or its staff with respect to the Schedule 14D-1 promptly after the receipt of such comments. (c) Nationwide shall provide or cause to be provided to Sub on a timely basis the funds necessary to accept for payment, and pay for, any Common Shares that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. Section 1.2 Allied Actions. (a) Allied hereby approves of and consents to the Offer and represents that the Board of Directors of Allied, at a meeting duly called and held, duly and unanimously adopted resolutions adopting this Agreement, approving the Shareholder Agreement, approving the Offer and the Merger, determining that the terms of the Offer and the Merger are fair to, and in the best interests of, Allied's shareholders, recommending that Allied's shareholders accept the Offer, tender their shares pursuant to the Offer and approve this Agreement (if required) and approving the acquisition of Common Shares by Sub pursuant to the Offer and the other transactions contemplated by this Agreement. Allied has been advised by each of its directors and executive officers that each such person intends to tender all Common Shares owned by such person pursuant to the Offer. 4 (b) On June 2, 1998, Allied filed with the SEC a Solicitation/ Recommendation Statement on Schedule 14D-9 with respect to the Existing Offer (such Schedule 14D-9 as amended from time to time, the "Schedule 14D-9"). Simultaneously with the filing of the amendment to the Schedule 14D-1 by Nationwide and Sub, Allied shall file with the SEC an amendment to the Schedule 14D-9 which contains the recommendation described in Section 1.2(a) and shall mail the Schedule 14D-9 as so amended to the shareholders of Allied. Allied agrees that the Schedule 14D-9 shall comply in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to Allied's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no covenant is made by Allied with respect to information supplied by Nationwide or Sub specifically for inclusion in the Schedule 14D-9. Each of Allied, Nationwide and Sub agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and Allied further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Allied shareholders, in each case as and to the extent required by applicable federal securities laws. Nationwide and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to shareholders of Allied. Allied agrees to provide Nationwide and its counsel any comments Allied or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) In connection with the Offer and the Merger and promptly following the execution of this Agreement, Allied shall cause its transfer agent to furnish Sub promptly with mailing labels containing the names and addresses of the record holders of Common Shares as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of shareholders, security position listings and computer files and all other information in Allied's possession or control regarding the beneficial owners of Common Shares, 5 and shall furnish to Sub such information and assistance (including updated lists of shareholders, security position listings and computer files) as Nationwide may reasonably request in communicating the Offer and any and all amendment thereto to Allied's shareholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Nationwide and Sub and their agents shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will, upon request, deliver, and will use their reasonable efforts to cause their agents to deliver, to Allied all copies and any extracts or summaries from such information then in their possession or control. Section 1.3 Directors. Promptly upon the acceptance for payment of Common Shares by Sub pursuant to the Offer, Sub shall be entitled to designate such number of directors on the Board of Directors of (i) Allied as will give Sub, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and Allied shall, at such time, cause Sub's designees to be so elected by its existing Board of Directors and (ii) each Subsidiary of Allied and each committee of the Board of Directors of Allied and each such Subsidiary as will give Sub a majority of such directors or committee, and Allied shall, at such time, cause Sub's designees to be so elected. In the event that Sub's designees are elected to the Board of Directors of Allied, until the Effective Time such Board of Directors shall have at least two directors who are directors on the date of this Agreement and who are not officers of Allied (the "Independent Directors"); provided that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Directors then remain, the other directors shall designate two persons to fill such vacancies who shall not be officers or Affiliates of Allied or any of its Subsidiaries, or officers or Affiliates of Nationwide or any of its Subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable law, Allied shall take all action requested by Nationwide necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 6 promulgated thereunder, and Allied agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to Allied on a timely basis all information required to be included in the Information Statement with respect to Sub's designees). In connection with the foregoing, Allied will promptly, at the option of Nationwide, either increase the size of Allied's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Sub's designees to be elected or appointed to Allied's Board of Directors as provided above. Following the election or appointment of Sub's designees pursuant to this Section 1.3 and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors then in office shall be required by Allied to (i) amend or terminate this Agreement by Allied, (ii) exercise or waive any of Allied's rights or remedies under this Agreement or (iii) extend the time for performance of Nationwide's and Sub's respective obligations under this Agreement. ARTICLE II THE MERGER Section 2.1 The Merger. Upon the terms of this Agreement and subject to the satisfaction of the conditions set forth herein, at the Effective Time Sub shall be merged with and into Allied in accordance with the applicable provisions of the Laws of the States of Ohio and Iowa and the separate corporate existence of Sub shall thereupon cease, and Allied, which shall be the surviving company (hereinafter sometimes referred to as the "Surviving Corporation"), shall continue its corporate existence under the Laws of the State of Iowa under the name "Allied Group, Inc." From and after the Effective Time, the Surviving Corporation shall possess all the assets and other rights, privileges, immunities, powers and purposes of each of Sub and Allied and shall be liable for all of the Liabilities of the Sub and Allied, all to the full extent provided in Section 1701.82 of the General Corporation Law of the State of Ohio (the "OGCL") and Section 490.1106 of the Iowa Business Corporation Act ("IBCA"). Section 2.2 Closing. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 8.1, and subject to the satisfaction or waiver of the conditions set forth in Article VII, the closing of the Merger (the "Closing") will take place at 9:00 a.m. on the second business day following the date on 7 which the last of the conditions set forth in Article VII shall be fulfilled or waived in accordance with this Agreement (the "Closing Date"), at the offices of Holleb & Coff, 55 E. Monroe Street, Chicago, Illinois 60603, unless another date, time or place is agreed to in writing by the parties hereto. Section 2.3 Effective Time. As soon as is practicable following the execution of this Agreement, the parties shall cause this Agreement to be provided to the Ohio Superintendent in accordance with, and in such form as required by, Section 3925.08(D)(2) of the Ohio Insurance Law and the regulations promulgated thereunder, to the Iowa Commissioner in accordance with Section 521A.3 of the Iowa Insurance Law and the regulations promulgated thereunder and the Iowa Attorney General in accordance with Section 521.12 of the Iowa Insurance Law, and to the Arizona Director in accordance with Sections 20-481.02 of the Arizona Insurance Law, in each case together with all other documents as may be required by applicable Law. Subject to the conditions set forth in Article VII of this Agreement, the Merger shall become effective (the "Effective Time") upon the last to occur of (a) the filing of the Certificate of Merger with the Ohio Secretary of State, (b) the filing of the Articles of Merger as required by Iowa law and (c) such later time as the parties designate in such filings; provided, however, the Effective Time shall not be more than one year from the date of 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 reasonable best efforts to assure that the filings contemplated hereby are made, and the Effective Time occurs, as soon as is practicable. Section 2.4 Articles of Incorporation and By-Laws of the Surviving Corporation. Following the Effective Time, the Articles of Incorporation of Allied, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by Law. The Amended and Restated Code of By-Laws of Allied, as in effect immediately prior to the Effective Time, shall be the Amended and Restated Code of By-Laws of the Surviving Corporation until thereafter changed or amended as provided therein or by Law. 8 Section 2.5 Board of Directors and Officers. The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation immediately following the Effective Time, each of such directors to hold office, subject to the applicable provisions of the Articles of Incorporation and Code of By-Laws of the Surviving Corporation, until his or her successor is duly elected and qualified, or his or her earlier death, resignation or removal. The officers of Allied immediately prior to the Effective Time shall be the officers of the Surviving Corporation at and immediately following the Effective Time, each of such officers to hold their respective offices, subject to the applicable provisions of the Articles of Incorporation and Code of By-Laws of the Surviving Corporation, until his or her successor is duly elected and qualified, or his or her earlier death, resignation or removal. Section 2.6 Effect of Merger on Sub Capital Stock. Each share of capital stock, par value $1.00 per share, of Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into one validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation. Section 2.7 Conversion of Allied Stock. (a) Outstanding Common Stock. Subject to the other provisions of this Section 2.7, each Common Share issued and outstanding immediately prior to the Effective Time (other than shares owned by Nationwide or Sub, shares held as treasury shares by Allied and Dissenting Shares (as defined in Section 2.9 below)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive $48.25 per Common Share (or if a greater per Common Share price shall have been paid in the Offer, such greater price), net to the shareholder in cash, without interest thereon (the "Merger Consideration"). (b) Treasury Shares and Nationwide Owned Shares. Each Common Share and each Preferred Share issued and outstanding immediately prior to the Effective Time which is then held as a treasury share by Allied, or owned by Nationwide or Sub, immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Allied, be cancelled and retired and cease to exist, without any conversion thereof. 