Exhibit 1
Charles I. Colby, age 70, has been a Director of the Company since 1993.
Mr. Colby had been a Director of ALLIED Mutual from 1971 to 1991. Since 1984,
Mr. Colby has been Chairman of the Board of Colby Properties, which is in the
business of real estate development. Mr. Colby is a member of the Board of
Directors of West Des Moines State Bank.
Harold S. Evans, age 69, has been a Director of the Company since 1974 and
of ALLIED Mutual since 1965. Mr. Evans also serves on the Board of Directors of
AMCO, ALLIED Property and Casualty, Depositors, and ALLIED Life Financial
Corporation. He was employed by Aluminum Company of America beginning in 1955,
serving as Group Vice President-International until his retirement in 1989. Mr.
Evans is a brother of John E. Evans, Chairman of the Board and a Director of the
Company.
Meetings and Committees of the Board of Directors
During 1997, there were five meetings of the Board of Directors. All
directors attended more than seventy-five percent of the aggregate committee and
Board meetings during 1997.
The Board has established Executive, Audit, Investment, Compensation, and
Coordinating Committees. The Company does not have a standing nominating
committee, and the functions that are normally performed by such a committee are
carried out by the Executive Committee. The Executive Committee will consider
nominees recommended by stockholders. Such recommendations for nominees for
election of the 1999 Annual Meeting should be submitted in writing to the
Executive Committee in care of the Secretary of the Company, 701 Fifth Avenue,
Des Moines, Iowa 50391-2000, no later than February 4, 1999.
The Executive Committee members are John E. Evans, James W. Callison,
Harold S. Evans, and Douglas L. Andersen. The Executive Committee has the
authority, with certain exceptions, to exercise the powers of the full Board of
Directors. The Board of Directors reviews and approves the minutes of all
meetings of the Executive Committee. The Executive Committee met five times in
1997.
The Audit Committee members consist of outside directors John P. Taylor and
Donald S. Willis. The Committee selects and retains the Company's independent
certified public accountants and approves the staffing and budgets of the
Company's internal audit department. Both the internal auditors and the
independent certified public accountants periodically meet with the Audit
Committee and have access to the members of the Committee. The Audit Committee
met two times in 1997. C. Fred Morgan, a member of the ALLIED Mutual Board of
Directors, sits as a nonvoting representative of ALLIED Mutual on the Audit
Committee.
The Investment Committee is a committee authorized to direct and approve
investment activities of the Company. The members of the Investment Committee
are John E. Evans, Harold S. Evans, James W. Callison, Charles I. Colby, and
Douglas L. Andersen. The Investment Committee met eight times in 1997.
The Compensation Committee of the Board has the authority to establish all
compensation and benefits for all of the executive officers and employees of the
Company and its subsidiaries. The members of the Compensation Committee,
Harold S. Evans, James W. Callison, and Charles I. Colby, met five times in
1997.
The Coordinating Committee is a committee responsible for matters involving
actual or potential conflicts of interest, if and when they arise, between the
Company, ALLIED Mutual, and ALLIED Life Financial Corporation. The Company's
members of the committee, Donald S. Willis and Harold S. Carpenter, are outside
directors of the Company who are not members of the Board of Directors of ALLIED
Mutual or ALLIED Life Financial Corporation. The Coordinating Committee met one
time in 1997.
Compensation of the Members of the Board of Directors and the Outside
Director Stock Purchase Plan
Directors who are not officers or employees of the Company received an
annual retainer in 1997 of $20,000 plus expenses incurred in attending Board
meetings. Directors were also paid $1,000 per Board meeting and $750 per
committee meeting. Directors who are executive officers of the Company do not
receive any fees in addition to their remuneration as officers. The annual
retainer is split among the Company, ALLIED Mutual, and ALLIED Life Financial
Corporation for James W. Callison, Harold S. Evans, and John E. Evans (each of
whom are also directors of ALLIED Mutual and ALLIED Life Financial Corporation),
and many of the meeting fees are also split for these three individuals in the
8
event the companies have meetings on the same day. In addition, Donald S.
