Exhibit 7
IN THE IOWA DISTRICT COURT IN AND FOR POLK COUNTY
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BRICKELL PARTNERS, . Case No. CL 76440
Individually And On Behalf of . --------
All Others Similarly Situated,
.
Plaintiff. .
-against- .
.
DOUGLAS L. ANDERSEN, JOHN E. CLASS ACTION PETITION
EVANS, WILLIAM E. TIMMONS, .
DONALD S. WILLIS, HAROLD S. .
CARPENTER, CHARLES I. COLBE,
HAROLD S. EVANS, JAMES W. .
CALLISON, RICHARD O. JACOBSON, .
JOHN P. TAYLOR, and ALLIED
GROUP, INC., .
.
Defendants.
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Plaintiff, by its attorneys, allege upon personal knowledge as to their own
acts and upon information and belief as to all other matters, as follows:
1. Plaintiff brings this action individually and as a class action on
behalf of all persons, other than defendants, who own the securities of Allied
Group, Inc. ("Allied" or the "Company") and who are similarly situated (the
"Class"), for injunctive and other relief. Plaintiff seeks to compel Allied,
inter alia, to consider the bona fide offer of Nationwide Mutual Insurance
Company ("Nationwide") to acquire all of the outstanding stock of Allied for $47
per share. Alternatively, plaintiff seeks to recover damages caused by the
breach of fiduciary duties owned by the defendants.
PARTIES
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2. Plaintiff is and, at all relevant times, has been the owner of shares
of Allied common stock.
3. Allied is a corporation duly organized and existing under the laws of
the State of Iowa. The Company through subsidiaries operates a regional
property-casualty insurance business specializing in personal lines and small
commercial lines of insurance. Allied maintains its principal executive offices
at 701 Fifth Avenue, Des Moines. As of March 27, 1998, Allied had approximately
30,546,746 shares of common stock outstanding and hundreds of stockholders of
record. Allied stock trades on the New York Stock Exchange.
4. Defendant John E. Evans is the Chairman of the Allied Board of
Directors. Evans also served as the Company's President from 1974 through 1994.
5. Defendant Douglas L. Andersen is the President, Chief Executive
Officer and a Director of Allied.
6. Defendant Donald S. Willis is a Director of Allied. Willis also serves
as a Director for AMCO, Allied Property and Casualty, and Depositors Insurance
Company - subsidiaries of Allied.
7. Defendant Harold S. Carpenter is a Director of Allied. Carpenter also
serves as a Director of AMCO, Allied Property and Casualty, and Depositors
Insurance Company - subsidiaries of Allied.
8. Defendant Charles I. Colby is a Director of Allied. Colby also serves
as a Director for AMCO - a subsidiary of Allied.
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9. Defendant Harold S. Evans is a Director of Allied. Evans also serves
as a Director for AMCO, Allied Property and Casualty, Depositors Insurance
Company, and Allied Life Financial Corporation - subsidiaries of Allied.
10. Defendant James W. Callison is a Director of Allied. Callison also
serves as a Director for AMCO, Allied Property and Casualty, Depositors
Insurance Company, and Allied Life Financial Corporation - subsidiaries of
Allied.
11. Defendant William E. Timmons is a Director of Allied.
12. Defendant Richard O. Jacobson is a Director of Allied.
13. Defendant John P. Taylor is a Director of Allied.
14. The defendants named in paragraphs 4 through 13 are hereinafter
referred to as the "Individual Defendants."
15. Because of their positions as officers or directors, the Individual
Defendants owe fiduciary duties of loyalty and due care to the plaintiff and the
other members of the Class.
16. Each defendant herein is sued individually as a conspirator, as well
as in his/her/its capacity as an officer or director of the Company, and the
liability of each arises from the fact that each defendant has engaged in all
or part of the unlawful acts, plans, schemes, or transactions complained of
herein.
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CLASS ACTION ALLEGATIONS
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17. Plaintiff brings this case in its own behalf and as a class action,
pursuant to Rule 42 of the Iowa Rules of Civil Procedure, on behalf of all
stockholders of the Company, except defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants, who will be threatened with injury arising from defendants' actions
as is described more fully below.
18. This action is properly maintainable as a class action.
19. The Class is so numerous that joinder of all members is impracticable.
The Company has approximately 30,546,746 shares of common stock. There are
hundreds of record and beneficial stockholders.
20. There are questions of law and fact common to the Class including,
inter alia, whether:
a. defendants have breached and will continue to breach the fiduciary
and other common law duties owed by them to plaintiff and the members of the
Class; and
b. plaintiff and the other members of the Class would be irreparably
damaged by the wrongs complained of herein.