9 (c) Preferred Shares. Each Preferred Share issued and outstanding prior to the Effective Time (other than Preferred Shares held by Allied or by Nationwide, Sub or any other Subsidiary of Nationwide) shall not be affected by the Merger and shall remain issued and outstanding Preferred Shares of the Surviving Corporation. Section 2.8 Exchange of Certificates and Related Matters. (a) Paying Agent. As of the Effective Time, Sub shall, and Nationwide shall cause Sub to, deposit, on an as needed basis, with a bank or trust company selected by Nationwide and reasonably acceptable to Allied (the "Paying Agent"), for the benefit of the holders of Common Shares, cash in an aggregate amount equal to the aggregate Merger Consideration (such amount being sometimes hereinafter referred to as the "Payment Fund"). (b) Exchange Procedure. Upon surrender to the Paying Agent of a certificate representing Common Shares for cancellation, together with a letter of transmittal and such other customary documents as may be required by the instructions to the letter of transmittal (collectively, the "Certificate"), the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash into which the number of Common Shares previously represented by such Certificate shall have been converted pursuant to Section 2.7. The Paying Agent shall accept such Certificate upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If the Merger Consideration (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate representing Common Shares surrendered in exchange therefor is registered on the record books of Allied, it shall be a condition to such exchange that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person requesting such exchange shall pay to the Paying Agent any transfer or other taxes required by reason of the payment of such consideration to a person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable. After the Effective Time, there shall be no further transfer on the records of the Surviving Corporation or its transfer agent of any Certificate representing Common Shares and if any such Certificate is presented to the Surviving Corporation for transfer, it shall be cancelled against delivery of the Merger Consideration as hereinabove provided. Until 10 surrendered as contemplated by this Section 2.8(b), each Certificate representing Common Shares (other than a Certificate representing Common Shares to be cancelled in accordance with Section 2.7(b) or representing Dissenting Shares), shall, at any time after the Effective Time, represent only the right to receive upon such surrender the Merger Consideration, without any interest thereon. (c) Letter of Transmittal. Promptly after the Effective Time (but in no event more than five business days thereafter), Nationwide shall require the Paying Agent to mail to each record holder of Certificates that immediately prior to the Effective Time represented Common Shares which have been converted pursuant to Section 2.7(a), a letter of transmittal (which shall specify that delivery shall be effective, and risk of loss and title shall pass, only upon proper delivery of Certificates representing Common Shares to the Paying Agent and shall be in such form and have such provisions as Nationwide reasonably may specify) and instructions for use in surrendering such Certificates and receiving the Merger Consideration to which such holder shall be entitled therefor pursuant to Section 2.7. (d) No Further Ownership Rights in Shares. The Merger Consideration paid upon the surrender for exchange of Certificates representing Common Shares in accordance with the terms of this Article II shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the Common Shares theretofore represented by such Certificates, subject, however, to the Surviving Corporation's obligation (if any) to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared by Allied on such Common Shares in accordance with the terms of this Agreement or prior to the date of this Agreement and which remain unpaid at the Effective Time. (e) Termination of Payment Fund. Any portion of the Payment Fund which remains undistributed to the holders of the Certificates representing Common Shares for 180 days after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Common Shares who have not theretofore complied with this Article II shall thereafter look only to the Surviving Corporation and only as general creditors thereof for payment, without interest, of their claim for any Merger Consideration with respect to their Common Shares. 11 (f) No Liability. None of Nationwide, Sub, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash, shares, dividends or distributions payable from the Payment Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates representing Common Shares shall not have been surrendered prior to seven years after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity), any such cash, shares, dividends or distributions payable in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of all claims or interest of any person previously entitled thereto. Section 2.9 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, the Common Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded properly in writing appraisal for such Common Shares in accordance with Sections 490.1301 through 490.1331 of the IBCA and who shall not have withdrawn such demand or otherwise have forfeited appraisal rights shall not be converted into or represent the right to receive the Merger Consideration ("Dissenting Shares"). Such shareholders shall be entitled to receive payment of the appraised value of such Common Shares held by them in accordance with the Iowa Corporation Law, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Common Shares held by them under such Iowa Corporation Law shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration, upon surrender, in the manner provided in Section 2.8(b), of the Certificate or Certificates that formerly evidenced such Common Shares. Allied shall give Nationwide prompt notice of any demands of appraisal received by Allied, withdrawals of such demands, and any other instruments served pursuant to Iowa Corporation Law and received by Allied, and Nationwide shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, Allied shall not, except with the prior written consent of Nationwide, make any payment with respect to any demands for appraisal, or settle or offer to settle, any such demands. 12 Section 2.10 Adjustments to Prevent Dilution. In the event that Allied changes the number of Common Shares issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse split), stock dividend or distribution, recapitalization, merger, subdivision or other similar transaction, the Merger Consideration shall be equitably adjusted. Section 2.11 Allied Employee Stock Options, Restricted Stock, etc. As of immediately prior to the Effective Time each option to acquire Common Shares (each, an "Option"), restricted stock award ("Restricted Stock") or stock appreciation right ("SARs" and, together with the Options and Restricted Stock, the "Awards") outstanding under any of Allied's Long-Term Management Incentive Plan, the Nonqualified Stock Option Plan, the Stock Option Plan, the Executive Equity Incentive Plan or any other similar plan, arrangement or agreement of Allied or any Allied Subsidiaries (together, the "Allied Plans"), whether or not then exercisable or vested, shall become fully exercisable and vested and shall be cancelled or repurchased and, in consideration of such cancellation or repurchase, Allied shall pay to the holder of such Award an amount in respect thereof equal to the product of (A) the Applicable Amount, multiplied by (B) the number of shares subject thereto (such payment to be net of applicable withholding taxes). The term "Applicable Amount" shall mean (i) in the case of Awards of Restricted Stock, the Merger Consideration, (ii) in the case of Awards of Options, the excess of (A) the Merger Consideration over (B) the exercise price of such Option or (iii) in the case of Awards of SARs, the excess of (A) the Merger Consideration, over (B) the grant price of such SAR. No consent or other authorization is required by the holder of any Awards to effectuate the transactions contemplated by this Section 2.11. In addition, following the Effective Time, no Person has any options, warrants, or other rights to buy any Securities of the Surviving Corporation. 