Exhibit 4
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UNITED STATES DISTRICT COURT
SOUTHERN IOWA
DISTRICT OF
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NATIONWIDE MUTUAL INSURANCE COMPANY and
NATIONWIDE ACQUISITION CORP., SUMMONS IN A CIVIL ACTION
(Plaintiffs),
CASE NUMBER:
V.
ALLIED GROUP, INC., and ALLIED MUTUAL INSURANCE,
DOUGLAS L. ANDERSEN, JOHN E. EVANS, HAROLD S. EVANS,
JAMES W. CALLISON, HAROLD S. CARPENTER,
CHARLES I. COLBY, RICHARD O. JACOBSON, JOHN P. TAYLOR,
WILLIAM E. TIMMONS, DONALD S. WILLIS, C. FRED MORGAN,
and JAMES D. KIRKPATRICK,
(Defendants).
TO: (Name and Address of Defendants)
ALLIED GROUP, INC.
Jamie H. Schaffer, Registered Agent
701 5th Avenue
Des Moines, IA 50309
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (name and address) Harold N. Schneebeck, Esq.
BROWN, WINICK, GRAVES, GROSS,
BAKERVILLE & SCHOENEAU, P.L.C.
Two Ruan Center
Suite #1100
601 Locust Street
Des Moines, Iowa 50309
an answer to the complaint which is herewith served upon you, within twenty (20)
days after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the relief
demanded in the complaint.
[STAMP APPEARS HERE]
___________________________________ ______________________________
CLERK DATE
___________________________________
BY DEPUTY CLERK
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF IOWA
CENTRAL DIVISION
Nationwide Mutual Insurance )
Company and Nationwide Group )
Acquisition Corporation, )
)
Plaintiffs, )
)
V. ) Case Number ____________
)
Allied Group, Inc., Allied Mutual )
Insurance Company, Douglas L. )
Andersen, John E. Evans, )
Harold S. Evans, James W. )
Callison, Harold S. Carpenter, )
Charles I. Colby, Richard O. )
Jacobson, John P. Taylor, )
William E. Timmons, Donald S. )
Willis, C. Fred Morgan, )
and James D. Kirkpatrick, )
)
Defendants. )
COMPLAINT
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Plaintiffs, Nationwide Mutual Insurance Company ("Nationwide") and
Nationwide Group Acquisition Corporation ("Nationwide Acquisition"), by their
undersigned attorneys, allege upon knowledge with respect to themselves and
their own acts, and upon information and belief as to other matters, as follows:
NATURE OF THE ACTION
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1. Plaintiffs seek an injunction, inter alia, prohibiting those
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individual defendants who are members of the board of directors of defendant
Allied Group, Inc. ("Allied Group"), from breaching their fiduciary duties and
violating the securities laws of the state of Iowa by entrenching themselves and
their management and denying the shareholders of Allied Group their right to
decide
for themselves upon the future of the company they own. In particular, Allied
Group's board has caused Allied Group to rebuff Nationwide's offer to purchase
the common shares and the preferred stock of Allied Group at a substantial
premium. Allied Group's board has done so in derogation of its duty to place the
interests of the shareholders above those of the board members. In addition,
plaintiffs seek an injunction that would prohibit those individual defendants
who are members of the Board of Directors of defendant Allied Mutual Insurance
Company ("Allied Mutual"), an affiliate of Allied Group, from engaging in
certain acts in assistance of the Allied Group board's wrongful actions.
PARTIES
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2. Plaintiff Nationwide is an Ohio mutual insurance company with its
principal place of business in Columbus, Ohio. Nationwide owns 4.9% of the stock
of defendant Allied Group. Formed in 1925, Nationwide and its affiliated
entities are engaged in selling a variety of insurance products, including
personal auto and homeowners policies. Nationwide sells these products primarily
through an exclusive career agency force, mainly in the eastern and central
states. In 1997, Nationwide wrote approximately $5 billion of insurance premiums
and had a net income in excess of $1.6 billion. Since 1982, one of Nationwide's
affiliate companies has been Farmland Mutual Insurance Company, located in Des
Moines, Iowa.