Willis receives from the Company $750 per committee meeting for sitting as a
Company representative and nonvoting member of the ALLIED Mutual Contributions
Committee.
The Company's directors who are not employees or officers of the Company
may elect to receive all or a portion of their director fees in the form of
Common Stock obtained under the ALLIED Group, Inc. Outside Director Stock
Purchase Plan ("Director Purchase Plan"). Under the Director Purchase Plan, a
participant may purchase Common Stock with a fair market value of no more than
$25,000 per calendar year. The price per share paid to the Company is 100% of
the fair market value of shares of Common Stock. The director fees that are
withheld are applied to 85% of the price per share, with the remainder being
paid proportionally by the Company and/or other ALLIED companies to whom the
participant's director fees are allocated. A participant may not dispose of the
Common Stock purchased under the Director Purchase Plan for a period of one year
from the purchase date. An Administrative Committee composed of employee
directors of the Company administers the Director Purchase Plan. During 1997,
the following directors participated in the Director Purchase Plan purchasing
the number of shares and receiving the dollar value of discount for all shares
purchased as indicated: Harold S. Carpenter, 924 shares, $3,746; John E. Evans,
952 shares, $3,750; Richard O. Jacobson, 920 shares, $3,747; John P. Taylor, 924
shares, $3,746; William E. Timmons, 333 shares, $1,368; and Donald S. Willis,
156 shares, $640.
John E. Evans has a Consulting Agreement with the Company, ALLIED Mutual,
and ALLIED Life Financial Corporation pursuant to which he performs certain
consulting services for the companies until such agreement is terminated by Mr.
Evans or the companies. Mr. Evans is to be paid an annual fee which is to be
prorated among the Company, ALLIED Mutual, and ALLIED Life Financial
Corporation. The annual fee was $250,000 for the first six months or 1997 and
$180,000 for the latter six months. The Company's portion of the fee for 1997
was $172,365. ALLIED Mutual agreed to nominate Mr. Evans for re-election to the
Board of Directors of the Company in accordance with ALLIED Mutual's nomination
rights under this Stock Rights Agreement between ALLIED Mutual and the Company.
Executive Officers
In addition to Douglas L. Andersen, the following are the executive
officers of the Company and its subsidiaries.
Stephen S. Rasmussen, age 45, has been Executive Vice President since March
3, 1998 and had been Senior Vice President of the Company since 1995. He serves
in a similar capacity in each of ALLIED Mutual, AMCO, ALLIED Property and
Casualty, and Depositors. Mr. Rasmussen had previously been Vice President of
underwriting of ALLIED Mutual, AMCO, ALLIED Property and Casualty, and
Depositors since 1986. He has been employed by ALLIED Mutual since 1974 holding
a variety of underwriting and managerial positions.
Jamie H. Shaffer, age 54, has been Senior Vice President and Chief
Financial Officer of the Company, ALLIED Mutual, AMCO, ALLIED Property and
Casualty, and Depositors since 1997. He has been President (Financial) of the
Company since 1994. Since 1978, Mr. Shaffer has served as Treasurer of the
Company, ALLIED Mutual, AMCO, ALLIED Property and Casualty, and Depositors. Mr.
Shaffer joined ALLIED Mutual in 1971.
Marla J. Franklin, age 51, has been Vice President of the Company and Vice
President of Human Resources of ALLIED Mutual, AMCO, ALLIED Property and
Casualty, and Depositors since 1994. Previously, Mr. Franklin was Assistant Vice
President of Human Resources having been with ALLIED since 1973.
Michael D. Holmes, age 40, has been Vice President of Information Systems
for ALLIED Mutual, AMCO, ALLIED Property and Casualty, and Depositors since
1996. Mr. Holmes served as Vice President of Emerging Technologies for AmerUs
Mutual Life Insurance Company from 1995 until 1996. Previously, Mr. Holmes
served in various management positions in the information systems area with
ALLIED since 1983.