13 ARTICLE III ADDITIONAL AGREEMENTS Section 3.1 Preparation of Proxy Statement; Information Supplied. (a) Proxy Statement. As soon as practicable following the purchase of the Common Shares pursuant to the Offer, Allied shall prepare and file with the SEC the Proxy Statement (as defined below), if required by applicable law. Allied will use its reasonable Best Efforts to cause the Proxy Statement to be mailed to Allied's shareholders as promptly as practicable. Nationwide and Sub will use their reasonable best efforts to assist Allied in the preparation and filing of the Proxy Statement. (b) Allied Information. Allied agrees that none of the information supplied or to be supplied by Allied specifically for inclusion in the Proxy Statement will, at the date it is first mailed to Allied's shareholders or at the time of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. (c) Nationwide Information. Nationwide and Sub agree that none of the information supplied or to be supplied by Nationwide specifically for inclusion in the Proxy Statement will, at the date it is first mailed to Allied's shareholders or at the time of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 3.2 Meeting of Shareholders. Subject to Section 6.10 hereof, following the purchase of Shares in the Offer, if Nationwide and its subsidiaries shall not following such purchase own shares representing at least 90% of Allied's outstanding Common Shares and 90% of Allied's outstanding Preferred Shares, Allied will take all actions necessary in accordance with applicable law and its Articles of Incorporation and By-laws to convene a meeting, if required by applicable law, of its shareholders (the "Shareholders Meeting") to consider and vote upon the approval of this Agreement and the Merger. Subject to Section 6.10 hereof, Allied will, through 14 its Board of Directors, recommend to its shareholders approval of this Agreement and the Merger. Allied will use its reasonable best efforts to hold the Shareholders Meeting (unless following the purchase of Shares in the Offer Nationwide and its subsidiaries own at least 90% of Allied's outstanding Common Shares and 90% of Allied's outstanding Preferred Shares), as soon as practicable after the date hereof. Section 3.3 Filings; Other Action. As promptly as practicable, (i) Nationwide and Allied shall make any additional filings and submissions under the HSR Act, (ii) Nationwide shall make any additional filings required by the insurance regulatory authorities in Iowa, Arizona and Ohio and deliver notices and consents to jurisdiction to such state insurance departments, each as reasonably may be required to be made in connection with this Agreement and the transactions contemplated hereby, and (iii) Allied and Nationwide shall cooperate in all reasonable respects with each other in (A) determining if other filings are required to be made prior to the Effective Time with, or if other material consents, approvals, permits, notices or authorizations are required to be obtained prior to the Effective Time from any Governmental Entity in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and (B) timely making all such filings and timely seeking all such consents, approvals, permits, notices or authorizations. In connection with the foregoing, Allied will provide Nationwide, and Nationwide will provide Allied, with copies of correspondence, filings or communications (or memoranda setting forth the substance thereof) between such party or any of its representatives, on the one hand, and any Governmental Entity or members of their respective staffs, on the other hand, with respect to this Agreement and the transactions contemplated hereby. Each of Nationwide and Allied acknowledge that certain actions may be necessary with respect to the foregoing in making notifications and obtaining clearances, consents, approvals, waivers or similar third party actions which are material to the consummation of the transactions contemplated hereby, and each of Nationwide and Allied agree to take such action as is reasonably necessary to complete such notifications and obtain such clearances, approvals, waivers or third party actions. 15 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ALLIED Except as otherwise disclosed to Nationwide and Sub in a letter delivered to it prior to the execution hereof (which letter contains appropriate references to identify the representations and warranties herein to which the information in such letter relates) (the "Allied Disclosure Letter"), Allied represents and warrants to Nationwide and Sub as follows: Section 4.1 Organization and Qualification. (a) Allied is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Iowa and has full 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 full power, authority and legal right to conduct its business as it is currently being conducted. Allied and each 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 or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Allied Subsidiaries is listed in the Allied Disclosure Letter. (b) Each Allied Insurer is listed in the Allied Disclosure Letter. Each Allied Insurer (i) possesses an Insurance License in each jurisdiction in which such Allied Insurer is required to possess an Insurance License and (ii) is duly authorized in its jurisdiction of incorporation and each other applicable jurisdiction to write each line of direct insurance being written in the Quarterly Statement for such Allied Insurer as of and for the quarter ended March 31, 1998, except where such insurance is written on an excess or surplus lines-basis and except where the failure to possess such Insurance License or to be so authorized would not reasonably be expected to have a Material Adverse Effect. All such Insurance Licenses are in full force and effect without amendment, limitation or restriction, other than as described in the Allied Disclosure Letter and except where the failure to be in full force and effect would not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect and to the Knowledge of Allied, there is no 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. 16 (c) Except for its Subsidiaries, Allied does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity that directly or indirectly conducts any activity which is material to Allied. Section 4.2 Capitalization of Allied. The authorized capital stock of Allied consists of 80,000,000 Common Shares and 7,500,000 Preferred Shares. At the close of business on June 2, 1998 (i) 30,114,827 Common Shares were issued and outstanding; (ii) no Common Shares were held as treasury stock; (iii) no Common Shares were held by Allied Subsidiaries; (iv) 5,174,437 Common Shares were reserved for issuance upon the exercise of options or other rights to purchase Common Shares under the Allied Plans (of which options or rights with respect to 1,113, 281 shares have been granted), and (v) 1,827,222 Preferred Shares were issued and outstanding. Except as disclosed in the SEC Documents, all outstanding shares of capital stock of Allied are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. No bonds, debentures, notes or other indebtedness of Allied having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which the shareholders of Allied may vote are issued or outstanding. Except under the Allied Plans or as set forth in the Allied Disclosure Letter, Allied does not have any outstanding option, warrant, subscription or other right, agreement or commitment which either obligates Allied to issue, sell or transfer, repurchase, redeem or otherwise issue, acquire or vote any shares of capital stock of Allied, or which restricts the transfer of Common Shares. Since May 29, 1998, no shares have been issued except subject on the exercise of options listed above and no options granted. Following the Effective Time, no Person shall have any right to acquire any securities of the Surviving Corporation. Except as described in this Section 4.2, no shares of capital stock, or any securities entitling any person to acquire such shares, are outstanding. Section 4.3 Subsidiaries. The Allied Disclosure Letter sets forth, as to each Allied Subsidiary, its authorized capital stock and the number of its issued and outstanding shares of capital stock. Except as set forth in the Allied Disclosure Letter or the SEC Documents, Allied 17 is, directly or indirectly, the record and beneficial owner of all of the outstanding shares of capital stock of each of the Allied Subsidiaries, and no capital stock of any Allied Subsidiary is or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable or exercisable for, shares of any capital stock of any Subsidiary, and there are no contracts, commitments, understandings or arrangements by which Allied or any Allied Subsidiary is or may be bound to issue, redeem, purchase or sell additional shares of capital stock of any Allied Subsidiary or securities convertible into or exchangeable or exercisable for any such shares. All of such shares so owned by Allied are validly issued, fully paid and nonassessable and are owned by it or by another wholly-owned Allied Subsidiary thereof free and clear of all liens, claims, encumbrances, restraints on alienation, or any other restrictions with respect to the transferability or assignability thereof (other than restrictions on transfer imposed by federal or state securities laws). Section 4.4 Authority Relative to this Agreement. (a) Allied has full corporate authority and legal right to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly approved and authorized by the Board of Directors of Allied. Except for the approval of this Agreement by the shareholders of Allied, no other corporate proceedings on the part of Allied are necessary to authorize this Agreement and the transactions contemplated hereby. The affirmative vote of at least the majority of the votes entitled to be cast by shareholders of Allied present or represented by a properly executed proxy at the meeting called pursuant to Section 3.2 hereof, if required under applicable law, is the only vote of shareholders of Allied necessary to approve this Agreement and the transactions contemplated hereby. (b) This Agreement has been duly and validly executed and delivered by Allied and (assuming this Agreement is a legal, valid and binding obligation of Nationwide) constitutes a legal, valid and binding agreement of Allied enforceable against Allied in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. 