3. Plaintiff Nationwide Acquisition is an Ohio corporation with its
principal place of business in Columbus, Ohio. Nationwide
2
TO COME
3
9. Defendant James W. Callison is a director of both Allied Group and
Allied Mutual, and is not a citizen of the state of Ohio.
10. Defendant Harold S. Carpenter is a director of Allied Group, and is
not a citizen of the state of Ohio.
11. Defendant Charles I. Colby is a director of Allied Group, and is not a
citizen of the state of Ohio.
12. Defendant Richard O. Jacobson is a director of Allied Group, and is
not a citizen of the state of Ohio.
13. Defendant John P. Taylor is a director of Allied Group, and is not a
citizen of the state of Ohio.
14. Defendant William B. Timmons is a director of Allied Group, and is not
a citizen of the state of Ohio.
15. Defendant Donald S. Willis is a director of Allied Group, and is not a
citizen of the state of Ohio.
16. Defendant C. Fred Morgan is a director of Allied Mutual, and is not a
citizen of the state of Ohio.
17. Defendant James D. Kirkpatrick is a director of Allied Mutual, and is
not a citizen of the state of Ohio.
JURISDICTION AND VENUE
----------------------
18. This court has jurisdiction pursuant to 28 U.S.C. (S)(S) 1332(a) and
2201. The amount in controversy exceeds $75,000, exclusive of interest and
costs.
19. Venue is proper in this district pursuant to 28 U.S.C. (S) 1391(a) and
(c).
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SCHEME OF ALLIED GROUP'S BOARD TO ENTRENCH ITSELF
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20. The individual defendant directors of Allied Group have participated
in a long-standing scheme to entrench themselves at the expense of Allied
Group's shareholders.
21. As part of this scheme, Allied Group and Allied Mutual have certain
interlocking executive officers. Also, at all times relevant, three directors of
Allied Group have been directors of Allied Mutual. Additionally, Douglas L.
Andersen, president of Allied Group, is a director of Allied Mutual. Thus, four
of the six members of Allied Mutual's board are also officers or directors of
Allied Group. Evans has dominated and controlled the actions of the boards of
directors of both Allied Group and Allied Mutual.
22. For the sole purpose of entrenching Allied Group's board, Allied Group
and Allied Mutual entered into a written Stock Rights Agreement dated July 5,
1990 (the "Stock Rights Agreement" or "Agreement"). Pursuant to Article I of
this Agreement, Allied Group agreed to use its best efforts to cause the
election and retention of a number of Allied Mutual nominees as members of
Allied Group's board. Under the Stock Rights Agreement, Allied Mutual may
nominate a number of directors in proportion to that percentage of voting
securities held by Allied Mutual. Allied Mutual is the only shareholder of
Allied Group that receives this special treatment. Absent this Agreement, Allied
Mutual would be in the position of every other shareholder, i.e., without Allied
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Group board's guaranteed support for its nominees.
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23. As a result of this arrangement and the interlocking boards, the board
of Allied Group has perpetuated itself while diluting the voting rights of the
shareholders of Allied Group.
24. Allied Group and Allied Mutual have acted pursuant to the Stock Rights
Agreement and have accordingly placed three of Allied Mutual's candidates on the
board of Allied Group.
ALLIED'S USE OF THE PREFERRED STOCK AS AN ENTRENCHMENT DEVICE
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25. As noted above (paragraph 5), Allied Mutual owns all of the Preferred
Stock of Allied Group. The Certificate of Designations -- 6 3/4% of Series
Preferred Stock of Allied Group provides in paragraph 3(c) and 3(d) as follows:
(c) In the event the Company shall, at any time, declare or pay any
dividend on its common stock or on its voting Preferred Stock of
any series (herein referred to as "voting stock"), payable in
shares of its voting stock, or effect a subdivision or
combination of the outstanding shares of its voting stock (by
reclassification or otherwise than by payment of a dividend in
shares of voting stock) either (i) the Company shall take all
comparable action necessary to preserve the relative voting
power of the holders of the 6 3/4% Preferred Stock outstanding
by subdividing or combining the outstanding shares of 6 3/4%
Preferred Stock, or otherwise; or (ii) each outstanding share
of 6 3/4% Preferred Stock outstanding shall thereafter have
that number of votes which is equal to the number of votes
which the holder of an outstanding share of voting stock on
which such dividend was paid or which was so subdivided or
combined held immediately after the payment of such dividend
or the subdivision or combination of such share.