Steven P. Larsen, age 41, has been Vice President of Claims of ALLIED
Mutual, AMCO, ALLIED Property and Casualty, and Depositors since 1993. Mr.
Larsen joined ALLIED in 1991 as Assistant Vice President-Claims Legal.
Previously, he was employed by United Services Automobile Association as Claims
Counsel since 1985.
Charles H. McDonald, age 59, has been Vice President of the Company since
1990 and was named Vice President of Communications in 1994 for ALLIED Mutual,
AMCO, ALLIED Property and Casualty, and Depositors. He had been Vice President
of Human Resources from 1979 to 1994. His employment in personnel and employee
relations commenced with ALLIED Mutual in 1973.
10
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
As of February 28, 1998, the directors, the executive officers named in the
Summary Compensation Table, and the directors and executive officers as a group
beneficially owned shares of Common Stock as set forth below. The issued and
outstanding Common Stock and 6-3/4% Preferred as of February 28, 1998 were
30,549,314 shares and 1,827,222 shares, respectively.
Amount and Nature of Percent Voting
Name of Beneficial Owner Beneficial Ownership (1) of Class (1) Percentage
------------------------ ------------------------ ------------ ----------
John E. Evans 866,219 1.2% 1.0%
James W. Callison 26,542 - -
Harold S. Carpenter 67,795 (4) - -
Charles I. Colby 23,349 (5) - -
Harold S. Evans 47,994 (6) - -
Richard O. Jacobson 9,974 - -
John P. Taylor 22,202 - -
William E. Timmons 13,898 - -
Donald S. Willis 30,952 - -
Douglas L. Andersen 224,430 (2) (3) - -
Stephen E. Rasmussen 103,069 (2) (3) - -
Jamie H. Shaffer 196,083 (2) (3) - -
Steve A. Biggi 67,643 (2) (3) - -
Scott E. Reddig 1,811 - -
All directors and
executive officers
as a group (24 persons) 1,664,270 (2) (3) (4) (5) (6) 5.4% 4.6%
- ---------
(1) Except as noted, all persons have sole voting and investment power with
respect to the shares reported; asterisks indicate ownership of less than
1%.
(2) Includes the following number of shares that are also reported as
beneficially owned by the ESOP Trustee: Mr. Andersen, 56,301 shares; Mr.
Rasmussen, 29,961 shares; Mr. Shaffer, 58,161 shares; Mr. Biggi, 14,086
shares; Mr. Reddig, 1,244 shares; and all executives as a group 345,588
shares. Allocated shares are voted by the ESOP Trustee in accordance with
the direction of the ESOP participant. Generally, unallocated shares and
allocated shares as to which no direction is made by the participant are
voted by the ESOP Trustee in the same percentage as the allocated shares as
to which directions are received by the ESOP Trustee.
(3) Includes the following number of shares which the following persons have
the right to acquire within 60 days of February 28, 1998 pursuant to stock
options granted under the ALLIED Group, Inc. Restated and Amended Stock
Option Plan. ALLIED Group, Inc. Nonqualified Stock Option Plan, and ALLIED
Group, Inc. Long-Term Management Incentive Plan: Mr. Andersen, 47,623
shares; Mr. Rasmussen, 13,688 shares; Mr. Shaffer, 23,436 shares; Mr.
Biggi, 7,308 shares; and all executive officers as a group, 244,363 shares.
(4) Includes 57,375 shares of Common Stock owned by Superior Gas and Chemical,
Inc.
(5) Includes 15,750 shares of Common Stock owned by Charles I. Colby & Ruth
Colby Trust #1, Ruth Colby Trust A, and Charles I. Colby and Ruth Colby
Family Trust, each of which Charles I. Colby is Trustee and Beneficiary.