18 (c) Based upon the recommendation of a committee comprised of members of the Board of Directors of Allied who are not directors or otherwise affiliated with any of Allied's subsidiaries or affiliates (the "Special Committee") appointed by the Board of Directors of Allied in connection with the Offer and the Merger, the Board of Directors of Allied (i) has declared that this Agreement, the Offer, the Merger and the other transactions contemplated hereby and thereby are advisable and in the best interests of Allied and (ii) has authorized, approved and adopted in all respects this Agreement, the Shareholder Agreement, the Offer, the Merger and the other transactions contemplated hereby and thereby. The Special Committee and the Board of Directors of Allied have received the opinion of the Special Committee's financial advisor, Morgan Stanley & Co. Incorporated, to the effect that the consideration to be received by the shareholders in the Offer and Merger, taken together, is fair from a financial point of view to such shareholders (other than Nationwide and its Affiliates). It is agreed and understood that such opinion is for the benefit of the Special Committee and Allied's Board of Directors and may not be relied on by Nationwide. Section 4.5 No Violation; Governmental Filings. (a) Except as set forth in the Allied Disclosure Letter, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) constitute a breach or violation of or default under the articles of incorporation or the by-laws (or similar organizational documents) of Allied or of any of the Allied Subsidiaries, (ii) violate, conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the assets of Allied or of any of the Allied Subsidiaries under any of the terms, conditions or provisions of any Allied Contract or (iii) constitute a breach or violation of or default under any Environmental Permit, Law or License to which Allied or any of the Allied Subsidiaries is subject, other than, in the case of clauses (ii) and (iii), such violations, conflicts, breaches, defaults or events or other matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or to prevent or delay the consummation of the transactions contemplated hereby. 19 (b) Except for (i) the Governmental Approvals set forth in the Allied Disclosure Letter, (ii) the filing of this Agreement with and the approval of such by the Iowa Commissioner, the Iowa Attorney General, and the Arizona Director under the Iowa Insurance Law and the Arizona Insurance Law, respectively, and such other applications, registrations, declarations, filings, authorizations, Orders, consents and approvals as may be required under the Laws of other jurisdictions listed in the Allied Disclosure Letter, (iii) the approval of this Agreement by shareholders of Allied, if required by applicable law, (iv) the filings required under the HSR Act and the expiration or other termination of any waiting period applicable to the Offer and 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) the filing with the SEC of (x) a proxy statement relating to the approval by the shareholders of Allied of the Merger (the "Proxy Statement"), and (y) such reports under the Exchange Act, as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (viii) the filing of the certificate of merger with the Iowa Secretary of State and appropriate documents with the relevant authorities of other states in which Allied is qualified to do business and (ix) any consent or filing that is disclosed in the Allied Disclosure Letter or that would not otherwise be required to be disclosed pursuant to Section 4.5(a) hereof, no consent, approval, permit, notice, Order or authorization of, or registration, application, declaration or filing with (each a "Consent or Filing") any Governmental Entity is required with respect to Allied or any Allied Subsidiary in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for such Consents or Filings the failure of which to make or obtain would not, individually or in the aggregate, prevent or be a material impediment to the consummation of the transactions contemplated hereby or reasonably be expected to have a Material Adverse Effect or to prevent or delay the consummation of the transactions contemplated hereby. Section 4.6 SAP Statements. (a) "Allied SAP Statements" shall mean: (i) the Annual Statements for the Allied Insurers as of and for the years ended December 31, 1995, 1996 and 1997; 20 (ii) the Quarterly Statements for the Allied Insurers as of and for the calendar quarter ended March 31, 1998; (iii) any supplemental or separate statutory annual statements or quarterly statements for Allied Mutual and the Allied Insurers for any of the periods ended December 31, 1995, 1996 or 1997 or March 31, 1998, that are filed with any insurance Governmental Entity and that differ from the Annual Statements or the Quarterly Statements described in Section 4.6(i) or (ii) hereto; and (iv) the audited SAP balance sheets of each Allied Insurer as of December 31, 1995, 1996 and 1997 and the related audited summary of operations and statements of change in capital and surplus and cash flow of each Allied Insurer for each such years, together with the notes related thereto and the reports thereon of KPMG Peat Marwick, LLP. (b) Since December 31, 1997, each of the Allied Insurers 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 would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. With respect to any Allied Insurer, 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 have been cured or corrected, or are being contested in good faith by such Allied Insurer. With respect to any Allied Insurer, each Allied SAP Statement (and any notes related thereto) referred to in Section 4.6(a)(i), (ii), and (iv) hereof was prepared (and, as to Allied SAP Statements filed after the date of this Agreement, will be prepared) in accordance with SAP as in effect at the time of preparation and presents (and, as to Allied SAP Statements filed after the date of this Agreement, will present) fairly in all material respects the financial position of the Allied Insurers as of the respective dates thereof. With respect to any Allied Insurer, each Allied SAP Statement referred to in Section 4.6(c) hereof was prepared (or, in the case of similar Allied SAP Statements filed after the date of this Agreement, will be prepared) in accordance, in all material respects, with the statutory accounting practices required or permitted by the insurance Governmental Entity in the jurisdiction in which such statement was (or will be) filed. The parties agree that the 21 foregoing representations shall not be interpreted to apply to the actuarial reserves and other actuarial amounts held in respect of Liabilities with respect to insurance contracts of the Allied Insurers, as to which the only representations or warranties made in this Agreement are set forth in Section 4.8. Section 4.7 [Intentionally left blank.] Section 4.8 Reserves. To the Knowledge of Allied, the aggregate reserves of the Allied Insurers as recorded in the Allied SAP Statements have been determined in accordance with generally accepted actuarial principles consistently applied (except as set forth therein). Except as disclosed in the SEC Reports or the Allied Disclosure Letter, the insurance reserving practices and policies of the Allied Insurers have not changed, in any material respect, since December 31, 1997, and the results of the application of such practices and policies are reflected in the Allied SAP Statements. All reserves of the Allied Insurers set forth in the Allied SAP Statements are, to the Knowledge of Allied, fairly stated in accordance with sound actuarial principles and meet the requirements of the insurance laws of the applicable insurance authority, except where the failure to so state such reserves or meet such requirements would not reasonably be expected to have a Material Adverse Effect. Section 4.9 SEC Documents. Allied has timely filed all required reports, schedules, forms, statements and other documents with the SEC since January 1, 1995 (such reports, schedules, forms, statements and other documents are hereinafter referred to as the "SEC Documents"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and none of the SEC Documents as of such dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Allied included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim 22 financial statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present, in all material respects, the consolidated financial position of Allied and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited interim financial statements, to normal year-end audit adjustments) in accordance with GAAP. The parties agree that the representations set forth in the previous sentence shall not be interpreted to apply to the actuarial reserves and other actuarial amounts held in respect of Liabilities with respect to insurance contracts of the Allied Insurers, as to which the only representations or warranties made in this Agreement are set forth in Section 4.8. Section 4.10 Absence of Certain Changes or Events. Except as set forth in the Allied Disclosure Letter, since March 31, 1998, there has been no event or condition which has had (or would reasonably be expected to result in) a Material Adverse Effect, and except as set forth in the Allied Disclosure Letter, Allied and the Allied Subsidiaries have in all material respects conducted their businesses in the ordinary course consistent with past practices and have not taken any of the actions contemplated by Section 6.1 hereto. Section 4.11 No Undisclosed Liabilities. Except as set forth in the Allied Disclosure Letter or the SEC Documents filed prior to the date hereof and for Liabilities arising since March 31, 1998 in the ordinary course of business and consistent with past practice, or in connection with the Offer or the transactions contemplated by this Agreement, neither Allied nor any of the Allied Subsidiaries has any Liabilities of a nature required by GAAP to be reflected in a consolidated balance sheet of Allied (or reflected in the notes thereto). The parties agree that the