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(d) In the event of any assignment, transfer, or other
disposition of shares of 6 1/4% Preferred Stock to
any person other than [Allied] Mutual Insurance Company
("[Allied] Mutual") or an affiliate or successor
corporation to [Allied] Mutual, the shares of 6 1/4%
Preferred Stock so disposed, upon such disposition and
without any further action by the Company or the holder
thereof, shall become non-voting, and no such person or
entity receiving the disposed of shares shall have any
of the voting powers ascribed to shares of 6 1/4%
Preferred Stock hereunder except as may be required by
law. Whenever the 6 1/4% Preferred Stock is non-voting,
pursuant to the preceding sentence, in the event that
Dividends shall remain unpaid for more than six
quarterly periods, the holder shall thereafter,
commencing with the Company, be entitled to elect one
director to the board of directors of the Company, upon
notice to the Company sufficient to permit its
compliance with all regulatory requirements.
Certificates representing shares of 6 1/4% Preferred
Stock shall be legended to reflect the provisions of
this Section 3(d).
26. Through Allied Mutual's control of the Preferred Stock and the
interlocking boards of directors of Allied Group and Allied Mutual, the board of
Allied Group wields a virtually unassailable power to control nearly twenty
percent of the voting shares of Allied Group. This power has been granted with
the intention of protecting the interests of the Allied Group board. The
enhanced voting power of the Preferred Stock vanishes upon transfer, at which
time the Preferred Stock becomes non-voting altogether. In effect the Allied
Group board controls a large block of its own voting stock. There is no
legitimate business purpose to the aforesaid voting arrangement, and it serves
only further to entrench the Allied Group board.
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ALLIED GROUP'S AMENDMENT TO ITS BY-LAWS
TO LIMIT SHAREHOLDER RIGHTS TO CALL A SPECIAL MEETING
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27. In furtherance of the scheme to entrench the Allied Group board, on
December 18, 1997, the board amended the Allied Group by-laws to provide that
special meetings of the stockholders may be called only by the holders of at
least fifty percent of all of the votes entitled to be cast on any issue
proposed to be considered at the meeting. Prior to this amendment, a special
meeting of shareholders could be called by the holders of ten percent of such
votes. The amendment prevents minority shareholders from challenging the already
entrenched position of Allied Group's board. There is no legitimate business
purpose to this change in Allied Group's by-laws. It serves only to entrench
Allied Group's board to the detriment of its shareholders, including Nationwide.
NATIONWIDE'S OFFER TO ALLIED GROUP
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28. In the last half of 1997, Nationwide engaged in an analysis of Allied
Group based upon then available public information. Nationwide concluded that
Allied Group provided a unique opportunity for expanding Nationwide's property
and casualty business both geographically and by use of Allied Group's
distribution system. Consequently, Nationwide concluded that it should initiate
discussions with Allied Group about the possibility of a friendly merger.
29. On or about January 26, 1998 Dimon R. McFerson ("McFerson"), Chairman
of Nationwide, contacted Evans to discuss Nationwide's interest in acquiring all
of the outstanding voting
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securities of Allied Group. A meeting between McFerson and Evans and certain
members of Allied Group's management was scheduled for later that week.
30. On or about January 28, 1998, McFerson and other members of
Nationwide's management met with Evans and certain members of senior management
of Allied Group in Des Monies, Iowa. At that meeting, Nationwide made an all
cash offer to purchase the common stock of Allied Group for $47 per share,
subject to Nationwide receiving all necessary regulatory approvals and
performing due diligence.
31. Nationwide's offer was non-coercive, fair to Allied Group's
shareholders and represented a substantial premium over the market price for
Allied Group's shares at the time it was made. Evans stated at the January 29
meeting that he thought the price offered was generous; however, he expressed
two concerns. First, he wanted assurance that Nationwide would indemnify the
members of the boards of Allied Group and Allied Mutual for all claims that
could be asserted against them for matters that arose prior to the closing of
the sale. This request would provide no benefit to Allied Group's shareholders,
but was of substantial benefit to the individual Allied board defendants, who
were concerned about pending or potential shareholder and policyholder claims.