(6) Includes 34,266 shares of Common Stock owned by the Bethany Foundation, a
nonprofit corporation, of which Harold S. Evans is President.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is responsible for establishing and administering the compensation
policies which govern annual compensation, stock ownership programs, and
employee benefit programs for the executive officers as well as other employees
of the Company and its subsidiaries.
11
Compensation Criteria
In making compensation determinations, the Committee considers and
endeavors to obtain the following goals:
1) attract and obtain highly qualified and motivated executive
officers and employees,
2) encourage and reward achievement of annual and long-term
financial goals and operating plans of the Company, and
3) encourage executive officers and employees to become stockholders
with interests aligned with those of other stockholders.
The Committee's policy with regard to the compensation of executive
officers is to meet the foregoing goals through a combination of base salary,
annual bonus, stock ownership, and other benefits with a particular focus on
encouraging executive officers to attain individual performance goals that are
designed to favorably impact overall Company performance.
Compensation Components
The basic components of Compensation for executive officers, including
those individuals listed in the Summary Compensation Table, are in four areas:
Base Salary: The Committee sets salary ranges annually which are intended
to reflect the median level of base pay for comparable positions at companies of
similar size and complexity. The Committee reviews salary survey data provided
by independent survey consultants and information provided by the Standard and
Poor's property-casualty insurance segment. Based on the scope and
responsibility of the position in the survey compared to the scope and
responsibility of the position at the Company, the Committee determines whether
the officer's salary range should be set at, above, or below the median level of
the industry. To determine the level of a specific salary within its range, the
Committee considers management input regarding the officer's length of service
in the position, experience, and management skills in handling short and long
range issues. In addition, the Committee reviews the officer's performance
during the prior year measured against predetermined corporate and individual
plans and objectives approved by the Board.
Annual Bonus: The Committee believes that a significant portion of annual
cash compensation for the executive officers should be variable ("at risk") and
tied to the Company's financial results. The Short Term Management Incentive
Compensation Plan (the "Short Term Plan") is administered by the Committee which
annually establishes goals for profit and growth. Depending upon attainment of
Short Term Plan goals, executive officers may receive a bonus amount equal to
12-19% of base salary if the minimum profit goal is attained, and up to 48-75%
of base salary if both profit and growth goals are maximized. Profit is based on
consolidated net income or profit center net income as appropriate for measuring
the participant's overall contribution to the Company's success. Growth is
measured in direct written premiums for the property-casualty companies
(excluding Western Heritage and crop-hail business).
The profit and growth goals are established annually by the Committee.
Goals are set to exceed expected profit and growth performance of the industry.
The potential total award is weighted toward profit: 75% of the award may come
from profit goal attainment and 25% from growth attainment. No incentive for
growth is given if the minimum profit target is not met. The Committee may use
its discretion to modify a portion of a participant's award, either upward or
downward, based on management's recommendation of the participant's contribution
to the achievement of goals.
Stock Ownership: The Committee believes that a fundamental goal of
executive compensation is to encourage and create opportunities for long-term
executive stock ownership. Stock ownership guidelines for officers were
established by the Committee in 1994. Over a period of ten years, the following
ownership levels of Company Common Stock should be attained:
President 150,000 - 200,000 shares
Senior Vice Presidents 100,000 - 150,000 shares
Key Vice Presidents 75,000 - 100,000 shares
Other Executive Officers 30,000 - 50,000 shares
The Long-Term Management Incentive Plan (the "Long-Term Plan") provides for
the award of stock options (nonqualified and incentive stock options), stock
appreciation rights ("SARs"), and shares of restricted stock. The Committee
12
encourages ownership of Company stock through the grant of options to
participants in the Long-Term Plan. In determining who will participate and the
amount of awards, the Committee selects key management employees, and based on
their position, salary, performance, and previous grants, the Committee
determines the amount of awards to be given to each participant. Generally, the
amount increases with the level of position. The Committee intends to make
grants on an annual basis and establish a vesting schedule at each grant date.