representations set forth in the previous sentence shall not be interpreted to apply to the actuarial reserves and other actuarial amounts held in respect of Liabilities with respect to Insurance Contracts of the Allied Insurers, as to which the only representations or warranties made in this Agreement are set forth in Section 4.8. Section 4.12 Takeover Statutes. Allied has taken all actions necessary such that the provisions of Section 490.1110 of the IBCA and any applicable anti-takeover provision in the Restated Articles of Incorporation or By-laws of Allied is not, or at the Effective Time will not be, applicable to Allied, Nationwide, the Common Shares, the Offer, the Merger or any other 23 transactions contemplated by this Agreement and, to the Knowledge of Allied, no other restrictive provision of any "fair price," "moratorium," "control share acquisition," "interested shareholder" or other similar anti-takeover statute or regulation is so applicable. Section 4.13 Compliance with Law. Except as set forth in the Allied Disclosure Letter or the SEC Documents filed prior to the date hereof, the businesses of Allied and the Allied Subsidiaries are not being conducted and since January 1, 1995 have not been conducted in violation of any applicable Law, except for violations that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Section 4.14 Assets. (a) Except as set forth in the SEC Documents filed prior to the date hereof or the Allied Disclosure Letter, each of Allied and the Allied Subsidiaries (i) has good and valid title to all of its properties, assets and other rights that do not constitute real property, free and clear of all Liens other than Permitted Liens, and (ii) owns, has valid leasehold interests in or valid contractual rights to use, all of the assets, tangible and intangible, used by, or necessary for the conduct of, its business, except where the failure to have such valid leasehold interests or such valid contractual rights would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (b) Except as set forth in the SEC Reports filed prior to the date hereof or the Allied Disclosure Letter, each of Allied and the Allied Subsidiaries: (i) represents that it does not own any real property; (ii) is in peaceful and undisturbed possession of the space and/or estate under each lease under which it is a tenant, and there are no material defaults by it as tenant thereunder; and (iii) has good and valid rights of ingress and egress to and from all the real property leased by such party from and to the public street systems for all usual street, road and utility purposes. 24 Section 4.15 Environmental Matters. Except as set forth in the Allied Disclosure Letter or the SEC Reports, or as would not reasonably be expected to have a Material Adverse Effect: (a) 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 material Environmental Permits required under Environmental Laws and compliance with the terms and conditions thereof. 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, there are no circumstances that are reasonably likely to prevent or interfere with such compliance in the future. Neither Allied nor any Allied Subsidiary has been notified by any Governmental Entity that any such material Environmental Permit will be suspended or revoked or cannot be renewed in the ordinary course of business consistent with past practice. (b) 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 or may have retained or assumed either contractually or, by operation of Law and, there are no facts existing on the date hereof which are reasonably likely to result in any such Environmental Claim. (c) There have been no releases, spills, leaks or discharges of Hazardous Substances at, from or to any Allied Real Property or any other property which required or is reasonably likely to require Allied or any Allied Subsidiary to undertake investigation, abatement, removal, remedial, corrective or other response action pursuant to applicable Environmental Laws. None of the Allied Real Property (i) is listed or proposed for listing on any list maintained by any Governmental Entity of sites that may require investigation, abatement, removal, remedial, corrective or other response action, including, but not limited to, the CERCLIS or the NPL or (ii) is the subject of any investigation, abatement, removal, remedial, corrective or other response action. 25 Section 4.16 Contracts. (a) The Allied Disclosure Letter contains a true and complete list of all the following Contracts (true and complete copies of all such written Contracts having been made available to Nationwide), currently in force, to which Allied or any Allied Subsidiary is a party or by which any assets of Allied or any Allied Subsidiary are or may be bound, as such Contracts may have been amended to the date hereof: (i) has been entered into since March 31, 1998 and would be required to be filed by Allied as an exhibit to an SEC Document filed after such date under Item 10 of Rule 601 of Regulation S-K under the Exchange Act; (ii) is a reinsurance or retrocession contract which requires the payment of premiums by the Allied or the Allied Subsidiaries of amounts in excess of $500,000 per year; or (iii) contains covenants limiting the freedom of the Allied or any of the Allied Subsidiaries to engage in any line of business in any geographic area or to compete with any person or entity or restricting the ability of the Allied Subsidiaries to acquire equity securities of any person or entity; or (iv) is an employment or severance contract applicable to any employee, director or consultant of the Allied or the Allied Subsidiaries, including without limitation contracts to employ executive officers and other contracts with officers or directors of the Allied or any of the Allied Subsidiaries, other than agent contracts with insurance agents and any such contract which by its terms is terminable by the Allied or any of the Allied Subsidiaries on not more than 60 days' notice without material liability; or (v) is a contract for borrowed money in excess of $2,500,000; or (vi) is a contract providing for the payment or receipt of over $2,500,000 per year. 26 (b) As to all contracts with respect to which Allied or its Subsidiaries is bound, except as disclosed in the Allied Disclosure Letter or as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect: (i) such contract is (assuming due power and authority of, and due execution and delivery by, the other party or parties thereto) valid and binding upon each party thereto and is in full force and effect; (ii) there is no default or claim of default on the part of Allied or the Allied Subsidiary party thereto or, to the Knowledge of Allied, by other parties thereto, and no event has occurred which, with the passage of time or the giving of notice (or both), would constitute such default thereunder. Section 4.17 [Intentionally left blank.] Section 4.18 Taxes and Tax Returns. Except as set forth in the Allied Disclosure Letter or the SEC Documents: (a) All material Tax Returns required under applicable Law to be filed by Allied or any Allied Subsidiary have been timely filed; (b) Allied and each Allied Subsidiary have paid or made provision in accordance with GAAP (or there has been paid or provision has been made on its behalf) for the payment of all Taxes for all periods or portions thereof ending through the date hereof; (c) The federal income tax returns of Allied and each Allied Subsidiary have been examined by the Internal Revenue Service (or the applicable statutes of limitation for the assessment of federal income taxes have expired) for all periods through and including 1993; (d) No outstanding deficiencies, assessments or written proposals for the assessment of any Taxes have been proposed, asserted or assessed against Allied or any of the Allied Subsidiaries which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect; and 27 (e) No audits or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns of Allied or any Allied Subsidiary wherein an adverse determination or ruling in any one such proceeding or in all such proceedings in the aggregate would reasonably be expected to have a Material Adverse Effect. Section 4.19 Benefit Plans. The Allied Disclosure Letter sets forth a complete and correct list of all Benefit Plans (as defined below). Except as disclosed in the Allied Disclosure Letter or the SEC Documents: (a) Each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other material plan, program, arrangement or policy (written or oral) relating to bonuses, deferred compensation, performance compensation, compensation, stock purchases, stock options, stock appreciation, severance, salary continuation, vacation, sick leave, holiday pay, fringe benefits, reimbursement programs, incentive, insurance, welfare or other employee benefits, in each case maintained or contributed to, or required to be maintained or contributed to, by Allied and the Allied Subsidiaries for the benefit of any present or former officers, employees, agents, directors or independent contractors of Allied or the Allied Subsidiaries (all the foregoing being herein called "Benefit Plans") has been administered in accordance with its terms and all applicable laws and regulations except where the failure to be so administered would not reasonably be expected to result in a Material Adverse Effect. All required contributions to the Benefit Plans have been made or provided for, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Allied, the Allied Subsidiaries and all the Benefit Plans are in compliance with the applicable provisions of ERISA, the Code, all other applicable laws and all applicable collective bargaining agreements, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Complete and correct copies of all current and prior documents, including all amendments thereto, with respect to each Benefit Plan have been delivered or made available to Nationwide. Copies of all summary plan descriptions, summary annual reports, IRS 28 determination letters, summaries of material modifications, other communications to employees