21. Plaintiff is committed to prosecuting this action and have retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Plaintiff is an adequate
representative of the Class.
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22. The prosecution of separate actions by individual members of the Class
would create the risk of inconsistent or varying adjudications with respect to
individual members of the Class which would establish incompatible standards of
conduct for defendants, or adjudications with respect to individual members of
the Class which would as a practical matter be dispositive of the interests of
the other members not parties to the adjudications or substantially impair or
impede their ability to protect their interests.
23. The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary and
final injunctive relief on behalf of the Class as a whole is appropriate.
SUBSTANTIVE ALLEGATIONS
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24. In January 1998, representatives of Nationwide initiated discussions
with Allied concerning a possible business combination of the two companies.
Despite specific offers made by Nationwide, defendants rebuffed all such offers
and refused to even inform themselves or negotiate with the representatives of
Nationwide.
25. On May 19, 1998, after months of attempting to negotiate with the
defendants, Nationwide publicly disclosed that it had offered to acquire all of
the outstanding stock of Allied for $47 per share in a transaction valued at
more than $1.59 billion. Nationwide further stated that it had no intention of
firing Allied workers or closing Allied offices.
26. Nationwide Chairman Dimon McFerson made Nationwide's offer public after
becoming "consistently frustrated" with Allied's "stalling tactics." As reported
by Reuters
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News Service on May 18, 1998, McFerson stated, "We felt it was important that
[Allied's] stakeholders should all have a chance to vote on this thing for
themselves and not accept the vote of their board of directors so we decided to
take the unsolicited offer to the marketplace."
27. Nationwide's $47 offer constitutes a remarkable 69% premium over the
unaffected trading price of Allied's stock prior to the public announcement.
28. Despite the unusually high premium offered, Allied's only public
response to the formalized offer was a terse statement that it would evaluate
the offer in due course.
29. Financial analysts following Allied favored the transaction proposed
by Nationwide. For example, Stephen Musser, an analyst at A. G. Edwards & Sons
Inc. stated that the proposed transaction "will help [Allied] to compete with
the State Farms and the Allstates of the world."
30. Defendants have breached their fiduciary obligations to Allied's
shareholders to maximize shareholder value by entrenching themselves in refusing
to consider the Nationwide offer, thereby assuring their positions and benefits
as directors of Allied. Defendants have further breached their fiduciary
obligations in failing to fully and properly inform themselves about
Nationwide's bona fide offer or negotiate with Nationwide to maximize the price
paid to the Company's shareholders.
31. Defendants have violated fiduciary and other common law duties owed to
the plaintiff and the other members of the Class in that they have not and are
not exercising independent business judgment, and have acted and are acting to
the detriment of the Class.
32. As a result of defendants' actions, plaintiff and the Class have been
and will be
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damaged by the breaches of fiduciary duty and, therefore, plaintiff and the
Class will not receive the fair value of Allied's assets and businesses.
33. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and will succeed in
their plan to exclude plaintiff and the Class from their fair proportionate
share of Allied's valuable assets and businesses, all to the irreparable harm of
the Class.
34. Plaintiff and the Class have no adequate remedy of law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
a. declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as a representative of the Class;
b. declaring that the defendants and each of them have committed a
gross abuse of trust and have breached their fiduciary duties to plaintiff and
the other members of the Class;
c. preliminarily and permanently enjoining defendants and their
counsel, agents, employees, and all persons acting under, in concert with, or
for them, from proceeding with or implementing the sale of Allied to Select at
the current bid price;
d. in the event this sale is consummated, rescinding it and setting
it aside;
e. awarding compensatory damages against defendants, jointly and
severally, in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
f. awarding plaintiff and the Class their costs and disbursements and
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reasonable allowances for plaintiff's counsel and experts' fees and expenses;
and
g. granting such other and further relief as may be just and proper.
Dated: May 21, 1998
LAMARCA & LANDRY, P.C.
By: /s/ George A. LaMarca
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George A. LaMarca PK 0003017
Alexander R. Rhoads PK 2015123
Walnut Grove Center
1300 50th Street - Suite 104
West Des Moines, Iowa 50266
Telephone: (515) 225-2600
Telefax: (515) 225-5851
CO-COUNSEL FOR PLAINTIFF
Of Counsel:
WECHSLER HARWOOD
HALEBIAN & FEFFER LLP
Matthew M. Houston
488 Madison Avenue
New York, New York 10022
(212) 935-7400
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