The 1997 option grants vest in 33-1/3% increments on the third, fourth, and
fifth anniversary of the grant date. In 1997, 240,000 options were awarded to 33
participants, and 555,969 shares remain available for award.
Employee Benefits: The Company offers benefit plans such as vacation,
medical, life and disability insurance to executive officers on the same basis
as offered to all employees. In keeping with the Company's commitment to align
employee interests with those of stockholders, employees may acquire shares of
stock through the Employee Stock Purchase Plan ("ESPP"), and all eligible
employees are allocated shares through the Employee Stock Ownership Plan
("ESOP"). The ESPP allows employees to purchase stock at 85% of its fair market
value, and the ESOP is discussed in note 5 to the Summary Compensation Table in
this Proxy Statement. Executive officers are eligible for these programs on the
same basis as other employees.
CEO's Compensation
Mr. Andersen participates in the compensation program described above and
has a significant portion of his total compensation at-risk. In March, 1997 Mr.
Andersen was elected Chief Executive Officer of the Company and received a 16%
increase in base salary. In 1997, he received 15,000 shares subject to option,
which adjusted for the stock split in November 1997, amounts to 22,500 shares
subject to option. Mr. Andersen led the Company toward excellent financial
results in 1997 and received a bonus award of $166,036 for that performance.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (the "Code") generally limits
to $1 million per individual per year the federal income tax deduction for
compensation paid by a publicly-held company to the company's chief executive
officer and its other four highest paid executive officers. Compensation that
qualifies as performance-based compensation for purposes of Section 162(m) is
not subject to the $1 million deduction limitation. Options and stock
appreciation rights granted under the Long-Term Plan satisfy the requirements
for performance-based compensation. The Committee presently does not intend to
seek to qualify other components of the Company's incentive compensation for
executive officers as performance-based compensation under Section 162(m) of the
Code, such as the Short Term Plan. However, the Committee currently does not
anticipate that any executive officer will be paid compensation from the Company
in excess of $1 million in any year (including amounts that do not qualify as
performance-based compensation under the Code), and accordingly, the Committee
anticipates that all amounts paid as executive compensation will be deductible
by the Company for federal income tax purposes.
COMPENSATION COMMITTEE
James W. Callison
Charles I. Colby
Harold S. Evans
14
COMPENSATION OF EXECUTIVE OFFICERS
All employees are directly employed by the Company. The Company leases
employees to all of its subsidiaries and to ALLIED Mutual and certain of its
subsidiaries. The following table shows the compensation earned by the CEO and
the four most highly compensated officers of the Company for services rendered
in all capacities to the Company, its subsidiaries, and to ALLIED Mutual and its
subsidiaries.
Summary Compensation Table
Long-Term Compensation
---------------------------------
Annual Compensation Awards
------------------------ ---------------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary (1) Bonus (2) Awards (3) Options/SARs (4) Compensation (5)
- --------------------------- ---- --------- --------- ---------- ---------------- ----------------
Douglas L. Andorsen 1997 $318,930 $166,036 -0- 22,500 $61,200
President, CEO, and Director 1996 279,594 -0- $11,900 15,750 27,000
of Company, AMCO, ALLIED 1995 260,000 108,754 22,200 38,250 21,000
Property and Casualty,
Depositors, and ALLIED Mutual
Stephen S. Rasmussen 1997 $180,847 $ 70,000 -0- 15,000 $67,600
Executive Vice President of 1996 169,825 -0- $10,750 11,250 30,375
Company, AMCO, ALLIED 1995 158,000 50,026 19,700 33,001 23,625
Property and Casualty,
Depositors, and ALLIED Mutual
Jamie H. Shaffer 1997 $229,362 $117,602 -0- 18,000 $57,600
Senior Vice President, 1996 219,132 -0- $13,000 15,750 30,375
Treasurer, and CFO of 1995 200,000 83,662 24,900 60,750 23,625
Company, AMCO, ALLIED
Property and Casualty,
Depositors, and ALLIED Mutual
Steve A. Biggi 1997 $157,750 $ 89,040 -0- 15,000 $57,600
Regional Vice President 1996 148,260 84,643 $ 9,000 7,875 30,375
of AMCO, ALLIED Property 1995 145,385 -0- 16,500 5,625 23,625
and Casualty, Depositors
and ALLIED Mutual
Scott E. Reddig 1997 $145,038 $ 53,400 -0- 6,000 $35,605
Vice President of AMCO, 1996 19,953(6) -0- -0- 22,500 -0-
ALLIED Property and Casualty, 1995 -0- -0- -0- -0- -0-
Depositors, and ALLIED Mutual
- ---------
(1) Includes amounts deferred at the election of the officer pursuant to the
Company's Savings and Investment Plan (401(k)).