concerning the Benefit Plans, and the three most recent Forms 5500 for each Benefit Plan have also been delivered or made available to Nationwide. (b) None of Allied or any other person or entity that together with Allied is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled Entity") has incurred any material liability to a Pension Plan covered by Title IV of ERISA (a "Title IV Plan") (other than for contributions not yet due) or to the Pension Benefit Guaranty Corporation (other than for the payment of premiums not yet due) which liability has not been fully paid as of the date hereof. No Commonly Controlled Entity has withdrawn from a Pension Plan covered by Title IV of ERISA (a "Title IV Plan") during a plan year in which it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA) where such withdrawal could result in liability of such substantial employer pursuant to Section 4062(e) or 4063 of ERISA that would reasonably be expected to result in a Material Adverse Effect. No Commonly Controlled Entity has filed a notice of intent to terminate any Title IV Plan or adopted any amendment to treat any such plan as terminated. The Pension Benefit Guarantee Corporation has not instituted proceedings to terminate any Title IV Plan in which a Commonly Controlled Entity participates. No accumulated funding deficiency, whether or not waived, exists with respect to any such plan, and no condition has occurred or exists which by the passage of time would be expected to result in an accumulated funding deficiency as of the last day of the current plan year of any such plan. No reportable event, as described in Section 4043 of ERISA, has occurred and is continuing with respect to Title IV Plan in which a Commonly Controlled Entity participates which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any such plan. No amendment with respect to which security is required under Section 307 of ERISA has been made or is reasonably expected to be made to any Title IV Plan. Since the last valuation date for each such plan, there has been no amendment or change to such plan that would increase materially the amount of benefits thereunder. In addition to the documents listed in subsection (a) above, Allied has delivered or made available to Nationwide, for each Title IV Plan in which a Commonly Controlled Entity participates, copies of the following documents: (i) the Form PBGC-1 filed in each of the most recent three plan years, and (ii) the actuarial report as of the three most recent valuation dates and the retirement plan disclosures required under Financial Accounting Standard 87 for the most recent fiscal year. 29 (c) No Commonly Controlled Entity is required to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such withdrawal has resulted or would result in any "withdrawal liability" (within the meaning of Section 4201 of ERISA) that has not been fully paid. (d) There are no pending or threatened claims (other than routine benefit claims), lawsuits or arbitrations which have been asserted or instituted against any Benefit Plan, any of the fiduciaries thereof or Allied or the Allied Subsidiaries with respect to their duties under the Benefit Plans that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect. (e) Neither Allied nor a Commonly Controlled Entity, nor to the Knowledge of Allied, any of their respective employees or directors, nor to the Knowledge of Allied, any fiduciary, has engaged in any transaction in violation of Section 406(a) or (b) of ERISA or which is a "prohibited transaction" (as defined in Section 4975(c)(i) of the Code) for which no exemption exists under Section 408(b) of ERISA or Section 4975(d) of the Code or for which no administrative exemption has been granted under Section 408(a) of ERISA. (f) The Benefit Plans and their related trusts intended to qualify under Section 401 of the Code received favorable determination letters from the IRS and to the Knowledge of Allied, such Plans and their related trusts continue to qualify and operate as designed. (g) Allied and the Allied Subsidiaries have no liability (contingent or otherwise) under Section 4069 of ERISA by reason of a transfer of any underfunded pension plan. (h) Complete and correct copies of the most recent actuarial reports (including for purposes of Financial Accounting Standards Board report nos. 87, 106 and 112) with respect to each Benefit Plan providing retiree medical or life insurance coverage for employees of Allied and the Allied Subsidiaries have been provided or made available to Nationwide. Except as 30 disclosed in the Allied Disclosure Letter, no current employee of Allied or the Allied Subsidiaries would be entitled if his or her employment with Allied and the Allied Subsidiaries is terminated to any retiree medical or insurance coverage. (i) No amount that could be received as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of Allied or any of the Allied Subsidiaries under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would be characterized as an "excess parachute payment" (as such term is defined in Section 280G of the Code). (j) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any employee (current, former or retired) of Allied and the Allied Subsidiaries, (ii) increase any benefits under any Benefit Plan or (iii) result in the acceleration of the time of payment of, vesting of or other rights with respect to any such benefits. Section 4.20 Labor Relations and Employment. (a) Except to the extent set forth in the Allied Disclosure Letter or the SEC Documents, (i) there is no labor strike, material labor dispute, slowdown, stoppage or lockout actually pending, or to the Knowledge of Allied, threatened against or affecting Allied or any of the Allied Subsidiaries, and since January 1, 1998 there has not been any such action; (ii) to the Knowledge of Allied, no union claims to represent the employees of Allied or any of the Allied Subsidiaries, there are no current union organizing activities among the employees of Allied or of any of the Allied Subsidiaries and Allied has not received notice of any unfair labor practice complaint or charge against it pending before the National Labor Relations Board and (iii) neither Allied nor any of the Allied Subsidiaries is a party to or is bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association, applicable to employees of Allied or of any Allied Subsidiary. Section 4.21 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 except for any failure to have such right which would not, 31 individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Knowledge of Allied, the use of such Intellectual Property does not infringe or otherwise violate the rights of any Person. Section 4.22 Transactions with Affiliates. Except as set forth in the Allied Disclosure Letter or the SEC Documents, neither Allied nor any Allied Subsidiary has entered into any material transaction with an Affiliate in connection with which either Allied or an Allied Subsidiary has continuing obligations, in the ordinary course of business or otherwise, which is not on the terms at least as favorable to Allied or an Allied Subsidiary as would have been applicable if such transaction had been entered into on an arm's-length basis with an unaffiliated third party. Allied has not made or declared any dividend or distribution that was disproportionate in favor of any Affiliate. Section 4.23 Voting Requirements. The affirmative vote of the holders of a majority of the voting power represented by the outstanding Common Shares and outstanding Preferred Shares voting together as one class and entitled to vote at the Shareholders Meeting is the only vote of the holders of Allied's capital stock necessary to approve this Agreement and the transactions contemplated by this Agreement. Section 4.24 Investment Company. None of the Allied Subsidiaries maintains any separate accounts. Neither Allied nor any of its Subsidiaries conducts activities of or is otherwise deemed under applicable law to control an "investment advisor" as such term is defined in Section 2(a)(20) of the 1940 Act, whether or not registered under the Investment Advisers Act of 1940, as amended. Neither Allied nor any of its Subsidiaries is an "investment company" as defined under the 1940 Act, and neither Allied nor any of its Subsidiaries sponsors any Person that is such an investment company. 32 ARTICLE V REPRESENTATIONS AND WARRANTIES OF NATIONWIDE AND SUB Nationwide and Sub jointly and severally represent and warrant to Allied as follows: Section 5.1 Organization and Qualification. Nationwide is a mutual insurance company and Sub is a corporation duly organized, validly existing and in good standing under the Laws of the State of Ohio and has full corporate power, authority and legal right to conduct its Business as it is currently being conducted. Each of Nationwide and Sub is duly qualified to do business, and is in good standing, in the respective jurisdictions where the character of its assets owned or leased or the nature of its Business makes such qualification necessary, except for failures to be so qualified or in good standing which are not, individually or in the aggregate, reasonably likely to have a material adverse effect on Nationwide. Nationwide possesses an Insurance License in each jurisdiction in which Nationwide is required to possess an Insurance License. All such Insurance Licenses are in full force and effect without amendment, limitation or restriction, and Nationwide does not have Knowledge of any event, inquiry or Proceeding which is reasonably likely to lead to the revocation, amendment, failure to renew, limitation, suspension or restriction of any such Insurance License. Section 5.2 Authority Relative to this Agreement. (a) Nationwide and Sub have full power, authority and legal right to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly approved and authorized by the Board of Directors of Nationwide and by the Board of Directors of Sub. No other corporate proceedings on the part of Nationwide or Sub are necessary to authorize this Agreement and the transactions contemplated hereby. (b) This Agreement has been duly and validly executed and delivered by Nationwide and Sub and (assuming this Agreement is a legal, valid and binding obligation of Allied) constitutes a legal, valid and binding agreement of Nationwide and Sub enforceable against Nationwide and Sub in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. 