Exhibit 21
STOCK RIGHTS AGREEMENT
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This is a Stock Rights Agreement (the "Agreement") made as of July 5, 1990
by and between ALLIED Mutual Insurance Company, an Iowa mutual insurance
company ("Mutual"), and ALLIED Group, Inc., an Iowa corporation ("AGI").
WHEREAS, AGI is a publicly-traded diversified non-operating holding company
with subsidiaries in property-casualty insurance, life insurance, data
processing and investment services; and
WHEREAS, as of September 30, 1989, Mutual owned 5,295,083 shares of AGI's
no par value common stock, such shares constituting approximately 78% of the
outstanding common stock of AGI as of such date; and
WHEREAS, Mutual and AGI have entered into a Stock Purchase Agreement dated
as of October 24, 1989, as amended under date of November 20, 1989 (as amended,
the "Stock Purchase Agreement") wherein, subject to the satisfaction of the
terms and conditions set forth in the Stock Purchase Agreement, Mutual has
agreed to purchase from AGI, and AGI has agreed to sell to Mutual, 80,000 shares
of the $10 par value common stock and 30,000 shares of the $100 par value
preferred stock of ALLIED Life Insurance Company, an Iowa stock life insurance
corporation ("Life"), such common and preferred shares constituting 100% of the
outstanding capital stock of Life (collectively the "Life Shares"); and
WHEREAS, the Stock Purchase Agreement provides that the consideration to be
paid by Mutual for the Life Shares shall be 2,700,000 shares of the no par value
common stock of AGI owned by Mutual (the "AGI Shares"); and
WHEREAS, subject to the satisfaction of the terms and conditions set forth
in the Stock Purchase Agreement, Mutual shall be required to deliver the AGI
Shares to AGI in exchange for the Life Shares; and
WHEREAS, in connection with the Stock Purchase Agreement, AGI has
established an employee stock ownership plan for the benefit of AGI employees
(the "AGI ESOP"); and
WHEREAS, AGI intends to fund the AGI ESOP through the issuance of 2,400,000
shares of the no par value convertible preferred stock of AGI (the "ESOP
Shares"), which issuance shall occur within thirty days subsequent to the
closing of the transactions contemplated by the Stock Purchase Agreement; and
WHEREAS, the ESOP Shares entitle the holder thereof to vote on all matters
submitted to the holders of the AGI common stock, with the holder of the ESOP
Shares and the holders of the AGI common stock voting together as one class; and
WHEREAS, upon Mutual's delivery to AGI of the AGI Shares in exchange for
the Life Shares and AGI's issuance of the ESOP Shares to the AGI ESOP,
Mutual's substantial stock interest in AGI shall be significantly reduced to the
extent that Mutual shall own only approximately 40% of the outstanding voting
securities of AGI based on the total of the number of shares of the no par value
common stock of AGI (the "AGI Common Stock") and the number of the ESOP Shares
outstanding as of the time immediately following the closing of the Stock
Purchase Agreement; and
WHEREAS, notwithstanding Mutual's delivery to AGI of the AGI Shares in
exchange for the Life Shares and AGI's issuance of the ESOP Shares to the AGI
ESOP, Mutual will remain the single largest stockholder of AGI; and
WHEREAS, Mutual and AGI mutually desire to have Mutual proportionately
represented on the Board of Directors of AGI during the term of this Agreement;
and
WHEREAS, Mutual and AGI believe that it is necessary, advisable and the
best interests of both organizations and their respective policyholders and
stockholders that they enter into an agreement settling forth the relative
rights, duties and obligations of each with respect to Mutual's ongoing stock
interest in AGI and to provide one or more mechanisms, to the extent required,
to enable Mutual to effect orderly distributions of shares of the AGI Common
Stock in the future.
NOW, THEREFORE, in consideration of the premises and for other valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
MUTUAL REPRESENTATION ON AGI BOARD
SECTION 1.01. Mutual's Proportionate Representation.
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Mutual and AGI hereby acknowledge and agree that each party shall use their
best efforts to cause, to the extent practicable, the election or retention as
members of the Board of Directors of AGI (the "AGI Board") of that number of
nominees proposed by and representing Mutual which most closely approximates the
same percentage of the total number of members of the AGI Board as is equal to
Mutual's percentage ownership of the total number of shares of AGI Common Stock
and AGI preferred stock outstanding at the time Mutual is required to submit any
nomination in accordance with the provisions of Section 1.02 below.
Notwithstanding the foregoing, AGI may at any time agree to nominate a number of
nominees proposed by and representing Mutual for election to the AGI Board in
excess of the minimum number required in accordance
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with this Section 1.01. Mutual and AGI hereby agree that it is in the best
interests of both parties to have the total number of persons nominated by
Mutual in accordance with the provisions of this Article I divided as equally as
is practicable among the three classes of directors serving on the AGI Board
from time to time.
SECTION 1.02. Mutual's Nominees For AGI Board.
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(a) By February 1 in any calendar year, if in connection with any annual
meeting of the stockholders of AGI at which directors will be elected, or at
least forty-five (45) days prior to any special meeting of the stockholders of
AGI at which directors will be elected (or, with respect to special
stockholders' meetings, such shorter period of time as is permitted under the
bylaws of AGI), Mutual shall give the Chairman of the Board of AGI written
notice identifying the person or persons nominated by Mutual to stand for
election as members of the AGI Board at such stockholders' meeting, with the
number of persons to be nominated by Mutual to be determined pursuant to Section
1.02(b) below.