(2) Amounts were earned in the year indicated but paid in the following year
under the ALLIED Group Short Term Management Incentive Compensation Plan.
(3) Awards of restricted stock were made to satisfy obligations under the Long-
term Management Incentive Compensation Plan (also known as the Performance
Unit Plan) which was discontinued in 1994. For the three-year performance
period ending in 1995 and 1996, shares of
15
restricted stock were awarded to satisfy prorated cash awards to which the
participants were entitled. The restricted stock vests 25% per year
beginning the second year after the award. Dividends are paid on the
restricted stock awarded to participants. The number and value of the
aggregate restricted stock holdings at the end of 1997 are as follows
(using a market value of $29.72 per share): Mr. Andersen, 1,989 shares
valued at $57,124; Mr. Rasmussen, 1,777 shares valued at $51,035; Mr.
Shaffer, 2,215 shares valued at $63,615; and Mr. Biggi, 1,488 shares valued
at $42,735.
(4) The number of reported options and SARs reflect the 3-for-2 stock split in
November 1997. See "Option/SAR Grants in Last Fiscal Year" for a
description of the terms and conditions of the option grants.
(5) Amounts are deferred compensation and reflect contributions made by the
Company under The ALLIED Group Employee Stock Ownership Plan ("ESOP") which
is a defined contribution retirement plan covering all eligible Company
employees. The amount of employer contribution is based on a percentage of
annual pay (capped at $160,000) and calculated as follows: less than 6
years of service, 6% of pay; 6 years but less than 11 years; 7% of pay; 11
years but less than 21 years, 8% of pay; and for 21 years or more, 9% of
pay. In 1995, 1996, and 1997, employees participating in the ESOP received
an additional 75%, 125%, and 300%, respectively, increased stock allocation
to their accounts. In 1997, Mr. Rasmussen received cash dividends on the
ESOP shares purchased with funds transferred from the terminated retirement
plan in the amount of $6,624.
(6) Mr. Reddig began employment with the Company on November 11, 1996. In 1996,
he received $21,600 in perquisites, the majority of which were for moving
expenses.
Option/SAR Grants in Last Fiscal Year
The following table summarizes certain information regarding options
granted during 1997 to the named executive officers and reflects the November
1997 3-for-2 stock split.
Potential
Individual Grants Realizable Value at
------------------------------- Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options/SARs Appreciation
Underlying Granted to Exercise or for Option Term (2)
Options/SARs Employees in Base Expiration ---------------------
Name Granted (1) Fiscal Year Price (5/ ) Date 5% 10%
- -------------------- -------------- ------------ ----------- ---------- -------- --------
Douglas L. Andersen 22,600 options 9.4% $22.9167 3/21/2007 $324.274 $821,775
Stephen S. Rasmussen 15,000 options 6.3% $22.9167 3/21/2007 $216,183 $547,650
Jamie W. Shaffer 18,000 options 7.5% $22.9167 3/21/2007 $250,419 $657,420
Steve A. Biggi 15,000 options 6.3% $22.9167 3/21/2007 $216,183 $547,850
Scott E. Reddig 6,000 options 2.5% $22.9167 3/21/2007 $ 86,479 $219,140
- ----------------
(1) These options will vest and become exercisable as follows: 33-1/3% as of
3/21/2000; 66-2/3% as of 3/21/2001; and 100% as of 3/21/2002.