33 Section 5.3 No Violation. (a) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) constitute a breach or violation of or default under the articles of incorporation or the by-laws of Nationwide or under the articles of incorporation or the by-laws of Sub, (ii) violate, conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the assets of Nationwide, Sub or any Nationwide Subsidiary under, any of the terms, conditions or provisions of any Contract to which Nationwide, Sub or any Nationwide Subsidiary is a party or to which it or any of its assets may be subject or (iii) constitute a breach or violation of or default under any Environmental Permit, Law or License to which Nationwide, Sub or any Nationwide Subsidiary is subject other than, in the case of clauses (ii) and (iii), events or other matters that are not, individually or in the aggregate, reasonably likely to have a material adverse effect on Nationwide or to prevent or delay the consummation of the transactions contemplated hereby. (b) Except for (i) the filing of this Agreement with and the approval of such by the Ohio Superintendent under the Ohio Insurance Law, the Iowa Commissioner under the Iowa Insurance Law and the Arizona Commissioner under the Arizona Insurance Law, (ii) the filings required under the HSR Act and the expiration or other termination of any waiting period applicable to the Merger under such act, and (iii) any Consent or Filing that would not otherwise be required to be disclosed pursuant to Section 5.3(a) hereof, no Consent or Filing of or with any Person is required with respect to Nationwide, Sub or any Nationwide Subsidiary or any Nationwide Affiliate in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for such Consents or Filings the failure of which to make or obtain would not, individually or in the aggregate, prevent or be a material impediment to the consummation of the transactions contemplated hereby or have a material adverse effect on the business, operations or financial condition of Nationwide or any of its Subsidiaries, taken as a whole, or that would prevent Nationwide or Sub from consummating the transactions contemplated by this Agreement. 34 Section 5.4 Litigation. There is no action, proceeding, investigation or inquiry pending or threatened against Nationwide and Sub which questions the validity of this Agreement or the Offer or any action taken or to be taken pursuant hereto or pursuant to the Offer. Section 5.5 Financial Ability to Perform. Nationwide and Sub at the expiration of the Offer and at the Effective Time will have cash funds sufficient to pay all cash payments for Common Shares in the Offer and the Merger, and to pay all related fees and expenses. ARTICLE VI CERTAIN COVENANTS Section 6.1 Allied Conduct of Business Pending the Merger. From the date hereof until the Effective Time, unless Nationwide shall otherwise agree in writing, or except as set forth in the Allied Disclosure Letter or as otherwise contemplated by this Agreement, Allied and the Allied Subsidiaries shall conduct their respective businesses in the ordinary course consistent with past practice and shall use all reasonable efforts to preserve intact their business organizations and relationships with third parties (including but not limited to their respective relationships with policyholders, insureds, agents, underwriters, brokers and investment customers) and to keep available the services of their present officers and key employees, subject to the terms of this Agreement. Except as set forth in the Allied Disclosure Letter or as otherwise provided in this Agreement, from the date hereof until the Effective Time, without the prior written consent of Nationwide: (i) Allied shall not adopt or propose any change in its Restated Articles of Incorporation or Bylaws; (ii) Allied shall not declare, set aside or pay any dividend or other distribution with respect to any shares of capital stock of Allied (except for regular quarterly dividends payable in an amount no greater than $0.14 per share on the Common Shares and the regular quarterly dividends per share on the Preferred Shares), or split, combine or reclassify any of Allied's capital stock, and Allied and the Allied Subsidiaries shall not repurchase, redeem or otherwise acquire any shares of capital stock or other securities of, or other ownership interests in, Allied; 35 (iii) Allied shall not, and shall not permit any Allied Subsidiary to, merge or consolidate with any other person or (except in the ordinary course of business) acquire a material amount of assets of any other person; (iv) Allied shall not, and shall not permit any Allied Subsidiary to, sell, lease, license or otherwise surrender, relinquish or dispose of (i) any material facility owned or leased by Allied or any Allied Subsidiary or (ii) any assets or property which are material to Allied and the Allied Subsidiaries taken as a whole, except pursuant to existing contracts or commitments listed in Section 6.1(iv) of the Allied Disclosure Letter (the terms of which have been disclosed to Nationwide prior to the date hereof), or in the ordinary course of business consistent with past practice; (v) Allied shall not, and shall not permit any Allied Subsidiary to, settle any material audit, make or change any material Tax election or file materially amended Tax Returns; (vi) Allied and the Allied Subsidiaries shall not issue any capital stock or other securities or enter into any amendment of any material term of any outstanding security, and Allied and the Allied Subsidiaries shall not incur any material indebtedness except in the ordinary course of business pursuant to existing credit facilities or arrangements, amend or otherwise increase, accelerate the payment or vesting of the amounts payable or to become payable under or fail to make any required contribution to, any Benefit Plan (as hereinafter defined) or materially increase any non-salary benefits payable to any employee or former employee, except in the ordinary course of business consistent with past practice or as otherwise permitted by this Agreement; (vii) Allied shall not, and shall not permit any Allied Subsidiary to, grant any increase in the compensation or benefits of directors, officers, employees, consultants or agents of Allied or any Allied Subsidiary other than increases in the ordinary course of business consistent with past practice; 36 (viii) Allied shall not, and shall not permit any Allied Subsidiary to, enter into or amend any employment agreement or other employment arrangement with any employee of Allied or any Allied Subsidiary, except in the ordinary course of business consistent with past practices (which past practices shall not be deemed to include actions taken in connection with the Merger); (ix) Allied shall not change any method of accounting or accounting practice by Allied or any Allied Subsidiary, except for any such required change in GAAP or SAP; (x) Allied shall not permit any Allied Insurer to conduct transactions in Allied Investments except in compliance with the investment policies of such Allied Insurer in effect on the date hereof and all applicable insurance laws and regulations; (xi) Allied shall not, and shall not permit any Allied Subsidiary to, enter into any agreement to purchase, or to lease for a term in excess of one year, any real property, provided that Allied, or any Allied Subsidiary, (i) may as a tenant, or a landlord, renew any existing lease for a term not to exceed eighteen months and (ii) nothing herein shall prevent the Allied, in its capacity as a landlord, from renewing any lease pursuant to an option granted prior to the date hereof; (xii) amend any agreement with Allied Mutual, Allied Life or any of their affiliates; (xiii) Allied shall not, and shall not permit any Allied Subsidiary to, agree or commit to do any of the foregoing; (xiv) except to the extent necessary to comply with the requirements of applicable laws and regulations, Allied shall not, and shall not permit any Allied 37 Subsidiary to, (i) take, or agree or commit to take, any action that would make any representation and warranty of Allied hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time, (ii) omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any material respect at any such time, provided however, that Allied shall be permitted to take or omit to take such action which (without any uncertainty) can be cured, and in fact is cured, at or prior to the Effective Time or (iii) take, or agree or commit to take, any action that would result in, or is reasonably likely to result in, any of the conditions of the Merger set forth in Article VIII not being satisfied; and (xv) none of the Allied Insurers shall make any material change in its underwriting, claims management or reserving practices. Section 6.2 Disposition of Litigation. From and after the date hereof and until the Effective Time, Nationwide shall cease, in any and all respects, the prosecution of any 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 6.3 Reasonable Best Efforts. Upon the terms and subject to the conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken all action, to do, or cause to be done, and to assist and cooperate with the other 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 I, II and III hereof, (ii) the obtaining of all Governmental Approvals, and all other necessary actions or nonactions, waivers, consents and approvals from all appropriate Governmental Entities and other Persons and the making of all necessary registrations and filings, (iii) the obtaining of the opinions and other documents referred to in Article VII hereof, (iv) the resolution of all organizational and human resources issues relating to the transactions contemplated hereby, (v) the