(b) After giving effect to those directors, if any, previously nominated by
Mutual and continuing in office as members of any class of the AGI Board not
standing for election at any stockholders' meeting at which directors will be
elected, Mutual shall be entitled to nominate that number of persons to stand
for election as directors as is necessary (when combined with any such
Mutual-nominated directors continuing in office) to provide Mutual approximate
proportionate representation on the AGI Board in accordance with the provisions
of Section 1.01 above. Any notice of nomination submitted by Mutual shall comply
with the provisions of the bylaws of AGI respecting the information to be
contained therein.
SECTION 1.03. Newly-Created Directorships; Vacancies.
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(a) In the event the AGI Board or the stockholders of AGI at any time
approves any increase in the number of members of the AGI Board and at such
time, Mutual would, if the provisions of Section 1.01 above were applied, be
otherwise entitled to nominate one or more additional persons to serve on the
AGI Board, as increased, AGI agrees to allow such additional person or persons
as are nominated by Mutual, by written notice delivered to the Chairman of the
Board of AGI within thirty (30) days of the date on which Mutual is notified of
any increase in the number of members of the AGI Board, to fill one or more of
the newly-created directorships to provide Mutual approximate proportionate
representation on the AGI Board in accordance with the provisions of Section
1.01 above.
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(b) In the event of any vacancy on the AGI Board in any directorship
previously filled by a nominee of Mutual, whether such vacancy results from
death, resignation, disqualification, removal or other cause, AGI agrees to
allow a person nominated by Mutual, by written notice delivered to the Chairman
of the Board of AGI within thirty (30) days of the date on which Mutual is
notified of such vacancy, to fill the vacant directorship.
SECTION 1.04. Election of Mutual's Nominee to Executive Committee. AGI
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hereby agrees to elect as a member of the Executive Committee of the AGI Board
(the "Executive Committee") at least one member of the AGI Board who has been
nominated by Mutual but who is not an officer or employee of Mutual. AGI hereby
agrees that the total number of members serving on the Executive Committee shall
not be greater than five. In the event of any vacancy on the Executive Committee
in any position previously filled by a nominee of Mutual in accordance with this
section, whether such vacancy results from death, resignation, disqualification,
removal or other cause, another member of the AGI Board who is nominated by
Mutual in accordance with this section by written notice delivered to the
Chairman of the Executive Committee within thirty (30) days of the date on which
Mutual is notified of such vacancy, shall be elected to fill the vacant position
on the Executive Committee.
SECTION 1.05. Recommendation of Mutual's Nominees: No Preventive Action.
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AGI hereby agrees:
(a) that it will recommend the election of any person or persons nominated
by Mutual in accordance with any of the foregoing provisions in any and all
proxy statements or other soliciting materials provided to stockholders of AGI
in connection with any stockholders' meeting at which directors will be elected;
and
(b) that it will not take, or cause to be taken, any action, whether direct
or indirect, which would be reasonably likely to prevent, discourage or
otherwise interfere with the election to the AGI Board of any persons nominated
by Mutual in accordance with any of the foregoing provisions.
ARTICLE II
STOCKHOLDER ACTIVITIES
SECTION 2.01. Stockholder Activities. Mutual agrees:
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(a) that it will not give a proxy with respect to its shares of AGI Common
Stock to any person other than (i) an officer or director of Mutual, (ii) a
majority-controlled affiliate of Mutual, or (iii) the management of AGI;
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(b) that its shares of AGI Common Stock will be represented, in person or
by proxy, at all meetings of the stockholders of AGI, provided that nothing
herein shall prevent Mutual from abstaining from a vote on any matter presented
at any stockholders' meeting; and
(c) that, except with regard to the election of directors, it will not,
directly or indirectly, solicit any AGI stockholders (except a
majority-controlled affiliate of Mutual) to vote on any particular matter.
SECTION 2.02. Tender Offers.
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(a) Except as provided in Section 2.02(b) below, Mutual shall not, directly
or indirectly, make, instigate or assist in the making of a tender offer for any
shares of AGI Common Stock or other acquisition of any shares of AGI Common
Stock which has the purpose or effect of constituting an acquisition of control.
Notwithstanding the foregoing, Mutual may tender any of the AGI Common Stock
owned by it in response to any tender offer by a third party in the following
circumstances:
(i) Mutual may tender its shares of AGI Common Stock in response to a
tender offer that the AGI Board has recommended to the stockholders of AGI;
and
(ii) Mutual may tender its shares of AGI Common Stock in response to an
unsolicited third-party tender offer in the event AGI has not exercised its
right of first refusal with respect to such shares in accordance with
Article III hereof and has not tendered or caused to be tendered payment
for the shares of AGI Common Stock owned by Mutual prior to the business
day next preceding the date on which such tender offer will expire.
(b) Mutual may make a tender offer at a price higher than the price at
which a bona fide tender offer for AGI Common Stock has been made by a third
party; provided, however, that Mutual may not make a tender offer to purchase a
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greater number of shares of AGI Common Stock than are proposed to be purchased
pursuant to such third-party tender offer.
SECTION 2.03. Public Disclosure of Mutual's Disagreement. AGI hereby agrees
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that if Mutual submits a letter to the Chairman of the Board of AGI wherein (a)
Mutual expresses its disagreement with AGI on any matter relating to AGI's
operations, policies or practices and (b) Mutual requests that the matter be
disclosed, AGI will make a public disclosure, within thirty (30) days of the
date on which it receives Mutual's letter, accurately summarizing Mutual's
description of such disagreement. Such public disclosure shall include, but not
be limited to, disclosure in any proxy statement AGI proposes to distribute to
its stockholders if
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the area of disagreement has not been resolved, to Mutual's reasonable
satisfaction, on or before any date on which proxy materials are being
disseminated to the stockholders of AGI. If AGI believes that Mutual's
description of the disagreement is incorrect or incomplete, AGI may include in
any such public disclosure a brief statement presenting AGI's views of such
disagreement.