Before leaving that meeting, McFerson responded by agreeing, on behalf of
Nationwide, to the indemnification requested by Evans. Evans' second concern was
that the Iowa Division of Insurance in the Department of Commerce might not
approve the transaction.
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Consequently, he wanted some assurance that regulatory approval would be
forthcoming from that agency.
32. In early February 1998, representatives of Nationwide met with
representatives of the Iowa Division of Insurance in the Department of
Commerce. Based upon this meeting, Nationwide satisfied itself that there were
no regulatory obstacles that would prevent the transaction from succeeding.
Nationwide conveyed this information to Allied group's executives in February
1998. Nationwide would not have devoted any more effort to the acquisition if it
had believed that it would be unable to obtain all necessary regulatory
approvals.
33. Based upon the discussions between the representatives of Nationwide
and Allied Group, on February 10, 1998, Nationwide sent Andersen, Allied
Group's president, a draft merger agreement and other documents pertaining to
the proposed acquisition.
34. On or about February 18, 1998, McFerson spoke with Andersen to discuss
the proposed acquisition. Andersen rejected Nationwide's offer and told McFerson
that although the price offered was reasonable, the Allied Group board did not
authorize any further negotiations.
35. Nationwide, at all times, has planned to operate Allied Group as an
ongoing entity headquartered in Des Moines. Nationwide plans to continue the
business of Allied Group intact. Nationwide plans not only to maintain Allied
Group's independent agency distribution network, but also to expand it for use
in Nationwide's
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business. Nationwide does not intend to strip Allied Group of its assets or to
liquidate it.
36. Nationwide's acquisition of Allied Group on the terms offered would
render a substantial benefit to all of Allied Group's constituencies, as well as
to Allied Mutual's policyholders. It does not pose any threat to the corporate
policy and effectiveness of Allied Group or to the policy or effectiveness of
Allied Mutual.
37. All reasons proffered by the defendants for failure to accept
Nationwide's offer were pretextual. In addition to the substantial premium of
the $47 per share price offered by Nationwide for the Allied Group stock,
payment was to be in cash, not securities. There was no question about
Nationwide's financial ability to make three payment. Given Nationwide's
financial strength and more than 50 years of experience in the insurance
industry, there was no serious reason to believe that Nationwide could not
secure all of the necessary regulatory approvals. The true reason for the
rejection of the offer was the desire of the board of directors of Allied Group
to maintain control and further entrench themselves to the detriment of Allied
Group's shareholders.
38. On or about May 4, 1998, McFerson telephoned Evans and advised him
that Nationwide was still interested in acquiring Allied Group. Evans told
McFerson that the time was not right for such an acquisition, that McFerson
should not contact Evans again, but that McFerson should contact Anderson in 30
days.
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ALLIED GROUP'S FALSE PRESS RELEASES
-----------------------------------
39. On May 5, 1998, Allied Group issued a press release announcing that
its board had approved a stock repurchase program to acquire up to 250,000
shares of Allied Group's shares of common stock over the next twelve months. The
press release stated that "the program is not a request or an offer for or in
response to a tender offer or any other offer for Company shares." This
statement was material, false, and was known to be false at least by Evans and
Allied Group at the time it was made. Allied Group's repurchase program was a
defensive response to Nationwide's offer.
40. On or about May 7, 1998, Allied Group issued a press release
announcing that its board had increased its stock repurchase program to buy back
up to 2 million of Allied Group's shares. In that press release Allied Group
again stated: "The program is not a request or an offer for or in response to a
tender offer or any other offer for company shares." This statement again was
material, false, and was known to be false at least by Evans and Allied Group at
the time it was made. Like the earlier statement, it constituted a breach of the
fiduciary duty of honesty and candor. The decision of Allied Group's board to
increase eight-fold the number of shares in its repurchase program was made in
response to Nationwide's continuing attempts to purchase the outstanding shares
of Allied Group.