obtaining or making of all Consents, Environmental Permits, Filings or Licenses necessary or desirable to ensure that the business of the Surviving Corporation may be conducted without disruption consistent with the past practice of each of the 38 Constituent Companies and (vi) the defending of any Proceedings challenging this Agreement or the consummation of the transactions contemplated hereby, the defense of which shall, at the request of either Allied or Nationwide, be conducted jointly by Nationwide and Allied on a basis that is satisfactory to both Allied and Nationwide. Allied hereby grants Nationwide the right to decide for purposes of the Form A regulatory hearings whether to submit regulatory applications for Allied, Allied Life and Allied Mutual concurrently or separately, and whether to conduct the regulatory hearing and approval proceedings concurrently or separately for each of Allied, Allied Life and Allied Mutual. Both Allied and Nationwide agree to use their reasonable best efforts to coordinate and cooperate during the regulatory approval process. Section 6.4 [Intentionally left blank.] Section 6.5 Access and Information. Subject to provisions of applicable law, Allied shall (a) afford to Nationwide's and Sub's accountants, legal counsel and other advisors ("Representatives") full access during normal business hours through the period immediately prior to the Effective Time to all of its and the Allied Subsidiaries' assets, books, Contracts, commitments and records (including, but not limited to, Tax Returns), and (b) during such period, Allied shall furnish promptly to Nationwide and Sub all such information concerning its business, assets and personnel or those of any of its Affiliates, in either clause (a) or (b), as Nationwide or Sub may reasonably request. Unless otherwise required by law, Nationwide and Sub will, and will cause their Representatives to, hold any such information in confidence until such time as such information otherwise becomes publicly available through no wrongful act of Nationwide, Sub or their Representatives. In the event of the termination of this Agreement for any reason, Nationwide will, and will cause Sub and their Representatives to, return to Allied all copies of written information furnished by Allied, Sub or their Representatives to Nationwide, Sub or their Representatives and destroy all memoranda, notes and other writings prepared by Nationwide, Sub or their Representatives based upon or including the information furnished by Allied or any of its Representatives to Nationwide, Sub or their Representatives (and Nationwide will certify to Allied that such destruction has occurred) and neither Nationwide nor Sub shall use any such information for any purpose. Prior to the completion of the Offer and, if this Agreement is terminated, during the two-year period following the date of termination, Nationwide will not (and will not assist or encourage others, including its Subsidiaries, to) solicit the 39 services, as employee, consultant or otherwise, of any employee of Allied, provided, that nothing in this Agreement shall be deemed to prohibit general solicitations of employment of persons in Nationwide's ordinary course of business not directed specifically toward employees of Allied, solicitations through executive recruiting firms not directed specifically toward employees of Allied or employees that make contact with Nationwide. Section 6.6 Notice of Proceedings. Each of Nationwide and Allied shall promptly notify the other of, and provide to the other all information relating to, any Proceedings or investigations commenced or, to the Knowledge of Allied, threatened against, relating to or involving or otherwise affecting Nationwide or Allied or any of their respective Subsidiaries which relate to the execution of this Agreement or the consummation of the transactions contemplated hereby. Section 6.7 Notification of Certain Other Matters. Each party shall promptly notify the other of any change or other event which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, including, but not limited to, any of the following: (a) any written notice from or to any Person alleging that the consent of such Person is or may be required in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby, and where the failure to obtain such a consent would reasonably be expected to have a Material Adverse Effect; (b) any written notice from or to any Governmental Entity in connection with this Agreement or the transactions contemplated hereby; and (c) any matter hereafter arising or discovered which, if existing or known at the date hereof, would have been required to be set forth or described in the Nationwide Disclosure Letter or the Allied Disclosure Letter, as the case may be; provided, however, that no such supplemental or amended disclosure by any party shall be deemed to cure any breach of a representation or warranty made as of the date hereof. 40 In furtherance of the foregoing, to the fullest extent permitted under applicable Law, each party shall provide the other with copies (or, to the extent written materials are not involved, oral notice) of proposed notices, applications or any other communications to any Governmental Entity or rating agency in connection with this Agreement or the transactions contemplated hereby, including, but not limited to, in respect of the Governmental Approvals, in each case at least three (3) Business Days prior to dispatch of written materials (or, to the extent written materials are not involved, prior to initiation) and neither Nationwide nor Allied will dispatch (or, to the extent written materials are not involved, initiate) such notice, application or communication without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed. Section 6.8 Indemnification; Directors' and Officers' Insurance. (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action, suit, proceeding or investigation by or in the right of Allied or any of its Subsidiaries, in which any of the present officers or directors (the "Indemnified Parties") of Allied or any of its Subsidiaries is, or is threatened to be, made a party by reason of the fact that he or she is or was a director, officer, employee or agent of Allied or any of its Subsidiaries, or is or was serving at the request of Allied or any of its Subsidiaries as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, whether before or after the Effective Time, the parties hereto agree to cooperate and use their reasonable best efforts to defend against and respond thereto. It is understood and agreed that Allied shall indemnify and hold harmless, and after the Effective Time the Surviving Corporation and Nationwide, jointly and severally, shall indemnify and hold harmless, as and to the full extent permitted by applicable Law, each such Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys, fees and expenses), judgments, fines and amounts paid in settlement in connection with any such claim, action, suit, proceeding or investigation, and in the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) the Indemnified Parties may retain one counsel satisfactory to them unless there are conflicts under applicable professional standards, and Allied, or the Surviving Corporation and Nationwide after the Effective Time, shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received and (ii) Allied and the 41 Surviving Corporation and Nationwide will use their respective reasonable best efforts to assist in the vigorous defense of any such matter; provided, that neither Allied nor the Surviving Corporation nor Nationwide shall be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld); and provided further that the Surviving Corporation and Nationwide shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and non-appealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. Any Indemnified Party wishing to claim indemnification under this Section 6.8, upon learning of any such claim, action, suit, proceeding or investigation, shall notify Allied and, after the Effective Time, the Surviving Corporation and Nationwide, thereof. (b) Nationwide shall cause the Surviving Corporation to keep in effect in its By-Laws a provision for a period of not less than six years from the Effective Time (or, in the case of matters occurring prior to the Effective Time which have not been resolved prior to the sixth anniversary of the Effective Time, until such matters are finally resolved) which provides for indemnification of the Indemnified Parties to the full extent permitted by applicable law. (c) Nationwide shall cause to be maintained in effect for not less than six years from the Effective Time the current policies of the directors' and officers' liability insurance maintained by Allied (provided that Nationwide may substitute therefor policies of at least the same coverage containing terms and conditions which are no less advantageous) with respect to matters occurring prior to the Effective Time; provided, however, that if the aggregate annual premiums for such insurance at any time during such period shall exceed 200% of the per annum rate of premium currently paid by Allied and its Subsidiaries for such insurance on the date of this Agreement, then Nationwide shall cause Allied (or the Surviving Corporation if after the Effective Time) to, and Allied (or the Surviving Corporation if after the Effective Time) shall, provide the maximum coverage that shall then be available at an annual premium equal to 200% of such rate, and Nationwide, in addition to the indemnification provided above in this Section 6.8, shall indemnify the Indemnified Parties for the balance of such insurance coverage on the same terms and conditions as though Nationwide were the insurer under those policies. 42 Section 6.9 [Intentionally Omitted.] Section 6.10 Acquisition Proposals. Allied will not, and will not permit or cause any of its Subsidiaries or any of the officers or directors of it or its Subsidiaries to, and shall direct its and its Subsidiaries' employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries