AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

NATIONWIDE CORPORATION,

NATIONWIDE MUTUAL INSURANCE COMPANY,

NWM MERGER SUB, INC.

and

NATIONWIDE FINANCIAL SERVICES, INC.

dated as of August 6, 2008

TABLE OF CONTENTS

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(continued)

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (“ Agreement ”), dated as of August 6, 2008, is by and among Nationwide Mutual Insurance Company, an Ohio mutual insurance company (“ NWM ”), Nationwide Corporation, an Ohio corporation (“ NWC ”), NWM Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of NWC (“ Merger Sub ”), and Nationwide Financial Services, Inc., a Delaware corporation (the “ Company ”). Certain capitalized terms have the meanings given to such terms in Article VIII or as otherwise defined herein.

RECITALS

WHEREAS, the Board of Directors of NWC has approved and declared advisable the merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and subject to the conditions set forth in this Agreement and has approved and declared advisable this Agreement;

WHEREAS, the Board of Directors of the Company (the “ Company Board ”), upon the recommendation of a special committee of the Company Board consisting solely of independent directors (the “ Special Committee ”), has (i) determined that the Merger and this Agreement are advisable, fair to and in the best interests of the Company and its stockholders, (ii) approved and declared advisable the Merger and this Agreement, and (iii) resolved to recommend that the stockholders of the Company adopt this Agreement; and

WHEREAS, the Company, NWM, NWC and Merger Sub desire to make those representations, warranties, covenants and agreements specified herein in connection with this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

THE MERGER

Section 1.1 The Merger . At the Effective Time, and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Delaware Law, Merger Sub shall merge with and into the Company. The Company shall be the Surviving Corporation in the Merger and shall continue its corporate existence under the Laws of the State of Delaware as a wholly-owned subsidiary of NWC. Upon consummation of the Merger, the separate corporate existence of Merger Sub shall terminate.

Section 1.2 Closing; Effective Time . The Closing shall take place as soon as practicable, and in any event not later than two Business Days after the satisfaction or waiver of each of the conditions set forth in Article VI hereof (other than those conditions that by their nature are to be fulfilled at Closing but subject to waiver or fulfillment of those conditions) or at such other time as the parties hereto may agree (the “ Closing Date ”). The Closing shall take place at the offices of Jones Day, 325 John H. McConnell Boulevard, Suite 600, Columbus, Ohio 43215, or at such other location as the parties hereto may agree in writing. The Merger shall

become effective at the Effective Time as set forth in the Certificate of Merger, which shall be filed with the Secretary of State of the State of Delaware on the Closing Date.

Section 1.3 Effects of the Merger . At and after the Effective Time, the Merger shall have the effects set forth in the applicable provisions of the Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 1.4 Conversion of Company Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of NWM, NWC, the Merger Sub, the Company or the holder of any of the following securities:

(a) Each share of Class A Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) shares of Class A Common Stock held by the Mutual Group, Merger Sub, the Company or any wholly-owned Subsidiary of the Company, and (ii) Company Dissenting Shares) shall be converted into the right to receive $52.25 per share in cash, subject to adjustment as provided in Section 1.4(c) (the “ Merger Consideration ”).

(b) All shares of Class A Common Stock converted into Merger Consideration pursuant to this Section 1.4 shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate or book-entry share previously representing any such shares of Class A Common Stock shall thereafter represent only the right to receive, with respect to each underlying share of Class A Common Stock, the Merger Consideration.

(c) If, prior to the Effective Time, the outstanding shares of Class A Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, then an appropriate and proportionate adjustment shall be made to the relevant Merger Consideration.

(d) Each outstanding share of Class B Common Stock, all of which are owned by NWC, shall no longer be outstanding and shall automatically be cancelled, without consideration, and shall cease to exist as of the Effective Time.

Section 1.5 Merger Sub Common Stock . At the Effective Time, by virtue of the Merger and without any action on the part of NWM, NWC or the Company, each share of the common stock, par value $.01 per share, of Merger Sub shall be converted into one share of common stock, par value $.01 per share, of the Surviving Corporation.

Section 1.6 Company Dissenting Shares .

(a) Notwithstanding any provision of this Agreement to the contrary, shares of Class A Common Stock that are outstanding immediately prior to the Effective Time and that are held by stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in

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accordance with Section 262 of the Delaware Law (collectively, the “ Company Dissenting Shares ”) shall not be converted into, or represent the right to receive, the Merger Consideration. Such stockholders shall be entitled to receive payment of the appraised value of such shares of Class A Common Stock held by them in accordance with the provisions of Section 262 of the Delaware Law, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares under Section 262 of the Delaware Law shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender of the certificate or certificates formerly representing shares of Class A Common Stock in accordance with Section 1.13 or, in the case of holders of book-entry shares of Class A Common Stock, upon compliance with the letter of transmittal sent to them in accordance with Section 1.13.

(b) The Company shall give NWC (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the Delaware Law. The Company shall not, except with the prior written consent of NWC, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

Section 1.7 Options and Equity-related Securities .

(a) Company Options . At the Effective Time, each outstanding Company Option shall automatically be cancelled and converted into the right to receive, as soon as practicable following the Effective Time, a lump sum cash payment equal to the product of (i) the number of shares subject to such Company Option and (ii) the excess, if any, of (A) the Merger Consideration over (B) the exercise price per share of such Company Option, without interest and subject to tax withholding by NWC and the Surviving Corporation in accordance with Section 1.14; provided , that any Company Option for which the exercise price per share exceeds the Merger Consideration shall be cancelled without any payment in respect thereof. The cash amounts resulting from the conversions pursuant to this Section 1.7(a) shall be paid by NWM as soon as practicable after the Effective Time, but no later than five Business Days thereafter.

(b) Restricted Stock . Each outstanding unvested share of restricted Company Common Stock issued pursuant to the Company Stock Plan (each, a “ Restricted Share ”) shall, at the Effective Time, be vested and no longer subject to restrictions, and shall be treated as provided in Section 1.4(a).

(c) Notice to Holders . Prior to the Effective Time, the Company shall use commercially reasonable efforts to deliver appropriate notices (which notices shall be reasonably acceptable to NWC) to each holder of Company Options and Restricted Shares setting forth such holder’s rights pursuant to the Company Stock Plan, stating that such Company Options or Restricted Shares, as applicable, shall be treated in the manner set forth in this Section 1.7. The Company shall cause the administrator of the Company Stock Plan to take such commercially reasonable actions under the Company Stock Plan in furtherance of the provisions of this Section 1.7.

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(d) Consents of Holders; Termination of Company Stock Plan. Prior to the Effective Time, the Company shall use commercially reasonable efforts to obtain any consents or releases, if any, from the holders of Company Options and Restricted Shares under the Company Stock Plan and to take all such other lawful action which in any case the Company determines is reasonably necessary (which include satisfying the requirements of Rule 16b-3(e) promulgated under the Exchange Act, and including adopting any necessary actions or resolutions of the Company Board or, if appropriate, any committee administering the Company Stock Plan) to provide for and give effect to the transactions contemplated by this Section 1.7. Except as otherwise agreed to in writing by the parties, (i) the Company Stock Plan will terminate as of the Effective Time and (ii) the Company shall use commercially reasonable efforts to assure that following the Effective Time, no participant in the Company Stock Plan shall have any right under the Company Stock Plan to acquire the capital stock of the Company or the Surviving Corporation.

(e) Deferred Stock Units . Each deferred stock unit issued to a director of the Company under the Nationwide Financial Services, Inc. Second Amended and Restated Stock Retainer Plan for Non-Employee Directors (the “ Director Stock Plan ”) shall automatically be cancelled and converted as of the Effective Time into the right to receive an amount equal to the Merger Consideration, which amount shall be credited to an account established for the director under the Nationwide Board of Directors Deferred Compensation Plan (“ Director Deferred Compensation Plan ”). Prior to the Effective Time, the Company shall take commercially reasonable actions under the Director Stock Plan and the Director Deferred Compensation Plan in furtherance of the provisions of this Section 1.7 and to ensure that following the Effective Time no participant under the Directors Stock Plan shall have the right under the Director Stock Plan to acquire the capital stock of the Company or the Surviving Corporation. Directors’ accounts under the Director Deferred Compensation Plan shall be held, administered and distributed in accordance with the terms of the Director Deferred Compensation Plan, including such terms as may be adopted thereunder regarding earnings that may be credited to directors’ accounts thereunder following the Effective Time. As of the Effective Time, an entity in the Mutual Group shall become the sponsor of the Director Stock Plan.

(f) Deemed Investments in Company Common Stock Under Deferred Compensation Plans . Amounts credited to the account of any employee under the Nationwide Officer Deferred Compensation Plan or the Nationwide Associate Deferred Compensation Plan (together, the “ Deferred Compensation Plans ”) that are deemed to be invested in Company Common Stock shall automatically be converted as of the Effective Time into an amount equal to the Merger Consideration multiplied by the number of shares of Company Common Stock (including fractional shares) that are deemed to be held in such employees’ account. Such amounts shall continue to be credited to employees’ accounts under the Deferred Compensation Plans and administered and distributed in accordance with the terms thereof, including such terms as may be adopted thereunder regarding earnings that may be credited to employees’ accounts under the Deferred Compensation Plans following the Effective Time. The amounts resulting from the conversions pursuant to this Section 1.7(f) shall be credited to the accounts within the Deferred Compensation Plan of the applicable employees by NWM as soon as practicable after the Effective Time, but no later than five Business Days thereafter.

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(g) Company Approvals . Prior to the Effective Time, the Company shall cause dispositions of equity interests of the Company (including derivative securities) in connection with this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act to be approved by the Company Board or a committee of two or more non-employee directors of the Company (as such term is defined in Rule 16b-3 promulgated under the Exchange Act). Such approval shall specify: (i) the name of each officer or director, (ii) the number of securities to be disposed of for each named person, and (iii) that the approval is granted for purposes of exempting the transaction from Section 16(b) of the Exchange Act under Rule 16b-3 promulgated under the Exchange Act.

Section 1.8 Certificate of Incorporation . At the Effective Time, the certificate of incorporation of the Company shall be amended so as to read in its entirety in the form attached hereto as Exhibit A , and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and applicable Law.

Section 1.9 Bylaws . At the Effective Time, the bylaws of the Company shall be amended so as to read in their entirety in the form attached hereto as Exhibit B , and, as so amended shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with their terms, the certificate of incorporation of the Surviving Corporation and applicable Law.

Section 1.10 Directors and Officers of Surviving Corporation . At the Effective Time, (a) the directors of the Surviving Corporation shall be the existing members of the Board of Directors of Merger Sub and (b) the officers of the Surviving Corporation shall be the existing officers of the Company.

Section 1.11 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the Company, NWM, NWC and Merger Sub shall cause their respective officers to take all such lawful and necessary action, so long as such action is not inconsistent with this Agreement.

Section 1.12 NWM to Make Cash Available . As promptly as practicable following the Effective Time, and in any event not later than two Business Days following the Effective Time, NWM shall, or shall cause NWC, Merger Sub or the Surviving Corporation, to deposit an amount of cash in an Exchange Fund with the Exchange Agent sufficient to pay the Merger Consideration in respect of the shares of Company Common Stock that are to be converted into the right to receive cash pursuant to Section 1.4 hereof.

Section 1.13 Exchange of Shares .

(a) As soon as practicable after the Effective Time, NWC shall cause the Exchange Agent to mail to each holder of record of one or more certificates (“ Certificates ”) or book-entry shares (“Book-Entry Shares”) that immediately prior to the Effective Time represented shares of Company Common Stock whose shares are being converted into the Merger Consideration pursuant to Section 1.4 (i) a letter of transmittal (which shall be in form and substance reasonably satisfactory to NWC and the Company and, in the case of certificated

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shares, shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and, in the case of Book-Entry Shares, shall specify that delivery shall be effected, and risk of loss and title to the shares shall pass, only upon adherence to the procedures set forth in the letter of transmittal) and (ii) instructions for use in effecting the surrender of the Certificates or, in the case of Book-Entry Shares, the surrender of the Book-Entry Shares, in exchange for the Merger Consideration. Upon proper surrender of a Certificate or Book-Entry Share for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal, duly completed and executed, and such other documents or information as may be required, the holder of such Certificate or Book-Entry Shares shall receive the amount of Merger Consideration provided in Section 1.4, and the Certificate or Book-Entry Shares so surrendered shall forthwith be cancelled. No interest shall be paid or accrued on any cash or on any unpaid dividends or distributions payable to holders of Certificates or Book-Entry Shares.

(b) After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Class A Common Stock that were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificates or Book-Entry Shares are presented for transfer to the Exchange Agent, each such Certificate or Book-Entry Share shall, subject to compliance with the provisions of Section 1.13(a), be cancelled and exchanged for the Merger Consideration as provided in this Section 1.13. In the event of a transfer of ownership of any share of Class A Common Stock prior to the Effective Time that has not been registered in the transfer records of the Company, the Merger Consideration payable in respect of such share of Class A Common Stock shall be paid to the transferee of such share only if the Certificate that previously represented such share is properly endorsed or otherwise in proper form for transfer, or a properly completed letter of transmittal, duly completed and executed if the share is a Book-Entry Share, is presented to the Exchange Agent accompanied by all documents required to evidence and effect such transfer, and to establish to the satisfaction of NWC that any transfer or other Taxes have been paid or are not applicable.

(c) Any portion of the Exchange Fund that remains unclaimed by the holders of Class A Common Stock (or is not otherwise provided for in any dissenter’s rights claims) for six months after the Effective Time shall be paid to the Surviving Corporation. Any stockholders of the Company who have not theretofore complied with this Article I shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration deliverable in respect of each share of Class A Common Stock such stockholder holds as determined pursuant to this Agreement without any interest thereon. Notwithstanding the foregoing, none of the Surviving Corporation, the Company, NWM, NWC, the Exchange Agent or any other person shall be liable to any former holder of shares of Class A Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

(d) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by NWC, the posting by such person of a bond in a customary amount and upon such terms as NWC may determine are reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, and upon compliance with the relevant provisions of Section 1.13(a), the Exchange Agent shall issue

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in exchange for such lost, stolen or destroyed Certificate the relevant Merger Consideration such holder has a right to receive pursuant to this Article I.

Section 1.14 Withholding . NWC and the Surviving Corporation shall be entitled to deduct and withhold from the Merger Consideration deliverable under this Agreement, and from any other payments made pursuant to this Agreement, such amounts as NWC and the Surviving Corporation are required to deduct and withhold with respect to such delivery and payment under the Code or any provision of state, local, provincial or foreign tax Law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to the holder of shares of Class A Common Stock, Company Options or Restricted Shares, as applicable, in respect of which such deduction and withholding was made by NWC and the Surviving Corporation.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Company SEC Documents filed with the SEC and publicly available prior to the date of this Agreement and the Company Disclosure Schedules, the Company represents and warrants to NWM, NWC and Merger Sub as follows:

Section 2.1 Corporate Organization, Standing and Power . Each of the Company and its Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Each of the Company and its Subsidiaries has the corporate power to own, lease and operate its properties and assets and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of any business conducted by the Company or its Subsidiaries or the character or location of any properties or assets owned or leased by the Company or its Subsidiaries makes such licensing or qualification necessary, other than such corporate power or defects in qualification or good standing that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. True, correct and complete copies of the certificate or articles of incorporation, bylaws and any other charter or organizational documents of the Company and its Subsidiaries as in effect at the date of this Agreement (the “ Company Charter Documents ”) have heretofore been made available to NWC. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its certificate or articles of incorporation or bylaws or other charter or organizational documents, each as amended.

Section 2.2 Capitalization.

(a) The authorized capital stock of the Company consists of 750,000,000 shares of Class A Common Stock, 750,000,000 shares of Class B Common Stock and 50,000,000 shares of Preferred Stock. As of August 4, 2008, (i) 46,122,309.50 shares of Class A Common Stock were issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (ii) 8,670,992 shares of Class A Common Stock remain for issuance as Restricted Shares or upon the exercise of Company Options issued under the Company Stock Plan, (iii) 25,825,328.50 shares of Class A Common Stock were held in the treasury of the Company, (iv) 91,778,717 shares of Class B Common Stock were issued and

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outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (v) no shares of Class B Common Stock were held in the treasury of the Company, and (vi) no shares of Preferred Stock were issued and outstanding. There are no bonds, debentures, notes or other indebtedness or securities of the Company or any Subsidiary that have the right to vote (or that are convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company or any Subsidiary may vote. Except as set forth above, as of the date hereof, no shares of capital stock or other voting securities of the Company are issued, reserved for issuance or outstanding and no shares of capital stock or other voting securities of the Company shall be issued or become outstanding after the date hereof other than shares of Class A Common Stock (not in excess of the amounts reserved therefor, as set forth above) upon exercise of Company Options to the extent outstanding as of the date hereof. Section 2.2(a) of the Company Disclosure Schedules sets forth a true and correct list, as of the date hereof, of all rights obligating the Company or any of its Subsidiaries to issue, grant or sell any shares of capital stock of, or other equity interests in, or securities convertible into or exchangeable or issuable for equity interests in, the Company or any of its Subsidiaries. Such list sets forth the name of each holder and the number of shares of Class A Common Stock subject to each such option or other security or interest, the date of grant, the exercise or vesting schedule, the exercise price per share and the term of each such option or other security or interest. Immediately prior to the Closing Date, the Company shall deliver to NWC a schedule listing (i) all exercises, expirations and conversions of Company Options and issuances in satisfaction of Restricted Shares since the date hereof and (ii) all shares of Class A Common Stock subject to each remaining Company Option, or which may be issued in respect of Restricted Shares, the date of grant, the exercise or vesting schedule, the exercise price per share and the term of each such security. No shares of Class A Common Stock are held by the Company or any of its Subsidiaries. All shares of Class A Common Stock subject to issuance as described above shall, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, be duly authorized, validly issued, fully paid and nonassessable.

(b) None of the Company or any of its Subsidiaries has any Contract or other obligation to repurchase, redeem or otherwise acquire any shares of Class A Common Stock or any other capital stock or other securities of any of the Company or the Company’s Subsidiaries, or to make any investment (in the form of a loan, capital contribution or otherwise) in any of the Company’s Subsidiaries or any other Person. All of the outstanding shares of capital stock, voting securities or other equity interests of each Subsidiary of the Company are owned, directly or indirectly, by the Company, and are duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. There are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements of any character relating to the issued or unissued capital stock or other securities of any such Subsidiary, or otherwise obligating the Company or any such Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire any such securities.

(c) Neither the Company nor any of its Subsidiaries (except with respect to investments held in any general account or separate account) owns, or has any Contract or other obligation to acquire, any equity securities or other securities of, or otherwise invest in, any Person (other than Subsidiaries of the Company) or any direct or indirect equity or ownership interest in any other business, except for investments effected by the Company or any of its Subsidiaries in the ordinary course of business.

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(d) There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of any of the capital stock of the Company or any of its Subsidiaries. None of the Company or any of its Subsidiaries is obligated under any registration rights or similar agreements to register any shares of capital stock of the Company or any of its Subsidiaries on behalf of any Person.

Section 2.3 Authority; No Violation.

(a) The Company has full corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Company Stockholder Approval, to consummate the transactions contemplated hereby. Upon the recommendation of the Special Committee, the execution and delivery of this Agreement and the consummation of the Merger and the transactions contemplated hereby have been duly and validly approved and adopted by the Company Board. The Company Stockholder Approval is the only vote of the holders of any class or series of the capital stock of the Company or any of its Subsidiaries necessary to adopt this Agreement, approve the Merger or consummate any of the other transactions contemplated by this Agreement, and no other corporate proceedings on the part of the Company other than the receipt of the Company Stockholder Approval are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company, and, assuming due authorization, execution, and delivery by each of NWM, NWC and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(b) The Special Committee has (i) received the opinion of its financial advisor, Lazard Frères & Co. LLC (the “ Financial Advisor ”), dated August 6, 2008, to the effect that as of such date and subject to the qualifications and limitations set forth therein, the Merger Consideration to be paid to the holders of shares of Class A Common Stock entitled to payment thereof pursuant to Section 1.4(a), is fair, from a financial point of view, to such holders (the “ Fairness Opinion ”), and (ii) by unanimous vote of the Special Committee, at a meeting duly called and held prior to the execution of this Agreement: (A) determined that this Agreement and the transactions contemplated by this Agreement, including the Merger, are advisable, fair to, and in the best interests of the Company and its stockholders (other than the Mutual Group and its Affiliates); and (B) recommended this Agreement and the transactions contemplated by this Agreement, including the Merger, to the Company Board and the holders of shares of Company Common Stock for their adoption. Upon the recommendation of the Special Committee, the Company Board has determined that the Merger and this Agreement are advisable, fair to and in the best interests of the Company and its stockholders (other than the Mutual Group and its Affiliates), approved and declared advisable the Merger and this Agreement and, subject to the provisions of Section 4.3, resolved to make the Company Recommendation and directed that this Agreement be submitted to the holders of shares of Company Common Stock for their adoption.

(c) Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby, nor compliance by

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the Company with any of the terms or provisions hereof, will (i) violate any provision of the certificates of incorporation or bylaws or other charter or organizational documents of the Company or any of its Subsidiaries; (ii) assuming that the consents and approvals referred to in Section 2.4 are duly obtained, violate any Law, judgment, order, writ, decree or injunction applicable to the Company or any of its Subsidiaries or any of their respective properties or assets or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by or rights or obligations under, or result in the creation of any Lien upon any of the respective properties or assets of the Company or any of its Subsidiaries under (in each case, or an event that, with notice or lapse of time, or both, would result in such effect), any of the terms, conditions or provisions of any Contract or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties, assets or business activities may be bound, except (in the case of clauses (ii) and (iii) above) for such violations, conflicts, breaches, defaults, terminations, cancellations, accelerations, creation of liens or the loss of benefits that would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect.

Section 2.4 Consents and Approvals . Except for (i) the filing with the SEC of a Schedule 13e-3, (ii) the filing with the SEC of the Proxy Statement, (iii) the Company Stockholder Approval, (iv) the filing of the Certificate of Merger as required by Delaware Law, (v) the filing of applications and notices with the applicable federal and state regulatory authorities governing insurance and the approval of such applications or the grant of required licenses by such authorities or the expiration of any applicable waiting periods thereunder and (vi) the consents, notices and approvals set forth in Section 2.4 of the Company Disclosure Schedules, no consents or approvals of or filings or registrations with any Governmental Entity or with any third party are necessary in connection with the execution and delivery by the Company of this Agreement or the consummation by the Company of the Merger and the other transactions contemplated hereby.

Section 2.5 Absence of Certain Changes or Events . Since December 31, 2007, the Company and each of its Subsidiaries has conducted its business in all material respects in the ordinary course consistent with past practice, and there has not been:

(a) any change, event or condition that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any Company Common Stock or any repurchase for value by the Company of any Company Common Stock or Company Options or Restricted Shares;

(c) any split, combination or reclassification of any Company Common Stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of Company Common Stock; or

(d) (A) any granting by the Company or any of its Subsidiaries to any current or former director, officer, employee or independent contractor of the Company or any of its

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Subsidiaries (each, a “ Participant ”) of any loan or any increase in any type of compensation, benefits, perquisites or any bonus or award, except for grants of normal cash bonus opportunities and normal increases of cash compensation (including compensation in connection with new hires), in each case in the ordinary course of business consistent with past practice or as was required under employment agreements in effect as of December 31, 2007, (B) any payment of any bonus to any Participant, except for bonuses paid in the ordinary course of business consistent with past practice, (C) any granting by the Company or any of its Subsidiaries to any Participant of any severance, change in control, termination or similar compensation, pay or benefits or increases therein, or of the right to receive any severance, change in control, termination or similar compensation, payor benefits or increases therein, except (x) as was required under any employment, severance or termination agreements in effect as of December 31, 2007, (y) in the ordinary course of business consistent with past practice in connection with new hires to replace departed employees and (z) in the ordinary course of business consistent with past practice in connection with promotions made in the ordinary course of business consistent with past practice, or (D) any entry by the Company or any of its Subsidiaries into, or any amendment of, (i) any material employment, deferred compensation, severance, change in control, termination, employee benefit, loan, indemnification, retention, stock repurchase, stock option, consulting or similar agreement, commitment or obligation between the Company or any of its Subsidiaries, on the one hand, and any Participant, on the other hand, and (ii) any agreement between the Company or any of its Subsidiaries, on the one hand, and any Participant, on the other hand, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of transactions involving the Company or any of its Subsidiaries of the nature contemplated by this Agreement.

Section 2.6 Compliance with Applicable Law . Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and each of its Subsidiaries have at all times complied with all applicable Laws, and are not in violation of, and have not received any notices of violation with respect to, any Laws in connection with the conduct of their respective businesses or the ownership or operation of their respective businesses, assets and properties.

Section 2.7 Broker’s Fees . Except for the Financial Advisor, neither the Company nor any of its Subsidiaries has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement. The Company has heretofore furnished to NWC a complete and correct copy of all agreements between the Company or any of its Subsidiaries and the Financial Advisor pursuant to which such firm would be entitled to any payment relating to the transactions contemplated hereunder.

Section 2.8 Company Information . The Proxy Statement will not, at the date it is first mailed to shareholders of the Company or at the time of the Company Stockholders’ Meeting (other than with respect to any information supplied by the Mutual Group or Merger Sub for inclusion therein) contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any information that subsequently changes or becomes incomplete or incorrect to the extent such changes or failure to be complete or correct

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are promptly disclosed to NWC and Merger Sub, and the Company uses its reasonable best efforts, with the reasonable cooperation of NWC and Merger Sub, to prepare, file or disseminate updated information to the extent required by applicable Laws. The Company will cause the Proxy Statement and all related SEC filings to comply as to form in all material respects with the requirements of the Exchange Act applicable thereto. No representation is made by the Company with respect to statements made in the Proxy Statement based on information supplied in writing by the Mutual Group or Merger Sub specifically for inclusion therein.

Section 2.9 Takeover Statutes . No “fair price,” “moratorium,” “control share acquisition,” “interested stockholder” or other similar anti-takeover statute or regulation (including, without limitation, Section 203 of the Delaware Law to the extent applicable) (“ Takeover Statute ”) is applicable to the Merger or the other transactions contemplated by this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF NWM, NWC AND MERGER SUB

Except as set forth in the NWC Disclosure Schedules, each of NWM, NWC and Merger Sub represents and warrants to the Company as follows:

Section 3.1 Corporate Organization, Standing and Power . Each of NWM, NWC and Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Each of NWM, NWC and Merger Sub has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to so qualify would not reasonably be expected to have an NWC Material Adverse Effect. NWC has furnished or made available to the Company a true and correct copy of the certificate or articles of incorporation, as amended, and bylaws, as amended, and any other charter or organizational documents, each as amended, of NWM, NWC and Merger Sub. Neither NWM, NWC nor Merger Sub is in violation of any of the provisions of its certificate or articles of incorporation or bylaws or other charter or organizational documents, each as amended.

Section 3.2 Authority; No Violation.

(a) Each of NWM, NWC and Merger Sub has full corporate power and authority to execute and deliver this Agreement, to perform its obligations under the Agreement, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Merger and the transactions contemplated hereby have been duly and validly approved and adopted by the Boards of Directors of each of NWM, NWC and Merger Sub. No other corporate proceedings on the part of NWM, NWC or Merger Sub are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of NWM, NWC and Merger Sub and, assuming due authorization, execution and delivery by the Company, constitutes a valid and binding obligation of each of NWM, NWC and Merger Sub, enforceable against each of NWM, NWC and Merger Sub in accordance with its terms, except that such