SECTION 2.04. Other Rights. Except as otherwise provided in this Article
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II, Mutual shall be untitled to exercise any and all rights with respect to any
shares of AGI Common Stock owned by it.
ARTICLE III
AGI RIGHT OF FIRST REFUSAL
SECTION 3.01. Right of First Refusal.
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(a) Subject to the provisions of Section 4.02 hereof, Mutual hereby
agrees that if it desires or proposes to sell any or all of its shares of AGI
Common Stock pursuant to a bona fide offer to purchase such shares (the "Mutual
Shares"), Mutual shall give prompt written notice to AGI (the "Seller's Notice")
identifying the number of Shares, the intended method of sale, the name, address
and principal business activity of the party who has made such bona fide offer
for such shares (the "Offeror"), the price or other form of consideration
payable therefor, the proposed sale date and all other material terms and
conditions pertaining to such proposed sale (including written evidence
therefor). Mutual agrees that it will offer to sell the Mutual Shares to AGI or
its designee at the same price and upon the same terms and conditions as are set
forth in the Seller's Notice, except that if the price specified in the Seller's
Notice is payable in property (which term shall include the securities of any
other issuer), the price shall be the fair market value of such property on the
date AGI receives the Seller's Notice, as agreed upon by Mutual and AGI within
fifteen (15) business days after AGI's receipt of the Seller's Notice or, if the
parties are unable to agree, as determined by an independent investment banking
firm designated by Mutual.
(b) AGI shall have the sole right to purchase, or to designate one or
more financially responsible persons to purchase all (and not less than all) of
the Mutual Shares as to which the Seller's Notice relates and shall have thirty
(30) days after it receives the Seller's Notice within which to decide to
purchase such shares or make such designation. If AGI so elects to purchase, or
to designate one or more financially responsible persons to purchase, all of the
Mutual Shares, it shall notify
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Mutual in writing (the "Purchaser's Notice") within such thirty-day period and
the consummation of any sale to AGI shall occur within one hundred and eighty
(180) days of the date of the Purchaser's Notice at the price and upon the same
terms and conditions as those set forth in the Seller's Notice, except in the
case of a purchase pursuant to Section 2.02(a)(ii) hereof, which shall be
consummated prior to the business day next preceding the date on which the
third-party tender offer will expire, if earlier.
(c) In the event the purchase is to be made by one or more financially
responsible persons designated by AGI, a binding agreement of each of such
persons shall be furnished to Mutual at the time AGI delivers the Purchaser's
Notice to Mutual. At the time such notice is transmitted, there shall be deemed
to be a binding agreement between AGI and Mutual on the price and the terms
determined as provided above, notwithstanding the designation of any alternate
purchasers by AGI. Any purchase by any financially responsible person designated
by AGI shall be consummated as provided in Section 3.01(b) above.
(d) If AGI elects not to purchase and not to designate one or more
financially responsible persons to purchase all of the Mutual Shares, Mutual may
sell any or all of the Mutual Shares as to which the Seller's Notice relates to
the Offeror at not less than the price and on the same terms and conditions as
disclosed in the Seller's Notice. If the sale as described in the Seller's
Notice shall for any reason not occur, then the provisions of this Section 3.01
shall again apply and no subsequent sale of the Mutual Shares shall be made
unless in accordance herewith.
SECTION 3.02. Sales Subject to Right of First Refusal. For purposes of
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Section 3.01 above, the term "sale" or "sell" shall be deemed to include any
sale to or voluntary exchange with any other person of any shares of AGI Common
Stock beneficially owned by Mutual but shall not be deemed to include:
(a) a sale pursuant to any default or security provisions in any loan or
security agreement under which Mutual Shares are bona fide pledged or otherwise
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serve as collateral;
(b) a sale or exchange with an affiliate or majority-owned subsidiary of
Mutual, provided that any such affiliate or subsidiary to whom such a
disposition is made shall agree, in a writing to be furnished to AGI as a
precondition of such disposition, to be bound by the provisions of this
Agreement;
(c) a sale pursuant to a distribution to the public in a firm underwriting
of an offering registered under the Securities Act of 1933, as amended (the
"Securities Act");
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(d) any sale or sales by Mutual pursuant to Rule 144 promulgated under
the General Rules and Regulations under the Securities Act (or any substantially
similar successor rule or provision), as now in effect or hereafter amended;
(e) the sale of not more than 2% of the then outstanding shares of AGI
Common Stock in any six consecutive calendar months, which amount shall be
non-cumulative so that the sale of less than 2% of the then outstanding shares
of AGI Common Stock by Mutual in any six-month period shall not entitle Mutual
to sell more than 2% of the shares outstanding in any succeeding six-month
period;
(f) a disposition of all AGI Common Stock held by an affiliate or
majority-owned subsidiary of Mutual to another corporation pursuant to a
consolidation or merger of such affiliate or subsidiary with and into such other
corporation (in a transaction in which such affiliate or subsidiary is not the
surviving corporation) or a sale of all or substantially all of such affiliate's
or subsidiary's assets to such other corporation, provided that, prior to the
consummation of such consolidation, merger or sale, such other corporation (the
"Successor") delivers a written agreement to AGI, satisfactory in form and
substance to AGI and its counsel, wherein the Successor agrees to be bound by
the provisions of this Agreement to the same extent as if the Successor were
Mutual, Mutual's affiliate or the majority-owned subsidiary of Mutual
hereunder; or
(g) a sale in response to a third-party tender offer to the extent
permitted by Section 2.02(a)(ii) hereof.