(2) These amounts represent assumed rates of stock price appreciation of 5% and
10% which are specified in applicable federal securities regulations. The
actual value, if any, an executive officer may realize depends on the
market value of the Common Stock at a future date. There is no assurance
that the value realized by an executive officer will be at or near the
values set forth in the table.
16
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option Values
The following table summarizes certain information regarding options
exercised during 1997 and presents the value of unexercised options and SARs
held at December 31, 1997. The SARs entitle the participant to receive payment
from the Company solely in cash.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at TY-End at FY-End (1)
Shares Acquired Exercisable (E)/ Exercisable (E)/
Name on Exercise Value Realized (1) Unexercisable (U) Unexercisable (U)
- -------------------- --------------- -------------------- ---------------------- -------------------------
Douglas L. Andersen 6,149 $138,891 options/$73,148 SARS 30,001 (E)/ 75,440 (U) $473,245 (E)/5 1,144,141 (U)
Stephen S. Rasmussen 3,949 $ 71,685 options/$11,983 SARS -0- (E)/ 60,564 (U) $ -0- (E)/5 780,104 (U)
Jamie H. Shaffer 4,149 $154,651 options/$35,170 SARS -0- (E)/ 94,505 (U) $ -0- (E)/5 780,104 (U)
Steve A. Biggi -0- $ -0- options/$ -0- SARS 3,435 (E)/ 29,910 (U) $ 67,279 (E)/5 292,202 (U)
Scott E. Reddig -0- $ -0- options/$ -0- SARS -0- (E)/ 20,500 (U) $ -0- (E)/5 244,735 (U)
- -----------
(1) Values are calculated by determining the difference between the fair market
value of the Common Stock and the exercise price of the options and SARs on
the exercise date or at fiscal year end, as appropriate. The fair market
value (average of the high and low as reported on The New York Stock
Exchange) as of December 31, 1997 was $29.72 per share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity securities file reports of ownership
and changes in ownership with the SEC. Officers, directors, and greater than
10% shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based on a review of the reports,
during the fiscal year ended December 31, 1997, all Section 16(a) filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Intercompany Operating Agreement
The Company and its subsidiaries are parties to an Intercompany Operating
Agreement ("IOA") with ALLIED Life Financial Corporation ("ALFC"), ALLIED
Mutual, and each of their respective subsidiaries. The IOA provides for the
sharing of employees, office space, agency forces, data processing, and other
services and facilities. The IOA extends through December 31, 2004 and continues
thereafter subject to any party providing two years notice that such party
intends to cease participation. In the event of a change of control (whenever
ownership of 50% or more of the voting stock of the Company or ALFC is acquired
by a nonaffiliated party) of the Company or ALFC, the other party or ALLIED
Mutual may (i) terminate it upon six months notice; (ii) extend the term for up
to ten additional years beyond 2004; or (iii) allow the IOA to continue in
effect without change. The Company leases to ALLIED Mutual and its subsidiaries
(except for ALFC) the employees utilized in their operations for a fee and
reimbursement of personnel costs based on certain allocation methods. The
Company is obligated to provide the entire requirements for employees to ALLIED
Mutual and its subsidiaries (other than ALFC), but ALLIED Mutual reserves the
right to hire employees independently rather than leasing them from the Company.
The Company has the right to determine the compensation and benefits of all
leased employees. However, if the Company wishes to adopt or amend any employee
benefit plan or program and pass on the increased costs thereof with respect to
employees leased by ALLIED Mutual, it must obtain the approval of