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enforceability (i) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(b) Neither the execution and delivery of this Agreement by NWM, NWC or Merger Sub, nor the consummation by NWM, NWC or Merger Sub of the transactions contemplated hereby, nor compliance by NWM, NWC or Merger Sub with any of the terms or provisions hereof, will (i) violate any provision of the certificate of incorporation or bylaws of NWM, NWC or Merger Sub, (ii) assuming that the consents and approvals referred to in Section 3.3 are duly obtained, violate any Law, judgment, order, writ, decree or injunction applicable to NWM, NWC and Merger Sub or any of their respective properties or assets or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by or rights or obligations under, or result in the creation of any Lien upon any of the respective properties or assets of NWM, NWC or Merger Sub under, any of the terms, conditions or provisions of any Contract or other instrument or obligation to which NWM, NWC or Merger Sub is a party, or by which they or any of their respective properties, assets or business activities may be bound, except (in the case of clauses (ii) and (iii) above) for such violations, conflicts, breaches, defaults, terminations, cancellations, accelerations, creation of liens or the loss of benefits that, either individually or in the aggregate, would not be an NWC Material Adverse Effect.

Section 3.3 Consents and Approvals . Except for (i) the filing with the SEC of the Schedule 13e-3 and the Proxy Statement and (ii) the consents, notices and approvals set forth in Section 3.3 of the NWC Disclosure Schedules, no consents or approvals of or filings or registrations with any Governmental Entity or third party on the part of NWM, NWC or Merger Sub are necessary in connection with the execution and delivery by NWM, NWC and Merger Sub of this Agreement and the consummation by NWM, NWC and Merger Sub of the Merger and the other transactions contemplated hereby.

Section 3.4 Disclosure Documents . None of the information supplied or to be supplied by the Mutual Group or Merger Sub in writing specifically for inclusion in the Schedule 13e-3 or the Proxy Statement will, at the date it is first mailed to stockholders of the Company or at the time of the Company Stockholders’ Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any information so provided by the Mutual Group and Merger Sub that subsequently changes or becomes incomplete or incorrect to the extent such changes or failure to be complete or correct are promptly disclosed to the Company, and NWM, NWC and Merger Sub reasonably cooperate with the Company in preparing, filing or disseminating updated information to the extent required by Law.

Section 3.5 Interim Operations of Merger Sub . Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, and as of the date hereof, has

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engaged in no other business activities and has conducted its operations only as contemplated hereby.

Section 3.6 Financing . As of the Closing Date, NWM will have and will make available to NWC and Merger Sub all the funds necessary to perform its obligations under this Agreement, including consummating the transactions contemplated by this Agreement on the terms contemplated hereby and paying of all of its fees and expenses relating to such transactions. Nothing contained in this Section 3.6 shall in any manner be deemed or construed to limit or modify the obligations of the parties to comply with Section 4.4.

ARTICLE IV

CONDUCT PRIOR TO THE EFFECTIVE TIME

Section 4.1 Conduct of Business Prior to the Effective Time . During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or permitted by this Agreement or except as required by applicable Laws, the Company shall, and shall cause each of its Subsidiaries, to (a) conduct its business in the usual, regular and ordinary course consistent with past practice, (b) use reasonable best efforts to preserve intact its present business organizations, maintain its rights and franchises, and maintain its relationships with and goodwill of customers, suppliers, distributors, licensors, licensees, contractors, employees and others having significant business dealings with it, (c) use its reasonable best efforts to maintain and keep its properties and assets in as good repair and condition as at present and (d) take no action that would adversely affect or delay in any material respect the ability of either the Mutual Group or the Company to obtain any necessary approvals of any regulatory agency or other Governmental Entity required for the transactions contemplated hereby.

Section 4.2 Conduct of Business of the Company . Without limiting the generality of Section 4.1, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement and the Effective Time, except as set forth in Section 4.2 of the Company Disclosure Schedules, except as expressly contemplated by this Agreement or except as required by applicable Laws, the Company shall not take, cause or permit any action prohibited by the terms of the Intercompany Agreement or any of the following, or allow, cause or permit any of its Subsidiaries to take, cause or permit any action prohibited by the terms of the Intercompany Agreement or any of the following, in each case, without the prior written consent of NWC, which consent shall not