SECTION 3.03. No Right of First Refusal if Unlawful.
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Notwithstanding the provisions of Section 3.01 hereof, if, at the time of any
required notice of proposed sale by Mutual, AGI shall not be permitted by
applicable law either to acquire the shares to be sold or to designate one or
more purchasers pursuant to Section 3.01 hereof, AGI shall have no rights
hereunder with respect to such shares for so long as AGI or its designees are
not permitted to acquire such shares, provided Mutual has given at least ten
(10) business days' prior written notice to AGI of the basis on which Mutual has
concluded that AGI may not acquire such shares or designate any such purchaser
and AGI agrees with Mutual's conclusion, which agreement shall not unreasonably
be withheld.
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ARTICLE IV
MUTUAL'S REGISTRATION RIGHTS
SECTION 4.01. Incidental Registration.
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(a) If AGI shall determine to register any shares of AGI Common Stock
either for its own account or for the account of any other holder of shares of
AGI Common Stock, other than a registration filed solely to (i) register shares
of AGI Common Stock issuable pursuant to employee benefit plans; (ii) register
shares of AGI Common Stock issuable pursuant to any dividend reinvestment plan
or any similar plan involving rights to purchase shares of AGI Common Stock
which is made generally available to stockholders of AGI and in which Mutual can
elect to participate by virtue of its position as an AGI stockholders; or (iii)
comply with Rule 145 (or any substantially similar successor rule or provision)
promulgated under the General Rules and Regulations under the Securities Act, as
now in effect or hereafter amended AGI will:
(i) promptly give Mutual written notice thereof (which shall
include a list of the jurisdictions in which AGI intends to attempt to
qualify such securities under the applicable blue sky or other securities
laws); and
(ii) use its best efforts to include, upon the same terms (including
the method of distribution), in such registration (and any related
qualification under state blue sky laws and other compliance filings, and
in an underwriting involved therein), all the shares of AGI Common Stock
specified by Mutual in a written request delivered by Mutual of AGI
within fifteen (15) business days after the written notice from AGI
described in clause (i) above is delivered to Mutual; provided, however,
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that, notwithstanding the foregoing, Mutual's right to have shares of AGI
Common Stock owned by Mutual included in such registration shall be
limited to that number of shares of AGI Common Stock as represents that
percentage of the total number of shares of AGI Common Stock proposed to
be registered by AGI which equals the percentage of the outstanding AGI
Common Stock then held by Mutual, unless AGI consents in writing to the
inclusion of a greater number of shares of AGI Common Stock owned by
Mutual.
(b) Notwithstanding the foregoing, AGI shall not be required to include
all or any portion of the AGI Common Stock owned by Mutual in any such
registration if it is advised by its investment banking firm that the inclusion
thereof may, in the reasonable opinion of such investment banking firm,
interfere with the orderly sale and distribution of the AGI Common Stock
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being offered by AGI. If any reduction is required, Mutual shall have the
right and option to elect to withdraw from the registration.
(c) AGI may, at its sole discretion and without the consent of Mutual,
withdraw any such registration statement and abandon the proposed offering in
which Mutual had requested to participate.
(d) In connection with any registration pursuant to this Section 4.01, AGI
and Mutual will pay, in the same proportions as the number of shares of AGI
Common Stock being sold by each bears to the total number of shares of AGI
Common Stock being sold, all Securities and Exchange Commission and state blue
sky registration and filing fees, underwriting discounts, commissions and
expenses, printing expenses, fees and disbursements of legal counsel and blue
sky expenses, transfer agents' and registrars' fees, and fees and disbursements
of experts used by AGI in connection with such registration, expenses of any
special audits of AGI incidental to or required by such registration, expenses
incidental to any post-effective amendment to any such registration statement,
and any expenses associated with AGI's obligations under Section 4.03(b) hereof
("Registration Expenses"); provided, however, that Mutual shall not be required
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to bear any portion of the compensation expenses of regular employees of AGI,
which shall be paid in any event by AGI.
SECTION 4.02. Demand Registration.
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(a) If AGI shall receive a written request from Mutual (complying with the
provisions of Section 3.02(a)(ii) below) that AGI effect a registration with
respect to all or any part of the AGI COmmon Stock then held by Mutual, AGI
will:
(i) use its best efforts to effect such registration (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under the applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as has been so requested and as would permit or
facilitate the sale and distribution of all or such portion of such AGI Common
Stock as is specified in the request of Mutual; provided, however, that AGI
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shall not be obligated to effect any such registration pursuant to this Section
4.02:
(A) in any particular jurisdiction in which AGI would be
required to execute a general consent (as opposed to a specific consent relating
solely to the registration) to service or process in effecting any such
registration, qualification or compliance, unless AGI is already subject to
service in such jurisdiction
and except as may otherwise be required by the Securities Act or
applicable rules or regulations thereunder; or
(B) more than three times at the request of Mutual during the
term of this Agreement; or
(C) covering AGI Common Stock representing less than 5% of
shares of AGI Common Stock then held by Mutual unless the shares of
AGI Common Stock subject to such request for registration represent
the entire holdings of Mutual, if less; or
(D) if Section 4.02(b) below applies, more than once within
any 12-month period.
(ii) Any request by Mutual for registration delivered to AGI in
accordance with this Section 4.02 shall specify the number of shares of AGI
Common Stock intended to be offered and sold, shall express Mutual's
present intent to offer such shares for distribution to the public, shall
describe the nature of the proposed offer and sale thereof and shall
contain an undertaking of Mutual to provide all such information and
materials and take all such action as may be required in order to permit
AGI to comply with any and all applicable requirements under the Securities
Act and to obtain acceleration of the effective date of the registration
statement.
(b) AGI Right to Postpone Registration. Notwithstanding the foregoing,
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AGI shall be entitled to postpone for a reasonable period of time the filing of
any registration statement otherwise required to be prepared and filed by it
pursuant to this Section 4.02, if at the time it receives a request for
registration from Mutual pursuant to this Section 4.02, it determines, in its
reasonable judgment, that such registration and offering would materially
interfere with any financing, acquisition, corporate reorganization or other
material transaction in which it is involved and AGI promptly gives Mutual
written notice of such determination. If AGI shall so postpone the filing of a
registration statement, Mutual shall have the right and option to elect to
withdraw the request for registration by giving written notice to AGI within
thirty (30) days after receipt of the notice of postponement (and, in the event
of any such withdrawal, such request shall not be counted for purposes of
determining the number of registrations to which Mutual is entitled pursuant to
this Section 4.02).
(c) Underwriting. Any registration effected at the request of Mutual in
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accordance with this Section 4.02 may, at Mutual's option, be effected pursuant
to a firm commitment underwriting and the managing underwriter shall be a firm
selected by Mutual
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and approved by AGI (which approval will not be unreasonably withheld). AGI will
enter into an underwriting agreement containing representations, warranties and
agreements not substantially different from those customarily included by an
issuer in underwriting agreements with respect to secondary distributions.
Subject to the provisions of Section 4.02(d) below, if the underwriters have not
limited the number of shares of AGI Common Stock to be underwritten, AGI may
elect to include shares of AGI Common Stock for its own account in such
registration provided that the number of shares of AGI Common Stock proposed to
be distributed by Mutual and that would otherwise have been included in such
registration and underwriting will not thereby be limited.
(d) Additional Securities. Any registration statement filed pursuant to the
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request of Mutual may, subject to the provisions of Section 4.02(c) above,
include other securities of AGI that are held by officers or directors of AGI,
or are held by persons who, by virtue of any agreements with AGI, are entitled
to include their AGI Common Stock in any such registration; provided that the
holders of such shares are granted no more favorable terms by AGI, with respect
to such registration, than have been granted by AGI herein to Mutual.
Notwithstanding the foregoing, if the managing underwriter determines that the
inclusion of shares of AGI Common Stock held by AGI for its own account, by
officers or directors of AGI or by other persons with registration rights
pursuant to any agreements with AGI which are proposed to be distributed in such
underwriting would, in the reasonable judgment of such underwriter, have a
material adverse effect on the offering, the underwriter may limit the number of
shares of AGI Common Stock to be included in the registration and underwriting.
In such event, shares of AGI Common Stock proposed to be offered by AGI for its
own account shall first be excluded from the registration, and, if a limitation
on the number of shares to be included is still required, shares of AGI Common
Stock held by officers or directors of AGI or by other persons with registration
rights pursuant to any agreements with AGI shall then be excluded from the
registration.
(e) Expenses. All Registration Expenses incurred as a result of any
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registration effected in accordance with this Section 4.02 shall be borne by
Mutual unless, in accordance with the provisions of Section 4.02(c) or Section
4.02(d) hereof, such registration includes shares of AGI Common Stock (i)
distributed by AGI for its own account, (ii) distributed by officers or
directors of AGI, or (iii) distributed by persons with registration rights
pursuant to any agreements with AGI, in which case (A) Mutual will pay that
portion of the Registration Expenses as is equal to the same proportion the
number of shares of AGI Common Stock being sold; and (B) AGI will pay that
portion of the Registration Expenses as is equal to the same proportion the
number of shares of AGI Common Stock being sold by AGI, its
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officers or directors or persons with registration rights pursuant to any
agreements with AGI bears to the total number of shares of AGI Common Stock
being sold.
SECTION 4.03. Registration Procedures. In connection with the filing of any
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registration statement pursuant to Section 4.01 or Section 4.02 hereof covering
shares of AGI Common Stock owned and to be distributed by Mutual:
(a) Mutual shall furnish to AGI such information regarding Mutual and the
distribution proposed by Mutual as AGI may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Article IV; and
(b) In the case of each registration effected by AGI pursuant to this
Article IV, AGI will advise Mutual in writing as to the initiation of such
registration and as to the completion thereof. AGI will:
(i) keep such registration effective for a period of 90 days or until
Mutual has completed the distribution described in the registration
statement relating thereto, whichever first occurs;
(ii) furnish such number of prospectuses and other documents incident
thereto as Mutual, or the underwriters, from time to time may reasonably
request in order to effect the offering and sale of any AGI Common Stock
being offered and sold by Mutual; and
(iii) furnish Mutual with certificates representing ownership of the
AGI Common Stock being sold in such numbers and denominations as Mutual, or
the underwriters, shall reasonably request, and meeting the requirements of
the exchange through which such shares are traded or the NASDAQ, as the
case may be.
SECTION 4.04. Indemnification. Whenever, pursuant to Section 4.01 or 4.02
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hereof, a registration statement relating to the AGI Common Stock is filed under
the Securities Act, AGI will indemnify and hold harmless Mutual if Mutual is
selling AGI Common Stock covered thereby, its officers and directors, each
person, if any, who controls Mutual, any underwriter, and each person, if any,
who controls any underwriter managing or participating in the registered
offering, against any losses, claims, damages or liabilities, joint or several,
to which Mutual, its officers or directors, any such underwriter or any such
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement, or alleged untrue
statement, of
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any material fact contained in such registration statement, or preliminary
prospectus or final or summary prospectus that may be a part thereof, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse Mutual, its officers and directors, each such underwriter and each
such controlling person for all legal or other expenses reasonably incurred by
it in connection with investigating or defending against such loss, claim,
damage, liability or action; provided, however, that AGI shall not be liable in
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any such case to the person and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or alleged untrue statement or omission or alleged omission
made in said registration statement, said preliminary, final or summary
prospectus, or said amendment or supplement, in reliance upon and in conformity
with information furnished to AGI by the person otherwise entitled to indemnity
hereunder, specifically for use in preparation thereof.
(b) Whenever, pursuant to Section 4.01 or 4.02 hereof, a registration
statement relating to AGI Common Stock is filed under the Securities Act,
Mutual, if selling shares of AGI Common Stock covered thereby, will indemnify
and hold harmless AGI, each of the directors of AGI, each of AGI's officers who
have signed such registration statement and each other person, if any, who
controls AGI, against all losses, claims, damages or liabilities, joint or
several, to which AGI, or any such director, officer or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement, or alleged untrue statement, or any
material fact contained in such registration statement, or preliminary
prospectus or final or summary prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only if, and to the
extent that, such statement or omission was in reliance upon and in conformity
with information furnished to AGI by mutual specifically for use in the
preparation thereof, and will reimburse AGI and such directors, officers or
controlling persons for all legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action.
(c) Promptly after receipt of notice of any claim or the commencement of
any action in respect to which indemnity may be sought on account of the
indemnity agreements contained in this Section, the indemnified party will
notify the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
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wish, to assume the defense, conduct or settlement thereof, with counsel
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to so assume the defense, conduct
or settlement thereof, the indemnifying party will not be liable to the
indemnified party under this Section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense,
conduct or settlement thereof. Notwithstanding an election by the indemnifying
party to assume the defense, conduct or settlement thereof. Notwithstanding an
election by the indemnifying party to assume the defense, conduct or settlement
of any claim subject to indemnification hereunder, if the indemnified party
reasonably determines that its interests may be adverse to, or conflict with,
those of the indemnifying party, it may elect, at its own expense, to retain or
continue to retain its own counsel to participate in the defense, conduct or
settlement of such claim. The indemnified party will cooperate with the
indemnifying party without charge in connection with any such claim, make
personnel, books and records relevant to the claim available to the indemnifying
party and grant such authorizations or powers of attorney to the agents,
representatives and counsel of the indemnifying party as such indemnifying party
may reasonably consider desirable in connection with the defense of any such
claim. For purposes of this Section 4.04, the terms "control," "controlling
person" and "underwriter" have the respective meanings that they have in and
under the Securities Act.
SECTION 4.05. Transfer of Registration Rights. Mutual's rights to require
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AGI to register Mutual's shares of AGI Common Stock in accordance with the
provisions of Section 4.01 or 4.02 hereof may be assigned by Mutual to a valid
transferee of the AGI Common Stock then held by Mutual, provided that AGI is
given written notice by Mutual prior to said transfer, stating the name and
address of said transferee and identifying the number of shares of AGI Common
Stock being transferred, and provided further that the registration rights
granted in Section 4.02 in all events shall be held by only one holder of the
AGI Common Stock held by Mutual on the date hereof irrespective of the number of
shares so held.
ARTICLE V
ADDITIONAL COVENANTS OF THE PARTIES
SECTION 5.01. Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations under the securities laws to permit
Mutual to sell shares of AGI Common Stock without registration from time to
time, AGI hereby agrees to:
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(a) make and keep public information available at all times, as those
terms are understood and defined in Rule 144 promulgated under the Securities
Act (or any substantially similar successor rule or provision), as now or
hereafter in effect;
(b) use its best efforts to file in a timely manner all reports and other
documents required of AGI under the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act");
(c) so long as Mutual owns any AGI Common Stock, furnish to Mutual upon
request a written statement by AGI as to its compliance with the reporting
requirements of Rule 144 (or any substantially similar successor rule or
provision) and with the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly reports of AGI, and such other reports and documents
filed by AGI as Mutual may reasonably need in order to avail itself of any rule
or regulation (or any substantially similar successor rule or provision),
allowing Mutual to sell shares of AGI Common Stock from time to time without
registration.
5.02. "Market Stand-Off". Unless participating in a registration pursuant
----------------
to Section 4.01 or Section 4.02 hereof, Mutual hereby agrees that if requested
by an underwriter of AGI Common Stock, without the prior written consent of the
underwriter, it will not sell or otherwise transfer or dispose of, directly or
indirectly, any shares of AGI Common Stock held by it during the ninety (90) day
period following the effective date of any registration statement filed by AGI
under the Securities Act to register any shares of AGI Common Stock for public
sale or distribution; provided, however, that AGI and all persons entitled to
registration rights with respect to shares of AGI Common Stock who are not
parties to this Agreement, all other persons selling shares of AGI Common Stock
in such offering and all officers and directors of AGI shall also have agreed
not to sell publicly their shares of AGI Common Stock under these same terms and
conditions.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties by Mutual. Mutual hereby
----------------------------------------
represents and warrants to AGI as follows:
(a) Mutual is a duly organized, validly existing mutual insurance company
in good standing under the laws of the State of Iowa and has all requisite
corporate power and authority to conduct its business, to own its properties and
to execute, deliver and perform all of its obligations under this Agreement.
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(b) The execution, delivery and performance of this Agreement has been
duly authorized by all requisite action, corporate or otherwise, by Mutual.
This Agreement constitutes the legal, valid and binding obligation of Mutual
enforceable against Mutual in accordance with its terms. Compliance by Mutual
with the provisions of this Agreement will not violate the provisions of any
law, regulation or order applicable to it, will not conflict with, or result in
the breach or default by it of any of the terms, conditions or provisions of its
corporate charter or bylaws or any contract or agreement to which it is a party
or by which it or its property is bound. Mutual is not a party to, subject to or
bound by or a beneficiary of any agreement or judgment, order, writ, injunction
or decree of any court, governmental body or arbitrator which would be
contravened or breached by, or under which any payment or other obligation could
be accelerated as a result of, the execution, delivery or performance by Mutual
of this Agreement, or which could prevent the consummation of this Agreement and
the transactions contemplated hereby, or which, by operation of law, or pursuant
to its terms, would terminate upon consummation of this Agreement. Subject to
filing with the Securities and Exchange Commission from time to time of any
registration statement effected in accordance with Section 4.01 or Section 4.02
hereof (and, if necessary, the consent of the Commissioner of the Division of
Insurance of the Department of Commerce of the State of Iowa to Mutual's
execution of this Agreement), no permit, consent, approval or authorization of,
or declaration to or filing or registration with any governmental or regulatory
authority is or will be required in connection with the valid execution,
delivery or performance by Mutual of this Agreement.
SECTION 6.02. Representations and Warranties by AGI. AGI hereby represents
-------------------------------------
and warrants to Mutual as follows:
(a) AGI is a duly organized, validly existing corporation in good
standing under the laws of the State of Iowa all requisite corporate power and
authority to conduct its business, to own its properties and to execute, deliver
and perform all of its obligations under this Agreement.
(b) The execution, delivery and performance of this Agreement has been
duly authorized by all requisite action, corporate or otherwise, by AGI. This
Agreement constitutes the legal, valid and binding obligation of AGI enforceable
against AGI in accordance with its terms. Compliance by AGI with the provisions
of this Agreement will not violate the provisions of any law, regulation or
order applicable to it, will not conflict with, or result in the breach or
default by it of any of the terms, conditions or provisions of its corporate
charter or bylaws or any contract or agreement to which it is a party or by
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which it or its property is bound. AGI is into a party to, subject to or bound
by or a beneficiary of any agreement or judgment, order, writ, injunction or
decree or any court, governmental body or arbitrator which would be contravened
or breached by, or under which any payment or other obligation could be
accelerated as a result of, the execution, delivery or performance by AGI of
this Agreement, or which could prevent the consummation of this Agreement and
the transactions contemplated hereby, or which, by operation of law, or pursuant
to its terms, would terminate upon consummation of this Agreement. Subject to
filing with the Securities and Exchange Commission from time to time of any
registration statement effected in accordance with Section 4.01 or Section 4.02
hereof, not permit, consent, approval or authorization of, or declaration to or
filing or registration with any governmental or regulatory authority is or will
be required in connection with the valid execution, delivery or performance by
AGI of this Agreement.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Conditions Precedent to the Obligations of the Parties.
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The obligations of either Mutual or AGI to comply with the terms of this
Agreement are subject in their entirety to:
(a) the consummation of the sale of the Life Shares by AGI to Mutual in
accordance with the terms and conditions of the Stock Purchase Agreement; and
(b) the consent, if necessary, of the Commissioner of the Division of
Insurance of the Department of Commerce of the State of Iowa to Mutual's
execution of this Agreement.
SECTION 7.02. Term of Agreement. Subject to the satisfaction of the
-----------------
conditions precedent hereto set forth in Section 7.01 above and to the
suspension of each party's obligations hereunder in accordance with Section 7.03
below, this Agreement shall become effective as of the date above first written
and shall terminate on, and be of no further force and effect after, the
fifteenth (15th) anniversary of the date hereof, unless earlier terminated as
provided in Section 7.07 below. Notwithstanding the foregoing, the restrictions
on Mutual set forth in Article II hereof shall terminate upon the first to occur
of any of the following events:
(a) AGI is consolidated or merged with another corporation (other than
with a wholly-owned subsidiary or by way of reincorporation) in a transaction in
which AGI is not the surviving corporation, or AGI sells all or substantially
all of its assets
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to another corporation (other than to a wholly-owned subsidiary unless such sale
is merely a step in the acquisition of AGI by another corporation); or
(b) at any time, any corporation, entity or person (other than Mutual)
holds 50% or more of the voting securities of AGI then outstanding.
SECTION 7.03. Suspension of Agreement. The obligations of either party
-----------------------
hereto pursuant to this Agreement shall be suspended if and for so long as
Mutual's aggregate holdings of AGI Common Stock are less than 10% of the then
outstanding AGI Common Stock.
SECTION 7.04. Assignment. Except as otherwise provided in Section 4.05
----------
hereof, neither this Agreement nor any rights hereunder may be assigned by
either of the parties hereto.
SECTION 7.05. Waiver, Modifications, Remedies. No delay or omission of any
-------------------------------
party to this Agreement to exercise any right or power hereunder shall impair
such right or power or be a waiver of any default or an acquiescence therein;
and any single or partial exercise of any such right or power shall not preclude
other or further exercise thereof or the exercise of any other right; and no
waiver or modification hereto shall be valid unless in writing signed by the
parties hereto, and then only to the extent in such writing specifically set
forth. In addition to any rights granted herein, the parties hereto shall have
and may exercise any and all rights and remedies now or hereafter provided by
law.
SECTION 7.06. Notices. Except as otherwise provided in Article I or
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Article II hereof, all notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, by certified or registered mail (return receipt requested) or
when sent by telex or telecopier (with receipt confirmed):
(a) If to Mutual:
ALLIED Mutual Insurance Company
701 Fifth Avenue
Des Moines, Iowa 50309
Attention: John E. Evans
Telecopy: (515) 288-4778
with a copy to:
Jay Eaton
Nyemaster, Goode, McLaughlin, Voigts, West,
Hansell & O'Brien, P.C.