41. The initial repurchase program for 250,000 shares represented less
than 1% of Allied Group's then outstanding 30-plus million shares of common
stock. The revised 2 million share
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repurchase program represented approximately 6.5% of Allied Group's outstanding
common stock. The purpose and effect of Allied Group's stock repurchase program
are to make it more difficult for plaintiffs, or others, to acquire control of
Allied Group or to call a special meeting of Allied Group's shareholders.
42. Since announcing its stock repurchase program, Allied Group has
repurchased substantial blocks of its shares at market prices, and it intends to
continue to do so.
43. Thus, not only has Allied Group and/or its board disseminated false
and misleading information about its stock repurchase program, but it has also
recently repurchased substantial numbers of shares of its own stock at prices
well below the $47 price that Nationwide offered.
NATIONWIDE'S TENDER OFFER
-------------------------
44. On May 18, 1998, Nationwide publicly announced its intention to
commence a tender offer for all of the outstanding shares of common stock of
Allied Group at $47 per share, net to the seller in cash, subject to certain
conditions and regulatory approvals (the "Tender Offer"). The Tender Offer is
not conditioned upon financing. The price offered represents a 69.36% premium
over the market price of the Allied Group shares which closed at 27% on May 15,
1998. The terms of the Tender Offer are more fully set forth in a Schedule 14D-1
filed with the Securities and Exchange Commission. The contents of Schedule
14D-1 are incorporated herein by reference, and a copy will be provided to
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the court after it is filed with the Securities and Exchange Commission.
45. Nationwide's Tender Offer is not 'front-end loaded' or otherwise
coercive in nature. It provides all of Allied Group's shareholders with the
opportunity to realize a substantial premium over the market price of their
stock prior to announcement of the Tender Offer.
46. The Tender Offer does not pose any threat to Allied Group's corporate
policy and effectiveness, to the interests of Allied Group's shareholders, or
to the interests of Allied Mutual or its policyholders.
47. The actions of defendants specified in paragraphs 20 through 43, Allied
Group's repurchase program set forth in paragraphs 39 and 40, and the false
or misleading statements contained in Allied Group's press releases set out
in paragraphs 39 and 40, constitute breaches of fiduciary duties by the
individual defendants who have thereby entrenched themselves at the cost of
the Allied Group shareholders and to the detriment of plaintiffs.
48. As a consequence of this improper entrenchment, Nationwide's first
two offers to purchase the stock of Allied Group at a substantial premium were
rejected to the detriment of plaintiffs and the shareholders of Allied Group.
These offers were rejected without reasonable investigation.
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COUNT I
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(BREACH OF FIDUCIARY DUTY
UNDER THE IOWA BUSINESS COMBINATIONS STATUTE)
49. Plaintiffs repeat and reallege paragraphs 1 through 48 as if they were
set forth in full.
50. Defendant Allied Group has all of the benefits provided by the
anti-takeover protections of Section 490.1110 of the Iowa Code (the "Business
Combinations Statute"). Under that statute, a third-party, such as Nationwide,
that acquires ten percent or more of the outstanding voting stock of an Iowa
corporation, such as Allied Group, cannot merge with Allied Group until three
years following the acquisition of the ten percent of Allied Group's stock,
absent circumstances not present in this case. Three of the exceptions of this
three-year restriction are: (a) pre-approval by the board of the Iowa
corporation of the third party's acquisition of 10% or more of the Iowa
Corporation's stock; (b) the third party owning at least 85% of the voting stock
of the Iowa corporation, "excluding, for purposes of determining the number of
shares outstanding, those shares owned by persons who are directors and
officers" of the Iowa corporation; or (c) the board of the Iowa corporation
adopting a by-law amendment by September 1997 electing not to be governed by the
statute (opting out).
51. The defendants' wrongful conduct, as set forth above, together with
the restriction in the Business Combinations Statute, frustrates and impedes the
ability of Allied Group's shareholders to decide for themselves whether they
wish to receive the benefits of Nationwide's Tender Offer. These devices
unreasonably and
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inequitably hamper plaintiffs' ability to consummate the Tender Offer. Given
the history of this matter, the Allied Group board defendants cannot be
expected, absent an order from this court, to approve the combination with
plaintiffs. The failure of Allied Group and its board to adopt a by-law
amendment opting out of the Business Combinations Statute and its anticipated
failure to approve the Tender Offer for purposes of the Business Combinations
Statute, constitute a breach of fiduciary duties by the Allied Group board.
52. The 18.2% voting rights in Allied Group controlled by its affiliate
Allied Mutual constitute a block that prevents plaintiffs from obtaining 85% of
the voting stock of Allied Group, which would enable plaintiffs to avoid the
restriction of the Business Combinations Statute. As alleged above (paragraph
26), the 18.2% voting rights in the Preferred Stock is actually controlled by
the board of Allied Group. Under corporation law, including Iowa corporate law,
a corporation and its subsidiaries cannot vote the corporation's own stock.
Under this policy, the Preferred Stock should be treated the same as "shares
owned by persons who are directors and officers" and the 18.2% should not be
counted for purposes of determining whether plaintiffs obtain 85% of Allied
Group stock in the Tender Offer.
53. Defendants' actions are causing plaintiffs irreparable harm, and
plaintiffs' remedies at law are inadequate.
WHEREFORE, plaintiffs request that the court enter an order:
A. Granting plaintiffs judgment on Count I of the Complaint;
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B. Declaring that the failure of Allied Group's board to "elect [_] not to
be governed" by the Business Combinations Statute (i.e., not opting out)
constitutes a breach of fiduciary duty because it stifles any attempted tender
offer for Allied Group's stock;
C. Declaring that the failure of Allied Group's board to approve
Nationwide Acquisition's purchase of at least ten percent of the Allied Group
common stock would constitute a breach of fiduciary duty;
D. Preliminarily and permanently enjoining those defendants who are
members of the Allied Group board from failing to approve, pursuant to Section
490.1110 (a) (a) of the Iowa Code, Nationwide Acquisition's purchase of at least
ten percent of the outstanding common stock of Allied Group;
E. Declaring that the use of the Preferred Stock by defendants is in
violation of Iowa law and is part of a scheme to entrench the board of Allied
Group in breach of its fiduciary duties;
F. Preliminarily and permanently enjoining those defendants who are
members of the board of Allied Mutual from voting the Preferred Stock of Allied
Group;
G. Granting costs to plaintiffs; and
H. Granting plaintiffs such further relief as the court deems just.
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Count II
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(Breach of Fiduciary Duties by the Individual Defendants)
54. Plaintiffs repeat and reallege paragraphs 1 through 48 as if they were
set forth in full.
55. The conduct of the defendants as set forth in paragraphs 20 through 43
above indicate that, without an injunction from this court, defendants will
manipulate or otherwise subvert the process of corporate democracy by amending
the by-laws of Allied Group or taking other actions to frustrate efforts of
plaintiffs to facilitate the Tender Offer.
56. Plaintiffs' remedies at law are inadequate.
WHEREFORE, plaintiffs request that the Court enter an order:
A. Granting plaintiffs judgment on Count II of the Complaint;
B. Declaring that the conduct of the individual defendant members of the
Allied Group board, as set forth in paragraphs 20 through 43, constitutes a
breach of their fiduciary duties;
C. Preliminarily and permanently enjoining Allied Group and its directors
from effectuating its stock repurchase program;
D. Requiring defendants to negotiate with plaintiffs in good faith;
E. Prohibiting the defendants from taking any action in any way to impair
the Tender Offer or to deny Allied Group's shareholders the opportunity to avail
themselves of the right to tender their shares pursuant to the Tender Offer,
including but not limited to, amending the by-laws or articles of incorporation
of
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Allied Group or Allied Mutual, instituting shareholders' rights plans or other
devices commonly known as "poison pills," adopting blank check preferred share
plans, or issuing dual classes of stock;
F. Granting plaintiffs their costs of this action; and
G. Granting plaintiffs such further relief as the court deems just.
Count III
---------
(Violations of the Iowa Securities Laws)
57. Plaintiffs repeat and reallege paragraphs 1 through 33 of the
Complaint herein as if they were set forth in full.
58. The false and misleading statements of material fact described in
paragraphs 39 and 40 above, made in connection with Allied Group's May 5 and May
7 press releases, related to Allied Group as a target company as defined in Iowa
Code Section 502.407. Iowa Code Ann. (S) 502.407 (West 1991 & Supp. 1998).
59. It was reasonably foreseeable that these statements would induce other
persons to sell securities of Allied Group. Allied Group violated Section
502.407 by issuing the May 5 and May 7 press releases.
60. Pursuant to Section 502.502 of the Iowa Code, Nationwide is a party
aggrieved by Allied Group's violation of Section 502.407, because those
violations improperly obstructed Nationwide's legitimate efforts to acquire
Allied Group.
WHEREFORE, plaintiffs request that the court enter an order:
A. Granting plantiffs judgment on Count III;
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B. Declaring that the false and misleading statements of material fact
described in paragraphs 39 and 40 above constitute violations of Iowa Code
Section 502.407. Iowa Code Ann. (S) 502.407 (West 1991 & Supp. 1998);
C. Preliminary and permanently enjoining defendants from issuing false or
misleading statements regarding or relating to the Tender Offer;
D. Requiring Allied Group to disseminate an appropriate correction of its
false and misleading statements;
E. Granting plaintiffs their costs of this action and reasonable
attorneys' fees; and
F. Granting plaintiffs such further relief as the court deems just.
COUNT IV
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(BREACH OF FIDUCIARY DUTIES IN CONNECTION WITH THE PREFERRED STOCK)
61. Plaintiffs repeat and reallege paragraphs 1 through 48 of the
Complaint herein as if they were set forth in full.
62. The provisions of the Certificate of Designations set forth in
paragraph 25 endow the Preferred Stock held by Allied Mutual with enhanced
voting power, but only so long as that stock is held by Allied Mutual. The
existence of this class of stock violates Section 490.601 of the Iowa Code,
which specifies the characteristics that a corporation's classes of stock may
possess. This section does not allow for a class of stock that possesses certain
voting powers in the hands of one person but altogether eliminates voting powers
in the hands of others.
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63. The existence of this Preferred Stock, as currently held by Allied
Mutual, serves no legitimate business purpose. Rather, it functions only to
entrench the board of Allied Group. Specifically, this entrenchment results from
the fact that the Allied Group board controls the Allied Mutual board and thus
controls the voting of Allied Mutual Preferred Stock.
64. The preferential voting rights of the Preferred Stock, coupled with
the loss of those rights upon transfer, places a significant impediment in the
way of plaintiffs or any third party who might attempt to gain control of Allied
Group. By thus exploiting the improper characteristics of the Preferred Stock,
the Allied Group board has breached its fiduciary duties to the shareholders of
Allied Group.
WHEREFORE, plaintiffs request that the Court enter an order:
A. Granting plaintiffs' judgment on Count IV of the Complaint;
B. Declaring that Allied Mutual's possession and voting of the Preferred
Stock while under the control of the Allied Group board constitutes a breach of
the fiduciary duties of the individual defendants as well as a violation of
Section 490.601 of the Iowa Code;
C. Preliminarily and permanently enjoining Allied Mutual from voting its
Preferred Stock;
D. Preventing Allied Group from counting Allied Mutual's Preferred Stock
as a part of Allied Group's outstanding shares on any vote taken by the Allied
Group shareholders;
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E. Granting plaintiffs their costs of this action; and
F. Granting plaintiffs such further relief as the court deems just.
NATIONWIDE MUTUAL INSURANCE COMPANY
NATIONWIDE GROUP ACQUISITION
CORPORATION
By: [SIGNATURE ILLEGIBLE]
--------------------------------
One of their attorneys
Harold N. Schneebeck
Brown, Winick, Graves, Gross,
Bakerville,
and Schoenbau, P.L.C.
Two Ruan Center, Suite 1100
601 Locust Street
Des Moines, Iowa 50309
(515) 242-2400
OF COUNSEL:
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Michael A. Reiter
Richard S. Rhodes
Holleb & Coff
55 East Monroe Street, Suite 4000
Chicago, Illinois 60603
(312) 807-4600
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