1900 Hub Tower
Des Moines, Iowa 50309
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(b) If to AGI:
ALLIED Group, Inc.
701 Fifth Avenue
Des Moines, Iowa 50309
Attention: John E. Evans
Telecopy: (515) 280-4778
with a copy to:
Donald J. Brown
Davis, Hockenberg, Wine, Brown, Koehn & Shors
2300 Financial Center
Des Moines, Iowa 50309
Any notice given as provided in this Section 7.06, if given personally, shall be
effective upon delivery, if given by certified or registered mail, shall be
effective three (3) days after deposit in the mail, and if given by telex or
telecopier, shall be effective upon transmission. Any party hereto may change
the address at which it is to be given notice by giving notice to the other
party as provided in this Section 7.06.
SECTION 7.07. Termination and Abandonment. Notwithstanding the provisions
---------------------------
of Section 7.02 hereof, this Agreement may be terminated and abandoned by the
parties hereto, without liability or restriction on the future activities of
either party hereto, by mutual consent of the Boards of Directors of Mutual and
AGI.
SECTION 7.08. Governing Law. This Agreement shall be deemed to be contract
-------------
made under the laws of the State of Iowa and shall be construed and interpreted
under the laws of such state applicable to contracts made and to be performed
entirely within such state.
SECTION 7.09. Consent to Arbitration.
----------------------
(a) Each party hereto hereby consents and agrees that any dispute between
the parties hereto with respect to the interpretation, performance or breach of
any of the terms of this Agreements which cannot be resolved amicably shall be
referred to arbitration conducted in accordance with the rules and procedures of
the American Arbitration Association ("AAA") upon written request of either
party hereto delivered to the other party. Within thirty (30) days of the
delivery of such written notice, each party hereto shall nominate an
AAA-licensed arbitrator (the "Party Arbitrators"). Within thirty (30) days of
their nomination, the Party Arbitrators shall select a third AAA-licensed
arbitrator (the "Third Arbitrator") and shall give the parties hereto written
notice of such choice.
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(b) The arbitrators shall be empowered to decide all issues submitted to
arbitration using principles of law and equity and, if required, by application
of any customary practices in the insurance and reinsurance industries. The
arbitrators shall be relieved of all judicial formalities and shall not be
required to follow any rules of evidence except as such rules may be imposed on
arbitration proceedings conducted in accordance with the laws of the State of
Iowa, but the arbitrators shall attempt to enforce the intents and purposes of
this Agreement to the extent practicable (in accordance with the provisions of
Section 7.10 hereof) and in accordance with Iowa law (as required by Section
7.08 hereof). The decision of a majority of the arbitrators shall be final and
binding on each of the parties hereto.
(c) Each party hereto shall bear the expenses of its Party Arbitrator. The
parties hereto shall jointly share all other expenses of the arbitration
proceeding and the expenses of the Third Arbitrator. The arbitration proceeding
shall take place at Des Moines, Iowa, unless another location is mutually agreed
upon by the parties hereto. The arbitration proceeding shall be governed by the
laws of the State of Iowa. The parties hereto hereby agree that any information
respecting any matter submitted to arbitration in accordance with the foregoing
and any aspect of the arbitration proceeding itself shall be treated as
confidential and will not be disclosed to anyone not employed or acting on
behalf of a party hereto in connection with such arbitration or used at any time
in any manner that is adverse to the interests or either party hereto but, in
any such case, such information may be disclosed if such disclosure is made in
connection with either party's prosecution or defense of any legal proceedings
or if such disclosure is required pursuant to a subpoena or other legal order
issued by any judicial or regulatory body or is otherwise required by law.
(d) Anything set forth herein to the contrary notwithstanding, with
respect to any issue to be determined by arbitration the parties shall each
submit in writing to the arbitrators their proposed resolution of such issue.
The arbitrators shall be constrained in their decision relating to such issue to
select only between the proposed resolutions, and the arbitrators shall have no
discretion to fashion any compromise or other resolution of the issue submitted
for arbitration.
SECTION 7.10. Enforceability. If any one or more of the covenants,
--------------
agreements, provisions or other terms of this Agreement shall be for any reason
whatsoever determined to be invalid, then such terms shall be deemed severable
from the remaining terms of this Agreement and shall in no way affect the
validity or enforceability of the other terms of this Agreement and such invalid
terms shall be replaced by valid terms bearing the
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closest possible similarity in substance so that the intentions and purposes
being the basis of this Agreement could be enforced to the greatest extent
permitted by law.
SECTION 7.11. Counterparts. This Agreement may be executed simultaneously
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in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 7.12. Headings. The headings in the sections and subsections of
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this Agreement are inserted for convenience only and shall not constitute a part
hereof.
SECTION 7.13. Entire Agreement. This Agreement, including the schedules
----------------
and exhibits referred to herein and any documents executed by the parties
simultaneously herewith constitute the entire understanding and agreement of the
parties hereto and supersede all other prior agreements and understandings,
written or oral, between the parties with respect to the transactions
contemplated herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year above first written.
ALLIED MUTUAL INSURANCE COMPANY ALLIED GROUP, INC.
By: /s/ John E. Evans By: /s/ John E. Evans
-------------------------------- --------------------------------
John E. Evans, President John E. Evans, President
and Chairman of the Board and Chairman of the Board
By: /s/ B. Rees Jones By: /s/ B. Rees Jones
-------------------------------- --------------------------------
B. Rees Jones, Secretary B. Rees Jones, Secretary
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